Driving Competitiveness through Servitization

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Competitive advantage; from sustainable to temporary by resilience, speed and reconfiguration of resources. CBS Competitiveness Day 2014 @ Copenhagen Business School

Text of Driving Competitiveness through Servitization

  • 1. Driving Competitiveness through Servitization Competitiveness Day 08 September 2014 servitization@cbs.dk
  • 2. 2 What we have accomplished in pre-phase 5th International Seminar on Service Modularity and Architecture, January 16-17, CBS with the participation of 25 researchers from 15 European universities Workshop with practitioners Driving Competitiveness through Servitization, April 28, CBS Booklet Driving Competitiveness Through Servitization: A Guide for Practitioners, published by CBS Competitiveness Platform Development of a research agenda for Phase 2 of the project
  • 3. 3 Agenda What we do Heading 1. Factors influencing the competitive situation Global challenges 2. How to compete in this environment Operations strategy 3. Servitization what can be offered in addition to the product? Servitization of manufacturing Extending your value proposition 4. How far to go what services to offer Strategic considerations Moving from product manufacturer to service provider 5. Clarifying the service as a product Contracting potentials and risk 6. The service relation has implications on how to calculate costs Calculating costs 7. Considering the customer perspective Perspectives on servitization 8. The challenges of servitization The servitization paradox Challenges to servitization
  • 4. 4 Intense societal debate on the competitiveness of Danish industry Headlines such as: If we move our production, what is next? Productivity in Denmark is lagging behind Will the innovation activities go the same way? Can re-insourcing replace off-shoring? How to cope with servitization? Creation of value through new business models What would Denmark live off?
  • 5. 5 Factors and trends that affect industrial operations worldwide Factors Trends Description Macroeconomic Globalization Competition from low cost countries Commoditization Competition shifts to cost Customer demand Risk aversion and new contract forms Market Lock in customers Sale of equipment at low cost to profit from spare parts and maintenance Life cycle offerings Total cost of ownership calculations New profit formulas Fixed costs and long term, outcome based contracts Technology Internet of Things Incorporation of sensors and actuators in machines to provide remote maintenance and continuous information Big Data analytics Making sense and analysis of the vast amount of field data Additive manufacturing (3D Printing) Displacement of inventory and spare parts by installing 3D printers at the customers site Environmental Geopolitical Export controls and conflict regions Ownership vs. usage Using rather than owning physical assets is more economically sound for the customer and environment friendly for all Global resource scarcity Energy prices, CO2 reduction, design for disassembly, take back systems
  • 6. 6 Background and driving forces Competitive advantage; from sustainable to temporary by resilience, speed and reconfiguration of resources Danish companies are increasingly competing on global markets Information and communication technologies shape economics Innovation is happening at a much higher pace Technology is transferred Complex product and process systems are becoming more intertwined
  • 7. 7 Agenda What we do Heading 1. Factors influencing the competitive situation Global challenges 2. How to compete in this environment Operations strategy
  • 8. 8 Competitive performance objectives Competitive performance objective Implications Examples of KPIs for manufacturing Examples of KPIs for service Quality Being right Fit for purpose Process control Defects per unit Mean time to failure Customer satisfaction Flexibility Being able to change Customization Resilience Range of product mix Range of service mix Speed Being fast Risk of obsolescence Cycle time for process Response time Dependability Being on time Trust Stability % orders delivered on time % faults addressed within time Cost Being productive Efficiency Efficiency Labor productivity
  • 9. 9 Polar diagram for our service versus a competitors service Cost effectiveness Quality Flexibility DependabilitySpeed Competitor Our company Required performance
  • 10. 10 Agenda What we do Heading 1. Factors influencing the competitive situation Global challenges 2. How to compete in this environment Operations strategy 3. Servitization what can be offered in addition to the product? Servitization of manufacturing Extending your value proposition
  • 11. 11 Servitization - creating value through the provision of services Servitization is about competing through value propositions that integrate services with product offerings Servitization based on physical product: - Adding services - Offering functions - Total solutions Essentially it is about interfering in your customers processes Selling an asset Providing recovery Maximizing availability Offering outcomes (See table 4 on page 10)
  • 12. 12 Value propositions and customer expectations Type of value proposition Customer expectations Example Selling an asset Quality and performance of equipment Offer customized product Providing recovery of an asset Minimum disruption in case of equipment failure Repair of equipment after notification Maximizing the availability of an asset Fault free equipment Provide remote and preventive maintenance Offering outcomes for the customer Assisting customers to achieve their goals Take over customer functions/activities A product goes into to the processes of the customer
  • 13. 13 Extending the value proposition through servitization
  • 14. 14 Agenda What we do Heading 1. Factors influencing the competitive situation Global challenges 2. How to compete in this environment Operations strategy 3. Servitization what can be offered in addition to the product? Servitization of manufacturing Extending your value proposition 4. How far to go what services to offer Strategic considerations Moving from product manufacturer to service provider
  • 15. 15 Servitization is an attractive strategic response
  • 16. 16 From component manufacturer to solution provider Type of Servitization Characteristics Product Oriented Use Oriented Result Oriented The business model is still mainly geared towards sales of products, but some extra services are added The product stays in ownership with the provider, and is made available in a different form, and sometimes shared by a number of users The client and provider in principle agree on a result, and there is no pre-determined product involved Examples Product related services Advice and consultancy Product lease Product renting or sharing Product pooling Activity Management/Outsourcing Pay per service unit
  • 17. 17 Agenda What we do Heading 1. Factors influencing the competitive situation Global challenges 2. How to compete in this environment Operations strategy 3. Servitization what can be offered in addition to the product? Servitization of manufacturing Extending your value proposition 4. How far to go what services to offer Strategic considerations Moving from product manufacturer to service provider 5. Clarifying the service as a product Contracting potentials and risk
  • 18. 18 Contracting potentials and risk
  • 19. 19 Risks involved in servitization Experiences f