Now in its eighth year and welcoming over 80 delegates from all over the globe, the Spring Servitization Conference focused on the impact of digitalisation and sought to affirm the benefits this discipline can bring to service in manufacturing....
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Jul 11, 2019 • aston business school • manufacturing • Professor Tim Baines • Christian Kowalkowski • Servitization • Servitization Conference • Spring Servitization Conference
Now in its eighth year and welcoming over 80 delegates from all over the globe, the Spring Servitization Conference focused on the impact of digitalisation and sought to affirm the benefits this discipline can bring to service in manufacturing. Attending the event in Linköping, Sweden, Mark Glover spoke to some of the keynote speakers and academics to gauge how important this gathering is...
Located in Southern Sweden, Linköping is the country’s seventh largest city. However, its dwarfed in comparison to London and New York, yet its charming and dotted streets littered with shops and cafes give it a very welcoming feel.
A five-minute walk from my hotel nestles an exhibition centre, the venue for this year’s Spring Servitization Conference, and like the rest of Linkoping it has a certain charm to it. Compared to conference hubs like London’s Excel and Birmingham’s NES, this is an idyllic setting: set among a lush green park littered with benches, where workers sip coffee enjoying the sun before heading to the office, the only sound is a polite bicycle bell or a the low drone of a tram.
I settle at the back of the main conference room on day one of the event, sipping my own coffee and grazing on some excellent Swedish pastries while awaiting the opening address from Professors Tim Baines and Christian Kowalkowski.
“I’ve taken a back seat this year,” says Professor Baines addressing delegates. This is the eighth year of the annual conference and the Director of the Advanced Services Group at Aston Business School has always played a key role in the content, but this year has ably passed the reins to Professor Kowalkowski from Linkoping University
“It’s an event that straddles disciplines and the [servitization] community,” Professor Baines says, extolling the conference’s benefits, “and is excellent to theory and research and relevant to application and practice.”
It’s a valid point: the event has always sought to bridge the gap between industry and application while creating a servitization community that can share ideas, best practice and findings. It remains the only event of its kind and its eighth year is testament to its development, where over 80 participants would come through the conference doors.
“It’s very important because we call come from different disciplines,” Professor Kowalkowski says, taking time out to grab a coffee with me during the first day. "Typically, we have a lot of academic conferences where you go to a conference belonging to a particular discipline, for example marketing or operations management, strategy or innovation or something else. This [servitization conference] is a multidisciplinary conference, so you can connect with other researchers from other disciplines. Because this is ultimately multi-disciplinary research, we are doing on servitization.”
Themed around ‘Delivering services growth in the digital era’, this year’s three-day event was structured, as always, round one single track of academic presentations, split into morning, mid-morning and afternoon sessions and each concluding with a panel debate discussing that session’s major points.
To meld industry and academia, Professor Kowalkowski was able to arrange a suite of excellent key-note speakers to begin each morning and afternoon session, including Ellen Molin, Head of Business Area Support and Services at SAAB and Magnus Savenas, VP Customer Care and Quality at Electrolux.
"It’s an event that straddles disciplines..."
To begin proceedings however, the conference welcomed speakers from Toyota Material Handling Europe (THME): Joakim Plate, Director Service Market and his colleague Patrick Carlsson, Senior Manager Business Development, Service Market.
TMHE the pair told us, carry out four million customer visits every year, with an impressive 96 per cent first-time fix-rate however, with connectivity (which Carlsson called a “game changer in service”) and other technology developments. They expect to improve these figures in the future.
Of course, the challenge lies in managing the rate of technology development, which the pair acknowledged, particularly in big data solutions and prediction models. A challenge into digitalization they’ve ratified by partnering with Microsoft.
Following the event, I caught up with both speakers to press them further on this link-up. “It’s two big brands working together for big future challenges,” Carlsson told me. “we have aligned to utilise technology going forward.”
“In more concrete terms,” Plate added, “they [Microsoft] have been a partner with is us throughout the process, initially by trying to predict how will a service technician in our industry work in five or six years’ time. With that starting point we were able to develop the new platform, which will be developed and deployed in several steps. So, we’ve only really just started the journey here.”
T-Stream, the TMHE digitalization platform for service runs on Microsoft’s Azure Cloud used by all its technicians to get access information in real time including online documentation, parts ordering, quote creations, planning, remote error code reading and GPS. These are collected in one user interface delivering engineers to assets before they have broken down.
