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We are undoubtedly entering a new era of technology, automation and innovation, but in a world of rapid industrial evolution how will regulations also adapt? 

Oliver Rickett, Solicitor, and Caroline Churchill, Partner, at law firm Womble Bond Dickinson  share their insights on this crucial topic... 

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"Everything is true… everything anybody has ever thought." Philip K. Dick – Do Androids Dream of Electric Sheep

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It is impossible to escape from the fact that technology, and increasingly artificial intelligence (AI), has transformed everyday life.

It all started with how we play our music, but Apple's Siri and Amazon's Alexa (along with other similar "virtual assistants") now have a daily interface with many of us. We are also, increasingly, now daily users of the Internet of Things (IoT) – connecting up smart fridges, boilers and alarm systems, each controllable from a smartphone. The "everyday" form of AI is almost unavoidable in the modern home, but, while not necessarily as obvious to you and me, there is also an ongoing, yet unseen growth in AI in the manufacturing sector.  What is still lacking, however, is concrete regulation in place for the use and development of AI in the industry.

This article looks at where AI regulation might be implemented and, specifically, what impact both AI has, and its regulation would have, on the manufacturing industry and what role the UK might have in this ever-changing sector.

 

What is "Industry 4.0" and how is AI related?

The term "Industry 4.0" is not a new one.  It relates back to discussions in 2012 of a forthcoming "Fourth Industrial Revolution", the idea being that the current trend of automation would increase, with technology enabling "smart factories". These factories take existing automated assembly line structures and include a cyber element, allowing for the underlying manufacturing machinery to communicate with one another and with the wider factory system as a whole via an IoT setup – increasing efficiency.

Machines with autonomy

The whole process is, and would still be, overseen by a human element, who the machines can also communicate with.  But one of the main goals of Industry 4.0 is to have the machines operating in a decentralised way and with as much autonomy as possible save only where exceptions, interferences or conflicting goals require additional input.

 

How is AI being used currently?

"So far, so sci-fi" you might think, but Industry 4.0 is alive across our manufacturing industry and there are already plenty of examples of manufacturers using this kind of technology across the sector.  Developments are being pioneered by high-end technology companies such as Tesla, Intel and Microsoft on an international scale, some through mere investment or others through actual manufacturing and application.

AI efficiencies and cost savings

Siemens has been using neural networks for a number of years in monitoring the efficiencies of their steel plants.  Siemens is now using this prior experience to make waves in the manufacturing AI sector, using AI to monitor variables (e.g. temperature) on their gas turbines which then adjusts the operation of the machine for increased efficiency and without unwanted by-products.

Others use system masters to spot potential problems and possible solutions, often before a human operator would notice such issues.  The use of this technology has resulted in positive improvements across their smart factories, reducing maintenance costs, as AI can now detect wear on machinery long before it becomes unmanageable.

 

The UK's role in AI and plans for regulation

In the UK, The Manufacturer's Annual Manufacturing Report 2018 conducted a survey on the possibility of a more widespread use of "smart factories" - 92% of senior manufacturing executives believe that digital technologies (including AI) will enable them to increase productivity levels.  Yet, the UK is generally seen as "lagging behind" many other developed countries when it comes to implementing AI in the manufacturing sector.  Is this an example of the UK "traditional mindset"?  With estimates on global turnover of the "smart manufacturing" market soaring to a projected $320bn by 2020 – let's hope not!

Sector-led regulation

Despite technology advancing at a rapid pace, regulation of AI is yet to emerge.  Whilst some commentators have theorised a Skynet-style AI uprising if the sector remains as unregulated as it is today, the UK government has provided a more pragmatic voice. According to the House of Lords Select Committee's report on AI[1], the UK "is in a strong position to be a world leader in the development of artificial intelligence" and with this comes some required element of regulation.

The report "AI in the UK: Ready, Willing and Able?" makes several recommendations as to how the law may need to be updated to account for these new technologies, but also states that "blanket AI-specific regulation, at this stage, would be inappropriate". The Lords instead believe that a sector-specific approach should be taken, with three new governmental organisations (the Centre for Data Ethics and Innovation (CDEI), the AI Council and the Government Office for AI) each taking a lead role in developing regulatory policy going forwards.

