Is servization a growing characteristic of UK manufacturing? How does a company become servitised and who does the model apply to? Professor Tim Baines of Aston University’s Centre for Servitization Research and Practice explains.
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This interview was conducted at PTC’s recent European Executive Connect event for users of its Service Lifecycle Management solutions.
Read more about this event here and look out for more news on SLM developments when TM attends PTC’s global user conference, PTC Live 14, in June.
Servitization is talked about as a growing trend and a key to increasing UK manufacturing competitiveness in reports like Foresight’s Future of Manufacturing. But what value is it really adding to the sector and who’s showing interest in developing servitised business models today?
We’re now working with a group of SMEs in the West Midlands using European Regional Development Funding which has some specific targets around proving the ability of servitization to increase the Gross Value Added contribution of companies in the UK.
Some of the companies working on this project are manufacturers, others are technology firms.
In the last eighteen months, audited reports have come back from around 15 of the SMEs we have worked with so far to show that they have created around £2m worth of business as a results of developing services-based business models.
This is nothing to a large firm, but it is significant for an SME and also helps to disprove the misconception that servitzation is only applicable to very large, multinational firms.
So far there are 30 SMEs involved in this project and we have funding to help 70.
What’s the process for becoming servitised?
Up until this point, most the major servitisation case studies we can point to have developed organically in response to customer pull – for instance MAN Group, Alstom and Rolls-Royce.
Manufacturers starting to investigate servitisation today however, want to be able to be guided through that process in the most efficient and effective way possible.
Effectively we are now in a second wave or era of servitisation. We have seen the ‘bleeding edge adopters’. Now we are with the mainstream adopters.
The main difference to the servisation process and strategy for this second wave is that businesses are developing their services and pushing them out to customers, whereas the first wave developed their models in response to customer demand – which in turn was often prompted by pressure on the customer from financiers to de-risk their business. Servitization can offer a means of doing this.
For us at Aston business school this means that second wave companies need to be sent different signals about the need to move towards servitisation.
On a very simple level, as we see at Goodyear at the moment, this might simply mean actively exposing senior management to the principles of servitization.
In this case we take senior executives to other companies that are already mature in this space and getting them to asks themselves ‘shouldn’t we be like this?’
The servitzation transformation process is complex but this early stage stimulation is essential foundation building.
What’s the most important change in mind-set/strategy that a manufacturer must achieve in order to successfully servitize?
The most important thing is to realise that our traditional ideas about products and services as two distinct business propositions are artificial.
In a servitised world, companies that focus on just product are likely to find themselves isolated – although there may be some exceptions for firms working to a craft production model.
In the new, servitised world, the fundamental target of creating a total customer care proposition brings products and service inextricably together.
This doesn’t mean that the product becomes unimportant.
The one company that has fallen out of our SME programme in the West Midlands did so because it found that, while its service proposition was strong, it had not invested enough in product quality and reliability and was therefore having to spend too much on maintenance and repair to make service contracts viable.
How important is technology to supporting servitisation?
Technology is an important enabler.
Servitisation is a technology innovation process and to conduct successful technology innovation the right information loops have to be in place to connect customer experience with manufacturing and service experience.
Happily with sensors getting smaller and cheaper and with computing power and data storage devices following the same trend establishing the technology infrastructure to support servitization shouldn’t be seen as a major hurdle today.
Again, the technology put in place needs to be able to support both product and service execution and development. You won’t hear a servitised company talking about the importance of Product Lifecycle Management to their business – this is why the appearance of service lifecycle management solutions like those at PTC is significant.
Truly servitised companies don’t seem to get excited about PLM technology because they are more interested in the evolution of service – which is why Service Lifecycle Management Tools like PTC’s are now coming to the fore.
We mustn’t forget product, but I can’t emphasize enough that a shift in mind set is needed in order to reap the added value benefits of advanced service provision.
Not saying that the product is not important – it is critically important – but only as a critical element in the delivery of a total customer experience.
Communications technology – the installation of sensors etc is relatively simple to install. And sensors are also becoming a lot smaller and cheaper with supporting computing power and data storage following the same trend.
Is servisation increasing in the UK?
We are working with more companies of all sizes all the time. But the scope to increase the rate of our shift towards servitization is great.
Lack of awareness is the biggest barrier to increasing the number of servitized manufacturers – not lack of opportunity.