New research from the Advanced Services Group at Aston Business School suggests that a focus on product as a platform and a clear understanding of the operational network can positively influence servitization efforts. Dr Kawaljeet Kapoor explains…
Servitization is widely recognised in the manufacturing sector today for its potential to bring about sustainable business growth and realise benefit from society’s appetite for services. Servitization is generally understood as the process by which a manufacturing company transforms its business model and capabilities to compete through a combination of products and services, rather than just products alone. For manufacturers, achieving their servitization goals means going beyond their product-driven internal capabilities.
It requires them to move away from the traditional linear supply chain models, in favour of collaborative working with external partners, which can evolve into a network with multiple, interacting actors.In this setting, which we would call an ecosystem, platforms enable increased interactions and transactions between the multiple actors and partners, which were not necessarily a part of the initial supply chains.
There is a plethora of companies that successfully utilise platform strategies. Intel and Windows, for example, bring together third party companies and developers to create innovation platforms.
Others, such as Airbnb and Amazon, allow producers, consumers and organisations to find each other and enable a multitude of transactions with each other. Clearly, businesses across a range of industries are investing in platforms. However, examples from the manufacturing sector are far and few between.
An exploratory research project by The Advanced Services Group at Aston Business School, is looking to change that. The project focuses on understanding the servitization process in a manufacturing setting and investigates the influence platforms have on a manufacturer’s journey to servitization.
What do we mean by platform and ecosystem?
Simply put, a platform can be a product, service, or technology owned by a company that external innovators use as a foundation to develop new products, services or technologies. These newly developed offerings always complement a platform owner’s original offerings, which is why we call such offerings, the complements. By the same logic, we call the companies or people who develop such complements, the complementors.
For instance, on a Fire TV platform, Amazon is the platform owner, and the app developers are the complementors, who use the Fire TV stick as a foundation to develop a multitude of apps for the end-users. A platform, its complements and all network actors put together, is what we call a platform ecosystem. In a platform-based ecosystem, you can typically expect to see a platform owner, the complementors, and the end users as its key actors.
"Modularity makes enabling varied functionalities very simple. In a manufacturing setting, product offerings can be modularized and broken down into services associated with product spares, preventive maintenance, fleet management, and so on..."
These platforms can have varying architectural types. They can be of internal – closed nature, such as Makita’s cordless power tool platform, where all tools can only be powered by a battery developed in-house. They can be across a supply chain – partially open, examples of which can be found across all assembly industries. Both of these types aim at increasing offering variety without complicating internal structures.
They can also be external – open for all external innovators in an industry-level ecosystem setting. An example of this is IBM’s collaboration with Intel and Microsoft in the 1980s, which led to the development of the IBM PC, an open platform used by complementors to develop compatible software, such as Word and others.Irrespective of the types, these architectures are increasingly modular in nature, which means that platforms increase flexibility and reusability.
Complicated production processes are broken into smaller parts or modules that deliver an intended technological function in the overall system, and by doing so, enhance the core functionality of a platform. For example, Google Chrome is a search engine, and its extensions are ‘modules’ developed to offer extended functionalities like a calendar, dictionary or storage drive. In other words, when modules connect to a platform, they add new functionalities to include extended utilities and features.
Therefore, modularity makes enabling varied functionalities very simple. In a manufacturing setting, product offerings can be modularized and broken down into services associated with product spares, preventive maintenance, fleet management, and so on. In essence, manufacturing firms can configure multiple offerings using different combinations of the same modules.
Why the ecosystem view is important
The concept of platforms has been a topic of discussion for more than two decades. Both research and practice have shared fundamental insights on platform dynamics and how they work. But the focus on platforms alone is not enough – the ecosystem in which the platform operates is just as important. Understanding the ecosystem, identifying the different actors and understanding your own role will ultimately determine the platform’s success.
Taking a full view of the ecosystem will account for all actors involved and help manufacturers understand which actors can add the most value to the platform and deliver the service-led offerings intended in the first place - beyond.
Platforms in servitizing companies
The word platform is often associated with all things digital, such as a software component or an application. In fact, platforms are more than just a piece of software, particularly in a servitization-based setting. It would not be too far fetched to suggest that if a manufacturer is acting as a platform leader, then their platform will essentially be their ‘product’.
As they have ownership of the product, it is their decision if and how much of the product and/or its specifications can be shared with complementors to produce novel offerings. Let’s take Trucknology, MAN’s fleet management solution, as an example here. Looking for solutions to better manage fuel costs and truck uptime - their customers’ main pain points - commercial truck manufacturer MAN partnered with telematics company Microlise.
"Technology is only one of the many components that go into building an ecosystem, and there are social and architectural aspects that are key and deserve due recognition..."
Together, Microlise and MAN produced a rating system across a range of driver characteristics, such as harsh braking and harsh cornering. The result was the Microlise Tracking Unit (MTU3), which was installed in MAN trucks to feed back driver and vehicle performance data. Customers can now view driver reports, which help to better manage drivers and inform driver training. Drivers can also access the reports to assess their own performance and improve their skills based on accurate data.In this example, MAN represents the platform owner and Microlise represents the complementor, i.e. the external innovator.
The Microlise Tracking Unit is the complement, and because it can only be of value once installed onto the MAN truck, the truck as MAN’s original product offering has become the platform. Successful examples like MAN are evidence that in manufacturing, collaborating with an extended network of actors can derive benefits of maximum value from investments, as well as lasting relationships with the customer even after product sales.
Research on Platforms and Ecosystems
Yet, not many manufacturers have adopted this approach in their servitization strategies. Whilst the terms platform ecosystems, platform thinking, and platform approach are increasingly used in business and manufacturing, they are often used to describe technology alone. Our research suggests, however, that technology is only one of the many components that go into building an ecosystem, and there are social and architectural aspects that are key and deserve due recognition.
The aim of this research project is to explain how platform ecosystems influence manufacturers developing servitization-based offerings. The project is based on interviews with manufacturing companies on their way towards servitization. A key outcome of this research will be a guide to help servitizing firms position themselves across the different roles (platform leader, complementors, etc.), map dominant players and potential partners, in order to use their network dynamics strategically to pursue collaborative innovation.
Dr Kawaljeet Kapoor is a Research Fellow at The Advanced Services Group at Aston Business School.