servitization is the new normal

Me, Anna

Servitization is the ‘new’ normal.

Introduction to the results of a research to Servitization by Anna van der Togt & Livework

We invited business leaders from 7 sectors to get inspired and discuss the topic servitization.

The evening revolved around

The Topic: Servitization...the process through which (originally) product focused companies change their strategies and value proposition to services.

The business drivers written on post-its by participants divided in four categories

Why shift to services? - Participants

Client

...to increase client loyalty

...to have contact with the client on a daily

basis

Economic

...to maintain a premium price level

...to make business across the total product

life-cycle

...to damp cyclical streams of income

Competitive

...to differentiate from competitors

Environmental

...to be able to provide better products that last longer --> sustainable

In the context of B2B product oriented companies:

Why shift to services?

The bigger picture:

Responsibly using resources

Business drivers:

Increasing value through services

Client drivers:

Getting solutions that provide support

B2B Clients want solutions that provide support. Not only by alleviating some of the product-related burdens, but also by supporting them in achieving their key goals. Offering integrated product-service solutions potentially is about shifting your role from supplier to trusted partner. This allows your clients to focus on achieving the best results for their customers by jointly applying core capabilities and sharing responsibility.

By offering integrated product-service solutions rather than products, companies increase the value of their offer. The proposition is no longer evaluated on its quality and associated costs, but on its value for the client’s overall process. This total package differentiates the company from its competitors and it allows greater profit margins to be made. Moreover, servitization contributes to provide a way to create long-lasting client relationships.

Servitization can be a solution to the supposed conflict between economic growth and environmental considerations. By providing use or result of a product rather than ownership of the product, the supplier can eliminate incentives to produce products that must constantly be replaced. Thus reducing waste.

Before deciding where to shift to...

What is the current situation?

Pure Services Clients pay for the

expertise of a service provider (no products)

Result Oriented Services Clients pay for the result

of a product (or of a combination of products)

Use Oriented Services Clients pay for the (best)

use of a product

Possession Oriented Services

Clients pay for a product that lasts as long as

possible

Pure Products Clients pay for a product

The attendees from B2B product focused companies all indicated that the majority of their portfolio could be plotted around pure products and possession oriented services. The use oriented services were mostly trainings. Some participants indicated that their portfolio included services that could be considered result oriented. However, these are accompanied by extensive contracts causing the risks and burdens to remain with the client. Therefore it is questionable whether these type of offerings are truly a shift from product to client focus.

Pure Services Clients pay for the

expertise of a service provider (no products)

Result Oriented Services Clients pay for the result

of a product (or of a combination of products)

Use Oriented Services Clients pay for the (best)

use of a product

Possession Oriented Services

Clients pay for a product that lasts as long as

possible

Pure Products Clients pay for a product

Most of the unacknowledged messiahs attending the evening hoped that the majority of their company’s portfolio would shift towards use- or result oriented services. They want their organizations to shift its focus from the physical design and production to providing solutions that fit the client and its context.

How far should you servitize?

The service aspirations are...

How far should you servitize?

Challenges in the shift to services

Overcoming Resistance

Most of the attendees emphasized that their biggest difficulty is changing their

own organizations & ecosystem. People are too stuck in their product focus

and structures and there is no mindset present that fits a service provider.

Reinventing the Business

Designing the business side of a servitization shift is hard. The business model has to be reinvented, new types of contracts need to be found and the shift of risk needs to be well thought

through. A clearly-defined service strategy is paramount. However, to formulate this vision the company

needs a new shared language and a thorough understanding of their client’s

operations.

Offering Complete Solutions

Clients want servitizing companies to unburden them from product

related activities, want them to share responsibility and would like them reach their goals. For that reason, servitization is all about offering integrated solutions. The challenge in providing solutions is

recognizing what a client (unknowingly) wants and needs and taking care

of “everything” (e.g. maintenance, upgrades, repair, returns, energy etc.).

How to tackle these challenges?

A Livework Case for Servitization

Differentiating the

In 2014 Kone targeted ambitious growth targets for their services business. To do this Kone needed to differentiate their offer in the market and re-think their sales approach to grow their business.

Working across four European countries Livework helped Kone define a new maintenance offer and create a consultative sales approach. This offer and approach has lead to higher sales conversions, new digital sales and service tools and the streamlining of back office work driving efficiency.

“Truly customer centric insight lead to higher quality of concept. Collaboration with management was high and effective Integration with business teams much better than other Konedesign projects”

Ralf Thierling , Head of Maintenance Services

Kone, Europe

maintenance service offer

And now...Our hunger for knowledge concerning servitization is far from satisfied. We were very much inspired by your stories and would like to continue the conversation. Let’s keep sharing insights and explore new business models, collaborations, strategies, systems and ways of working together.

To Conclude.We want to thank all the participants of the wonderful evening for their enthusiasm and contribution. Servitization will be on the business agenda for the foreseeable future. Using design thinking can bring another level of capabilities to organizations by bringing in the crucial human perspective that makes any endeavor towards services more relevant.

Want to know

More?

Published White-papersThe results of Anna’s graduation

project for Livework are published in three white-papers. Find them on

Livework’s website:

https://www.liveworkstudio.com/whitepapers/servitization/

Presentation & DrawingsThis presentation and scans of the beautiful drawings can be found on

Livework’s website:

https://www.liveworkstudio.com/collections/servitization-is-the-new-

normal/

Get in Touch!Do you want to sit down with Livework? Please give us a call

Melvin Brand Flu [email protected]

+31 655 767 278

Erik Roscam [email protected]

+31 624 518 462

Anna van der [email protected]

+31 655 968 367



https://www.liveworkstudio.com/collections/servitization-is-the-new-normal/

