"Servitization" Malcolm Yull, Cargotec presentation at Aftermarket Business Platform 2012. More information www.aftermarketeurope.com

2. This presentation will cover
•Why parts & service are not enough for the changing marketplace and why companies must focus on customer solutions
•Why thinking about a complete customer solution will secure improved customer satisfaction and protect and grow future revenues and profits for your business
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3. How to make this presentation a success
•The presentation is intended to create triggers for the audience
•Its not going to answer all of your questions, however it is an honest view of what we think of the future direction of Aftermarket
•Ask the difficult questions, challenge our thinking
•Success for me will be if companies want to collaborate with us to find new ways of improving the end to end solution for our customers
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4. Malcolm Youll Bio.
•Malcolm is an experienced international executive who has successfully operated within leading manufacturing and engineering companies to deliver increased revenues and profits across a variety of industries. Pragmatic in approach, he delivers results ahead of targets; using best in class methodologies, processes and systems to deliver unrivalled financial returns and customer service.
•Malcolm earned an MSc in Manufacturing, Management & Technology and has attended MIT Driving Strategic Innovation and the Lausanne Leadership Program at IMD (International Institute for Management Development) - Business Programs
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5. •Cargotec improves the efficiency of cargo flows by offering handling systems and related services for the loading and unloading of goods.
•Cargotec’s Hiab, Kalmar and MacGregor solutions serve customers wherever cargo is on the move
•Sales 2011: EUR 3,1 billion
•Approximately 10,500 employees
•Class B shares are quoted on the NASDAQ OMX Helsinki
Cargotec in brief

6. SERVICES
AMER
APAC
EMEA
MARINE
TERMINALS
President and CEO
LOAD HANDLING
CFO
CTO
HR & Communications
COO
Cargotec Organisation

7. Services organisation
Services
Finance
HR
HCO
CRA
ROR
OFS
BLK
Parts &
Logistics
Services
Development
M. Youll*
Projects & Contracts
Marine Service Operations
Communications
Executive
Assistance
Merchant
Ships Service
Offshore Service
Terminal
Service
Load Handling Service
Regions
EMEA
APAC
AMER

8. How our journey began?
Timeline
Today
Level of sophistication
Invoiced business
Benefits of solution
04UK0360X008_r&dworkshopfindings.pptx
Source:
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9. Judge Business School
© 2012 Cambridge Service Alliance www.cambridgeservicealliance.org
Background Data:
The Global Shift to Services

10. The shift to services is happening globally
© 2012 Cambridge Service Alliance www.cambridgeservicealliance.org

11. Reasons for the shift to services
Strategic rationale
Environmental rationale
Economic rationale
1.Manufacturing firms in developed economies cannot compete on the basis of cost (technological developments are enabling them to add innovative services)…
2.The installed base argument (e.g. for every new car sold there are already 13 in operation, 15 to 1 for civil aircraft and 22 to 1 for trains)…
3.Stability of revenues – services vs. products…
1.Environmental rationale (change notions of ownership and resource use – e.g. Mobility cars)…
1.Lock in customers (sell the original equipment at cost, make money on spares & suppliers - razor, printers)…
2.Lock out competitors…
3.Increase the level of differentiation (e.g. equipment provider offers to take customer’s risk and give predictable maintenance costs)…
4.Customers demand it (e.g. contracting for capability)…
© 2012 Cambridge Service Alliance www.cambridgeservicealliance.org

12. The shift to services involves change and business model innovation
How do firms innovate their business models in this world of service?
© 2012 Cambridge Service Alliance www.cambridgeservicealliance.org

13. Making the business model innovation requires nine capabilities…
ECOSYSTEM
VALUE PROPOSITION
Understand client’s BM
Demonstrate delivery skills
ACCOUNTABILITY SPREAD
Collect data to quantify risk (data resources)
Price risk to client and manage risk with partners
PERFORMANCE (PROFITS & GROWTH)
SUSTAINABILITY
Demonstrate value
VALUE DELIVERY
Identify partners and design governance
Coordinate multi- party value delivery
Design value content and structure
Understand sources
of risk associated
with BMI
© 2012 Cambridge Service Alliance www.cambridgeservicealliance.org

14. Cargotec has built a strong foundation
Advisory
focused
Aftermarket
focused
Product
focused
Product & parts
Solution
At point of sale
Through life
When is value realised?
Where does the value lie?
Outcome focused
Cargotec Insight is an Advisory Service that allows you to create and capture value through consultancy, while identifying opportunities for…
CMI, Uptime and Training and Development

