Kris Oldland, Editor-in-Chief, Field Service News talks to Ulrika Lindberg, Vice President, Global Service at Alfa Laval AB following on from her keynote presentation at the Spring Servitization Conference, about why having a customer-centric...
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Aug 01, 2018 • Features • Advanced Services Group • Alfa Laval • Future of FIeld Service • field service • Servitization • Servitization Conference • Through life Engineering • Ulrika Lindberg • Servitization and Advanced Services
Kris Oldland, Editor-in-Chief, Field Service News talks to Ulrika Lindberg, Vice President, Global Service at Alfa Laval AB following on from her keynote presentation at the Spring Servitization Conference, about why having a customer-centric strategy is key to developing advanced services...
One thing stood out very clearly when Ulrika Lindberg, Vice President, Global Service at Alfa Laval AB posted up her organisations mission statement during her presentation at the Spring Servitization Conference, hosted by Copenhagen Business School and the Advanced Services Group, part of Aston University in the UK, that was that even within this small, yet carefully crafted sentence which captures Alfa Laval's corporate identity, it is clear the value they place on their customers.
On the surface, it certainly seemed indicative of an organisation that already had a clear Outside-In philosophy with regards to how they view their relationship with their customers.
Against a backdrop of a conference where advanced services are the sole talking point, I was keen to see just how important Lindberg and her colleagues at Alfa Laval believe such a mindset is when seeking to establish service as a core strategy within an organisation.
“How important is it? Well it’s in our DNA,” begins Lindberg.
"Whilst we have a wide range of products, we have an even wider range of industries that we serve and we would never be able to do that successfully unless we understood our customers’ needs..."
“Part of the reason why that is, is because whilst we have a wide range of products, we have an even wider range of industries that we serve and we would never be able to do that successfully unless we understood our customers’ needs within their industry.”
“We need to understand how our products can benefit an industry and our customers’ within that industry - and if we don’t have that understanding then we wouldn’t be successful. That is how our whole company has grown, by actually finding where our products could benefit certain industries and how.”
“Some of our products, although customised are not that unique, but one of the things we’ve been able to be successful at is tailoring those to a certain customer or a certain industry.”
It is this industry knowledge, largely fed by a desire to get close to their customers and understand the challenges that they face that has become an intrinsic part of how Alfa Laval approach growth and development - and this is something that ultimately builds upon itself over time.
“The more critical it becomes for us to understand the needs of the sector, the bigger the industry becomes to us and then the further knowledge and insights we develop - which embeds us even further into the industry and into our customer’s processes,” Lindberg explains.
Of course, operating across such a wide array of vertical sectors means that Alfa Laval have to establish a flexible approach to their service offerings as what is good for the goose is not always good for the gander. This is something that becomes particularly prescient when we look at servitization.
One of the big discussions across the conference and beyond is whether there is a need for either a customer pull or a market in decline and in need of disruption for a company to successfully introduce advanced services.
We all see that data is going to be hugely important in the future and we need to build our services around that but I think that we have a lot of work to do to build on that“I’m not sure,” Lindberg responds, giving the question consideration when I put it to her.
“I think certain industries are more advanced and it is easier in those. Equally some geographies are more advanced and it is easier there also. Personally, I would say the geography dimension might influence more whether a company is able to introduce advanced services.”
"I think across the globe, in terms of data and analysing data, there is a big interest but I still think we are just seeing the tip of the iceberg in terms of the complexity this is going to drive in terms of who is going to look at the data and what kind of advice are they going to be delivering?"
"If we look at predictive maintenance who is going to be calling the customer and saying the service is required? If we need to go in and stop the machine what power do we have to do this in a critical environment for the customers where that maintenance might have significant consequences for the customer.”
“I think we all see that data is going to be hugely important in the future and we need to build our services around that but I think that we have a lot of work to do to build on that. The appetite for this is big all around the globe, but the most critical question is 'are we ready?' That is the question I would suggest most companies need to be asking themselves.”
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Jul 24, 2018 • Features • Advanced Services Group • Andy Harrison • Aston Centre for Servitization Research and Practi • Future of FIeld Service • field service • Rolls Royce • Service Management • Servitization • Servitization Conference • Through Life Engineering Services • Servitization and Advanced Services
Rolls Royce’s Andy Harrison has been playing a pivotal role in the Through Life Engineering Services Centre’s work in putting together a blueprint for how organisations can establish advanced services capabilities - a topic he recently discussed...
Rolls Royce’s Andy Harrison has been playing a pivotal role in the Through Life Engineering Services Centre’s work in putting together a blueprint for how organisations can establish advanced services capabilities - a topic he recently discussed at this year’s Spring Servitization Conference. Kris Oldland sat down with him to find out more...
