The term servitization has recently been a trending industry term – and for a good reason. If done right, servitization can generate new growth for the business.
In simple terms, servitization means changing and expanding the business from products to services.
Currently, many companies seek to utilise data in a more efficient way, and this need in particular steers their business towards services. Servitization may result in, for example, the adoption of sensor-based predictive maintenance.
If implemented right, the transformation from a manufacturing company to a service provider can open up great opportunities. Integrated services provide more value to customers than simple products and a steady revenue for the company that provides the services.
However, servitization comprehensively transforms companies’ business logic and activities. Its impact can be seen in everything from sales to management.
With all this in mind, how should companies go from product sellers to service providers?
Integrated services provide more value to customers than simple products and a steady revenue for the company that provides the services.
In this article, we have listed four perspectives to get you started.
1. Servitization is a comprehensive change that shakes up the entire company
Servitization is a comprehensive change for the organisation. It should therefore be treated as such. Simply changing the prices and sales presentations is not enough. The management, sales, production, and customers should all be committed to the process.
In order for servitization to succeed, the company must have a clear vision of where it is headed. In other words, the company needs to know what it wants to achieve through servitization.
Therefore, setting a goal should be the first and most important step that the company takes. It is important to come together to discuss and define: what are we trying to achieve and why and how are we trying to achieve it? Express clearly in words what the sentence “Going forward, this is what we want to be” entails for your company.
After you have a clear idea of what your direction and goals are, the next step is to look at your company’s structures, practices and responsibilities from the point of view of the established goals. These elements should be adapted to align with your goals.
Sometimes the company’s entire operating model has to be changed. However, there is no need to tackle everything at once. You can also get started by taking smaller steps.
Ideally, the customer has been involved in developing the service and commenting on its perceived value from the start.
2. Close collaboration with customers is the key to servitization
The customer is always at the centre of servitization. Current customers do not go from purchasing products to services overnight unless they understand the added value services can provide for them. The easiest way to commit to customers is by engaging with them when designing the service.
Ideally, the customer has been involved in developing the service and commenting on its perceived value from the start. For example, the customer has been able to see the benefits of regularly collected data at the company’s factory.
Moreover, the individual buying your new service for their company might be a different person from the one who purchased the old product. In fact, the purchaser could be a development or a maintenance manager instead of a product manager in the future.
Customers might not get excited when you start selling a service in place of the old product. During the servitization process, it is also important to consider ways to increase your customers’ understanding of the advantages and benefits your service can provide. Without such understanding, you might end up losing a customer.
3. Selling services and selling products are not the same
Servitization is a great change for the sales department. Service selling requires different skills to traditional product selling. Service selling is, above all, interpersonal and based on relationships.
It is necessary to have a more in-depth understanding of the customer and their operating environment. Old ideas about pitchmen selling features should be scrapped.
Sales performance targets should be designed to support the sale of services. Additionally, change ambassadors, the people who first get excited about selling the service, and their success stories should be utilised in sales management.
Do not overlook questions and comments from the salespeople. It is of utmost importance to convince them of the value of your new service.
Salespeople are adept at discerning whether a customer is ready to purchase your service, which reflects on their sales work. You should therefore first sell the additional value of your service to the salespeople.
Naturally, many salespeople might feel confused as to why they should start selling a new service when the old product is still selling well. Typically, this means that they do not have a clear idea of the benefits of your new service or they might feel uncertain about selling the service.
Sometimes you may need to add new competence to your sales team. However, experienced experts possess a strong customer understanding that should be utilised during the transformation. Good sales are sure to follow after a seasoned salesperson sees the value of the service and has been provided with adequate support and materials to sell it.
4. Collect data to develop your service
Although the current trends are strongly shifting the industry towards servitization, companies should not transform simply for the sake of it. Therefore, it is important to first consider why your company has decided to take a step towards servitization.
Servitization should have a clear goal that guides the company’s actions. Commensurable data should be collected at every step of the way from the production and sale of the service to customer feedback. This data should serve as the basis for all the decisions concerning the development of the services, sales, and processes.
Sometimes this might mean going back to the drawing board.
Is your company interested in developing its service business or have you faced obstacles that hinder your servitization process? Please contact us. We will be glad to help you!
Read Eija Vaittinen’s academic dissertation on servitization here.