15. Servitization within Cargotec - Asset Management Excellence

16. The move to servitization
Timeline
Today
Level of sophistication
Invoiced business
Benefits of solution
04UK0360X008_r&dworkshopfindings.pptx
Source: Neely, The Servitization of Manufacturing: An Analysis of Global Trends, Cambridge, 2009
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17. We agree where we want to go
Timeline
Today
Servitization
Level of sophistication
Invoiced business
"Need based neutralisation"
Value creation through lower risk
Benefits of solution
04UK0360X008_r&dworkshopfindings.pptx
Source:
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18. Asset management excellence is the first step
Approval point for todays meeting
Timeline
Today
Asset management excellence
Servitization
Level of sophistication
Invoiced business
"Cost reduction"
"Need based neutralisation"
Cost savings
Value creation through lower risk
Benefits of solution
Source:
04UK0360X008_r&dworkshopfindings.pptx
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Two further strategic projects will be required to fulfil Value creation in respect of Servitization, within Cargotec

19. Assets means Cargotec equipment in this context
The management of assets essentially means Cargotec type of equipment (i.e. Cargotec & competitors).
Asset Lifecycle
Traditional Asset Classes
Asset
Strategy
Plan
Evaluate and Design
Create /
Procure
Operate
Maintain
Modify
Dispose
Real Estate and Facilities
Land, Offices, Warehouses, Retail Space, Schools, Hospitals, Airports
Machines and equipment of Cargotec
Plant and Production
Mining, Textile, Chemical, Petroleum, Electronics, Food, Life Sciences
Transportation and Fleet
Military, Airlines, Trucking, Shipping, Railroad, Public Transportation
Infrastructure
Railways, Electric / Gas Distribution, Highways, Telecom, Water
IT Equipment and Network
PCs, Networks, Routers, Applications, Auto Discovery, Service Desk
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20. The direction we are following….
“Offer solutions which add value to customers processes“
Servitization is the innovation of organisation's capabilities and processes to better create mutual value through a shift from selling product to selling Product-Service Systems.
A Product-Service System is an integrated product and service offering that delivers value in use.
A Servitized Organisation designs, builds and delivers an integrated product and service offering that delivers value in use.
What is servitization?
04UK0360X008_r&dworkshopfindings.pptx
Source: Neely, The Servitization of Manufacturing: An Analysis of Global Trends, Cambridge, 2009
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21. Market landscape: there is an accelerating trend towards predictive/preventative maintenance
New and Emerging EAM (Enterprise Asset Management) Functions Question: What are your plans for new EAM functions?
Source: “Survey Results for EAM Systems: Current practices and future plans”, Ralph Rio, ARC Advisory Group, April 2011, n=117 (respondents with manufacturing, technology, engineering and corporate executive roles)
Based on planned EAM functions, customers are moving towards predictive maintenance. In 3 years time 84% will have predictive maintenance as an EAM function
Additional Market Survey Results
Predictive Maintenance
Asset Info Master Data Management
Warranty Management
Training & Certification Tracking
Mobility Software
Analytics or Data Mining
RFID Asset Serialization
Cloud Computing
36%
35%
34%
21%
14%
14%
14%
8%
17%
12%
15%
15%
17%
8%
6%
6%
31%
30%
20%
21%
44%
32%
29%
18%
84%
77%
68%
56%
74%
53%
49%
32%
Have Now
2011 Budget
In 3 years
EAM Functions – Existing and Planned
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22. UPTIME: a unifying theme and solution…
…not "new" but an umbrella to bring together internal and external best practices to meet our customers' service needs in a systematic and profitable manner.
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23. Predictive Maintenance and Condition Monitoring
Optimised Maintenance Strategy

24. Integrated Systems providing real time Information
Control
Predictive Maintenance
Intelligence
Advanced Data Mining
Command
Global View
Communicate
Advanced Planning

25. Concluding thoughts
•Aftermarket “Solutions” is the future. Invest time in understanding Servitization; I am happy to facilitate this workshop if there are 4-6 companies interested
•Recognise the value you provide within your own organisation and start to build support to have a solutions based company rather than a product based company
•Understand your starting point and what you already have an “Umbrella approach” is often the safest way to make progress within an established business
•Be realistic over time and investment
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26. Malcolm Youll – Vice President Services Development
Q&A’s
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Malcolm Youll