Strategic Global Outsourcing and Offshoring
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week5-BNM748_Strategicoutsourcing1.pptxDr Ali Z. Bigdeli
Senior Lecturer in Industrial Service Innovation
The Advanced Services Group
Aston Business School
#servitization
@DrAliBigdeli
The Journey towards Servitization
What it takes to compete through advanced services
AGENDA
Servitization?
Different types of services
Business model concept
Components of a business model
Advanced Service as new business models
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TYPICAL PRODUCTION AND CONSUMPTION MODEL
TYPICAL PRODUCTION AND CONSUMPTION MODEL
A PRODUCT-SERVICE SYSTEM
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CONTEXT
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Servitization
SUSTAINABILITY
ENVIRONMENTAL
TECHNOLOGICAL
MARKETING
Also;
SS
IPS2
TLES
BigData
Product-Service Systems
Circular Economy
Industry 4.0 & IOT
Services Dominant Logic
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CONTEXT
TYPES OF SERVICES
Services Supporting Products
Services Supporting Customers
OUTCOME FOCUSED ON PRODUCT PROVISION
BASE SERVICES
Product provision
Warranty
Spare parts
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Services Supporting Products
Services Supporting Customers
OUTCOME FOCUSED ON PRODUCT CONDITION
TYPES OF SERVICES
INTERMEDIATE SERVICES
BASE SERVICES
Repairs
Maintenance Overhauls
OUTCOME FOCUSED ON PRODUCT PROVISION
Training
Helpdesk
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ADVANCED
SERVICES
INTERMEDIATE SERVICES
Services Supporting Products
Services Supporting Customers
BASE SERVICES
OUTCOME FOCUSED ON PRODUCT CONDITION
OUTCOME FOCUSED ON PRODUCT CAPABILITY
TYPES OF SERVICES
OUTCOME FOCUSED ON PRODUCT PROVISION
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SOME EXAMPLES OF ADVANCED SERVICES
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Predictive Maintenance
Engine Health Monitoring
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SOME EXAMPLES OF ADVANCED SERVICES
Outcome: 900% increase in turnover
Business
Model(s)
WHERE DOES THE TERM ‘BUSINESS MODEL’ COME FROM?
Some scholars argue that the term is originated in the Drucker’s HBR article in 1994 titled “theory of the business”, where he talked about the “assumptions about what a company gets paid for”.
BUSINESS MODEL CONCEPT
Business Model as the
“design or architecture of the value creation, delivery, and capture mechanisms”
TEECE, D. J. 2010. Business models, business strategy and innovation. Long range planning, 43, 172-194.
BUSINESS MODEL COMPONENTS
“ how the firm defines its competitive strategy through the development of the product or service it offers to its customers
BUSINESS MODEL COMPONENTS
“ how it charges for it what it costs to design and develop
BUSINESS MODEL COMPONENTS
“ how it differentiates itself from other firms
ADVANCED SERVICE AS A BUSINESS MODEL
Choosing an appropriate framework.
ADVANCED SERVICE AS A BUSINESS MODEL
The chosen framework.
| Customer value proposition What we can do for our customers and the outcome they will get | Value creation Characteristic of operations needed to deliver value |
| Value capture Economic models commonly aligned with value propositions | Business impact . Relative potential for growth and risk exposure . |
SERVICES VISION TEMPLATE
Rights protected: Prof Tim Baines, ASG, UK
Advanced services
Intermediate services
Base services
23
Baines, Tim (BT) -
THE CUSTOMER VALUE PROPOSITION
An offer to provide for the customer a capability, within their business, which results in functional value outcomes
Product
Product spares
Customer asset capability
Performance Intelligence and data
Product break / Fix
Customer process capability
Customer platform capability
We supply products
We supply spare parts for products
We restore the condition of products
We guide the capture of more value from products
We guarantee the outcomes from products
We guarantee the outcomes of business processes
We guarantee the outcomes of a business platform
We guarantee our performance in restoring the condition of products
Assured maintenance
PRODUCT
SERVICE
CAPABILITY
Increasing customer integration / organisational stretch
Customer value proposition
What we can do for our customers
and the outcome they will get
VALUE CREATION PROCESSES
A strong co-creative relationship is formed between the customer and manufacturer which generates mutual value through:
Alignment of motivation
Ownership of risk
Knowledge-based innovation
VALUE DELIVERY PROCESSES
Value is delivered through an integrated system of:
customer-centric performance measures
decentralised facilities
extended design and production capabilities
digitally-enabled products
customer-centric service teams
VALUE CAPTURE PROCESS
An advanced service business model features usage- based revenue models that align rewards to the value generated by the customer
SOURCE OF COMPETITIVE ADVANTAGE
The competitive advantage for a manufacturer lies in their Intellectual Property and the knowledge generation processes (design and production)
© Aston Business School 2017
TRANSFORMATION JOURNEY
© Aston Business School 2017
TRANSFORMATION JOURNEY
© Aston Business School 2017
TRANSFORMATION JOURNEY
© Aston Business School 2017
TRANSFORMATION JOURNEY
Searching and finding out about the concept and the implications of competing through advanced services, until they are confident that the opportunity exists.
© Aston Business School 2017
TRANSFORMATION JOURNEY
Seeking to evaluate and demonstrate advanced services, until the potential is accepted within the organisation.
© Aston Business School 2017
TRANSFORMATION JOURNEY
Increasing the scale and speed at which advanced services are innovated and implemented, until significant value is demonstrated within the organisation.
© Aston Business School 2017
TRANSFORMATION JOURNEY
Seeking to optimise innovation and delivery of an advanced services portfolio, unless business is adversely disrupted.
3. ACCELERATION
3.1 Build a services culture inside the organisation
3.2 Measure and demonstrate performance to build buy-in
3.3 Scale up the selling and delivery of services
4. EXPLOITATION
4.1 Integrate services & product businesses
4.2 Change the organisational structure to embed advanced services
4.3 Embed advanced service-led product innovation
2. TRACTION
2.1 Create a senior leadership role dedicated to advanced services
2.2 Develop a customer value proposition
2.4 Align organisational processes to deliver pilot
2.5 Execute pilot to test value proposition
2.6 review organisational processes and structure
2.7 Secure senior management agreement to scale advanced services
1. EXPLORATION
1.1 Understand the service business landscape
1.2 Identify threats and opportunities within the value chain
1.3 Create a business case for competing through advanced services
1.4 Secure senior management buy-in to proceed to prove the opportunity
TRANSFORMATION ROADMAP
© Aston Business School 2019
© Aston Business School 2019
TRANSFORMATION JOURNEY
TOP CHALLENGES
Industry 4.0 Reediness Report
Copyright © 2019 Deloitte Development LLC.
© Aston Business School 2017
CONCLUSION
Servitization … a paradigm shift for many industries.
Several case studies (multinationals and SMEs) confirms the potential impacts of such transformation.
Technological innovation should be seen as an enabler!
Different decisions and factors trigger the journey: leadership vision, customer pull, competitors threats, innovation driven, …
It should start with the “customer”, and not what we can deliver!
Complicated, yet rewarding journey!
Dr Ali Z. Bigdeli
Senior Lecturer in Industrial Service Innovation
The Advanced Services Group
Aston Business School
#servitization
@DrAliBigdeli
The Journey towards Servitization
What it takes to compete through advanced services
Fixed Payment Variable Payment Fixed & Variable
Payment
Flat fee-based
(Type 1)
Profile-based
(Type 2)
Usage-
based
(Type 3)
Output-
based
(Type 4)
Outcome-
based
(Type 5)
Hybrid-based
(Type 6)
