The central topic for the inaugrual Manufacturing Services Thought Leadership Network's (MSTLN) Annual Conference is - more than just making things, SMEs route to growth.
Offering first-hand examples of the benefits of a service-based business model and the growth companies can derive from its implementation, the event will showcase innovative firms that have embraced this new manufacturing paradigm.
The goal of the Manufacturing Services Thought Leadership Network (MSTLN) is to raise awareness within UK manufacturing, that ensuring long-term success requires companies to increasingly focus on creating value in the customers’ business, rather than solely in the production facility or R&D lab.
The network consists of manufacturers wanting to learn more about service-based business models, alongside supporting others who are beginning to implement such models.
The key aim of the conference is to articulate the benefits of product services to manufacturing businesses.
Manufacturers that wish to add value and grow their business must remain competitive and seek to move towards service driven business models by providing holistic solutions to end-users.
This shift in focus aims to nurture relationship with customers that endures well past the sale of a physical product.
Content is going to be updated throughout the day, so ensure you refresh your page.
Chairman’s opening remarks:
Dr Tim Baines – Professor of operation strategy, Aston Business School
“Today we will be discussing some of the concepts of servitization and how they can be applied.”
“At Aston, we have been working on servitization for the past five years and it has actually been quite a lonely experience for a number of those years.”
“What’s interesting is that servitization is gaining some traction. There are a lot of conversations happening.”
“Servitization is about manufacturers building their revenue streams through services. It’s an organisational transformation and what we see as the fourth paradigm of manufacturing.”
“There’s an awful lot of conversations around IoT, Industry 4.0, sustainability, the circular economy, and the work of servitization is very much at the confluence of these discussions. It’s very much at the heart of the change we are seeing out in the world.”
“Servitization is fundamentally changing how things are made. It’s a shift from focusing on product-dominated perspectives, so that of services.”
“I am very passionate about emphasising that servitization is not just applicable to large companies, but equally relevant to SMEs. Interestingly, one of the hurdles stopping that from happening is finance – something we will be exploring later today.”
“When we think about servitization, often people only consider manufacturers moving into services. What we are seeing alongside that shift, are services companies moving into manufacturing. Something rarely considered.”
“Servitization is absolutely not about reductions, it’s about growth.”
“There are some internationally recognised challenges to servitization. Langauge (terminology) is one, but the real challenge is identifying and understanding the processes and pathways to successful servitization implementation.”
“Every manufacturing company is a consumer of products and services, so is in essence – a customer. A customer of a potentially servitized company themselves.”
“The MSTLN is vital because it is helping to raise the profile of servitization and spark discussion. It’s about promoting servitization and understanding, as well as nurturing and supporting those companies who are seeking to exploit the benefits of more service focused offerings.”
Servitization of trucks
Des Evans – former CEO, MAN Truck & Bus UK
“The future of manufacturing is an elephant on a matchstick. There’s a lot of plants, equipment and investment in manufacturing, but currently only 15% of the world’s truck are made in Europe, and just 1% of that manufacturing is in the UK.”
“If all you’ve got to do is think about making things, you haven’t got long to live.”
“If you can look at your business from the other end of the telescope – from the perspective of your customers, you can transform your business.”
“From the decline of the UK truck industry, there was an overwhelming need to embrace and adapt to change. A valuable lesson that is equally relevant across many other sectors.”
“From 1992 – 2012, 50% of MAN Truck & Bus UK sales came from finance and services contracts.”
“The return on sales of purely making a product and selling is between 1% – 3%; that for aftersales can be as much as 10% – 12%, five times as much.”
“Can you create and deliver value for your customer, to help your customer become more profitable? If you can, that is a key way of differentiating yourself from an increasingly crowded and competitive market.”
“We implemented a TCO (total cost of ownership) approach, one aligned to servitization. An approach that incorporated adding value to our customers’ businesses. Our service packages provide a range of services depending on customer requirements.”
“By doing so, our market share grew from 3% to 12% and turnover rose from £50m to £600m. Ultimately, we stopped selling trucks and started selling solutions.”
Solving your customers problems through techonology
Asif Moghal – manufacturing industry manager, Autodesk
“I am driving a project on behalf of Autodesk on the future of manufacturing in the UK, to up its innovation, productivity and competitiveness – what we call, the Future of Making Things.”
“The way we design, produce and sell products is fundamentally changing.”
“Everybody is going to want something that is different and unique. Products which will have to be made by someone. So the question is, how do you serve markets of one as efficiently and cost-effectively as markets of many?”
“Tesla is a great example of a manufacturer which is selling products which actually improve over time. A really valuable concept which allows Tesla to successfully cater for markets of one.”
“57% of the information a potential consumer gets about your product happens before ever speaking to you directly. Many of it being research online before making a purchase decision.”
