Driving the servitization transformation through change management: lessons learnt from industrial cases

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  • Driving the servitization transformation through change management: lessons learnt from industrial cases

    Aston Spring Servitization Conference, May 2016

    Dr Shaun West and Paolo Gaiardelli

  • West & Gaiardelli, 2016

    IntroductionThe problem and the purpose of this paper

    To describe a series of challenges leaders in the service business faced during their servitization journey

    Servitization as a transformational process has major effects on the cultures, business models and processes of a firm. Yet the change management is poorly understood.

    To identify the impacts of organisational barriers on different types of companies

    Purpose of this paper

    Preliminary review on how six firms in Europe navigated the servitization journey successful without tripping over barriers

    Problem

  • West & Gaiardelli, 2016

    IntroductionWhat does the literature say?

    is generally agreed that such a transformation calls for organisations to radically innovate all components of their business model Gebauer

    there is no unique, ideal servitization transition, as a successful transition to services depends upon context Neely

    there are no specific models for servitization as a change process Pawar

    Servitization is a change process that impacts on the operation and the culture of the business

  • West & Gaiardelli, 2016

    MethodologyA three step methodology was applied in this study

    An initial review to gather a wide range of inputs and categorize them systematically

    Literature study Interviews Cross case analysis

  • West & Gaiardelli, 2016

    Results and analysis of the literature reviewThe servitization barriers were categorised according to those defined by Hou and Neely

    These categories will be used to help analyse the findings

    Competitors, suppliers and partners Complex and competitive environment, involving different actors

    Society and environment Lack of policy, infrastructure support and incentives

    Customers Heterogeneous demand

    Economic and finance Unexpected costs and difficulties in pricing services

    Knowledge and information Difficulties in knowledge and information management

    Products and activities Lack of competences and infrastructuresDifficulties in designing service packages

    Organisational structure and culturePreconceived thoughts and resistance to change conflicts among different departments and different hierarchies in organisationsLack of service-based organisational structure and service-oriented culture

  • West & Gaiardelli, 2016

    Results and analysis cross case analysisOverview of the six firms selected for interviews

    Firm Segment HQ OEM tier Service emplyees

    1 Equipment for trains GER 2nd 540

    2 Marine and power CHE 2nd 1,300

    3 Textiles CHE 1st, 2nd 400

    4 Logistics equipment NLD 1st 1,200

    5 Video surveillance ITL 1st, 2nd 540

    6 Energy CHE 1st, 2nd 3,200

    - The objective to get insights from manufacturers- Diversity measured by

    - Segment- Geography- Position of OEM business in supply chain- Size

    - Interviewees requirements- Long-term experience of the firm- Senior management

    - Detailed feedback provided to the firms

    A wide range of manufacturing firms were targeted for interviews

  • West & Gaiardelli, 2016

    Results and analysis of the interviewsInterviewing process

    The interviews provided an insight into the reasons, problems and benefits of servitization

    West%&%Gaiardelli%

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    ANNEXE''DETAIL'OF'THE'FIRMS'%

    Firm%1%

    The%firm%begin%its%service%transformation%in%2002%and%has%gown%in%service%employees%from%100%to%450FTEs,%

    during% that% time% the% sales% from% services% have% increased% from% 15%% of% total% sales% to% over% 35%% with% the%

    expectation%of%50%%in%the%future.%%The%business%objectives%have%been%achieved%but%the%start%was%tough%and%

    continued%management%focus%and%attention%was%required%to%guide%the%firm.%%The%positioning%on%the%service%

    matrix%is%given%in%Figure%2.%

    Prior%to%2002%there%were%limited%management%change%programmes.%%Between%2002%and%2016%four%changes%

    programmes%were%implemented:%

    ! organisational% structures% % the% creation%of% a% service%division%with% P&L% responsibility,% prior% to% 2002%service%fell%under%the%responsibility%of%sales%as%basic%after%sales%support;%

    ! project% management% development% % the% delivery% of% complex% service% project% required% a% different%approach% to% project% management,% basic% project% management% was% embedded% within% product%

    development%and%production%however%missing%were%the%commercial%aspects;%

    ! sales%development%%the%selling%of%services%was%found%to%be%different%from%product%selling%and%a%wider%base%of%sales%skills%were%required,%more%on%a%consulting%selling%bases%

    ! services%R&D%%this%was%required%to%address%specific%issues%that%were%identified%during%the%operational%life%of%the%equipment.%

