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The growing industrial trend of servitization amongst manufacturers is gaining traction and as it does so ever more importance is placed upon delivering efficient and effective field service.

The Aston Spring Servitization Conference brought together industry and academia to discuss the latest developments within the field and Field Service News was there to find out more...

 

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The world of manufacturing is getting ready for one of the most significant changes since the industrial revolution. Servitization is coming and amongst those leading the charge is Professor Tim Baines of Aston University. We're pleased to welcome him to the list of field service news columnists and here in this first article he gives us an introduction to this complex yet fascinating and important topic... 

The world once seemed simple; manufacturers made things and services companies did things for us. Today, increasing numbers of manufacturers compete through a portfolio of integrated products and services.

This is a services-led competitive strategy, and the process through which it is achieved is commonly referred to as servitization. Celebrated exponents of such strategies include Rolls-Royce, Xerox and Alstom; all offer extended maintenance, repair and overhaul contracts where revenue generation is linked directly to asset availability, reliability and performance.

Servitization is much more than simply adding services to existing products within a few large multi-national companies. It’s about viewing the manufacturer as a service provider that sets out to improve the processes of its customers through a business model, rather than product-based, innovation. The manufacturer exploits its design and production competencies to deliver improvements in efficiency and effectiveness to the customer.

Manufacturers have traditionally focused their efforts on product innovation and cost reduction. Companies such as Porsche and Ferrari are celebrated for bringing new and exciting designs into the market, while companies such as Toyota are held in awe for their work with Lean production systems. These successes foster a perception that the only way for manufacturing to underpin competitiveness is through new materials and technologies, faster and more reliable automation, machining with more precision, waste reduction programmes, smoother flow of parts etc.

Competition through services

Services offer a third way to compete. This is not an ‘instead of’ or ‘easy option’ for companies that are struggling to succeed. Indeed, delivering advanced services can require technologies and practices that are every bit as demanding as those in production. Neither do they require the manufacturer to abandon its technology strengths; instead it can build on these to help to ensure long term and sustained benefits. Consequently, there is a growing realisation that such services hold high value potential.

Conventional manufacturers can struggle to appreciate the value of services, seeking such simple explanations of servitization that they fail to appreciate potential benefits. This is often the case with organisational rather than technological innovations. In the early 1980s it was difficult to imagine that ‘Just-in-time’ would endure, and yet today it’s hard to identify a single manufacturing company that has not been touched by Lean techniques in one way or another.

 

Servitization is a similar paradigm shift. The word ‘service’ can be used in different ways. It can refer to how well an action is performed – “that was good service” – or to an activity, like maintenance, spare parts provision and so on. Servitization relates to this second interpretation; activities that a manufacturer can perform to complement its products.

All manufacturers offer services to some extent, but some establish market differentiation through these, following services-led competitive strategies. Servitization is a term given to a transformation. It is about manufacturers increasingly offering services integrated with their products. Of these, some manufacturers choose to servitize by offering an extensive portfolio of relatively conventional services, while some move almost entirely into services, largely independent of their products, by providing offerings like general consulting. Others move to deliver advanced services.

Advanced services are core to servitization. Xerox’s ‘Managed Print Services’ is one example; rather than simply selling equipment, the company offers ‘document solutions’ to customers. For a typical customer, such as BA, Xerox provides project management, implementation of new technology, and management of third parties.

There are various types of advanced services, and a variety of terms is used across industry to describe these (e.g. availability contracting, performance contracting, managed services, solutions). However the outcome of these contracts is, invariably, a capability for a customer to perform a business function or process.

This is distinct from conventional services where the outcome is product ownership and maintenance of an asset’s condition. Particular contracting features are often coupled to advanced services.

There are four key features; the first three of which are relatively widespread: Pay-for-use revenue payment: pay-per click, pay-as-you-go, power-by-the-hour etc. are all terms used to refer to advanced services. For instance, in its contract with Xerox, Islington Borough Council receives a ‘click charge’ each time a document goes through a machine.

Long-term contracts: Contracts of fewer than two years are rare. The Heart of England NHS Foundation Trust has a ten year contract for its pathology laboratory facility, while in power generation, GDF Suez enters into contracts of 20 to 25 years. Risk management: The provider is responsible for ensuring asset availability, condition and performance. If an Alstom train is late, penalties of £600 per minute of delay are incurred if the fault is with the OEM. Commitment to on-going process improvement and cost saving: this features increasingly in advanced services contracts.

