What is the Role of the non-OEM in Servitization
Whilst companies shift from strictly new product sales to instead selling the outcome a product delivers, its an embodiment of change. As we know regardless of the circumstances, change can be unnerving.
The manufacturing industry in particular has remained relatively unchanged for decades, but this new era of servitization is requiring OEMs to completely upend the status quo.
Due to the boom in servitization, and OEMs taking responsibility for ensuring equipment is up and running as much as possible, what is the role of the non-OEM in servitization?
Chris Raddats, Reader in Marketing, University of Liverpool who has looked at the issue in depth started the conversation, “The roles of non-manufacturers in servitization are significant. I can see at least three roles. You have the role of the tide intermediary. So, think of JCB and GM, JCB, which is a distributor. It’s an independent company. But it’s essentially batting for the same team, it looks like JCB, and essentially just sells JCB doesn’t sell Caterpillar or any arrival brands.
Then you have the more independent distributor. An example from the Telecom sector. At Ericsson, “and we used to use independent service companies to provide the services because that had the market access and they would also sell products from other vendors as well, other OEMs so that they weren’t tied in that respect, but we needed them for market access.
“And then the third category is almost where the OEM is replaced by an independent service company DXT technology, for example, very large IT player, which would coordinate and brings to the table other OEMs cloud providers, software providers and coordinate the offering.
“I would say there’s at least three roles there and clearly, they all going to need different strengths. So the OEM type model, perhaps they need innovation in what they do, the independent distributor needs this customer intimacy is knowledge of tailoring the solution to their markets. And the independent service provider needs the ability to coordinate or orchestrate a partner of other actors such as Cloud providers, other manufacturers, software companies, so they will need different strengths to give that value. But there are definitely different roles for other actors other than manufacturers in Servitization.”
Sam Klaidman, Founder and Principal Advisor, Middlesex Consulting had an interesting example, “I have a colleague in America who manages the end user service for robots and Drive systems. He explained his organisation set up. He has his own service team, and he’s got a network of service organisations. That may be one man or it may be a large company, but he requires that in the end the service people have to be certified by him and have to use genuine parts.
“He believes, as I do that, at the end of the day, your name is on the product, and you’re responsible for it and you may not have the right resource in the right place to fix it. But you can assure that the person who is fixing it is high enough quality to win your certification.”
As the customers needs change service companies need to move with them to maximise growth opportunities in the coming years.
The group highlighted the importance of providing value for customers starting with Nick Frank, Founder and Managing Partner, Si2 Partners, “We understand the motivation from the OEM manufacturers perspective, brand reputation and through life income. Actually what makes a Servitization strategy successful is will the customer pay for it? So its key to understand how we can drive value for the customer, and we’re talking in the broadest sense of the word, we can be successful at servitization. How do you actually release that value for some manufacturers? Going direct, it’s a fairly simple process. So working with their customers is probably the most efficient way.
“From my experience with companies who’ve been successful with Servitization it starts with the customer working back. With most of the successful companies what the customer says, drives what the requirement for success. They had some ideas, but the real drive came from the customer because they’re paying for it. “
Jan Van Veen, Founder and Managing Director at more Momentum added “We have to understand how our customer needs are going to develop. What are different segments to focus on, that can change, what kind of capabilities do we need to develop that? Also what is the competition doing? What are other players in the ecosystem or in the value chain doing? And that all together is going to give you a kind of picture of where are the opportunities and where are the threats?
“But as a service leader, we have to find the answers for our business for the next five years. And I think that’s a unique opportunity. But it’s also challenging.
“Its key that’s in the customer needs, and maybe good to translate that you solve a customer problem, a big problem that they urgently want to solve. But that can be reactive. It can also be proactive by developing a vision about their pain points now or in the near future, and start developing a solution for that. That’s also what Apple did. They didn’t ask the customers, but they did have a very strong vision.
“So are you moving to your customer needs reactive? Or are you articulating your needs? And do you are you able to move the customers towards your solution? Because it’s solving a problem for them, and that’s more latent nature to solving. With these kinds of trends its also good to look into the future, which is maybe less reactive and more positive, proactive from your own vision.”
Shaun West, Professor of Product-Service System Innovation, Lucerne University of Applied Sciences and Arts elaborated, “We also have to keep in mind that in different industries, the manufacturers or technology providers have different scope in the value chain of the customer service support. Manufacturers providing a piece of technology for a major part of the whole value chain of the customers can in some cases be as high as 90%.
“At a paper factory manufacturer, they build the whole production line and that’s the whole production facility for their clients. So they control the whole thing. And then they are more dominant than another manufacturer which produces one product or component. I think that also has a big difference in what is the opportunity for the manufacturer or other players to increase the value.”
Chris Craggs, CEO, MCFT Food Equipment Services continued, “Its vital to provide value for customers and this may require pointing them in the direction of solutions. They may not be aware of problems and as a service provider you may have to guide them to a suitable solution. This may involve a complex ecosystem of service providers such as OEMs, the integrators, the dealers, spares suppliers, and field service companies, it lives within the market framework. It may also involve working with competitors.
“Coming back to the constituents of that ecosystem, they are going to have different skills, abilities and strengths. Value for customers relies on technical competence, the ability to communicate, API’s, footprint and ability to deliver on the ground. Data literacy and the ability to interpret the data and make insightful recommendations is also important. Providing choice architecture and directing people towards decision making is key.”
There is little doubt that whatever approach is taken to servitization, if the customer wont pay for it then it wont be successful. Hence its fundamental to understand the customers requirements and provide value to them. If value is provided to the customer a companies success through servitization is not guaranteed but without this building block it is certain to fail.
All members of the Field Service Think Tanks are speaking from their own personal opinions which are not necessarily reflective of the organisations they work for.