Sarah welcomes back Tim Baines, Professor of Operations Strategy at Aston Business School and Executive Director of the Advanced Services Group to share his insight on what businesses can expect as it relates to the Servitization journey in 2021.
Welcome to the Future of Field Service Podcast. I'm your host, Sarah Nicastro. Very excited to welcome back to the podcast today, Professor Tim Baines, who is the professor of operations strategy and the executive director of the Advanced Services Group at Aston Business School. Tim, welcome back to the Future of Field Service podcast.
Tim Baines: Thank you, Sarah.
Sarah Nicastro: We had Tim on episode 70 of our podcast. If you have not heard that episode, you may want to go back and check it out after today's discussion. Tim will tell us in a moment a bit about what he does with the Advanced Services Group at Aston, but today, we're going to be hearing Tim's predictions for what will take place in the world of Servitization in 2021. Tim, before we dig into the conversation, for those that may not have heard our first podcast together, can you give them a little bit of background on your role, the Advanced Services Group at Aston, and what it is that you all are doing?
Tim Baines: Okay. Thank you, Sarah, for that. I'm a professor of operations strategy, manufacturing operations. My background is that I've spent all my working career working either for or with manufacturing businesses, helping them with their strategic decisions with regards to their operations.
Tim Baines: I became involved with the Servitization conversation around about 2003, 2004, that type of period. And I did so because we were asked to... Within the U.K., we were asked by the U.K. government. A group of universities were asked to respond to the competitive priorities for manufacturing firms moving into the new millennium. Up until then, our attention had been looking within the factory, had been looking efficiency within the production process and how to be effective, how to exploit digital to make sure that products are made cut, made quickly, made of a good quality, and made cost-effectively.
Tim Baines: This project, this program of Servitization was really about, within manufacturing, within the research community in the U.K., looking beyond the factory gates, looking at the opportunities for manufacturers beyond the factory gates. And that really brought us to get interested in this topic of Servitization or advanced services.
Tim Baines: Since that time, my work has been entirely focused on Servitization. Servitization, very simply, in my mind, is all about helping manufacturing companies to compete through services rather than products alone. Since that time, my work has been entirely focused on this topic. A few years ago now, we titled the whole research center the Advanced Services Group, because we wanted to distinguish between those service-based business models which are truly disruptive and high-value and game-changers in the marketplaces, versus the more traditional view of services inside manufacturing firms, which is about selling spare parts and brake fix. We really wanted to position our work as being about the new business models, the new service-based business models for manufacturing organizations moving forward.
Tim Baines: That's where we are, and that's just a brief overview. The work that we do is a combination of research, which is very much trying to understand and frame what it means for a manufacturing company to compete in this space. We develop research frameworks, such as services staircase, which talk about the different customer value propositions an organization can offer. Transformation roadmap, which describes how organizations have moved into this space. The business model blueprint, which focuses on the core elements of a service business model.
Tim Baines: We do research which is very much about framing the innovation, helping to understand it. We work closely with businesses in the U.K. and around the world to apply the concept, and through the application of the concept of Servitization, advanced services, we learn, it fits back into our research, back into our teaching, back into our publications. And we just keep the virtuous cycle moving, of research, impact upon practice, research, impact upon practice, to move forward the whole knowledge in this area.
Tim Baines: The one thing which galvanizes all our work together is this open ambition to really change the world for the better through these advanced services. It's based upon a motivation that... The business that many manufacturing firms follow hasn't really shifted much since the ideas of Henry Ford in 1910, 1912. A lot of manufacturers are still very much committed to that business model of production, consumption, and dump. And the whole business model of advanced services maintains that route in the products and the IP of the products, but very much looks at gaining value through the services, and is a much more environmentally, economically sustainable business model. And we're very much committed to promoting that business model.
Tim Baines: Sarah, does that help as a form of introduction? Is there anything you think I ought to have covered there, which I've missed or skipped over?
Sarah Nicastro: I think it's perfect. I've said here before that the work you guys are doing is really, really good, well worth everyone checking out. We'll make sure that there's a link to the Advanced Services Group in the notes.
Sarah Nicastro: What struck me is that the research you all do and the work you do, it's very clear when you look at it, when you consume it, that it is very grounded in the voice of the industry. To your point, my passion is helping folks that are on this journey in any way I can through providing them insights and content and connections that can help them, because we know that this path to Servitization is not one that is very simple or happens overnight.
