Looking at 2014 reports of nine Finnish “big companies focusing on industrial products and services”, as listed in the Helsinki stock exchange, ie Cargotec, Huhtamäki, Kone, Konecranes, Metso, Outotec, Valmet, Wärtsilä and YIT, there is a positive and interesting development of what services business bring to the companies´ overall strategy and future outlook.
Services business is not systematically reported by all
companies in their financial statements, yet clear development and focus of
services business is found. For example, Konecranes splits its business clearly
in two areas: equipment and services, and reports 2014 services as maintenance
and modernizations business, with a 0,7% improvement from previous year. Metso
reports services as part of their annual net sales and gives a share of 55% of
last year total turnover, increase from previous year though down from record
results in 2012. Outotec reports a 9% increase in its service business of net
sales in 2014 (including comparable currency fluctuations) and continues to
have higher share of services of its net sales.
Based on the financial information, it seems that services
business may account for approximately 23-55% of these companies´ total net
sales, yet in some cases the profitability of the services business may be
better than that of equipment sales. I do not see any of the companies taking
steps to fully servicizing the business, à la former IBM, ie equipment still seems
to be a strong foothold of any industrial company today, though services is
clearly giving a buffer to possibly weaker equipment sales.
Where is the future focus of these companies in regards to
their services? According to financial reports and CEO overviews, it looks like
there is a lot of expectation on growth. And how do the companies plan to grow
their services business? Several companies are heavily focusing on future
trends like industrial internet and mobility (Wärtsilä, Cargotec, Valmet). Almost
all companies have mentions or a full strategy focusing on improved customer
understanding. Huhtamäki talks about “increased sharing of customer know-how
and knowledge”, and “…focus on higher consistency in managing customer
interfaces”. Kone discusses “understanding customer needs, refining promise and
offering…”, “…better use of data (eg remote monitoring) …optimizing maintenance
schedules, routes, tasks…” and in general focusing on increased share of
planned maintenance and repairs ie looking into better productivity. Konecranes,
too, talks about improved focus on customer understanding and even a member of a
senior management team is responsible for “Customer experience and service
offering”. Some companies are linking the customer performance targets to sustainability,
like Valmet, who is clearly listing “customer sustainability needs”.
The market continues being challenging for all companies.
This puts additional pressure in sharpening the strategies and considering key
values to customers. Metso strategy summarizes well targets of more or less any
industrial company in Finland today: “…we are focusing on being close to
customers, listening to their needs, renewing our offering to meet their
changing needs…”
And my learning of the quick analysis? Finnish industrial
companies have built their foundation on products, but services business is
there to stay, and helps companies grow. Finnish companies are learning how to
better understand customer needs and serve them, improving their services
offering, and providing efficiency or even business improvements. This requires
learning, customer focus and new commercial competences, complementing
technical and engineering skills. There is a new demand also in company
management, looking holistically across trends, even on the consumer side, to
learn about how digitalization and data changes our way of working and provides
more predictability and opportunities.
