Professor Tim Baines, Director of the Advanced Services Group, Aston University and Dr. Ali Zia Bigdeli, Senior Lecturer in Industrial Services Innovation at Aston University argue manufacturing should embrace services as part of its...
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Professor Tim Baines, Director of the Advanced Services Group, Aston University and Dr. Ali Zia Bigdeli, Senior Lecturer in Industrial Services Innovation at Aston University argue manufacturing should embrace services as part of its post-COVID-19 strategy.
Change, a 1985 paper argued, can be characterised as a “punctuated equilibrium”: long periods of relative calm and small incremental alterations that are interrupted by brief, but radical, seismic shifts. COVID-19 means that we are now living through one of those revolutionary moments.
Advanced Services and Positive Business
But that also means that there is an opportunity to look at things in a new way. For the past 20 years, we’ve been conducting research and advising manufacturers to compete through services – activities aimed at solving customers’ problems – rather than simply just pushing boxes out of the factory.
And our reasons are simple: services are good for business, good for the economy and environment, and good for society. Now accounting for 80% of the UK’s economic output, services have grown by 30% over the past 20 years. By comparison, gross domestic product (GDP) generated from selling products has contracted – a trend that is being replicated in every developed economy across the world.
But it has been a slow and sometimes painful journey – “What is this thing called servitization,” we are asked. “And how do you spell it?!” Up until now, change in this field, like in so many others, has been evolutionary, somewhat incremental and exploratory. But then arrives a global pandemic that shatters the equilibrium and stimulates radical innovation.
These are challenging times, and it’s important not to make light of the struggles facing the global economy. Business activity is currently polarised around sector and geography. On the one hand are manufacturers who support the food and health sectors and have never been busier. On the other are those businesses linked to the aerospace, automotive, and oil and gas industries which are being forced to mothball facilities and lay off staff in their tens of thousands.
For some, the implications are so severe that they may not survive. Even those that are doing well are having to deal with a reduced workforce, social distancing in the workplace, and the economic fallout of customers being unable to pay their bills.
Disrupting the old norms
How appealing the old norms may now seem. Until just a few months ago, most executives within manufacturing organisations had a rather passive, established view of services. For us, it was frustrating, but comfortingly familiar.
We could work with these manufacturers to help them better understand the value of services, influence key decision-makers and then hopefully get a chance to support their innovation of new business models, technologies and organisational structures. But we often experienced an equilibrium – the harder we helped manufacturing executives to push for more services, the harder the system pushed back.
Now, however, that equilibrium is being disrupted.Take performance advisory services. These are services that allow manufacturers to use digital technologies to gain insight into how customers use their products, and then offer data and/or intelligence back to that customer on how to gain more value from those products.
"The end of this period of disruption will bring a new set of norms, and it’s beyond belief that we will return to the days of simply shifting boxes..."
An example of this type of service is Siemens’ monitoring of the condition of airport baggage carts. The company gathers acoustic and vibration data from rail-mounted luggage carts around the airport and uses this data to assess the likelihood of breakdowns before they happen.
Breakdowns cost time and money. So spotting potential breakdowns in advance saves airport operators the penalties that must be paid when luggage isn’t loaded onto flights on time, and improves the passenger experience through the punctual delivery of baggage.We have seen a wealth of technically excellent digital systems like this. Most, however, have so far failed to be commercially viable and manufacturers have been reluctant to invest in and push them to customers. But in the current climate, that may change.
As well as opening up a huge new market opportunity, these services could be far more profitable than simply selling the products themselves. Such services can also develop enviable intimacy with and loyalty from customers as the provider is able to address their customers’ demands and problems much more quickly and effectively.
And now times are changing, the economic potential of services is becoming more visible. Indeed, remote support and performance advisory services – helpdesks, remote support for breakdowns, digital installations – provide obvious solutions in an age of social distancing, remote working and lockdowns.
Customers either want remote advice on how to fix problems themselves, or they want the manufacturer to remotely fix and upgrade their equipment. It’s not all about technology, of course – customers still value speaking to a person, just not face to face. But manufacturers no longer need to gamble as much on selling these new systems; customers actively are seeking them. Both parties are starting to look at the bigger picture, and services are proving vitally important to both.