Manufacturing sector

For the manufacturing sector, this is expected to cover a number of areas. A key area of focus is likely to be the availability of data access.  AI systems are notoriously expensive and this could clearly impact on the revenues of SMEs struggling to compete financially with international corporations if they were to be further bolstered by AI. A possible solution suggested by the Lords is to implement an "Open Banking" style model where some data can be made public in order to make the sector, as a whole, more competitive.

Safety concerns

Terminator references aside, safety is also one of the primary concerns in this new technology. The current law is a long way from Asimov's "Three Laws of Robotics" and currently fails to address liability issues if, for example, a worker was to be injured by a machine malfunction. As with all policy issues at the moment, the spectre of Brexit looms large and is specifically referred to in the Lords' report as an area of concern since many of the UK's AI initiatives are run jointly with EU counterparts.

Impact on workforce

Finally, aside from direct regulation, businesses across the sector must prepare themselves for potential changes in personnel. Much has been made of how AI will "cost jobs" but the reality is that work in this field is expected to create as many as are lost. It will be more a matter of retraining current staff to deal with the new equipment, and each business will have to assess how much of an impact this will have on their own operation.

AI promotion of innovation and growth

The use of AI in manufacturing will inevitably increase over the short-to-medium term before becoming the "norm" and with an encouraging approach taken by the Lords, aligned with UK Government – who are committed to regulation "that promotes innovation and the growth of new sectors while protecting citizens and the environment", it is likely that we can expect domestic investment in AI as well as the inevitable international investment.

Sustainable regulation required

As with all rapidly growing technologies, the focus should be on sustainable regulation (such as the recent developments in UK law on the use of drones).  However, while the regulatory forecast is still uncertain, what is becoming clear is a real sense of opportunity.

AI - an opportunity for all

With the possibility of the UK being front-and-centre of the new age for manufacturing, there is huge potential for our manufacturing and technology clients:

• those that embrace the change and move towards a technology-focused approach away from the traditional "industrial" style will surely benefit from the efficiencies that come with that change, and
• for the smaller UK SMEs and start-ups out there – dream big!  With the AI sector in such an early stage of development and with many larger corporations lacking the technological know-how (for the time being) to trail-blaze the industry, UK start-ups, with the technological background, have the opportunity to partner or contract with large industrials and have their say on what the future of the manufacturing sector looks like.

Womble Bond Dickinson takes a sector-based approach in all work that we do for our clients and are particularly strong in both manufacturing and technology.  If you have any comments or queries in relation to this article, AI in general, or questions about how we can help your business grow and embrace this new landscape, please get in touch.

Field Service News Editor-in-Chief, Kris Oldland offers up some insight into how field service has become a core differentiator amongst competing organisations and how the trend towards advanced services is being driven by technology...

 

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This video was originally included in a video presentation run in partnership with Salesforce.

Download the full webcast @ http://fs-ne.ws/Y8ny30lsZUR

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Kris Oldland, Editor-in-Chief, Field Service News talks to Ulrika Lindberg, Vice President, Global Service at Alfa Laval AB following on from her keynote presentation at the Spring Servitization Conference, about why having a customer-centric strategy is key to developing advanced services...

One thing stood out very clearly when Ulrika Lindberg, Vice President, Global Service at Alfa Laval AB posted up her organisations mission statement during her presentation at the Spring Servitization Conference, hosted by Copenhagen Business School and the Advanced Services Group, part of Aston University in the UK, that was that even within this small, yet carefully crafted sentence which captures Alfa Laval's corporate identity, it is clear the value they place on their customers.

On the surface, it certainly seemed indicative of an organisation that already had a clear Outside-In philosophy with regards to how they view their relationship with their customers.

Against a backdrop of a conference where advanced services are the sole talking point, I was keen to see just how important Lindberg and her colleagues at Alfa Laval believe such a mindset is when seeking to establish service as a core strategy within an organisation.

“How important is it? Well it’s in our DNA,” begins Lindberg.

"Whilst we have a wide range of products, we have an even wider range of industries that we serve and we would never be able to do that successfully unless we understood our customers’ needs..."

“Part of the reason why that is, is because whilst we have a wide range of products, we have an even wider range of industries that we serve and we would never be able to do that successfully unless we understood our customers’ needs within their industry.”