 

When these features are coupled with the principle of delivering a capability, contracts become sophisticated and demanding. Many existing contracts are relatively large, which is perhaps part of their appeal to OEMs. MAN Truck and Bus UK has 10,000 vehicles under contract, and expects this to grow by 50% over the next three to five years, to represent £200million of business. The Heart of England NHS Foundation Trust’s five-year contract in its pathology laboratory is valued at £20M per year.

Advanced services are however not only for large organisations. They can hold high-value for manufacturers big and small. They can help strengthen relationships, lock-out competitors, and grow revenues and profits and this is why servitization can be a sustainable business model for manufacturers of all sizes.

 

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Want to know more - why not attend the Servitization Spring Conference in May 18th - 19th Click here for more information

 

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At the recent AfterMarket conference in Amsterdam Field Service News Editor, Kris Oldland hosted a panel debate with three speakers key to servitization; Professor Tim Baines, Aston University a leading proponent of the movement, Brendan Viggers, Product and Sales Support for IFS Aerospace & Defence division who has worked closely with a number of companies such as Emirates on moving towards a servitization model and Koen D’Haeyer, Global Manager Service Development & Technical Services Lely who had been through the journey himself with Dutch Farm Technology company.

In the first part of this feature we looked at whether servitization was limited to just large size companies and how to manage the change involved in moving to such a radical new approach. Here in the final part of this feature the debate continues....

Kris Oldland: There is a point there that you touch on briefly about not just getting the buy in from the internal teams but also from the customer. Data can play a significant part in servitization and that presents a challenge in it’s own right, as data is very precious currently. How can we overcome that and encourage our customers to let us access their data?

Koen Dyaeyer: To start I’ll mention one thing, there is an aspect on this benchmarking data with your customers which is of course, that you are obliged to do this anonymously that is clear. You can tell the a customer ‘look this is your data this is the rest of the market and this is the variation’  but you cannot be open to all extents.

But the value is not in knowing exactly who is doing what, the value is in comparing yourself with others and knowing what to learn, and how to then improve.

On the other hand it is also true that you have to select your targets when your developing these value propositions. This approach may not fit every type of customer immediately. I would say twenty to thirty percent may adopt really quickly, really embrace it and are immeditely fond of the concept, another twenty to thirty percent will be lagging – it is not in their mindset and then the part in the middle is where you have to push. And when you have pushed and achieved the 80% mark then you can approach the laggards.  That is more or less how we approached it so we didn’t lose to much time and energy in developing it.

 

Brendan Viggers:  Certainly in the defence market the classic contracting model is performance based logistics where the OEM is providing a platform and then the through life support of the platform as well, so all the servicing that goes with it and they will then offer a SLA or guarantee the fleet availability for 80% of that time.

What we are finding is there is a need for partnership between the OEM and the customer. Because the OEM needs to know how the customer is driving that vehicle. If he is taking that tank and forcing it across a plain over the bounds of normal operational use then it’s going to cost that OEM more to service it. So can be a win-win but if you want that platform you need to be prepared to operate within acceptable bounds.

Koen Dyaeyer: To add to Brendan’s point there I would add that in our case we are looking for the win-win-win because we are in between but if we focusses on the win-win-wins we can really drive forward.

Tim Baines: This debate about ownership of data has been going on for over 10 years. To my mind its the use of the data that is important. I’ve seen it in Xerox’s case where they will turn around and say OK the contract price is this for an advanced services contract on print management but if you let us share that data and use that data it’ll come down to this.

Audience Question: What would you say are your most important KPIs to actually monitor and drive your service business today?

Koen Dyaeyer: The most important group of KPIs are the service profitability KPI’s we have data on overall revenues and data on cost indicators. We cannot always be exact with th eservice cost indicators to the penny but we know what it is likely to be. So the service profitability is a major KPI.

Then there is customer satisfaction. The first question we ask in every technical assessment is what type of customer do you think this is and also is he satisfied? So we link that data to understand the relationship of data to customer satisfaction.

 

Then for the operations we also have the performance KPIs of the product so mean time between failure, mean time between breakdown, some performance indicators specific to our industry so number of failed milkings for example that help us see if the farm management is running smoothly. So performance, customer satisfaction  and service profitability – these are the three main KPI group we use.

Kris Oldland: Have these KPIs evolved as you have moved through this process of servitization? Have they evolved as you gather more data and therefore Insight into your customers?

Koen Dyaeyer: Actually we started with maybe 8 or 10 basic KPIs and what we started to get excited about was the analysis we could do with them. We were able to look at the years of technical experience and see how that aligned to customer experience and service profitability. We learned a lot out of that initial process and then some new KPIs grew out of it .

Tim Baines: I may have seen something slightly different in some of the companies that I have looked at. A quote that comes to mind is by Henry Ford who said profit is a result of service. Therefore when I look at people like Alstom the number one KPI is around customer experience.

