Services: the missing piece in the manufacturing puzzle?

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Adam Barber
June 1, 2012
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Services: the missing piece in the manufacturing puzzle?

The wind industry is frequently encouraged to learn from other sectors that have historically shared, or share, the same challenges.

A perhaps incongruous synergy could be said to be emerging between the automotive industry and the wind manufacturers. As we noted at Copenhagen 2012, Felix Ferlemann, Wind Power CEO at Siemens, and a man with an auto background, encouraged the wind industry to think more like the car sector when it came to economies of scale.

Perhaps Gamesa were paying particular attention at this point – the firm appointed ex-CIE Automotive SA man, Ignacio Martin, as new CEO last week following Jorge Calvert’s departure.

In all seriousness, however, given the problems currently being experienced by the global turbine manufacturers, what are their business models missing?

Well, according to research released by the US division of Barclays this week, 55% of US manufacturers offer services as well as products, compared to only 30% in the UK. Xerox was highlighted as a firm that now sees a greater proportion of its revenues from servicing than product sales.

Transposing this to the wind industry, though, is not so straightforward. And, the majority of turbine manufacturers are able to enjoy good incomes from operations and maintenance contracts.

But given the assets in most cases have been sold to the developer, the manufacturer will be at risk from specialist O&M businesses who may be able to provide servicing at a more competitive price.

Perhaps then, the turbine manufacturers could look towards the Rolls Royce model. Alongside the aero engine manufacturing business, the firm also rents its jet turbines to the airlines and ensures their maintenance under a scheme called Total Care. This has meant the business now secures over half its revenues from services.

The turbine manufacturers would obviously have to hold onto their assets, which given some of the technology reliability issues with the industry could cause a headache in its own right, and it’s not necessarily the panacea for all the travails of the turbine makers, but moving towards a service-oriented model has some obvious advantages.

Arguably though, in the final analysis, there is a conundrum. Manufacturing firms are often captained by excellent engineers who have risen to the top through visions in product innovation. But they might not come with the experience to broaden the business’s horizons into other models.

So, recruiting from more mature manufacturing industries, like the auto sector, could prove to be a mixed blessing. On the one hand it provides a safe pair of hands, but it may not provide a vision to take the firm to a new level.

Either way, the pressure is on for the manufacturers to think a little differently.

The wind industry is frequently encouraged to learn from other sectors that have historically shared, or share, the same challenges.

A perhaps incongruous synergy could be said to be emerging between the automotive industry and the wind manufacturers. As we noted at Copenhagen 2012, Felix Ferlemann, Wind Power CEO at Siemens, and a man with an auto background, encouraged the wind industry to think more like the car sector when it came to economies of scale.

Perhaps Gamesa were paying particular attention at this point – the firm appointed ex-CIE Automotive SA man, Ignacio Martin, as new CEO last week following Jorge Calvert’s departure.

In all seriousness, however, given the problems currently being experienced by the global turbine manufacturers, what are their business models missing?

Well, according to research released by the US division of Barclays this week, 55% of US manufacturers offer services as well as products, compared to only 30% in the UK. Xerox was highlighted as a firm that now sees a greater proportion of its revenues from servicing than product sales.

Transposing this to the wind industry, though, is not so straightforward. And, the majority of turbine manufacturers are able to enjoy good incomes from operations and maintenance contracts.

But given the assets in most cases have been sold to the developer, the manufacturer will be at risk from specialist O&M businesses who may be able to provide servicing at a more competitive price.

Perhaps then, the turbine manufacturers could look towards the Rolls Royce model. Alongside the aero engine manufacturing business, the firm also rents its jet turbines to the airlines and ensures their maintenance under a scheme called Total Care. This has meant the business now secures over half its revenues from services.

The turbine manufacturers would obviously have to hold onto their assets, which given some of the technology reliability issues with the industry could cause a headache in its own right, and it’s not necessarily the panacea for all the travails of the turbine makers, but moving towards a service-oriented model has some obvious advantages.

Arguably though, in the final analysis, there is a conundrum. Manufacturing firms are often captained by excellent engineers who have risen to the top through visions in product innovation. But they might not come with the experience to broaden the business’s horizons into other models.

So, recruiting from more mature manufacturing industries, like the auto sector, could prove to be a mixed blessing. On the one hand it provides a safe pair of hands, but it may not provide a vision to take the firm to a new level.

Either way, the pressure is on for the manufacturers to think a little differently.

The wind industry is frequently encouraged to learn from other sectors that have historically shared, or share, the same challenges.

A perhaps incongruous synergy could be said to be emerging between the automotive industry and the wind manufacturers. As we noted at Copenhagen 2012, Felix Ferlemann, Wind Power CEO at Siemens, and a man with an auto background, encouraged the wind industry to think more like the car sector when it came to economies of scale.

Perhaps Gamesa were paying particular attention at this point – the firm appointed ex-CIE Automotive SA man, Ignacio Martin, as new CEO last week following Jorge Calvert’s departure.

In all seriousness, however, given the problems currently being experienced by the global turbine manufacturers, what are their business models missing?

Well, according to research released by the US division of Barclays this week, 55% of US manufacturers offer services as well as products, compared to only 30% in the UK. Xerox was highlighted as a firm that now sees a greater proportion of its revenues from servicing than product sales.

Transposing this to the wind industry, though, is not so straightforward. And, the majority of turbine manufacturers are able to enjoy good incomes from operations and maintenance contracts.

