When shifting focus from products to instead build revenue through services, a manufacturer’s approach to new business must be wholly geared towards understanding the outcome customer’s value.
Once a manufacturer realises the short-sighted and unsustainable nature of focusing purely on selling a product, and starts a servitization business transformation, the resulting discussions it has with customers – existing and new – changes dramatically.
Not only has the central tenet shifted from, “We’ll offer you this product with these services”, to “We’ll offer you this capability”; but the entire approach has to be geared towards understanding what outcome each customer wants to deliver. As a result, the conversation becomes much more of a consultation, rather than a straightforward product demonstration.
This consultative approach requires an appropriate mindset and methodology to correctly ascertain exactly what the customer’s critical processes are, and, once identified, pinpoint how your service offering can help maximise those processes. It may even be the case that selling a service requires speaking to a new point of contact within a customer’s organisation, a more senior individual for example, negating personal relationships often forged over many years.
However, any expenditure necessary such as additional recruitment, training or networking is almost immediately offset by the effect offering a consultation has on your business progression along the value chain.
Also helping to drive the growing popularity of servitization is an external change occurring across almost all markets, from logistics and healthcare, to energy generation and construction, that of businesses shunning owning a product outright and instead focusing on a capability.
Take a heavy-duty, scissor lifting platform, or ‘cherry picker’. To buy such equipment outright represents a significant investment for a business, a potential contributing factor towards limiting its future growth opportunities.
As the platform is expensive, bulky, depreciates overtime and requires periodic specialist maintenance, a business is likely to value the physical equipment far less than it does the outcome it provides, i.e. working at height. In turn, any manufacturer able to provide ‘working at height’ as an outcome is likely to be valued more highly than those pushing a more traditional standalone offering.
That scenario works fine if the customer comprehends your business’ proposition and the benefits of a service-based outcome; but what about if your customer doesn’t accurately measure internal KPIs, or focuses on entirely the wrong metric to measure? What if your customer is unfamiliar with servitization?
In that situation, roundtable delegates reinforced the importance of adopting a consultative approach, one where you explore a customer’s business in partnership to help inform their decision-making – driving both businesses forward in tandem.
This building of deeper customer relationships, an essential factor when fostering a higher perceived value offering, is a growing trend within manufacturing; however currently the focus would appear to be on collaboration, rather than full integration.
According to The Manufacturer’s Annual Manufacturing Report, almost 40% of those UK manufacturers surveyed employ performance measures designed to reflect outcomes aligned to individual customers. This is going beyond basic quality control – “Does it work as specified and did it arrive on time” – to a more personal and tailored relationship.
This is adequate for those offering base services, but to achieve advanced – even intermediate – services, there is still a long way to travel. Yet, the means of doing so may well be at hand, with 10% of respondents stating that they are already making use of IIoT technologies in order to manage support, maintenance spare parts and repair.
With manufacturers awareness of both servitization and IIoT rising, coupled with finance becoming more readily available and inherent hesitation towards automaton and technology – particularly the cloud – alleviating, these figures are sure to grow significantly as businesses look to capitalise on the benefits of servitization, and the marketplace increasingly looks to seek such propositions out.
This 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.