I ask what takeaways the pair have gained attending and presenting at an academic conference focused on servitization. “For us, it’s about sharing our challenges with the academic world and to try and bridge the gap between the industry and the academic world,” Plate explains. “I think both parties have a lot to gain in working more closely together and for us it’s an opportunity to convey the challenges that we see, and to get input from the academic world. One area could be big-data handling, for instance.”
Michael Kato is Chief Digital Officer at commercial vehicle manufacturer Scania and made the short journey by train to deliver day one’s afternoon key note. Kato told delegates, fresh from an excellent sit-down lunch, about driving a digital strategy with a focus on customer service and service development, the heart of which, he explained, is to “walk extensively in your customer’s shoes”.
Having been in the role for two years, I asked Kato what challenges he found, culturally, in integrating a digital strategy into a well ingrained core business of a company that has 52,000 employees. “I viewed it like an adventure,” he says smiling.
“We had to establish the values we’re after and what are the levers for higher customer value. We needed to formulate an awareness of what we wanted to do and then prioritise it. It’s taken nearly a year and a half to work out how can we drive digital in business both in a long and medium-term way, because it’s massively complex.”
And academically, what did Kato gain from attending the conference in Linkoping? “I think it is of big value,” he says. “From my point of view, you have to understand what you want to take out of it. So, it might be a framework giving a higher clarity on things that you need to focus on. It might be of viewing different capabilities or it might be understanding the complexities of driving change that you might not have reflected on.
“Many companies have problems on getting progress on different areas, they know what they need to do but they don’t know why they’re not getting there.”
Of course, academic presentations make-up most of the conference content and universities across Europe explored strands around SMEs, Industry 4.0 and advanced services. Generally, delegates saw how the digital side of servitization can be turned into actual value creation for customers and suppliers alike.
On this, Chris Raddats, a Lecturer in Marketing at the University of Liverpool attending and presenting, told me that the conference shines a light on the potential of digitilisation for manufacturing servicing. “The Spring Servitization Conference provides a unique opportunity to discuss servitization from both practical and academic perspectives,” he told me at the evening’s drinks reception.
“This year’s conference was particularly interesting as it focused on digitalisation, a phenomenon that is disrupting many industries and one that could profoundly change how manufacturers develop and deliver services.”
It was during this drinks gathering that I met Lina Sunden, a young PHD student from the Lulea University of Technology in Sweden. Lina had a poster on display at the event, which she was due to present on the third day. She was looking forward to the prospect and excited to be part of this event. She told me that a specialist servitization event like the SSC was important as it focused on a discipline that may get lost in other conferences, something which inspires her throughout her academic pursuits.
It’s this coming together of like-minded academics that makes the SCC such an important gathering. Not only bridging the gap between academia and practice, the event offers a place for scholars whose research can be overlooked. However, the potential value that servitization brings to manufacturing, particularly when viewed through digitilisation could be hugely significant.
I’m already looking forward to next year’s event.
Located in Southern Sweden, Linköping is the country’s seventh largest city. However, its dwarfed in comparison to London and New York, yet its charming and dotted streets littered with shops and cafes give it a very welcoming feel.
A five-minute walk from my hotel nestles an exhibition centre, the venue for this year’s Spring Servitization Conference, and like the rest of Linkoping it has a certain charm to it. Compared to conference hubs like London’s Excel and Birmingham’s NES, this is an idyllic setting: set among a lush green park littered with benches, where workers sip coffee enjoying the sun before heading to the office, the only sound is a polite bicycle bell or a the low drone of a tram.
I settle at the back of the main conference room on day one of the event, sipping my own coffee and grazing on some excellent Swedish pastries while awaiting the opening address from Professors Tim Baines and Christian Kowalkowski.
“I’ve taken a back seat this year,” says Professor Baines addressing delegates. This is the eighth year of the annual conference and the Director of the Advanced Services Group at Aston Business School has always played a key role in the content, but this year has ably passed the reins to Professor Kowalkowski from Linkoping University
“It’s an event that straddles disciplines and the [servitization] community,” Professor Baines says, extolling the conference’s benefits, “and is excellent to theory and research and relevant to application and practice.”
It’s a valid point: the event has always sought to bridge the gap between industry and application while creating a servitization community that can share ideas, best practice and findings. It remains the only event of its kind and its eighth year is testament to its development, where over 80 participants would come through the conference doors.
“It’s very important because we call come from different disciplines,” Professor Kowalkowski says, taking time out to grab a coffee with me during the first day. "Typically, we have a lot of academic conferences where you go to a conference belonging to a particular discipline, for example marketing or operations management, strategy or innovation or something else. This [servitization conference] is a multidisciplinary conference, so you can connect with other researchers from other disciplines. Because this is ultimately multi-disciplinary research, we are doing on servitization.”
