Mr. Jeffrey, we’re here to talk about SMS group’s integrated performance services. Can you start by breaking that down for us – what does that really mean?

David Jeffrey — Let’s take it from the top and start with performance. When we talk about performance in this context, what we mean are the business performance outcomes our customers experience as a result of the services we provide. And when we say ”integrated“, that refers to both the manner in which we deliver the services and how we get paid for them. That’s the crux of the matter in the types of contracts we’re talking about here; our economic success depends directly on our customers’ level of success. If what we do doesn’t work for them, we don’t make money. The integrated performance services model is 100% customer-­focused.

In a service world that often overpromises and underdelivers, that almost sounds like a radical shift. What does it take to make that work?

It requires a serious commitment to integration – both internally and externally. Otherwise, we could not keep the promises we are making to our customers. The commitments we make to them are hard and fast and, as a consequence, have to be measurable. When we say to them that by doing certain things, we can raise their productivity for a certain grade of steel by a certain percentage, we need to be absolutely sure that we can do that. And that requires two things – knowing precisely what’s going on at the customer’s plant, down to the very last detail, at any given moment. It also means that we must be able to access and deploy every last bit of expertise and know-how that exists within our group. Here’s a simple example: When we’re maintaining a caster, getting paid on its output, and the hot strip mill stops producing for some reason, the money stops for everybody – us and the customer. Obviously, we can’t have that. So that’s the level of integration we’re talking about.

And just as there is no single solution, as you said, the processes you describe are continuous, correct?

Absolutely. This is a customer lifecycle partnership approach. Generally speaking, there are four parts to it. It starts with the project phase, which takes us from a plant concept to the start of production, the ramp-up. Then the steady state where we ensure stable plant operation, after which we introduce change and optimization processes that might lead to a new project, and so the cycle becomes continuous – a true lifecycle partnership.

From conventional to integrated performance services.

Now, you didn’t just come up with the concept of integrated performance services out of the blue. Presumably, you are reacting to changes in the market. So, what are the global drivers that generate demand for these kind of services on the customer side?

Certainly, our customers face fundamental market changes that pose significant challenges for which we must figure out solutions. Foremost among the external changes is definitely decarbonization. But there are others – digital transformation, the need to manage and control overall energy consumption, and the need for overall lifecycle financial efficiencies. These are all high-level forces that affect pretty much every one of our customers. But there are essential differences in how individual customers have to respond to the drivers, for instance, depending on whether they have a start-up, a greenfield, or a brownfield project. Let’s take a greenfield operation, for example. The most critical factor for them is to get a return on their investment as quickly as possible. The plant needs to make money. You’re looking to minimize CAPEX and stabilize OPEX. These are drivers that we must address in our solutions if we want to deliver value. In addition, you have your conventional drivers that really have stayed the same – that’s your throughput, consistent quality, yield, and cost-efficiency.

All of the above is significantly affected by unplanned downtimes. Predictive maintenance is a key measure to avoid these. We offer integrated solutions to our customers that are based on all our competencies with respect to automation, digitalization, and technical services. Based on our plant automation, predictive tools can derive maintenance tasks before negative effects on the plants productivity occur. The maintenance can be done by SMS group staff even in our dedicated workshops on the premises of our customers.

Our success is born off the back of total integration with our customers and their ultimate downstream success.

So when you’re changing how you service your customers, you also have to make internal changes.

Yes, as a company, we are in a unique position because we currently manage the maintenance/operation of customer assets in excess of 100 million tons of liquid crude steel. And roughly 85% of that is through contracts with performance-based and investment performance-related services. That’s a complete paradigm shift from the days of the conventional services we would provide in the past when our work was largely about repairs, managing spare parts, and training. The performance-based services we deliver today represent a totally different risk structure for us and require a much deeper level of integration with our customers. Today, we are truly breathing the same air as our customers – we only get paid when that’s working as advertised. We feel their pain in real time. When things go wrong for our customers, they go very bad for us – that’s why we do everything in our power every day not to let that happen. It drives everything we do.

Change of that magnitude is never just technological, is it? There must be more to it from an organizational perspective, right?

That is correct. To successfully implement the necessary changes on a technical and technological level, we really had to also adapt our culture. That meant looking at how we are integrated globally.

The important thing was to really make sure we got rid of any silos we had in the group. This is because the solutions we provide for our customers are never out of the box – so we can’t be doing our thinking inside of silos. We also had to become a lot more local than ever before – we have now empowered the regions to manage the business much closer to the local customers, which has made a world of difference. When you want local accountability, you’ve got to give your teams on the ground more responsibility. We’ve taken that even further now to empowering individual projects and contracts. The decisions are made where the business impact comes from.

So, with all these new global drivers and massive resulting changes internally and externally, how would you boil down the role SMS group plays for your customers? What is it that they really need you for?

There, you’ve said it already. We’re shouldering a massive burden for them. All those technology changes and all that change management required to be successful today in this business, we’re now operating for them. They simply don’t have to worry about it and can focus on growing their core businesses profitability.

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