For some time yet, change will be accelerated and hastened. The end of this period of disruption will bring a new set of norms, and it’s beyond belief that we will return to the days of simply shifting boxes. At the very least, business plans will need to include how to deal with disruption – whether it’s related to health, the economy or the environment.
The opportunities that this creates for services are potentially dramatic. Services are in the midst of radical change and, of course, we all look forward to returning to those long periods of relative calm. However, in so many ways, things will never be the same. Business models for manufacturers will have been disrupted, and there will be new and different conversations about the value of services. These business models have the potential to deliver huge value, and a level of resilience that we may never see again for production-based ways of competing.
- Read more articles by Tim Baines @ https://www.fieldservicenews.com/tim+baines
- Read more articles by Ali Zia Bigdeli @ https://www.fieldservicenews.com/AliZiaBigdeli
- Find out more about the World Servitization Conference @ https://www.advancedservicesgroup.co.uk/wsc2020
- Read more articles about servitization @ https://www.fieldservicenews.com/servitization
- This article first appeared The Conversation.com here
- Follow the work of the Advanced Services Group @ www.advancedservicesgroup.co.uk/
- Follow the Advanced Services Group @ twitter.com/theasgroup
A webinar hosted by Professor Tim Baines previewing September's World Servitization Conference will feature manufacturers exhibiting at the event and hosted on the 5th May 2020
A webinar hosted by Professor Tim Baines previewing September's World Servitization Conference will feature manufacturers exhibiting at the event and hosted on the 5th May 2020
The webinar, which takes place on Tuesday 5 March at 2pm (BST), serves as a digital preview to the forthcoming World Servitization Conference and will feature some of the manufacturers who will be exhibiting at the re-arranged event which now takes place in September - its original date in May having to be moved due to the Corona Virus pandemic.
The Increasing Importance of Servitization
The World Servitization Conference is in its first iteration of the a new event but already has an excellent pedigree being a natural extension of the Spring Servitization Conference which Field Service News has been a long standing media partner.
Run out of Aston University and hosted by the Advanced Services Group the global nature of this event in 2020 is testament to the increasing significance of servitization within industry - something that many are anticipating will be further increased by the impact of the Covid-19 pandemic.
The guest line-up includes:
- Chris Dodd, Managing Director, Assisted Living & Healthcare at Legrand UK & Ireland;
- Alec Anderson, Founder and Managing Director at Koolmill Systems;
- Lee Cassidy, Chief Executive Officer,Tactile Technology and
- Tim Hughes, Managing Director at CHH Conex.
As well as looking forward to September's conference, the webinar will look at manufacturing's relationship with servitization and how it might be affected in post-pandemic world.
You can register for the webinar here.
The World Servitization Conference takes place from 14 to 16 September at the NEC in Birmingham, UK. For more information on the event including details on how to register click here.
Industry and academia combine for new servitization event.
Industry and academia combine for new servitization event.
Rolls-Royce, Goodyear and Alstom will share with share their experience of growing business through services at the inaugural World Servitization Conference in Birmingham in May.
The World Servitization Convention, organised by The Advanced Services Group, part of Aston Business School, will see industry experts join academics to demonstrate the way that servitization can be used to transform the future of manufacturing through keynote speeches, developmental workshops and live demonstrations.
Some of the keynote speakers attending the event include Andy Harrison, Engineering Associate Fellow for Life Cycle Engineering at Rolls-Royce, Marc Preedy, Managing Director of Truck Replacement Sales in Europe at Goodyear, Mike Hulme, Managing Director of Trains and Modernisation at Alstom and Antony Bourne, President of IFS Industries.
Professor Tim Baines, Director of The Advanced Services Group and regular Field Service News’ contributor said: “What will set the World Servitization Convention apart from other conferences is the exhibition – or as I like to think of it, ‘Servitization Live’ – with demonstrations from businesses at the forefront of the business model.
“We will bring servitization alive with exhibits and demonstrations of advanced services and the technologies that enable them.”
Keynote speaker Andy Harrison, from Rolls-Royce, said: “The World Servitization Convention provides an excellent opportunity for businesses to network and learn about the benefits of advanced services from those already offering them.Servitization is quite prolific in the business world, but relatively few people recognise what it is. This event will be a great way to address that and encourage more companies to adopt the model.”