Themed around ‘Delivering services growth in the digital era’, this year’s three-day event was structured, as always, round one single track of academic presentations, split into morning, mid-morning and afternoon sessions and each concluding with a panel debate discussing that session’s major points.
To meld industry and academia, Professor Kowalkowski was able to arrange a suite of excellent key-note speakers to begin each morning and afternoon session, including Ellen Molin, Head of Business Area Support and Services at SAAB and Magnus Savenas, VP Customer Care and Quality at Electrolux.
"It’s an event that straddles disciplines..."
To begin proceedings however, the conference welcomed speakers from Toyota Material Handling Europe (THME): Joakim Plate, Director Service Market and his colleague Patrick Carlsson, Senior Manager Business Development, Service Market.
TMHE the pair told us, carry out four million customer visits every year, with an impressive 96 per cent first-time fix-rate however, with connectivity (which Carlsson called a “game changer in service”) and other technology developments. They expect to improve these figures in the future.
Of course, the challenge lies in managing the rate of technology development, which the pair acknowledged, particularly in big data solutions and prediction models. A challenge into digitalization they’ve ratified by partnering with Microsoft.
Following the event, I caught up with both speakers to press them further on this link-up. “It’s two big brands working together for big future challenges,” Carlsson told me. “we have aligned to utilise technology going forward.”
“In more concrete terms,” Plate added, “they [Microsoft] have been a partner with is us throughout the process, initially by trying to predict how will a service technician in our industry work in five or six years’ time. With that starting point we were able to develop the new platform, which will be developed and deployed in several steps. So, we’ve only really just started the journey here.”
T-Stream, the TMHE digitalization platform for service runs on Microsoft’s Azure Cloud used by all its technicians to get access information in real time including online documentation, parts ordering, quote creations, planning, remote error code reading and GPS. These are collected in one user interface delivering engineers to assets before they have broken down.
I ask what takeaways the pair have gained attending and presenting at an academic conference focused on servitization. “For us, it’s about sharing our challenges with the academic world and to try and bridge the gap between the industry and the academic world,” Plate explains. “I think both parties have a lot to gain in working more closely together and for us it’s an opportunity to convey the challenges that we see, and to get input from the academic world. One area could be big-data handling, for instance.”
Michael Kato is Chief Digital Officer at commercial vehicle manufacturer Scania and made the short journey by train to deliver day one’s afternoon key note. Kato told delegates, fresh from an excellent sit-down lunch, about driving a digital strategy with a focus on customer service and service development, the heart of which, he explained, is to “walk extensively in your customer’s shoes”.
Having been in the role for two years, I asked Kato what challenges he found, culturally, in integrating a digital strategy into a well ingrained core business of a company that has 52,000 employees. “I viewed it like an adventure,” he says smiling.
“We had to establish the values we’re after and what are the levers for higher customer value. We needed to formulate an awareness of what we wanted to do and then prioritise it. It’s taken nearly a year and a half to work out how can we drive digital in business both in a long and medium-term way, because it’s massively complex.”
And academically, what did Kato gain from attending the conference in Linkoping? “I think it is of big value,” he says. “From my point of view, you have to understand what you want to take out of it. So, it might be a framework giving a higher clarity on things that you need to focus on. It might be of viewing different capabilities or it might be understanding the complexities of driving change that you might not have reflected on.
“Many companies have problems on getting progress on different areas, they know what they need to do but they don’t know why they’re not getting there.”
Of course, academic presentations make-up most of the conference content and universities across Europe explored strands around SMEs, Industry 4.0 and advanced services. Generally, delegates saw how the digital side of servitization can be turned into actual value creation for customers and suppliers alike.
On this, Chris Raddats, a Lecturer in Marketing at the University of Liverpool attending and presenting, told me that the conference shines a light on the potential of digitilisation for manufacturing servicing. “The Spring Servitization Conference provides a unique opportunity to discuss servitization from both practical and academic perspectives,” he told me at the evening’s drinks reception.
“This year’s conference was particularly interesting as it focused on digitalisation, a phenomenon that is disrupting many industries and one that could profoundly change how manufacturers develop and deliver services.”
It was during this drinks gathering that I met Lina Sunden, a young PHD student from the Lulea University of Technology in Sweden. Lina had a poster on display at the event, which she was due to present on the third day. She was looking forward to the prospect and excited to be part of this event. She told me that a specialist servitization event like the SSC was important as it focused on a discipline that may get lost in other conferences, something which inspires her throughout her academic pursuits.