“We need to understand how our products can benefit an industry and our customers’ within that industry - and if we don’t have that understanding then we wouldn’t be successful. That is how our whole company has grown, by actually finding where our products could benefit certain industries and how.”

“Some of our products, although customised are not that unique, but one of the things we’ve been able to be successful at is tailoring those to a certain customer or a certain industry.”

It is this industry knowledge, largely fed by a desire to get close to their customers and understand the challenges that they face that has become an intrinsic part of how Alfa Laval approach growth and development - and this is something that ultimately builds upon itself over time.

“The more critical it becomes for us to understand the needs of the sector, the bigger the industry becomes to us and then the further knowledge and insights we develop - which embeds us even further into the industry and into our customer’s processes,” Lindberg explains.

Of course, operating across such a wide array of vertical sectors means that Alfa Laval have to establish a flexible approach to their service offerings as what is good for the goose is not always good for the gander. This is something that becomes particularly prescient when we look at servitization.

One of the big discussions across the conference and beyond is whether there is a need for either a customer pull or a market in decline and in need of disruption for a company to successfully introduce advanced services.

We all see that data is going to be hugely important in the future and we need to build our services around that but I think that we have a lot of work to do to build on that“I’m not sure,” Lindberg responds, giving the question consideration when I put it to her.

“I think certain industries are more advanced and it is easier in those. Equally some geographies are more advanced and it is easier there also. Personally, I would say the geography dimension might influence more whether a company is able to introduce advanced services.”

"I think across the globe, in terms of data and analysing data, there is a big interest but I still think we are just seeing the tip of the iceberg in terms of the complexity this is going to drive in terms of who is going to look at the data and what kind of advice are they going to be delivering?"

"If we look at predictive maintenance who is going to be calling the customer and saying the service is required? If we need to go in and stop the machine what power do we have to do this in a critical environment for the customers where that maintenance might have significant consequences for the customer.”

“I think we all see that data is going to be hugely important in the future and we need to build our services around that but I think that we have a lot of work to do to build on that. The appetite for this is big all around the globe, but the most critical question is 'are we ready?' That is the question I would suggest most companies need to be asking themselves.”

 

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Gary Brooks, CMO, Syncron talks to Kris Oldland, Editor-in-Chief, Field Service News about how the discussion around uptime has shifted from how to why...

“Time is something that is incredibly perishable, it’s finite, we never seem to have enough of it and we always wish for more of it in dire times.”

This eternal maxim, that translates across all cultures in all corners of the world, was at the heart of an excellent keynote presentation given by Gary Brooks, CMO at Syncron at the Field Service USA Conference in Palm Springs earlier this year.

Time is something that is incredibly perishable, it’s finite, we never seem to have enough of it and we always wish for more of it in dire times“It is interesting to apply that thinking to our business of field service,” Brooks explained when I sat down with him to catch up over a coffee a little later in the day.

“Let's look at it through the lens of time being a cruel mistress and then imagine you're a farmer. Not just any farmer but a very excited farmer because it is the first day of the harvest season. You’re deploying your new half a million dollar combine to go out and harvest at a fantastic new rate - but then it fails.” “It is a Sunday morning and your 200 miles from the dealer and can’t get someone out to fix it - then shift your thinking from that scenario to a question around uptime.”

It is an important shift in thinking and one in which the manufacturer bears more of the burden of failure in return for greater profit and a stickier relationship with the customer.

“At Syncron we’re obsessed with coming up with solutions that help manufacturers improve their uptime levels,” Brooks continues.

“We recently worked with WBR to launch a research project that is looking into uptime. How important is it for the OEM? Do they consider it a strategic advantage? How important is it for the customer of the OEM? 

Do they consider it something that can make their business more competitive? How much are the end users willing to pay for maximised uptime? Are they even willing to pay at all for maximised up time?”

An overwhelming majority of OEMs believe that maximising uptime is a strategic advantage for them“The preliminary research findings have identified that an overwhelming majority of OEMs believe that maximising uptime is a strategic advantage for them. An overwhelming majority of the customers of the OEMs believe it would be a competitive advantage for them. Executives are demanding it from the OEM side. End customers are even willing to pay more for it but the OEM is not ready to maximise uptime.”

