Welcome to the latest in a series of brief interviews with guest experts from KnowledgeBrief’s Innovation Programmes, providing a window into the experts’ latest ideas and new advice for executives.
Following the Innovation Day in February, Jeanne Meinholt, Senior Researcher at KnowledgeBrief (KB), talked with Dr Ali Bigdeli (AB) from Aston Business School to discuss the paradigm shift from product-centric to service-centric solutions in the manufacturing industry, and how this can be applied to other sectors.
KB: What’s the key business challenge that organisations need to address, that your research tackles?
AB: Conventionally, manufacturing has been about product and production; utilising a combination of people, processes and equipment to transform materials into products for sale. Over the last few decades, however, this paradigm has shifted due to the pressures from the low-cost economies as well as the fast pace of technological innovation. Products have become commodity, and customer’s needs and requirements become more complex. For manufacturers striving to deliver increased customer satisfaction, improved competitiveness, and more sustainable revenue streams, it has become clear that simply making and selling physical products is no longer enough to secure success. As a result, the manufacturing sector finds itself transitioning to a new paradigm called “servitization”.
Understanding and systematically adopting servitization is, however, challenging. The concept of servitization is inclusive and can be used to represent a breadth and depth of services. To illustrate, some manufacturers can build their services business by offering an ever-greater variety of ‘intermediate’ services such as condition monitoring, maintenance, repair, overhaul and remanufacturing services. Other manufacturers servitize by extending into more ‘advanced’ services, such as Rolls-Royce with the Power-by-the-Hour model, and similarly Alstom with TrainLife Services, Xerox with Print Management and MAN with Pay-per-Kilometre. Both intermediate and advanced services can deliver a growth in revenue and profit for the manufacturer, but are distinctly different pathways to servitization.
KB: What advice would you give to executives, based on your findings?
AB: Executives need to realise the potential opportunities of servitization. Many people talk about Industry 4.0, Internet of Things, Circular Economy, etc. I believe servitization is much more comprehensive than these. It is not only about installing a sensor to a machine to collect data, or develop a new business model to capture the value. It’s also about change at organisational level – change in structure and processes, people’s mind-set and culture.
KB: How does your latest research approach this? What do the results indicate?
AB: My research specifically focuses at organisational change towards servitization. Recently, I have started to explore how transformation took place in the leading companies in this space (e.g. Royce Rolls, Caterpillar, MAN Truck & Bus UK, etc.), and examine the ways in which such process could be developed and implemented within those manufacturing firms that have recently started to move towards servitization. Some of the initial results of my research demonstrate that there are several distinct pathways towards servitization. Depending on how the entire initiative is triggered (e.g. from the senior leadership, through customer pull or technology push) the pathways will be different.
KB: What did you learn or take away from meeting with the executives in the KnowledgeBrief Innovation Programmes?
AB: I had a great discussion with the delegates. The topic of my presentation was very new to them, and hence I received a lot of interesting, yet relevant questions. One of the key take away for me was recognising how a group of customers from different industries appreciate this topic. It was interesting to see some participants found servitization as an opportunity for value creation and value capture, while others started to realise that that they need to collaborate with their partnered manufacturing firms on these initiatives, not only to create more value but also to stay competitive.
With thanks to Dr. Ali Bigdeli, Senior Research Fellow, Aston Business School.
Next month, KnowledgeBrief clients will be exploring how to harness the neuroscience of leadership, with cognitive neuroscientist, Dr. Marcello Malavasi. Find out more here.