Stepping stones to Advanced Services or a walk up the garden path?

• Analyse your Business Model
• Develop new customer value propositions
• Create basic, intermediate or advanced services
• Test, modify and select
• Modify your Business structure
• Implement.....
• ....

These are all sensible steps to take as you move into Advanced Services, but they can seem a little like walking into an unknown garden. Having worked with dozens of SMEs and several large companies the Advanced Services Group, a spin out from the well established Centre for Servitization Research and Practice can guide you faster and further than any other.

Before you lose your way contact us here.

UK Manufacturing Statistics. Part 2: What does it say about Servitization?

In the first of these two pieces we saw how employment in manufacturing has had a re-visit. That post and this draws on the new report Measuring Manufacturing: Manufacturing Metrics Review Report, just published by the Department for Business, Innovation and Skills.

The report also looks at how servitization is changing the shape of UK Manufacturing:

• In 2011, 39% of UK manufacturers with more than 100 employees derived value from services related to their products, compared with 24% in 2007.  That is a leap of 60% from that initial baseline in 2007. If that year doesn't seem significant to you, remember that the first iPhone went on sale that year. How many apps and support services do you have on your smart phone right now?

• The number of UK businesses recognized as Service Plus (i.e. with Manufacturing SIC codes and revenues from services >50%) has increased from 2008 to 2013 by either 85% or 212%, depending on the analysis approach. The wide difference in those two percentages are because it is early days in how to measure companies that accrue large revenues indirectly from their manufactured goods. The raw numbers suggest that there were approaching 20,000 such companies in 2013, nearly 3 years ago.

Before I finish consider how GE is re-positioning itself as a digital company, advertising on the TV and Youtube and to learn more about Servitization see the Advanced Services Group video here

So, I ask you is your business part of the servitization revolution? Join us at our Global Forum on 26th April to begin.

UK Manufacturing Jobs double from 2.6M to 5.1M: Part 1 Is it True?

Now that is a real headline, and puts Brexit discussions into the shade, but is it true?
Measuring Manufacturing: Manufacturing Metrics Review Report, just published by the Department for Business, Innovation and Skills https://www.gov.uk/government/publications/manufacturing-metrics-review has re-visited how manufacturing is interpreted in the national statistics and the chair Professor Sir Mike Gregory states in his summary:

"In summary, the group found that, while manufacturing as currently defined in national and international statistics is being effectively and reliably reported, there are substantial opportunities to capture and reflect the influence of manufacturing activities within the economy more comprehensively.

and that a new Value chain approach "suggests that jobs associated with manufacturing might number 5.1 million compared with the 2.6 million directly classified to manufacturing using conventional interpretations."

The graphic below taken from that report, reproduced here courtesy of Open Government Licence v3.0, shows the detail:

The report goes on to state:  "it is worth noting that UK manufacturing has delivered a productivity revolution showing a 125% increase in labour productivity since 1985" 

Feeling a little better now? Part 2 of this blog looks at what the report has to say about Servitization.

Running in New York for the Alzheimer’s Society

I have been lucky in obtaining an entry to the New York Marathon on the 1^st November in the public lottery. For the first time in years I am going to use this event to raise money for charity and I have chosen the Alzheimer’s Society. Alzheimer's Society is the leading UK care and research charity for people with Alzheimer's disease and other dementias, their families and carers.

Dementia is a collection of brain diseases, over 200 separate diseases in fact, that affect over 850,000 people in the UK today. To me that feels like Cancer did 40 years ago and I hope that if we raise money for research and support we can tackle this problem and stop it becoming such a burden, especially to the elderly and their carers.

I have set myself a target of raising £4,000. I know from the Society that just £50 can provide the chemicals and consumables to allow a PhD researcher to research the causes of dementia for a day.  £350 can pay for someone with dementia to attend a Dementia Café for an entire year, where they can meet others with dementia and gain knowledge that can help them cope better in their daily life. And £650 can pay for a brain scan in studies looking to improve diagnosis.

If you would like to learn more about dementia, there are one-hour dementia friend courses run all round the country. I went to a course in Leicester. It's fun and you'll learn a little more about how to live and care for those affected. Just put "dementia friends" into Google to find the right page about it. Or Click here.

If you do go to a course you will learn that dementia is not just a part of growing old and that it’s not just about losing your memory. You’ll also learn a little about how you can help people to have an active and happy life with the disease.

If you would like to donate having read this blog I would be delighted. It is easy to donate online through my justgiving page here.

Thank you for reading, please share if you know others might be interested.

Three (and a half) rules: Book review

First published in 2013 and out now in Paperback, "The three rules- how exceptional companies think" by Michael Raynor and Mumtaz Ahmed from Deloitte is well worth a read.