When the topic of servitization comes up it is usually only a matter of time before Rolls Royce and Power by the Hour is mentioned. Indeed, Rolls Royce alongside a select number of other organisations such as Caterpillar and Alstom have essentially become the de-facto poster boys for all things advanced services.
Who better then, to lead a multi-organisation committee created to help distil the complexities of servitization into a meaningful framework than one of one of their key service executives, Andy Harrison, Engineering Associate Fellow - life cycle engineering?
But what exactly is the Through Life Engineering Services Centre, which Harrison heads up?
“For a number of years here in the UK we have had a group of companies get together around through life engineering services. In essence, a sort of working club made up of people working in the services space and in particular services around complex long-life engineered products,” he explains.
“For a number of years, we had struggled to get a framework diagram around what we meant by that this particular space. Then in mid-2016 the EPSRC Centre for Innovative Manufacturing Through Life Engineering Services, which was run out of Cranfield and Durham Universities, issued a strategy paper which called for the creation of a national council - something we have subsequently created.”
So what is the key function of this council?
One of the challenges we have taken on has been to develop a relatively simple explanation of what exactly through life engineering services are“One of the challenges we have taken on has been to develop a relatively simple explanation of what exactly through life engineering services are,” Harrison explains.
“In addition to this, we have also moved onto tackling the question of what a national educational program within this area would look like. If we wanted our engineering graduates to arrive at the doors of organisations already understanding the value of through life support, which we think is 16% + of GDP, then what would that involve?”
It’s an ambitious project, but one that is absolutely critical as we see economies both in the UK and beyond become increasingly more service-centric and Harrison has played an integral role in fulfilling the council’s vision, which is now coming together at pace.
“I’ve led the working group that has put that framework diagram and the education program that goes around it. That is in the process of being embodied into a publicly available specification by the British Standards Institute and it is due for publication sometime very soon,” he comments.
“Essentially what we’ve got is a framework diagram that outlines the topics that make up this thing called Though Life Service, then dividing those topics into further subheadings with information and direction as to what a company would need to know to understand each of those sub-headings.”
In fact, one of the highlights of The Spring Servitization Conference, held this year in Copenhagen, was when Harrison very eloquently and concisely walked the attendees through this framework.
“Basically, the framework diagram is essentially setting the scene when we talk about this space,” Harrison explains.
It’s a way of thinking about the big picture and breaking it out into commonly described terms so that when the industry practitioners review the academic material they have a frame of reference“It’s a way of thinking about the big picture and breaking it out into commonly described terms so that when the industry practitioners review the academic material they have a frame of reference - they can look at it and say ‘OK so this is addressing this part of the equation.’”
This is a huge part of the discussion that needs to come to the fore if the worlds of academia and industry are to fully align around the concept and strategies of servitization - a common language is essential. This is also why the bringing together of a number of different companies from disparate sectors to work on this project alongside Harrison and his team at Rolls Royce is also imperative.
“The fundamentally important part of this is that if you let any one organisation try to write this they would do it in their own language in their own context. It might work for them but it is unlikely to work for a broad range of companies,” Harrison explains.
We have deliberately forced ourselves to argue how to get this down to a small number of items“We have deliberately forced ourselves to argue how to get this down to a small number of items,” he adds.
Within the framework itself, the group has essentially identified three core areas of activity.
“Firstly, there is the business context where the sub-elements are all centred around if and how you understand your customers. Can you identify with them the value opportunities are - and this can be either getting more work out of a machine or spending less money obtaining that work,” Harrison begins.
“Do you have the organisational set up to deliver these benefits and do your customers have the right set up to receive those benefits? Do you have all of the underpinning capabilities that are required such as the consumable elements you need to deliver this level of service - for example, can you model x and predict y? Can you gather the data required? Do those things exist and do you have them within your organisation? We then have to consider what are the service value streams that you have to offer? We divide that up into four streams which are avoid, contain, recover and convert.”
The road to servitization is challenging and the journey for every company of course slightly different reflecting the unique needs, processes and goals an organisation may face“Avoid is can you change the reality of how much damage the product is accumulating and the likely consequences of that? Contain is about an organisation's ability to step in and make the decisions around when and what to do as intervention activities - so there is no physical activity in this step, it is all around decision making. Recover is your ability to re-inject life back into the asset, through overhaul, repair and inspection. Finally Convert is about your ability to take the experience that you gain in the other three and to generate additional value out of those.”
“The final dimension is the basic life-cycle of the product and the service which talks about the need for planning throughout the life-cycle, the creation process of your products and service, standing up ready for operation, the operational activity of making the products and delivering the support service and eventually the retirement phase of the downturn of the supply chain, the de-commissioning of assets and the eventual retirement of the entire of service offering around them.”
