How UK Manufacturing Firms Can Create a Business Model Fit for Exports in 2014

Listen to a podcast by Andy Neely on this topic

I am optimistic that during 2014, UK companies will be exporting more if they can think radically about what the future holds for them and about what role technology will play. They need to be able to deliver value to their customers. To achieve that they will need to create new business models. They will need to put their traditional business model under the spotlight, and do some robust thinking about how they are offering good products and services to their customers, but I think there are excellent reasons to be optimistic and at the Cambridge Service Alliance, we see lots of manufacturing firms moving forward and succeeding.  Our partners  BAE systems, Caterpillar, IBM and Pearson’s have been pioneering new ways for manufacturing companies to capture value and they have lessons they can impart to others.

Take the use of technology for example. We know that the World is becoming more “instrumented", that companies are using more and more “senses” and that those senses are connected to the net and that they are “intelligent”. Those “senses” can help customers make smarter decisions. My mobile phone company knows when I leave my home because my phone starts moving. It knows when I walk to the station because it knows the pace that my phone is moving because it is tracking the GPS signal. It therefore knows the train I am catching because it knows when I start moving from a walking pace to moving to a train pace. It can predict what time I am getting into London, and it can text me a voucher saying: “Get 15 p off a cup of coffee between 8.45 am and 9 am on this particular morning”! Unbelievably it knows that my train is going to arrive in London at 8.40 am and wants to encourage me to go and buy coffee from a particular stand at Kings Cross station.

This technology already exists, I am not talking about a mythical future, it is already here and there are now endless new ways in which you can innovate your business model, to create new value for your customers.

Capturing all of the value in your business model that new technology can add will not be a quick process, it will take time. But we need to wake up to the reality that the changes taking place in manufacturing over the next five to 20 years are really profound. Manufacturing firms need to ensure that as we enter 2014 they have to be there and ready to capitalise on the economic recovery that is most likely taking place around the Globe. They will need to put their hard manufacturing yellow hats on to think about the longer term and how they can build a sustainable new business model in the light of some of the incredibly profound changes that are taking place in our economy.   

  

Clearly with the fast pace of technological change taking place all over the World traditional Strategic Plans will need to undergo radical change and need more flexibility than ever before. Long  term planning is essential, and our UK manufacturing firms will have to make predictions about where the World is going and they will need to think carefully about how they build the right capabilities in their organisations to capture the value from those changes. They must not lock themselves into one single path they must think about what we at the Alliance term “the alternative futures” scenario. Their business models  will need  to reveal the real future trends across sectors with a World class strategy that supports those trends.

They will need flexibility in the longer term to be able to adapt and respond to the way that the economies they are working in move, and also the way the technology moves too. They will need to be nimble and respond quickly to those challenges and changes.

One trend that they will need to be aware of, is that the traditional classification of sectors is breaking down. There will over time be a convergence of certain sectors, particularly where those sectors rely on data. There is an interesting question about what role Google or companies like IBM will play in those sectors  in the future. Both are really good at analysing data so will they suddenly find themselves in sectors that they haven’t traditionally been big players in?

Their business models will need to take into account what their competitors are doing, where their partners are and who they are collaborating with and wish to partner with in the future. It may just be right for them to embrace their traditional competitors and work with them in some way at some time in the not too distant future. This new “strategic thought” will influence their future success.

We are used to the term “ Big M manufacturing” and are aware of how manufacturing companies are supplying services to sustain the assets they sell to others for the entire life-time of these products. Manufacturing firms now work with others running everything, from the initial concept and the initial idea,  through to the design and the production process. The relatively narrow concept that people have technically thought of as manufacturing has now expanded to include the distribution of products, and the service and support and ultimately end of life care of those products, including recycling the products and components! Now that is impressive.

We know that “Big M manufacturing”, adds value across that entire set of activities that a company offers, and that manufacturing is evolving and will continue to evolve during 2014 and beyond. This new industrial age we have entered is unbelievably exciting. Factories matter, the production process matters, but manufacturing is now part of a much broader chain of services companies can supply to their customers.

