Making Servitization Happen: Building the Value Proposition

That question set the direction for Episode Two of Copperberg’s Servitization Series, which focused on the practical work required to make servitization viable inside manufacturing organisations. 

Hosted by Managing Director Lisa Hellqvist, the session brought together Iain McKechnie, Director of Strategic Partnerships at the Advanced Services Group, Aston Business School; and Alec Anderson, Founder and Managing Director of Koolmill Systems.

Together, they explored how a clear servitization framework helps manufacturers move from ideas to evidence before committing to change.

The Servitization Series is a structured set of webinar discussions that examine how manufacturers transition from product sales to service-led business models. 

Servitization as a Growth Driver

Servitization refers to the shift away from selling equipment as a one-time transaction and toward offering services tied to the equipment’s performance over time. This change reflects how customers evaluate value. 

Many are now less interested in buying assets and more focused on reducing risk, controlling costs, and keeping operations running. Selling products alone often fails to address those priorities. 

Growth comes from aligning offerings with what customers are trying to achieve, which places pressure on manufacturers to rethink how they define and communicate value. A clear value proposition becomes critical because it explains how a service-led approach captures and creates customer value, which is the tangible benefit a customer receives when a service reliably improves their operational or financial success.

Anderson illustrated this dynamic, where early on, Koolmill focused on large rice mills with capital to buy machines, but these customers had little reason to change. During customer discovery, he realised the real demand was for outcomes, not equipment: “Customers didn’t want machines. They just wanted milled rice.” This shifted Koolmill’s value proposition toward performance and results.

The Shift From Product to Service

This transition changes a company’s core focus from selling assets to selling results. The business model shifts from a one-time transaction to an ongoing partnership centred on outcomes like uptime, yield, or guaranteed performance.

Understandably, there are key challenges in this shift that need to be addressed:

• Building trust: The model requires customers to share operational data and admit inefficiencies. This level of transparency doesn’t come naturally and must be built over time.
• Redistributing risk: The provider now owns the risk of equipment failure and performance. This demands new capabilities in remote monitoring, maintenance, and rapid response.
• Measuring value: Agreeing on how to quantify “value,” such as increased yield or lower energy use, and building a fair revenue model around it is a complex process. Establishing reliable baseline data adds another layer of difficulty.

Navigating this alone is difficult. A structured servitization framework provides the necessary guide. It outlines the phases, tools, and steps to systematically build the new capabilities needed to deliver and profit from customer value.

The Engage Phase: From Discovery to Pilots 

As McKechnie highlights, “We want to be able to understand the empathy that we have between ourselves… providing the product and service and the customer getting the value.” This involves going to the customer’s site to observe their operations, understand their challenges, and identify areas where new value can be created together.

The Advanced Services Group uses a Seven-Step Customer Discovery Process to guide this work:

1. Select customers: Choose partners who are willing to collaborate deeply, not just those with the biggest budget. As Anderson noted, they initially targeted large mills with money, but later found that their true partners were smaller mills with a greater need for change.
2. Brief customers: Set clear expectations for the visit. Explain the collaborative goal of finding mutual value, not making a sales pitch.
3. Conduct field visits: Go to the customer’s operational environment. Anderson emphasised this was key to their discovery, noting the advantage of their open access: “We had an openness with a customer… that I think perhaps if you’re a legacy company… you may not have.”
4. Observe operations: Watch processes in action. Look for workarounds, inefficiencies, and hidden problems that people no longer mention.
5. Create empathy maps: Systematically analyse findings. This tool classifies insights at four levels:
   – Asset/Product level: Pains and gains related to the machine’s use, maintenance, and failure.
   – Business process level: How the asset affects wider workflows, logistics, and team productivity.
   – Business strategy level: How the asset’s performance aligns with the customer’s future plans and competitive goals.
   – External environment: Influences from regulations, market trends, or sustainability pressures.
6. Co-design solutions: Bring insights back to the customer to jointly sketch new service concepts. This ensures that the proposed value is rooted in their reality.
7. Validate scalability through a pilot: Test the co-designed concept with the customer to ensure its effectiveness. This step transforms a single experiment into a repeatable and scalable business model.

A key insight from this phase is that segmentation changes. McKechnie stressed that effective segmentation for servitization isn’t about geography or industry, explaining that: “What we’re looking at… is that you want to identify a segment that will react in the same way to a given service offering.” 

Group customers by their shared response to a specific value proposition. 

The Human Element: Critical Success Factors

The technical and financial aspects of servitization are only one part of the journey. Success ultimately depends on people, relationships, and internal change. 

These human factors form the foundation that the new business model depends on:

• Building deep, operational trust: This is a non-negotiable prerequisite. The customer must be willing to share sensitive data, operational shortcomings, and financial pain points. “If you’re going to be successful with servitization, you need to knock that door down and go beneath [the public face] to find out what’s really happening… it became really painful and challenging to even contemplate sharing your not so good bits in public… this is where the whole trust thing comes in,” Anderson explains. 
• Securing leadership commitment and managing internal change: This transformation can’t be driven from the middle of the organisation. It requires clear, top-down vision and support to align departments, shift incentives, and secure resources for the long-term journey. McKechnie framed it as a dual challenge: “You’re talking about business model innovation… And you’re talking about organisational change. And organisational change has to happen in both the provider and the receiver of that value.”
• Cultivating the right mindset from product to partner: Every team member, especially in customer-facing roles, must internalise a new purpose. The core question shifts from “How do I sell this unit?” to “How do I make my customers more successful?”
• Navigating cultural and behavioural resistance: Change creates friction. Employees and customers alike may feel threatened by new technologies or processes that challenge established expertise and routines. A practical approach is to frame the change not as a replacement of old expertise, but as a new tool that augments it, involving key stakeholders early as co-designers of the new process.

In essence, while frameworks provide the roadmap, trust provides the fuel, leadership steers the vehicle, and a proper mindset makes sure that everyone is headed to the same destination. Addressing these human elements is not a secondary task but the primary work of servitization.

Looking Ahead: Scaling Service Transformation

The journey from a successful pilot to a scaled, mature service business is the final, decisive phase. It requires moving from learning and experimentation to systematisation and growth. 

Anderson offered a crucial reality check, noting that “one pilot doesn’t prove anything.” He stressed that customers in new markets or segments will demand proof in their own specific environment, underscoring the need for repeated, real-world validation as the business expands. 

Equally critical is integrating the right financial structures from the start. The business model and the funding model must be designed in tandem to enable scaling.

Ultimately, the entire transformation rests on a fundamental shift in perspective, best captured by McKechnie’s guiding principle: “Help your customer be more successful, and that doesn’t mean thinking about the product. It means thinking about what they value.”

Scaling a service-led business means repeating this partnership approach everywhere. True growth comes from consistently proving that you help your customers succeed.