Servitization in means of improving customer satisfaction and competitiveness.
Manufacturing companies need new innovative ways to increase their existing product offerings’ value chain, profitability and customer satisfaction. Industry 4.0 has also brought new ways for manufacturing companies to create services with digital technology. With servitization companies aim to embed products and services to solutions that create more value to customers and long-term relationships with customers. (Shamsuzzoha A, 2020) Several technologies such as advanced robots, augmented reality, horizontal and vertical system integration are reshaping production, enabling new service development around physical products. In manufacturing, this means a significant improvement in information flow between departments and live data. The way that physical products position in the supply chain is also changing and reshaping co-operation within the business ecosystem. Upstream firms can capture more value with digital services that are hard to imitate. (Ennis. C, et al 3-4, 6, 2018).
Servitalizion is driven by financial, strategic and market motivators. Companies search for new revenue streams and profit income. With valuable services, companies gain market advantage and increase competitiveness in the market with product differentiation and customer relations management. (Shamsuzzoha A, 2020). Servitization can open new untapped customer segments and lead to a new differentiated business model.
The first latter of servitization is to build and sell parts of consumables for product provision. On the second latter of Servitalization, the focus is on after-sales activities where the manufacturer is monitoring for instance equipment or running maintenance activities for long term sales revenue. (Shamsuzzoha A, 2020). For many manufacturing companies servitization starts from increasing the range of services that the company offers. This includes help-desk and periodic maintenance. (the ASG, 2015) The third step of servitization is having advanced services that take after-sales activities to the next level. These activities are designed customer-centric to support the customer as whole with the manufacturer's solution. (Shamsuzzoha A, 2020)
Servitization is done by the whole company. To start with, to succeed in it, it requires a company culture that is ready to transform the way it creates value to customers and operates. Company culture should be innovative, agile and accepting changes. It is also a mind-shift from a product-oriented system to a customer-oriented system. To get started with servitization, and as a project manager to a manufacturing company, I would need to gain customer insight. This insight can come from current customer service, sales, marketing or from any other data that describe customer behavior. Naturally, this would include co-creation workshops with customers and interviews. Besides, I would also research current and future market trends and map stakeholders from a customer perspective. Once with good insight, I would target service that we aim at in the short, mid and long-term. As said, servitization is a mutual effort and requires leadership commitment and new skills from employees, which as with company culture should be prepared well in advance.
Adopting servitization through business collaboration
Industry 4.0 is impacting manufacturing by connecting physical elements with virtual services and providing a big data environment with analytics that enable transparency and productivity to the manufacturer. Recent technology developments that support this are the Internet of Things (IoT), advent cloud computing, cyber-physical systems and self-aware and self-maintained systems that operate autonomously. This automation and transparency make it possible to create more complex business models around services. (Shamsuzzoha A, 2020)
Manufacturing companies are focusing more on improving core competitiveness and outsourcing non-core business. In a product-service system, all players need to support the system that supports infrastructure, striving to stay competitive. (Ming et al. 2011, 5) It is necessary to plan servitization adoption by having the whole service system in mind.
The way I would approach servitization adoption would be to understand the system and include organization as a whole to planning. Developing products and creating a seamless union with value-adding services would need to take place simultaneously to avoid possible overlaps in solution design between product and service. This would also help to understand where product and service customization happens when delivering new customized solutions to customers. Understanding roles and responsibilities for service delivery is crucial when adopting servitization.
Servitazilation business is about co-creation, therefore crowdsourcing in servitization adaption is a good a sourcing model for generating ideas, content, and information from customers and employees. Crowdsourcing needs leading but is an efficient way to have people collaborating throughout servitization adaptation. (Shamsuzzoha A, 2020). Enhanced technology has made it fast to collect information from big crowds and analyze big data. There has also been a mind-shift from people in general. More people, especially customers, want to contribute to service development, especially if the service is significant to them. I would use crowdsourcing for understanding product-service transition in the business environment that the manufacturing company.
Practical challenges that businesses can come across at first are new variables in a product-service system, such as interaction with people, cultural background and time. (Ming et al. 2011, 10). Adopting servitization in a company requires new organizational structure, breaking and joining existing silos together across the company for successful adaptation.
When adopting servitization manufacturing businesses can come across new unexpected competitors even from their suppliers, partners, and customers. (Ming et al. 2011, 7).
Other challenges when adopting servitization is to understand how services produce in the company as those do not always follow the same structure but are customized and vary according to customer. Understanding each job function's input on creating value to the customer is important and helps to map the structural changes that need to be done for adapting servitization.
References:
Design Thinking in Service lecture notes, Shamsuzzoha, A. University of Vaasa, 2020.
The advanced services group (The ASG), What is servitization? https://www.youtube.com/watch?v=i9VBS8D56Gk, 2015 , accessed 25.3.2020.
Ennis, C., Barnett, N., De Cesare, S., Lander, R. and Pilkington, A. 2018. A Conceptual Framework for Servitization in Industry 4.0: Distilling Directions for Future Research. The Advance Services Group Spring Servitization Conference 2018. Copenhagen Business School 14 - 16 May 2018 Aston University and Higher Education Academy.
Ming, Xinguo & Li, D. & Kong, F. & Wu, Z-Y. (2011). Status review and research strategies on product-service systems. International Journal of Production Research - INT J PROD RES. 49. 1-21. 10.1080/00207543.2010.535862.
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