One of the figures that gets quoted often is that for every pound you spend on the initial product, you spend something like four pounds on the service and support of that product through its life time. When products are created we need to think of the “through life” value and support.

For a  business model to succeed in 2014, firms will need to be innovative, a much overused word. The challenge for manufacturing companies will be to think differently about the role that their business plays and how they are going to create value from that role.  A lot of that new value is going to be created by data and technology.

I would advise companies to think robustly about the way that they can use data, either to improve the efficiency of their products and services, or to improve their customers efficiency. If they get  that combination right, particularly the innovation that can come about around the use of new data, their 2014 business models will stand a greater chance of success.   

Here we talk about how UK firms can capture value from exporting more to the BRICS, Brazil, Russia, India and China, but we need to remember that this is a global race, and that the BRIC economies will also be adapting their business models too. They know that they ARE having the same conversation and are also working towards making manufacturing fit for the 21^st Century.

Manufacturers as exporters can’t afford to ignore this global race, but they will need to make the right decisions, and to realise that “Big M manufacturing” is already a reality for many of the companies they are competing with.

My first Tip for 2014 is to get companies to focus on the outcomes that their customer wants. That outcome focus will lead to more profitable companies in the longer term. Customers don’t just want your products, they want the service or solution that the product offers and if you can give customers that final solution you will succeed. It  means that companies will really need to be clear about what their customer value is.

My second Tip for 2014 is to define what you are going to do in-house, and what you are going to ask others to do for you? How you collaborate and partner with people will be pivotal to your success.

My third Tip for 2014 is to understand some of the risk that is inherent when you start to move to these outcome based contracts. Companies will need to review what risk they are taking on, and how they mitigate those risks?

If they get these three things right, if they get the customer outcome right, the value delivery system right and understand the risk and the accountability spread, then I think UK manufacturing companies will be in a good position to capture value from their business models in 2014.

And one more tip from that Smarter planet phrase that IBM has coined. You DO undoubtedly have to think smarter. The World is getting more complicated for manufacturing firms, partly because sectors are breaking down and partly because of the speed at which technology is developing, but that also means there are many new opportunities that are opening up. Thinking smarter and thinking strategically about what you will and what you will not do is essential.

I know that the manufacturing renaissance is not just a vision for many UK manufacturing firms it is already a reality. Some are doing very well providing both products and services in this country and overseas. The market may be difficult, and it may be challenging, but there are many firms UK firms who already have a firm foot in that renaissance for manufacturing. They have got their business models right, and others will need to follow the lead they are setting in 2014.

Andy Neely, Cambridge Service Alliance

First Electric Vehicle Project in the World for holidaymakers in Okinawa, Japan, struggles to make a profit

Researchers at the Cambridge Service Alliance at Cambridge University, have suggested new ways of increasing the uptake of electric car usage. They have just published a new paper on a pioneering Electric vehicle rental service for holidaymakers in Okinawa Japan, and found that low usage has led to a loss for the car rental companies. It is one of the first EV rental projects of its kind in the World and aims to help improve the environmental sustainability of tourism on the island of Okinawa, Japan. 

The search for alternative fuels to reduce car CO2 emissions is an important part of the climate change challenge. In Japan 18 per cent of total CO2 emissions are caused by road transportation, in the EU it is around 12 percent. In China car usage is expected to rise from 43 cars per 1,000 in 2010 to 320 cars per 1,000 in 2035, thereby increasing the pressure to find alternative sources of fuel.  

The paper called: 'Electric vehicle rental services: Project in Okinawa, Japan', written by PhD researcher Claire Weiller, in collaboration with the Department of Systems Innovation, University of Tokyo, concludes:

“The Okinawa EV rental service at the end of its first three-year operational phase in 2013, missed its initial targets. Low usage rates mean rental companies are making a loss. Customers worry about insufficient recharging infrastructure. Sales of used rental cars are low.”

