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MaximizeEuropeWheretostartwithServitizationandwhataretheenablers–SessionNotes8thNovember2016Dearattendee,Thankyouforcontributingtothisdiscussion,whichIhopewasstimulatingandinformative.ThesenotescapturethekeypointsIheard.Ifyouhaveanyquestions,youcancontactmeat:nick.frank@Si2Partners.comLuxembourgOffice:+352621215856;LondonOffice:+442081446452IntroductionInsimpletermsServitizationiswhenbusinessesaddservicestotheirproductstodelivervalueandenhancedcustomerexperience.ThisdiscussionwastofurtherunderstandthechallengesthatcompaniesfaceastheyshiftfromProducttoServicethinking,deliveringoutcomesratherthanjustafunctioningproduct.

1.FromProductThinkingtoCustomerOutcomes• Wediscussedsomeexamplesofoutcomebasedservice

businesses:o GE/RR:Fromsellingenginestodeliveringthrusto MANTruckUK:Fromtrucksaletotruckavailability

forafixedpricepermile(seearticleinFieldServiceDigital21stApril2016;’Isculturepreventingyoufromsellingoutcomes’)

o Fasteners:Fromsellingapartforacartobeingpaidforallfastenersengineered,sourced&assembledinacari.e.Outcomebasedservicesarenotjustforcomplexassets

• AsthebusinessmodelshiftsfromProductstoCustomerOutcomes(Services),theculture,organization,sales&marketing,operations/servicedelivery,financialmanagement,engineering&designwillalsofacenewchallenges

• Itisnotappropriateforallcompaniestoshiftcompletelytotherightinallcustomer/businesssegments.ThepositiononthePtoScontinuumdependsontheValuethatcanbedelivered.

Where to start with Servitization & what are the enablers?

Adding Service to Product to deliver Value & Customer Experience Product Service

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2.FindingProfitPoolsintheCustomer&IndustryValueChains• WedevelopedtheideaoftheValueIcebergbasedon

theTotalCostofOwnershipprincipal.The‘visible’productrepresentsasmallpartofthevaluechain.Muchmorevalueisburieddeepinthebusinessindirect&indirectcostsaswellas‘fuzzy’costssuchasRISK.

• Themostprofitablecompaniesunderstandtheirvaluechainanddesignproducts&servicesthatmakearealdifferencetotheircustomers:eg-FastenercompanieswithEBITDA>30%-InjectionMoldingcompanywhofocusesonmaterialthroughputtohave75%shareinPETbottlemarket-MANTruckUKgrewfrom$75Mto$770Mover20yrsbychangingtoaoutcomebasedservicemodel

• Asproductsdigitise&producemoreuseabledata,soServicesbecomeanidealgrowthstrategytowinvaluedeepdownwithinthe‘valueIceberg’.ForexampletheUKMinistryofDefenceestimatethatthroughhavingtheirsuppliersdeliveroutcomes,suchasavailabilityofafighteraircraft,theycanreducetheircostsby20%andincreaseassetavailabilityby20%

• Henceidentifyingtheopportunitiesinthecustomer&industryvaluechainiskeytounderstandingnewpropositionstodevelopandguidinginvestmentintechnology’ssuchasIoT.

3.TransformationJourneyCompaniesthattrytomovestraighttoOutcomebasedservicesusuallyfail.Successgenerallycomesfromappreciatingthattheorganisationorganisationmustgothrough4levelsinthematurityofit’sthinking:1. Awareness:Organisationsrecognisethattheyalready

deliverservicesandthattheycanmakeastrategiccontributiontothecompaniesgrowthstrategy.

2. Excellence:Forexistingservices,customisethefrontofficeandindustrialisetheback-office.Thisiskeytodevelopingprofitableservicesandbeingabletocrediblydemonstratevaluetootherpartsoftheorganisation.

3. ServiceSavvyOrganisation:Movetoalevelwhereeachindividual/functionalareawithintheorganisationunderstandstheroletheyplayindeliveringvalue.Thisincludes,Sales,Marketing,CustomerSupportaswellasR&D.

4. CustomerProcess:Havingdevelopedthislevelofmaturityandcapability,thenanorganisationisreadytodeliverOutcomebasedservices

Thesephasesdonotneedtobesequential.Butexperiencesaysthatdeliveringoutcomebasedservicescannotbesustainablyachievedunlessthefirst3levelsarereasonablymature.

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4.TheArtofTransformation

• Wedevelopedthebusinessecosystemtounderstandthatprofitabletransformationisnotjust

aboutprocess.i.e.Hereisthestrategy,goexecutethroughOperations.

• Leaderstendtoplaceemphasisonexecution(what);overlookingtheimportanceofthe‘How’(People&Clients)andpaylipservicetoVision/Valuesthatcreatesaculturethatcandeliverprofitablechange

• Understandingandmanagingtheseinteractionsisakeysuccessfactor.Formorebackgroundonthisdiscussion,seethisblogarticlearticle.https://serviceinindustry.com/2016/06/10/service-transformation-more-an-art-than-process/

• Wealsosawhowproductorganisationstendtohaveacultureofpushingproductstocustomers.

ServicefocusedcustomershavemuchgreaterinteractionwithcustomersandtendtooperateaPulltypemodel.

• Thishighlightstheculturalshiftmanyorganisationsneedtomakeastheytransitiontoamoreservicebasedapproach.

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5.KeyTakeawayThisquotefromSteveJobssumsupthechallenge.“StartwiththeCustomerExperience”i.ethetotalvalueyoucandeliverthatwillmakeasignificantdifferencetothecustomersbusiness.“Thenworkbacktothetechnology”i.e.InadditiontothetraditionalviewofTechnologyalsoincludethePeoplewhousethetechnology.InotherwordscultureisimportanttoachievingsustainablegrowthFurtherresourcesSi2on-DemandprovideAdvisoryandSupporttoTopPerformingmanagerstohelpthemmaketheShiftfromProducttoServicethinkingmoreeffective.Weprovideaccesstoanetworkofexpertpractitionerstosolveproblemsfacingserviceleadersinallkindsofsituationsthroughshort1-4hrmissions,butonlywhenneeded.Youmayfindthefollowingresourcesusefulonyourjourney

• ServiceinIndustryBriefing:ablogwithmanyexpertcontributorshttp://www.serviceinindustry.com• JoinourLinkedinGroup:ServiceinIndustry• OrfindoutmoreaboutSi2On-Demandonourwebsitewww.si2partners.com

Where to start with Servitization & what are the enablers?