It’s this coming together of like-minded academics that makes the SCC such an important gathering. Not only bridging the gap between academia and practice, the event offers a place for scholars whose research can be overlooked. However, the potential value that servitization brings to manufacturing, particularly when viewed through digitilisation could be hugely significant.
I’m already looking forward to next year’s event.
Apr 15, 2019 • Features • Future of FIeld Service • BigData • Christian Kowalkowski • Digitalization • Servitization
Dr Christian Kowalkowski, Professor Of Industrial Marketing at Linköping University outlines how two of the biggest trends amongst manufacturers, digitalisation and servitization, are in essence two sides of the same coin and why digitalisation...
Dr Christian Kowalkowski, Professor Of Industrial Marketing at Linköping University outlines how two of the biggest trends amongst manufacturers, digitalisation and servitization, are in essence two sides of the same coin and why digitalisation requires more, not less, service and customer centricity than ever before.
The growing digital disruption is blurring industry boundaries and altering established positions of firms. While manufacturers are investing strategically in data gathering and analytics capabilities and in cloud-based platforms, many firms remain concerned about how to best address digital disruption and enable digitalisation.
Last year, General Electric cut expenses by more than 25% at its digital unit responsible for Predix, its software platform for the collection and analysis of data, which previously has been hailed as a revolutionary driver for Industry 4.0. This move highlights the difficulties involved in adopting digital technology in an industrial business. Having worked with B2B firms in diverse industries on designing and implementing service-growth strategies, I have seen both highly successful and unsuccessful cases of what I call ‘digital servitization.’
Why is it so that even many firms that run a profitable field service organisation struggle to implement digitally-enabled services?
Before looking at some key challenges, let us first define what we mean by digital servitization. As a start, we need to distinguish between digitisation, which means turning analogue into digital, and digitalisation, which refers to the use of digital technology to change the business model. A tech-savvy firm with a product-centric mindset may have little difficulty in implementing digitisation, as when record companies moved from selling LPs to CDs.
However, rather than embracing the new digital opportunities that changed the way we interact with music, most record companies then clung on to a product-centric business logic of selling CDs.
Instead of developing business models based on Internet distribution they promoted new physical media like the Super Audio CD. Ironically, their defensive stance—manifested in such things as copy protected CDs—forced many people to illegal downloading in order to conveniently access MP3 music, thereby undermining their product-centric model even further. Digital servitization, then, refers to the utilisation of digital technologies for the transformation whereby a company shifts from a productcentric to a service-centric business model.
Of course, digitally-enabled services are not new; for example, Rolls-Royce’s archetypal solution TotalCare begun in 1997 and BT Rolatruc (since 2000 part of Toyota Material Handling) created its software system BT Compass in 1993, to help its customers improve their performance. Digital technology can be a double-edged sword however. For example, many manufacturers have been carried away by the technical possibilities of telematics without having a clear service business model in mind.
Rather than crafting a compelling value proposition based on enhanced customer performance, it was tempting to give the service away for free with the hope that customers eventually would discover the value of data access and be willing to pay for it.
There are however at least three problems with such a technology-centric approach. First, as the connected installed base grows and the costs of collecting and managing data increase year by year, it becomes increasingly difficult to defend the model unless service sales start to materialise. Second, giving services away for free always reduce the perceived value of the offering in the eyes of the customer. Why should they pay for something that was previously free of charge and that competitors may still be treating as a commodity and giving away?
Third, customers typically do not have the time nor the skills to interpret and act on the data collected. The real value of Big Data only comes once it is processed. By collecting and analysing data from multiple customers, a supplier may know more about the customers’ equipment and operations then they know themselves, which creates opportunities for new advanced advisory services.
The digital dimension of service growth requires purposeful and coordinated effort. As we know, while manufacturing and conventional R&D activities can be centrally managed to achieve efficiency and standardisation, services require increased local responsiveness and closer customer relationships.
"The real value of Big Data only comes once it is processed..."
During digital servitization, however, the central organisation must take a more proactive leading role to ensure platform consistency and data quality, to provide the requisite data science skills, to support local units, and to address cyber security issues. The 2017 large-scale cyberattack (NotPetya) on Danish shipping giant Møller-Maersk, which shut down offices worldwide, illustrates the dangers of inadequately managing the latter issue.
A service manager at Toyota pointed out over ten years ago that service development “is very much IS/IT. Instead of sitting and discussing how to be able to quickly change oil in the truck, there has become very much focus on data.”
