Minimising the disruption from a shift towards servitization

Posted on 19 Apr 2017 by Jonny Williamson

Embracing servitization will affect every area of your business, both physically and digitally. The Manufacturer explores how, and advices on how to mitigate the disruption.

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Every business is unique and so each individual servitization journey is going to have some variation.

Several industry reports have suggested that by 2020, as much as 65% of manufacturers worldwide will switch from a focus on products and production to instead build their revenue streams through services and digital insight – servitization.

The primary premise of these services is to support clients to deliver value to their own customer-base. Such a premise requires a fundamental shift in the way an organisation considers where, and how, value is created in its own business.

Consequently, embracing servitization wont’ just affect a single business department in isolation, it will permeate every aspect of an organisation, both physically and digitally.

As previously mentioned, this shift to a services-based business model is a journey, it’s not a transformation that will – or even should – happen overnight. Like any journey, it’s not enough to simply describe the start, end points and any destinations you hope to reach along the way. Every step has to be mapped out with clear objectives, the people responsible for achieving them and anticipated dates of delivery.

Every business is unique and so each individual journey is going to have some variation; however, the overarching structure typically remains the same: exploration, traction, acceleration and exploitation.

It was noted by Tim Baines, professor of operations strategy at the Advanced Service Group, during his presentation at The Manufacturer’s conference on Servitization, that how fast a manufacturer moves through these four phases depends on several factors, including market pull, its distribution network, its level of readiness (both in terms of the product and organisation), and technological push.

World Trade Export Europe Supply Chain - image courtesy of Pixabay.
Taking the time to make a detailed map of your business’ transformation path will make each step and the overall goal clearer – image courtesy of Pixabay.

Encouragingly, Baines added that though there was a variety of different pathways, none can be classed as either the right or wrong option as there isn’t a one-size-fits-all solution.

What’s most important is to outline the risk and opportunities to your business of both embracing servitization and not, and in doing so a compelling business case for servitization should become clear.

Taking the time to make a detailed map of your business’ transformation path won’t make this journey any easier, however it will make each step and the overall goal clearer to every stakeholder, from the shop floor to the board room.

Many working in and alongside manufacturing agree that there is a vital need for a board-level sponsor or champion to drive this transition and keep it on track; without which, a true transformation can be very difficult to realise. The benefits of achieving a number of ‘quick-wins’ are also widely extolled in regards to helping maintain focus within the business and fostering momentum.

According to the Advanced Service Group’s Dr Andreas Schroder, one of the big challenges many businesses face when initially embracing servitization is a lack of engagement from customers. This can be the result of several factors; the principal being that a service contract is offered in the same way that standalone product contracts were tendered previously.

It is suggested that this potential pitfall could be avoided by offering your business’ sales team commercial training to better educate them on the value of your services. However, there is often a split between those who feel that existing sales members can be effectively retrained, and those who feel that there is a fundamental incompatibility between selling products and selling services.

In their eyes, additional training isn’t a viable option and a completely new approach to recruitment and training is required.

Servitization - The Road to Customer Intimacy Through a Service – Centred Approach FCThis article is taken from the recent white paper The Road to Customer Intimacy Through a Service-Centred Approach, based on research conducted by both The Manufacturer and Aston Business School’s Advanced Services Group, and the insights gained from an exclusive servitization roundtable event which brought together senior leaders from across UK manufacturing.

The full white paper – co-created by The Manufacturer and Microsoft – discusses how servitization complements Industry 4.0 technologies, what impact adopting servitization will have on your workforce, mitigating the challenges associated with business transformation, and identifying where within your business customer value is created.

If your company has already made the first step, or is considering embarking on its own servitization journey, this is vital reading for you and your business’ decision-makers to question your existing processes and ensure you get the most out of your transformation journey.

Click here to download the full white paper.