Why Can t Everybody Copy Rolls-Royce? A Demand Side Perspective on the Difficult Path to Servitization

Transcription

1 Why Can t Everybody Copy Rolls-Royce? A Demand Side Perspective on the Difficult Path to Servitization Marin Jovanovic, PhD Candidate Mats Engwall, Full Professor Anna Jerbrant, Assoc. Professor Spring Servitization Conference Aston Business School Birmingham, May 18 th 2015

2 Motivation: Why can t everybody copy Rolls-Royce? Rolls-Royce s Power-by-the-hour concept has gained status as an archetype for servitization of manufacturing We question the general applicability of Rolls-Royce as a role model The first wave of servitization case studies were trying to capture the shift from product to services by studying first-movers (successful)? We conceptualize around the shift from value-in-use to value-in-exchange Today, manufacturers are searching for answers to the more operational questions: How can we servitize our specific product lines?

3 Research question? How is a service transition strategy influenced by the product s value in use? We pinpoint how product value-in-use, outside the direct control of the supplier, can increase, or decrease, the potential of service transition strategies It reveals how the preconditions for the customers value-in-use of a product, profoundly affect the possibilities for servitization

4 Method Exploratory case study inspired by ethnography method (insider-outsider) Insider spent 6 months within the company (employee-level access) Case company is a leading construction equipment manufacturer worldwide Comparative case study of two service transition initiatives at a premium brand, capital equipment manufacturer In spite of the same organizational setting, the same corporate management, and the same servitization strategy the two initiatives had opposite outcomes!

5 Data collection Data sources Organization Respondents/Specific sources Documentation Interviews, 19 Participant observations Informal observations Document studies (> 30 documents) Shop floor visits, 5 Case company: High value equipment manufacturer Executive level, managers from various departments, key account manager, service manager, service support sales, operators, service center manager, various equipment technicians and specialists Audio recording, notes, internal documents, financial statements, annual reports, internal portal Interview, 1 Website Interview, 1 Website Customer: Contractor CFO Notes Customer: Contractor Purchasing manager Notes

6 Compressors vs Construction Equipment Division Stationary industrial compressors Road construction equipment Share of revenues (2014) Services, 37% Rental, 6% Equipment, 57% Services 18% Equipment 82% Orders received by customer category Manufacturing, 38% Process industry, 25% Service, 11% Construction, 8% Mining, 8% Construction, 58% Manufacturing, 13% Mining, 9% Services, 5% Process industry, 2% Application domain Compressors are used for different applications. In process industry e.g. food, pharmaceutical, electronics, and textile industries, in assembly operations, snow making, fish farming, on high-speed trains and in hospitals. The key customer segment is construction, general and civil engineering contractors, involved in infrastructure and road building projects.

7 Value Propositions Customer utility and benefit Function in customers value creation process Service offerings Value Chain Structure Functional markets Customer types Supply of compressed air Indirect Enables the production process of the customer Financial solutions Spare parts Maintenance contracts Predictive maintenance Equipment rental Performance based operation contracts Manufacturing industry, Oil & gas industry, Process industries Industrial companies of any size or type Reliable construction equipment Direct Core part of the production process of the customer Financial solutions Extended warranty Service plan (Insurance) Spare parts Service shops Split rental Construction industry Major infrastructure contractors, Major rental companies, Sub-contractors (SMEs) with own equipment Sales channels Direct Direct Wholesalers Rental Demand Relatively stable Fluctuates due to seasons Different construction projects requires different sets of equipment Product Operations Operating environment Variance in operations Product automation In-house maintenance by the operator Connectedness (Internet of Things) Product performance Stationary Indoors Low Results High Self-contained technology No or unlikely Yes Remote measurements of equipment performance Direct relation between measurable performance and customer costs savings Movable Outdoors Often remote locations High Low to medium Customer employees operates the equipment Frequent for minor malfunctions No Hard to measure Customer operations affect performance significantly Breakdown costs Approx. Euro 400,000 per hour Euro 5,000 10,000 per hour