Applying new customer solutions and business services is the driving force in transforming modern industrial companies.
The phrase “service economy” has been ubiquitous in business circles for many years, but business services – rather than consumer services – are the main driver of expansion in today’s service economy. Manufacturing is a prime example. Today, leading performance materials and technology firms enhance their competitive edge by providing superior value to their customers in the form of tailored services and bespoke solutions.
The elevated status of business services has gone hand-in-hand with a shift from product-centric strategies to a greater emphasis on adding value for clients. In the performance materials and technology industries, where products are highly specialized and complex, interaction with customers does not end after a product is sold. Product training, repair, maintenance and enhancement services are increasingly important for acquiring and retaining customers.
“There has been a move from manufacturingcentered to a service-based business model. In manufacturing technologies, industrial suppliers are increasingly using machines and technical modules as platforms for the delivery of services,” says Prof. Jochen Wirtz, Professor of Marketing at the ational University of Singapore.
In his research, Prof. Wirtz cites aircraft engine manufacturer Rolls-Royce as an example. “Rolls-Royce builds its services strategy on investments into information systems favoring its measurement costs and capabilities to track and manage engine performance,” says Prof. Wirtz. “Instead of selling engines and then later parts and services, it created an attractive bundle, which it branded TotalCare®.”
The increased influence of service-driven capabilities in the performance materials and technology sectors is the result of two overlapping drivers: 1) intensified competition in key marketplaces, and 2) higher service expectations of customers.
Prof. Wirtz notes that as products become increasingly commoditized in tough marketplaces, business model thinking reverses the competitive strategy approach by starting from the opportunity in order to identify value propositions. From this standpoint, entrepreneurial industrial companies identify the key value proposition from the customer’s perspective, and devote considerable resources to developing value-added solutions that drive differentiation.
“Companies use business models as a strategic response to the increasing competitive pressure which shows in reduced margins and shorter time frames to capture the value from product innovation,” says Prof. Wirtz. “Chances are shrinking that products with cost or differentiation advantages today will still be leaders tomorrow.”
To confront changing customer requirements, firms are organized around opportunities in order to craft value propositions that are difficult for others to copy or reengineer. “This requires companies to focus on domains where they are unique and have competencies that provide a sustainable competitive advantage, while using business services to integrate underlying resources,” says Prof. Wirtz.
Staying ahead of the competition is a motivating force for Klingelnberg, a worldleading mechanical engineering company based in Switzerland. It believes that much of the exciting action will take place in major developing Asian markets. India is considered a high-potential market, as the government’s Make in India campaign creates new business opportunities.
“My vision puts India at the center of our strategy for Asia with a focus on technical capabilities and regional reach,” says Jan Klingelnberg, CEO of Klingelnberg. “Growth-oriented investments in the manufacturing, power, infrastructure and defense sectors in India and South East Asia will drive business over the next five years.”
As customer demand has changed from pure products toward solutions, Klingelnberg enhanced its competitive advantage by providing its customers with a technological solution called “closed-loop-technology.”
“This is a software-based bevel gear design and manufacturing concept that affords the gear designer complete control over the entire gear manufacturing process, from cutting tool design and quality to the final design and product quality of the bevel gear set,” says Jan Klingelnberg. “The associated development work never ceases and will become even more refined in future. This is a distinguishing feature where we are ahead of the competition.”
Helping customers gain a competitive edge
When it comes to chemical consumption, Asia is the largest market globally, and is the biggest regional market for WACKER Chemicals. “In 2014, Asia contributed more than 40 percent of the Group’s total sales, and it continues to offer us the greatest business opportunities,” says Patrick de Wolf, Managing Director, WACKER Chemicals South Asia. “The economic importance of China and the emerging Asian countries will undergo a change in the coming years. Vietnam and Indonesia will be important markets by virtue of their demographic development, while countries like Myanmar, Cambodia and Laos will also play an important role in the near future.”
Headquartered in Singapore, WACKER Chemicals South Asia has representative offices in Thailand, Indonesia, Vietnam and the Philippines. Being close to customers provides the basis for success. “We developed and penetrated the region step-bystep. Later, we established a technical center in Singapore for our polymers and our silicones divisions,” says Patrick de Wolf. “This set-up and investment is paying off. Together with our customers and distributors, we have been able to develop and further grow various products and applications for the diverse market needs and industries of the region.”
Increased urbanization and a rise in the standard of living across South East Asia have driven demand for high-quality products. “Our customers know WACKER as a technology leader, and our innovative strength enables us to support customers to speed up their own product or project cycles,” says Patrick de Wolf. “The superior quality and novelty of our products is what they need to gain a competitive edge that helps them tap into new markets.”
The Singapore branch of the company’s global training facility, the WACKER ACADEMY, also plays an important role. “Besides the established customer training in our labs, we conduct market development via symposia and trade fairs or joint regional distributor seminars, and intensify our cooperation with authorities and universities,” says Patrick de Wolf. “We can customize and adapt our training schedules to ensure that customers have sufficient knowledge to use and market our products. That’s why the WACKER ACADEMY has itself become a well-known brand in the region.”