Megatrends Driving the Need for Advanced Services: Part 1 - Value Change
It is widely recognized that manufacturing practices, technologies, and the broader markets manufacturers operate in are going through a period of significant change. Assessing and understanding the implications of these changes can be a challenge as change itself can seem sudden and unpredictable as we peer into the future.
If we look around in society and the world, we can see political, social and environmental changes, which taken together can be described as ‘Megatrends.’ A megatrend is a long-term change that affects governments, societies and economies permanently over a long period.
My recent research with manufacturers, in collaboration with Noventum Service Management explores how these megatrends provide opportunities for business growth and how it will impact their futures.
In a series of posts, I will discuss our findings on five key societal megatrends that are having, or will have, significant implications for manufacturers, as well as ways these megatrends provide opportunities for growth for manufacturing companies of all sizes.
Megatrend #1: Value Change
In the consumer world, major social and demographic changes are underway and altering the way customers define value; we are becoming more tech savvy and less wedded to ownership of products, in favor of experiences delivered by service providers operating new business models, like Airbnb.
Consumer habits are changing and expectations of a personalized experience are higher, which means companies must respond to customers faster. This is passed back through the supply chain by B2C customers towards their B2B suppliers and partners. For manufacturers, this means staying alert and being proactive. As Anders Mossberg of Scania Trucks stated in our study, “Talk to your customers’ customers because they are the ones that will drive the trends in the future.”
Manufacturers are recognizing that they need to find new ways of offering value to customers. Their value propositions (or offerings) are changing from a product focus to a service focus, which emphasizes providing the customer with the capability to achieve their business goals, instead of emphasizing product features. They are now competing through a combination of products and services, enabled by technology, tailored to meet the customer’s needs.
As services become more advanced, they change from being focused on the product (base services such as spare parts, and intermediate services such as break-fix) towards being focused on supporting the customer’s key processes through the capability the product enables. Rolls-Royce, for example, sells hours of flight time for its jet engines rather than a more traditional purchase of the engine. These are more sophisticated, higher-value contracts, based on outcomes. They are also higher risk for the manufacturer but with higher potential to create a competitive advantage.
Delivering such advanced service requires fundamental changes in the manufacturer’s operations, relationships, organizational structures and potentially a change in their culture. Denis Bouteille of Fives addressed this in our study by saying, “Talking to the customer, we need people who can really develop the empathy, the listening and the deep understanding.”
Dr Chris Owen is a Teaching Fellow and former Aerospace Engineer whose research focuses on improving business performance.
Read the whitepaper on the five megatrends conducted by the Advanced Services Group and Noventum Service Management.