Research finds 68% of manufacturers now derive value from ‘servitisation’

IFS, a global enterprise applications company, on Tuesday announced the manufacturing industry-specific results of its “Digital Change Survey”. 
The study concludes that the industry is using a wide range of digital technologies to drive commercial growth as “servitisation” efforts take hold, but that skills shortages, aversion to change and reluctance to collaborate externally remain key challenges.
Servitisation drives change
The strategic shift from manufacturing products towards creating new services through servitisation is a key factor behind the imperative for digital transformation. 
Sixty-eight per cent of respondents claim that servitisation is either ‘well-established and is already paying dividends’ or ‘in progress and is receiving appropriate executive attention and support’. However, almost one in three manufacturing companies are still to derive value from servitisation.
“The servitisation of the manufacturing sector is being driven partly by competitive pressures, but also from customers who are demanding more and wanting everything faster,” said Antony Bourne, vice president of Global Industry Solutions at IFS. 
“The manufacturers that have not yet adopted a service-centric business model are missing out on revenue streams and new ways to develop their offerings. To be successful in their response to customer needs and increasing demands, manufacturers must compress time to market, taking an idea through from design to a saleable item as quickly as possible. New digital technologies can help with this,” he added.
Unlike those in other sectors, who view digital change primarily as an efficiency play, manufacturers see it as a key to unlocking commercial growth. 
Some 37 per cent identified accelerating innovation as a driver for change – more than in any other industry – while competitive differentiation (32 per cent) was also a top-five factor. In fact, these two can be seen as almost comparable with more common organisational drivers: internal process efficiencies (40 per cent) and cost savings (33 per cent).
A digitally mature sector
The manufacturing sector is taking full advantage of a range of new technologies to accelerate growth, with 83 per cent of respondents identifying themselves as ‘enabled’, ‘exploratory’ or ‘enhanced’ and not a single one in the ‘nascent’ stages. 
North American firms are at the vanguard with 55 per cent identifying as ‘enhanced’ or ‘optimized’; much higher than Europe, the Middle East and Africa (29 per cent) and Asia-Pacific (21 per cent) respondents.
However, 84 per cent of manufacturers said they think funding is ‘adequate’ or ‘advantageous’, the lowest of any sector. 
Furthermore, 12 per cent described funding as ‘excessive’, something not seen in any other industry. It is clear that manufacturing firms are not always allocating budget effectively, or getting value for money. 
Cultural transformation
The report also highlighted cultural challenges which may impede digital transformation efforts, especially openness and willingness to share with external third parties. 
Almost a third (31 per cent) of respondents said they wanted to increase collaboration, identifying ‘aftermarket/estimating’, ‘supply chain’ and ‘sales/bid management’ as key areas. With 57 per cent reporting a very strong level of internal integration and cross-departmental work, external collaboration seems to be the area where there is room for improvement.
Talent gaps
Servitisation offers new job opportunities for manufacturing employees currently focused on production-only tasks. 
However, nearly a quarter (23 per cent) of respondents claimed that a lack of skills and talent currently present a barrier to change, with artificial intelligence/robotics and business intelligence the two areas most deeply affected. 
There is a sizeable opportunity for manufacturing organisations to better communicate the fact that servitisation and the proliferation of machines in the workplace can create new jobs: currently 49 per cent of workers cite aversion to change as the biggest barrier to digital transformation.
Nevertheless, 71 per cent of respondents are taking proactive steps to upskill their existing talent, while 29 per cent are also looking to hire externally.
Lacking data-driven insight
Big data and analytics is identified as the number-one digital technology for investment by respondents. 
However, just a quarter (26 per cent) are actually harnessing data-driven insight successfully to deliver faster time to innovation. It seems that most manufacturing firms have yet to work out how to derive value from their data. 
Some 58 per cent claimed they are only ‘beginning to utilize data-driven insight, which is starting to have a positive impact on time to innovation, but it is not yet a competitive advantage’.
Accelerating digital transformation
That said, the study found there are signs that manufacturing firms are embracing automation – which was identified as the most disruptive force facing the industry – and new ways of using data to stay competitive and innovative. 
Over half of respondents (55 per cent) have already transitioned to smart manufacturing, with a further 26 per cent expecting to do so within two years. 
To stay ahead of the competition, firms will need to accelerate their adoption of digital transformation, and third parties can help here by bringing in much-needed skills and resources. 
Some 81 per cent of manufacturing respondents say ‘the company’s current third-party vendors are equipped to provide for future digital needs’. 
The report reveals that manufacturers see third parties playing key roles in ‘digital organization and operations’, ‘performance analytics and reporting’ and ‘digital strategy’.