“Are you being Served?” From production to “as a Service” in four steps
Manufacturing companies can no longer afford to exclusively focus on just making and selling products. To stay relevant, more and more companies are moving towards ‘servitization’. This means a serious change of gears on all fronts, whether it comes to strategy, processes or systems. A lot of organisations struggle with the question of where to start in order to offer a ‘Product as a Service’. In this blog, I offer some jumping-off points for companies that want. In this blog I will explain how to make this happen.
From product to “as a Service”
Because the competition is becoming tougher and customers’ needs are changing, more and more manufacturing companies are moving towards servitization. This means that manufacturers sell a total service—including product, maintenance and advice—instead of selling separate and complementary products. Some well-known examples are Philips’ ‘Lighting as a Service’ and ‘Power by the Hour’ from Rolls Royce.
No servitization strategy
Yet a lot of production companies find the transition towards servitization challenging, as it has consequences for each aspect of the business: from strategy to positioning, as well as operational challenges concerning technology, data and of course collaborating with customers.
Research by the PA Consulting Group shows that among the European industry’s top 60 managers, 75 percent expects services to grow significantly in their company within the next three to five years. However, only 30 percent has a strategy that adequately accommodates servitization.
Companies that do succeed in introducing servitization completely report profit margins of 15 to 35 percent on services. That is a lot more than the average margin on products. So how do they do it?
Servitization, where do you start?
If you have ambitions concerning servitization, how can you realize them? What steps should you take to prepare your organisation to successfully start selling services that cater to your customers’ needs?
In 1960, the American Maxwell Maltz published the self-help book ‘Psycho-Cybernetics’. Roughly put, Matz argues that knowing yourself is the first step towards change. Take a good look into the mirror and then clearly define your ambitions are when it comes to service. This is your starting-off point for the transition towards servitization.
Next, make sure you map all the processes within your current service organisation. Identify any bottlenecks, as well as any bottlenecks concerning partners and customers. Redefine you processes and internal organisation and make sure that you have access to a quick and immediate overview of all client relevant information, the smart service contract and products on location.
And how great would it be to ‘predict’ and solve disruptions before they even happen? To do this, you need insight into the functioning of your products. Based on the service you provide, decide what the measuring points and limit values are, and which actions should be initiated in case of a deviation. Do you want to know when a pump is running or if a valve is open? Do you want to measure the temperature or resistance? Should the customer be notified or do you want to dispatch a mechanic straight away? Or will you integrate the notification system with your operating systems so that the valve is closed automatically?
With ‘smart contracts’, it is possible to completely free your customers from any worries and keep them fully informed. Everything is then automatically taken care as per the initial agreement. If a limit value is passed, a service order is automatically created which you can, in turn, allocate to an available mechanic. If there are not any available within your own pool, then you can use the Crowd Service solution to find a mechanic within a connected network of sub-contractors. All the relevant instructions are sent to the respective mechanic and he or she can get to work on a first-time fix!
3. Action plan
Based on whatever you decide, set up a concrete action plan. Stipulate which steps you will take in what order, as well as what you will need to achieve this. Make sure to involve your clients and colleagues at each step along the way. This is how you facilitate involvement with the project and foster support. Then, build a solid business case to justify the project.
As soon as you begin the transformation towards becoming a service-oriented organisation, you need to ensure that the change is visible. Subdividing the project into short ‘sprints’ yields quick results. The sooner you involve your stakeholders with the project, the less you risk the project not meeting their wishes. Moreover, this will also foster involvement and support both within and outside your organisation. And with each project you finish, you can celebrate a small success.
Once you have ensured a solid base for servitization, then you can take the next steps and start offering products “as a service”.
Want to know more?
On 23 October, Marie-José Veerhuis and I will go into servitization more deeply in a webinar. We will go through each step of the process and paint a picture of what an efficient service process looks like. Interested? Apply for the webinar.