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Servitization: Manufacturing Growth
Ia in McKechnie Co-Director Aston Centre for Servitization Research and Practice 16th Apri l 2015
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
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.
The advanced services
landscape and common features
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
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
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
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
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
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…
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
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)
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
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.
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
ADVANCED SERVICES ARE
INCREASINGLY APPEALING
Today Desired future
Re
ve
nu
e
Revenue
from
product
sales
Revenue
from
advanced
services
Revenue
from
product
sales
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/
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
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