MIT Sloan Management Review

Corporate Strategy

 

Charting a Path Toward Integrated Solutions

By Andrew Davies, Tim Brady and Michael Hobday

April 1, 2006

For manufacturers and service companies alike, the ability to sell integrated solutions requires completely new organizational structures and capabilities.

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Some of the world’s leading companies IBM, General Electric, Rolls-Royce, Ericsson, and EDS among them — now compete by providing integrated solutions rather than making stand-alone products or selling services.1

Suppliers of products as diverse as information technology systems, trains, aircraft engines and telecom systems have achieved success with this approach by providing innovative combinations of technology, products and services as high-value unified responses to their business customers’ needs.2 For example, Rolls-Royce plc competes by providing airlines with “Power By The Hour” — selling the jet engines along with the services to maintain, repair and upgrade them over many years. And providers of services such as IT, telecom network management and technical consultancy now compete by offering solutions that incorporate products from a few select manufacturers. Electronic Data Systems Corp., the global IT service provider, has built the capabilities to manage and integrate different suppliers’ technologies and products as part of its business outsourcing solutions.

The shift has been underway since the early 1990s. Looking just at the manufacturing side, a growing number of manufacturers have begun providing services to finance, operate, maintain and upgrade an installed base of products — their own and, increasingly, those of other manufacturers. Services are attractive because they provide continuous revenue streams, have higher profit margins and require fewer assets than manufacturing. By... To read the complete article, login or sign-up using the form below.

 
 

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