Sarah Nicastro: If you were to go back and listen to the episode Tim and I did, episode 70, we talked about the four forces behind Servitization. It's well worth a listen. But the reality, to set the stage for today's episode, is that I think the vast majority of our audience recognizes those four forces. They recognize the fact that this is the future, this is where we're heading, and they're at varying stages of readying themselves and progressing themselves through this continuum.
Sarah Nicastro: Today, what I want to talk about is what we expect to see next year. 2020 has been an immensely challenging year for all of us personally, professionally, and I have a deep respect for the service leaders that I talk with on a daily basis for the fortitude that they've had to show. Not only progressing forward-thinking goals like this, but dealing with a lot of very complex challenges on top of it. I certainly don't want to minimize that.
Sarah Nicastro: I think one of the things that I've taken heart in this year, one of the silver linings, if you will, of this situation is the impact that it's having on the Servitization journeys, in the sense of really spurring them forth, in my opinion. There's a number of factors that have come into play in this very challenging year that I think really have helped make some significant strides in Servitization efforts. What are your thoughts, Tim?
Tim Baines: It's really interesting to hear you speak, Sarah, because you touched on, when you were introducing the work that we do, about the contribution that an academic makes in this space. And it's very interesting, because my background's a little bit unusual within the context of a business school. I'm actually a professional engineer, I'm a chartered engineer. When we look at what research engineers do, it's very much around materials, products, functional things. Engineers are allowed to invent things, but when you look at a business school and research that's carried out inside the business school, the research inside a business school is very much based upon this world of observing the phenomena. You recognize innovation and you look at the innovation, you try and make sense of the innovation. And a lot of the research which is carried out in business schools is all about trying to make sense of the innovation.
Tim Baines: Now, the innovation that we're talking about here is this notion of Servitization. When you ask me to comment upon the innovation which is taking place inside industry, you're trying to make sense of this innovation. The academic community isn't inventing it, but they're trying to make sense of it, they're trying to clarify what is actually happening.
Tim Baines: One of the frameworks the academic community has come up with to help to understand these innovations is a change management framework, which basically says that change takes place as an interplay of the context within which the organization sits, the management process which take place inside an organization, and ultimately the outcome of the decisions that are played. The machine tool, the management processes, the business context to be all into play.
Tim Baines: What, of course, just happened massively for us over this past year is that the context has shifted. Now, the way in which we tend to think about making strategic decisions inside businesses hasn't necessarily moved. The cultural side of things hasn't shifted in terms of how we run businesses, but the context has shifted. And as a consequence there, the decisions we're making inside businesses, the actual outcome of the decisions has shifted also.
Tim Baines: When you ask me to comment, I'm sitting and I'm thinking about this context, and thinking, "What shifted about the context?" We are in this world when we're thinking about what's going around us at the moment in time. It's a bit like predicting the weather. Of course, we're sifting through the trends in the past and we're trying to reflect upon what we've seen and make predictions as to what the future might be, and of course, it's been a year of tremendous shift and change. But if you accept that a lot of the forces which are shaping industry were there anyway, what also COVID has actually done is to strip away almost the grayness of those forces. If you strip those away, I think COVID has shown us that forces which are shaping industry have almost accelerated the shift.
Tim Baines: This time last year, I wrote a blog, and I was talking about the shift, the forces. And I was saying, to me, in terms of Servitization, the forces which were shaping industry were this desire for productivity, greater outputs for the amount of inputs we're putting, this adoption of digital and accelerating the adoption of digital, and sustainability. And I was talking about environmental sustainability.
Tim Baines: Particularly if you're in Europe, the environmental sustainability agenda is really at the forefront of a lot of people's minds. Sitting where I am in the U.K., you were looking and you were saying, perhaps in the order of digital productivity and sustainability, these were the things which were coming on the agenda. These were the priorities. Now, we still have this bizarre situation where we've got this thing called Brexit, but let's not worry about that, because that'll take us in another direction together.
Tim Baines: And then you've had this year. Of course, we stripped away this grayness about what's shaping industry. And I would argue now, moving forward over this next year, of course, I think recovery and resilience are going to be the two fanfares, almost, at the forefront. But then coming right behind that is I do think the environmental sustainability agenda is going to be very high on people's list of priorities.