Ms Weiller suggests an ecosystems approach, favoured by the Cambridge Service Alliance, whose partners include BAE Systems, Caterpillar, IBM, and Pearson says this could help turn around the project for others wanting to introduce similar schemes in the future. She continued:

”By adopting an ecosystems approach we can look at all the companies that are involved in providing this service and that affect the outcome of this service, for instance we found there was a lack of information sharing between them all.“The information was broken down into all the different components. They were keeping the data to themselves so Nissan kept information about the battery in the car, the travel agents keep information about the customers who book their holidays, but the charging company on the Island, for example, doesn’t have this information, it doesn’t know if the user is just one person or a family. Therefore it was difficult to tailor the service or improve it for the customer.“If the customer worries about whether they will be able to drive from the airport on the South of the Island to the beaches on the North of the Island, and there is no-one in the value chain able to answer that question they will not feel reassured about the rental service. An ecosystems approach can change that. ”    

Professor Andy Neely, Director of the Cambridge Service Alliance said: 

“An ecosystems approach could be beneficial to those involved in the EV scheme in Okinawa, in Japan. All the partners involved need to think about how to capture value from the information they have in order to serve the customer better.”

In a Podcast Interview on the Alliance website Ms Weiller adds: 

“It is very conceivable that this type of rental service with electric vehicles will be offered by more and more countries, including in the UK where there are plans to develop the charging network to 70,000 stations by 2020.“Electric vehicles really are a great option for the transportation of the future, for environmental reasons to reduce greenhouse gas emissions, and also for economic reasons. This makes them attractive because they have so much lower operating costs than gasoline vehicles. Electricity is cheaper and the fuel is more efficient.“Electric vehicles are a great option for rental car companies, or taxi fleets, as well as for private users such as commuters or for people who want to sign up for car sharing schemes.”

Innovating Your Service Business Model: The Capabilities to Succeed

One of the themes we have been exploring in the Cambridge Service Alliance is the question of how organisations best innovate their service business models. In some of our early work, Ivanka Visnjic and I, developed a framework of 12 capabilities that underpin successful service business model innovation. Since then we have been developing and iterating this framework, creating a maturity model that firms can used to assess the maturity of their capabilities for innovating their service business models. It seemed to me that it would a good idea to write a series of blogs on this framework and the twelve capabilities that underpin it - so here's the first one - explaining the framework.

In essence our research suggests there are four categories of capability that really matter when it comes to innovating the service business model. These are: (i) the ecosystem; (ii) the value proposition; (iii) the value delivery system and (iv) accountability spread. Let me explain these in turn.

The first set of capabilities are concerned with the ecosystem - increasingly competition is taking place at the level of the ecosystem, not the individual firm. In today's interconnected economy, what matters is the way the ecosystem is configured and how your firm is positioned to capture value from it. Apple and HP illustrate the point. If you ask the question - "of the $1,000 someone pays for an Apple or HP machine, who gets the money" - you find that Apple keep 60-70%, while HP keep only 30%. Why the difference? Because Apple use their own proprietary operating system (they don't cede money to Microsoft), they use their own chip (they don't cede money to Intel) and they have created their own distribution infrastructure (they don't cede money to the retailers).

So what can HP do? It is too late for them to develop their own operating system or get into chip manufacturing. Both technologies are too well established, with large incumbent players and high barriers to entry. The cost of establishing a retail infrastructure, certainly a high street retail infrastructure, is prohibitive. But what they can do is invest in Linux. If HP help Linux become a more dominant operating system then Linux reduces Microsoft's power in the marketplace and hence their ability to appropriate value, leaving more of the money on the table for HP. And in fact, it is in the interests of all of HP's traditional competitors to increase the power of Linux. So if HP collaborates with other laptop manufacturers, then collectively they can try to shape the ecosystem and their ability to capture value.

It is not just the ecosystem perspective that matters. The second theme that we saw in our research was the importance of innovating the value proposition - really understanding what the customer valued and the outcomes they were looking for. There's an old Theodore Levitt quote - "customers don't want quarter inch drills, they want quarter inch holes".  We don't think this is right. Customers don't even want quarter inch holes. When innovating your value proposition you have to understand why the customer wants the quarter inch hole. If it is to hang a picture, then how else might the picture be hung - you could glue it to the wall. You could invite an artist in to paint the picture on the wall. The key to innovating you value proposition is to understand deeply what your customers really value.

