Creating and measuring value: Alternative operations and maintenance business models

ShaunWest

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JC

Creatingandmeasuringvalue:Alternativeoperationsandmaintenancebusinessmodels

TheFutureofGasTurbineTechnology,ETN’s8thInternationalGasTurbineConference,12-13October2016,Brussels,Belgium

ShaunWestIServiceInnovation

IntroductionTheproblemandthepurposeofthispresentation

…toprovidesomeinsightintosituationswhendifferentmodelscouldbeapplicable

Byexaminingusecasesfortheoperationandmaintenanceofturbineswewilldiscoversomenewbusinessmodelsthatcouldincreasecustomervalue

…todescribesomeusecasesfromanassetmanagementperspective

Purposeofthispaper

…notanytwoownersarethesamesowhydoweoftentreatthemasiftheywerethesame…

Problem

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IntroductionUsecasesthatwewillexploretheowner’sandtheOEM’sperspective

- TheOEM’sviewontheproductlifecycleisveryshort- TheOwner’sviewontheassetismuchlonger

Theassetlifecycleismuchlongerthantheproductlifecycle– thiscausesconflicts

Initialoperation

Extendedoperation

Conversion,modificationorupgrade

OEM’sproductlifecycle

ShaunWestIServiceInnovation

IntroductionTheapproachforthispresentation

- Considerthesituationfromtheassetowner’sview- UseexamplesofdifferentO&Musecases- Useextremeexamples(wherepossible)- (Re-)imagingthefuture

Thisapproachwillchallengethestatusquoandsuggestpossiblefutureopportunities

Do It Yourself

Do It For MeDo It With Me

ShaunWestIServiceInnovation

IntroductionServicedesignwithusecasesandsituationanalysis

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Iwillbasethispresentationon”usecases”tostimulateideasfromactualcasestofuturepossiblecases

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UsecaseTheutilitywhocanactasanarchitectengineer

TakingtheleadallowedEDFtosuccessfullyrepowertheirexistingoil-firedthermalpowerplants

goo.gl/m1GhDF

Background- Re-poweringofanexistingasset- Oilreplacementwithgas- CustomerhasownEPCgroupCustomervalue- Lowerinstallationcosts- Improvedintegrationwithexistingplants- UseofownEPCteamsSuppliervalue- Riskslimitedtoequipmentsupplied- Improvedcustomerrelationships- Equipmentmaintenance

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UsecaseTheIPPwhomovedtoself-performandnon-OEMservices

Background- 23GWofadvancedturbines- Ownerneedstocutcosts- TurbinemaintenanceisamajorcostsCustomervalue- Lowermedium/long-termcostofmaintenance- Builtupownturbinemaintenanceknow-how- RiskoftechnologyobsolesceSuppliervalue- OEMlost’aftersales’revenues- Non-OEMsgainedbusiness- Non-OEMsprovidedamoreopenbusinessmodel

WithalargestandardfleettheIPPwasabletointernalise theservicesanddrivecostandriskout

goo.gl/aTVeNg

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UsecaseThenewtechnologyriskmanagementusinglong-termcontractualagreements

Background- Powerprojectsneedtobe’bankable’- Newtechnologyriskscanbehardtoaccept- Owners’want’betterperformanceCustomervalue- Newtechnologyriskspushedofftothesupplier- KnownmaintenancecostsperMWh- Somecoverageonavailability/reliabilitySuppliervalue- Cashflowsareknown- Tie-induringearlyevolutionofthetechnology- O&Mknow-howflowsintothesupplier

TheLTSAofferstechnologyriskmanagementduringtheearlyyearsofnewtechnologyintroduction

goo.gl/fUY2mr

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UsecaseThematuretechnologymovingtoado-it-yourselfmodel

Background- Theownerknowstheplantwell- Plantoperationishardtoforecast- CostcuttingbecomingevermoreimportantCustomervalue- Repair/replacedecisionsincustomer’shand- Obsolescenceriskiswiththecustomer- Phasedshutdown/cannibalisationbecomepossibleSuppliervalue- Pricesmaybeset– volumesarenotset- Moreconsultingadviceisrequired- Productrebuyopportunitiesthroughrelationships

Thecustomerknowstheplantwellandisabletomanagetheequipmentandperformancerisksgoo.gl/Gvu5tQr

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UsecaseUsingowner(or3rd party)craftlabourtosupportaninspection