Viewing data as “the new oil” is a claim oftentimes heard. Like oil, data is a source of power. It is a resource used to power transformative technologies such as automation, artificial intelligence, and predictive analytics.
However, unlike oil, data also has other properties. We are currently seeing a shift from scarcity of information (data) to abundance of it. Data can be replicated and distributed as marginal cost, and competitive advantage can be achieved by bringing together new datasets, enabling new services. But this also creates new tensions between companies regarding the issues of generation, collection, and utilisation of data. If a customer is generating massive amounts of data that the supplier is collecting, once processed, it can be used for better serving also the customer’s competitors. In other cases, we are seeing completely new companies emerging and collecting data on behalf of their clients.
Digitalisation is beginning to have a profound impact on even the most stable businesses. Customers increasingly expect that a single provider will integrate the system of which the products are part, and that they will do so through one digital interface. Whether the platform provider is one of the established OEMs or a new software entrant might not matter. Competition may come from unexpected sources, as for example when one of the leading international standards organizations in the marine industry recently moved into platform-based services.
Oftentimes, the most formidable threat comes from disruptive innovators outside the traditional industry boundaries. An executive in a leading incumbent firm stressed that her main concern was not the competition from any established player. Instead, what kept her awake at night was the prospect of Amazon entering—and reshaping—the market. While many share the concerns of being overrun by new competitors, the threat is most imminent to those firms that lack service leadership and a clear road map for service growth.
To conclude, no firm can afford not to strategically invest in digitalisation. However, as firms compete in the digital arena, there is a risk that focus shifts too much away from service and customer centricity to new digital initiatives and units. Ten years ago, many executives sang the praises of servitization.
Today, digitalisation is the poster boy for business transformation. Given the rapid pace of innovation, it may be tempting to launch new concepts as soon as the technology is available, rather than waiting until the they have been properly piloted and customer insights gained. To reap the benefits, firms also need to understand the interplay between back end and front end, investing in both back-end development for enhanced efficiency and better-informed decision-making, and front-end initiatives to enable new services and closer customer integration.
Correctly designed and implemented, digital servitization provides benefits for companies, networks, and society at large. Successfully seizing digital opportunities, however, requires more, not less, service and customer centricity than before.
Dr Christian Kowalkowski is professor of industrial marketing at Linköping University, Sweden, and the author of Service Strategy in Action: A Practical Guide for Growing Your B2B Service and Solution Business. Find out more here.
Apr 24, 2018 • Features • Management • Advanced Services • Wolfgang Ulaga • Christian Kowalkowski • Service Growth • Service Strategy in Action • Servitization
Servitization has been an increasingly widely discussed topic amongst the Manufacturing sector for some time now, but whilst an understanding of the why is becoming widely accepted, the how still remains a mystery for many.
Servitization has been an increasingly widely discussed topic amongst the Manufacturing sector for some time now, but whilst an understanding of the why is becoming widely accepted, the how still remains a mystery for many.
Here Christian Kowalkowski and Wolfgang Ulaga coauthors of the book Service Strategy in Action go some way towards demystifying the path to servitization...
With growing digital disruption across industries, the emergence of new business models, and the mounting pressure to deliver better business outcomes for customers, much has been written about what servitization of industries means and why firms need to move into the service space.
Yet, in times where increasingly ‘everything’ is considered as a service, decision makers still need to understand how to master this profound transformation and decide which concrete actions they must take to carry out this change.
Roadmap for service growth
In our new book, Service Strategy in Action (S2iA), we show how to shift your business from a goods-centric model to a service-savvy one.
For over a decade, we have accompanied numerous firms on their journeys from focusing on manufacturing and selling products to providing services and customer solutions in a broad array of industries and markets. We distilled what we learned into a 12-step roadmap which provides clear directions for crafting a competitive service strategy and putting it into practice. We recognize that all companies have different starting points and goals for their service businesses, so we tailored the roadmap to make it possible for managers to focus on the most pressing issues.
When service-growth strategies work, the payoffs are impressive, and firms often discover that their new activities make more money than productsWhen service-growth strategies work, the payoffs are impressive, and firms often discover that their new activities make more money than products. But for every success story, numerous cautionary tales remind us that this move involves more than a few cosmetic adjustments.
Without giving this strategic initiative serious thought, and without methodologically managing the change process, our research has found that the transition is doomed to fail and companies struggle to turn a profit from their service growth initiative.
Our intention in this book is, therefore, to provide decision-makers with the tools they need to craft a competitive service strategy and put it into practice.
