February 2017 Business SCAN
Some industries are experiencing a switch from focusing on products and production, to service and holistic solutions for their customers, clients, citizens, etc. This focus is offering a new way to be financially sustainable and yet, despite this growing recognition, the adoption of servitization is still moving quite slowly. In part, this is because it involves not only business model innovation, but also organisational change and new technologies to be adopted.
Ultimately, servitization is making the deal between clients and providers more of a partnership than a transaction. A classic example is Rolls-Royce selling ‘power-by-the-hour’. Instead of selling aero engines, the customer buys the power the aero engine delivers and Rolls-Royce provides all of the support.
Incorporating this shift into the business model is so far predominantly seen in manufacturing. In fact, it is expected that over the next three years, 65% of the worldwide manufacturing industry will build their revenue streams through services rather than simply on products. It has emerged in business-to-business (B2B) offerings and is an opportunity for providers of services to take a fresh look at their ways of working too. The concept is also starting to touch our everyday lives at a business-to-customer (B2C) level.
To think in terms of servitization is really about transforming from being ‘product-centric’ to ‘service-centric’:
- Recognise that your organisation’s product is a platform to deliver a full service.
- Build solutions that deliver the outcomes your customers want and value.
- Understand that customers only realise value from the outcomes when they actually receive the service.
Sources: Bigdeli, A. (2016) Will services be the saviour of manufacturing? The Conversation. [Online], Available: https://theconversation.com/will-services-be-the-saviour-of-manufacturing-70081 [6.jan 2017]; Neely, A. (2013) What is Servitization?, [Online], Available: http://andyneely.blogspot.co.uk/2013/11/what-is-servitization.html [6 Jan 2017]
Servitization could offer a secure long-term strategy that localises value creation and value capture for many traditional organisations, public and private. Consider how your organisation could exploit the opportunity to think more in terms of service, and holistic solutions.
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