Published in The Manufacturer March 2015 by Nick Frank, Co-Founder of Si2Partners
“Service Thinking is just for big companies!” WRONG, I suggest you think again!
In my experience of the manufacturing industry, those companies that achieve an EBITDA of 20-35% do so because they have found a way to have a significant influence on their customer’s business’s profitability. Partly it is achieved through excellence in technology, manufacturing and sales/service. But a major element is having the mind-set that value is actually created in the customer’s business when they use the product or service. Traditionally we have called this ‘business nous’. Today management guru’s now call this customer oriented approach Service Thinking. It goes beyond talking to your customers asking what they want. It is developing a really deep understanding of how your customer’s business makes money and sometimes your customer’s customer. With this insight, then figure out how your technology and know-how can make a difference.
Service Thinking can be applied to companies big and small with impressive results. Take UK mould maker R&D Leverage Europe (www.rdleverage.com). This Nottinghamshire based UK company of 85 people is part of an American business with a global workforce of 322. The UK company specialises in single stage tooling used to mould niche plastic PET consumer packaging. Alan Tolley, the UK Managing Director picks up the story;
‘In our key markets we sit at the end of the customer value chain. At the front end are the major brand owners such as global cosmetic companies, who constantly innovate their packaging to differentiate their brand. Having designed the packaging, the Brand owner chooses a Converter to turn their creation into reality at a quality, cost & delivery. The converter then chooses a mould maker such as ourselves to provide the production tooling. Being at the end of the value chain, we find ourselves under significant price pressure, yet we are also being asked by the Converters to do more of the technical design work.
We started to realise that when given the opportunity to talk to the Brand owner, with our huge library of pre-form designs and experience, we could advise them on how to push the boundaries of their packaging designs. Then if they came to our facility for just a couple of days, together we could take 4-8 weeks out of the prototyping phase of the project. As we started to explore this business model, we found we were able to sell a prototype mould at a significant premium. In additional as we had co-created the design, often the Brand owner would specify us as the provider of the production tooling’
Based on his experience, Alan intuitively understood the value R&D Leverage could offer the Brand owners within the value chain. By using their knowledge and organising their manufacturing facility they were able to help Brands differentiate their packaging and deliver projects up to 2 months faster. The additional revenue generated, far outweighs any premium they had to pay. Now Alan and his team are are using the same thinking to find new ways to grow.
It all sounds so simple, but in the rough and tumble of business life, the answers are not always so obvious. I believe the key is to re-orientate our thinking to understand that value creation occurs in the customer. Then by taking a structured approach to understanding how they make money, develop ways to make our customers more successful. Do this, and any company including SME’s, can achieve results through Service Thinking.