Servitization: the best of both worlds

It is a popular truism that our economy has shifted in recent decades from manufacturing to services. However, the extent of this shift is perhaps overstated.

UK manufacturing has not disappeared and remains a major driver of innovation, exports and prosperity.

Globally, the UK is the ninth-biggest in terms of manufacturing output, which represents 11% of our economy. However, if we include the services around manufacturing that add significant value, then this figure should be doubled.

‘Servitization’, the coupling of traditional products with our strength and expertise in services, can offer much to manufacturers that are prepared to think beyond their factory gates – to think about customers, end users, their products’ failure modes and what happens at the end of a product’s life.

Greater emphasis on the service that is delivered with manufactured products can yield ideas for new ways of retaining or adding value in products and the systems around them – for example, product improvements, enhanced sustainability and brand value, additional revenue streams and market differentiation.

At a recent conference, I heard the scale of untapped opportunities described as a benign iceberg – the value manufacturers see is a fraction of the opportunities that exist beyond the obvious.

By helping businesses access funding from Innovate UK, and through programmes such as REBus, I’ve encountered businesses big and small across many sectors that are thinking about their business in a different way – bringing innovation to their products, supply chain and business model.

From a furniture-for-life company to big brand names such as Caterpillar and Ricoh, organisations are rethinking their products and allied services. This is an exciting time to be a manufacturer.

There is a whole new raft of innovation springing forth as a result of ‘digital’ and related technologies under the umbrella term ‘Industry 4.0’ – from the internet of things and cloud-based data and communications to technologies such as additive manufacturing.

Benefits for the customer include enhanced tailoring of products to the individual – ‘the market of one’.

KTN and Innovate UK have recognised the significance of these ideas and many of our initiatives and projects have explicitly picked up on them.

Recently, the materials and manufacturing competition brief highlighted the opportunities for:

• Diversification of product and service lines to serve new markets
• Development of novel services that open up new sources of revenue from manufacturing

Round 2 of this competition is expected to launch later in the year – visit KTN’s web presence and receive our newsletters for details on how you can take part: www.ktn-uk.co.uk.