The road to servitization is challenging and the journey for every company of course slightly different reflecting the unique needs, processes and goals an organisation may face.
However, the framework Harrison and his peers have put in place does an excellent job of signposting the way, to help companies navigate the path successfully.
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Jul 20, 2018 • Features • Management • Ali Bigdeli • MAN UK • Ishida • Rolls Royce • Ross Townsend • Servitization • Through Life Services • tim baines • The View from Academia • Servitization and Advanced Services
Servitization is becoming a huge topic in the field service sector as we see more and more organisations step on a path towards advanced services we must realise that they cannot do it alone, their customers must be prepared to come along on the...
Servitization is becoming a huge topic in the field service sector as we see more and more organisations step on a path towards advanced services we must realise that they cannot do it alone, their customers must be prepared to come along on the ride as well...
Ross Townshend, EMEA Business Manager - Advanced Services & Data for Ishida Europe talks to Kris Oldland and outlines some of the challenges he has faced in building advanced services within his organisation...
The topic of servitization is of course highly complex and for those just starting to explore the area, it can be a daunting prospect to get one's head around. However, Ross Townsend, Advanced Services Business Manager, Ishida has had been able to get a bit of a head start by not only arriving into an organisation that has already embraced the idea, but that is also working with the Advanced Services Group, headed by Professor Tim Baines, Aston University, one of the leading proponents and thinkers within the servitization movement.
Kris Oldland, Editor-in-Chief, Field Service News caught up with Townshend to find out how he is adapting to a world of servitization some six months into the job…
“Before I joined servitization was something I knew nothing about,” states Townshend as we begin our conversation.
This was one of the key reasons I was so keen to speak with Townshend in the first place.
Pleasant and approachable, Townshend is one of those people that you find it instantly easy to talk to. A very subtle hint of slight West Country burr to his accent adds an earnestness and integrity that could be perhaps lost in the international world of servitization, but for us here in the UK, it is noticeable and adds a natural ease to Townshend’s manner.
Certainly, what comes across even within just a few moments of speaking with him is that he has that key ingredient that all great service people have, he is able to communicate effectively and eloquently within a comfortable use of language that feels all the time natural, relaxed and honest. In my experience people with such a manner, often speak with authority in areas they know well and integrity and humility in areas in which they are slightly less surefooted.
As part of the Advanced Services Group, Ishida and Townshend will be working alongside the like of Prof. Tim Baines and Dr. Ali Bigdeli.In the context of this conversation then it would be interesting to not only hear his thoughts and gain his insights on how Ishida are approaching servitization, but also to understand first hand how daunting it was to leap into this baptism of servitization fire that few elsewhere have had the opportunity to do.
In Ishida, Townshend has arrived in an organisation that has fully embraced servitization, his former colleague Jason Smith is the only man I’ve personally met who has been involved within two separate companies moving to a servitized business model and as part of the Advanced Services Group, Ishida and Townsend will be working alongside the like of Prof. Tim Baines and Dr. Ali Bigdeli.
So whilst he may have to endure a baptism of fire to get him up to speed, he has some heavyweight support to help him get through it.
“When I look at the transformational roadmap that the Advanced Services Group have created, we have this cycle that we are going through exploring it and trying to work through it,” Townshend explains.
However, it has not been plain sailing for Townshend and the team at Ishida to introduce advanced services to their market - and the reluctance of the market itself is something Townshend thinks could be a factor, having arrived from an entirely different vertical that was further along the road in terms of acceptance of servitization and digitalisation.
Whilst that is a separate issue to the conversation around servitization in a way it does add some context to the arena we are working in“I’m not from the food industry most of my work was in automotive having worked with Bosch Rexroth for a number of years with a background in design engineering, product management,” Townshend explains.
“In terms of the digitisation side of things generally, I find the food industry is massively behind and that’s not just in terms of technology but also in terms of mindset to work with technology. Whilst that is a separate issue to the conversation around servitization in a way it does add some context to the arena we are working in. It can be a frustration even just to get the software adopted let alone the advanced services longer term,” he continues.
“In terms of why the business is diversifying into advanced services is another interesting point. I view this as a journey for a manufacturer and then also as a journey for a manufacturer within the food sector. The suggestion would be that we are a long way down the journey but I think we are still packing the car up at the moment – we haven’t even actually started on the actual journey yet.”
“A part of that is the fact that we are in the food sector, where the adoption of technology is somewhat lagging behind where it is in other sectors.”
“Also the food sector is the largest, it's highly profitable and its growing. We are growing double digit year on year so why would we diversify?”
Of course, the food sector is one which by the very nature of the products it generates will always remain transactional. There isn’t a service contract that can be sold on a packet of oven chips. You buy them, you eat them, then you buy some more.
