By Theoni Paschou, Federico Adrodegari and Mario Rapaccini

Many companies are now pursuing business models of digital servitization: The biggest obstacle is insufficient human digital competences. We developed a framework to help structure the discussion, identify gaps and problems and set priorities.

The phenomenon of globalization has led to lower margins and hence the need to reduce cost of development, production, implementation and maintenance of products. At the same time, customers’ expectations in terms of offered solutions and technological content continue to grow and oblige manufacturers to accelerate product renewal cycle times. In this context, many manufacturers have decided to extend their offer through the provision of advanced services, often enabled by new technologies, not only for product support but also for the support of clients and processes. This strategy, commonly known as “servitization“, makes it possible to create durable competitive advantages through customer loyalty, the differentiation of the offer and generation of consistent revenue streams. In this transformation, new digital technologies play an increasingly important role: we are talking today about “digital servitization”. This is not only a radical transformation of the traditional business model of firms (i.e. moving from selling products to the sale of performance or results arising from the use of the product itself). Digital servitization is also radically changing work, peoples’ needs, and the competences required to do their jobs and achieve outcomes. Being one of the most complex and relevant challenges it attracts the attention of both the academic and managerial world.

In order to support companies in this competences focused transformation process, ASAP SMF (see below for description), created a focus group involving more than 40 managers (CEOs, HR directors, service directors) and 27 leading companies in various sectors to facilitate research and idea generation. We report here on outcomes and conclusions that were presented at a meeting in June in Milan regarding the need for human digital competences, and on a framework we created to structure the discussion and help shape priorities. The meeting included over 20 participating managers, from companies such as Baltur, Came, CGT, Canon, Clivet, Electrolux, Kyocera, Pietro Carnaghi, Ricoh, Turboden and ServiceMax – GE Digital, a partner of the initiative. The meeting was was also attended by two distinguished experts: Mark Homer, Vice President Global GE Digital Transformation Customer and Till Post, of the German chapter of the Association for Service Management International (AfSMI), who provided additional points of reflection.

The opinion of the participating managers was that in this new economic environment, analyzing and establishing the required core competences for the future is already today an indispensable element for competitiveness and the development of new strategies. And it is the lack of reference models on which to plan organizational change, supporting not only the most “codifiable” skills such as technical and after-sales skills, but also those that are more supportive of digital transformation, such as data analytics or business model development, that today represents the main obstacle for companies to successfully pursue digital servitization.

For this reason, we proposed a reference model to classify the “key competences for digital servitization”. The framework is organized in 4 pillars (see Figure 1). The first pillar identifies the key competences for managing and analyzing data that underlie many business models of servitized companies. For instance, companies that have an interconnected installed base, can leverage the collected (big) data from the field to analyze customers’ needs and provide proactive services with high added value. The huge data volumes are considered “the new oil”, and require specific know-how and skills, techniques and tools for processing, analysis and visualization as well as for utilization in the development of analytical and data-driven models. The second pillar, closely related to first, includes useful skills for the creation of new digital content. This category includes creative coding skills aimed at developing applications, tools, and solutions for complex business problems. The third pillar encompasses soft skills, like results orientation, time management, communication and leadership, which are increasingly identified as being crucial to the employee of the future. The fourth pillar includes the skills related to the ability to stimulate and guide the processes and dynamics of innovation and transformation. Special emphasis is placed on knowledge and awareness of the impact of new digital technologies

Based on interviews/discussions with the participants, all the described competences in the framework are considered relevant for digital servitization. In fact, the average score for “Relevance” is between 2 (average) and 3 (high). And by plotting the Relevance against the Gap Relevance – Presence in a company, it is possible to identify those classes of competences, which are most sought and of high priority versus others (Figure 2 highlighted with the different colors (i.e. gray, peach, green).

In particular, the class of skills that characterizes the Data Scientist/Analyst and Data security management (in green) is the rarest and most sought. There is strong awareness of the usefulness of these competences, but they are not easily acquirable in the market nor can they be simply created internally. As confirmed by case studies, it is increasingly crucial to know how to handle and analyze large amounts of data, often of a heterogeneous nature and to extract value from them. In addition, many of the managers pointed out, that another critical factor is the ability to protect that data, in order to ensure compliance with regulations. In both cases, these are complex competences to find, recruit and put into action. These skills are located at the intersection of computer science, statistics, information technology, law, management and strategic marketing. These should be people able to identify socio-cultural trends, aggregate and process data sources, interpret the gathered data and give a first interpretation in terms of business impact.

Regarding roles, eight were indicated by participating managers as important (see Figure 3) for organizational change and digital service transformation. They are in line with the competences mentioned above: in particular, the Data Scientist and Cybersecurity Expert, for the first pillar (data management). The Service Architect (designer of digital services) and the Digital Communications Expert (social, internal and external channels) for the second pillar (digital creativity), and other roles in support of innovation driven by technologies, and management of processes and transformation projects.

Although there is a strong agreement by the participating managers on the importance of the identified roles for digital transformation, the road ahead seems still long. And it is not just a problem of “operational” roles; Even the C-Level of a company is now forced to change, and there are few companies today that have done it. Not surprisingly, these companies are also the ones who have already consistently developed a structured path of acquisition and development of new competences identified by our framework (Figure 4).

 

Of course, many managers want to investigate how companies can organize themselves in order to develop these competences in-house (train, retrain). This is important in order to be able to sustain the existing experienced workforce. However, participants agreed that retraining of the workforce, while necessary, is not sufficient to fully seize market opportunities, and to facilitate the ongoing transformation. It is also essential to invest in the acquisition of new talent able to fill in roles effectively non-existent a few years ago. This comes up against the strict limits imposed on budgets and employee numbers. It seems that in Italy, in many sectors, large companies hire staff only when there are some retirements, or in small numbers for very specific needs or tasks. We have rarely found major recruitment plans for build-ups of competences, particularly when speed is of essence. And another limit to digital servitization, at least at Italian companies, seems to be imposed by the shortage of investment in human capital dictated by the need to contain the costs of personnel already in place.

In conclusion, our work clearly shows that the greatest obstacle related to development of digital servitization is not the availability of technologies, but human digital competences to support the strategic development of new product-service offerings, value-added solutions and solutions based on data from the Internet of Things. The ASAP research highlights the need for a genuine new process for identifying, acquiring and training specific skills, which are consistently directed towards the development of digital servitization. We need to create not only technical knowledge, but also awareness of the preconditions for use, the implications and the risks associated with technologies that are not yet fully mature. A great effort is needed in order to manage the organizational implications. Above all, it is necessary to operate in accordance with strategies for transforming the business model. 

 

Theoni Paschou and Federico Adrodegari are members of the RISE laboratory – Research and Innovation for Smart Enterprises- at the Dept. of Mechanical and Industrial Engineering at the University of Brescia, Italy

Mario Rapaccini is a member of the IBIS laboratory at the Dept. of Industrial Engineering at the University of Florence, Italy