Over the past few weeks I’ve stood in front of a lot of audiences talking about how manufacturing companies wanting to compete through services offerings need to develop a whole new level understanding of their customers in order to be successful.
The starting point to develop this understanding and create services offerings or ‘value propositions’ is to explorethe customer’s ‘pains’ and ‘gains’.
Pains are typically costs, risk, and disruptions that a customer is exposed to through the use of a product. Offerings can be developed which solve these pains and help the customer’s operations to run more smoothly, and perhaps be more profitable.
When I’m working with companies helping them to think about their customer and new offerings, I invariably start with the pains. They are usually easier to identify; things like cost and risk are fairly tangible, and a lot of manufacturers have at least some idea of how their customer uses their product. They also might know about problems, which could be solved by the manufacturer taking more responsibility for the product (things like predictive maintenance for example).
Gains are more difficult. They help the manufacturer’s customer to extend their own business activities and do new and different things for their customers, or reach new customers with new propositions.
The manufacturer Alstom, for example, enabled Virgin to create a new offering in the rail travel market in the UK, by providing trains and taking care of all the maintenance of the trains (and much more), leaving Virgin to focus on selling tickets and employing drivers. For some companies I’ve found it can be more difficult to work out how these apply- but they often do, with a bit of imagination.
Identifying gains that you could offer to your customer requires an in-depth knowledge of their strategy and how they are trying to grow their own business. This takes a lot of time, and most importantly trust, to develop. And of course this isn’t a one-way activity; for a services offering to work in practice, it needs to be developed, or tested and refined, in collaboration with a customer. Otherwise you run the risk of developing something that addresses what you think your customer wants, but doesn’t meet their real need.
Businesses that are offering advanced services have forged strong partnerships. You can see this, for example, between the truck manufacturer MAN and haulage company Hoyer, or Alstom Trains and Virgin. These manufacturers have spent a huge amount of time and resource understanding their customers’ business goals and strategies for growth and sustainability, and where ‘pain’ points in their customers’ operations detract from achieving these goals.
Through trial and error over time, they’ve developed relationships of trust where the customer sees the manufacturer as a partner rather than a supplier in a transactional arrangement, and the two work together to co-create and refine the services provided. Though I know all involved would say this has not been an easy or straightforward process!
I recently tried to engage a group of companies in our Advanced Services Partnership in a co-creation exercise with their customers, and it was actually a real challenge. The partner companies are in the early stages of their servitization journey – and so the close, trusting relationships with customers are yet to be developed.My research team and I conducted some extremely informative visits to our partners’ customers sites, and we gathered a lot of insight which helped to inform the services offerings the partners are developing, but it was a struggle to get those customers to engage in the co-creation of those offerings.
I’ve learnt a lot over the past few weeks about the nature and importance of relationships with customers, I’ve experience my own ‘pains’ in the process, and realised the size of the task ahead of us in helping our partner companies with developing them. Over the summer I’ll be doing more visits to our partner companies’ customers, and I’m sure they will be even more enlightening.
The Advanced Services Partnership is an exclusive network of like-minded business executives applying leading practices. We are running an induction programme in Birmingham, UK on 7th and 8th June, if you’re interested please send me an email at email@example.com.