Servitization Competency 103 – Hit Your Stride
The Service Design Group has driven servitization and as-a-service transformations for mid-market and enterprise B2Bs since 2011. This work is rewarding as it unlocks new revenue streams, growth potential, and enterprise value for our clients, ultimately resulting in impactful business model transformation. Today, the case for why a B2B organization should consider and begin a servitization journey is stronger than ever before. However, as we look across industries, very few companies have started or made any significant progress towards servitization!
Hit Your Stride
Of the few B2Bs that have started building service innovations, few hit their servitization stride!
Very few companies, today, are actively doing servitization or as-a-service transformation. Of the few that have started building new service innovations, even fewer are able to hit their servitization stride! Perhaps they prematurely conclude that the servitization journey isn’t paying off. Or, they’re using the wrong metrics to measure progress and success. Or – and perhaps the worst scenario – they decide to just “keep with the original business” because the change is too hard!
Regardless of the reason, what’s clear today is the servitization clock is ticking, pressure is mounting, and there is a growing sense of urgency to really transition from product-derived to service-derived revenue streams. While this is the correct strategy, we must recognize and understand the core competencies to actually hit your stride with servitization.
In our experience, most organizations do not have the critical core competencies needed to go from building new services to an actual portfolio of services that provides a going concern and legitimate revenue contribution to the firm. If you’re trying to get to that next level of your servitization journey, take stock of these competencies and see if you have what it takes!
You need a pipeline management system that lets you quickly identify and add ideas as they materialize.
To get here, you successfully unstuck, started servitization, built a service and went to market. Now, it’s imperative to keep the ideas flowing and the build process humming so you can do more and more with services. At this point you will need a pipeline management system that lets you quickly identify and add ideas as they materialize. More importantly, your pipeline system must be specifically tuned to fully develop, consistently evaluate and efficiently mature ideas into investable, actionable services and solutions. The maturation cycle needs to cover the full-service stack: identity, branding, outcomes, jobs to be done, value proposition, segments, go-to-market, packaging, pricing, channel dynamics, value for the business, value for the customer, component architecture, experience design, operations, delivery, financial modeling and key metrics.
You must manage each launched service and effectively evaluate the balance of your portfolio of services.
A well-oiled and complete service idea pipeline isn’t enough on its own. You need a portfolio management – or science – model to complement the idea pipeline. It should have many of the attributes of the pipeline system, but the key difference is the portfolio model must handle the services which have been “launched” (taken to at least one customer). You must be able to manage and improve each launched service, as well as, effectively evaluate the performance, balance and effectiveness of your portfolio of services. You have to understand the promise and benefit of each individual service and how services combine to create a well-structured basket of options capable of driving your as-a-service transformation. In our experience, the traditional “quad chart” used in product portfolio management won’t do what’s needed. Instead, you need portfolio models that are tuned to the realities of service-based offerings, pricing models, revenue-generation timelines and other service-specific key metrics (e.g. renewals and utilization) that are absent from (most) management science.
To really hit your stride you will need someone – or a small group – owning and driving the success of each service offering and the aggregate portfolio of services. In our experience, too many firms believe that an existing product manager can simply “also do services on the side.” This does not work. To hit your stride, you need at least one dedicated service manager, who is fluent in services-thinking, pricing models and go-to-market that is also empowered to drive service-success independent of product offerings (as often, this will require some cannibalization and healthy competition with your products while you are in transition). This person can’t be your standard product manager. They need a more robust appetite for risk and a higher tolerance for ambiguity. They also need an open, continuous-learning mindset, as there will be aha moments, missteps and pivots along the way.
Find a way to use fractional resources and align incentives to get your new service innovations delivered.
As with the requirement for service management, your services will go nowhere and you will not hit your stride if you do not have dedicated delivery capabilities. In our experience, it is often impossible in the early days to have fully dedicated service delivery teams. That’s ok. We solve for this with a delivery pods concept. That is, find a way to use fractional resources and align incentives so you get the most out of the resources already in the organization and prove that the time spent delivering services is in the best interest of the organization. When successful, the time allocated to service delivery will grow (or, often, people will see service-success building and ask how they can also contribute to the service delivery pod!).
It’s important to note that hitting your stride with servitization isn’t a one way street. You’re not just pushing services at your customers. You got started with customer-centric ideation and co-creation. And, just like in the beginning, you need that continuous customer voice to be successful hitting your servitization stride. That’s where feedback loops come in. You need to continually pulse your early service customers and learn from them. Was the service delivered as expected? Did they perceive it as a complete service solution? Did they get the outcome expected? Were they surprised or disappointed by anything? Make sure to listen for yet undiscovered areas of opportunity so you can feed those back to your service pipeline and keep strengthening your budding services portfolio!
Stay Tuned! Part Four will cover the core competencies for achieving servitization at scale!