Servitization of Manufacturing

Break-out Session 1b

Ji l l Forrest Aston Centre for Servitization Research and Practice 12th June 2015

Aston Centre for Servitization Research and PracticeOur 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 SMEsS 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 63 manufacturing SMEs – capacity to help more until December

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

H e l p i n g m a n u f a c t u r i n g S M E s t o g r o w t h e i r r e v e n u e s

SME Case Studies

Out of the 63 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.

Wa 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 )

We monitor and measure the change in revenues (actual/forecast) for manufacturing SMEs assisted through the project.

We have received confidential company and financial data from 30 of the SMEs.

Although we have worked with 61 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

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

Growth

Today Desired future

Re

ve nu e

Revenue from

product sales

Revenue from

advanced services

Revenue from

product sales

Likely

ADVANCED SERVICES ARE INCREASINGLY APPEALING

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

Servit izat ion of Manufacturing

Jil l Forrest

www.aston-servitization.com

j.forrest1@aston.ac.uk

@_servitization