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The Journey to Servitization Part 1

It is a great time to be a customer. More and more technology is empowering customers (as I write another major update in the iPhone7 and Amazon launches DASH in the UK) and this is driving companies to be increasingly customer focused. This is also driving new business models and supply chains to create efficiencies and create service excellence.

One of the key growth areas in the manufacturing sector is the push by companies to add a services portfolio to their core product offering to combat the challenges of globalisation and cheaper commodity based manufacturing abroad. Through the delivery of advanced services manufacturers are looking to offer greater benefits to customers by creating an integrated product-service offering that delivers value in use and so gain closer ties between their businesses. This is termed Servitization.

Key adopters of advanced services are companies such as Rolls Royce who no longer sell aircraft engines but offer to sell “power by the hour”. Their customers now buy the outcome the aero engine delivers and Rolls-Royce provides all of the support to ensure that the engines can continue to deliver. This shift in business model means the interests of clients and providers are much more closely aligned.

To make this transformation - to sell services and solutions - requires significant change for manufacturers. The product is now a platform to deliver a service. They focus on the delivery of outcomes their customers want and how they create value. Customers only realise the value when products are in use not through product acquisition.

However maintaining the advantage is a key challenge. The adoption of new technologies are essential in enabling manufacturers to provide their own integrated and advanced product-service offering to sustain and obtain a competitive position in challenging markets.

These new technology areas include Data Management, Predictive Analytics, the Internet of Things, Mobile platforms, Business Intelligence and Digital Engagement capability. Tennantco a US manufacturer of commercial cleaning machines has used IoT extensively and developed a portal to allow customers to monitor their asset utilisation and maintenance operations.

However whilst many manufacturer’s want to move towards the goal of providing Advanced Services, most just don’t have the internal skills to manage the process of transformation, nor deliver the technology needed or understand the “people skills change” that will come from the transition.

The time of a traditional manufacturer selling products and repair cover is coming to an end. The new empowered customer is demanding more and manufacturer’s need to find a way to deliver. Partnering strategies and the implementation of enabling technologies are helping visionary manufacturers to survive and prosper.

Now go to Part 2 of the Journey to Servitization