19 January 2014

Service-intensive business model needed

The Government's Foresight study into the future of UK manufacturing sets out a challenging roadmap for the industry to 2050, but the critical question is who is doing the driving?

As a contributor to the report, my focus has been on the different business models needed in the industry, all of which will require bold leadership. For example, in future, basic production may be a very small part of the cycle in terms of revenue, jobs and competitive importance; customers won't necessarily want the trouble of owning equipment, but would rather just pay to be able to use it.

Production technology – underpinned and linked together by IT – will be much more responsive and flexible, meaning that products can be personalised and customised on demand. 'Intelligent' and 'incomplete' products will be able to adapt and evolve as the circumstances of their use dictate. The full cycle of manufacturing will take place in networks of smaller firms interacting intensively with each other and with customers.

Building cycles of re-use, re-manufacturing and repair into manufacturing will become a central rather than a marginal concern for manufacturers across many sectors. Manufacturing needs to shift to service-intensive business models in a circular economy rather than production-intensive business models in a linear, factory-to-landfill economy.

A key factor for successful delivery will be leaders at a number of levels within organisations capable of identifying opportunities, making radical decisions and managing fundamental change in terms of how operations work. This is where some of the biggest challenges lie, in running business models across multiple organisations and different types of partner.

Bold experiments are needed to establish prototypes for this new form of manufacturing and universities have a potentially important role to play in this. A useful first step would be the creation of 'business model catapults' – development centres to test out new models in specific local areas and used to develop new ways of creating value as well as new ways of organising.

Martin Spring, professor of operations management, Lancaster University Management School

Supporting Information

Lancaster University

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