    %

    Over%the%transformation%the%business%has%moved%from%a%reactive%service%business%into%one%where%service%

    is%now%integrated%into%the%culture%(Figure%2).%%The%firm%has%a%desire%to%move%to%service%as%a%product%but%has%

    yet%to%reach%this%position,%there%remains%a%focus%on%productKservice%systems.%The%service%maturity%for%the%firm%

    has%increased%in%the%six%dimensions%measured%over%the%transition%with%the%major%focus%being%on%getting%closer%

    to%the%customer.%%

    %

    %Figure%2%Service%matrix%and%service%maturity%for%firm%1%

    %

    Key%direct%comments:%

    ! [service]%culture%is%everything%as%it%is%drives%the%attitudes%and%behaviours%of%our%employees;%%! [we]%are%starting%to%offer%service%as%a%product%on%its%own%to%better%create%customer%value;%! we%look%today%for%customers%problems;%! we%must%have%an%ecosystem%view%as%it%helps%us%to%work%together%but%this%is%a%change%in%mindset;%! we% need% to%work% during% the% life% of% the% equipment% to% overcome% design% problems% and% changes% to%

    operations;%

    ! our%success%has%in%a%large%part%been%borough%about%because%we%have%a%P&L%responsibility%and%a%seat%on%the%leadership%of%the%business.%

    %

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    5Management

    Culture

    Customers

    Offerings

    Resources

    Performance:

    Initial 2016

    Initial

    2016

    - A detailed interview form was designed- Questions based on findings from the literature and prior studies (published and unpublished)

    - Company details and information- Questions to support basic benchmarking- Open interview question

    - Interviewees were from leadership positions- All interviewees had long-term connection to the firms

    - A detailed report from the interview was given to the firms

    West%&%Gaiardelli%%

    % 13%

    Firm%2%The%firm%started%its%transformation%into%services%in%1999%and%over%that%time%has%grown%into%a%full%business%unit%with%around%1300%FTEs%from%a%base%of%around%100K500.%%Over%this%time%the%aftermarket%service%business%has%grown%from%being%simply%spares%to%one%that%constitutes%over%30%%of%their%business%and%a%higher%figure%for%the%margin%generation.%%The%longerKterm%aim%is%to%grow%the%service%business%further%without%growing%the%head%count%so%that%it%is%over%50%%of%the%business.%The%business%objectives%have%always%been%met,%however%the%leader%of%the%business%pointed%out%that%it%takes%three%years%to%make%a%visible%change.%The%position%on%the%service%matrix%is%given%in%Figure%3.%

    Prior%to%1999%there%had%been%a%six%sigma%operational% improvement%programme.%%Since%then%there%have%been%two%major%change%programmes%and%one%additional%planned%programme:%

    ! single%service%origination%%service%business%unit%with%its%own%P&L%and%this%is%seen%in%Figure%3%with%the%increase%in%service%offering%and%greater%focus%on%customers;%

    ! Sales%focus%K%the%firm%had%put%in%place%a%sales%focus%programme%which%had%the%effect%of%positive%impact%on%the%service%behaviours%and%put%the%business%closer%to%the%customer;%

    ! customer% value% and% process% integration% % this% programme% is% planned% for% the% next% phase% and% that%address%customer%value%and%process%integration%as%this%will%help%them%to%move%from%product%services%to%thinking%as%service%as%a%product%and%assist%the%final%push%to%a%cultural%intensity.%%%

    Over% this% time%the%business,%according% to% the% interviewee,%has%generally%moved% from%being% reactive% to%more%proKactive%a%key%to%this%was%having%a%service%business%unit%with%its%own%P&L%and%this%is%seen%in%Figure%3%with%the%increase%in%service%offering%and%greater%focus%on%customers.%%

    %Figure%3%Service%matrix%and%service%maturity%for%firm%2%

    Key%direct%comments:%! we%need%to%work%more%efficiently%together%over%the%coming%years%to%get%the%growth%without%additional%

    white%collar%staff;%! our%productKservice%system%offing%is%quite%complete,%we%need%to%push%more%into%pure%services;%! we%got%closer%to%our%customers,%now%we%need%to%invest%in%the%IOT%and%integrate%into%our%customers%

    processes;%! you%need%HR%to%help%drive%business%thinking%in%a%knowledge%rich%environment;%! we%need%to%move%to%appreciate%our%customers%even%more%than%the%technology.%%%

    % %

    West%&%Gaiardelli%

    %

    % 15%

    Firm%4%

    The%firm%started%it%service%transformation%in%2010%and%has%grown%services%from%less%than%5%%of%the%business%

    to%over%20%%today%with%the%longerKterm%objective%of%reaching%25%%of%the%total%sales.%During%this%time%the%

    business% objectives% of% increased% customer% intimacy,% new% revenues% and% i