As official media partner of the event, Field Service News are able to offer our manufacturing audience complimentary admission by quoting code WSC20-FSN during the registration process which you can find here.
The next decade will see manufacturers come under pressure to ensure their processes are significantly more sustainable. But what role can service play in this shift? Through technology and servitization, Mark Glover discovers a strong will in...
The next decade will see manufacturers come under pressure to ensure their processes are significantly more sustainable. But what role can service play in this shift? Through technology and servitization, Mark Glover discovers a strong will in the sector to make a difference and to make it happen.
Professor Tim Baines’ is synonymous with all things servitization and advanced services as well as a long-term contributor to Field Service News. His Advanced Services Group are launching the World Servitization Convention in 2020 an exciting new...
Professor Tim Baines’ is synonymous with all things servitization and advanced services as well as a long-term contributor to Field Service News. His Advanced Services Group are launching the World Servitization Convention in 2020 an exciting new project Field Service News is proud to be working alongside. Here we speak to him exclusively to get the low down on what to expect...
When I joined Field Service News one word appeared more frequently in my browser and in-box than any others: servitization. Its resonance was affirmed by my Editor Kris Oldland; who, during one of our early induction meetings, explained the pivotal role it plays in modern manufacturing. Three months’ on, I flew to Stockholm, and then took a two-hour car journey to Linkoping where I was to attend a conference dedicated solely to the discipline.
So, it was during a coffee break I sat down with Tim Baines, Professor of Operation Strategy at the Aston Business School and a significant player in servitization’s evolution. I was pleased to have an audience with someone who could shed some light on an area that to a layman (me) can be slightly overwhelming. We both grabbed a coffee and one of the many excellent Swedish pastries on offer before finding a quiet corner to talk.
I started off (perhaps boldly) by explaining my slight surprise that a whole three-day conference on servitization existed; that universities have whole departments dedicated to its research – many of whom were here in Sweden presenting – and that academic papers on the subject are being circulated widely. “Business researchers observe industry,” Tim said, sipping his drink. “They’re looking for phenomena, which they are trying to conceptualize and describe and test their hypothesis and understanding. They ultimately arrive at a clinical description of what that phenomena is.”
The phenomena of servitization emerged from the marketing community in the 1980s, Tim tells me, with its first research work appearing in the European Management Journal. Sandra Vandermerwe and Juan Rada’s paper Servitization of Business: Adding Value by Adding Service was published in 1988 and the former is now credited with introducing the term ‘servitization’ to represent the addition of services to enhance a manufacturer’s commercial offerings.
However, the discipline went into incubation. That was until the 2000s when Tim, along with Andy Neely from Cambridge University and Raj Roy from Cranfield niversity respectively, were awarded a research grant from the Engineering and Physical Sciences Research Council (EPSRC) to resurrect its study. “We all put a lot of effort into it,” Tim recalls. “If you look at the citations; the academic citations on servitization; look at the highest cited papers on servitization, it was really down to our collective work.”
Thanks in part to the funding, as well as the efforts of Tim and his fellow academics interest in the discipline flourished both academically and in practice. Demand for a specialist, academic event grew and eight years ago the Spring Servitization Conference was born; its eight years testament to its growth and popularity. Its first incarnation was a workshop of sorts laying out the basic principles of what the group wanted to achieve; essentially something that was crossdisciplinary within a tight-knit, specialised community.
Tim explains: “The conference is a platform for people to network, to meet each other, to share those ideas, those insights, and to learn from a few carefully chosen manufacturers how they’re seeing the world. I think what we will see in a few years’ time, we’ll have a stronger group coalescing around the key topics. Ultimately, this is a community which could very well define an
equivalent of Industry 4.0 or Industry 5.0.”
“Don’t be put-off by the word servitization... all manufacturers can gain some value through service...”
Industry 4.0 discussions were a key part of that morning’s presentations. Chairing a debate himself, Tim asked panelists if servitization was part of Industry 4.0 or vice-versa? Away from the conference hall I pushed him on his own thoughts. “Most manufacturing companies,” he said, “would associate Industry 4.0 with what’s going on inside the factory. Servitization invariably is what’s going on beyond the factory gate. In reality servitization predates industry 4.0. It will exist concurrently, and in a few years’ time will be still going on and industry 4.0 will have come and will have gone.”