Tim Baines: Here's a great example of this. You very kindly helped us with the World Servitization Convention. You did a great job with that. It was excellent, thank you. But a few weeks before it, the BBC published a statement, and it was about Apple computing. The value of Apple was given to be higher than the whole of the FTSE 100. The FTSE 100 is the U.K.'s top 100 share index, and the U.K. share index was declared as having... It was full of dinosaur stocks, it was stocks like British Petroleum, Shell, all these different things. Fossil fuel-based stocks. And Apple was held up as being worth the equivalent of that.
Tim Baines: Coupled with that Apple statement, you had a statement about sustainability. And whereas in the U.K., we have this ambition of being carbon neutral by 2050. Apple was saying, "We're going to be carbon neutral by 2030, and we're going to be carbon negative by 2050." Carbon negative. And then when you look inside Apple and you look at... If you want a second example of Servitization and see how Apple have dematerialized their supply chain, and are really... The Apple iPhone, it's all based around services. The value's coming through services. And you look at that as an exemplar and you look at what's happened, you say, "Absolutely, these are going to be the trends." Industry is responding to public demand for this improvement in sustainability.
Tim Baines: When we look at it, and I take a step back, I say that my prediction, my reflections, is that the forces which will be shaping what we do over the next year will be, of course, responding, resilience, but I do believe that sustainability is going to be evermore at the forefront. And those leading businesses, those businesses which... There are really excellent examples of businesses which are leading the way there and are really making a lot of ground. Does that help, Sarah? Does that resonate with your own thoughts?
Sarah Nicastro: It does. There's a couple areas I want to dig into. You spoke about context and that the context is what has changed a lot this year, and I agree with that. I think that that shift in context... Really, if you break it down, I think that the biggest impact of that is... Like I said at the beginning, we talked on our last podcast about the four forces behind Servitization, and I think that there is a general acknowledgement of those forces and, again, I said this earlier, an awareness that this is the direction we're heading.
Sarah Nicastro: But I think that, for a variety of factors, if you were sitting in January of this year again, there's just still a lot of things that can lead to more of a resistance to really progress as quickly as is possible through that journey. There's some history and some operational things and some cultural things that were holding companies to their roots. And I think that what has happened is, particularly for anyone that was lagging a bit in getting on board this journey, the context of this year has given them a quick shove in the direction of progress.
Sarah Nicastro: And I would argue, though, that that shift in context is, I think, having a cultural impact in companies. I really do believe that... And it's probably what I'm most excited about. I think that there's been so many interviews I've done this year, where people have talked about just very quickly becoming more creative, more innovative, and more quickly adapting to, what do our customers need from us right now? And it's okay if that doesn't look like how we've historically delivered value. We need to shift, we need to pivot, we need to react quickly.
Sarah Nicastro: Companies have had to become accustomed to making far more rapid decisions than they ever have before with, arguably, more complex and quickly changing criteria than they've ever had to deal with before. The use of digital tools and technology. Again, even employees that were resistant to that have a change in thinking, because they see it as a way to persist in doing their work and having a job. I think that there's a lot of challenge to what's happened this year, but the outcome, I do think is on the company culture, and I think there's a lot of positive things that are going to come out of that.
Sarah Nicastro: I want to dig into a bit more of your specific points and some others and talk a little bit about more of those. When I think about the excitement that I have for moving forward, I think that, as we focus on that resilience and move toward recovery, these companies are doing so from such a stronger place because of the experience of this year and how both the context and the culture have changed in a way that can really move them forward in a positive way. Does that make sense?
Tim Baines: It does, Sarah. If I was to reflect upon the situation, I think businesses are at a crossroads, a t-junction crossroads. And we have this, certainly inside the U.K., where there is this... Some businesses will look at what we have been through over this last year, they will look back at what has happened in the past. And you might take this, for example, as the automotive industry. Look in the past, and then they're saying to themselves, "Okay, as soon as we can get back to the old way of doing things, as soon as we can get back to the past, then that's great. We've got to try and move back towards there, we've got to get people back into their offices, we've got to focus on production, get the product out there, get the shops open, et cetera." That's the whole business model Henry Ford made so successful, and was absolutely right for that context. It's not a critique of the business model; it's a critique of the fit of the business model with the context.
