Driving Disruption

Stockholm in November is a cold place but Syncron's Innovate2019 conference warmed delegates with its mix of excellent keynote presentations and exciting product launches. Both Gary Brooks, the firm's Chief Marketing Officer, and Henrik Lenerius spent time on-stage and they kindly found time to speak to me about the origins of the event, the complexity of servitization and what inspires them to do what they do.

Mark Glover: Let's begin with servitisation and its many nuances. Do you find it a challenge to communicate its benefits to your clients?

Gary Brooks: I think that one of the big drivers for the OEMs is they’re seeing a big driver of their revenue and margin, particularly in some industries like material handling where they’re moving towards electrification. So the more electrified those vehicles become the less need there are for spare parts, and they are seeing that revenue decline. So what do you do to protect that revenue? You have to move to some type of subscription based model.

So I think there are things that are happening economically that are forcing them to be more receptive to this whole concept of servitisation. Two years ago, three years ago, I think it was very foreign, and even last night I was having a conversation with [Innovate keynote speaker] Professor Carlo Alberto Carnevale Maffè, who was talking about how much we’ve advanced in just two years. He said if you all had done this conference two years ago you wouldn’t have had the people here that you have.

MG: Do you think because it’s moved so quickly that some of your clients are further down the servitisation route than others? Are those left behind, perhaps scared by the complexity of servitization?

GB: I think personally, being a little scared can be a good thing. It is inevitable there will be some fear, and if we can help them understand what are some of the concrete steps that they can actually take, then that creates a lot of comfort as well. As you say, there’s always a risk that you get too far ahead of the curve and you can alienate yourself when you’re a little bit too far out, but with something like inventory management, we say that that’s something you need in the reactive stage already, but not only there, It’s absolutely foundational in the servitized world.

"There’s a disruption underway and it presents opportunity and the manufacturers need to understand to capitalise on that opportunity...'

Henrik Lenerius: So I think that that’s why we’re so excited that the role that we can play in this. We already have the leading products for what’s necessary today but that they continue to be incredibly important. However, we might think that everything’s going to happen overnight but it’s certainly not but we are putting in those building blocks and the foundation in place. And I think with that then you can add on more advanced concepts to that all the time.

MG: Do you think people, more generally in society, are overwhelmed by the era of connectivity, of Iot, of their fridge speaking to their phone? Again, can this shift to Industry 4.0 be in anyway detrimental?

GB: I think there’s so many examples that make it an easier leap to take. Whether it’s Spotify for music, or UBER if you need a ride, I think as a society we’re moving in that direction. It’s also slightly generational. Obviously the younger generation is much more familiar with it I think that there’s definitely a disruption underway for industrial manufacturers. We’re at the very early stage of that disruption but when there’s a disruption underway it presents opportunity and the manufacturers need to understand to capitalise on that opportunity.

This is not just tweaking what you have to improve in order to get better output. This is a fundamental shift, and to go through any type of transformation you need leadership at the company level. Some companies will emerge as leaders and others will become irrelevant. But it takes individual leadership to really push companies forward.

MG: One of the challenges of integrating servitization into a business model is convincing the board that it's actually a good idea. One of your keynote speakers, Kent O'Hara [Nissan's Senior VP, Global Aftersales Alliance] suggested that the way to get this message across is to tell your board what they are missing out on if you don't integrate. Again, creating a sense of fear.

GB: I would maybe add one more aspect to it. Because I think of course, as you say and where you started, is that the whole IoT can be overwhelming for everyone, particularly for the older generation and I think but I don’t know if that’s the biggest obstacle in the industry, to be honest. Think back to the music industry; yes, you had records and you sold records but that wasn’t originally disrupted by Spotify and Apple Music, it was disrupted by the Napsters of the world. Yes, it was illegal but it was the most convenient way of getting music. There was a few failed attempts but it was only when Spotify really made it super convenient to actually get a communicative value. In fact, I would say, Apple before them and the I-pod. So if you had a thousand songs in your pocket, how do you find the correct way to articulate that value? The same goes for OEMs. They need to figure out how to articulate a new kind of value.

