Services Development in Luxembourg 100511

Services development in Luxembourg:
Opportunities and challenges
Innovation Workgroup meeting

11th May 2010
Facilitators:
Nick Frank Frank-Partners
Jean-Marc Rommes Business Paradigms Ltd
Pathways to Service Profitability

Objective
Stimulate discussion on the challenges in
Luxembourg that inhibit industrial and
logistics businesses from developing services
2
Agenda
1. The trend towards services (Servitisation) & the impact on
Supply Chain / logistics services
2. Services development in Luxembourg: Opportunities and

challenges
3. Service development as change management strategy
3
Xerox: From Copiers to
Services led Technology company
Printing & Copying Solutions

Document management
Content management
Facilities management
1949: Copier Industrialized 1960’s Cost per copy 2010 Services Centric business
supported by Technology
4
Remote monitoring of Injection
Molding Systems to reduce down time

In logistics the concept of adding services
to products has been around a long time
Michelin: Fleet tyre management
• Basic services developed 80 years ago led to tyre-by-the-kilometre concept:
– France: Started from technical assessments to gauge performance
– UK: started from a desire to commercially lock in the customer
• 1990 understood that Tyre management in large fleets is complex

– Commercially
– Technically
• 2000: Michelin Fleet Solutions Organisation
• 2010: Still following business model

– Customer intimacy
– Customer loyalty and sales
Source: From Product to Services, Laurie Young 2008
6
Why add services to products
• Economic
– Differentiate yourself
– Installed base Opportunity
– More stable and predictable revenues
• Strategic
– Lock in Customers / Lock out Competition
– Customers demand it
– New markets
• Environmental
– Changing attitude to resource utilisation
7
The trend in your customers to add services is
similar to the trend to productise in logistics
Product Service Systems or PSS for short is the
integration of products and services to deliver
value to the customer.
Customer trend Logistics

Servitisation of provider trend
Products is the Productisation of
trend to create Services is the
value by adding evolution of
services to services to
products or even include a product
replacement by a or a new service
service. marketed as a
product.
Source: Baines, Timet.al. (2009) The Servitisation of Manufacturing – A review of Literature and Reflections on Future Challenges
8
Reality shows for many companies
increased profits
An analysis 12,331 manufacturing companies

showed that companies below 3000 people
have greater profitability & revenue if the
offer services in addition to products…
…But also greater financial risk
Source: Neely 2009 ‘ Exploring the financial consequences of Servitization of manufacturing’
9
Europe has been lagging in the
development of services
% Servitised Manufacturing Firms : 2009
70%
60%
50%
40%
30%
20%
10%
0%
10
Types of Services being offered
Service offered % of Firms Offering
Service in 2009
Design & Development 23%
Systems and Solution 16%
Maintenance and support 12%
Retail & Distribution 12%
Installation and Implementation Services 5%
Property and Real Estate 5%
Financial Services 4%
Consulting Services 3%
Leasing Services 2%
Outsourcing & operating Services 1%
Procurement Services 1%
Transportation and Trucking 0.2%
11
Strategic options
Barrier to entry
Tangible Intangible
Product Centric Service Centric

Level 1: Level 2 : Level 3: Level 4: Level 5: Level 6:
P P+(S) P+S P&S S+(P) S
Product only Services Services are Stand-alone Services Service

with the offered that designed services Provider replaces
minimum add value into the alongside based on product
Customer during the product product Product
Support and products technologies
warranty lifecycle
Source: Product Service Innovation, 2010
12
Textron Fastening Systems (TFS)
Full Supplier Contract for Fasteners
Background
• Largest fastener supplier to
Automotive
• Contract to deliver all fasteners
to Ford Fiesta plus Engineering
Services
• Total Service & product supplied
at a fixed price per car
13
Product only Supply Chain Model
Key to process flow
Information Ford Koln
Goods/Cash
Product EDI Forecast & Order
Ford
Logistics centre
Payment Fastener Supplier
Parts Shipped
Shipping Notification
14
Product & Service Supply Chain
Key to process flow
Information Ford Koln
Goods/Cash
Product EDI Forecast
Shipping Note Payment
Supplier Park
Logistics centre
Good Issues &
receipts Payment EDI
Order
Parts Shipped Fastener Supplier

