Obstacles with Servicification of Manufacturing

When thinking of Servicification of the Manufacturing Industry, you soon realize it's a very complex topic. Not only you must have deep insights in topics like history, psychology, economy, technology, trade politics, and others - you also face a shortage of studies in the area. Gremyr, Löfberg & Witell writes that "there is a shortage of literature that includes elaborate empirical accounts of service innovations in manufacturing firms", and Oliva & Kallenberg concludes that "The literature, however, is surprisingly sparse in describing to what extent services should be integrated, how this integration (services into their core product offering) should be carried out, or in detailing the challenges inherent in the transition to services.". So it's big, it's complex, and we don't know too much. I would call that a major obstacle - you really need to roll up your sleeves!

Gremyr, Löfberg & Witell conducted their study "Service Innovation in Manufacturing Firms" on the companies SKF, Volvo Buses, and Volvo Trucks. They all are highly successful in their transitions, and they are all 100% dedicated to the task. One thing they all have in common is that their transition is strongly enforced by the top management, and this leads me to the second obstacle: top management. There is no way you (as an engineer in a major company) can start or manage to implement any major servicification in your company, unless you start by getting the trust and assignment to the task from the top management. This not only means the managing director, possibly you also need the whole board of directors and the majority of the owners at your side. If not, just forget it.

In today's highly globalized markets, especially evident for Swedish companies, the trade policies are another obstacle. Lodefalk remarks in a column that "The historic divides in policymaking between trade in manufactures and services, and between offensive and defensive interests are largely antiquated". So the policymakers are also an obstacle on the way to success, and they are not easy to get the hold of!

In my own experience as a Quality Manager, many manufacturing companies are entangled in long and complex supply chains. For example supplyers to the oil & gas industry, apart from facing fierce competition from other manufacturers, also have to face a complex and multi-level supply chain of purchasers; contracting negotiators; engineering-procurement-construction (EPC) companies; platform owners; operators; right owners, and many others - not to mention the whole industry of companies specializing in services like operating, manning, maintenance, repair, and more. The only way to implement anything like vertical integration or integrating services on a major scale is through acquisitions. And again, this is a task for owners and top management.

Nevertheless, servicification of manufacturing is an ongoing process, locally, nationally and globally. How intelligent it may appear, there is no "intelligent design" behind it all. It's more like a silent evolution happening in front of us, and we can only discover its driving forces, machinery and effects. Should we stop it? Should we hail it? Well... no. As little as we could stop industrialization, we can or should stop servicification. But we certainly need to learn more, to get our industry "on track", and to spread the word to all top management and leaders in policy making around the world. To start with. Someone said that there are people out there that are against any change - but that's a completely different story!

References

Oliva, R., Kallenberg, R. ("Managing the transition from products to services". International journal of service industry management 14.2 (2003): 160-172.

Gremyr, I., Löfberg, N., Witell, L. (2010), "Service Innovations in Manufacturing Firms". Managing Service Quality, 20(2): 161-175

Lodefalk, M. (2015), "Tear down the trade-policy silos! Or how the servicification of manufacturing makes divides in trade policymaking irrelevant". http://www.voxeu.org/article/servicification-manufacturing-and-trade-policy

What does it take to actually do an innovation?

First and foremost, the organization itself must participate. Otherwise it is considered an external innovation, possibly an acquired one from another party - and that would only require a nose for a good buy.

Secondly, to have a fair chance for the innovation to survive its infancy, it requires the active participation of the customer. More specifically, as Associate Professor Peter Magnusson at the Center for Service Innovation at Karlstad University advocate in his videos, open innovation radically raises the probability to get the smartest people to join forces and co-innovate with the organization. And moreover, these smart customers will have unique user knowledge of both existing products and services and what it takes to be successful in the future.

In my own experience as an IT systems developer, I certainly can affirm that. In a few rare occasions, where the outcome was truly innovative and successful, I teamed up with a (one) customer representative in a very specific way. As I now recall it, in the light of Magnusson's theories, there are a few prerequisites that made the success possible:

1. My expert knowledge and the users deep knowledge from practicing
2. Our true interest in the other party and his field of knowledge, willingness to learn from each other and to give up old standpoints
3. For the user to realize that his role is to provide the problem, not the solution
4. For me to realize that my role is to provide the solution, not to add to or modify the problem
5. For the both of us to be dedicated enough not to give up, even though it looks impossible from start and will take endless iterations until we can finalize
6. The cooperation must be sound, equal and mutually rewarding

Magnusson uses the term lead user, as a user with both use knowledge and technology knowledge. I would say that to have technology knowledge is not necessary and might even lead to problems. More important is that the user doesn't restrict his thinking to what's technically possible - from real or imagined limitations. This way his problem description might seem unsolvable to a rigid expert on the basis of old technology and routines, but would be gold worth as the problem basis for an innovation. For me, as the expert, I have to acknowledge the description and use all my knowledge, experience and inventiveness to find a solution that reaches out and solves the problem. In practice, it's a dialogue where we step by step rephrase, tweak, and reconsider, until we have found the best solution and problem compromise - including aspects as feasibility, cost, producability etc. In this dialogue, we would have made loads of drawings, mock-ups and at least a few working prototypes. Even though my experience is from programming, I would say this way of working in a close companionship should be considered for any product or service innovation.

Could this be scaled up to cover more complex products or services? Yes, I think so. My experiences covers two persons, but I believe it very well can be re-written to guide any innovation project. Possibly with the addition that it requires a dedicated project leader.

Oh, one more thing: you need fuel. This can be very personal, like for a friend of mine who propelled himself thru the education system to become a plastic surgeon because of a an accident that crippled his friend. For me it's much easier - just tell me it's impossible.