Readers can employ our proprietary 12-step roadmap and use methods and frameworks for each step in their own firms to navigate the transformation.
The first part of the roadmap tackles the very foundations of a service business: why to move into services and how to embed a true service-centric culture in your organisation.
The second part deals with strategic issues: how to drive change and align your service strategy with corporate goals, and determine if your company is “fit-for-service.” Then we discuss how to come to grips with implementation: how to make the most of your existing services, innovate and create value-added services and solutions beyond your products, and build the service factory.
Finally, we show how to build the structure needed: transforming your product-centric sales force into a service-savvy sales organization, designing an organizational structure that promotes service growth, and aligning your interests with distributors and partners.
Many firms profited from our hands-on approach.
For example, in one project with a forklift manufacturer, we worked on transforming short-term opportunities in revenues and profits.
Together with the company, we reviewed more than 80 “low-hanging fruits.”
In one project with a forklift manufacturer, we worked on transforming short-term opportunities in revenues and profits.During the project, we identified 22 service activities that the firm had been providing free of charge, but that offered notable opportunities for revenue generation.
Over a period of several months, the company moved 14 of these activities along the journey from free to fee. For example, the manufacturer started invoicing for on-site equipment diagnostics, an activity previously provided free of charge by service technicians during customer visits.
The diagnostic fees for each customer were relatively small, so customers were widely willing to pay. In one test market, 80 percent of customers accepted the fees, resulting in substantial additional revenues in the first year in which this single initiative was implemented in just one country.
The various free-to-fee initiatives that the forklift manufacturer adopted after attending our workshop collectively led to millions of euros in added revenues.
Building a true service culture
Once you understand why to move into service and what the main roadblocks are, consider the culture that supports successful service enterprises and how to venture into the service space. In working with managers in industrial and professional services companies, we have seen over the years that a strong service culture serves as a powerful enabler of successful service growth.
Product firms that neglect to assess culture often struggle to implement services, and sometimes abandon the effort.Product firms that neglect to assess culture often struggle to implement services, and sometimes abandon the effort. A company can burn a lot of energy trying to move forward with services if its culture is product-centric, because culture underpins the organization.
We have identified six misconceptions that are hurdles to transitioning from a product-centric to a service-savvy culture. Here are the hurdles, and the signs that you still need to jump over them:
- A product-centric mind-set — Your marketing efforts focus on things that come in boxes. Your accounting system is designed for physical resources. R&D works on solutions that are objects. You compensate your sales team based on boxes moved.
- An absence of deep customer insights — You are using a distributer network, and those channels – not you — have the close and valuable relationships with your customers.
- A lack of understanding and using the co-creation concept. You still think value is created in your factory and you can’t see how customers can partner with you to co-create a service product.
- The right rules are factory rules — You are uncomfortable with the new rules of service production that upset traditional factory values like standardization and quality control.
- It’s all about CAPEX — You are focused on capital expenditures and selling customers equipment, rather than helping them solve operational challenges.
- Working through channels — You have built a strong channel network, and you don’t want to think that it may be necessary to assume more control over channels – even owning them outright.
Making the move to services, then, is a process that starts with the culture at the very core of your business.
Changing culture is never easy, and understanding that fact improves a company’s chances of transforming their product-centric culture to service-focused culture.
Four stages mark the way. Not every company starts at the same point, so it’s useful to figure out where your firm is on the map, and what actions and initiatives will be required to move to the next step.
- Step One: The Service Desert – Many firms are what we call services-myopic. They are aware of service, but they see it as an after-sale addon.Firms deeply grounded in the service desert often consider providing spare parts or repairing equipment as a substantial part of their service business. This is a narrow focus view that obscures opportunities that could result in double-digit revenue growth.
- Step Two: The Dark Tunnel – A company ramps up investment in service, but results are slow. It’s a “bitter pill” experienced by many companies going through this transition. Decision makers must understand that a critical mass of services is needed before reaping benefits. A short-term focus only can lead to sacrificing long-term growth.
- Step Three: Promising Light – In this stage, companies that seized service opportunities early on are experiencing quick wins.Some firms emerge into this stage without even going through the dark tunnel. When it happens, welcome revenues turn up, and the proponents of the services transition have powerful evidence to persuade others across the organization.
- Step Four: Bright Landscape – This is the destination! The company has devoted sufficient resources and people top its cultural transformation, and the new service business is a source of profit and growth.
Would you like to know more? Please visit us on www.ServiceStrategyInAction.com To find out more and continue the conversation.