“Product design is changing. We are seeing a lot of companies start to embrace open IP and becoming comfortable with sharing designs, etc. Design is no longer relying solely on human brain power, software is starting to take away the burden of complex design. How products are being funded is also changing thanks to crowd sourcing platforms such as kickstarter.”
“There are three types of innovation – incremental, adjacent and transformative. Each of which has a level of risk – low, medium and high respectively. As such, around 70% of investment goes towards low risk, incremental innovation, opposed to only 10% for high risk, transfomative investment.”
“We are starting to see manufacturing companies become smarter, in themselves, what they produce, how they produce it and how it operates.”
“The materials we are using to manufacture products is also changing thanks to carbon fibre, graphene, 3D printing, etc. This is enabling a lot of the transformation occuring across the industrial landscape.”
IoT – the enabler of service provision
Alistair Williamson – managing director, Lucid Innovation
“The benefit of a phone, for example, is not the actual phyiscal product, but the services it offers.”
“You cannot make more and more of the same thing anymore, it just won’t work. The world is far too competitive for that method to succeed. Too many people are focusing on making just the same as everyone else, just a bit cheaper. We need to focus on adding value.”
“Making more of the same isn’t an option, making it better is a more worthwhile direction. People don’t need as many products, and if they do, they don’t necessarily need to own them outright. Conversely, people and organisations always have, and always will, need services.”
“Convergence and competition is driving servitization. Connected devices provide us with real opportunities.”
“Selling products into markets with no budget, such as the NHS for example, is often cited as being incredibly difficult. An easy way to overcome that challenge is to not sell them a product, but a service through revenue models such as pay-per-use.”
“Servitization opens up new doors, creates new opportunites, and connectivity makes servitization more accessible.”
“If you own more of a customer’s experience, enables you to take a larger slice of the pie – even bake a whole new pie.”
“Servitization isn’t scary. It doesn’t necessarily mean a shift of business model, but it does require a shift of mindset and involves a greater depth of thinking alongside more R&D upfront.”
“Everybody is always saying they want a larger slice of the pie. The world is a kitchen – make your own pie.”
Beyond the hype: servitization in practice
Jan Godsell – professor of operations and supply chain strategy, WMG
“Was Dyson’s original model, the DC01, a product or a service? It was actually very expensive to manufacture, something reflected in the cosumer price. However at the time, retailers were starting to offer interest-free credit which allieviated that price issue.”
“At the time, Dyson serviced all of the vaccuum cleaners itself. It offered a specific service relating to a fault, or a complete service. So even back then, services were being offered.”
“How do you simulataneously reduce costs while increasing sales and achieving growth? McDonald’s is a good example of an organisation that has used strategic alignment to achieve exactly this. It’s standardised menu helps to create steady, predictable demand for itself and its supply chain.”
“Too many companies look to achieve growth without considering the impact such growth may have on their current supply chains.”
“There has been a shift from companies turning away from using the term supply chain, to begin using value chain.”
“An SME looking to build its supply chain capability should consider – being niche/focused; being customer driven; embrace opportunities for globalisation; strong financial management, and work collaboratively.”
“If you are an SME, you need to ask yourself what are your opportunites against those five points in regards to building your organisation’s supply chain capability?”
“A study by Rolls-Royce discovered that very few of the SMEs in its extended supply chain had any debt.”
“The circular economy takes us away from the make-break-dump cycle to create an industrial system that is restorative by design.”
Growth through service thinking and imagination
Nick Frank – director, Frank Partners
“Growth and change are key to developing long term sustainable and successful businesses. Living in a digitalised world makes change faster, but also more confusing.”
“Service thinking and imagination are key ingredients to driving growth and innovation. Service thinking is a way to tap into a customer’s or industry’s profit pools. Value is created by applying your technical or business knowledge to improve whatever it is your customer is trying to achieve.”
“Value or profit pools are hidden in the customer’s (or industry’s) total cost of ownership (TCO). So alongside the direct cost of equipment or a part, you have factors such as maintenance; downtime; labour; material; logistics; operating risk; quality; purchasing; financing; engineering; infrastructure, management and so on.”
“The result of service thinking will change your relationship with your customers and create more loyalty and long term value.”
“What are the first steps towards implementation? The key to success is your mindset. As Steve Jobs said, “You’ve got to start with the customer experience and work back toward the technology – not the other way around.””
“It’s no secret there are many tools to faciliate service thinking – Customer Insight (interviews; focus groups; surveys; mystery shoppers; video, etc.); Business Tools (value chain analysis; five-forces model; innovation models, blue ocean, etc.); Service Design (journey maps; touch-point analyisis, blue printing), and Experimantal/Pilot Projects.”
