Servitisation: making data pay

09 July 2018

Tim Clark, head of manufacturing solutions, SAS UK & Ireland, talks about how data can make money for manufacturing companies.

The term servitisation was first coined by Vandermerwe and Rada in the 1988 article ‘Servitisation of business: Adding value by adding services’.   One definition of the term is the strategy of creating value by adding services to products or even replacing a product with a service. An example of this can be drawn from the aerospace industry, where a jet engine can be sold as units of time to power a plane (‘power by the hour’) rather than the capital cost of buying the engine itself.  

Servitisation can only be viable when an organisation has a true understanding of the products and services it provides throughout its entire life cycle. This means knowing every aspect of the true production cost, logistics, operating environment, performance and life expectancy throughout its operational life. In simple terms, it is having the power to know what operational data and digital footprint a device or service has. This provides the insight needed to effectively manage and cost a servitisation offering effectively. Many organisations are familiar with the term ‘big data’ which represents data in volume, variety and velocity – but very few organisations know how to manage this data and extract the right level of insight and value to adopt this type of strategy.  

The granularity needed to drive servitisation needs to join the operational gaps between departments and external business partners. A focus on the data and how to extract value from it a quickly is vital.  

Organisations need advanced analytics as a platform rather than a point solution. By taking this approach processes and capabilities can be connected around monitoring machines, systems and data in the make process, and can join this to post-production analysis around forecasting and supply chain processes to aid future planning. This is paired with data-driven analytical approaches to customer engagement and post-sale monitoring of product performance, service requirements and infield product satisfaction.  

A servitisation approach
Many companies have adapted well and diversified or moved to a servitisation strategy (Apple, Google, Rolls Royce, GE, Siemens to name a few). But even organisations like these are still evolving and will continue to do so. To take advantage of this approach – you just need to have a clear understanding of what your customer wants, what capability you have, what you need to make it a better ‘experience’ and how responsive you can be in the market. Companies that are making headway are those that understand the value of data.

Manufacturers need to change their mindset and look at how data can deliver insight and generate new business models. Many businesses have invested in operational platforms like ERP. More recently businesses have seen value in productivity platforms with office tools and CRM systems. Now the next wave is here: analytical platforms that encompass artificial intelligence (AI) and machine learning to support deeper insight and new levels of automation and driving greater commercial benefits. This will provide the framework for manufacturers to optimise operational processes, join and collaborate business units and generate new revenue streams.  

Hyperconnected customers are the fundamental premise of Industry 4.0 and they expect more than good quality. They expect manufacturers to behave like business to consumer (B2C) companies and service providers by delivering that one-to-one relationship. Real-time and predictive engagement is becoming much more of a ‘must-have’. Research carried out last year across UK industries by SAS showed that the majority believed real-time customer engagement could deliver revenue increases of up to 40%.  

Upwards of 40% of many manufacturer’s total revenue comes from the after-market; much of the inventory costs in a company are held in after-market systems and whether the customer is lost or retained is often the result of after-market performance. So why is after-market an afterthought for many? Manufacturers must change their approach. Yes, it is about people and processes, but it also requires more robust platforms that handle complex data from diverse sources, and which deliver actionable insight that drives faster and more accurate decision making.  

Manufacturers need to be more open to change and realise the value they already have in their business. Innovate and experiment quickly but design a business around a platform not a bunch of point solutions. Focus on the customer by listening and adapting to change – this will drive greater innovation in how products are made, moved, paid for, used and, importantly, recycled.

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