I wonder if the fact that Ishida’s customers themselves will always have that transactional relationship with their customers is in part responsible for creating a mindset that is hard to overcome in terms of raising conversations around outcome-based contracts?
“I think it is,” Townshend concurs.
At the moment as part of our work with the team at Aston are trying to find pilot customers to establish a proof of concept and even that is proving to be a significant challenge“At the moment as part of our work with the team at Aston are trying to find pilot customers to establish a proof of concept and even that is proving to be a significant challenge. We have had conversations with a couple of parties where we thought OK, we’ve got a reasonable amount of equipment in there, you could argue that we’ve got a fair amount of ownership of the process which is quite critical when you're looking to establish this type of working agreement."
"They have five or six pieces of machinery in a line so we can really add some value there and take ownership of that process and work towards what we would ultimately be our vision of a servitized contract which internally we are terming pay-per-pack, which is the holy grail for us in terms of advanced services to achieve this pay per pack model. Securing a pilot has been very difficult.”
“We had a large manufacturer of salad that we were speaking to and they showed interest. We had a meeting with them and their senior directors and they could certainly see the mileage but as it is in the case of lots of businesses they are too busy to be able to really think about it and they don’t really need it at the moment.”
This is an interesting point here.
In the case of Rolls Royce’s power by the hour there was a strong customer pull from American Airlines. In the case of MAN UK there was a huge backdrop of hauliers and logistics firms struggling to make a profit.
Perhaps the burning platform factor is a necessary element in the equation for creating an environment in which an approach to business that steps as far away from the traditional path as servitization does. It is perhaps far less easy to be a driving innovative force in an industry that is profitable and ticking along nicely.
As the old adage goes if it ain't broke…
I do think that the sector you are operating in is one factor in the ability to drive something innovative like servitization forwards“Whilst I absolutely won’t take anything away from the achievement that companies like Rolls Royce or MAN Trucks have managed, I do think that the sector you are operating in is one factor in the ability to drive something innovative like servitization forwards. Another area to consider within there success also is that they have complete control of the process,” Townshend says expanding on the discussion.
“In our industry and with our customers, at best there may be one significant chunk of a production line which is our equipment. If they are a major manufacturer they will certainly have other lines that are our competitors' machines or they will have a line with six different manufacturers equipment in them so certainly whatever we do needs to be scalable, unless we go in and basically say 'we will provide you with all the equipment for your factory'. Unless your in the lucky position to be on a greenfield site where you're in the right place at the right time that is very difficult to achieve.”
Signs of an emerging appetite for such advanced services are beginning to appear as Townsend recalls one such example.However, signs of an emerging appetitie for such advanced services are begining to appear as Townsend recalls one such example.
“A big dairy producer approached us within the last six months and they were looking for a supplier that could take on all of their quality control equipment, on every site across Europe. They were looking for one supplier to look after everybody's equipment service maintenance in the full acceptance that that is a very difficult job and while you're going through that period of changing out equipment it is going to be a difficult thing to manage.”
“But it is interesting that they were asking that and the reason they were doing so was that they didn’t want the hassle. Clearly they of course also wanted a good price but they accepted that this removal of the hassle came at a premium. Also financially to them, it would be more visible on their books versus the huge maintenance and hidden costs that they would have to deal with on a daily basis.”
“And they were going to several suppliers and there was a huge team of people set up to go and find the right supplier for this so they took this very seriously - it wasn’t just one person’s crusade.”
So clearly there is at least the seeds of some companies looking for servitization from providers within the sector“They’ve gone through the analysis at their end and decided that outsourcing this area of their business was the direction they wanted to go. So clearly there is at least the seeds of some companies looking for servitization from providers within the sector."
“This organisation is clearly looking to remove the headache of maintenance for them and the next logical step along that path would be some form of advanced services contract where maybe you go in there and say, yes, we can take on the entirety of your maintenance contracts and we can take all of our competitors machines out and put ours in but it will be on a cost per usage basis. It’s a big leap forward but it certainly follows that path."
However, until that one customer makes the leap that pulls the entire industry forward it is perhaps a wiser move to bring customers with you on the journey in a more incremental manner.
This is certainly how Townshend is approaching the task…
“The direction I am taking with the business is to start to bundle in certain value added functions and features to start to drive some customer pull and start at a lower level than pay-per-pack just to get the appetite there. I used the term holy grail and the problem is it is just that it is just too far away for our customers to grab. They get it and they go wow that’s good but they have no idea about how to move forwards to implement it.”
The move to advanced services needs to be a symbiotic relationship, it needs to be something that you go to your clients with and they come with you on the journey. Whoever leads that journey whether it be a customer pull or a client push you both need to be going on that journey at the same time.
