Manufacturer or service – or both?

The debate raging in British industry that has never been resolved. And, like many debates, the arguments over ‘manufacturing or service’ have become polarised. For or against, in or out, black or white? In this case the debate matters because it involves industrial strategy, exports and ultimately jobs and a healthy economy.

Manufacturing…

Let us examine the positions. In one corner we have the supporters of the manufacturing economy. To prosper, the UK needs to inspire a ‘march of the makers’. The de-industrialisation of the 1970s must be reversed and we must emulate Germany by identifying high-value tangible products that the world will want to buy. Pharmaceuticals, top end automotive, defence equipment and aerospace are all sectors that have been in fine fettle and other contenders need to be identified.

…or service led?

In the other corner we have the cheerleaders for the service-led economy. The UK will never be able to compete with BRICs’ economies, let alone the industrial might of Germany. We have no Mittelstand. The industrial economy of the north is now a retail park. Our real strength lies in high-end creative and knowledge-led industry. From digital to film production, management consulting to outsourcing – and to higher education. There are brands from WPP to Oxbridge that the world wants, and they are the future. Harry Potter may not employ as many people as Longbridge once did, but the contribution to the Exchequer is greater.

A new economic future through ‘Servitization’

At Aston University we see strengths and weaknesses in these arguments. But the solution is in both and in neither. We need to have both, and by bringing them together skillfully we can lead the world. We even have a term for the new economic future – we call it ‘Servitization’.

Servitization is a process whereby an organisation thinks in terms of a service based strategy, even where its roots are based in developing and manufacturing a tangible product. Think Rolls-Royce and ‘Power by the Hour’. This combination of aero engines and after sales support and maintenance has been a winner, for the airlines and for Rolls-Royce. It integrates the two closely together, and provides long term revenue potential as well as insights for new developments. The focus is on the customer, not the manufacturing capability.

A team at Aston is leading a major Servitization project with Xerox, with research that demonstrates that how the concept can be applied across a range of sectors and across companies of all sizes. Alsthom and Virgin have a Servitization partnership on the West Coast Main Line. A KTP (Knowledge Transfer Partnerhip) with a medium sized business specialising in care services for the elderly has led to them branching out into product development.

Ultimately Servitization can help bring customers and suppliers together in a powerful partnership. It can blur the boundaries between factory gate and retail, and between after sales and initial contact. The process of continuous product improvement is aided by the constant exchange of data and information at all stages of the product life cycle. Like many business relationships it is of course highly reliant upon trust, from brand trust through to a willingness to move away from the redundant definitions of ‘who owns what’.

Which brings us full circle. Until we can move away from the sterile ‘manufacturer versus services’ debate and start to look for new solutions we will not progress. Servitization is a potential answer to many of the issues besetting the UK economy, but to really grasp the opportunity it presents we have to move away from the terms of reference of the old debate.

[Picture credit: http://www.ainonline.com]