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Three questions to help you pivot your business with servitization

Who is in charge of your business transformation strategy? The CEO? The CFO? Or Coronavirus?


There’s perhaps never been a more challenging year for businesses than 2020. The impact of the global Coronavirus pandemic has been profound across every sector. With supply chains disrupted, some businesses paused altogether, with global economies suffering the worst recession for decades. Most businesses have been forced to pivot in some way or another, and to differing degrees. Some business have pivoted to survive whilst others have been able to take advantage of the opportunities and are thriving.


This collective pivot has been seen in several examples, notably the Herculean effort from manufacturing SMEs to rapidly overhaul production lines and focus efforts on the design and manufacture of critical ventilator parts and components and Personal Protective Equipment (PPE).


It’s also been seen in other ways with more traditional businesses adapting to offer sales online, others offering virtual meetings or experiences instead of physical ones and some firms providing remote servicing and diagnostics equipment in place of traditional engineer visits.


While the ability for a business to quickly pivot and adapt to changing circumstances is both critical and effective during times like these, it’s important that it’s not entirely reactive. In an ideal world, any pivoting or diversification should be aligned with your overall business plan and value proposition, but because of the sudden onslaught of Covid and the disruption it has caused, this has led to strategy and planning going out of the window in a lot of cases.


As we head for the New Year, and having learned a lot in 2020, now would be a good time for businesses that have diversified suddenly to revisit and review their strategies, their target markets and the values propositions they are offering.


This is a topic that the SME Partnership Programme explores in detail when working with companies that are looking to to embrace servitization by adopting enhanced or extended service models.


An effective servitization model begins with a strong strategic approach with three of the key questions that are typically asked being:

  1. How does this affect or change your existing value proposition?

  2. Do you need to further define your value networks?

  3. How will servitization affect both existing and future customers?


Value proposition


If your business has pivoted or diversified, it is likely that you have entered new market sectors. In a lot of cases, this means you’ve entered a whole new ball game, with different sets of rules, and different audience demographics. If this is the case, then it is vital that you revisit your value propositions so they are aligned with the different audiences. Drilling down further, it is also important to understand the unmet customer needs that servitization will help you to meet. Are you pivoting to meet these needs today, or over a longer-term period? How can you use servitization to deliver a complete solution, rather than a partial one?



Value networks


More than anything, the opportunities to pivot and adapt have demonstrated that there are ways you can create new value with existing assets, delivered in a different way, and to different customers. Automotive and aerospace manufacturers, for example, have the capabilities and expertise to change their manufacturing processes to produce ventilator parts. Other companies have offered condition monitoring to replace physical service and maintenance routines. Other considerations in the value networks are whether you have the right supply chain and infrastructure in place to support servitization and looking at how you could you perhaps boost profits by changing your pricing model.



Customers


In rapidly changing markets, where there is now a lot more fluidity than ever before, we need to redefine our customer bases. Whilst producing ventilator components may be similar to machining engine parts for automotive or aerospace, the customers in these markets are different. They themselves serve different audiences and this all needs to be explored and understood. How relevant is servitization to existing customers as well as potential new customers in emerging markets? Can you partner with a business to offer greater value to customers? How do your customers define value beyond transactions?


These are all important discussions that we have with businesses that join us on our servitization workshops and courses to help determine the most effective servitization strategy to help pivot their business for long term success.


When you look at some of the examples of successful pivots they all have one thing in common: they are not designed to be a ‘once done and then forgotten’ activity. Take Airguard Filters as an example, a traditional filter manufacturer based in the Black Country. The owners successfully pivoted the business during the first UK Coronavirus wave, overhauling production lines to create much-needed PPE. This was an immediate response to a need but with a long-term strategy as the business is now looking to servitize its offering. As well as hiring new employees and investing in new equipment, the company is also looking at how it can add value. One of its propositions will be to produce reusable hospital gowns that they will also launder upto 100 times before finally taking the gowns back at “end of life” to be recycled. Airguard PPE as it is now known sees long term opportunities in the way that PPE is produced and delivered to customers and has pivoted to take advantage of these.


While it is critical your business can pivot quickly and effectively to create new opportunities, it is also important that this transition is completed with a long term vision on how it affects your value proposition and current business positioning. Only with a long-term view can business transformation and servitization deliver the kind of benefits your business craves.



The SME Partnership is currently recruiting its next cohort of SMEs for 2021 from the Black Country, Birmingham and Solihull. Join like-minded businesses who will receive at least 12 hours of practical fully funded support and guidance from our industry experts. Come and learn how you can transform your business, align your strategy for 2021 and beyond, explore existing and new routes to market and shape your value propositions. To register your interest, contact:

• Birmingham & Solihull: Sandra Starke, s.starke@aston.ac.uk

• Black Country: Danny Harrison, harrid10@aston.ac.uk


For further information visit about the SME Partnership visit: https://www.advancedservicesgroup.co.uk/sme-programme-home

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