Beyond the value proposition, the third category of capabilities centred on the value delivery system. Here we are shifting into the question of how do we configure the resources and activities required to deliver the value proposition. What should we do? What should we ask others to do? Many of the services firms deliver today require networks of organisations to pool their capabilities. Understanding the right network structure and identifying the right partners is essential when innovating the service business model.

Finally, we shift to capabilities concerned with accountability spread. Here the idea is that by taking on responsibility for the outcomes your customers want - you increase your risk and exposure. By innovating the value delivery system - either through technology or partnering with others - you may decrease the control you have over the ecosystem. Hence you have increased your accountability, but potentially reduced your control - hence you may have increased your risk or accountability spread. Understanding the implications of this and how the risk will therefore be managed is paramount if the service business model is to be sustainable.

These four categories of capability - ecosystem, value proposition, value delivery system and accountability spread - form the highest level of our framework for understanding business model innovation. In future blogs I'll unpack each of these categories in turn and explain the capabilities that underpin them.

Professor Andy Neely

Director Cambridge Service Alliance 

Industry Transformation Towards Service Logic

Industry Transformation Towards Service Logic: A Business Model Approach

December working paper from
Cambridge Service Alliance -
'Industry Transformation Towards
Service Logic: A Business
Model Appraoch, by Anna Viljakainen,
Marja Toivonen and Maiju Aikala

The issue of how customer value is turned into profitable business is becoming increasingly important when companies adopt new service-based business models. When moving the focus from making goods or services to assisting customers in their value creation processes, the managerial opportunities to influence value co-creation becomes to the fore. Business models may be used as static blueprints describing how organizations function and generate revenue, or alternatively as tools to address a transformation or change in a firm or in an industry. Our work addresses the latter perspective: what kind of changes are going on in the magazine publishing business as the result of the adoption of service logic. Traditionally the widely-adopted business model frameworks have lacked the attributes that are characteristic of a service logic. Our aim has been to modify the well-known and well-articulated business model canvas by Osterwalder and Pigneur (2010) into the world of services and offer a managerial tool for making the transfer towards a service-based thinking. In effect, we argue that the different building blocks of a business model change dramatically when service-logic is applied instead of goods-based logic. For example, instead of talking about target customers, we should be getting into the context of our customers and partners. Similarly, instead of managing our infrastructure, we should focus on mobilising and integrating resources within our networks. As such, a service-based business model highlights the importance of the understanding of customer context and the fostering of collaborative interaction with customers, as well as the value of a firm’s  internal and external resources. We have used magazine publishing as a case context to illustrate the implementation of a service-based business model in an industry, and we hope this will give you some ideas where to focus when entering the service business.

Blog post created by Anna Viljakainen, Visiting Researcher to the Cambridge Service Alliance

What is servitization?

I've had a couple of occasions in the last week where I've used the word "servitization" - either in a presentation or an article and someone has responded by saying, "so what is servitization". Given the frequency of the question I thought it might be worth writing a short blog to explain what servitization is and where the idea came from.

In essence servitization is a transformation journey - it involves firms (often manufacturing firms) developing the capabilities they need to provide services and solutions that supplement their traditional product offerings. More formally, my colleagues and I at Cranfield University defined servitization as "the innovation of organisation’s capabilities and processes to better create mutual value through a shift from selling product to selling Product-Service Systems". Two other definitions accompany this: (i) the idea of a product-service system - "an integrated product and service offering that delivers value in use" and (ii) a "servitized organisation which designs, builds and delivers an integrated product and service offering that delivers value in use".

