Is servitization the route to sustainable growth in the maritime industry?

Securing a way to deliver sustainable growth is a major focus for all businesses. Does servitization hold the answer for maintaining long-term profitability in the maritime industry?

Many sectors operate in a boom-and-bust cycle, particularly in the maritime industry. For the majority of incumbents, that means hoping the good times will cover the bad. It is only those that can find a way to grow consistently, with only minor adjustments needed when conditions are unsettled, that can emerge as true market leaders.

It may require a complete rethink of business models. For manufacturers that make and sell products to other industries, focusing on orders and production lines leaves them at the mercy of how customers are performing. What if there was a way to get more revenue out of each order and continue to sell even when customers aren’t investing in major projects?

Selling services

One route many manufacturers are taking is servitization. Pioneered by the likes of Rolls Royce and Alstom, the aim is to sell services linked to products, rather than just the products themselves.

Why the shift? Increased product sales, satisfying customer requirements, reducing the overall cost of production and production flexibility were all highlighted as benefits when implementing servitization, according to one manufacturing industry survey. Technology companies have long focused on services, rather than purely product selling, and the influence is not hard to see – increasingly, businesses talk about solutions, with actual, tangible products relegated to being a part of an overall offering.

Selling a product is often a balancing act between cost and quality. The net result being that quite often it is cheaper to rip and replace a component when it breaks rather than repair it.

With servitization, the manufacturer is selling the business outcome based on the product, such as propulsion. This means that the manufacturer bears the cost of any repairs or performance deficits. Therefore, it is in its interest to deliver as high a quality product as possible, ensuring that any costs of service are minimized.

The maritime sector is also waking up to the opportunities of servitization. Maersk bills itself as delivering integrated logistics and supply chain services, while in other parts of the industry companies are reporting better growth in services than in orders.

Yet overall, there is still much the maritime sector could do to embrace servitization. Where then do the opportunities lie, and what changes need to be made in order for those manufacturers serving the maritime industry to deploy servitization-focused business models?

Opportunity as a service

When looking for opportunities, it is first worth considering the challenges the industry still wrestles with.

Primarily, there’s the question of how service can be delivered when a large proportion of the products are on vessels circumnavigating the globe with, at best, variable connectivity? A part may stop working days out from the next port, yet the notification may only reach the manufacturer’s service team the day before the vessel is due in. How do manufacturers ensure that they have the right people, and the right parts, in place to cover eventualities?

Then there’s the fact that even some of the world’s largest ships spend barely twelve hours in port loading and unloading their cargo. This puts repair time at a premium.

In addition, despite so much of the maritime industry being interconnected, rarely are different systems designed with any form of interoperability in mind. This creates data silos, increasing the amount of work required to extract information and understand what is actually happening on a vessel.

So, where are the opportunities?

Anything that can gather data with systems that can, as far as possible, be deployed by vessel crews. For instance, sensors on machinery can be calibrated to share data when connectivity is available. Using predictive analytics, manufacturers can then work out when they think performance is going to drop below acceptable levels and pre-empt the need for repair. They can then deploy engineers and parts as required, liaising with crews at sea when communication allows and meeting vessels in ports to make changes as needed.

Engineers on-board could even be supplied with a training and maintenance package that uses emerging technologies to help them solve the problems themselves. One example of this is Orange Aider, a solution combining augmented and virtual reality. Wearable technology, in this instance glasses, allows remote workers, such as seafarers and field engineers, to perform new or complex tasks while delivering information directly back to central teams.

The steps needed to implement servitization

To get to that stage, however, requires a change in approach. If manufacturers want to implement servitization, they need to follow three main steps.

First, they need to design for it. That means products, but it also means how the company as a whole goes to market. This is not a case of adding a service package to existing products and calling it servitization. It requires a change in business model, and every aspect needs to adhere to the servitization approach. This includes aligning supply chains and partner networks with the new focus.

Second, as much of the system as possible needs to be automated. Can machinery be delivered with sensors already attached, where it is simply a case of adding them to a pre-existing network, with no calibration required? Part of the appeal of software-as-a-service solutions is that they don’t require specialist onsite knowledge to get up and running – the same principle needs to apply to the products wrapped into a servitization offering.

Third, it all needs to be managed remotely. With ships in port for limited amounts of time, the window for installing, adjusting and fixing products is minimal. If adjustments can be made remotely, whether by the manufacturer or at a central customer hub, and if those adjustments can be applied not just to one vessel, but to a whole fleet, the benefits can be significant. Manufacturers can cut back on onsite service teams, while vessel operators, for instance, can make changes without having to impact the day-to-day running of the ship.

Servitization – a route to sustainable growth?

At a time when market unpredictability is leading to caution around major projects, being able to offer customers performance guarantees can not only help decision making, it can also offer a more financially flexible model. Servitization can offer both manufacturers and the marine industry a route to investing in better performance while mitigating the risks of capital outlay in volatile environments. As all businesses seek ways to grow, manufacturers that can build and deliver servitization to their customers could find a way of delivering growth sustainably.

Orange Business Services has extensive experience in helping companies in many sectors test and launch servitization initiatives. For example, developing concepts for the automotive industry using 5G. If you want to talk to us about your servitization ideas, contact me at jonas.wallengren@orange.com.

Jonas Wallengren
Jonas Wallengren

Jonas Wallengren is a Senior Digital Business Consultant at Orange Business Services, leading business consulting and innovation teams to help multinational organizations find, enable and scale up growth through the data value chain. He has a passionate focus on mobility, sustainability and resource efficiency and believes that digitally empowered people who use data in smart ways in a hyperconnected society will be the great enablers. He is also a skateboard enthusiast.