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Jun 25, 2018 • video • Features • Management • Jonas Granath • Polyflow • Polygon • Risk Management • Enterprise Service Management • field service • field service management • IFS • IoT • Service Management • Servitization • Servitization and Advanced Services
Kris Oldland, Editor-in-Chief, Field Service News talks to Deputy CEO and COO of Polygon a company with over 3,500 field service engineers, about how his organisation has evolved over the last decade, the shift towards advanced services that has...
Kris Oldland, Editor-in-Chief, Field Service News talks to Deputy CEO and COO of Polygon a company with over 3,500 field service engineers, about how his organisation has evolved over the last decade, the shift towards advanced services that has come from that evolution and how a close working relationship with Enterprise Service Management solution provider IFS has empowered their ability to develop and advanced services approach to field service delivery.
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Annick Perry, Senior Project Manager, Noventum gives us some insight into the findings of a recent research project that Noventum and Aston Universities Advanced Services Group have undertaken to look at Advanced Services Trend within...
Annick Perry, Senior Project Manager, Noventum gives us some insight into the findings of a recent research project that Noventum and Aston Universities Advanced Services Group have undertaken to look at Advanced Services Trend within Manufacturing...
In a joint research study with the Advanced Services Group, a centre of excellence at Aston Business School, Noventum explored how five societal ‘Megatrends' bring opportunities for business growth for manufacturing companies through advanced IoT enabled services.
The five societal megatrends we explored in this research are:
- Value change: The increasing importance of transparency, diversity, individualisation and freedom of choice, as well as demand for meaning and connectedness.
- Green and resource scarcity: The increasing consciousness of manufacturers when providing products and services to fulfil human development and at the same time take care of the natural system.
- Health and Aging: An ageing society and the increasing importance of healthy living and lifestyle.
- Globalisation and the need for community: The increasing emphasis on communities, localities, etc. to foster identity in light of a globalised world.
- Inequality and Social Exclusion: The increasing market share of poor customers, means reducing the complexity and cost of a good and its production. Designing products for emerging countries may also call for an increase in durability and when selling the products, reliance on unconventional distribution channels. Globalisation and rising incomes in emerging countries may also drive frugal innovation, which implies that services and products need not be of inferior quality but must be provided cheaply[/ordered_list]
In this article, the focus is on just one of the Mega Trends ‘Value Change’ which provided some interesting insights on how this will impact the manufacturing industry.
Customers’ perceptions of value are changing
Consumer habits are changing, we are becoming more tech-savvy, and less connected to ownership of products and, in favour of experiences delivered by service providers operating new business models, like Airbnb. Expectations of a personalized experience are higher, which means companies must respond to customers’ needs faster and in a unique way. This change is passed on by B2C customers towards their B2B suppliers and partners. For manufacturers, this means staying alert and being proactive. As Anders Mossberg of Scania Trucks stated in our study, “Talk to your customers’ customers because they are the ones that will drive the trends in the future.”
Customers want to Buy Everything as a Service
Manufacturers are recognising the need to find new ways of offering value to customers. Their offerings are changing from a product focus to a service focus, which emphasises providing the customer with the capability to achieve their business goals, instead of emphasising product features. They are now competing through a combination of products and services, enabled by technology, tailored to meet the customer’s needs. Rolls-Royce, for example, sells hours of flight time for its jet engines rather than the more traditional purchase of the engine. These are more sophisticated, higher-value contracts, based on outcomes. They are also higher risk for the manufacturer but with higher potential to create a competitive advantage.
New technologies enable to respond to changing needs
New developments in technology are enabling the value chain to be redesigned. Embedded sensors and processors in assets and devices are increasingly capable of transmitting data to control centres to signal the need for repair or refurbishment. Research participants cited the introduction of driverless vehicles, some of whom mentioned that this is already a reality in some situations, and will increasingly be the case in the future. It will provide the opportunity for companies to take leadership and redesign the value chain to increase efficiency and added value. New configurations of networks allow companies to redefine their role in the value chain.
A transformation is needed
Delivering such advanced service requires fundamental changes in the manufacturer’s operations, relationships, organisational structures and potentially a change in their culture. Denis Bouteille of Fives addressed this in our study by saying, “Talking to the customer, we need people who can really develop the empathy, the listening and the deep understanding.”
Conclusions of the research on societal ‘Megatrends’
This exploratory research concludes that societal megatrends can drive opportunities for manufacturers to compete and grow through advanced services. To realise those opportunities, it’s important that companies exploit the implications of new trends together with their customers and explore what the impact of societal trends might be for future needs. The megatrends explored in this research show a significant potential for companies to develop advanced services and strengthen the competitive position of companies. However, some key factors need to be taken into mind when manufacturing companies take the decision to invest in developing advanced services.
