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Servitization : Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th April 2015

Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

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Page 1: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Servitization: Manufacturing Growth

Ia in McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th Apri l 2015

Page 2: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Aston Centre for Servitization

Research and Practice

Our goal is to transform the adoption of servitization; our approach is to learn about

the processes of servitization from the world’s leading organisations, and then work

with manufacturers to servitize their operations.

w w w. a s t o n -s e r v i t i z a t i o n . c o m

@ _ s e r v i t i z a t i o n

Page 3: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th
Page 4: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Our definition of servitization

The process by which a manufacturer changes its

business model to provide a holistic solution to the

customer, helping the customer to improve its

competitiveness, rather than just engaging in a single

transaction through the sale of a physical product.

Page 5: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

The advanced services

landscape and common features

Page 6: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Exploiting Servitization in

West Midlands SMEs

S M E g r o w t h p r o g r a m m e :

• Part-funded by the European Regional Development Fund (ERDF)

• £800k project to help manufacturing SMEs in the West Midlands region

• We have worked with 55 manufacturing SMEs – capacity to help more until December

• Support is provided free for manufacturers that meet the usual ERDF eligibility criteria

He l p i ng m a nuf a c t u r i ng SM Es t o g r ow t he i r r e v e nue s

Page 7: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th
Page 8: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

SME Case Studies

Out of the 55 SMEs assisted, a small number of case studies have been created to

capture the impact on SMEs that have undertaken the servitization transformation:

Haigh Engineering Waste Spectrum Goodflo

E x p e r i e n c e o f s o m e o f t h e S M E s s u p p o r t e d

Page 9: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Case study: Strategic

‘This is a significant opportunity for us to

deliver benefits to our customers and enhance

revenue; since the start of the year our

revenues from service and spares have already

gone up by 25-30%.’ Mark Brian, Managing Director

Revenue from services is set to increase from

10% of overall income to at least 25%;

revenue from services and spares has already

increased by 25-30% since the start of 2013

due to the roll-out of their new refurbishment and

maintenance programme.

H a i g h E n g i n e e r i n g L i m i t e d

Page 10: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Case study: Sustainability

‘We’re not incinerator suppliers anymore, we’re a solution provider’

Neil Rossiter, Managing Director.

Waste Spectrum is leading the incinerator

market in offering an advanced service

package and is reaping the rewards;

20% of its revenue is now coming

from services.

Neil is now talking to a number of large

corporate organisations with multiple

incinerators to design bespoke support

packages for them.

W a s t e S p e c t r u m L i m i t e d

Page 11: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Case study: Moving from pure

services to product manufacturing

‘Retaining the customer and managing the

customer relationship through servicing is

much more profitable for us than selling them a

piece of kit.’ Russell Fraser, Managing Director.

Russell identified an opportunity to use his

company’s expertise in services to help to

get the new product to market, combining the

two together to provide a complete solution to

the problem of fats, oil and grease discharged

in kitchen waste water from washing up.

G o o d f l o L i m i t e d

Page 12: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Observations from case studies

From experiences to date:

• Organisational culture produces differences in how staff engage with servitization

• The most successful adoption example involved the most sceptical managing director

• The concept is hard to grasp when manufacturers think in terms of products/units

• Contracts and Finance remain problematic areas for SMEs to address

• Ownership within companies for adopting servitization are still unclear…

Page 13: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Impact achieved

G r o s s Va l u e A d d e d ( G VA )

I monitor and measure the change in revenues (actual/forecast) for manufacturing SMEs assisted through the project. I have received confidential company and financial data from 30 of the SMEs. Although we have worked with 55 SMEs to date, not all of them are prepared to provide financial or operational data due to commercial sensitivities. Total revenue growth recorded (over 12-month period from 30 SMEs) = £16.5m Total revenue growth attributed to servitization (using a nominal 30%) = £4.95m

Page 14: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Mapping of GVA achieved

0

200

400

600

800

0 1 2 3 4 5 6

5 highest GVA figures recorded by sector

GVA (£k)Chemicals

Foundry Health Transport

Software

AM (Tgva/30)

Page 15: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

SMEs on our programmes have experienced growth by:

• Securing new and longer-term contracts

• Improving their turnover through new services

• Strengthening customer relationships leading to new sales

• Altering their business model to include advanced services

• Forming collaborative ventures around complementary skills

Experiences of growth in our SMEs

Page 16: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Industry White Paper: 2013

After speaking to 33 key executives, from 28 leading

UK organisations, we identified four key findings:

• Servitization promises sustained annual

business growth of 5-10%.

• Customers of Servitization are reducing costs

by up to 25-30%.

• Servitization can deliver resilience and growth

to the UK economy.

• Adoption is inhibited by a lack of awareness.

Sponsored by Xerox.

Page 17: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Common Drivers: Manufacturers

Seeking to improve commercial viability through:

• Response to customer demand

• Competitor lock-out

• Smooth revenue streams

• Response to legislation

• Product life-cycle extension

Seeking to improve growth through:

• Greater customer intimacy

• Market adoption of product and process innovations

Page 18: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

ADVANCED SERVICES ARE

INCREASINGLY APPEALING

Today Desired future

Re

ve

nu

e

Revenue

from

product

sales

Revenue

from

advanced

services

Revenue

from

product

sales

Page 19: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

ADVANCED SERVICES ARE

INCREASINGLY APPEALING

15%

23%

31%

18% 13%

0% 1%

21%

62%

17%

0%

10%

20%

30%

40%

50%

60%

70%

Product focused Products and parts Products, parts, time andmaterials

Products, parts & servicescontracts

Products as a service

Pe

rce

nta

ge o

f re

spo

nd

en

ts

Product-service balance

Current position Expected position in 3 years

PTC sponsored Global survey of almost 400 senior executives from firms recording annual sales exceeding $1 billion. http://www.ptc.com/topics/manufacturing-transformation/oxford-research/

Page 20: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Our 3 pil lars of engagement

Industry- Driven Research

Networking & Conference

Executive Education

HOW TO ENGAGE WITH

THE CENTRE FOR SERVITIZATION

www.aston-servi t izat ion.com

Page 21: Servitization - Midlands Economic Forum · 4/20/2015  · Servitization: Manufacturing Growth Iain McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th

Supporting grow th in manufacturing

SMEs through the adoption of

advanced services.

Iain McKechnie Dip Mgmt CMgr FCMI

www.aston-servitization.com i [email protected] @_servitization