We are sincerely interested in your comments and reactions and hope that our book will initiate a fruitful dialogue among our community on this topic we all are so passionate about!
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Jul 30, 2017 • Features • Management • Andy Neely • Wolfgang Ulaga • books • Christian Kowalkowski • Dr. Michael Provost • Howard Lightfoot • Servitization • Spring Servitization Conference • tim baines
With the topic of Servitization gaining more and more traction both in manufacturing circles and beyond a new industry book that provides a roadmap to making the shift towards advanced, outcome based services could well be of vital use for...
With the topic of Servitization gaining more and more traction both in manufacturing circles and beyond a new industry book that provides a roadmap to making the shift towards advanced, outcome based services could well be of vital use for service executives across the globe. One such book Service Strategy in Action has just been published and Kris Oldland spoke exclusively to co-author Christian Kowalkowski...
I’ve met with Kowalkowski a number of times over the last few years.
More often than not it is at the Spring Servitization Conference, arranged by the Aston Centre for Servitization, (who themselves are part of Aston University,) which in itself is an interesting few days as it brings the universes of industry and academia together and there seem to be more and more people in attendance from both sides of the table each year.
Indeed, this should come as little surprise to anyone who has attended any field service oriented conference across the last few years. Servitization, arguably driven by the growing maturity of IoT, has become a mainstream topic within our industry and academics such as Aston’s own Professor Tim Baines, or Cambridge University’s Andy Neely - are both highly sought after for speaking engagements on the topic.
So given the rise in interest in Servitization, it is perhaps something of an anomaly that there are so few books dedicated to the topic. There is Baines’ own offering written with Cranfield’s Howard Lightfoot, 'Made to Serve' that is generally regarded as the go to book on the topic. Then there is Dr. Michael Provost’s excellent work ‘Everything Work’s Wonderfully’ but there is not a huge amount else.
At least until now.
Kowalkowski's new book Service Strategy in Action, co-written by Wolfgang Ulaga , is in many ways perhaps a natural sequel to Baines’ & Lightfoot’s Made to Serve, which although still superbly relevant to anyone wanting to understand the topic of servitization - is now approaching it’s fifth birthday.
And while the philosophy and concept remains the same, the conversation has evolved considerably within that period.
So how does Kowalkowski view the book?
What we wanted to do was come up with a really simple road map for service strategy in action, divided into twelve distinct step
Indeed, the book certainly has the well ordered structure of a manual or how-to-guide. However, given the heavy weight nature of the content this not only makes absolute sense but is probably essential for it to be easily digested as a whole.
Kowalkowski himself, is a softly spoken and quietly intense academic with a clear passion and dedication to his topic and this also flows into his written work. Without, the roadmap structure, there could have been a danger that this book could’ve become a book for academics, that lay-folk like myself (and much of it’s intended audience) may have found hard to navigate through.
As it is however, it provides a perfect reference tool for companies making their way through the maze of moving from a traditional break-fix/SLA based business model to an outcome based services model, where uptime and CSAT are the new golden KPIS.
So how does the book plot out your path towards a truly servitized business?
Actually, the path laid out by Kowalkowski and Ulaga is a fairly straightforward one, based on their work with a number of differing organisations. As with all good ideas this journey starts at the beginning by establishing a clear understanding of why companies should be taking this path in the first place.
And of course not all companies are created equal, and very few scenarios are ever the same. So the opening section of the book deals with understanding your organisations position.
“First of all the service imperative, why at all move into service in the first place,” Kowalkowski comments.
“Is such a move a defensive stance to defend a product business? Or is it more offensive to gain additional revenue streams? What internal and external drivers towards advanced services exist within your organisation? Are you perhaps already on a burning platform - in which case maybe you better move a lot faster?”
“It [Understanding your position] also enables you to access the low hanging fruit, but then if you want to make more profound changes then you need to transform your business model more extensively and different elements of it.”
What are B2B services – what are the key challenges? Products, are of course very heterogeneous but services are even more so
The book also focuses on the cultural elements of such activities which typically are overlooked in a lot of the other academic literature on servitization which do not touch much upon the softer issues.
Yet the cultural aspect is really important and a key inclusion the book as Kowalkowski explains.
“We have a framework, key characteristics of what becomes important when building a service culture,” he begins.
“It’s all about the starting points – you often start in a service desert, a very myopic perspective where service is a necessary evil. Then the journey is through a dark tunnel before you the see the first glimpse of the promising light where service becomes a key growth engine - and that should be the aim.”
