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5 Recent Examples of Servitization

The formula is straight-forward: markets match customer needs with businesses that provide options intended to satisfy them. Products have historically been the solution: the customer gives the business money; in exchange, the business transfers product ownership to the customer and the customer puts the product in use to complete a task, perform a job or achieve an outcome.

There is an increased demand for solutions that perform a job or deliver an outcome.

Things are changing! There is an increased demand for solutions that perform a job or deliver an outcome. This demand is pushing industries to convert from a product-base to a service-base. While some industries (think software) are close to 100% converted, many still wonder if their industry will change. It’s not a matter of if, but when!

Industry by industry, the shift to as-a-service is happening. This is not a phenomenon exclusive to the software sector or something that only matters in the B2C world. In this rendition of “Recent Examples of Servitization” we cover glimpses of servitization in Banking, Automotive and Healthcare.

Banking

This approach allows both parties to improve their existing offerings and co-develop future offerings

Our first example comes from the world of financial services, where indicators and trends show that banks are opening up to the idea of banking as-a-service (BaaS). In brief, the premise is that large financial institutions have an opportunity to leverage as-a-service business models to create co-opetition (and avoid competition!) with the new direct to consumer and “digital native” players entering the sector. How? By providing their banking capabilities via APIs to the non-financial institutions who want to offer financial products (and who increasingly “own” the customer experience and customer relationship). This “banking as a service” approach allows both parties to improve their existing offerings, learn more about their customers, and co-develop future offerings. Sure, the traditional banks may have to accept the “loss” of the customer relationship, but likely the “banking-as-a-service” opportunity will prove more lucrative.

For more about the opportunities for servitization in the banking sector, read the article “Can legacy banks stay relevant with banking as a service?” from Tech Wire Asia.

Automotive

Up next are multiple examples of evolving service strategies in the Automotive sector.

They see the writing on the wall that “cars as a service” is coming!

To start things off, German giant Volkswagen recently bought a majority stake in Europcar, a car rental service with infrastructure laid out across the European continent (note that VW had previously invested in the company). Why? They see the writing on the wall that “cars as a service” is coming! Rather than try to build it all from scratch, VW took this route to step into a new market and attempt to beat out not only other traditional automakers, but also ride share moguls such as Uber and Lyft.

For more insight into this move towards as-a-service from Volkswagen, read the article “Why Volkswagen thinks buying a car rental company will turn it into Uber—but better” from Fortune.

In parallel, Renault recently announced a new subscription only cross over vehicle, built via a joint venture with Jiangling Motors. It’s an interesting study in product-meets-service thinking. While still heavily focused on “product innovation” it’s a glimpse of what might come in the industry, where the focus could shift to the design of the service more than the design of the automobile.

For more information about Renault’s subscription only cross over, read the article “Renault’s Mobilize Limo is a subscription-only electric crossover” from IOL.

Also in automotive, there’s an interesting attempt from Tesla to offer after market features or enhancements via a subscription service. Tesla is beta testing selling its automated driving as a subscription. This one will be interesting to watch over time!

For more insight into Tesla’s potential service add-on play, read the article “Tesla could become a subscription company” from Seeking Alpha.

Healthcare

It also improves health outcomes by allowing rural and underfunded hospital systems access to technology

Increasing healthcare costs are driving medical device manufacturers to reimagine their CAPEX-intensive business models. For many, this means transitioning to offering their most expensive products as-a-service. This allows them to not only generate recurring revenue, but it also improves health outcomes by allowing rural and underfunded hospital systems access to top-of-the-line technology.

For more insight into the possibilities for as-a-service in healthcare, read the article “The Rise of the On-Demand Robot Industry” from MD+DI Online.

This shift to services is not contained to only the industries above. The move to as-a-service is happening everywhere. Act now to be a leader in your industry, generate growth, and capture options for increased market share, wallet share and recurring revenue.

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