1. Before companies can start developing advanced IoT enabled services…..
- Top management needs to support the development of advanced services and provide clear leadership to staff in the mindset appropriate to the development of the new capabilities[/unordered_list]
2. Stay close to your customers to identify opportunities for advanced IoT enabled services by understanding how value perception and needs are impacted by societal trends
- Understand your companies role in tackling global social and environmental challenges
- Explore the opportunities of the ‘circular economy’
- Recognise the impact of IoT on your customer's value chain
3. When you are developing the business models around advanced services make sure that:
- The tacit knowledge of the very experienced but ageing workforce is transferred into technical solutions to deliver advanced services
- Your company thinks global, but acts local and delivers a superior customer experience
Want to know more? Download an executive summary of this research and learn how the other societal trends can bring business opportunities. @ http://fs-ne.ws/dOId30iepLh
While for many the shift from traditional transactional product focussed business models to a more strategic service centric approach that focuses on longer term, outcome based contracts is a complex process to navigate. However, Jason Smith,...
While for many the shift from traditional transactional product focussed business models to a more strategic service centric approach that focuses on longer term, outcome based contracts is a complex process to navigate. However, Jason Smith, General Manager, Aftersales, EMEA for Japanese food packaging and weighing manufacturer Ishida is a man that has not only been through the process, he has done it twice.
Kris Oldland, spoke exclusively with him about the importance of executive level buy-in to undertake such a move and why customer selection when rolling new service models out is vital….
KO: All too often I hear that despite the fact that service operations of a business brings in a significant proportion of revenue into a company, there is a general lack of support for the service team of many businesses at the top tier executive level.
This of course would be a fundamental barrier to moving to an advanced services model and is a challenge many senior service executives are confronted by even though they can see how both their business and their customers could benefit from a move away from the traditional break-fix maintenance to the type of proactive service operations that advanced services require.
So how can we get the voice of the service department heard at the executive level?
JS: I think the only way to do that is to have a fairly compelling argument and there is nothing like having a very compelling customer story to help give that leverage at board level. Traditionally, businesses are built upon delivering a product and they will have done that very successfully to have grown to a large size. It is the case really that they will have done so on tangible benefits.
I think within most manufacturing organisations there is still probably a lack of understanding about the value services can deliver to a customer combined with a product
Its still regarded as a separation – that’s why we have terms like aftersales – it’s after the sale, its not combined with the sale.
For your typical product salesman it’s hard to comprehend something as intangible as advanced services and how to explain it and describe the value when he hasn’t got any evidence or experience to back it up with.
KO: So does the adoption of servitization as a business model need to be driven from the top down?
JS: Absolutely, without that support from the top it is dead before it’s ever started.
KO: What about the customer point of view - it’s one thing pushing an advances services route and getting buy in internally, but what about externally?
Is it a case that some customers just don’t want to come down this route because they are so used to the transactional nature that they have always operated within?
JS: Very much, it is a cultural thing for a customer and customer selection is therefore very important.
A customer who is used to transactional relationships, that may have those pressures on them themselves from their own customer base, would be one who is very transactional and possibly looking to exploit the relationship.
I think customer selection is absolutely vital. The question is along the lines of technology push/customer pull – which is best?
Therefore, I think customer selection is absolutely vital. The question is along the lines of technology push/customer pull – which is best?
I think it depends very much on the pace at which you want to work. Customer pull you lose control of the pace and velocity at which you want to work at in terms of the delivering the service. But if you push it out to your customers you have the challenge of convincing them to get on board.
KO: Ultimately will there always be two-tier customers, will there be those companies that you take on the servitization journey with you and those that remain doing business in the traditional sense or is the long term aim to eventually bring everyone on board with advance services?
JS: I think there is really three types of customers and I would support the Caterpillar approach that there are those who want to do it themselves, those who want us to do it with them and those who want us to do it for them.
In terms of servitization probably you are always going to have an element in each of those three camps. The challenge that we face as service providers is moving them out of the ‘do it myself’ to ‘do it with me’ to ‘do it for me’.
Obviously moving them from a point where they are doing it themselves, to where you are doing everything for them is a big leap of faith. It’s not something you can do overnight, certainly not at a risk that you can sustain economically. So it’s a case of migrating that customer and building that trust over a period of time, to gain the confidence that you can deliver and that you can add value to their business.
KO: We touched on the fact that servitization needs to be driven from the top down, but do you need buy-in across the whole organisation as well?
For example with our field technicians - do we need their understanding of the concept and if so how do you achieve that?
JS: The easy answer to that is yes, you need buy in across the whole organisation because you are going to be relying on those inter-siloed relationships within the business to deliver within your promise. You’re going to have to rely on your supply chain and you’re going to have to rely on all your internal supporting departments to deliver that.
