The key to helping manufacturers gain a competitive advantage

Posted by Tilt Recruitment on December 9th, 2020

The key to helping manufacturers gain a competitive advantage

Posted by Tilt Recruitment on December 9, 2020

The post-COVID manufacturing industry is likely to see companies locked in a bloody struggle for survival. Who will come out on top?

According to Professor Tim Baines of Aston Business School, it’ll be companies that drop product-based business models in favour of service-based ones – a process called servitisation.

The old business models have had their day; many leaders have realised that whittling down their product lead-times, moving a few extra boxes, or skimping on labour costs won’t deliver the massive boost to productivity they need to survive.

It’s time to look beyond tangible products to high-value advanced service offerings that deliver business outcomes, not boxes. Manufacturers need to start selling mobility instead of just cars; heat instead of boilers; thrust instead of engines.

One manufacturer doing just that is the famous tyre company Goodyear. By gathering data from their tyres, they’re offering customers a service that gives them insights into the state of the tyres on their fleets, predicts maintenance needs, and helps with route planning. This has proved invaluable during the pandemic.

A less famous name, Nicklin Transit Packaging, is successfully implementing a similar strategy, adding sensors to its packaging that enable it to provide real-time updates on where customers’ packed products are and what’s happening to them, including temperature, humidity, tilt, shock and drop.

These advanced services enable customers to pay for what they want when they get it, rather than shelling out up front for a product and then having to deal with its maintenance. And manufacturers win too, gaining long-term client relationships they can use as a springboard for further service offerings.

Servitisation used to have one driver, customer demand; then it had two, demand and data innovations; and with the advent of COVID, then there were three. It’s become imperative for businesses to pay attention to this new trend in order to survive.

With worldwide market growth for services well ahead of that for products, servitisation makes sense. It boosts growth and resilience for businesses and therefore for the whole economy. It goes beyond efficiencies to adding real value and delivering real productivity. And needless to say, the carbon cost of services is far less than that of production, meaning servitisation boosts sustainability too.

Despite these compelling arguments, it won’t be easy for many manufacturers to make such a drastic change. But in the long run, ignoring servitisation is going to be much harder than embracing it.

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