How to unlock the value of servitization? Get insights and tools for manufacturing digitalization and service-driven business.
There is a pervasive expectation today that by making certain digital investments (IIoT platforms, machine connectivity, digital customer portals and so on) will directly yield new and improved service revenue streams via new portfolio offerings. The reality is that very few machinery and equipment manufacturers have successfully made the shift from Foundational Service revenue streams (field service, repairs, spares etc.) to Advanced Service revenue streams (performance and outcome services).
This is a very common challenge – a sticking point for business leaders as they ask “how do we monetize digital capital investments and build profitable revenue streams from Advanced and Digital service offerings? Most of the learning curve over the past decade in manufacturing has focused on choosing technology, platforms and data capabilities.
Now, there is a strong consensus that this approach is putting the cart before the horse. You need to first identify what you want to sell and how you will sell it before you can develop the service offering capabilities (platforms, data, digital etc.). It’s time for a new approach, and one that is linked firmly in the reality of service business growth today. Here’s a look at the basic rules to follow and how Tietoevry can help you chart the course for service transformation success.
In this article you will learn:
For centuries, traditional manufacturing has been the backbone of industrial development – but with the advent of technology and digitalization, things have changed. Today, we see how the focus on selling capital equipment is rapidly shifting towards a service-based operational model (Servitization) and the trend is destined to accelerate even faster in the years ahead.
Indeed, in many manufacturing companies, traditional service-based operations are already well established and account for major shares of revenue and margin. But are they sustainable in the long term? That’s a question business leaders are trying to answer. The shift to future proof and digitally powered business models for servitzation brings a set of new and unique challenges to the transformation table.
In response to this rapidly changing marketplace, decision makers face four main tasks. They need to:
All Servitization journeys have two key considerations:
Both of these considerations are obvious and easy to identify. However, they require careful planning and strategic roadmaps for both the implementation of new services and ways of working as well the digital capabilities needed. In Tietoevry’s experience, the most common challenges and the strategic prerequisites in all transformation planning include:
Challenge: The vision for developing a service-based business model may not be shared by all stakeholders. Quite often there are different opinions on the objective, the way the new system should be organized, and also the expected outcomes
Challenge: When it comes to the data assets that service-based offerings require, these may not be readily accessible. More often than not, service data assets are contained in silos at individual business units or service centers that are not connected and use different systems for documentation and other vital information.
Challenge: Your customers’ maturity levels and expectations differ from region to region. This means that your service business will need to be agile enough to deliver both traditional and advanced services in parallel, not to mention the growing demand for outcome-driven services too.
Industrial companies have clearly realized that IT and digital platform investments alone will not support the transition towards Servitization. There is a need to consider both the complete business model, the supporting business capability requirements and data governance processes alongside the assessment of the required digital capabilities.
Tietoevry is the leading expert in the Nordic region and a powerful service transformation partner thanks to our range of advisory capabilties, digitalization expertise and IT offerings – which altogether help you to fast track your service growth ambitions.
Our solution to accelerating the creation of your Servitization roadmap is firmly rooted in ‘what’ you sell, and ‘how’ you sell it. We do this with a unique consultancy approach incorporating strategic planning, advisory and guidance through to selection and implementation of technologies and right-sized digital solutions.
Irrespective of which phase in the transformation journey your company may be on, we recognize that all companies are different with their own special prerequisites and needs.
The above graphic shows one part of a very typical Servitization roadmap that we develop with our clients. It details a scenario of how you are likely to tap into service revenues today, tomorrow and in the future. Furthermore, it takes into account how your Service portfolio needs to adapt to changing customer expectations, and the key steps that need to be considered to enable the journey.
Tietoevry has developed a methodology that focuses not only on technology, but on your roadmap for Service business growth. We put the spotlight on the three primary questions: what you sell, who you sell it to, and how you sell it.
Our experience in working with Nordic equipment manufacturers is that a service customer-centric approach is the key to success.
Working in close collaboration with your team leaders in services expansion, we outline the future of your services portfolio, and then translate this into a step-by-step roadmap. Each development step takes into account the digital capabilities and IT tools that will be needed to support and accelerate the digitalization journey toward services growth.
In addition to foundational platforms and tooling (field service, ticketing systems etc.) we also help you to plan for your data asset needs to support new services, as well as your ERP and core integration requirements with a ‘big picture’ focus.
The servitization journey is most often a non-linear one. To achieve your growth targets you will need a roadmap that is both agile and also firmly anchored in the reality of your services portfolio.
Based on our experience and industry capabilities, we have pinpointed five key areas where we can help you accelerate your Service Transformation. The five areas (outlined in above graphic) are all interconnected and need to be navigated with a proactive mindset. That’s where our Designed to Run approach comes in.
By planning for service transformation in all five areas, we provide end-to-end support that puts you in the driver’s seat – ensuring that your roadmap contains realistic milestones and growth results.
Designed to run methodology helps your organization to become a Cognitive Enterprise.
We have one mission in life. To enable you to leverage the power of digitalization so that you can convert your vision into tangible returns and add value across your entire business chain.
In many cases, this requires a transformation roadmap for technology implementation that not only monetizes existing data across your business, but also unlocks opportunities to develop new ways of doing business and explore new servitized business models.
It makes no difference if your company is large or small, whether you are looking to enhance certain aspects of your operations or if you are aiming for a complete transformation of your service business model, the same principles apply. The key is not to leave good profitable service business behind, but also to ensure that new revenue streams are both stable and recurring.
In manufacturing, we understand that the level of digitalization can differ greatly depending on where the company operates, and that not only our client’s needs but also how they interact with their customers must be taken into account.
Tietoevry has a solid track record of removing the kind of stumbling blocks to progress described in this article and build servitization solutions and strategies that are fit for purpose and tightly aligned with business goals.
Explore more insights on this topic in our blogs or contact us to get started now.
Servitization in manufacturing demystified: Learnings from growing service business
Get concrete servitization learnings based on service business change programs of Nordic manufacturers.