A friend of mine raised an interesting issue with regard to a major global and high respected ex employer of his. This business has recently declared a strategic intent to move from manufacturing as its core activity (and one for which it is justifiably famous) to becoming a services organisation.
This is not unusual…just today there was an announcement in the FT about a similar path for another manufacturer in the UK. The strategic rationale is simple…the reduced capital requirement, economic value added, responsiveness and potential stickiness of the customer relationships all add up to making this a logical step to make.
And that’s the problem, you see…the relative simplicity of the strategic business case hides the enormous complexity of implementation behind that change. Let’s think about a few areas where that complexity exists:
- Your operating model where the delivery of a product and that of a service are likely to be substantially different.
- Your organisational structure where your governance may need to change in terms of representation at the highest level, management and mitigation of risk, and above all pace…as, for example, decisions around pricing for core activities become less of a science and more of an art form.
- The capabilities, skills and expectations of your existing workforce at every level (not just client facing).
…but even these challenging areas are as nothing compared with the most fundamental shift of all…which lies in your culture and the subsequent behaviours which the leadership and workforce will need to demonstrate going forward, assuming that you can persuade them to do it in the first place!
As an example, think about how you buy products as opposed to services. If you examine your buying habits with regard to the two, they are fundamentally different. Whilst the advent of 3D printing and the internet of things is creating a much more tailored set of possibilities, the reality is that we still purchase products based on availability and the ‘look and feel’. With services however, we have an expectation (whether it’s banking, insurance, cleaning, breakdown cover for the car, boiler, refrigerator etc) that good service involves listening to our very specific requirements and providing a solution which is entirely tailored to that. In fact, even the interaction with the service provider is part of our assessment of that delivery. Iteration therefore is important and perhaps even necessary for the perceived value of what we’re paying for.
Iteration is a challenge for manufacturing but a necessity for service delivery.
The challenge is therefore great and the conversion complex. To use a cricketing / baseball analogy, taking the best batsman in the team (the one not just with the greatest scoring average but also with the greatest strategic sense / vision / and knowledge of the history of the game) and turning him into a bowler / pitcher is an experiment with significant issues. Beyond the mechanical requirements which are perhaps a combination of building muscle memory and practice, there are many more interesting issues…how to play, what strategy to employ (field placement, variation of delivery, approach to openers vs tail enders), what mindset to adopt in general, how to deal with failure! All these facets differentiate the great from the good!
Both activities are involved in the same ‘sector’, both understand intimately the nature of the business and what success looks like but conversion is not unlikely to be easy!
…which is however the expectation of many corporates making this change….that this represents yet another strategic shift on their journey where the challenge lies in coming up with the idea rather than the implementation.
The same complexity of implementation exists in going from being a business relying on organic growth to one which seeks to grow by acquisition – this link will take you an explanation as to why!
Think about it when you next pick up a cricket ball!