Tim Baines: And then you've got the second one that says, "Okay, well, we've come from here, but we're in a situation where we found our people were actually quite ready to change. We're finding that the people are becoming more sensitive. What we have been through over the past year has forced us to make redundancies. We've stripped away people inside the organization." Invariably, these perhaps are people who have been with the organization longer term, or perhaps were custodians of the old business model. Some organizations say, "Well, let's see and move forward with this."
Tim Baines: I'll be honest. The reality is, I am sure that the future direction will be a compromise of both, and that's fine. But there are so many exciting opportunities, to my mind, of embracing what these forces which COVID has made so apparent to us, embracing those through Servitization and advanced services, really capitalizing upon it. So many exciting opportunities.
Tim Baines: To your point initially, Sarah, I am mindful that there's a lot of people who are senior positions inside services businesses who've had a terrible time dealing with what we've been through and having to make the best of it. You and I today, we're talking and we have this very privileged position to be allowed to talk freely about these things without this legacy of having to bring the whole organization with us. That's our responsibility, is to talk a little bit about some of what the future might hold.
Tim Baines: The opportunities, to my mind, are absolutely phenomenal. Let's take some examples. If we take what's happened in terms of these forces which are shaping industry, and we talk about the market pull and the technology push, the market pull has shifted. Go back to the environmental one. If you look at the environmental context, which COVID has made a more apparent to people... In the U.K. particularly, people are spending more time at home, they're spending more time at the gardens, they're looking around them and they're seeing what's happening. They're more aware of their environment, and they're saying, "Hey, we like this. We want to spend more time with this environment, we want to care with it more."
Tim Baines: The environmental pull is becoming more apparent, so how can industry respond to it? Well, you've got all the technology which is required to be put in place and got out there, that manufacturing can provide and get into the marketplace. There are services upon services, whether it's heat pump technology, whether it's hydrogen for house heating, whether it's shift in mobility, all these different technologies which can be got out there through advanced services.
Tim Baines: And then we look at another area. Food has become more of an issue. We live on an island. The food supply, et cetera. Again, advanced services, looking at food, looking at this whole sector, how it can provide a more resilient supply chain, how we can get new technologies, how we can get robots out there. Again, through advanced services. That's another exciting opportunity. And we see the same service here in what I might call assisted living. People living independently and promoting that, without the need to jump in the car and go somewhere. All these different sectors, the opportunities are becoming so exciting for these innovations that we're talking about.
Tim Baines: Really, the biggest challenge, I would say, to a lot of people for this next year, the one challenge is, have you got the vision to actually exploit those things? Can you get the vision there? Or are you going to push this away? Are we going to try and regress? Or have you got the vision for imaging, for thinking about it in manufacturing industry, beyond the idea of producing, consuming, and just dumping it? That's the challenge to my mind.
Sarah Nicastro: Mm-hmm (affirmative). Maybe the conversations I'm having are just a really good sample, but I think that the vast majority of service leaders are really focused on harnessing this momentum and caring forward. I'm not talking to a lot of people that are intent to go back to the way it was.
Sarah Nicastro: I want to dig into a couple specific areas and talk about how the challenges of this year are really going to have a positive impact once we've progressed through them. The one is, we've seen an increased uptake of an openness to technology this year. Obviously, companies have, in parallel, been on their digital transformation journeys. There're still laggards and leaders. I think anything related to innovation, when things are going well, it's easy to deprioritize the need to evolve if you're in a good spot. This year, we've seen companies that have either rapidly expanded their use of technology to persist with business, or have quickly looked to get up to speed in that area. When we think about an increased use of an openness to how technology can play a role in these operations, how do you think that will impact Servitization progress in 2021 and moving forward?
Tim Baines: Okay. If I may, Sarah, I'll just comment very briefly upon what you just said about the service leaders you've interviewed. I would say the same. I very much endorse that, that these service leaders... And maybe it's because people inside of services are naturally more intimate with customers, so they are seeing these trends.
Tim Baines: However, when we think about Servitization inside the context of a broader firm, one of the big inhibitors of progress has always been almost the cultural change, the legacy of the production that's sitting behind. Of course, for the organization to shift, it requires that production environment. When I talk about people who perhaps not embracing the new business models with perhaps as much enthusiasm as you and I are, it's because I am reflecting also upon this traditional legacy lots of organizations have had. But it's really reassuring to hear that the people you've been interviewing are being consistent with ourselves. We're not just a bunch of crazy academics talking about what the future might like.
