It might have been its association with the buzzwords and hype flying around Industry 4.0, or even just the American ‘z’, but it took me a while to realise that ‘servitization’ is a real and meaningful word, like a few others we've recently learned.
As it turns out it is ‘a thing’, and one that has been around for a few years. The dawn of a new digitized (again with the z) age in manufacturing has opened new possibilities, making servitization all the more important.
In essence, it’s about the customer paying for an outcome rather than a product, meaning the business is providing a service that adds value. Nick Peters, writing for The Manufacturer, provides a bit of history with some examples, and identifies four traits of a servitization company. Nick also makes an interesting observation that companies still focussing on outputs are perhaps not offering the best service they could, and what they do offer might be eating into profits.
So if you’re a manufacturer that has already made the leap to servitization, then you’ve all done very well. If you’re a customer paying for a manufacturing service, with all the value-add that brings, then you may be rightfully braggadocious.
Today, the speed with which digital storage and data transmission have come down in price has made servitization possible for a wide array of businesses. But, why bother? If your product is popular with customers, why mess with success?
It is a reasonable argument to make, but as a study conducted by The Manufacturer with Microsoft demonstrates, companies who think they are in the output-only game are quite likely to be offering service as a free sales incentive that ends up eating into profitability.
Better to improve the service offering and wrap it together with the product in a way that provides an improved experience for the customer.