Servitization

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Servitization is a business model innovation that is relevant for manufacturing companies and describes the change in the previous product portfolio away from only material goods and towards a combination of material goods and services . It thus reflects the general economic trend towards a service society at company level.

Examples of servitization have been around for more than 100 years. However, the topic has quickly gained in importance for about 20 years, because due to globalization, companies in high-wage countries like Germany see it as a means of protecting themselves against competition from low-wage countries. In science, servitization has established itself as an independent research topic based on a specialist article by Sandra Vandermerwe and Juan Rada.

The servitization concept

Servitization is emerging both in science and in corporate practice as a concept that can fundamentally change the understanding of products and business models, especially in manufacturing companies. The associated upheavals within the organization - but also the potential benefits - can be as significant as the “just-in-time” or “lean manufacturing” concepts in recent decades. Scientists who are currently driving intensive research on servitization include, for example, Prof. Andy Neely at the University of Cambridge and Prof. Tim Baines at the Aston Business School, as well as the Fraunhofer-Gesellschaft. In practice, the relevance of servitization is shown using a wide variety of examples. Major companies such as Rolls-Royce, Alstom or Xerox have successfully adapted their existing business model to changed framework conditions using servitization (see examples).

Since tertiarization , a trend has developed in which the demand for offers shifted towards services due to increasing prosperity, social change and digitalization . At the same time, the customer plays an increasingly important role in every stage of the value chain of a new product, so that in today's fast-moving world he requires 24/7 support. As a result, ownership of the material product also loses its importance when the service is replaced with the pure function of the product. The new task of organizations is to achieve a customer-oriented production process. The development of goods begins with the customer and is thought through from there "backwards" to the producer. In the maximum ratio of service to product, a purely material product should no longer be created, but solutions and results should be offered. This promotes customer relationships in the long term.

According to the literature, servitization is a “transformation”, a “process” or a “paradigm shift” in which manufacturing companies in particular begin to pursue a service-oriented strategy. In particular, servitization is used when product providers complement their portfolio with services or convert them into a pure service offering with the aim of achieving a competitive advantage. On the basis of these often far-reaching changes towards servitization, win-win situations can be generated for manufacturers and customers. Therefore servitization is seen as a great opportunity as well as a great challenge for the manufacturing industry.

Servitization is to be distinguished from similar terms such as B. "Servicizing" and "Product-Service-Systems": When going through the servitization change process, the company can opt for a portfolio with so-called product-service systems for implementation. Servicizing describes the associated (sales) transaction in which the customer benefit is created by the overall solution.

Service types

Based on Tim Baines, there are three service types with different levels of maturity. "Base services" are services that come in addition to the pure product provision, e.g. B. a spare parts service. "Intermediate Services" aim to ensure the functionality and performance of the product, e.g. B. through preventive maintenance. The idea behind the "Advanced Services" is that customers no longer necessarily purchase the physical product (e.g. crane), but instead acquire a certain result or a desired service, possibly over long periods of time, e.g. B. an (agreed and guaranteed) lifting and transport service. With the latter type of service, the above-mentioned product service systems come into play; in many cases, there is no longer a change in ownership of the physical product from the manufacturer to the customer. Corresponding service lifecycle management is crucial so that the new service concepts can be implemented smoothly. Usually the servitization transformation starts at the level of the "base services".

Examples

An often cited example of servitization is the Power by the Hour model from Rolls-Royce and other manufacturers of aircraft engines. Instead of selling an engine to an aircraft manufacturer, the device instead remains the property of the manufacturer, who takes responsibility for maintenance and repairs. It is paid for per hour of operation of the device. With this new offer, Rolls-Royce was able to stabilize its revenue streams and increase its sales.

Another example is the former British company ICI-Nobel, which made explosives for quarries. ICI-Nobel has started offering blasting as a service. This was possible because the company had specialist knowledge of optimizing blasting processes. The result of this servitization was higher profits and improved customer loyalty.

These are both examples of the above. "Advanced Services". Examples of "Base Services" and "Intermediate Services" that are often offered by manufacturers of goods are:

advantages

Servitization can create advantages for both the supplier and the customer.

Some of the benefits that servitization suppliers expect are:

  • Growth: The services generate additional sales.
  • Maintain margins: Due to the price war with cheap competitors, the margins in the product business are shrinking.
  • Customer loyalty: Services are often less easily interchangeable than products.
  • Intensify customer relationships: Services create human contacts that deepen the relationship with customers.

The following advantages can result for the customer:

  • Cost structure: Servitization transforms fixed costs into variable costs.
  • Risk: Financial risks (for example due to failure of a device) are partially or completely outsourced to the supplier.
  • Operating costs: The manufacturer can often achieve a more efficient operation than the user.
  • Alignment of goals: Supplier and customer have common, rather than contradicting, goals. (In the traditional case, a supplier also earns money with every repair of his sold device, with servitization, on the other hand, it is also in his interest that the device he has built works properly. Thus, both sides strive for the maximum service life of the product.
  • Contracts: The customer achieves long-term quality assurance through contracts for an extended warranty period.

