Product Life Cycles, Innovation and Industrial Evolution

1
Technology Management Network - 29 April
2004 Managing Technology Knowledge Across
Organisational Boundaries
Managing internal and external interfaces to
deliver integrated solutions
Dr Tim Brady CoPS Innovation Centre
2
Overview

• Background to the research
• The shift to high-value services and solutions
• Drivers
• High-value activities
• New business models for services
• New capabilities
• New organisational structure
• Conclusions

3
Cops Research Programme

• ESRC Complex Product System Innovation Centre
  1996-2006
• Collaboration SPRU (Sussex University CENTRIM
  (Brighton University)
• Major projects funded by EPSRC

4
Research on integrated solutions

• EPSRC Systems Integration Initiative Research
  project - 2000-2003
• Cross-sector research
• Collaboration with leading firms
• Alstom, Cable and Wireless (CW), Ericsson,
  Thales, and WS Atkins

5
Integrated Solutions
Combinations of products and services brought
together as high-value solutions that address the
unique needs of large business or government
customers, throughout the life cycle from design
and development, to systems integration,
operations and de-commissioning.
6
Integrated Solutions

• developed jointly by the supplier and customer
  and cover multiple aspects of the relationship,
  such as commercial, technical, operational, and
  financial issues
• customer-centric, because all the ingredients of
  the the solution - products, services and pricing
  - are tailored to the customers needs
• integral to the customers business needs

7
Drivers into integrated solutions

• high-value added goods and services
• customer outsourcing
• competitive markets (privatisation,
  liberalisation, etc.)
• private finance (PFI, PPP, vendor financing)

8
Strategies for solutions

• change position in value stream
• find/develop new business model
• build/acquire new capabilities systems
  integration, operational, financing consulting
• create new organisations

9
Value-adding activities in CoPS
UPSTREAM (products)
 
DOWNSTREAM (services)
Manufacturing-services interface
Added value
Earlier stages
 
Systems Integration
Operations
Service Provision
 
Final consumer
Manufacture
Flow
Design manufacture components subsystems
Design, build, integrate products systems
Maintain and operate products systems
Buy in capacity to provide services to final
consumers
 
10
Moving from a manufacturing base
11
Moving from a base in services
12
Traditional product-forward thinking

• Traditional product-forward thinking
• 'throw product over the wall' and add services
• Increasing customer demand for services through
  the product life cycle

13
Solutions-based thinking

• Begin with desired customer outcome
• Design integrated solution to customer needs
• Work backwards to the products and services

14
Customer-centric
15
Example Alstom's Transport solutions

• Manufacturers railway equipment and systems
• Moves into solutions for 'train availability'
• London Underground Northern Line (1995)
• Customer did not specify size of fleet. Asked for
  96 trains available for service each day for a 20
  year period
• To achieve customer's targets Alstom built 106
  trains set up dedicated mainentance
  organisations

16
Alstom's new revenue streams
SERVICE LIFE 28 YEARS
2 YEARS
2 YEARS
Design, manufacture build rolling stock Cost of
building a typical fleet of 70 diesel trains 65m

• Operational services
• maintenance,
• renovation,
• parts replacement,
• asset management,
• new products
• Service life generates income worth 200m

17
Integrated solutions capabilities
18
Customer-focused organisations
19
Problems and challenges

• How far to migrate along the value stream
• boundary with customer has to be managed
• Managing internal and external interfaces
• products and service suppliers
• Overcome problems of channels to markets
• training companies in flight simulation
• business consultants in global telecoms
• High-risks financial exposure
• service level agreements (SLAs)
• Create new business models
• beyond manufacturing service-centred models

20
Conclusions

• Rethinking firm strategy
• shift from product/service to solution
• systems integration is the core
• multi-vendor
• channel control
• New capabilities
• different from manufacturing or services
• New organisational form
• driven from the customer back
• Meeting the challenges
• driving through the change - building new
  capabilities, creating new structures, developing
  new alliances