The rise of servitisation in manufacturing: What it means for employers

The manufacturing sector is facing a set of complex and interconnected challenges, including rising business costs and material and component shortages. This has coincided with a period heightened macro-uncertainty in the UK as energy costs, inflation, and interest rate fluctuations alter the economic outlook.

Manufacturers are seeking top professionals to help them navigate this challenging environment, meaning that demand for talent has remained high. Businesses are also looking to mitigate rising costs and grow profitable revenue streams through innovative new commercial approaches. One such strategy is ‘servitisation’, which has been deployed by businesses for years, but is now being explored in more traditional manufacturing industries.

Here, we’ll be discussing exactly what servitisation is and how its adoption could impact manufacturing employers and their talent strategies.

What is servitisation?

In the context of manufacturing, servitisation refers to the process whereby a company transitions from solely making and selling physical products and components, to providing services that complement their physical products. Where successful, servitisation can turn a traditional revenue-generating single sales model into an ongoing relationship with repeated and predictable revenue streams.

A recent example of this model would be BMW’s “subscription services for heated seats”. Essentially, the seat-heating functionality will be built into all seats, with ongoing service delivery via subscription.

But beyond the headlines, what does this trend mean for manufacturing more broadly? In more traditional industries, is the servitisation trend set to accelerate? And what implications will it have for talent attraction and development?

The benefits of servitisation

Having recruited within the industrial manufacturing and automotive manufacturing sectors for over 20 years, Page Executive and Michael Page Manufacturing have seen the rise of many different commercial models. Whether or not BMW’s subscription service for heated car seats is viable or performs well among consumers, it demonstrates innovative thinking.

Servitisation in general simplifies the bill of materials, the manufacturing process, and the supply chain needed to support said manufacturing process, whilst also creating an ongoing revenue stream above and beyond the original sale.

The next question is whether or not the concept can be developed further and with other applications. If so, it could not only simplify the manufacturing process, but also secure ongoing predictable service-related revenue streams tied to original product sales.

As manufacturers connect servitisation to new advanced engineering initiatives, the gap between traditional manufacturing and service provision will narrow. Ongoing customer contact, through high quality service agreements, will improve the customer experience and increase the opportunity and likelihood of repeat purchases.

Furthermore, the elongated customer relationship of the servitisation model will present new opportunities for customer data collection, with significant knock-on effects for the emerging ‘Internet of Things’. We are likely to see manufacturing organisations which currently rely on data becoming truly data-driven businesses that also manufacture tangible products.

How will this impact hiring in manufacturing?

Servitisation will impact the commercial models of manufacturers - but it will also transform their recruitment needs and talent strategies.

For instance, in a sector with significant uptake of servitisation models, it will be more important than ever for management and leadership candidates to have a broad understanding of the end-to-end business proposition. This means thinking well beyond the products, sub-assemblies, or components they design and manufacture, developing a deep knowledge of the wider value they offer to clients and customers.

We would also expect a rise in the adoption of servitisation to result in more candidates entering the manufacturing space from non-traditional sectors. For instance, at Page Executive and Michael Page Manufacturing, we are already seeing candidates from technology and non-automotive electronics entering the automotive space. But in the future, servitisation could require an increase in candidates from data rich commercial and sales backgrounds.

Rob Bales, Partner at Page Executive’s Industrial and Manufacturing practice, commented:

“Hiring managers from traditional manufacturing sectors increasingly appreciate the benefits of attracting technical leaders from outside their immediate industries. These candidates often have a greater understanding of data and ongoing value creation beyond the initial sale of a product.”

Meanwhile, employers will likely also seek talent with advanced engineering skills for pure manufacturing roles. This will increase the importance of skillsets related to innovation, such as data analysis, and the capacity to link previously independent commercial activities.

What next?

At PageGroup, our industrial manufacturing recruitment teams have hundreds of years of combined experience recruiting in this space. We see every day how the manufacturing sector is adapting, not just to meet today’s challenges, but to turn challenges into competitive advantage.

To help businesses attract the professionals they need to capitalise on emerging technologies and commercial models, we are also partnering with leading industry publication, the Manufacturer.

If you are interested in hiring top talent, please get in touch today.

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