It seems clear that the conversation has moved somewhat beyond whether the shift towards uptime was the right path to follow - the question many organisations are now facing is how they make that shift. Although case studies are beginning to surface as Brooks alludes to himself.

“I came to my first field service event three years ago, there was very little mention of the product becoming service, of servitization. Last year there was a tiny bit, but this year we are seeing companies that have now gone out and done it. We’re seeing companies who have now fully evolved to that model.”

Just how important a factor within the move towards servitization is the industry that an organisation operates withinHowever, one consideration I have recently been discussing with the likes of Prof. Baines at Aston University and Ross Townsend of Ishida Europe is just how important a factor within the move towards servitization is the industry that an organisation operates within?

“I think you're absolutely right that it is industry specific,” replies Brooks when I put this to him.

“For example, there are lots of articles on how the automotive industry is transitioning to a new norm where rather than buy a vehicle customers now want to buy access to a vehicle - the end result of which is that the customers no longer become the end-user but a fleet owner whether that be an internal or external operator.”

“And of course a fleet manager will be far more demanding in terms of uptime, than a single end user, so the market disruption really is felt on numerous levels,” Brookes concludes.

Whilst this is a specific example of a vertical being disrupted there could be wider learnings for other industries in how a shift to servitization could impact there own sectors as some business models evolve and other new models that have yet to be considered emerging.

What is holding some sectors back, whilst others drive forwards to embrace advanced services?But what is holding some sectors back, whilst others drive forwards to embrace advanced services?

“Part of the reason for the lack of full adoption could be a mindset, the preliminary response that we are getting from the research suggest that an overwhelming majority of the OEMs view their ability to deliver maximum product uptime or a type of service that guarantees maximum uptime - it was almost 80% that said they would view that as a competitive advantage,” Brookes muses.

“So when things have words like competitive advantage and revenue maximisation tied with it you would think that it would be accelerated implementation - so there is some barrier. The desire exists both on the OEM and the customer side, the opportunity to differentiate your product exists, the technology exists so what are the other variables?”

It is an important question that many companies in many sectors are trying to grapple with and when whoever discovers the answer will hold the keys to the future of field service.

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Rolls Royce’s Andy Harrison has been playing a pivotal role in the Through Life Engineering Services Centre’s work in putting together a blueprint for how organisations can establish advanced services capabilities - a topic he recently discussed at this year’s Spring Servitization Conference. Kris Oldland sat down with him to find out more...

When the topic of servitization comes up it is usually only a matter of time before Rolls Royce and Power by the Hour is mentioned. Indeed, Rolls Royce alongside a select number of other organisations such as Caterpillar and Alstom have essentially become the de-facto poster boys for all things advanced services.

Who better then, to lead a multi-organisation committee created to help distil the complexities of servitization into a meaningful framework than one of one of their key service executives, Andy Harrison, Engineering Associate Fellow - life cycle engineering?

But what exactly is the Through Life Engineering Services Centre, which Harrison heads up?

“For a number of years here in the UK we have had a group of companies get together around through life engineering services. In essence, a sort of working club made up of people working in the services space and in particular services around complex long-life engineered products,” he explains.

“For a number of years, we had struggled to get a framework diagram around what we meant by that this particular space. Then in mid-2016 the EPSRC Centre for Innovative Manufacturing Through Life Engineering Services, which was run out of Cranfield and Durham Universities, issued a strategy paper which called for the creation of a national council - something we have subsequently created.”

So what is the key function of this council?

One of the challenges we have taken on has been to develop a relatively simple explanation of what exactly through life engineering services are“One of the challenges we have taken on has been to develop a relatively simple explanation of what exactly through life engineering services are,” Harrison explains.

“In addition to this, we have also moved onto tackling the question of what a national educational program within this area would look like. If we wanted our engineering graduates to arrive at the doors of organisations already understanding the value of through life support, which we think is 16% + of GDP, then what would that involve?”

It’s an ambitious project, but one that is absolutely critical as we see economies both in the UK and beyond become increasingly more service-centric and Harrison has played an integral role in fulfilling the council’s vision, which is now coming together at pace.

“I’ve led the working group that has put that framework diagram and the education program that goes around it. That is in the process of being embodied into a publicly available specification by the British Standards Institute and it is due for publication sometime very soon,” he comments.

