A Cambridge University initiative is revolutionising the business model for manufacturing and boosting the industry’s impact on economic growth.

The Cambridge Service Alliance is preaching value-add service provision that leverages innovation and technology to solve long-term headaches for customers rather than purely hitting production targets.

Professor Andy Neely, who is spearheading the initiative from the UK, said the global collaborative movement was picking up huge momentum as more partners engaged.

The Alliance was founded by the University in 2010 in conjunction with BAE Systems and IBM, with Caterpillar Inc. joining as an industrial member in 2011.

Two new collaborators are set to come on board, Professor Neely revealed in an exclusive interview with Business Weekly.

The Alliance was established to help companies gain competitive advantage by addressing the challenges they face in designing and delivering tomorrow’s high performance complex services.

Such complex services refer to the infrastructure that underpins the delivery and support of many products and services, often hidden from the end user.

Many of these services are delivered through networks of collaborating organisations. iTunes, for example, is easy to use, but depends on a sophisticated and complex infrastructure of suppliers and intermediaries.

Services are of critical importance to national economies. They now account for 75 per cent of the labour force in the US and the UK and more than 50 per cent in Brazil, Russia, Japan and Germany.

The dramatic growth of services is also changing the nature of organisations. This transition can be extremely beneficial, securing an organisation’s competitive position, offering long-term stable revenues and opening up new market opportunities.

By combining research and education, the Alliance explores future business models, service & support engineering, and performance and information management.

The Alliance develops and delivers tools, education and insights needed for complex services. Research underpins this, bringing together leading academic researchers and expert industrial practitioners.

Academically, the Alliance unites some of world's leading scholars working on the design and delivery of complex service solutions. Academic leadership at Cambridge is provided by a core group sourced from the Institute for Manufacturing. This group combines its expertise in the servitisation of high value manufacturing with the University of Cambridge Judge Business School's know-how in improving business models across a range of industries.

From a business perspective, the Alliance combines BAE Systems’ world leading experience in the aerospace and defence sector with IBM’s leading role in providing services in a range of industries and Caterpillar’s industrial expertise.

Professor Neely said: “This unique network of academics and business organisations tackles some of the pressing challenges facing organisations today. Innovation in service business models, underpinned by technology and enhanced organisational capability are central to the future success of many sectors.

“Uniting the world’s best organisations will help us progress faster innovative solutions to the challenges of designing and delivering high performance complex services.”

Professor Neely said that even China – hotspot of cheap, high volume manufacturing, had recognised the power of the proposition. Sixty per cent of US manufacturers had turned to service enhancement rather than pure product-driven solutions and China had gone from less than one per cent following the model to 20 per cent and rising.

Manufacturing companies were starting to realise that it was a long way from unleashing the full power of its proposition, said Professor Neely. “We are not just talking about heavy engineering. The model embraces the entire culture of service provision – what your customers want from you. This even involves assets.

“Train companies want to ensure they get passengers from station to station and concentrate on running to schedule. They don’t necessarily want to own the rolling stock you make for them.

“This takes you beyond pure manufacture and into service provision and there are many such examples in aerospace, transport and other industries. The challenge for manufacturing companies is to innovate around that service provision.”

Professor Neely said manufacturing businesses in a lot of countries were unable to compete on cost so had to compete on value-added, being innovative with solutions that helped customers become more productive or profitable.

He cited the example of a company that repaired potholes in the road for a local council. The company was asked if it wanted to bid for a new service contract for refuse collection and recognised an opportunity.

It put cameras on the refuse trucks and while they were driving around the county were able to photograph the roads and look for signs of cracks and predict which were likely to turn into potholes.

The company was able to argue that it could repair the cracks before they became potholes and save the council a lot of money. That proactive innovation and good service had the bonus of strengthening the long-term relationship between the organisations.

Organisations interested in embracing the concept can learn more by attending the Alliance’s one-day conference, ‘Big data: An innovation opportunity for complex services?’ at the Moller Centre, Cambridge on Tuesday, September 18.

Speakers include Google Enterprise, the Cabinet Office and the University of Cambridge. For more details visit: http://2012serviceweek.eventbrite.com