Aligning with the conference’s theme, Delivering Services Growth in the Digital Era, Tim suggests firms feel more comfortable adopting servitization as digital offered a layer of security. “Digital is de-risking, enabling those more advanced services to be offered with lower risk,” he says. “It’s making it easier for manufacturers to do it.”
The other driver, Tim continued, is a broader societal shift around service consumption superseding product consumption. “If you think about servitization; it’s not a question in my mind whether companies will make more money from services or less money from services – that’s an outdated question, an outdated conversation. It’s really a case in the way that society is going. We are consuming more services where the appetite is for more sophisticated services.” Sustainability, another large societal issue is also being bearing down on the servitization sphere.
Tim is hopeful that servitization - and industry 4.0 - can ultimately negate the environmental impact of material-heavy supply chains. He referenced a presentation that morning from Cranfield University’s Tobias Benjamin Widmer, who talked about the de-materialisation of the chain; reducing the consumption of raw materials while still achieving a desired outcome.
From that, our conversation naturally turned to regulation and the influence of Government on sustainability initiatives. Firm polices around electric cars, for example, would Tim Says, have an impact on the supply chains. “If the incentives are there for electric cars, why would you have a diesel manufacturing plant? If you don’t have a diesel manufacturing plant, then your whole supply chain evaporates.”
“Here’s an interesting one,” he smiles. “The number of rotational components in a diesel engine car: about 1,500. In an electric car: about 22. Now what’s that going to do your material supply chain?”
We finish our drinks, aware of the slow movement of delegates at they file back into the conference room, themselves refreshed by caffeine and pastries. I shake hands with Tim and thank him for his time, and we both agree to keep in touch.
The next day, I send Tim an email asking if he could possibly spare a copy of his book he wrote with Howard Lightfoot, Made to Serve. The book is seen as an excellent primer into servitization, and I said as much Tim in my email; how it could enhance my learning on a topic that I was beginning to find rather intriguing.
The book arrived in my mailbox a few days’ later; a good-looking tome with a striking cover. A contemporary, simple image of three factories, the middle one with a striking red path leaving its front gate; fanning in perspective to the base of the cover. I read the book’s preface: “Don’t be put-off by the strange word of servitization,” part of it said, “all manufacturers can gain some value through service.”
I recalled the interview in Sweden, when Tim told me about the early days of servitization; when people queried the term, wondering how you spell it, asking if they would make money out of these advanced services. “Now, we don’t have these questions anymore,” Tim had said.
What is a relatively young area of research, servitization now seems to be an integral cog of a manufacturer’s approach to revenue. As Tim suggested, technology will evolve and eventually become exctinct (Industry 4.0, for example), but servitization, as a theory and practice, will continue to grow alongside and compliment manufacturing. In short, making money from selling spare parts is no longer the revenue stream it once was.
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.
Mar 27, 2019 • Features • Advanced Services Group • Aston Centre for Servitization Research and Practi • Data Capture • Future of FIeld Service • manufacturing • Monetizing Service • Professor Tim Baines • Servitization • tim baines
Digital technologies, IoT and digitalisation have been big topics in the manufacturing sector. Combined with services, digital seems to be the answer for a multitude of manufacturing questions, if you take the hype at face value.
But for many manufacturers, digital actually raises more questions than it answers, with one particular question at the centre: how to capture the value of digitally-enabled services?
The Advanced Services Group at Aston Business School has recently released a whitepaper on performance advisory services, which aims to cut through the hype and provide clear information and insight into how manufacturers can make the most of digitally-enabled services.
Real business insight
In this whitepaper, we wanted to reflect real business insight and real business challenges. We invited senior executives from a range of manufacturing companies - from multinationals such as GE Power and Siemens to local SMEs – for a structured debate on digitally-enabled services.
The discussion and its outcomes formed the basis of the research for the whitepaper and helped crystallise the three areas that are most important to manufacturers:
1. Performance intelligence and data as a service offering;
2. How to capture value from these services;
3. How to approach the design process to achieve success.
What are performance advisory services?
