UK firms miss revenue opportunity

31 May 2012

LONDON: Many UK brand owners are missing out on potential growth opportunities by failing to diversify and provide services alongside their core products, experts suggest.

Barclays, the banking group, has released figures stating less than 30% of major UK manufacturers offer services as well as goods, falling considerably behind the 55% score posted by their US peers.

Xerox is one organisation demonstrating how such a policy can pay dividends by moving beyond hardware sales to help clients manage all their printing needs at scale.

A particular outcome of this shift in approach was that customers bought fewer Xerox machines, with some big firms cutting the number of devices they utilised from 50,000 to 22,000. Furthermore, Xerox often has to work with appliances made by its rivals.

"That was counter-intuitive for a business built on selling more and more products," Andy Jones, a director at Xerox Europe, told the Financial Times. "That was a difficult internal transition. But you have to change your mindset and start thinking about the long-term opportunity."

"Everything is different. The business model, the financial measurement of performance, the levers you use to control the business, the way risk is shared in contracts."

Rolls Royce, the industrial conglomerate, now yields over half of its sales from services. As an example, it not only builds aircraft engines, but has begun renting them to air carriers in tandem with the "Total Care" maintenance support scheme.

Elsewhere, Spectris, which makes precision instruments, also monitors noise levels at Heathrow Airport, and from building projects for the Crossrail public transport network in London.

Stephen Bird, the chief executive of Vitec Group, an equipment provider to the broadcast, entertainment and photographic sectors, as well the military, argued dynamic leadership was crucial here.

"Manufacturing companies are often run by people with an engineering background who are brilliant at designing products, but don't necessarily have the skills to look at the broader model," he said.

MAN, the truck manufacturer, also offers a range of fleet management services. However, Des Evans, its UK chief executive, sounded a note of caution.

"If you look at what has happened in trucking: ERS, Ford, Foden - they focused too much on the product and not enough on the service. And as a result, they're out of the game," he said. "[But] if you get it wrong and deliver a bad service, you're toast."

Data sourced from Financial Times; additional content by Warc staff