But given the assets in most cases have been sold to the developer, the manufacturer will be at risk from specialist O&M businesses who may be able to provide servicing at a more competitive price.

Perhaps then, the turbine manufacturers could look towards the Rolls Royce model. Alongside the aero engine manufacturing business, the firm also rents its jet turbines to the airlines and ensures their maintenance under a scheme called Total Care. This has meant the business now secures over half its revenues from services.

The turbine manufacturers would obviously have to hold onto their assets, which given some of the technology reliability issues with the industry could cause a headache in its own right, and it’s not necessarily the panacea for all the travails of the turbine makers, but moving towards a service-oriented model has some obvious advantages.

Arguably though, in the final analysis, there is a conundrum. Manufacturing firms are often captained by excellent engineers who have risen to the top through visions in product innovation. But they might not come with the experience to broaden the business’s horizons into other models.

So, recruiting from more mature manufacturing industries, like the auto sector, could prove to be a mixed blessing. On the one hand it provides a safe pair of hands, but it may not provide a vision to take the firm to a new level.

Either way, the pressure is on for the manufacturers to think a little differently.

The wind industry is frequently encouraged to learn from other sectors that have historically shared, or share, the same challenges.

A perhaps incongruous synergy could be said to be emerging between the automotive industry and the wind manufacturers. As we noted at Copenhagen 2012, Felix Ferlemann, Wind Power CEO at Siemens, and a man with an auto background, encouraged the wind industry to think more like the car sector when it came to economies of scale.

Perhaps Gamesa were paying particular attention at this point – the firm appointed ex-CIE Automotive SA man, Ignacio Martin, as new CEO last week following Jorge Calvert’s departure.

In all seriousness, however, given the problems currently being experienced by the global turbine manufacturers, what are their business models missing?

Well, according to research released by the US division of Barclays this week, 55% of US manufacturers offer services as well as products, compared to only 30% in the UK. Xerox was highlighted as a firm that now sees a greater proportion of its revenues from servicing than product sales.

Transposing this to the wind industry, though, is not so straightforward. And, the majority of turbine manufacturers are able to enjoy good incomes from operations and maintenance contracts.

But given the assets in most cases have been sold to the developer, the manufacturer will be at risk from specialist O&M businesses who may be able to provide servicing at a more competitive price.

Perhaps then, the turbine manufacturers could look towards the Rolls Royce model. Alongside the aero engine manufacturing business, the firm also rents its jet turbines to the airlines and ensures their maintenance under a scheme called Total Care. This has meant the business now secures over half its revenues from services.

The turbine manufacturers would obviously have to hold onto their assets, which given some of the technology reliability issues with the industry could cause a headache in its own right, and it’s not necessarily the panacea for all the travails of the turbine makers, but moving towards a service-oriented model has some obvious advantages.

Arguably though, in the final analysis, there is a conundrum. Manufacturing firms are often captained by excellent engineers who have risen to the top through visions in product innovation. But they might not come with the experience to broaden the business’s horizons into other models.

So, recruiting from more mature manufacturing industries, like the auto sector, could prove to be a mixed blessing. On the one hand it provides a safe pair of hands, but it may not provide a vision to take the firm to a new level.

Either way, the pressure is on for the manufacturers to think a little differently.

The wind industry is frequently encouraged to learn from other sectors that have historically shared, or share, the same challenges.

A perhaps incongruous synergy could be said to be emerging between the automotive industry and the wind manufacturers. As we noted at Copenhagen 2012, Felix Ferlemann, Wind Power CEO at Siemens, and a man with an auto background, encouraged the wind industry to think more like the car sector when it came to economies of scale.

Perhaps Gamesa were paying particular attention at this point – the firm appointed ex-CIE Automotive SA man, Ignacio Martin, as new CEO last week following Jorge Calvert’s departure.

In all seriousness, however, given the problems currently being experienced by the global turbine manufacturers, what are their business models missing?

Well, according to research released by the US division of Barclays this week, 55% of US manufacturers offer services as well as products, compared to only 30% in the UK. Xerox was highlighted as a firm that now sees a greater proportion of its revenues from servicing than product sales.

Transposing this to the wind industry, though, is not so straightforward. And, the majority of turbine manufacturers are able to enjoy good incomes from operations and maintenance contracts.

But given the assets in most cases have been sold to the developer, the manufacturer will be at risk from specialist O&M businesses who may be able to provide servicing at a more competitive price.

Perhaps then, the turbine manufacturers could look towards the Rolls Royce model. Alongside the aero engine manufacturing business, the firm also rents its jet turbines to the airlines and ensures their maintenance under a scheme called Total Care. This has meant the business now secures over half its revenues from services.

The turbine manufacturers would obviously have to hold onto their assets, which given some of the technology reliability issues with the industry could cause a headache in its own right, and it’s not necessarily the panacea for all the travails of the turbine makers, but moving towards a service-oriented model has some obvious advantages.

Arguably though, in the final analysis, there is a conundrum. Manufacturing firms are often captained by excellent engineers who have risen to the top through visions in product innovation. But they might not come with the experience to broaden the business’s horizons into other models.

So, recruiting from more mature manufacturing industries, like the auto sector, could prove to be a mixed blessing. On the one hand it provides a safe pair of hands, but it may not provide a vision to take the firm to a new level.

Either way, the pressure is on for the manufacturers to think a little differently.

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