The process by which a manufacturer transforms it business model to focus on the provision of services, not just the product, is called servitization. Generally, we distinguish three types of services. Base services, such as warranties and spare parts, are standard for many manufacturers and focus on the provision of the product. Intermediate services, such as maintenance, repair and remanufacturing, focus on the condition of the product. Advanced services take a step further and focus on the capability that the product enables.
In this framework, performance advisory services are situated in between intermediate and advanced services. Typically, these are services that utilise digital technologies to monitor and capture data on the product whilst in use by the customer. These insights can include data on performance, condition, operating time and location – valuable intelligence that is offered back to the customer, in order to improve asset management and increase productivity.
Why are they attractive to manufacturers?
Performance advisory services are attractive to manufacturers because they allow the creation and capture of value from digital technologies that are likely in use already. Take the example of a photocopier - with the addition of sensors that monitor paper and toner stocks, it can send alerts when stocks are getting low. This kind of data is valuable to the customer, as it will help improve inventory management and avoid service disruptions or downtime, but it is also valuable to the manufacturer in helping them understand how the product is used, providing data that they can use to re-design products or to develop and offer new services.
Making money from performance advisory services.
Performance advisory services offer the manufacturer the potential to capture value either directly or indirectly and there is a strong business case for either. Whilst charging a fee directly for data or a service provided is compelling, the potential indirect value for the manufacturer should not be underestimated, as it can yield not only greater control and further sales, but also new and innovative offers, as well as improved efficiencies.
"Performance advisory services are situated in between intermediate and advanced services..."
In the photocopier scenario, the data generated could be sold to the customer as a service subscription, thus earning money directly.
Alternatively, the manufacturer could use the data generated for maintenance programmes or pre-emptive toner and paper sales, thus earning money indirectly. In reality, however, direct and indirect value capture are likely to go hand in hand. A prime example of this is equipment manufacturer JCB, whose machines are fitted with technology to alert the customer if the equipment leaves a predefined geographical area.
For the customer, knowing the exact location of the equipment is valuable – as it may have been stolen. But it also greatly improves efficiency for the manufacturer when field technicians are sent out for maintenance work and do not lose time locating the vehicle.
Performance advisory services - just one step on the journey to servitization
Performance advisory services present a compelling business case for manufacturers looking to innovate services through digital technologies, in order to improve growth and business resilience.
With the immediate opportunity to capture value, these digitally-enabled services are a first step for many manufacturers towards more service-led strategies and servitization.
But that is what they are – just one step on the journey to servitization. Manufacturers looking to compete through services should not stop with performance advisory services.
In the environment of a more and more outcome based economy, it is imperative to understand the potential of taking a step further to advanced services and to recognise performance advisory services as a step toward this.
The full whitepaper Performance Advisory Services: A pathway to creating value through digital technologies and servitization by The Advanced Services Group at Aston Business School is available for purchase online here.
The world of academia and industry came together at the end of May to discuss the latest theories and trends in servitization at the Aston University Spring Servitization Conference. Held in the purpose-built Aston conference centre in the heart...
The world of academia and industry came together at the end of May to discuss the latest theories and trends in servitization at the Aston University Spring Servitization Conference. Held in the purpose-built Aston conference centre in the heart of the University and hosted by the Aston Centre for Servitization Research and Practice, the conference holds a unique position within the servitization community in bringing together representatives of both academia and industry. Kris Oldland was there.
Aston's own Professor Tim Baines is widely considered by many to be one of a handful of people at the very top of this field and he was joined by academics from across the globe from Helsinki, to Tokyo, from Hangzou to Glasgow. Industry was also well represented with companies of all sizes in attendance ranging from third generation family-run Nicklin Transit Packaging through to blue chip companies such as Air France and Goodyear.
“The purpose of the conference is best expressed as three objectives,” explained Baines. “Firstly, to bring the researchers in the field together to really consolidate the knowledge base around servitization, so where are we today with servitization.”
“Secondly it’s to bridge theory and practice, to bring practitioners into the mix, talk about their experiences and let the academics learn from that and vice versa.”
All too often the community of servitization is disparate and fragmented...
