Innovations

The RE-INVENTION of Manufacturing and its implication on Service business leaders?

Re-invention‘I am still making order out of the chaos of reinvention’ said novelist John Le Carre as he penned another cold war spy thriller.

Many would say the same is true of manufacturing today. Gone are the days when a manufacturer simply made the product, delivered it to the customer, sometimes supplied some parts & services, and then moved onto the next sale. In today’s unpredictable world, this model is fast becoming unsustainable.

Accelerated by the chaos of the financial crisis and propelled by the industrial internet, many businesses are moving beyond this traditional notion of manufacturing. No longer do they just ‘make products’, they provide services such as financing, maintenance programmes, lifecycle consulting or even outcome orientated service contracts. Complex equipment manufacturers are leading the way in evolving ever more strategic relationships with their clients, as they deliver their technology as a service outcome rather than stand-alone product.

Why is this important? It’s not just that product transaction orientated business models are being replaced by those centered on relationships, outcomes and service. But that to achieve this re-invention, manufacturing must overcome a severe skills shortage! Without people and skills, all the advances in technology and thinking will stagnate. Companies need to attract a completely new talent pool into their industry. One that is technically and socially more diverse and which has many of the marketing, customer experience and media skills found in the FMCG and financial sectors.

There are a number of mega-trends combining to drive this paradigm shift: The current period of history is unique as we see a number of political, technological and cultural trends interacting;

  • Products have digitalized: they are no longer defined by their physical attributes, but increasingly by the information they develop and outcomes they achieve. The recent explosion in the adoption of connectivity technologies has emphasized this shift as companies increasingly focus on how to use the data created by their products to offer more value to their clients and so improve margins. As manufacturers become more integrated into their customers processes, so their customers place greater emphasis on the total customer experience. No longer is the product at the centre of all things that are made!
  • Services are now increasingly in the industrial business mainstream: Many of the worlds leading industrial companies openly state that they generate more revenue and profit from services than from products. There are now so many examples of large companies making this transition that the industrial establishment is slowly changing its paradigm.   In the Germany we see the ‘Industrie 4.0’ initiative around the impact of IoT technologies on the Industry value chain. In the UK research institutions such as Cranfield, Aston Business School and the Cambridge Service Alliance are pushing for a national policy on Manufacturing Services which is conservatively estimated at £23bn to the UK GDP in a global market of over £1trillion.
  • Public pressure to look after our environment: Society and hence policy makers realise that the world needs to stop digging material out of the ground and then later scrapping products. It needs to transform to the Circular Economy, where services are used to maintain assets at their highest level of value and at the end of the life-cycle, re-use as much as possible. This policy is now being built into many major infrastructure projects in the UK.

These are all pretty powerful indicators that more than an evolution is happening, but a slow process of re-invention where the definition of a manufacturing company is a mix of product, services, solutions and experiences. The days are numbered for companies who believe they can continue to be successful with the traditional design, product, deliver and forget model that served many industries so well for the past 150 years.

This revolution must mean that the very nature of a manufacturing organisation must change. It is difficult to predict how, but here are a few potential examples;

  • Sales & Marketing will becomes more focused on co-creation and solutions: It’s not just about understanding the customer’s immediate needs, but delving more deeply into how a company can improve the profitability of its clients business. Many product sales people will have to learn how to co-create solutions with their customers as opposed to responding to customer needs with a list of benefits. To have the customer insight at their finger tips, sales will increasingly use CRM tools that are integrated with the Service and Engineering processes.
  • R&D will no longer be technology focused: They will need to incorporate service thinking into product design in order to develop integrated product-service solutions that can deliver new business models.
  • The understanding of Design is changing: Manufacturing is no longer the realm of Product Designers and the traditional Engineering disciplines. Service designers who bring a greater focus to the user’s of the value proposition become a key part of the design process. As products and services become more blurred and integrated with each other, so this Product and Service design expertise will merge and focus on the process of co-creating solutions with the customers.
  • A supply chain integrated by technology and analytics: The companies supply chain including production will become a highly integrated value chain through the connectivity concepts offered by ‘Industrie 4.0’ thinking. To meet the market needs, companies will have to form much closer partnerships to deliver capabilities they may not have. This increased inter-dependence between partners will lead to greater use of open innovation and ecosystem thinking.
  • Mathematical technologies that enable ‘Big data’ will become a capability that all companies must master: These ‘Data Scientists’ already exist in many research-associated industries. But some of these skills and tools will have to increasingly come into mainstream manufacturing and service if companies want to figure out how to monetize their information.

Whether you believe that all these things will happen or not in your business is not so important. The message is manufacturing must re-invent itself as a dynamic, intellectually stimulating environment that can and should attract the best brains in our society for both men and women.

What does this mean for Traditional Service Operations? A lot has been written around how connectivity technologies will change the nature of Field Service in terms of efficiency, transparency and customer relationship management. All this is true, but more profoundly as manufacturing re-invents itself, so the idea of Service as an entity must also fundamentally change. It will be incorporated into a new ways of thinking about the goals of a services organization and how to achieve them.

As connectivity and data become more available in real time, so more problems can be solved centrally. As service thinking becomes more embedded in manufacturing businesses so even self-healing technologies may be introduced into product design. One can see that this will require a completely different approach as to how service organisations are perceived and managed. It is logical that in order to provide seamless outcomes and experiences to the customer, organizations will become much more integrated, between, centralized technical support, the machine itself, local support, 3rd parties and parts and sales/relationship management. Exactly how will depend on the business models being supported.

This trend can already be seen in many leading global organisations. For example in the Asia-pacific market a leading supplier of industrial robots see their mix of Field /Central services swinging from 60/40% to 40/60% as they increasingly integrate remote services into their solutions. There are companies in the defence industry who have their service team located in situ on warships where they are contracted to provide availability. These are perhaps the more extreme examples of the moment, but one can clearly see that there is a link between the technology, the contractual relationship with the customer and the organisation of the service organisation.

We also see field service and central service organization being closer to the sales team. Just look at the emphasis we have seen in recent years on the Trusted Advisor roles and the discussions of how field service interacts with sales. And at the more radical end of thinking, there are those that predict that Field Service will replace sales as the business area that manages the customer relationship.

The bottom line is that as manufacturing re-invents itself, so Service will become an integral part of the companies growth strategy. How this will happen is difficult to tell because we are in the early stages of a manufacturing revolution. And this re-invention of manufacturing is exciting from two perspectives. It means that a more diverse and broader skills set will be attracted into manufacturing. And secondly that Service businesses must adapt to new product technologies and business models bringing new challenges and opportunities for its people.

To be part of this re-invention process, business leaders can follow a simple 3 point plan:

  1. Undertake a strategic re-evaluation of the customer /industry supply chain to identify how services can contribute to sustainable business growth.
  1. Experiment with and adopt connectivity technologies to discover the cost and business model benefits.
  1. Constantly look at how other businesses are adapting and using this Outside-In perspective to speed up the adoption of innovation.

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