Let the record show that I"m no fan of the iPod®. My wife got one two years ago, and upon downloading the iTunes® media player program and going through setup, the dang thing prompted us to register at the iTunes Store andwait for itinsert a credit card number.
What?
We just shelled out money for this gadget, which cost more than most comparable brands, and now it wants us to set up an iTunes account so we can spend more money? We"re frugal (we still haven"t set up the iTunes account), but the story does show why Apple"s been a Wall Street darling in recent years. It can make money not only making computers and software (though much of the hardware is outsourced to Asia), but also selling services, which has the advantage of high margins and steady income: The company sells an iPod to a consumer once, but those music download fees keep coming. Judging by its market performance in recent years (excluding recent weeks), Apple"s apparently on to something.
And judging by a report in this week"s Economist, Rolls-Royce is on to something too. The article states that the company has deliberately blurred the lines between making things and offering services. The report goes on to explain that not only does the jet engine manufacturer make engines, it also sells services by monitoring and maintaining the units throughout their life cycle. The company installs engine sensors that, when a certain technical glitch occurs, immediately send signals back to Rolls-Royce technical experts, who then get busy engineering a solution.
I think it"s a good idea for any product that needs maintenance. (In fact, iTunes account holders feel they need to maintain their music collection; I"m just not one of them. I"m one of those people who still likes buying CDs, for some weird reason.) Rolls-Royce"s monitoring and maintenance make especially good sense because, the theory goes, those who make it may best know how to maintain it. As The Economist put it, It is sometimes necessary to be good at making things to sell the services connected with them. At Rolls-Royce, it is difficult to see where one begins and the other ends.
Such services aren"t new to manufacturing. Other manufacturers offer real-time monitoring similar to Rolls-Royce"s technology. SKF, for instance, offers real-time monitoring of its motors used on wind farms in far-out places.
Thinking back to my shop visits in recent years, I see two kinds of fabricators flourishing in the years to come: Companies that adopt automation, and those that rely on manual, high-touch processes (certain welding operations, for instance). Both kinds of shops will need talent; automated shops need skilled technicians to integrate, set up, and operate the equipment; manual shops will employ those with the hands-on skill needed to tackle work that can"t be automated cost-effectively.
Regardless of what their shop floor looks likeautomated or manualmetal fabricators in the future may expand their services to form deeper partnerships with their customers. They"ll get involved earlier in the design process and offer not just design-for-manufacturability services, but full-blown product design programs as well. The partnerships may continue throughout the product life cycle. If a fabricated element goes awry in-service, who better to talk to than the contracted fabricator who made the product?
As The Economist aptly concluded, The success of Rolls-Royce suggests that the world will not be neatly divided into firms (or countries) that make things and those that sell services. Flying high depends on being able to do both.
About the Author: Tim Heston