Background- Ownerhasownlabournotfullyutilised- LabourpooloftechnicianswithO&Mknow-how- LabourpoolsunderstandstheworkingenvironmentCustomervalue- Useofexistingresourcereducescosts- Understandcustomer’ssite- Understandthecustomer’sbehavioursSuppliervalue- Improvedcustomerrelationships- Customerbecomespartofthesolution- Reductioninrevenues

Localcraftlabour oftenunderstandsthecustomerbetterthantheOEM

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UsecaseGeneralcontractortomanageallpowerplantmaintenance

Background- Routine,plannedandunplannedcontractedout- Movemaintenanceriskstooneparty- ProvidessimplercostcontrolCustomervalue- Bundlingroutine,plannedandunplannedactivities- Risksplacedwithonecontractor- DifferentrevenuemodelspossibleSuppliervalue- ExpansionofEPCconceptsandthinking- Contractorgainslong-termrelationshipwithowner- Improvedbalancebetweenplantandproduct

Ageneralcontractorcanusetheecosystemtocreatenewofferings

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UsecaseValuenotcostinO&Gcanhelptodrivethecostout

Background- Customerrevenueisbasedonperbarrelofoil- Facilityhada’cost’mentality- TheavailabilityandHSEwerepoorCustomervalue- Customervalueisderivedfromoilsold- Outsourcetocompetentparty- AlignmentofgoalsSuppliervalue- Incomebasedonperbarrel- Removesprocurementdistractions- Alignmentofgoals

Movingfromcostplustoatariff-likeagreementcanprovideopportunitiestocutperbarrelcosts

goo.gl/Ab3ZEH

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UsecaseConversions,modificationsandupgrades– providingcustomerandsuppliervalue

Background- AllassetownersgainfromreducecostsperMWh- Somecustomersgainfrommorecapacity- SomecustomersgainfromfewerinspectionsCustomervalue- Morecapacityorloweroperationalcosts- Thecustomerisinthedrivingseat- KnowncostswithknownperformanceSuppliervalue- Customerlock-in/non-OEMlockout- Standardisedfleet- Basedonexistingtechnology

Thevalueoftheupgradeisthatitaddressestwomarkets:cost-savingandrevenuegrowing

AlstomPower:13E2MXL2Brochure

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UsecaseTheapplicationoftechnicalupdateshasvalueforallparties

Background- Technicalupdatesoccuronallequipment- Somearerequired,someareoptional- WhyshouldIpayextraforrequiredupdates?Customervalue- Safereliableoperationoftheequipment- Riskofequipmentobsolescence- RiskoflossofwarrantySuppliervalue- Opportunitytogainextrarevenues- Standardisedfleet– easiertosupport- Improvedcustomerexperience/betterretention

Whatisthebalanceof’freeissue’updatesvscustomerpaidupdates?goo.gl/hbMYjp

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UsecaseLNGtrainisthecorevaluecreationforthecustomer

Background- ValueisderivedfromtheLNGshipments- Costorpoorreliabilityishigh- AvailabilityiscriticalCustomervalue- Productioncapacity- Instabilityinmaingastraindestroysvalue- Costofpower(inputs)Suppliervalue- Singlepointofcontact- Fulltrainsolutions- Sparesavailability

ThecustomerisunlikelytomovefromtheOEMonthemainLNGtrainasdownsideriskishigh

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UsecasePowerforLNGprovidesopportunitiesfordifferentbusinessmodels

Background- FocusremainsonLNGshipments- ElectricitycostsimpactonLNGcosts- ElectricitycanbeimportedCustomervalue- ProductionofLNGiscorevaluecreationactivity- CompetencyistheO(&M)oftheLNGtrain- ElectricitycostsaretranslatedtommBTU’s shippedSuppliervalue- Long-termagreementtoprovidepower- LNG-trainproduction- Tradingofexcesspower

Providinghighqualitypower’over-the-fence’solutionscansupporttheLNGoperations

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UsecaseTheInd4.0– oneOEMsupportingallofyouroutcomes

Background- M&Donasemi-openplatform- ItsupportsO&M/assetmanagementoutcomes- IntegratesallequipmentCustomervalue- ReducingO&Mcosts- Improvedequipmentriskmanagement- AdvisoryserviceshelpingyoutoachievemoreSuppliervalue- Manyhundredsofmachinesinarrogate- Becomesmoreeffectiveatprovidingsupport- LocksoutotherInd4.0providers