“Essentially what we’ve got is a framework diagram that outlines the topics that make up this thing called Though Life Service, then dividing those topics into further subheadings with information and direction as to what a company would need to know to understand each of those sub-headings.”

In fact, one of the highlights of The Spring Servitization Conference, held this year in Copenhagen, was when Harrison very eloquently and concisely walked the attendees through this framework.

“Basically, the framework diagram is essentially setting the scene when we talk about this space,” Harrison explains.

It’s a way of thinking about the big picture and breaking it out into commonly described terms so that when the industry practitioners review the academic material they have a frame of reference“It’s a way of thinking about the big picture and breaking it out into commonly described terms so that when the industry practitioners review the academic material they have a frame of reference - they can look at it and say ‘OK so this is addressing this part of the equation.’”

This is a huge part of the discussion that needs to come to the fore if the worlds of academia and industry are to fully align around the concept and strategies of servitization - a common language is essential. This is also why the bringing together of a number of different companies from disparate sectors to work on this project alongside Harrison and his team at Rolls Royce is also imperative.

“The fundamentally important part of this is that if you let any one organisation try to write this they would do it in their own language in their own context. It might work for them but it is unlikely to work for a broad range of companies,” Harrison explains.

We have deliberately forced ourselves to argue how to get this down to a small number of items“We have deliberately forced ourselves to argue how to get this down to a small number of items,” he adds.

Within the framework itself, the group has essentially identified three core areas of activity.

“Firstly, there is the business context where the sub-elements are all centred around if and how you understand your customers. Can you identify with them the value opportunities are - and this can be either getting more work out of a machine or spending less money obtaining that work,” Harrison begins.

“Do you have the organisational set up to deliver these benefits and do your customers have the right set up to receive those benefits? Do you have all of the underpinning capabilities that are required such as the consumable elements you need to deliver this level of service - for example, can you model x and predict y? Can you gather the data required? Do those things exist and do you have them within your organisation? We then have to consider what are the service value streams that you have to offer? We divide that up into four streams which are avoid, contain, recover and convert.”

The road to servitization is challenging and the journey for every company of course slightly different reflecting the unique needs, processes and goals an organisation may face“Avoid is can you change the reality of how much damage the product is accumulating and the likely consequences of that? Contain is about an organisation's ability to step in and make the decisions around when and what to do as intervention activities -  so there is no physical activity in this step, it is all around decision making. Recover is your ability to re-inject life back into the asset, through overhaul, repair and inspection. Finally Convert is about your ability to take the experience that you gain in the other three and to generate additional value out of those.”

“The final dimension is the basic life-cycle of the product and the service which talks about the need for planning throughout the life-cycle, the creation process of your products and service, standing up ready for operation, the operational activity of making the products and delivering the support service and eventually the retirement phase of the downturn of the supply chain, the de-commissioning of assets and the eventual retirement of the entire of service offering around them.”

The road to servitization is challenging and the journey for every company of course slightly different reflecting the unique needs, processes and goals an organisation may face.

However, the framework Harrison and his peers have put in place does an excellent job of signposting the way, to help companies navigate the path successfully.

 

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Servitization is becoming a huge topic in the field service sector as we see more and more organisations step on a path towards advanced services we must realise that they cannot do it alone, their customers must be prepared to come along on the ride as well...

Ross Townshend, EMEA Business Manager - Advanced Services & Data for Ishida Europe talks to Kris Oldland and outlines some of the challenges he has faced in building advanced services within his organisation...

The topic of servitization is of course highly complex and for those just starting to explore the area, it can be a daunting prospect to get one's head around. However, Ross Townsend,  Advanced Services Business Manager, Ishida has had been able to get a bit of a head start by not only arriving into an organisation that has already embraced the idea, but that is also working with the Advanced Services Group, headed by Professor Tim Baines, Aston University, one of the leading proponents and thinkers within the servitization movement.

Kris Oldland, Editor-in-Chief, Field Service News caught up with Townshend to find out how he is adapting to a world of servitization some six months into the job…

“Before I joined servitization was something I knew nothing about,” states Townshend as we begin our conversation.

This was one of the key reasons I was so keen to speak with Townshend in the first place.

