Servitization: From understanding to implementation....
Over the past few years servitization has become a topic of hot debate. Several years ago, when I talked to businesses about my work on servitization, managers would look at me blankly and ask what it was all about. Often they would get hung up on the spelling, or simply say ‘what’s new here? We offer services anyway’. The concepts of advanced services, IOT and Industry 4.0 were largely unheard of, and the term servitization was often dismissed as ‘a bit too academic’.
Now the world has changed, and servitization has become more mainstream. I’ve always taken the view that servitization is simply ‘manufacturers growing their revenues and profits through services’ and that ultimately we are looking at a paradigm shift in our ideas about manufacturing.
Relax this definition a little and you will see that servitization is all around us; it might be Goodyear implementing proactive services on in commercial trucking, GE following through on their digital industrialisation strategy in power generation, BMW offering a new MINI on a Personal Finance Plan with a package of services, or Brompton Bikes being offered to hire by the hour in the high street.
Servitization is happening in many guises, and technological innovations are helping to bring about rapid change. Industry 4.0 is popular today, while just yesterday it was IOT and before that Big Data. Innovative use of technology is attractive, and understandably so for people within manufacturing who come from a technology background.
However I think there is also an element of fear; we’ve all witnessed the rise of IT giants, whether it’s UBER, Apple, Facebook or EBay- many businesses are anxious about the next innovation from Silicon Valley and what it might mean for them and I have heard IT vendors countless times pushing businesses to invest in IT and develop ‘the killer app’. A word of warning here: remember that service is not an app or a new technology. Take a step back before you invest and think: How can you really make money through technology? What outcomes will it help you deliver to customers?
So my conversations about servitization have moved from ‘what is it?’ to ‘how do you do it?’ My team at Aston Business School and I have now worked with over 100 manufacturers helping them to discover and implement servitization. There are four fundamental stages through which every company must go; Exploration, Traction, Acceleration and Exploitation. Today, most want help with the first stage, and to those business leaders who want to get started with servitization we suggest three steps:
Step 1: Think clinically, and understand servitization as an innovation: The recent popularity of servitization has inspired some business leaders, consultants and vendors, to re-brand their older offerings and muddy the water in the process. This can significantly undermine your chances of success. Understand that servitization embraces business model innovation, organisational change, and new technology adoption. That services exist in various forms, and represent differing values to both the customer and provider. Also understand the limits of our knowledge, for instance large scale surveys will help to give you a sense for how the world is changing, but don’t expect any to tell you exactly how the revenue and profits will change for your own business.
Step 2: Allow yourself to imagine an advanced service proposition - but only a little: Imagine what types of services you might offer, but don’t get too drawn into the people, processes and technologies you might need to deliver these, in the same way that a design engineer will conceptualise the form and function of a car, rather than be constrained by design of the production line. Keep it simple, don’t yet begin to think that these ideas will ultimately transpire into ‘the’ customer value proposition, just try to give your ideas a sense of realism.
Step 3: Explore, benchmark and validate your ideas: Identify a business in your wider value chain that has moved forward with services- this might be a distributor, competitor, or one of your own suppliers that is asking to do more for your business.
Alternatively you may need to look to an analogous market sector which has some similarities to your own. In each case visit both the service providers and customers, and try to get a sense of how each collaborated to form a proposition, and how they have behaved to make services a success. Compare your own thoughts on services against these, and use this insights to inform your own ideas, and so test whether your own thoughts are indeed realistic.
The outcome of these three steps is simply a better understanding of servitization and what it could mean for your business. They are elementary but they will improve realism and confidence.
After this, the hard work really begins, as you will need to develop new relationships with customers, innovate you customer value propositions, form new value chain relationships, adapt your business model and much more- and even these are still only part of the exploration phase.
I will be sharing more about the transformation journey at The Manufacturer’s Servitization Conference and I hope to see you there.
This article was written for, and first appeared in, the October print edition of the publication Field Service News.