servitizationand future trends for wholesale channel prof ... · wholesale is a process of supply...
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Servitization and future trends forthe wholesale channelProf. Carlo Alberto Carnevale Maffè
Three key questions
1. Wholesale what? It’s not really“whole”, it’s no longer “sale”.How about “integratedservitization”?
2. What are your customerslooking for? And yourcustomers’ customers, theirinfluencers and decisionmakers?
3. How will your organizationaland service models change inthe future?
Wholesale is a process of supplyServitization is a model of demand.
Wholesale of electrical supplies hasbeen the organizational answer tocomplexity and interdependency oftechnical components for downstreammarkets.
Supply today is getting moreaccessible, both for data and logistics,more competitive and increasinglydeflationary…
Understanding the Threats of Deflation
B2B E Commerce explodesaccessible supplies morethan cheap informationshifts demand outwards…
…and the equilibrium price falls: deflation
Quantity
Price
P1
P2
S1 S2
D1
D2
Scarcity used to be on physical availability of supplies.No longer. Scarcity is shifting to services.
The Earth of Warehouses isno longer the center ofuniverse.
Today, selling is incidental.
Expressions such as “pre sale” and“post sale”, referred to services,are ptolemaic concepts...
Easy QizzyWhat are the meanings of these phases of supply chain?
P CD
PP
P PP
Push, push, push. Discount, discount, discount. Confusion…
P C?DP
PP
P
“Bargain Deal”?
Proposal, Dialogue, Context
P CD
The product is an organizational curtain.The service is a house of glass. With your people inside
Owning a car is highly inefficient.Welcome to the “inclusive economy”
The global shift to services…
Services now account for the majority of GDP and employment in the west…
• Service sector accounts for over 70% of EU’s economic activity• Nearly 70% of EU’s workforce are employed in service sectors
Source: University of Cambridge Service Alliance, 2013 150
The evolving nature of services in a connected context
Source: University of Cambridge Service Alliance, 2013151
In a service-oriented market, wholesale is a “line” function
Servitization, i.e. The Factory of Growth
• In advanced economies, services represent 70-85% of GDP and contribute to 80-95% of its growth.
• In USA, 80% of productivity improvements over the last 20 years has been deriving from services.
People-as-a-Service
• In a service economy, every person is on the front line with respect to the market.
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Past
Present
Future
Products arethe Value Product Related
Services are theValue
Customer BusinessRelated Services are
the Value
Service trends in the electrical distribution industry
154
Product RelatedServices
• Offering is ‘’simple & small’’• Technical capabilities are key• Decisions at operational level• Vendor relationships• Effort driven cost structure
Customer BusinessRelated Services
• Offering is ‘’broad & complex’’• Process and customer knowledge is key• Decisions at boardroom level• Strategic partnerships• Decoupling of effort and value
Time/volume
Product related services versus customer business related services
Time/volume
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Service trends in the manufacturing industry
ProductRelatedService
CustomerBusinessRelatedservice
Drivers
Service Field management
Drivers
Risk for commitmenton the outcomeCustomer businesscompetences
Manage
Technology (Internet of Things IoT) providesmany opportunities for equipment suppliers: theability to monitor machines while in use at thecustomers site. Performance data can helpintroducing new services “customer related”and can help the design of new products takinginto account serviceability.
1. People on Field as a sensor on Customer tocapture needs not adressed
2. Standardization of Service Processes andOffering Portfolio (from sales to delivery)
R&D serviceability
Price (spare parts, services)
Manage Spare parts availabilityand on time delivery
Service trends in the manufacturing industry
Evolution of service propositions
Speed of Repair
Reduce Cost
Product Quality
Reduce Product RelatedRisk
Improve Efficiency &Compliance
Custom
erVa
lue
Product RelatedServices
Customer BusinessRelated Services
Improve CompetitiveAdvantage
Preventive Predictive ProactiveReactive
ProcessOptimisation
BusinessTransformationBusiness
Optimisation
Warranty
Time &Material
PreventiveMaintenance
AvailabilityServices
Implement StrategicChange
Prod
uct
Service
Relatio
nship Value
Proposition
ProductRevenue
Service LevelAgreements
OutcomeBased Services
Invoice Time& Material
Pay per Use
BusinessModel
PM Contracts
ManagedServices / BPO
PreferredSupplier
Vendor
SolutionProvider
Trusted AdvisorStrategic Business
Partner
Type ofRelationship
Maturity level
Low Basic Medium Advanced State of the art
Do you happen to sell anything “cyborg”?
In “Blade Runner”, Roy Batty’s inception date was January 8th, 2016.(We’re a few months late…)
All these years spent in keeping electricity “isolated”…Now, the challenge is “hybridation”, contamination, integration
You will no longer focus ondistributing wholesale electricalsupplies.
You will be building organizationsbased on integration between:
• Demand and Supply• Analog and Digital• Human and Robotic
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In the Internet of Everything, new industries are innumerable.
