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It’s clear that servitization – the transformation from selling products to selling Product-as-a-Service – has made its way into the minds of most manufacturing organizations; however, how far along the journey they’ve advanced will vary greatly from company to company.
Servitization comes with great opportunities but also poses many challenges for a service leader and his/her organization. So, what’s the path to success?

Author Thomas Igou | Copperberg

This past February in Frankfurt, Clayton Slagle, Business Value Consultant at Syncron, hosted an exciting workshop on the paradigm-shifting challenge of servitization with a passionate group of more than 20 service and parts leaders from cross-industry manufacturing organizations.  Below is a recap of the great discussions that occurred over a two-hour period.

Why Servitization?
“It’s inevitable: selling products-as-services will become a major component of OEMs’ businesses over the next decade.” – Aly Pinder, IDC

The need for servitization is an inevitable consequence of changing customer expectations coupled with an array of new (and cheap) technological developments.  As consumers, we expect continuous real time updates available on our devices, whether it be on the location of a parcel delivery, status of an upcoming flight, or the development to the latest breaking news story.  These consumer expectations are taken with us to the workforce. As such, we now have the same expectations in our B2B relationships. And with heightened development in the performance of technology around remote diagnostics, augmented reality, artificial intelligence, gps tracking, ecommerce platforms and many others, the standards of B2C are much more accessible today to the B2B world than just a few years ago.  

Servitization is the way for manufacturers to meet these new customer expectations.  As products become more and more commoditized and interchangeable, it’s not enough to compete on product quality to gain a competitive edge.  The battlefield has moved on to the overall experience of a product, and service accounts for a big chunk of that experience. 

It’s interesting to note that the push for servitization itself from manufacturers differs; for some, it was driven by a visionary leader who wanted to be at the forefront of his sector; for others, it was playing catch-up to competitors who had already gone down that road; and for one, a Swedish manufacturer of refrigeration systems for trucks, it began from customers themselves, who requested a new relationship from their supplier.

Challenges of Servitization
However, from a manufacturer’s perspective, moving along the maturity model is met with a multitude of challenges. The basic foundation of building a servitization house is data.  We hear a lot left, right and center that companies need to learn how to use the data they already have rather than try to acquire more data.  As simple as that sounds, when you work in a traditional, global organization that’s been around for decades and whose business model is to grow through mergers and acquisitions and with no centralized ERP, data turns out to be quite bad.  Databases are corrupted so it becomes impossible to make smart decisions. Many of those “smart decisions” rely too heavily on key individuals – and when they leave, that knowledge is lost because it is not captured or documented.  And as teams work more and more remotely with a global scope, the cultural aspect of how to deal with data becomes an issue.  As one participant put it, priorities can vary region to region.

There was general consensus that, to really get going with servitization, the key challenge was understanding the customer.  This led to intense discussions. As the Swedish manufacturer of refrigeration systems said, “each customer will have specific requests so servitization cannot be standardized, it needs to be agile.”  But in order to truly understand customers, you need to onboard sales, who has the relationship with customers.  That also became an issue for many organizations, who could not make their sales team see the benefits of moving from a pure transactional business model towards an outcome-based model.

And the word “customer” itself is a broad term.  Some participants came from organizations with a more direct supplied/end-user relationship, while others had a business model where their direct customers were not the end users, but distributors, service centers, resellers etc. As one participant asked, “what is my interest as a service center in a pay per use model?”

Syncron’s View on the Road to Servitization
Clayton explained to the workshop participants Syncron’s Servitization Maturity Model:

Syncron’s maturity model is a four-step process that will serve as the roadmap for manufacturers to navigate the necessary steps and changes required for the journey to delivering Product-as-a-Service (PaaS). And while operating two service models in parallel will most certainly be a balancing act, it is possible. Along the way to the full realization of delivering products as services, manufacturers will fall into several stages of maturity. Manufacturers must cultivate strong ecosystems of technology and consultative partners to accompany them on this journey as they invest in the new resources, technology and infrastructure needed to succeed.

The end goal is of course always the same: deliver a service.  What changes as companies move along the maturity model from left to right is the customer’s experience on how that service is delivered.  Clayton also stressed: “the importance on the left side is the best preparation for the right side”. Syncron also believes that optimizing today’s reactive, break-fix service is a prerequisite to the full realization of servitization. 

Conclusion
The move to Servitization makes sense when you can provide – and maintain – the asset cheaper and better than the customer can on his own.  The service portion of this leverages the expertise and the economies of scale that the manufacturer or distributor owns. Regardless of whether you are maintaining an existing service operation or are moving to Product-as-a-Service as fast as you can, excellence and efficiency in your service parts business is both necessary and profitable.

Is your service department meeting the basic needs or delighting the customers? Use the Kano Chart to map out your organisation’s service prowess and comment below as to what you think are delighters in your service today.

The Kano Model as illustrated above has two extremes of a product or service features on the horizontal axis- Not implemented and Fully Implemented. On the Vertical Axis is Customer Satisfaction Extremes- Satisfied and Dissatisfied. The red, purple and green shows the musts, wants and exciters for the customers. A must have to be met while increasing the wants beyond a certain level will make customers happy linearly whereas exciters increase customer delight exponentially.

Let us first try to understand the Kano Model from an everyday example. In 2010, a mobile with a large screen along with a good resolution was a customer delight. If you increased the quality of the screen, the customers became more and happier. Fast forward to 2012, HTC Droid DNA was released with a 1080p display and then every mobile phone manufacturer started producing phones with a 1080p display. Fast forward to 2015, no one would buy a phone with anything less than Full High Definition screen and it became a basic need. Not having a basic need fully implemented leads to a dissatisfied customer. Moral of the Model: Delights become basic needs over time and companies have to figure new delights to keep customers excited and happy.

How basic needs(musts) work differently from exciters is not having exciters will lead to a neutral customer and implementing it will increase the customer’s delight. On the other hand, with a basic need(must), not having it can kill your brand, product or service. To put it in another way, your service must need the customer’s basic needs for you to remain in business while you should start working on delighters to differentiate from your competitors. An example of a basic need is customer care that answers within a reasonably short amount of time, in a polite manner and knows the basics of the product or service they are providing support for. Remember how quickly you hung up on that airline support who was rude to you and been booking with the rival airlines all your life?

Good Service in the B2B area half a decade back implemented was a delighter for the customer. As companies continuously improved their service the customer delight increased but also customer expectations increased. Having your service workforce address a complaint within a few hours was once a delight is a basic need today. Most companies have adopted automated replies communicating the time the customer must expect a reply in. Interactive Manuals and Websites for troubleshooting has been a basic need for most service companies whereas some are striving to please through the use of AR/VR tools.

Ask a customer twice about the problem or don’t remember what you fixed the last time? Prepare to lose the customer at the blink of an eye. Centralising all information systems from the customer service desk to the on-site field workforce has become of utmost importance with B2C companies setting amazing customer experience examples. If you can’t deliver a spare within the right amount of time, someone somewhere will before you. With today’s search engines, 1 day across the globe shipping and alternate parts market, you have to make sure to provide the right customer experience at every step of the customer’s journey.

Is your service department meeting the basic needs or delighting the customers? Use the Kano Chart to map out your organisation’s service prowess and comment below as to what you think are delighters in your service today.

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