Tim Baines: Let's talk about digital. If you ask me about the innovations which are likely to have the biggest impact upon manufacturing businesses moving into services, I wouldn't put digital in the top two. I would put the two innovations which I think are most exciting at the moment in time. One is what we've already spoke about, which is the cultural change. I think there's an awful lot to be done there about vision and empowerment and really grasping the opportunity. I think the second opportunity innovation is financial innovations.
Tim Baines: That is not to say that I don't believe that digital has got tremendous opportunity to accelerate. I think that what we're talking about is the confluence of digital, financial, cultural. We're sitting at the center of these three, and we're enabling an acceleration into a new way of doing business which wasn't there previously. Whether it's artificial intelligence, whether it's remote monitoring, whether it's big data, whether it's blockchain. Those are fantastic innovations and they're really enabling what's going on, but the thing which has really come to my attention recently is the financial innovations, because it's the financial innovations which, I think, we need also.
Sarah Nicastro: Tell us more about that.
Tim Baines: Okay. The background to this is, 18 months ago, I went to a conference which was an asset financing conference. It was a big event, it was held in London, and I spoke about Servitization. And I was really surprised to hear about all these financial institutions who were talking about Servitization. We'd never come across this community before. What they're talking about is things that you would be familiar with, Sarah. It starts with subscription charging, which we're familiar with. But then it moves into conversations about asset financing, partnering with a manufacturer. It moves into conversations about ownership, moves into conversations about contracting.
Tim Baines: It's complicated, and I'll be honest. If anybody's listening to this podcast who is from the financial community, please forgive me when I say this. But their understanding of the concept of Servitization is inconsistent with the popular understanding of the concept of Servitization, as is held by the broader scholarly community that looks at it. They're looking at Servitization from an innovation... It's almost what I would call the mechanism for revenue capture. When we talk about Servitization, we're talking about how you're bundling the service offerings together to build a bigger customer value proposition. Basically, this is all about, to me, the shift to an outcome-based society. The subscription charging can go hand-in-hand with that, but it's slightly different things.
Tim Baines: Let's take a practical example. A couple of examples, if I may. I think I spoke about this last time. In the U.K., fossil fuel heating on new-build properties, 2025, you're not going to be allowed to have it. Even retrofitting, fossil fuel heating has been challenged at the moment in time. The alternative technology is technology like heat pump technology. It's expensive, so how do you get that new technology into it? How do you actually get somebody like you and I... If we went out and bought a fossil fuel heating system, it might cost us $2,000. The heat pump system for a house or equivalent property might cost us $20,000. How do we do it? Well, we obviously need financing. And if that financing can be bundled together in terms of a subscription charging, where we don't feel the pain as a big lump investment, but rather, the pain is spread out over multiple, maybe five-year contract. Then, we're going to feel more ready acceptance of the technology.
Tim Baines: We shift and take something alternative. You take food production. In the U.K., aging population, you got food production. A lot of the farmland in the U.K. is held over to dairy. And then as you start to move over from dairy, as people's... We're having a growth in people moving to being vegetarians, being vegan, et cetera. Concerns about climate change. There's pressure on dairy farming, and there's a request to actually exploit the land in different ways, but exploiting the land in different ways requires new technologies to get in there. You start to talk about autonomous vehicles and robots and such like. How are you going to make that happen? Again, you want to shift to an outcome-based contract, and financing can enable that. It's on subscription-based charging with really intelligent ways in which you're financing the asset.
Tim Baines: It's our service world, and it's our move to these advanced services, this outcome-based world, where we're buying the outcomes. But it's the bundling between the cultural organization to offer the services that the product enables, coupled with the technologies which help us to monitor how the product is used and build up intelligence, coupled with the financing which gets those innovations into the marketplace as quickly as we can.
Sarah Nicastro: Yeah. That makes sense.
Tim Baines: Sorry, Sarah. I've gone off into complete tangent there, but hopefully it's relevant.