That means the customer experience, which in their instance would be the amount of time a customer is waiting because a train has failed to show up, that customer experience is the number one KPI.

For Alstom that’s key because it relates directly to the customers key core business process, which is about moving people. Then there are KPIs around the customer experience when somebody is onboard the train and so on. It’s the manufacturer that then translates those to mean time to failure etc.

What is very interesting to me coming from a world of production, where the main KPIs were cost, quality and  delivery and everything was around that then moving to the service world where KPIs are centred around the business processes of the customer, and because those customers differ so must those KPIs differ.

 

Audience Question: I am understanding this correctly that the fourth industrial revolution is about re using our IP and industrial assets to serve customers better?

Tim Baines: I think that we are looking at a very special form of organisation. What is particular about the technology innovators you see here is that if they have the internal procedures in place to capture how the product is performing in the field and then feedback to the design process so the product becomes better suited for application, then that innovation loop is what is distinctive about the manufacturing companies and is different to technology innovators.

Ultimately it means language like through life support  are actually a characteristic of the old product mentality, we’re talking about a capability being delivered. Indeed even the notion of After-sales service is a product based concept because we are thinking of the notion of  producing something selling it transactionally and then after sales.

Another point to make is that we talk about servitization from the point of view of a manufacturing company, a company that’s got technology innovation capabilities delivering advanced services. But we also have the phenomena of companies which are service companies, technology integrators, developing their ability to technology innovate.

So there are two ways that servitization can arise. Predominantly we talk about a move from manufacturers to manufacturers that deliver service but we can also talk about service providers developing their abilities to redesign products.

 

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Servitization has been talked about for many years but all of a sudden it seems to be a key topic on the agenda of many manufacturing companies and also amongst may service based organisations as well. For those companies that tread the path being dubbed the fourth paradigm it will mean a complete rethinking of how they view field service. 

At the recent AfterMarket conference in Amsterdam Field Service News Editor, Kris Oldland hosted a panel debate with three speakers key to servitization; Professor Tim Baines, Aston University a leading proponent of the movement, Brendan Viggers, Product and Sales Support for IFS Aerospace & Defence division who has worked closely with a number of companies such as Emirates on moving towards a servitization model and Koen D’Haeyer, Global Manager Service Development & Technical Services Lely who had been through the journey himself with Dutch Farm Technology company.

Kris Oldland: The case studies we hear around servitization to date all seem to involve large organisations with quite complex or evolved business models already. Is it the case that servitization only applies to companies that have the size to make it work?

Tim Baines: I’ve worked with quite a few smaller companies which has been quite interesting first of all to break away from the myth that servitization is just about large companies. By this time next year we will have got around 70 companies within our region of the UK the west midlands engaged in servitization.

One company which helps us breakaway from this idea that it is all about delivering complex products is a company that actually delivering pallets, regular wooden pallets and these pallets are used in the automotive industry to move windscreens and cars and things like this. There business model before we got involved was they would make a pallet, sell the pallets.

 

But what they are doing now is slowly but surely getting into the space where they are making the pallets, they are designing the pallets for the application, they are working with the customer to make sure the pallets are well suited, they are actually putting the pallet in the system, they’re tracking the pallets, they are taking care of stock control and slowly and surely they are moving to a position where they are becoming the business process outsourcing partner for the customers own material handling system.

Whilst this may not be a perfectly clinical example of servitization by some definitions, but nevertheless it is a good example of a small company that has adopted the principles of servitization and then put them into practice.

Koen Dyaeyer: I couldn’t agree me that smaller companies companies servitization can work. I have a history in smaller to medium sized companies, and we went drastically through servitization aspects even by a make and buy proposition through to quality assurance etc so it’s applicable for sure in all industries.

What I would say is that technology there is an extra opportunity as in complexity it is very much possible to create the value of your expertise which is also holds true of course.

Audience Question: Whenever we decide to do any transformation a big chunk of it is behavioural change, besides the software and the hardware how to you trigger the behavioural change within a company?

Brendan Viggers: For us its understanding the processes, being able to model those processes and work as a team to fully understand what the different functions and responsibilities you have within that team. But its also being able to drive down to having a piece of data that will ultimately help you deliver that new change.

Koen Dyaeyer: My experience is set directions clearly for each individual so people understand what is needed from them to achieve the goal. Also motivate people, there is a study that says people only get a message when it is [quote float="right"]There is a study that says people only get a message when it is repeated twenty three times. That’s often a slogan that I use, just repeat it and to be honest sometimes it may need to be repeated forty six times

repeated twenty three times. That’s often a slogan that I use, just repeat it and to be honest sometimes it may need to be repeated forty six times but energise it, make it engaging.