"I hope sustainability will become a major driver..."

MG: One positive outcome of servitization is sustainability and the benefit it can have on the environment. What do you think about this potential?

GB: I'm hoping, and maybe I’m being a little bit optimistic - perhaps even naïve - but I hope the whole sustainability will become a major driver. The manufacturers they figure out how to build stuff efficiently and then sell it and they’ve been doing that forever. There need to be other incentives to change that chain. Until that mind-set changes it will be a struggle but I think a factor like sustainability, it really tugs at a certain emotion and I think there are many drivers that will begin to accelerate this over the next decade.

MG: I wanted to ask you about the technical knowledge gap that exists in the sector, particularly in the UK, with the lack of new engineers coming into the industry and conversely people retiring and taking that knowledge with them, which they've retained rather than digitalise.

HL: It’s not an easy trade to be a field technician and there’s a lot of learning to go into that, and lots of them are actually the baby boomers that are retiring, so it’s even more important than ever to capture that knowledge. But I think from our perspective - from a technology perspective - it probably goes the other way round; that we need that closed loop.

You need not only to predict something, you need to actually get the feedback from the technicians. What they thought they’d predicted: was that actually right? And get it back in so we can get smarter and better over time.

GB: I’m kind of looking at it through a completely different lens. Yes, there’s a gap and there’s a shortage of talent as the baby boomers are retiring but I think when you have any type of a business challenge like that, that’s when innovation comes in. So I think the fact that there’s this gap of information, I think we’ll fill it some way, hopefully with technology, or maybe with the next wave of engineers coming in that are going to change everything. They’re tech-native and they have a completely different way of approaching it and I think the final output will take us further towards where we need to be than if the baby boomers stayed doing it the same way for ever. So I think the new blood combined with the gap, something great will come out of it.

MG: Do you think service has a bit of a PR problem? That the sector perhaps doesn't get the credit it deserves?

HL: think that the field service of yesterday with wrenches, I think it’s changing now. You have virtual reality and AI and machine learning, and I think the technology that’s being used to solve problems, whether it’s in a predictive way or a reactive way, there’s a new level of technology that’s being deployed that makes those positions more attractive to the younger engineers.I think the whole field is changing dramatically. You go to field service conferences and you see the new technology, you walk around to all the different stands and it’s completely different than it was ten years ago.

MG: So I think the first way of starting to address the problem, is to acknowledge that we have a problem. So in some cases I think that it has a bad reputation for a reason, but on the flipside, I think for a lot of industries service is also a very profitable part of the business itself.

"It's only a couple of times in your life you get to be involved in a real disruption..."

MG: Finally, what inspires you both to do what you do? To get up in the morning and come to work for Syncron?

GB: It’s only a couple of times in your life you get to be involved in a real disruption and I believe that we are in the early stage of an incredible disruption and to capitalise on an opportunity created by disruption, you need transformation. And I believe that we’re providing the technology that will enable these OEMs to transform and really secure their future in the servitised economy that’s not that far away. That’s what gets me excited. It’s seeing everyone here at the conference, from academia to the investment community, to the OEMs and to hear the exciting conversations going on, that’s what fuels me.

HL: Perhaps the strongest motivation for me, not least being a father of young kids, is the whole sustainability aspect and how we can make a meaningful impact. That gives me some deeper sense of purpose in what we’re doing. When I interview product people here in Stockholm, I really like to hear that the reason that they want to move is that they sense the purpose is something they can’t get in their current role then I think they are well aligned to what we are about. This is incredibly important to us.

I know as a member of our executive committee that we spend a large amount of time when we get together talking about sustainability and how we can be more sustainable. However, being a software service company, the amount of energy that computation takes up means we can make a difference in our operations and we put pressure on our suppliers to make sure we use renewable energy, for example. But even more powerful is that we can enable our manufacturing customers, through the supply chain to be more sustainable.