An advantage of servitization for society as a whole can be found in the area of environmental protection : Resource savings are often possible if devices or vehicles are serviced by their manufacturers instead of their users.

Challenges

Servitization not only requires changes in all components of the business model , but also a change in the company's self-image and corporate culture . This includes that companies acquire the customer perspective, deal in detail with the customer's service needs and ultimately manage the transition from short-term transaction business to long-term relationship business. In addition to the physical product technology competencies, the practices for services or overall solutions must also be integrated and developed. In addition, it must be borne in mind that with each additional service level, the responsibility of the producers for the availability and durability of their goods and services increases, and with it the risk.

Other challenges can include B. be:

  • The definition of the product can change completely, so in extreme cases a customer “only” purchases one service. This requires a holistic rethinking and a consistent interlinking of all areas of the company, from product development to sales .
  • Downstream processes, such as product cost and profitability calculations, have to be adjusted due to servitization. In particular, more complexity arises when individual physical products are sold both “traditionally” and used as part of a service contract.
  • Incentive systems, measurement parameters and key figures in “servitized” organizations must be further developed in order to support the company's alignment to the new business model.
  • Service competencies and infrastructures in branches and with partners have to be built up or expanded.
  • Since the modern services of smart objects are becoming more and more complex, the resulting data dimension ( big data ) must be bundled and filtered using innovative technologies. This requires new processes in the service lifecycle management infrastructure. The use of information and communication technologies is an indispensable requirement in all business processes in order to optimize productivity with constant quality and to offer it to the customer as a service.

Servitization is therefore a fundamental change. Depending on the size and complexity of the company, it can take several years of transformation to develop a company focused on new business into a provider of sophisticated product service systems.

Individual evidence

  1. ^ Sandra Vandermerwe & Juan Rada: Servitization of business: Adding value by adding services , European Management Journal, Volume 6, Issue 4, Winter 1988, pages 314-324.
  2. ^ A b Baines, Tim & Lightfoot, Howard: Made to Serve: How manufacturers can compete through servitization and product service systems. Wiley, 2013, ISBN 978-1-118-58531-3 , p. 3
  3. ^ Institute for Manufacturing, University of Cambridge: Professor Andy Neely . 2014, accessed November 10, 2014
  4. ↑ Aston Business School: Professor Tim Baines (PhD, MSc C.Eng FIMechE FIET) . 2014, accessed November 10, 2014
  5. ^ Lay, Gunter (ed.): Servitization in Industry. Springer, 2014, ISBN 978-3-319-06935-7
  6. ↑ Lerch, Christian et al., Fraunhofer Institute for Systems & Innovation Research ISI: Service offers as competitive strategy in industrial firms ( Memento of the original dated December 3, 2014 in the Internet Archive ) Info: The @1@ 2Template: Webachiv / IABot / www.aston-servitization.com archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. . May 12, 2014, accessed November 22, 2014
  7. ^ Baines, Tim & Lightfoot, Howard: Made to Serve: How manufacturers can compete through servitization and product service systems. Wiley, 2013, ISBN 978-1-118-58531-3 , pp. 10-16
  8. ^ Neely, Andy: What is Servitization? . November 30, 2013, accessed November 18, 2014
  9. ^ A b c Baines, Tim: Servitization (Servitization) Explained . In: The Manufacturer November 15, 2013, accessed November 10, 2014
  10. ↑ a b c VeitingerPartners: Servitization is currently the greatest opportunity for device, machine and system manufacturers - but also the greatest challenge! . 2014, accessed November 16, 2014
  11. ^ Atos Consulting: Servitization in product companies, 2011, accessed on November 10, 2014
  12. ^ Baines, Tim & Lightfoot, Howard: Made to Serve: How manufacturers can compete through servitization and product service systems. Wiley, 2013, ISBN 978-1-118-58531-3 , pp. 6-7
  13. ^ Toffel, Michael: Contracting for Servicizing . May 15, 2002, accessed November 15, 2014
  14. ^ Baines, Tim & Lightfoot, Howard: Made to Serve: How manufacturers can compete through servitization and product service systems. Wiley, 2013, ISBN 978-1-118-58531-3 , pp. 64-68
  15. ↑ Freitag, Mike & Münster (ed.), Marc: Requirements for a service lifecycle management. Short study at German companies . 2013, accessed November 9, 2014
  16. ↑ PTC: PTC: The right approach is decisive. On the way to becoming a service company . In: Scope Online July 18, 2014, accessed November 23, 2014
  17. ↑ a b c d Innovation Laboratory of the University of Magdeburg: An Introduction to Servitization - A Business Model Innovation for Manufacturing Companies . 2014
  18. ^ Neely, Andy et al .: The servitization of manufacturing: Further evidence . 2011, accessed November 8, 2014
  19. ↑ Lienert, Elfving et al .: Enabler or inhibitor - understanding the role of KPIs within the servitization process . November 13, 2014, accessed November 28, 2014

literature

  • Timothy Baines & Howard Lightfoot: Made to Serve: How manufacturers can compete through servitization and product service systems , Wiley, 2013.
  • Gunter Lay & Petra Jung Erceg: Product Support Services: Concepts and Examples of Successful Strategy Development , Springer, 2002.