Sarah Nicastro: No, that makes sense. This is in line with... Historically, one of the challenges that I hear a lot from people, and this is a combination of different factors, but people saying, "How do we bring our customers on board this journey?" While there is a market pull, there's also the real shift in terms of... Now, we're moving from delivering products to delivering service. What does that look like? How does all of that work?
Sarah Nicastro: One of the things I've heard a lot this year echoes what you just said. If you think about a manufacturer of really large equipment, obviously if people are looking to avoid CapEx expenditures and move toward more OpEx options, then they're looking for more of that financial innovation. How do we do this differently? How do we bundle these things together? How do we achieve the outcome we need in a way that looks different than that purchase or revenue model did in the past? That makes sense.
Sarah Nicastro: Generally, again, going back to the positive implications here, I think that the need to get creative this year is breaking down some of the barriers in communication between companies and customers to have discussions around what different models might work. What does this look like in reality? And I think that, again, that's something that will propel companies forth, because rather than avoiding those conversations or struggling through those conversations, they're coming together in a time of need to find outcomes that are mutually beneficial to both parties in a way that hopefully makes progress these folks can build upon. Does that make sense?
Tim Baines: It absolutely does. And this is tough, isn't it? We're asking of ourselves to envision a future which is different to the past. And just like when you started this conversation, you were saying what's our predictions for next year, we're making those predictions by looking at the past and teasing out which we can conclude factors, and we're being effective by our own assumption and prejudices.
Tim Baines: If you can, when you move to our world of these advanced services and you start to think about the opportunities which have been opened up and are opened up by this combination of this digital, this cultural shift to these outcome-based contracts, digital, shift to outcome-based contracts then the financing, they take you home. I'm fortunate enough to have a sensible office in my own home, et cetera, but an awful lot of people were shifted from being based inside the factory or inside the office block, and they now work from home.
Tim Baines: And then you look at it and you're saying, "Okay, well, what do you need to work from home?" And you think about the computers, you think about the printing technologies, you think about your desk, et cetera. How are we expecting people to go out and buy this? Actually, the old model is, go and buy it. The model that we really want is, the outcome I want is a work environment that I can be productive within, that's got all my technologies. It's safe, it's ergonomically sound, et cetera. What a fantastic opportunity for an outcome-based contract.
Tim Baines: It's not about a big asset. It's about that shift, enabling this outcome where I can be productive in my own workspace. And for that to happen, of course, requires the technology, but it requires the digital. I've got a printer over there. If my printer doesn't work, I need somebody to ring me up and tell me how to fix it. I don't want to go into YouTube and have to sift through all the various presentations how to fix my HP printer. I want it fixed, and I want financing in a way which I can afford it. I just want these outcomes.
Tim Baines: This goes back to your initial point about, what does the future look like? Look at this fantastic opportunity for the home working environment. Physical fitness, everybody's saying... In the U.K., we had a big run on people buying bikes and fitness equipment, et cetera. You want this gym at home, you want the outcome of being able to exercise at home. All these different things, all these opportunities.
Tim Baines: The big challenge for us, in my mind, is, is it envisaged that this is forthcoming, or this forthcoming? This is how the future could really look if we really exploited what is happening. The digital, finance, and the shift towards an outcome-based economy.
Sarah Nicastro: Mm-hmm (affirmative). Yeah. We had Peloton on the podcast earlier this year, and boy, are they one that has... The challenges they have are opposite of many of the companies we're speaking with, because their demand has just been through the roof, and it's been immense growth.
Sarah Nicastro: It is a good point. The opportunity here to innovate is not limited to manufacturers of huge equipment. We've talked with service companies that... Again, it's about listening to the needs of the customer and adapting quickly. We've had a lot of different examples of organizations that have just paid very close attention to the outcome desired in January and how that differed to the outcome desired in March of April, and they just moved quickly to be able to meet those needs.
Sarah Nicastro: I think, again, the thing I love about this is it's forcing these companies to flex these muscles of openness and creativity and innovation. As they're doing that by force, they're learning that they're capable, and that the opportunity to continue doing that is immense. That, I guess, is what really excites me about the way that the challenges of this year, I think, are going to pay off immensely in 2021 and beyond. It's really interesting to think about some of the ways that we'll see this come to fruition as we move along.
Tim Baines: Sarah, I... Sorry.
Sarah Nicastro: Yeah, go ahead, Tim.