It is a fundamental change to the way you do business and the way you have done things traditionally, so yes the answer is yes you do need to have buy in from all levels and in particular your service engineers
There will be a lot of knowledge in those teams, which is experiential and built up over time together with product training and in some ways you’re starting to both capitalise on their experience but also put it in a bottle so that you can use it in your supporting systems and algorithms for example.
That represents a fairly big challenge and that’s also going to have it’s own implications for supporting systems such as knowledge management.
KO: Finally, technology is the key enabler to allow us to move to advanced services, but how far along the journey do you think we are in terms of the development of the technology such as IoT and Cloud? Are we there already or is there more to come?
JS: In terms of being enabled to do the job and to support the decision-making within servitization I think we are actually there with the Internet of Things. OK, there will be enhancements, maybe faster connection times, you can store more data etc., but I think it is essentially there.
We’ve got enough to be able to do it, maybe even too much.
The real challenge is what you are measuring, the volume of what you are measuring, how you analyse it and draw conclusions from it -to me that is the real challenge.
Also the prize is that the value of the analysis that you do is metamorphosed into the value that you can then create for your customer. How you do that, that methodology, is your future IP. That’s where your sales proposition will lie in the future.
So its not the fact that you can get the data, its what you measure, how you measure it and more importantly how you analyse it, what you do with it and being able to express that value in a manner which the customer can fully understand.
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In his leader for this issue, Kris Oldland discusses the challenge in finding a metaphor powerful enough to reflect the potential transformation that is happening in field service organisations across the globe...
In his leader for this issue, Kris Oldland discusses the challenge in finding a metaphor powerful enough to reflect the potential transformation that is happening in field service organisations across the globe...
The title came to me easily enough and it is in evidence all throughout this issue. Advanced Services is a field/movement that is advancing at rapid pace.
But how best to convey this in the artwork?
In my mind the shift towards Advanced Services is growing in momentum and as it begins to hit the tipping point it will become an unstoppable force, driving into every corner of business, across every part of the global economy.
Well as ServiceMax CEO Dave Yarnold comments in our exclusive interview on page 24 “Of course outcome based services makes a ton of sense to customers. It’s far more balanced, it’s what customers want.”
Ultimately, this is why Advanced Services will flourish. Because it brings balance to relationships between service providers and their customers, and in doing so brings benefits to both. I remember someone telling me once that a good negotiation is where both parties feel like they have lost something. Where both have had to make some concession to the other.
Advanced Services is perhaps the first business model I’ve come across where that actually doesn’t hold up.
So one of my first thoughts around the artwork was something like a tidal wave or tsunami. A great unstoppable force of nature that would sweep everything before it, leaving space in it’s wake for rebirth - rebuilding and replacement of the old ways with something new.
However, I felt that this imagery was to destructive, to uncontrollable, to urgent. One thing about the Advanced Services movement is it has been patient. Patiently waiting for cultures and technologies to catch up since at least the mid 60s when Rolls Royce were forced by American Airlines to come up with a new business model because the old one wasn’t working.
Now that the time is finally right for Advanced Services to take hold it will be much more of a steady march ever onwards than a flash in the pan incident.
Which lead me to the imagery that I settled on, although I still had considerations around whether the image of an army walking across a battlefield was right to convey something that as I mentioned previously, is a movement that brings balance to the force provider/consumer relationship?
After consideration I realised that of course an advancing army isn’t always one of invasion and oppression but alternatively can be one of liberation and freedom.
OK maybe I’m taking the metaphor too far here, but essentially the companies that have pioneered the SaaS model in the software industry such as Salesforce absolutely broke the chains of monopoly that were restricting all but the biggest players.
Whilst the likes of IBM, Microsoft and Oracle mocked the Cloud, innovative start-ups were getting a head-start, reinventing the game so both they and the customer had more control and freedom than ever before- which ultimately pushed the need for innovation across the whole industry, leading to mass disruption.
You can bet that large manufacturers and others have watched this development across the last decade and a half keenly and are looking to see how they can be sure they are on the Advanced Services train, so they don’t get left behind playing catch up, like the big players in Software had to.
Of course, that’s the other flip-side of the cover image I opted for. Ultimately it does invoke thoughts of a battle or war and in such conflicts there are always winners and losers.
I can’t help but feel that right now we are at a pivotal time in the history of enterprise.
I see us at a fork in the road where those companies who take the right path now, those that embrace technologies like IoT and business concepts like Advanced Services will truly flourish across the next decade.
And as for those companies that don’t... I have just one word of advice.
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Faced with high fuel costs, congestion, driver shortages and changing delivery patterns, the UK road transport industry has to change radically to improve profit margins and survive. Servitization is the solution, recommends this report by...
