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Servitization: Closing the gap between your business and your customers.

Servitization: Closing the gap between your business and your customers.

This blog posts refers to expert opinions on how manufacturing companies should adopt a Servitization approach through the likes of IoT, to better serve their customers. 

 

Not got time to read? Here`s a snippet of golden information

- Companies are now expected to shift from offering products to services such as after-sales support.

- This is good news however as it opens up new opportunities to differentiate yourselves and go beyond customer expectations.

- Servitization requiries executives and strategists to align products, technologies and supply chain with their new service offering which can take time but if done correctly it will allow you to add new creative elements to your offerings that can make you stand out.

The advantages are: Generating new revenue streams, improving maintenance efficiency and effectiveness, improved product performance & more. 

- Having software that can predict product failure is deemed to be the most valuable offering for companies who have adopted Servitization. This has been agreed by a panel of high flying organisations and academics.  

- Software that facilitates Servitization, usually incorporating IoT, enables you to provide an outstanding service that should improve your customer relationships and open up new revenue opportunities with existing customers further down the line.

- Software that provides more analytical data, Faster quotes (CPQ), Communicating electronically (Electronic Data Interchange) and advanced ERP systems will enable this transition.  

Servitization

What is it? 

In short, it allows firms to go beyond their initial product offering by providing a solution that adds further ‘mutual-value’ through a service. Companies are now looking to innovate their product portfolio by offering their customers more help and support than ever before.

This opens up new opportunities for companies to engage with their customers long after they make the purchase.

The after-sale support has become a prominent selling point for a majority of suppliers to leverage a competitive advantage whilst being able to differentiate themselves. This has become more of a priority over the past decade due to the increased competition occurred though globalisation.

How easy is it for a company to target new customers abroad? Very easy, thanks to the internet.

 

Why should you implement it? 

It sounds very simple on paper (or on your screen), but many organisations may have been slow to start this transformation due to the changes it requires in organisational structure and processes.

To ensure servitization can exist within an organisation, it requires executives to align their products, technologies, operation and supply chain to integrate with the new changes – which can take time. But adopting a servitization approach can provide a wide range of benefits for you and your organisation.

Examples of these are:

The Cambridge Service Alliance, from the University of Cambridge, reviewed Servitization and its implications for manufacturers (although this phenomenon has cultivated many other industries).

They came to the consensus that “If firms on the servitization journey can identify and deploy technologies that will help them refine and develop their servitization operations, to create and deliver greater value to customers... then they may be able to stay ahead of the market.”

So, by adding services to your products to help create value, your company can start enjoying better margins over a longer lifespan due to customers getting better products and services that match their needs and your business can maximise the performance of the product.

Your happy, They`re happy!

By incorporating a servitization approach, your company will move from just having a transactional sale type process to being able to incorporate a service that holds relationship interactions at the heart of each purchase. By examining the literature that tries to identify a definitive version of servitization – the simplest approach we found was coined by Dr. Howard Lightfoot from Cranford University.  Dr. Lightfoot divides the levels of service into three distinct categories:

  1. Base Services: Product Provision
  2. Intermediate Services: Product Repair, Condition monitoring, Field Service and customer help desk.
  3. Advanced Services: Pay Per Use, Fleet Management, Availability contract and integrated solutions.

Of course, the higher you rank in your level of services, the higher the customer expectations will be. But appropriate research and gathering consensus on an appropriate strategy that identifies the ‘risk-returns’ for each service offering, will help you identify how you can manage expectations.

In fact, we can help you create software which enables you to manage these expectations efficiently. If you have an idea in mind or you need advice on how to take your first steps into this strategy, get in touch and we will gladly discuss how you should move forward.

Who uses it and how do they use it? 

To gather a consensus of what servitization software can do you for you, The Cambridge Service Alliance, questioned Capital equipment manufacturers (CEM), manufacturers of plant or equipment whose products have lifespans of over one year and academics who discussed the potential functionality and importance each software has to a firm.

Those representing companies were selected from across 13 organisations, which operate in a variety of capital equipment segments ranging from construction equipment, rail, power generation and defence to industrial machinery.

The panel of academic experts was chosen from nine institutions based on their involvement in the service science and/or technology domain.

All the participants ranked the top 5 technologies relative to one another based on how valuable they believe the function is to their business.

 

Rank % in Top Five Capital equipment manufacturers panel Rank % In top five Academic panel
1 100% Predictive Analytics: Used to predict specific failure modes. 1

77%

 

Predictive Analytics: Used to predict specific failure modes.
2 92% Increasing analysis of existing data sets used to find causality and patterns of failures, instead of simply tracking trends. 2 46% Remote communications: Used to remotely adjust, fix or send software updates to machines/Products.
3 83% Remote communications: Used to remotely adjust, fix or send software updates to machines/Products. 3 62% GPS or Geo-spatial technologies: Used to track Machines/Products, People, Or components.
4 67% Dashboarding technologies: Used to provide KPI’s to make services more tangible and visible 4 69% Consumption Monitoring: Used to create consumption driven supply chains for consumer specific offerings
5 58% Case-Based Reasoning: (Using historic data) In failure pattern recognition, frequent failure pattern analysis. 5 54% Mobile Phones (or other mobile platforms) used to receive internal data or customer information in real time. E.g. control system data or information pushed to customers.

 

As you can see from the above table, servitization is not a one-way street and there are many more functions to be explored not covered on this table.

To learn more about the industry and the opinions of CEM’s and academics, we highly advise you reading through ‘The Future of Servitization: Technologies that will make a difference” – You can find a detailed analysis of the industry and its implications for your company. You can read it by following the link in this paragraph. 

The advantages of applying a servitization approach far out weighs the disadvantages (in our opinion) and it’s a very sustainable approach to generating new revenue streams whilst ensuring you can provide exceptional customer service. By adopting this system, you are enabling your sales force to reach success by giving the customer more choice.

There are multiple software applications available that can help you make the transformation to Servitization. Software that allows you to understand more about your customer wants, needs and their values will help you adopt a service that goes beyond the initial product offering. Software that provides more analytical data, Faster quotes (CPQ) and advanced ERP systems will enable the transition.

If you would like to discuss a bespoke software solution that can help you achieve this kind of commercial success, then please do get in touch so we can have a chat.

No project is too big or small for us – we just want to help.

Our contact details are:
01257794862