To contrast with quite heavy statistical analysis are several graphs that support some surprisingly simple conclusions. The authors set out to find the few rules that identify exceptional companies in the US. Rather than use the case study route or select well known exemplars, they have crunched years and years of financial data and subjected it to analysis, looking for significant, statistically significant, differences.

And the results? Well exceptional companies should follow these rules when having to make decisions on resourcing, strategy, structure:

1 Better before cheaper. So don't compete on price, compete on value.
2 Revenue before cost. Drive profitability with higher revenue, not lower cost.

Their analysis supports these rules, and in searching for further rules, they could not find any others that withstood a rigorous analysis, and hence the last rule is:

3 There are no other rules. Change anything and everything to stay aligned with the first two rules.

Now although there are only three rules, looking simple, following them isn't. In particular that phrase "change anything and everything to stay aligned", means just that. Everything is up for grabs, nothing is sacrosanct. Divisions can be bought or sold, markets conquered or exited.

Intuitively the rules mean that exceptional companies must deliver products or product/services of high value, bought for their high value, and at a higher price point. And when you have done that, driving for more revenue through price or volume should come before cost cutting to improve returns.

The final twist that the authors have identified in the last few years and is explained fully in the Deloitte Review Issue 16 asks the question of how companies reach the level of exceptional in the first place. Reviewing the data and tabulating the results they conclude that when a company is performing poorly and certainly sits in the lower half of the competitive landscape, they should cut "other costs", costs that don't impact on gross margin.

As they rise towards excellence and strive for a return on assets ratio that makes economists salivate they should turn their attention to gross margin, by creating high value propositions. So I would propose the rules can be modified to read:

0 If performing in the lower half of your peer group sector, cut non-direct costs. Overheads, SG&A need to be brought into line with sector norms.
1 Better before cheaper. So don't compete on price, compete on value.
2 Revenue before cost. Drive profitability with higher revenue, not lower cost.
3 There are no other rules. Change anything and everything to stay aligned with the first two rules.

Read and enjoy.

Pan for Starter/Finishers not the Completer/Finisher

Completer/finishers are always in demand. As project managers, salesmen (deal closers!), writers, craftsmen etc.

However a much rarer and more valuable group of people are the starter/finishers. Now I know that finishing requires a lot of qualities such as perseverance, attention to detail, focus, but starting requires all that and more.

To start something often requires courage, especially if that something is new. It means raising your head above the parapet of comfort zones and safety. It means putting pen to paper or asking a question or creating an idea or enterprise and probably being wrong. We're all human and we can't be right all of the time, and that is most likely when you are the first.

Seth Godin, a renowned speaker and publisher wrote a book called Poke the Box in which he explores this with enthusiasm and wit. Look there or at his blog for more on that topic.

I'd like to return to the group name again though. Starter/Finishers (S&F) are essential. They get things off of the ground and almost as important they finish what they start. They recognise that starting with something that is good is more important that forever waiting for the perfect moment, design or graphic. In this instance perfection can be the enemy of the good. We have to know when to launch.

And then we have to use judgement about when something needs to be finished. If the starting falls flat on it's face, we will have learnt something, but maybe it isn't worth seeing through to the end. Of course if the starting worked, then finishing is what will make it successful.

So when you recruit, or choose leaders are you panning for rare S&Fs or mining for valuable completer/finishers?

Islands of Lean: Not a new holiday destination

Lean implementations can fall into many well trod and well constructed traps. Sometimes it starts at the top with a Lean VP, pushing down the latest company drive without proper engagement. Sometimes it focuses on the teaching of tools or the number of green belt projects completed.

Island to archipelago

A sadder trap though is when lean has been successfully implemented in "pockets". A focused improvement or Kaizen event takes a problem area to a new height of efficiency, reduced waste or customer response. Submerged like it is in an ocean of non lean systems and ways of working however the benefits don't drop to the bottom line, practitioners lose heart and the pocket becomes an island, maybe with others visible in the archipelago.

Crossing the ocean to create commerce

Taking the analogy further, the bigger body of water to cross is frequently the divide between supplier and customer. Here we have the meeting between two or more firms, trying to give valuable products or services in exchange for money. And of course we don't want it to happen for just the one transaction, it needs to be a continuing business: Commerce. Commerce is about setting up the systems and understanding that underpins long term trade, or in this case a business.

Servitization takes Lean into commerce

Servitization is not new, it was coined back in the '80's, but deals with the development of complex interactions between suppliers and customers. It often takes the form of providing advanced services in addition or in parallel to product transactions. For me the key focus of servitization is a business relationship in which customer value is transferred with the least waste possible. Lean therefore can see itself as a tool that reaches out towards the customer, blurring the divide and crossing the ocean. It can involve financing, maintenance, through life support and much more.

This and other developments of servitization will be the subject of the Aston Spring Servitization Conference 2015. Come along or contact me for further information.