Then this framework can also be used for analysing and diagnosing the internal organisation – where are you today and what do you need to do to get to where you need to be.
Do we have some people who are really strong and supportive within the service business and if so are they in the right place?
“It’s not enough to have a service enthusiast in middle management level.” Kowalkowski asserts.
You might need to have some service evangelist on the top level and you need the service promoters on the front office. Then you need to convince enough people who are fairly indifferent
“We explore how can you do this using established change management framework and how to apply that to a servitization context – so forming a strong guiding and coalition and then empowering others to act upon that vision,” he adds.
In fact, the approach outlined in the book utilises the well established Kotter’s eight step framework which we then applied to this context.
“We said what are the service specific traits of change management here and provide some examples of that instead of re-inventing the wheel,” Kowalkowski comments.
“You have these proven frameworks already and this is very much a change management effort. It is not necessarily the hard things that fail, you might have the technology in place but maybe a company may focus to much on what is technically possible.”
You need someone who can analyse the data and suggest improvements for your client’s business, and provide them with insight that they don’t necessarily have the time and resources to do themselves
In fact, the questions around how, when and why customers should be engaged within the process of moving to a servitized business model are also covered extensively within the book.
“We focus on the customer and the job to be done in really understanding and outlining how service innovation and development is different from product innovation. We look at strategy and how it is aligned to corporate thoughts?”
“Are you really prepared to cannibalise your business – is that even really necessary?” It may that it is not - depending on what your goal is for the service growth initiative is.”
Again the emphasis is very much about establishing a firm understanding of your own current position before proceeding further. “We offer a diagnostic test that asks are you are you fit for services, do you have the right resource for what it takes? We look at this in a very straight forward manner but it can be a good starting point for many companies.”
“Then we also look at how to move from free to fee, that is how to capture more value from your existing services – which again is a good starting point for moving towards advanced services, but is also useful for maximising revenue from and getting the most mileage out of your existing services.”
Finally, there is then a focus on building a service factory, which is also about improving existing services.
“We include an example of service blueprinting and how it can be used to improve the efficiency and productivity of the service business," Kowalkowski states.
“It’s all about managing efficiency, effectiveness and capacity utilisation. Again depending on the type of service business, then what productivity aspects are important can be defined.”
Whilst the change management and cultural question are in the main handled by Kowalkowski, the discussion around the transition from selling items, to selling services is a complex one and this part of the equation is handled predominantly by Ulaga.
“Transforming sales is of course a big thing as well and Wolfgang has been working a lot with the sales management - so this part of the book is all based on his extensive work in that area,” explains Kowalkowski.
There is, of course, a very different mindset between a service sales team and a product sales team. But should companies who move to advance services be focussed on retraining their existing staff or replacing them with a specialist sales team that understands and gets service sales?
“Obviously with the magnitude of change, understanding how important it is to get this right is key,” replies Kowalkowski when I put this question to him.
“We dedicate time to looking at the key aspects; what is the difference between industrial sales and service sales? The differences in learning orientation? Customer service orientation?”
Look at those who sell service, and who does so well and there is often a much more introverted personality amongst those who are successful
‘But look at those who sell service, and who does so well and there is often a much more introverted personality amongst those who are successful.”
It is of course all about the organisation and how to fit service into your organisation.
You will never have a one size fits all solution as different companies work in different ways but Kowalkowski points out that they have noted some “different development patterns over time, such as breaking up the silo mentality, how to foster the collaboration of central and local units and so on,” insight into which would pay for the price of the book itself.
Similarly, understanding if Servitization is right for your business is just a first step on that journey, having a road-map like this book is useful in terms of knowing where you are heading and how to get there. However, it’s also good to know how fast you should be going on various elements of the journey as well.
And this has been embedded into Kowalkowski and Ulaga work also. “In terms of what comes first, strategy or structure - for us it is about having enough in place to be able to initiate the change and execute it,” Kowalkowski comments.
“Maybe you can quite easily identify things that are currently lacking – e.g ‘we are not strong in risk management’. Obviously if a company is about to offer output based services they need to improve that before they can move forward.”
“Yet, whilst that is quite concrete and you could still grab some further low hanging fruit by reviewing your current service pricing – can you start doing something about that?”
“Maybe you need to just start changing cultures and processes for certain things – or even leave some problem areas as they are - as in the long term it may encourages other service and product sales, having a delayed benefit that outweighs the problem it creates today.”
Indeed, the questions around servitization are often as complex as they are numerous, yet the long-term rewards are numerous and long lasting. For anyone going through the shift to servitization books like this are going to be of huge use.
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