Pleasant and approachable, Townshend is one of those people that you find it instantly easy to talk to. A very subtle hint of slight West Country burr to his accent adds an earnestness and integrity that could be perhaps lost in the international world of servitization, but for us here in the UK, it is noticeable and adds a natural ease to Townshend’s manner.

Certainly, what comes across even within just a few moments of speaking with him is that he has that key ingredient that all great service people have, he is able to communicate effectively and eloquently within a comfortable use of language that feels all the time natural, relaxed and honest. In my experience people with such a manner, often speak with authority in areas they know well and integrity and humility in areas in which they are slightly less surefooted.

As part of the Advanced Services Group, Ishida and Townshend will be working alongside the like of Prof. Tim Baines and Dr. Ali Bigdeli.In the context of this conversation then it would be interesting to not only hear his thoughts and gain his insights on how Ishida are approaching servitization, but also to understand first hand how daunting it was to leap into this baptism of servitization fire that few elsewhere have had the opportunity to do.

In Ishida, Townshend has arrived in an organisation that has fully embraced servitization, his former colleague Jason Smith is the only man I’ve personally met who has been involved within two separate companies moving to a servitized business model and as part of the Advanced Services Group, Ishida and Townsend will be working alongside the like of Prof. Tim Baines and Dr. Ali Bigdeli.

So whilst he may have to endure a baptism of fire to get him up to speed, he has some heavyweight support to help him get through it.

“When I look at the transformational roadmap that the Advanced Services Group have created, we have this cycle that we are going through exploring it and trying to work through it,” Townshend explains.

However, it has not been plain sailing for Townshend and the team at Ishida to introduce advanced services to their market - and the reluctance of the market itself is something Townshend thinks could be a factor, having arrived from an entirely different vertical that was further along the road in terms of acceptance of servitization and digitalisation.

Whilst that is a separate issue to the conversation around servitization in a way it does add some context to the arena we are working in“I’m not from the food industry most of my work was in automotive having worked with Bosch Rexroth for a number of years with a background in design engineering, product management,” Townshend explains.

“In terms of the digitisation side of things generally, I find the food industry is massively behind and that’s not just in terms of technology but also in terms of mindset to work with technology. Whilst that is a separate issue to the conversation around servitization in a way it does add some context to the arena we are working in. It can be a frustration even just to get the software adopted let alone the advanced services longer term,” he continues.

“In terms of why the business is diversifying into advanced services is another interesting point. I view this as a journey for a manufacturer and then also as a journey for a manufacturer within the food sector. The suggestion would be that we are a long way down the journey but I think we are still packing the car up at the moment – we haven’t even actually started on the actual journey yet.”

“A part of that is the fact that we are in the food sector, where the adoption of technology is somewhat lagging behind where it is in other sectors.”

“Also the food sector is the largest, it's highly profitable and its growing. We are growing double digit year on year so why would we diversify?”

Of course, the food sector is one which by the very nature of the products it generates will always remain transactional. There isn’t a service contract that can be sold on a packet of oven chips. You buy them, you eat them, then you buy some more.

I wonder if the fact that Ishida’s customers themselves will always have that transactional relationship with their customers is in part responsible for creating a mindset that is hard to overcome in terms of raising conversations around outcome-based contracts?

“I think it is,” Townshend concurs.

At the moment as part of our work with the team at Aston are trying to find pilot customers to establish a proof of concept and even that is proving to be a significant challenge“At the moment as part of our work with the team at Aston are trying to find pilot customers to establish a proof of concept and even that is proving to be a significant challenge. We have had conversations with a couple of parties where we thought OK, we’ve got a reasonable amount of equipment in there, you could argue that we’ve got a fair amount of ownership of the process which is quite critical when you're looking to establish this type of working agreement."

"They have five or six pieces of machinery in a line so we can really add some value there and take ownership of that process and work towards what we would ultimately be our vision of a servitized contract which internally we are terming pay-per-pack, which is the holy grail for us in terms of advanced services to achieve this pay per pack model. Securing a pilot has been very difficult.”

“We had a large manufacturer of salad that we were speaking to and they showed interest. We had a meeting with them and their senior directors and they could certainly see the mileage but as it is in the case of lots of businesses they are too busy to be able to really think about it and they don’t really need it at the moment.”

This is an interesting point here.

