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Servitization, demystified by Bridge PR

24 July 2018 by Bridge PR

Servitization – it’s everyone’s favourite new word. Leading manufacturing magazine The Manufacturer has an entire section on it. So it must be important, but what the bleep is it? How do you even spell it? Don’t worry, it’s actually really simple! See, servitization is all about manufacturers delivering services.

Services? From manufacturers!?

At this point, an astute shop floor worker is going to say rather sharply “manufacturers don’t provide services manufacturers manufacture stuff. That is why they are called manufacturers instead of service providers you idiot.” And at first blush, this seems to be true. Rolls-Royce is a manufacturer and they make, manufacture, cars and jet engines. If you want a Rolls you buy it. The Rolls is a product of Rolls Royce. However, what if you wanted to get it repaired. Well, you might take it to a car mechanic, such as KwikFit. Repairing your car is a service that KwikFit provides. They might use products to perform the services, such as spare engine parts or catalytic converters, but the thing they’re selling is a service. Well, suppose Rolls-Royce had its own in-house KwikFit. You might buy a Rolls – the product – and take it back to get it repaired, a service. Neat huh? Let’s see if we can make things neater still. Imagine that you can’t afford to buy a Rolls but you want to drive one for special occasions, maybe to impress your girlfriend on a romantic date. Rolls-Royce might kindly offer to rent out one of their models. When it broke down – just as you and your date were about to drive off into the sunset say – you could take your rented Rolls to the in-house KwikFit to get it fixed. And let’s say Rolls-Royce are willing to provide the car and fix it for a flat rate. “Rolls-Royce don’t really do that,” says our friend on the shop floor.

In fact Rolls-Royce do really do that and have been doing since the 1960s, not for cars, but for jet engines. In 1962, Rolls-Royce decided to sell their Viper engine through a scheme called “power by the hour”. Instead of putting down a lump sum for the engine, operators paid for it per flying hour so they only had to pay for the time they were using it. If the Viper engine malfunctioned, the company would provide a maintenance service for no extra charge. With Power by the Hour, Rolls-Royce had invented servitization.

Rolls-Royce have continued their scheme into the 21st century and expanded their service into a package called CorporateCare®. This is a suite of monitoring and maintenance services such as Engine Health Monitoring which uses onboard sensors to track engine performance in real flying conditions, and lease engine access to facilitate off-wing maintenance and reduce downtime.

“So what?” you say. “you rent a car from Rolls-Royce and they offer to fix it for you when it breaks. That’s not exactly rocket science. Heck it’s not even aeronautical engineering.” If leasing out a car or jet engine and throwing in a maintenance service was all there was to servitization it would be difficult to see what all the fuss is about.

Let’s look at another level of servitization. Suppose you’ve lost a set of keys and need to get them replaced. You go to a key cutter such as Timpson. They cut you a new set of keys using a standard key machine. What are Timpson doing for you? They’re not doing mass production, each of your keys is individually cut. Neither are they delivering an order to some blueprint, like Nasmyth Group making engine bits for General Electric. Timpson just cut the requisite key on the spot. They are making something, a key, and they are using machining to do it, but what they are selling isn’t the key per se, it’s the service of key-cutting. Et voila, manufacturing as service provision (no, Bridge PR can’t prove black is white.)

Might SMEs in the aerospace sector offer a “key cutting” service to their customers? AE Aerospace is trying to do just that with a service called “machining by the hour.” Currently the aerospace supply chain is long and opaque. A customer such as General Electric will send a blueprint to an SME but they don’t know what’s going on when their part actually gets made… if it gets made! AE Aerospace is aiming to make the supply chain as clear as glass. With machining by the hour a big company will be able to walk in to an SME factory and have their components tailor made on the spot, in the same way you get a key cut at Timpson’s.

Services such as machining by the hour herald an entirely new way of thinking about manufacturing. Writing for The Manufacturer Professor Tim Baines explains:

“Servitization is much more than simply adding services to existing products within a few large multi-national companies. It’s potentially about viewing the manufacturer as a service provider that sets out to improve the processes of its customers through a business model, rather than product-based, innovation.”

Tim Baines is head of Aston University’s Centre for Servitization Research and Practice. He pioneered the study of servitization with his classic work, Made to Serve, which spelt out a roadmap for manufacturers looking to translate the lessons of servitization into real world business practice. Servitization hangs off what Baines terms “advanced services”. These take servitization above and beyond the conventional definition of service provision. For example Xerox doesn’t simply sell its customers photocopiers. Rather it offers “Managed Print Services” that involve a package of project management and technology implementation for its clients. Xerox doesn’t just “flog” products to customers, it works actively with them to achieve project aims. The idea of manufacturers as service providers is one that many establishments still find difficult to swallow. But once industry acquires the taste for servitization it’s here to stay.

If you have a servitization story to tell then get in touch with Bridge PR. We can help you get your key messages out there to your targeted key markets and audiences, helping to grow your business through PR and Marketing.

If you want help in beginning or continuing your servitization journey then get in touch with Aston University and the Advanced Services Group.

Ref:

Tim Baines Servitization Explained

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