Servitization is not aboutcounting the “versions” ofIndustry, from 1 to 4.0
It is about bringing togetherand connecting every signal,every process, everywhere.
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... to an integrated system ofinteroperable elements.
From a collection of sparse supplies...
Connecting markets
1. Think “ecosystem”:standardisation, interoperability,complementarity, positivenetwork externalities.
2. Educate the extended valuenetwork, both upstream anddownstream.
3. Integrate with your industrial &service customers processes.
Internet? It’s in the Things. Better, it’s in Everything
• Intelligent buildings (energy metering, homeautomation, wireless monitoring)
• TLC, POS and payment systems• Healthcare (personal area networks,monitoring of parameters, positioning, realtime location systems) and Pharmaceutical(smart labels and sensors)
• Retail, logistics, Supply chain management• Lean manufacturing, Product Lifecycle Manag.• Process Industries (Oil & Gas)• Environmental Monitoring & Ecology• Transportation of goods and people• Agriculture & Cattle• Media, entertainment & ticketing• Surveillance and Monitoring for Insurances
What & How
WHAT:Face the challenges in a market that ischanging:
• Business processes• Relationships with points of sale & installers• Dialogue with decision makers and final users
HOW:a. Competitive differentiation in services
and technical know howb. Avoiding “price wars” …c. …and the risk of becoming mere
intermediaries of commodities.
What do your customers sell? (And what would the final users rather buy?)
1. Electricity and its applications, of course.
2. Actually, Compliance to norms.
3. Oh, wait a second! There’sMaintenance andSpare Parts, too.
• It’s not about electricity, or cables, motors, sensors.• The service “is” the product.• To be precise, it is the management of power based processes
across time & space• In smart territorial networks, there’s a change in nature of the
contract with local stakeholders.
Your new job? ADC. Analog-to-Digital Conversion
It’s not just a change ofsignal.
It is extracting economies ofscale, scope, extension,density, network.
Better if deriving from “FiatMarkets” created byregulations
A model of primary demand, instead of traditional segments of supply
Which are the key factors determining thedynamics of demand, in terms of:
• Volumes• Values• Compliance to norms• Periodicity/Seasonality• Lifetime cycle & lifetime value,• Switching factors• Complementarity
And the macro drivers?
• Regulations• Industry & Technology Factors• Organizational and governance changes
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We are still segmenting the supply side:
Installation materials 37%Cables & Management 17%Specialties 16%Lighting 15%Heating/Ventilation & A/C 9%Communication & Security 6%
With just a broad reference to the nature ofapplications:
• Residential• Industrial• Commercial• Utilities
The distributor’s new “tool box”
1. The “back end” for data management &logistics: becoming an infrastructure ofservices.
2. The “front end” for relationships withretail market (events, promotions,technical training, sales support manager).
3. The “demand management platform”and “service design” for primary clients,both retail and professionals (engineers,designers, installators, etc.)
From existing channels to “Fiat Markets”
Channels/sectors (global):
• Installers 57%• Industry 24• Service & Utilities 8%• Other 11%
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“Fiat” Markets
Green EnergySmart CitiesSmart GridsDistributed Power GenerationDomoticsInternet of ThingsIndustry 4.0
We are rising a generation of opportunists
Designing the “demand chain”.
A tale of two markets
In the product market, we exchange objects with a welldefined set of technical functionalities.In the service market, we exchange a system of expectationand experiences.
Guess where you can earn (or loose...) more?Guess where there’s more customer lock in?
When the “nature” of the good sold changes, there are neweconomic and organizational implications.
Before selling services – and related products , you needto learn how to buy data.
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- Real, good money is the least efficient mean of payment- Data are the perfect “bad money”…
Data is the New Money
Collective entrepreneurs of “Orgware”
•HW SW OW• Hardware in the supply chain andlogistics. They connect the atoms.
• Software in the IT Department.They connect the data.
• The challenge is designing andimplementing the “Orgware”.Connecting the minds.
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The evolution matrix of service economy
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P&L B/S CF
Hardware Sales of products PatentsExclusivity
IPRLicences
Software MaintenanceContractes
Industry Standards Lock in
Orgware Co production Critical mass ofadoption
ResilientEcosystem
1. Bring us customer traffic, notjust sales orders for stockreplenishment.
2. Help us to differentiate,improving service processesin a measurable way.
3. Keep us updated on marketevolution and customerrelationship management.
What should you ask to Vendors & Brands(from payables to receivables….)
Learn how to program the “perfect robot” for servitization: your customer.
The disequation of servitization
V * P < A * F * S
Volumes * Prices < Affiliates * Frequency * Subscription
Thanks!Prof. Carlo Alberto Carnevale Maffè
Bocconi University School of ManagementE-mail: [email protected]
Twitter: @carloalbertoFacebook: carloalberto.carnevale