Servitization: Plain Sailing or Choppy Seas?

Oct 05, 2017 • Features • Management • ABB • aston university • Felix Keiderling • Servitization

Kris Oldland talks to Felix Keiderling, General Manager responsible for Global Service Business Development and Product Management of ABB Turbocharging shortly after his presentation at the Spring Servitization Conference in Lucerne, to find out more about how ABB are approaching the introduction of an outcome based service offering for the merchant marine sector as well as for power plants.

KO: Having just given a fantastic presentation a little earlier this morning one of the things you highlighted was that you have an install base of 200,000 assets and you know exactly what is going on with each and every one of those assets.

How do you achieve that?

FK: Well, we do not have a real-time information about all turbochargers.

But basically, knowledge about the installed based is at the core of our business considering the long life cycles over which vessels and power plants are operated. In order to do this we have an intelligent product and service database for specific application data covering from cradle to grave the whole process. I.e. from day one how we manufacture with what materials, through to where it is installed, on which engines and then keeping track of the lifecycle of the asset - how we’ve serviced it, if there are any upgrades and also technical information such as the estimated running hours and scheduled maintenance.

All this information creates value in particular for our long-term customers as we can be available where and when the customer needs us, with the right parts and the right people, very effectively.

KO: The business model that you described today generated a significant chunk of the revenue from service, has that always been the case, i.e. has service always been a key element within your business model?

FK: Yes it has. From Day 1 on, if you look at the harsh operational environments these engines are operating in, of course our turbo chargers also face these environments - so wear and tear is always occurring and we have always had to do regular maintenance because of that.

Due to this, from the beginning service has been an important part of our business approach and our success.

KO: And has it also always been a driver for you strategically? Or was there a customer pull as well?

FK: In one sense, it was a clear strategic decision especially when we looked at how manufacturing was moving to Asia and the big growth in logistics that was coming along with that. The merchant marine sector that we support is also driving this demand for regular maintenance for turbochargers as well.

Whilst it was a strategic decision in that we saw this market developing and positioned ourselves accordingly, there was also the move to implement our service solution globally which was in part a reaction to the changing demands of the sector.

So whilst it was a strategic decision in that we saw this market developing and positioned ourselves accordingly, there was also the move to implement our service solutions globally which was in part a reaction to the changing demands of our customers.

KO: When you were speaking earlier on today you alluded to such change and that the shift in market forces had allowed to put yourselves in the position where you can begin to explore the potential of an outcome based solutions model - what exactly does that look like for your division in ABB and what is that appeals to you in such a model?

FK:We see certain things happening in the market- one is that uptake of service agreements is picking up in pure numbers, customers are increasingly willing to outsource their service needs to service providers, and in particular to the OEM.

We see that there is an interest in customers engaging in much longer term service agreements because they see the leverage of reducing their total cost of ownership the over asset lifecycle and also outsourcing the risk.

Secondly, we see that there is an interest in customers engaging in much longer term service agreements because they see the leverage of reducing their total cost of ownership over the asset lifecycle by also outsourcing the associated risks.

Then thirdly, there is the customisation possibility that you have within the scope of these lifecycle agreements - customers are willing to engage if you can truly support their operations and are willing to adjust to their needs.

KO: Finally, one other area that was brought up in your presentation, was digital transformation, which is one of the buzz-terms of 2017 it seems, but what does digital transformation mean for ABB both company wide and in your division?

FK: From top down, ABB has recently announced ABB Ability as the platform where we plan to connect all Internet of Things related services, products and people into this one common platform to ultimately enable our customers to know more, do more, do better, together with us. Then talking about our own specific unit, we are of course part of that process and we are looking into blending our excellence in global service execution, with digital customer solutions to support customers’ operations to be most reliable and efficient.

These solutions are in the development and are yet to come to the market