It is worth unpacking these definitions a little, but before I do, let me give a couple of practical examples of servitization. The first, and classic, example is Rolls-Royce selling "power-by-the-hour". Instead of selling aero engines, Rolls-Royce now contracts with many of its customers for "power-by-the-hour". In essence the customer buys the power the aero engine delivers and Rolls-Royce provides all of the support (including maintenance) to ensure that aero engines can continue to deliver power. This shift in business model is important because it means the interests of clients and providers are much more closely aligned. In the olden days Rolls-Royce used to make money on time and materials - basically repairing engines. Put crudely the worse the engines were, the more maintenance they required, so the more money Rolls-Royce would make. Of course customers don't want unreliable engines that are always in the repair shop. They want reliable products that - in Rolls-Royce's case - allow planes to fly safely.

This same trend - selling solutions rather than products - can be seen in lots of industries. In healthcare, for example, many pharmaceutical firms are under significant pressure. The cost of developing drugs is increasing, many of the traditional drugs are coming off patent and so the generic manufacturers can move into the market. As a consequence pharmaceutical firms are rethinking their business models - defining themselves as healthcare solutions providers. Think like a patient - most of us don't want the products that pharmaceutical firms provide. We'd prefer not to be ill in the first place. So if someone can provide healthcare solutions, which reduce the likelihood of illness, the interests of providers and customers are again much more closely aligned.

So let us return to the definitions. To make this transformation - to sell services and solutions - requires significant change inside many traditional manufacturers. They have to recognise that the product is a platform to deliver a service. They have to build solutions that deliver the outcomes their customers want and value. In essence these solutions are often capture in product-service systems, combinations of products and services. Customers only realise value from these when they actually receive the service - hence the concept of value in use.

Servitization as a word has been around since the late 1980s. The most frequently source article is cited as Vandermerwe, S., & Rada, J (1988) "Servitization of Business: Adding Value by Adding Services", European Management Journal, 6(4), 314–324. An article that appeared, but has only relatively recently been getting more attention in the broader academic literature and business press. A recent high-profile example, is UK Government's Foresight Report on the Future of Manufacturing - which identifies servitization as a core element in its vision for the future of manufacturing.

How to Succeed and Make the Shift to Solutions in Today’s Fast Changing Business World

Operating in fast changing global business environments, presents real challenges even for the most successful corporate enterprises and as former market leaders like BlackBerry have learnt to their cost, competitors are always ready and waiting to step-in and take over your market share. What should “Corporates” do to maintain their competitive advantage, and plan for the future? Here Professor Andy Neely, Director of the Cambridge Service Alliance, discusses a concept that is helping to make sense of these many challenges and bear traps – it’s called “the shift to service solutions”. 



Listen to a Podcast with Andy Neely on the topic of this blog

This October like others, the Cambridge Service Alliance held its annual Cambridge Service Week Conference bringing together speakers representing the market leaders in their field, Caterpillar, Finning, IBM, Pearson, and even the Northern Arizona University - which is teaching completely online.  

We wanted to look at what we term “the big shifts” that are going on around the World as organisations look at selling solutions and services rather than products. As firms have sharpened up their business operations to become more competitive they are increasingly looking at selling the outcome that their clients want rather than merely the ownership of the product. 

All these business changes are taking place in a World where climate change, water shortages, demographic changes, and a scarcity of resources are putting huge pressures on decision makers in both the public and private sector.  

One of our Cambridge Service Alliance members with an interest in this shift to services is Caterpillar. Caterpillar machines and products might typically last for thirty years but if you sell a machine tool for one million dollars, it is probably worth about four times that if you include over the course of that products life time, the spares and support services that can be sold around it. The big challenge for Caterpillar in today’s fast changing business environment is not just how do they sell their machines and products, but how do they capture the relationship and then the support that they can then offer on the back of the sale of that product to make sure their customers get what they  want, which is the ability to move earth, or extract coal from the earth. The customer doesn’t necessarily want the machine itself, it wants the outcome the machine delivers!