“The key takeways are: move to an outside-in mindset, deep insight into your customer business processes and how they generate revenue, and try out ‘small’ ideas to stimulate your imagination.”
Is servitization just for the big boys?
Alec Anderson – managing director, Koolmill Systems Ltd
“The simplest way to describe Koolmill is, what Dyson did to the vacuum cleaner industry, we are doing to an industry that feeds half the people in the world everyday.”
“For us the challenge is arguably much harder, you will need up to 10 £30,000 machines and a rice mill, not just a £300 vacuum cleaner and carpet.”
“We have run more than 100,000 machine hours and milled over 100,000 tonnes of rice.”
“We are a small company selling a disruptive, capital intensive and – in our customers’ view – an unproven technology. We are challenging the established norm in the industry, making it difficult for our customers to accept the commercial risk.”
“The global rice industry is significant – 750m tonnes of paddy is harvested eaach year worth £200 bn. However, post-harvest 60m tonnes is lost and 180m tonnes damaged – that equates to around £50bn.”
“We want to establish a West Midlands pilot, a best in cass demonstration facility. Koolmill will supply and support three machines, the mill will provide the infrastructure and rice. Together, we will work towards developing a standardised SME-appropriate manufacturing services-based model that shares the risk and benefits.”
“Manufacturing services has to be an option that is worth seriously considering. We are building an ever increasing capital base. By the end of year five, we have an inventory of 500+ machines with a book value of £5m. At the end of the contract, the machines will be recovered, remanufactured and sent out again on a new contract. A circular model with minimal recycling and minimsing wasted raw material (food) and power.”
Growing your business through remanufacturing
Ann Beavis – head of sustainability, Premier Sustain
“As a services company, Premier Sustain has always had to differentiate itself.”
“We rebranded last year from Premier Moves, to Premier Workplace Services to reflect the fact that we weren’t just moving offices and everything in them.”
“How did Premier Sustain come about? Clients often left redundant office furniture assets from changing staff/functions, closing buildings/mergers, moving operations or wanted a different aesthetic.”
“This seemed a natural opportunity to structure a service to help clients identify more sustainable practices, delivering against a waste hierarchy – prevention; minimisation; reuse; recycle, and recovery.”
“The items that couldn’t be reused, recycled or donated and were being thrown out were often simply the wrong shape, too long or the wrong colour. We looked at what we could do to help, in terms of finding someone able to reize or repaint this furniture, and there wasn’t one. So we created our own remanufacturing centre.”
“We can offer resizeing; re-topping of desks; refurbishing; repair and reupholster; reconfigure storage and shelving units and produce new furniture from off-cuts.”
“The emerging business case for remanufacturing as part of a service offering is increasingly compelling.”
“From a client’s perspective, we offer benefits regarding cost; speed; quality, and the integrated service. The benefits to Premier Sustain is we now have a sustainable solution for clients; new and increasing business opportunities, and generated additional employment.”
“Being an SME I see as being an advantage, we are able to work on smaller quantities, trial methods nad we’ve found it easier to take risks.”
“For the future, we are doubling the size of the workshop and storage area; increasing staff and training/skills; increased marketing and awareness, and continue to look at further business opportunities and innovations.”
Circular economy and remanufacturing: realising the opportunities
Ben Peace – sustainability lead, The Knowledge Transfer Network
“The KTN has a mission to stimulate innovation and drive economic growth. Our vision is for the UK to be a global leader in innovation.”
“With the cost of materials and resources increasing, the circular economy and a greater consideration of the entire product lifecycle offer a potential way of addressing the challenge.”
“A more circular economy could increase UK GDP by £3bn.”
“There are a wide variety of ways Innovate UK helps fund innovation, from vouchers and collaborative R&D, through to themed competitons, catapults and launchpads.”
“Every company wants to do things better, but by embracing servitization and a more circular economy, organisations have the opportunity to gain a closer relationship with customers and actually not just do things better, but do better things.”
Never too old to innovate
Danny Harrison – business development manager, Nicklin Transit Packaging
“We are fourth-generation family-owned manufacturer of bespoke timber and corrugated transit packaging products and services.”
“We have always looked at ways of incorporating value added ancilliary services, though previously on quite a basic level, such as offering a single source supply for all packaging requirements, repair and waste removal, and bespoke specification.”
“Why did we decide to develop a service-led strategy? A couple of years ago we celebrated 100 years of business, service thinking has always been part of the DNA of Nicklin, and servitization has grown to become a big part of this.”
“The reasons for this is that our products are becoming increasingly commodotised, differentiating on a purely product basis can be challenging, and product price was increasingly becoming the key driver of winning new business leading to eroded profit margins.”
“One of the issues and challenges to developing a service-led approach was the single-use, low-tech nature of our product.”
“Our journey to servitization started with developing our product offering first, before using those products to deliver services.”
