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 21st
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
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