- Textron
Shipping Notification - Non Textron
15
Does the Supply Chain model change
for Products & Services?
Process Does the addition of Services increase
the complexity of the process
Information flow management
Customer relationship management
Supplier management
Demand management
Production Management
Order Delivery Management
Financial flow management
Returns management & End of Life
Product Development Mngt
Risk Management
16
And which processes impact Third
Party Logistics providers?
Process Impact on Logistics Providers
Information flow management Data Accuracy
Customer relationship management Service Delivery for client
Supplier management Representing the client
Demand management
Production Management Management of Shortages
Order Delivery Management
Financial flow management
Returns management & End of Life Manage the returns process
Product Development Mngt Key player in services business
Risk Management Shared Risk
17
Is the Supply Chain model different for
Products than Services?
Conclusion
1. When product & Services are combined, the
complexity of the Supply Chain is increased
2. This will impact the expectations placed on

logistics companies in many different areas
depending on the service offered
18
Agenda
2. Services development in Luxembourg: Opportunities and

challenges
3. Service development as change management strategy
19
Discussion:

Agenda
2. Services development in Luxembourg: opportunities and

challenges
3. Service development as change strategy
21
Servitisation
• Servitisation = big change
– Structure: Process (what)
– Culture: People (how)
• 60-70% of change initiatives fail
– Underestimation of change factors at all levels of
the organisation
• Integrate customer into the organisation
22
Customer Integration
Strategy
Structure - What
People Clients
Relationships - How
Execution
23
Strategy
Values & Culture Profitability & Growth
Satisfaction Loyalty
People Clients
Performance Satisfaction
Transaction Quality Perceived Value
Execution
24
Strategy
Usual organisatioal drivers

Benefit/demand driven, PULL
Sustainability
People Clients
Supply driven, PUSH
Execution
25
Servitisation strategy
Decide a vision:
WHO do we want to be to our customers?
Develop a strategy:
WHAT do we need to do?
Deliver the plan:

HOW do we implement the transformation?
26
Potential change obstacles
• Decide
– Lack of sense of urgency
– No vision
– No guiding coalition
• Design
– No obstacle removal process
– No long-term staying power
• Deliver
– Under-communication
– No short term wins
– Shouting victory too soon
Based on John Kotter: Why change initiatives fail Harvard Business Review 2007/1
27
The Servitisation journey
• Decide
– Service centric or product centric?
– What does service value mean to our customers?
• Design
– Services to provide value to the customer
– Compelling argument to your clients
– Industrialised service operations
– Effective sales processes and customer centric culture
• Deliver
– Execute services strategy with purpose & leadership support
– Measure results: benchmarks and KPIs
28
Innovation Workgroup meeting
11th May 2010
Facilitators:
Nick Frank nfrank@Frank-Partners.com
Jean-Marc Rommes jeanmarc@busionomist.com
www.productserviceinnovation.com
Thank you!

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Services development in Luxembourg:

Opportunities and challenges

Innovation Workgroup meeting

Pathways to Service Profitability

2. Services development in Luxembourg: Opportunities and

3. Service development as change management strategy

Printing & Copying Solutions

Pathways to Service Profitability

• 1990 understood that Tyre management in large fleets is complex

• 2000: Michelin Fleet Solutions Organisation

• 2010: Still following business model

Source: From Product to Services, Laurie Young 2008

Customer trend Logistics

An analysis 12,331 manufacturing companies

…But also greater financial risk

Source: Neely 2009 ‘ Exploring the financial consequences of Servitization of manufacturing’

Source: Neely 2009 ‘ Exploring the financial consequences of Servitization of manufacturing’

Product Centric Service Centric

P P+(S) P+S P&S S+(P) S

Product only Services Services are Stand-alone Services Service

Source: Product Service Innovation, 2010

Product EDI Forecast & Order

Payment Fastener Supplier

Product EDI Forecast

Shipping Note Payment

Parts Shipped Fastener Supplier

2. This will impact the expectations placed on

2. Services development in Luxembourg: Opportunities and

3. Service development as change management strategy

Pathways to Service Profitability

2. Services development in Luxembourg: opportunities and

3. Service development as change strategy

Transaction Quality Perceived Value

Usual organisatioal drivers

Supply driven, PUSH

Deliver the plan:

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