Faced with high fuel costs, congestion, driver shortages and changing delivery patterns, the UK road transport industry has to change radically to improve profit margins and survive. Servitization is the solution, recommends this report by Eleanor Musson and Dr Ali Bigdeli of the Aston Centre for Servitization Research and Practice
The road transport industry is crucial to the UK economy; 68% of freight goods are moved by road according the UK's Department for Transport Transport Statistics 2014. But the industry faces the challenges of fuel costs, driver shortages, congestion and regulation. Moreover changing consumer behaviour in the UK is turning the industry on its head; 74% of adults bought goods or services online in 2014, compared with 53% in 2008, according to the Office for National Statistics, Internet Access in Households 2014, and the demand for flexible, fast delivery is growing rapidly according to the Guardian newspaper. These are just some of the factors behind the low profit margins in the industry: 3% for operators , reports the Freight Transport Association in its 2014 Logistics Report, and 6% for manufacturers.
This industry has to change radically. There is little to be gained from piecemeal changes to products or pricing; the customer’s priorities and requirements must be placed at the heart of operational strategies. This is achieved through what we call advanced services, which are implemented in an organisation through servitization. Advanced Services are provided by manufacturers and technology innovators with an intimate understanding of the customer’s business priorities, and their difficulties in achieving these. They are a package of a product, and the services that go around the use of the product, consumed as a single offering, which help the customer achieve its requirements.
In order to understand how advanced services and servitization are being adopted in the road transport industry, we interviewed a panel of senior executives from within vehicle manufacturers, component manufacturers, operators, fleet management companies and technology providers, and we outline some of our findings here.
There are three categories of advanced service currently been offered in this industry: [ordered_list style="decimal"]
- The first is vehicle condition and safety related services. Real-time reporting about the condition and performance of the vehicle helps the service provider (e.g. manufacturer, fleet management company) to see how the vehicle is being used by the customer, which mitigates the contractual risk and gives opportunities for service and product improvement. Data are used to help fleet managers monitor costs and identify problem vehicles, either by sharing the information with the customer, or by the manufacturer providing this function as a service. For fuel efficiency and safety, manufacturers test tyre pressure and tread depth, with real-time reporting to alert drivers to problems, and service operatives on hand to make repairs or replacements.
- The second type of services is driver-related services. Through the use of telematics, the manufacturers and operators are able to assess how the truck is being driven, to examine any incidents such as harsh breaking, speeding and idling, and to inspect driving and rest periods. This data is analysed to identify training requirements and in some cases pay performance bonuses.
- The third type is route planning and delivery services. Real-time reporting allows operators to manage routes, taking into account live road conditions. Data on deliveries made compared to schedule and route information enable managers to identify opportunities for improvement.
Advanced services have a three-fold impact in the industry:[ordered_list style="decimal"]
The greatest efficiencies are achieved by maximising the uptime of vehicles, planning routes efficiently, and processing orders. To illustrate:
• The use of technologies and data by skilled route planning staff reduces mileage driven by up to 10%
• Uptime is maximised by reducing roadside failures thanks to greater visibility of the vehicle, its condition and how it’s being used
• Operators can expect at least a 5-15% reduction in vehicle maintenance and service costs as a result of condition monitoring according to telematics specialist Microlise
- Safety and better image
Driver-related services have had a significant impact on driving standards, and in turn the image of operators and the industry. In this regard:
• Microlise reports customers see annual reductions in speeding incidents of up to 90%, and a reduction of up to 60% in the number of accidents.
• The same report states operators are seeing a 5-15% reduction in carbon emissions as a result of optimised routes and better driving.
- Cost Savings By enabling improvements in driving performance and better, more informed route planning, technology is helping to deliver cost savings in terms of fuel usage. According to the Freight Transport Association's Manager's Guide to Distribution Costs, fuel represents on average of 30% of the cost of a vehicle . The average unit costs £49,000 per year in fuel. Microlise reports an average 10% (£4-5000) saving on each unit’s fuel consumption being achieved by customers using driver management and training tools.
While the leading organisations demonstrate what can be achieved, our research demonstrated that advanced services are not being adopted universally or uniformly in this industry. In order to accelerate this, we recommend that manufacturers ensure advanced services are properly led and embedded. Servitization is a wide ranging, complex process that requires transformation and coordination of an entire organisation. In most companies, it doesn’t fit neatly within the realm of one department. Just like any other organisational change, servitization needs a champion to lead it and generate buy-in across departments.
Servitization provides an opportunity to ‘be closer to the customer’ which can also be facilitated by innovative pricing models which assure the prospective service user of the level of commitment, and create alignment of objectives between service provider and user. Selling and supporting services is a very different proposition to selling products, requiring different skills and reward structures. Manufacturers will need to invest in training their staff, and consider the incentive and reward structures that will generate the desired outcomes.
The full whitepaper report Delivering Growth can be downloaded here:
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