Cameron Ferguson, Caterpillar

Cameron Ferguson, Manager of Global Dealer Capability in the Customer Services Support Division, Caterpillar, told me:  “Our customers make lots of choices about where they are going to get their services done, by themselves, by Caterpillar or by another party so we want to make sure that Caterpillar is at least being considered to being the preferred and primary service supplier. We can do that through solutions rather than just the traditional linear service, but a solution that says, “We can guarantee up time, we can guarantee costs per hour we can guarantee parts availability”, whatever it maybe that is tailored to that particular customers’ needs.”  

Surprisingly as the Caterpillar example shows, what we call “the vision” planning is relatively easy. You can understand the role that technology or data might play in enabling you to remotely monitor your equipment or in the education world to remotely monitor whether students are completing their course assignments and are therefore likely to graduate from the programmes they are taking.  However the planning process gets tougher when you want to put the right technological structure in place. You will need to get the right behaviour in your organisation and you will need to get your customers to accept these solutions and services! As you can imagine, that will involve a significant change process in any organisation – what we term “the shift to solutions”.

We have learnt that rarely does a single organisation have all of the capability to deliver the service solution or the outcome. Increasingly this shift requires networks of organisations to come together, to pool their resources and capabilities to create solutions for their customers.  So who are the players in these new networks and how do they emerge?

Increasingly, we are finding that these new networks involve firms who are traditionally competitors, who come together for the purpose of providing a better service for their customers. We find this work fascinating and revealing. There are some really interesting dynamics around the way firms collaborate, when they compete and how the ecosystems they are working in take shape.

Hold onto your seats, working towards these service solutions requires your business to be quick off the mark and ready for a white knuckle ride. It is clear that as your customers’ business model changes, and what they do changes, you will also need to evolve your business, but here comes the scary part, as you evolve your business, that in turn will allow further evolution in the customer’s business model too, which in turn demands further evolution in your own business plans! Responding to the challenges of business today will require a continuous process of evolving your capability.

We know that firms have thought about competition between firm A and firm B, but now people are worrying about competition between the ecosystems they have traditionally worked in together, and the roles each play in that system. You will need to think very carefully about where you want competition, and who you want to collaborate with! Maybe you should ask yourself if you want to encourage competition between some of your suppliers, and if perhaps you use multiple suppliers for different technologies or sub- assemblies, or data, which ones you might want to encourage competition in, and which part of the ecosystem that would impact on. At the same time you may want to plan for change simultaneously in another part of the ecosystem as well. This means that your boardroom strategic discussion is much more about the way the ecosystem works and your role within it, rather than the traditional model of: “we want to compete with firm A or firm B”.    

Certainly a business model that can react with speed and the ability to evolve your business model over time is very important for some industries. You will need to think about the clock speed of the industry you are in, so in some industries the pace of change will be incredibly fast while in some industries it will still be more measured, so therefore you can afford to be slightly slower in evolving the business model.

One of the things we have learnt in the Cambridge Service Alliance is that there are ten basic lessons that you need to get right if you are going to make a successful shift to solutions management. Let me give you three of these.; You will need to understand risk and the transfer of risk and if you offer solutions to your customers find out what risks you are being asked to take on and how that plays out over the longer term? The context really matters too, so you have to ask yourself – “Are we ready to make this transformation as an organisation, can we break away if we are a product or technology business from our technology heritage and worry more about service?” In terms of context, you are really asking- “Is the customer ready for our service?”

The third question to think about is: how do we design the customer service experience to create the right emotional response as well as delivering the pure technical service. Our Alliance partner, Finning have thought carefully about what their customers’ want and if they can support their customers. Finning know that their customers want equipment that works, they want no down time so they  have put processes and products in place that meet those needs,  but they have also built a centre that creates a great customer experience too. Customers walk in and have been known to say: ““Wow” are you really monitoring three-thousand pieces of equipment remotely, are you really watching what is happening, and looking after our equipment, you are like a safety blanket for us?” This is a valuable service so that emotional response from the customer is partly created from the design of the control centre in Finning’s case as well as the products and services it is selling.  