There certainly was a genuine buzz of community throughout the two days, which was greatly enhanced by the format itself. With no less than forty presentations being presented across two days the danger of death by PowerPoint ran higher here than at most conferences. However, the ten minute rule – strictly enforced by Baines and his colleagues - kept everyone on their toes and the sessions were well supported by a slick app which allowed for feedback and questions for each presentation. This added a good interactive element which kept the audience involved throughout.
The advantage of so many presentations, of course, is that there were a phenomenal number of talking points being generated from each session, so as we made our way to the networking coffee breaks each time the courtyard area was full of debate and discussion.
Whilst servitization is indeed gaining a lot of traction at the moment, it remains an unknown area for many or at best an area of confusion for others. In it’s simplest sense servitization is the shift from a traditional transactional manufacturing approach (whereby we build a build a product, sell it and then offer some form of aftermarket service to help maintain that product for a specific period of time) to a model where we build a product in order to sell the service itself.
Sony and Telemadrid
A great example of this approach is the brand new state-of-the-art system Sony Professional Systems Europe have just installed for Spanish news company Telemadrid, replacing an existing suite. However, instead of Telemadrid having to pay a big lump sum they are paying Sony on a pay-per-usage basis.
Instead of Telemadrid having to pay a big lump sum they are paying Sony on a pay-per-usage basis...
The benefits for Telemadrid are that they have a far more manageable cost line on their proft and loss sheets, they have access to the very latest technology and they need no internal technicians to service that technology. Most importantly, it is in Sony’s best interests to ensure that Telemadrid receive 100% uptime otherwise they will face severe financial penalties. Result: Telemadrid knows the service they receive will be reliable.
(For the full story on how Sony is transforming its service business in Europe read our in-depth two-part interview with John Cooper, Head of IT and workflow Management, Europe here)
This trend will continue as more and more companies are pulled into a servitization model by their customers. Rolls Royce’s power-by-the-hour is one of the best-known examples of the servitization model and was the direct result of American Airlines demanding such a service from the jet engine manufacturer some thirty years ago). Other companies are seeking to adopt a servitization model for reasons such as improving profits or differentiating themselves from their competition.
One company that has just made the transition to servitization is mining, utilities and recycling organisation Metso. John Cullen, Vice President of Marketing and Brand, was one of the keynote speakers at the conference and outlined how and why Metso had made the shift.
“At the moment I would say we are at the beginning of the process,” Cullen began. “We’ve actually been going through a process of servitization within our company but it’s a journey that started some three years ago when our services unit was put into a separate division having previously been attached to the different product businesses.”
But why have they made this move? In fact there were a number of different reasons that led Metso went this path. “There were a number of different drivers for us,” Cullen stated. From a customer perspective we weren’t delivering to our customers everything that they wanted. They were looking for us to take a more active role in their business processes and support them, where we tended to be very much more reactive.”
We had a lot of great service products within the company but they weren’t recognised because we weren’t selling them as a servitized products
“So we really needed to change the way we were doing things from being reactive to proactive. For us, it helps our business develop new revenue streams, but it also means we deliver a better service to our customers.”
The cultural challenge
Of course such a radical shift in business strategy needs not only the buy-in from the executive level but also from all members within the organisation. Something which can prove to be a significant hurdle for companies to overcome when moving to a servitized business model.
“When we presented these concepts they’ve actually been embraced by our people but one of the challenges is that we are changing the way people do their job in everything. So what we are asking people to do is throw away maybe twenty years of doing things and look at things in a completely different way and that’s hard for anybody to do,” explained Cullen.
One of the challenges is that we are changing the way people do their job...
It is, of course, a cultural shift for Metso’s clients too. It’s a big point of discussion: should companies try to roll out such an approach to all of their customers in one go or is it better to perhaps apply the Pareto principle and roll the changes out to those customers your closer to first?
For Metso the intention is to take the first approach although the reality of doing so isn’t particularly straightforward. “It’s an approach that we are trying to put out to every company but the practicalities are that we have to start with a few customers within various territories and then actually develop competence within the organisation to deliver,” Cullen explained.
“But it’s not something we want to limit,” he added, “It’s a culture and we want to change the culture everywhere.”
Look out for Part 2 of this report from the Servitization conference where we'll hear from Christian Kowalkowski of the Hanken School of Economics on how servitization has evolved over the past decade.