Initial feedback on services survey

Transcription

1 Services for Competitive Manufacture Initial feedback on services survey Tim Baines & Howard Lightfoot

2 Aim of the PSS theme of the IMRC To be the UK s centre for internationally leading research on the adoption of services for manufacturers Objectives: 1. Develop a truly multi-disciplinary and integrated community of researchers. 2. Execute a high-quality and highly industrially relevant research strategy. 3. Strategically engage with international academic and industrial collaborators Funding: At launch, 5M from the Engineering and Physical Sciences Research Council (EPSRC)

3 PSS people and projects Link projects Core projects Core academic staff from Schools of Engineering, Science and Management Tim Baines (lead), Jeff Alcock, Steve Evans, Rick Greenough, Mark Johnson, Jenny Kingston, Helen Lockett, Veronica Martinez, Joe Peppard, Raj Roy, Essam Shehab, Ashutosh Tiwari, Ian Walton & Hugh Wilson Core research staff Howard Lightfoot (lead) Oluseun Ajai Oyetola Bankole Marko Bastl Alan Durugbo John Erkoyuncu Windo Hutabarat Philip Klaus Emma Macdonald Kate Panikowska Fran Romero Rojo Amir Toossi Tonci Grubic Louis Redding PSS Value Systems PSS Design Service Delivery System Service Network Transformation PSS Cost, IVHM Mapping, etc New initiatives and Centres Initially five years

4 PSS & IVHM research agenda PSS agenda Service system Eg: Service values, design, delivery and organisational transformation Service Lower TRLs so largely EPSRC funded IVHM agenda Technology system Eg: IVHM design, evaluation and demonstration Sensor Higher TRLs so largely industry funded

5 Service Delivery System project team Tim Baines, Howard Lightfoot, Joe Peppard, Essam Shehab, Ashutosh Tiwari and Mark Johnson, Cranfield University Ornella Benedettini, University Bari, Dan Whitney, Italy Massachusetts Institute of Technology, USA. Morgan Swink, Michigan State University, USA

6 Agenda Study context and motivation Study design and execution Initial findings Overview of future research

7 The Servitization community 1988 Servitization terminology introduced by Vandermerwe & Rada Most definitive papers are from the USA Followed by the UK and Western Europe Few from Asia and the Far East Authors are from Operations, Production, Services and Business Management

8 The Product Service Systems community 1999 Product Service Systems. Ecological and Economic Basics Report commissioned by VROM & EZ Holland Authors Goedkoop et. al. Most papers are from the Scandinavian countries Increasing no. of papers from UK A few papers from Asia Most authors are from Environmental and Ecology disciplines

9 Motivation Our reasons for conducting this survey is that there is little documented evidence about: Growth of services as the basis of competitive strategy for UK based manufacturers. Success through services and in particular whether such strategies make good business sense. Motives behind service adoption both from the perspective of manufactures and customers. Challenges that occur when organising to efficiently and effetely deliver services

10 Agenda Study context and motivation Study design and execution Initial findings Overview of future research

11 Purpose To better understand the penetration and impact of service strategies within the UK based manufacturers Process: Design survey with questions informed by international research and the practices and a sample of manufactures. Pilot and refine questionnaire, scope study, and target manufacturers. Execute survey, compile results, document and present executive summary Gather further data, extend analysis, publish and present complete findings

12 Questionnaire design Two introductory sections relating to the company and product business Five focus sections about the service offering of the company, the service strategy, its origins, the challenges encountered in the transition into services, the structure of the service organisation Closing section asking respondents personal view about the future of their service business In total 61 questions, predominantly closed-ended, but accompanied with comment boxes

13 Sample selection Companies listed in the FAME (Financial Analysis Made Easy) database Companies with UK manufacturing operations B2B Turnover > 10mn More companies identified through a Cranfield database and personal contacts

14 Survey administration Self-administered mail survey Addressed to Managing Directors Survey website for on-line questionnaire completion ( Questionnaires sent out in November 2008 About 3 weeks time to respond Remind letter sent to all the non-respondents at the end of the field period with one additional week time to respond

15 Survey response The response rate so far for fully completed questionnaires is 11% (AAPOR, 2008) Analysis and findings presented today based on the responses of 39 companies Responses are complete and comprehensive from senior personnel (Managing, Operations & Engineering Directors) These initial findings should be treated as indicative of trends

16 Respondent profiles Other 16% Electrical Equipment 32% Over 50M 37% Less than 10M 11% Machinery 26% Mechanical Equipment 26% Between 10 and 50M 52% Products Turnover

17 Typical respondents Manufacturing Electronic / Electrical / Electro-Mechanical equipment with annual turnover > 10-50M B2B companies with Industrial Organisations or Government agencies (predominantly large enterprise) as Customers / End Users Service Strategies in process for more than 10 years (60%) and 3-10 years (35%) Installed base of a few thousand products or less Market share 20% - 40%, with up to 10 main competitors, less than 1000 main customers

18 Next steps Publication of executive summary (Feb 09) Further extension of data-base and validation of company data (March 09) Analysis and workshops to establish rich and reliable insights about service strategies (July 09) Final presentation and publication of results (Sept 09)

19 Agenda Study context and motivation Study design and execution Initial findings..strategy, motivations, challenges and success Overview of future research

