Partnering along the servitization journey

We recently held the Winter Roundtable of the Advanced Services Partnership. The partnership is a network of executives from global and multinational manufacturers that are in the exploration and engagement stages of becoming services-led companies. Partners are all from different industries (ensuring they don’t compete) and the partnership is international, with members in the USA, UK and Europe.

There are three main components to the partnership roundtables:

· Research: updating partners on latest research, gathering their insights and understanding their challenges to guide research topics, and running workshops to apply our latest tools to their companies

· Benchmarking: presentations from other companies on the servitization journey along with site visits to the host’s facilities (these have included JCB, GE Power, AirFrance KLM, Goodyear, Thales, Yamazaki Mazak and Legrand)

· Networking: learning from other partners, the challenges they’ve dealt with and the initiative they’re pursing, the good ideas and the pitfalls to avoid

The relationship with the partners is one of co-creation; our researchers learn from them as much as they learn from us and together we create tools that are leading the application of knowledge into global businesses. At the roundtable last week we shared two tools in development: the Business Model Blueprint and Value Network map, and partners spoke about how they were helping us to refine these tools and the insights they’d gained from using them.

Our partner Legrand, for example, provides assisted living technologies to vulnerable people to enable them to keep living independently. The traditional model is a reactive one whereby a response is activated when something has happened (for example someone has fallen). We have worked with them to develop a new, ‘proactive’ approach that can read multiple signals to predict when there is a risk of something happening and pre-empt it. Through mapping the value network (which looks at the stakeholder involved in delivering the offering and what they bring) we helped Legrand identify that this new value proposition has an entirely different beneficiary to their current value proposition. By preventing accidents, it is ultimately the NHS that will save money and be the beneficiary. This realisation is shaping every aspect of planning launching this service and is an insight that might have taken much longer to reach without our guidance on value network mapping.

We also heard at the roundtable from the VP for Digital Services at Rolls-Royce. He spoke about the obvious and well-documented impact of the pandemic on their business. However, it was clear from his presentation that the story is much more nuanced than what has been in the press recently. He gave a clear case for how services have helped organisational resilience. Across the industry, a greater proportion of older engines are managed by customers on a break-fix basis. In 2020, these revenue sources have been even harder hit than those related to advanced services. These customers hold a lot more financial risk themselves and chose to cut all possible costs, including planned or event-based maintenance- preferring to just use a different aircraft rather than repair an engine. Even in those cases where aircraft were still flying, with repairs and maintenance cancelled or postponed, Rolls-Royce isn’t generating revenue. As a provider of these services, it is difficult to make predictions and judgements of likely revenue.

On a TotalCare contract, by contrast, any flying hours at all have generated revenue for Rolls-Royce and this has at least given an element of certainty of revenue. In commercial aviation (airlines and regional) airlines are making sure those aircraft that do fly are, wherever possible, the more recent models, with higher payload capability and the latest gas turbine technology in order to operate the routes more effectively and generate most revenue with a greater mixing of passengers and cargo on the same flight. These newer engines on newer aircraft are much more likely to be covered by TotalCare.

Our partners, too, have learned in the past year about how services can support resilience in a challenging time. They are finding that customer appetite for services that takes the risk away from them and delivers more responsive, targeted, data-informed and outcome-focused offerings has, arguably, never been greater. 2020 has shown them just how much change is possible and we are thrilled to be on that journey with them.