Serve yourself

“The potential impact that servitization could have on manufacturing is similar to the impact that lean has had. It’s a paradigm shift.”

So says Professor Tim Baines as we discuss the content he has planned for Aston Business School’s Spring Servitization Conference from May 12-14.

“There is no question about whether a manufacturer should servitize,” he continues robustly. “You have to do it. Our conference will help manufacturers to gauge their expectations of the process, understand how far their servitization model should go and gain an impression of how it will impact on their revenues and profits.”

The potential benefits that servitization can bring to manufacturers’ profit margins will form a significant core to discussion and case studies at the May conference. Other benefits connected with becoming closer to customers will also be covered as well as the challenges involved in organisational transformation for servitization and the role of IT in delivering advanced services.

“The UK is home to some practice leaders in servitization,” observes Prof Baines. “Indeed, relative to the size of the UK economy I’d say we have one of the highest densities of practice leaders in the world.

“Look at our conference keynotes,” points out Baines. “We’ve got a lot of the big names in the field – Rolls-Royce, Alstom Energy and MAN.”

There’s also vibrant representation from SME manufacturers, which have worked with Aston on a European Regional Development Fund project, experimenting with the potential of servitization for smaller firms.

“In the last 18 months 15 Midlands SMEs have generated a combined value added of £2m through the growth of services,” Baines relates.

“These companies range in size from those employing less than 20 to those employing about 100.”

While £2m seems a fairly insignificant sum in macroeconomic terms or when compared to the revenues a company like Rolls-Royce can reap from service provision, it is worth remembering the West Midlands alone is home to around 2,000 SMEs – so a wider uptake of servitization could have a big impact.

But although evidence is growing of the benefits and opportunities advanced service provision can offer, Baines admits the concept is still far from mainstream.

“The big opportunity for the UK is to develop a supply chain which is confident in the provision of services which can support the practice leaders,” he says. “Today the concept is not pervasive.”

But why is it not?

Obstacles and vision

The term servitisation dates back to the 1980s – it’s not new.

If its potential is so great – why has a craze for servitisation not swept through modern manufacturing economies?

There’s a mixture of reasons says Baines.

Firstly the technology to support servitisation has not been as mature or accessible as it has recently become.

Secondly, the challenges in organisational transformation including culture change and systems for contracting and sharing risk have not been fully acknowledged.

Thirdly, bit-part adoption of basic and intermediate services has clouded perceptions of the end goal of advanced service provision.

“I started my career in manufacturing in the mid eighties when everyone was beginning to be concerned with just in time and lean [methods],” says Baines.

“I see so many parallels with the way the debate about that concept evolved and the way the debate about servitization is developing.

“People asked then what all the fuss was about. Many manufacturers were sceptical because they’d experimented with putting a Kanban system within one part of their factory and in doing that they said they had just in time production.”

Of course this localised, small scale adoption barely scratched the surface of the benefits that can be offered when a true lean culture is adopted, Baines observes. “I’d say that many companies are at a similar level of maturity with services.

“They have a few basic or intermediate offerings – a bit of  maintenance, spare parts and a help desk – but there is a world of difference between this and advanced service provision whereby a company undertakes to provide the capability that will allow a customer to run their business.”

Baines hopes this May’s Aston conference will highlight the extent of the ambition available to firms who are bold enough to adopt the servitization model.

“We will show what a servitised world could look like,” he sums up.