20 Strategy Most respondents consider themselves to be niche operators, and being mature or quite developed in the adoption of a service strategy Most respondents base their service strategy around the sale of the core product, though more than 40% expressed a willingness to offer services in pay per use arrangements Most commonly respondents set out to only service their own products, though many are prepared to service competitors products, or have competitors willing to service theirs

21 Strategy Most respondents offer tailored service strategies as part of an integrated solution The most popular measures of service business success are customer satisfaction, profit from services, then sales and customer retention Most service agreements include financial penalties if a failure to meet service contracts occurs The value of services are most often demonstrated to customers either by improvements in product performance or monetary savings

22 Strategy Only half of the respondents undertook risks previously taken by their customers The risk takers typically provided their customers with products delivering functional results or systems About a quarter of these risk takers did not proactively mitigate the risk Risk mitigation in the other risk takers used combinations of liability limitation, product field data collection, and technology investment

23 Strategy Popular services

24 Clustering of Services Traditional (reactive) Spares, help desk, training, repairs, resource provision Risk-reducing or protective Spares inventory management Regular maintenance Proactive (sophisticated) Condition-monitoring, data gathering and analysis

25 Range of Services 100 % of Respondents ~70% ~25% Traditional Risk Reducing Proactive Clustering of Service Provision

26 Questions raised about strategy include... Are these companies really producing niche products, or is there a better description of how they compete? There seems to be little evidence that services are really offered as fully integrated solutions, so what do companies really mean? Is risk adoption a function of product service complexity? Is our clustering of services into traditional, risk reducing and proactive valid? How sophisticated is the approach to pricing services?

27 Clustering of Supplier Motivations Supplier Motivation Improved Customer Responsiveness Revenue generation, product differentiation, customer loyalty Customer pressure, new product sales Competitive barrier Reducing price based competition 0 6 Relative Importance

28 Customer Motivations Customer Motivation Reduced Operating Costs Reduced Risk Reduced Investment Improved performance Focus on core competences Support product related activities 0 6 Relative Importance

29 Questions raised about motives include... Did respondents enter the services business because : o They thought they could make money? o To prevent losing product customers? o Because customers demanded that they do? Why is the reduction of operating costs of prime importance in the acquisition of services?

30 Challenges Most respondents have taken a top down approach to identification of a service strategy, most frequently being based on the personal judgment of key personnel Less than half of the respondents claimed any structured approach to the design of their service offering Most respondents involved customers at some level in the development of service offerings Many respondents developed additional competencies to provide services. These included technical, communication and management skills.

31 Challenges Only 20% of respondents said they needed to make significant additional capital investments to deliver services Few respondents claimed to have conducted significant restructuring to deliver services Most respondents claimed to have experienced very little internal resistance to the adoption of a service strategy

32 Questions raised about Challenges include... Less than half of manufacturers have any structured approach to service design. Why is this? The manufacturers that we know are more advanced in their provision of services have indicated that they have made significant organisational change, so: o For our respondents, has the pain of resistance to change dulled with time? o What really is the impact of providing truly complex services?

33 Success Most of the respondents see their service strategy as successful, being resilient to economic downturns and competitive pressures, and key to future business growth Profit Before Interest & Tax on service sales is frequently higher, or at the very least equivalent, to that on product sales. In only 6% was profit higher on products than on services Almost 90% of companies surveyed see services to be core to their growth strategy

34 Questions raised about success include... What specific services attract the most profit for manufacturers? Can we separate out the value that customers place on different service offerings (replacement cost/opportunities cost)? To what extent have these service strategies penetrated their relative installed base, and so what are the future opportunities for growth?

35 Summary Our survey respondents claim: They are succeeding with their service strategies To offer a spectrum of services that appear to be clustered as traditional, protective and proactive Services strategies can aid customer retention, offer lower costs and reduced responsibilities for customers Providing a range of services can, in some cases, be achieved with limited organisational change

36 Observations The penetration of service based business models is still unclear, we suspect that: The extent of service support for the existing installed base is not yet reliably known. For most companies, services provision has been customer driven, and was then found to be a profitable strategy.

37 Observations Few have fully exploited services provision as the basis of their competitive strategy, although most consider themselves mature in the adoption of services. Only those that offer truly integrated solutions have fully experienced the necessary investments in capital, people, and restructuring. There are likely to be small new entrants, or those who service other firms products, who have not been reached by our survey.

38 Agenda Study context and motivation Study design and execution Initial findings Overview of future research

39 Purpose In-depth case study research to establishing the internationally leading practices for organising for services growth and productivity

40 Purpose Aim: An international programme of case study research to explore and confirm leading practices in the selection and delivery of product-centric services Objectives: Understand the differing forms of generic service offering and determine relative value appropriated by these. Capture the differing organisational structures, policies, practices and processes used to deliver service offerings. Identify leading organisational practices to deliver service offerings by benchmarking across industries and literature Identify enablers and inhibitors to success in the adoption and delivery of services

41 Cross sector Study Overview of case study research process Knowledge from literature 2.0 yrs Case 1 Case 2 Case 3 Case 4 Case 5 Leading practices Case 6

42 Scope The international case studies will focus on: Leading manufacturers Services which are in some-way linked to products Internal organisation of the host rather than the wider supply chain

43 Concluding remarks Study context and motivation Study design and execution Initial findings Overview of future research