Capabilities to Servitize – Part One
The drivers and benefits of servitization, digitalization and as-a-service transformation are clear and compelling. Market-by-market and segment-by-segment, products, incremental innovation, and transactional relationships are being replaced by services and solutions that deliver relevant outcomes to customers. Those who make this transition are rewarded with diversified revenue streams and enhanced enterprise value.
If you’re considering servitization, review your must haves. If you have too many gaps, it may be implausible to start your journey, today.
At The Service Design Group, we’ve been guiding mid-market and enterprise B2Bs through the process of transitioning from product-based revenue to service-derived revenue streams since 2011. Today, we’re encouraged by the increased number of firms considering embarking upon servitization, digitalization and as-a-service transformation journeys; however, over the years, we’ve identified a number of critical items that – if missing – make it difficult to have a credible start.
If you’re considering a servitization, digitalization or as-a-service transformation, we encourage you to review our list of must haves. While you can make do with gaps in some of these areas, if too many of these are missing, it may be implausible for you to start your journey, today.
This article is part of a two part series. Part 2 will cover the softer capabilities (management and leadership) required to servitize.
If you’re looking to servitize, you must have direct access to the target customer.
This one is critical! If you’re looking to servitize, you must have direct access to the target customer (not to be confused with the consumer!). If you’re stuck behind a channel and the opportunity to servitize is with the customer at the end of the channel, servitization will be a long and difficult road for you. Likewise, it will be a challenge if your servitization opportunity is in a market or segment where you have little to no penetration or brand awareness. Make sure you’re clear on your current level of customer access as you look to servitize.
Data (or data access)
While data (aka big data) isn’t a necessary component of servitization, it sure is a useful one. And, let’s face it: in today’s digitally fueled, data rich world, the most interesting and value generating servitization plays will inevitably include a data story! Which brings us to, do you have the data or the ability to get it? Keep in mind a simple “yes” isn’t good enough, because the next, much more critical questions are whether the data contains what you think it will and can you use it to deliver an outcome for your customer? Make sure you know – or are very confident on your data play – before you go running down the data-driven servitization path.
Field skills (or boots on the ground)
Field skills and personnel are a must have for servitization
This can be a contentious one! Many view servitization, digitalization and as-a-service models as some kind of efficiency play. The logic being that digital technologies can unlock efficiencies and levels of scale previously unheard of and unreached. The insights will be amazing! Or so the logic goes. We believe it’s naive to think that your people – your greatest investment! – can, will or should be eliminated. In our opinion, field skills and personnel are a must have for servitization, not something to be eliminated. They may however, take a distinctly different footprint when combined with a true as-a-service business model!
Industry / Process expertise
Tightly related to – but very different from – data and field skills is deep, current and relevant industry knowledge. Not theoretical knowledge gained from research or analytics. But real knowledge, from years of practical experience. This is particularly true in process industries. If you’re considering a servitization play but don’t have in-house domain knowledge and hands on expertise, you will need to fill this gap before going too far with servitization.
For further reading, check out Part Two! Part Two covers the soft skills (leadership and management) that are just as vital as these hard, technical skills to the success of your servitization initiatives.