29 May 2014

Is servitization for everyone?

One of the questions I have been asking my students recently is whether "servitization is a strategy for everyone". Effectively I ask them to take any product they wish and develop an idea for a service that is directly related to the product. The students have come up with some great ideas. One group developed a business model for renting umbrellas. Imagine having umbrella rental kiosks at busy main line stations in London. You arrive at Kings Cross, without an umbrella, only to find it is raining. Rather than buying an overpriced umbrella in a local store, you can rent one for a day and if you don't return it, you forfeit your deposit, but are then allowed to keep the umbrella. Another group developed a business model for exchanging baby products - a store where you could buy second hand cots, toys and prams (all of which had been fully refurbished and reconditioned). As your baby grows older and bigger the store would take back products you no longer needed and sell you a new set - a child's bed rather than a cot or toys for a three year old, rather than a new born baby. Any products you returned to the shop would be refurbished, reconditioned and sold on to a new set of parents. Yet other groups have suggested technologically enabled services. One team came up with the idea of machine tool manufacturers offering environmental monitoring services. This group proposed that firms should couple an energy monitoring service with the machine tools they sell. In essence the manufacturer of the machine tool would provide guidance and advice on how to reduce energy consumption of capital equipment.

While the ideas themselves are interesting, one of the things that I have found most fascinating is that nobody has yet come up with a product that could not be accompanied by a service. Luxury goods - where ownership might confer status - are appealing as rental items. Why own that fantastic diamond necklace (and carry the risks and costs associated with ownership of a very valuable piece of jewellery) when you can rent whatever jewellery you want for particular events. A counter argument might be that jewellery as a gift is important. If I told my wife that I had rented our wedding ring rather than bought it for her I might get short shrift. But the jeweller who sold me the ring offers a reconditioning service, a personalisation service and could offer a consultancy service, providing advice on which product to select.

Move to the other end of the scale and think about commodity products. Take something as simple as a paperclip. What service could be associated with paperclips? At first blush this appears to be a more challenging question. Paperclips are so plentiful and cheap that it is more difficult to conceive a service. But think about how many paperclips are wasted, taken off sheets of paper and dropped in the bin or put in that jar that sits on your desk and gradually fills to overflowing. What about a service centred around paperclip recycling, where unwanted paperclips (like spent batteries) are collected and returned to source. What about paperclips with RFID tags on them - paperclips that could provide location information so you would never again lose that important document in a pile of paperwork!

The more I think about it, the more I feel that the world of services and solutions is endless. Some of my academic colleagues argue that products are only ever a means to deliver services. I wouldn't go quite that far, but I think it is right to say that all products can be supported or supplemented by services. I'd be interested to hear of examples of products that you think it would be difficult to support or supplement with services.

12 May 2014

Why SMEs need to put their feet on the starting line to ensure they can capture value from data…ready, steady, go!

Andy Neely - Interviewed on SMEs and Big Data
In this interconnected World all sorts of devices are creating data all of the time from when you use your mobile or when you log into the Web, or when you use cards to shop in stores or online. The systems for capturing and storing data are becoming better and faster.

With all of this innovation there is a risk for SMEs that they won’t be able to compete in this so called Big Data World. They will need to build their capabilities to understand and analyse all forms of data to make sense of it. They will need to put in place the technology to capture the data and ensure they have the right professional advice to use it, and draw up the appropriate legal agreements.   It could be that only large firms can afford these costs, but another option for the SME is to think about who they can partner with, and how can they build or share the infrastructure to capture and analyse data rather than do it all themselves. 

SMEs need to think through their data strategy clearly to ensure that they are not beaten to the starting-line by new start-ups who may launch using publicly created data sources such as Facebook or Twitter. 

However,  the issue is not one of “Big” but that of “Data”, the value lies in how SMEs us their data more generally. SMES need to do three things. They need to explore their options with data and ask what does data allow them to do that they can’t currently do? They will need to think about how the data might allow them to monitor the use of their products, or better manage their supply chains. They will need to think through who their partners are, alliances will become central to their success.  Thirdly, they will need to ask where the value in the data sits for them and how they capture that value as an SME rather than just let it leak out to other organisations in the market.  Fast footwork is going to be useful for them when the whistle blows on that starting line.