Doesthispotentiallyconcentratealloftheknow-howintoonesupplier

goo.gl/yvW8XG

ShaunWestIServiceInnovation

UsecaseTheInd4.0– anopenplatformsupportingyouroutcomes

Background- M&Donanopenplatform- ItsupportsO&M/assetmanagementoutcomes- IntegratesallequipmentCustomervalue- ReducingO&Mcosts- Improvedequipmentriskmanagement- Dataandknow-howislocalwithremotesupportSuppliervalue- Expertscanaccessthesystem- Becomesmoreeffectiveatprovidingsupport- Allowsengagementwithotherexperts

Anopensystemallowswiderecosystemengagementandbetterfastersolutions

goo.gl/oxdTo5

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UsecaseTheonsiterepairshotgascomponentschangingservicedeliverymodels

Background- Onsitemachiningis’normal’duringaninspection- Onsiterefurbishmentofcapitalpartsisnew- ContainerisationoftherepaircentreCustomervalue- Reductioninnumberofsparessets- Outgoingshipmentsareremoved- EarlierwarningofscrappingSuppliervalue- Workingatsiteimprovescustomerexperience- Reducedworkinprogress- Flexibledelivery

Convertingarepairshopintoasite-basedserviceshopprevides newopportunities

goo.gl/KdARAU

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UsecaseTheonsiteadditivemanufacturingcreatingsparesasneeded

Background- Onsitemachiningis’normal’duringaninspection- Onsiteadditivemanufacturingisnew- Containerisationoftheadditivemachining- Customervalue- Increasedavailabilityofreplacementparts- Reductioninnumberofsparessets- OutgoingshipmentsareremovedSuppliervalue- ’Xerox’printingmachineatsite- Simplersparesmanagement- Accidentalbreakagecanbesupported

Sparescanbeprintedandfinalmachinedatsiteprovidingrealjust-in-timeservice

goo.gl/KdARAU

ShaunWestIServiceInnovation

LessonsfromtheusecasesWhatdotheusecasestellus?

Whatisthesituation?- Doweunderstandthecontext?- Doweunderstandthecustomer’soutcomes?- Whatisrelevantforusfromthesituationandtheusecase?

Wheredoesthevalueaccrue?- Isvaluecapturedbytheowner,supplierorinotherstheecosystem?- Whatistheformofthevalue?- Doesvalueaccrueintop-line,bottom-lineorbusinesssuitability?

Usecasesfeedourimagination!

Fromthesituationanalysiswelearnmoreaboutourcustomersandtheiroutcomes.Wecanthenstarttounderstandwhoandwherethevalueaccruesandhowandwhoshouldpay.

ShaunWestIServiceInnovation

LessonsfromtheusecasesMyquestionsfromtheusecases

- DoyouunderstandhowLTSAsreducetechnologyrisks?- DoyouunderstandwhyanIPPmightmoveawayfromtheOEM?- CouldyoucreatenewmaintenancemodelstodriveO&Mcostsout?- Couldyouuse3rd partylabourtoimprovethecustomerexperience?- Howcouldyouhelpanownermovetoaself-performmodel?- CouldanLTSAbedeliveredbyageneralcontractor?- HowcouldyoudesignCMUstoproviderealcustomervalue?- WhoandhowcouldyouchargeforCMUs?- WheredoyoufitintotheLNGvaluechain?- WhatoptionsdoyouhaveforInd4.0services?- Couldyoudelivermoreonsite?

Whatquestionsdoyouhave?

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ConclusionsWehaveseenmanyusecases– notallarefullyapplicablebutallhavelessonsforus

Thereisalwaysmorethanone’right’solution

Situationschangeovertheassetlife:newmission,newtechnology

Therearemanydifferentmodelsthatwecandrawfrom

Allcustomersfacedifferentsituationssoweneedtolearntoaddresstheiroutcomesandnotassumewhatis’bestforthem’

Businessmodelsneedusecasestosupportunderstanding

ShaunWestIServiceInnovation

RecommendationsLearnfromotherusecasesandgetclosertoyourcustomers

Alwaysconsideratleastthreesolutionstooneproblem

Understandthesituationsyourcustomersfindthemselvesin

Lookatdifferentusecasesandlearnfromthem

Fromalternativeusecasesandunderstandinghowtheycouldhelpourcustomersyouwilllearnhowtodesignbettervaluepropositionsandbusinessmodels

Buildabusinessmodelthatsupportsyourcustomer’soutcomes

ShaunWestIServiceInnovation

Thanksforyourtime!Questionsovercoffee… SlidespostedonSlideShare.com