In the case of Rolls Royce’s power by the hour there was a strong customer pull from American Airlines. In the case of MAN UK there was a huge backdrop of hauliers and logistics firms struggling to make a profit.

Perhaps the burning platform factor is a necessary element in the equation for creating an environment in which an approach to business that steps as far away from the traditional path as servitization does. It is perhaps far less easy to be a driving innovative force in an industry that is profitable and ticking along nicely.

As the old adage goes if it ain't broke…

I do think that the sector you are operating in is one factor in the ability to drive something innovative like servitization forwards“Whilst I absolutely won’t take anything away from the achievement that companies like Rolls Royce or MAN Trucks have managed, I do think that the sector you are operating in is one factor in the ability to drive something innovative like servitization forwards. Another area to consider within there success also is that they have complete control of the process,” Townshend says expanding on the discussion.

“In our industry and with our customers, at best there may be one significant chunk of a production line which is our equipment. If they are a major manufacturer they will certainly have other lines that are our competitors' machines or they will have a line with six different manufacturers equipment in them so certainly whatever we do needs to be scalable, unless we go in and basically say 'we will provide you with all the equipment for your factory'. Unless your in the lucky position to be on a greenfield site where you're in the right place at the right time that is very difficult to achieve.”

Signs of an emerging appetite for such advanced services are beginning to appear as Townsend recalls one such example.However, signs of an emerging appetitie for such advanced services are begining to appear as Townsend recalls one such example.

“A big dairy producer approached us within the last six months and they were looking for a supplier that could take on all of their quality control equipment, on every site across Europe. They were looking for one supplier to look after everybody's equipment service maintenance in the full acceptance that that is a very difficult job and while you're going through that period of changing out equipment it is going to be a difficult thing to manage.”

“But it is interesting that they were asking that and the reason they were doing so was that they didn’t want the hassle. Clearly they of course also wanted a good price but they accepted that this removal of the hassle came at a premium. Also financially to them, it would be more visible on their books versus the huge maintenance and hidden costs that they would have to deal with on a daily basis.”

“And they were going to several suppliers and there was a huge team of people set up to go and find the right supplier for this so they took this very seriously - it wasn’t just one person’s crusade.”

So clearly there is at least the seeds of some companies looking for servitization from providers within the sector“They’ve gone through the analysis at their end and decided that outsourcing this area of their business was the direction they wanted to go. So clearly there is at least the seeds of some companies looking for servitization from providers within the sector."

“This organisation is clearly looking to remove the headache of maintenance for them and the next logical step along that path would be some form of advanced services contract where maybe you go in there and say, yes, we can take on the entirety of your maintenance contracts and we can take all of our competitors machines out and put ours in but it will be on a cost per usage basis. It’s a big leap forward but it certainly follows that path."

However, until that one customer makes the leap that pulls the entire industry forward it is perhaps a wiser move to bring customers with you on the journey in a more incremental manner.

This is certainly how Townshend is approaching the task…

“The direction I am taking with the business is to start to bundle in certain value added functions and features to start to drive some customer pull and start at a lower level than pay-per-pack just to get the appetite there. I used the term holy grail and the problem is it is just that it is just too far away for our customers to grab. They get it and they go wow that’s good but they have no idea about how to move forwards to implement it.”

The move to advanced services needs to be a symbiotic relationship, it needs to be something that you go to your clients with and they come with you on the journey. Whoever leads that journey whether it be a customer pull or a client push you both need to be going on that journey at the same time.

 

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Nick Frank, Si2 Partners and Harald Wasserman explore the growing conversation around digital servitization as they attempt to break down the whole challenge around digitalisation into smaller more practical actions which leaders can take to make themselves more competitive...

The increased accessibility of digital technologies is accelerating the shift from product to service led growth strategies.

The problem is that many leaders are confused by the jargon and unclear how to leverage these opportunities Intuitively they know they must do something or potentially face disruption, as they see the industrial world shifting in 3 major ways:

1. The growing awareness of the importance of data and the accessibility of powerful analytics technology means that most business leaders recognise the value of data. GDPR is an excellent example of this awareness at a legislative level
2. The Industrial Internet of Things has transformed how we can move data around the world
3. That the role of services in industrial business is being increasingly perceived as strategic rather than tactical, as companies want to capture more value and monetise their data through Service-led business models

Successful companies starting along this ‘Digital Servitisation’ route, typically start their journey with the following three basic steps:

1. Discovery: opening up their eyes to the possibilities
2. Solutioning: developing and piloting tangible ideas
3. Business Plan: to fund the scale up and the often associated organisation transformation

Discovery:

Understanding the potential impact of these trends on your business and developing a compelling vision is an important first step.