 

Tim Baines: The companies that I studied when we wrote made to serve, were all companies that were pulled into the delivery of advanced service by their customers. In some instances companies they were pulled into this space kicking and screaming, they were product based companies and they were given no option.

What’s interesting to me now is this second wave of organisations where in some instances you are not being pulled into this space by your customers, rather your looking at the benefits that organisations such as Rolls Royce and Caterpillar have got from servitization and you want a piece of that action. But you have a different set of challenges. Some of the challenges remain the same but some are very different.

For example you have to educate your customers, about the opportunity, this is the theory here, an innovation theory showing us the difference between market pull and technology push. You’ve now got to educate your customers. You’ve got to get the buy in of the whole organisation to the servitization approach. Some of the processes and tools that are out there are great once you’ve started down the path but really to start to get the traction in the first instance, to really get people at board level to buy-in to the idea is one of the biggest issues.

 

How to inspire the senior management, how to get the messaging about what it is that servitization is about both internally and externally, how to frame servitization so they know what you are talking about. Going to customers and stimulating a customer demand which then pulls everything together.

Look out for more from this debate coming soon... 

Servitization is a key trend in that is rapidly on the rise in manufacturing realm and it's impact on Field Service could be game changing. But what exactly is servitization, how can it change the way we work and will it live up to the hype?

To find out more Field Service News Editor, Kris Oldland spoke to Professor Tim Baines one of the leading proponents of the servitization movement

 

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Across December and January we asked our readers to nominate candidates for the inaugural #FSN20, a list of the twenty most influential people in field service. We received nominations from across the globe through social media, email and even a phone call or two directly into the news-desk.

Armed with a list of candidates, a Field Service News panel selected the final list of twenty based on the number of nominations, their impact on the industry (past, present and future) and their sphere of influence in both the physical and digital world.

After much long deliberation, heartful debate (read arguing) and enormous amounts of coffee we managed to whittle our list down to a final twenty which we pleased to present to you here the inaugural edition of the #FSN20. You may not agree with our selection and if you don’t tell us, tell your friends, tell your colleagues, hell tell the world - because at the heart of it that’s what this list is all about, getting people talking about excellence in field service and raising the profile of those leading us to a better future.

We will be announcing who made the list in alphabetical order in four sections across the next four days. So without further ado we are pleased to bring you the first five of the #FSN20

Colin Brown, Managing Director, Tesseract

Every generation or so a company will pioneer a new approach and then when they start to get some traction everyone else follow’s suit. Service Management Software company Tesseract under Brown’s long standing direction happen to have been that company twice, being the first company to launch a Service Management solution firstly for Windows and secondly in the Cloud.

If they head off in a new direction again I’d suggest paying attention.

Follow Colin @tesseractuk

 

 

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Professer Tim Baines, Aston University

Co-Author of “Made to Serve” and also Director of the Aston Centre for Servitization Research and Practice, Baines is one of the leading figureheads for the servitization movement, which could have an incredible impact on how field service operates for companies that adopt this approach.

An engaging and passionate speaker, with unbridled passion for his topic, Baines is one of the most significant figures in what is potentially one of the most significant industrial concepts in the twenty-first century.

Follow Tim @ProfTimBaines

 

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John Carroll, CEO, The Service Council

As founder of The Service Council Carroll’s impact on the field service industries stretches far beyond their home shores of the U.S. and right across the globe.

Having rapidly evolved from a good idea to a community spanning across 6 continents and representation in more than 30 countries, Carroll finds himself spearheading one of the most influential groups dedicated to field service in the world.

Follow John @tservicecouncil

 

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Alastair Clifford-Jones, Managing Director, Leadent Solutions

For perhaps too long Leadent Solutions have been one of the industry’s best secrets as Clifford-Jones has quietly built his managing consultancy with a team that, unlike some of his better known competitors, is populated with people who have worked in similar roles for their clients –so they inherently ‘get it’.

Therefore, it is not surprising that they are putting together an enviable track record of working with some big names and I think soon many more are set to follow.

Follow Alastair @LeadentSolution

 

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Sumair Dutta, CCO, The Service Council

In his previous role with Aberdeen Dutta headed up the organisation’s Customer Experience and Service Management Group and was a significant key figure in the launch of Aberdeen’s Chief Service Officer Summit Series.

Now in his role as Chief Customer Officer for The Service Council Dutta is one of the most widely seen commentators on the industry.

He also has field service’s best avatar.

Follow Sumair @suma1r

 

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See the rest of the list here:Part Two, Part Three,  Part Four. 

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