Servitisation and the 4th Industrial Revolution

Servitisation and the 4th Industrial Revolution

The 4th Industrial Revolution (4IR) is real, it’s here and deserves your attention now if you truly want to benefit from what it can deliver. This may seem a strong statement, but there is an increasing global recognition of the concepts and opportunities albeit under different names depending on where in the world you sit.

A good example of this is Servitisation, where customer expectations are driving a transformation journey to develop the capabilities they need to provide services and solutions that supplement their traditional product offerings.

Fuelled by the need to improve productivity and create growth, the use of technology has become a more accessible and more affordable enabler than at any previous point in history. But 4IR is more than a new name; it is becoming the catalyst for creating new opportunities with tangible benefits through enabling new services and business models that deliver a true step change in operational performance. So, what’s the hold up? Well, there are a few challenges that need to be tackled:

  • 4IR will require investment in time and money. How do you move to 4IR without dramatically increasing the OpEx or CapEx spend?
  • Digitalisation will dramatically change the work-force profile in manufacturing. How will you deal with the shortage of skills and the social impacts?
  • New business models may increase operational and financial risk. How can you make effective long-term decisions while maintaining short-term financial performance?

Any transformation programme will encounter similar challenges, but 4th Industrial Revolution is real and requires immediate focus if you are to remain competitive. Four observations from work undertaken with clients looking at accelerating 4IR led initiatives are:

  • Many businesses are moving towards outcome led business models to improve their competitive positioning.
  • 4IR with IOT and Advanced Analytics can deliver new levels of performance and enables these new business operating models
  • Collaboration between end to end supply chain development, operations, IT and business leadership ensures aligned investments and governance.
  • A mindset shift is required to deploy end-to-end business processes enabled by technology inherent designed to support them.

According to The Manufacturer, “65% of manufacturers will use service-based selling by 2020”. (Source: https://www.themanufacturer.com/articles/servitization-helping-business-rise-value-chain/)

Let’s not forget that Servitisation (service-based selling) is a transformation journey – it involves companies (often manufacturing companies) developing the capabilities they need to provide services and solutions that supplement or replace their traditional product offerings.

While there are obvious economic benefits to the manufacturer in the form of longer term annuity sales, increasingly customers want to buy complete solutions and not just products. For the manufacturer, these solutions must solve business problems and in turn create additional business value often through an eco-system of new partnerships.

To date, many of the Servitisation success stories have been centred around global manufacturing giants such as Rolls Royce, P&G, GE, and Hitachi, where Asset Monitoring, Production Monitoring, Fleet Monitoring, Connected Worker etc. are used successfully to support additional product offerings.

So, is it feasible that smaller SME organisations can leverage Servitisation?

Simply put, yes, they can but it requires a change in the organisation’s mind-set, the transformation of business processes combined with greater systems integration to provide customers with greater insight and service capability.

A connected enterprise supported by IoT solutions can help transform customer maintenance from Break Fix or Scheduled to Preventative, Predictive or Prescriptive. Static Analytics become Real-Time and Centralised Product Service can be supplemented with customers performing Self-Service or Self-Guided Service.

Gartner’s 2018 “Future of Supply Chain Operations” predicts a world where technology innovation — from artificial intelligence to Blockchain — is intertwined with supply chain management (SCM) strategy and operations. This means SCM is on its way to becoming technology-centric as opposed to simply technology-enabled. (Source)

D

So it’s interesting to see that Supply Chain Operations has hit the headlines, not for the first time, but none the less surprising Gartner has chosen to make the following predictions:

  • Autonomous mobile robots
  • By 2021, one in 10 warehouse workers in established economies will be replaced by autonomous mobile robots (AMRs).
  • Stalled artificial intelligence (AI) initiatives
  • By 2021, three out of five factory-level AI initiatives in large global companies will stall due to inadequate skill sets.
  • Proof-of-concept Blockchain initiatives
  • Through 2020, 90% of supply chain Blockchain initiatives will be proof-of-concept initiatives.
  • Virtual customer assistants
  • By 2021, 20% of all customer service interactions will be handled by virtual customer assistants and chatbots.

While I, on a daily basis, encourage businesses to adopt and invest in emerging technologies to gain a competitive edge, I question the basis of Gartner’s predictions and is there really the mass demand for these solutions….yet?

Unquestionably the largest 4IR investment and growth area in recent years has been where predictable physical work takes place as it offers significant potential for automation, eliminating the need for human intervention in often physically demanding or dangerous scenarios.

Amazon are a good example of an organisation that has embraced Robots to perform ‘predictable physical work’ and has not yet been at the expense of the traditional workforce, more than 125,000 people across the United States. Reportedly, ‘Amazon now has more than 100,000 robots in action around the world, and it has plans to add many more to the mix’, but not at the expense of human jobs.

While Amazon continues to invest in robotic automation it has necessitated the creation of new opportunities for its warehouse and distribution staff, altering the mind-set of what a traditional team looks like as robot and human work side by side.

We must remember that while the technology may be maturing, or even mature, businesses need to consider the wider impact of adoption within their own organisational structure and 3rd parties before heavily committing to any new transformational activity.

As mentioned at the beginning, 4th Industrial Revolution is real, and manufacturers have been embracing the opportunities it presents but for the question of will 65% of manufacturers globally be using a service-based selling model as opposed to product-based by 2020? Only time will tell.

Browse

Article by channel:

Read more articles tagged: Featured, Fourth Industrial Revolution

The Case For Digital Transformation