Lucy Courturier, Finning

Lucy Couturier, Finsight Manager,  Finning,  told me: “We have really become involved with the concept of Ecosystems since working with the Cambridge Service Alliance and we now ask ourselves: “who are all the players”? We take into account everybody that has an impact or that we impact in our day to day operations. We have customers, competitors, suppliers, and we need to understand how each of those interact to be able to provide the solutions that customers want. We can’t just look at one part of that puzzle, we need to understand that complex web of relationships to manage it effectively. The customer experience is as important to us now as the business side is. The customer experience and the relationships they have with us, is as critical in moving us forward.”

Mark Anderson, President, Schools & Higher Education Strategy & Business Development, Pearson, says the growth in those needing higher education in the World and the technology changes that are taking place, means the sector will need to adapt to change on both fronts on a huge scale in the future. He told me:  

Mark Anderson, Pearson

“There is an enormous growth in demand for higher education, at the moment there are about 180 million people in tertiary education, and in about thirty to forty years’ time that will rise to about  500 million people. Countries like China, Brazil, India and South Africa will expand their education systems and at the same time the development of technologies is pluralising access to and availability of education, so we will we have to bring these two changes together.  

“The ecosystem concept is one we have worked closely with through the Cambridge Service Alliance, we probably didn’t use it previously but if you are a company like Pearson where for hundreds of years you have essentially been selling books, you had a relatively simple ecosystem consisting of book producer, distributor or intermediary, book seller, and student, there was a linear progression. Now there is a far more complex diverse international mix of organisations who have a stake in education. Governments are now more activist in education too, so we need to track a world which is more complicated with a lot of new entrants who are having a rapid and an immediate impact. Our business environment is changing very quickly and an ecosystem model is a very good way of tracking that.”  

As these stories from Finning’s and Pearson show the experiences of others are really an important part of the business journey. Ecosystems are a really good way of thinking how you might innovate your business, how you might come up with services and solutions but remember just because you have come up with them, doesn’t mean to say that you can implement them. There is a lot of hard work to do to bring those visions, those ideas, those innovations, to reality.

I hope we can help our partners come up with the innovations and then help them execute them too, this is what we mean by the shift to service solutions. Hold tight, it could be a roller coaster ride, but we guarantee it will be full of excitement.

[More on this event]

Struggling to Make the Shift to Solutions: Write Your Own Obituary

It is clear that organisations across the globe are making the shift to solutions. Often the ultimate aspiration is providing the outcomes the customers (and in some some cases the customer's customers) want and need. Often this journey is described in terms of a service ladder - gradually moving from providing products to supporting the products with spares; through to remote or condition based monitoring; and finally onto contracting for capability or outcomes. While a logical flow and an inherently attractive proposition, successfully making this shift to solutions in reality is challenging. A critical issue is winning the hearts and minds of people who are used to a world of products. If you've always worked in a product or technology centred business then a commonly heard fear is "won't services cannibalise the product business" or put more directly "aren't we sowing the seeds of our own destruction - we'll kill the product business if we are too good at offering solutions".

Hearts and minds are always difficult to win, but one useful trick is to play on this fear. Recently we have been experimenting with asking organisation's to write their own obituary. The exam question we set is "write or record a short obituary for our services business. Imagine we are five years down the road and we haven't made our services business work (while all of our competitors have). What would the press be saying about us? What would they put our failure down to? Who would get the inheritance (e.g. which competitor gets our business and why)".

A simple trick, but the responses that are generated are both illuminating and in some cases humbling. Senior executives start to verbalise ideas like "ACME Inc has divested all of its remote and condition monitoring efforts and sold them to Monitoring-R-Us, a private company specialising in industrial solutions". Five themes consistently shine through these obituaries - the failure of the organisation concerned to keep pace with change; the inability to break away from the product-dominant culture; the need to get closer to customers and really understand their businesses; the reluctance to make the necessary investment - dabbling rather than committing to services and solutions; and missing the opportunity that the era of big data and sensors offers. In another blog I'll try to write more about these issues, but in the short-term if they strike a chord with you, join us in Cambridge on 1st October for the Cambridge Service Alliance conference - "Successfully Making the Shift to Solutions" - where we'll hear from organisations that are making the shift and overcoming the barriers.