A mistake many companies make is to start with Technology first, creating platforms and offering services they assume the customer wants.

If they started with the customer and industry need and then worked back to how they add value through technology and know-how, they are much more likely to be successful.

The Discovery phase can be facilitated by three simple methodologies to identify the profit pools that will pay for your investments; Value Mapping your customer and industry supply chain, examining your Points of Selling in the product life-cycle, and finally a review of the data you currently create and will/can create in the future.

Solutioning:

Solutioning involves breaking the vision down into tangible projects and programmes that deliver something real.

Although understanding customers enables us to quantify the opportunities and set priorities, figuring out where to focus a Digital Servitisation strategy that flows across organisational silo’s is not so easy. One way is to see the impact from two very distinct perspectives:

1. Technology Digitalisation:

That product and supporting operational infrastructures are designed to produce data that can be collected, analysed and then monetized through service-based business models. Generally, technology is used in one of two ways:

• Technology in the product and company infrastructure that enables Digital Support, such as remote diagnostics or predictive maintenance.
• Capabilities and technologies in the organisation that enables Data Analytics, such machine learning, visual analytics and business intelligence technologies.

2. Back Office Digitalisation:

The tools we use to manage our business back-office which sustain and improve margins /profits. Examples might be Service Management solutions, CRM and ERP. Generally, there are two aspects to consider in terms of system & process development:

• To enable Customer Management, making customer data transparent and so breaking down silos.
• Enable Business Process Automation: so reducing cost and often leading to improved customer experience.

3. Combining Technology and Back-office Digitalisation:

When products and infrastructure that collect, analyse and action data, are fully integrated with the back-office process, we can explore what new business models such as Digital Servitisation can deliver in terms of value

Business plan:

Having identified the customer solutions and internal process improvements, it is time to execute and deliver the products and offering.

We require a business plan which defines Where we will target, with What, When and Who in the target organisations and How the delivery model will deliver excellence.

This is a process in its own right and one which we call Customer Focused Business Development.

It involves working through a structured approach to customer segmentation, defining the service product portfolio that is relevant to specific customer profiles, the GoTo market or sales strategy that will be most effective, and the service delivery model that drives profitability.

Learning points

Digital Servitisation does not all have to be done at once, nor is it necessarily a linear process. An agile approach in small pilots or sprints that overcome specific hurdles are a good way to drive small incremental changes towards a larger goal.

The key to success is to use cross-functional teams with a breadth of expertise and experience coupled with a logical framework to cut through complexity. In our experience, it is possible to run through these 3 phases between 3-6 months depending on the complexity and ambition of the business.

The key to success is to use cross-functional teams with a breadth of expertise and experience coupled with a logical framework to cut through complexity.

Don’t be put off by technology jargon, and if in doubt always come back to the customer value as your guiding light through the complexity of change.

Once you have developed your direction, execution of the transformation strategy is more akin to a major change programme. For more thoughts on this process, you can read our FSN articles on the Art of Driving Innovative Change and Self-learning solution-focused mindset.

If you would like to know more about how Si2’s Digital Servitisation programme can help you unlock the data and know-how of your business, then please contact us Nick Frank or Harald Wasserman who can be reached at info@si2partners.com

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Kris Oldland, Editor-in-Chief, Field Service News talks to Deputy CEO and COO of Polygon a company with over 3,500 field service engineers, about how his organisation has evolved over the last decade, the shift towards advanced services that has come from that evolution and how a close working relationship with Enterprise Service Management solution provider IFS has empowered their ability to develop and advanced services approach to field service delivery.

 

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Kris Oldland, Editor-in-Chief, Field Service News talks to Prof. Tim Baines about the recent Spring Servitization Conference hosted by The Advanced Services Group and how the conversation around servitization is continuing to evolve as academia and industry come together to drive advanced services forwards...

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