Tim Baines: No, I was just going to... And your point about the threat side of things is interesting. One of the businesses we work with looks at assisted living inside your home, particularly for disabled or elderly people. They're very conscious of how the technology providers... We saw it this week with Amazon declaring that they're offering the capability to monitor machine tools and report on machine tools' performance. How do you compete against somebody like that? Well, you don't take them head-on in terms of the product. You do something that they can't do. And what they can't do is that services package. We're not talking about just good delivery. We're talking about that services package of assuring somebody can live safely inside their own home.
Tim Baines: Even if you're traditionally rooted in production and products, and you're looking at the future from... Not just the threats of COVID, but what else? For example, what technology vendors are doing, how they might move into your space. Customer intimacy that's demanded to be successful with services, particularly advanced services, is such that it builds that resilience. And it's resilience not just to pandemic, but it's resilience against the technology vendors. And that's good for us. None of us want to live in a world where everything's dominated by one particular business. It's healthy for people to have choice, and that's what services enables. It's a much more resilient business model.
Tim Baines: I should just say, we're certainly fine in the U.K., you have to be careful. Organizations such as Rolls-Royce have been hit very badly. When you look at something like Rolls-Royce, there has been an ambassador for the more advanced services, certainly over the past 10 years. It's very easy to look at them and say, "Oh, is that a reflection upon the service-based business model?" If that is a reflection on the sector... The whole sector of air travel has been so badly hit. Sectoral factors will always play into this, but nevertheless, the level of the individual business, services give resilience. Services provide the platform to respond, to recover, to get innovation out there, and sustainability.
Tim Baines: Big challenge to me, though, is whether organizations and politicians can actually envisage that, can buy into the vision, can see the vision, can understand that this is not about... So many opportunities have been opened up by this pandemic, and let's embrace them.
Sarah Nicastro: Mm-hmm (affirmative). Absolutely. All right, Tim. We've talked about the context and how that's shifted. We've talked about culture, we've talked about financial models, we've talked about sustainability. Any other thoughts? Any other thoughts or words of wisdom to folks as we wrap up 2020 and move into the new year?
Tim Baines: I think one of the challenges, Sarah, is for anybody that is spectating and looking to what's happened, there's a myriad of spectators, et cetera. The only thing I would say is look at the evidence. When we go back and you look at the Apple example that I spoke about shortly, there was evidence of a response and a potential trajectory. And then look at the evidence of other organizations, look at the evidence of data coming out of the World Bank in terms of where gross domestic product is generated, and the fact that services supersedes products and production.
Tim Baines: Look at the evidence, and the classic ways you know to look at the evidence is to find it, recognize what you believe in, form what we call the null hypothesis, which is the opposite view, and go out to prove the opposite view. And when you can't prove the opposite view, then there may well be some truth in the view that you want to believe. And I think if you go out there and you look at the evidence, then you can make your own mind up. I think it's extremely difficult to argue against the adoption of Servitization. That will be my finishing... I can't find the arguments against it.
Sarah Nicastro: I agree 100%. Again, in a year fraught with difficulty, I think we, as individuals and as a community, need to look for, what are the positives? And again, to me, the conversations I've had around... From company to company and individual to individual, how this has opened eyes and created more open-mindedness and spurred more innovation and creativity and agility, it's really heartening to see. And I think that, while we probably all would wish this situation away if we could, it's something that I think is really going to create a lasting positive impact for a lot of these organizations in terms of their ability to be resilient and to persevere and to think differently than they have historically.
Sarah Nicastro: I'm personally really excited to see what 2021 will bring, and certainly hoping it's an easier year for everyone than 2020 has been. But I appreciate you coming and sharing your thoughts and insights, and I know that we'll look forward to having you back next year to discuss how things are going and what we're seeing in terms of these predictions becoming reality.
Tim Baines: Thank you, Sarah. I very much enjoyed today's conversation, and I look forward to speaking to you again on this.
Sarah Nicastro: Me too, Tim. Thank you.
Sarah Nicastro: For those of you that haven't listened to episode 70, go back to futureoffieldservice.com and take a look for that. It's a great discussion. You can also find us on LinkedIn as well as Twitter @TheFutureofFS. The Future of Field Service podcast is published in partnership with IFS. You can learn more about IFS Service Management by visiting www.ifs.com. As always, thank you for listening.