With the continued growth of emerging markets as centres of both manufacturing and design, UK companies face a challenge in retaining their global market share.
For many manufacturers, the no-frills make it and sell it approach may not be enough to differentiate them from their global competitors. And they will be unable to compete on price alone.
One solution for manufacturers is to look to servitisation to add value to what they can offer their customers.
Turning Your Product into a Service
“Manufacturers must adapt in an age where it’s all about the customer,” suggests Jeremy Hacking of Finch Electronics. “Using service as a wraparound is a way of differentiating what you can offer.”
This process, servitisation, marks a change in emphasis, away from selling a product only to selling the product-as-service.
“It’s a way of adding value, but also integrating this into what you’re offering,” Jeremy explains. “In this way, you help shore up your customer base, while presenting what you offer as something unique.”
“The additional benefits manufacturers can offer alongside the product might be intermediate ones, such as aftercare and servicing, or they may be more advanced, such as pay per use”Jeremy Hacking, Finch Electronics
“An advanced example is Rolls Royce’s power by the hour service,” offers Jeremy. “This is where instead of selling the aero engine product, the company sells the power it generates, and as part of the package, provides full support and maintenance.”
In effect, the engine is simply the means of delivering the product-as-service.
The Challenge of Servitisation
As Jeremy points out, adapting the servitisation model requires a shift in attitude and a different mindset than traditional manufacturing.
“It’s a long-term strategy which might, in the short term, eat into your percentage profit,” he advises.
At the same time, the spread of the internet of things is likely to accelerate servitization, as more and more devices have smart interfaces, raising users’ expectations of customer service.
This development is rapidly redefining boundaries between products and services.
“In the future, servitisation may not be optional but essential, and various aspects of it will help set the standard by which customers will make their choices,” Jeremy concludes.
For related content, please read, Manufacturers: Can Your Innovation Generate Profitability?