The challenges of servitization



Our partners in industry experience a lot of challenges along their route to transforming their businesses to compete through services. Sometimes they can feel like they're on their own, trying to single-handedly forge a path to significant organisational change, and wondering whether anyone out there is having as much difficulty doing so as they are. Being a services champion in a product-centric company can feel like a lonely place to be at times; a bit of a barren, icy wilderness.

As the saying goes 'misery loves company', so to help you feel you are not on your own, I have compiled the top ten challenges faced by the executives we meet and work with; not every executive we meet has had all of these problems, but you can bet most have experienced at least some:

THE TOP 10 CHALLENGES OF SERVITIZATION

1. BUILDING THE VISION FOR CHANGE

So you've learnt a bit about advanced services and you think they could represent a sustainable future for your company. How do you build a case to persuade stakeholders this is the right route to take? How can you explain the potential benefits of advanced services in a way to convince a company that has always been product-led?

2. WHO OWNS THE INITIATIVE?

Servitization needs a leader within the organisation, who has the seniority to authorise the strategic change required. It does not usually fit neatly within a single portfolio in most organisational structures. It can’t be owned in a silo such as sales, marketing or operations. Do you have (or are you) a champion at senior level who can get the resource commitments and investment you need?

3. SENIOR BUY-IN

Getting the backing of the management team or board of the company is crucial, because committing to servitization means a wide organisational change. You may face a challenge convincing the senior management to take what they may see as a big risk.

4. OVERCOMING MINDSETS

Even with the backing of your board, you will have to convince people throughout all levels of the company. How do you change the mindset of a product-led company to one where everybody sees their role as being a provider of outcomes? How can you convince people to take what they might see as a big career risk and back this initiative, and how should they be rewarded for doing so?

5. CREATING AN ADVANCED SERVICES BUSINESS MODEL

There are so many different ideas and interpretations of what a business model actually is, this lack of clarity can really make it challenging to create one. Partners experience challenges creating services-led business models for product-based companies; how do you test and refine a model that is totally at odds with the rest of the company? Tim talks about this challenge in more detail in his blog post on business models.

6. CREATING AN OFFERING

The foundational component of the business model is the offering, or customer value proposition; what is it you will do that will take away ‘pains’ for your customer, and help them add value to their business? Your customer might be aware of their needs, but can you get them to share these with you? How can you find out about the ‘hidden’ needs your customer isn’t even aware of? How do you go about co-creating an offering with your customer, and testing to see if they might adopt it, and pay for it?

7. CONVINCING THE CUSTOMER

Many of our partners say convincing their customers to consider a new offering, with associated new payment models, contracts and responsibilities is a big challenge; how do you win their trust in you to provide advanced services for them when you are just starting out with this new offering?

8. EXISTING BUSINESS

Many of our partners find they are managing a servitization initiative on top of their existing commitments; the risk of over-stretching themselves and their teams is a big challenge, and the need to maintain existing business and revenue streams can take away any focus on developing new initiatives.

9. STAFF AND SKILLS

What skills do your staff need in order to deliver an outcomes-based, customer-centric service? Do you have the right skills in your company? If not, how will you develop them?

10. TECHNICAL AND TECHNOLOGICAL CAPABILITIES

How do you develop the new technical capabilities you will need to support your advanced service offering, and how do you identify and implement the technological capabilities and resources you will need?

Congratulations if you made it to the bottom of the list. How many of these did you identify with?

The challenges that executives like you are facing in transforming your businesses is what drives our research. The partners in our Advanced Services Partnership inform our research agenda, and the work we do is all about helping them overcome these challenges. The partnership is a supportive and like-minded network of people facing the same business problems.

This year we have been focusing on the ones that were most urgent for them: how to create a customer value proposition and a business model for advanced services, and how to set the vision for the company.

If you would like to know more about how you can get involved with the partnership, email me or give me a call on +44 121 204 3580.

#EleanorMusson #ServitizationChallenges #BusinessModels #Organisationaltransformation

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