Servitization improves revenue and customer experience

Dec 14, 2015 7:00:09 AM

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The case for servitization: Improved revenue generation for manufacturers and a better experience for their customers

Some enterprises are well on the way to complete servitization of what used to be product offerings, and others are defining their goals and planning for it. Many are looking for a sound roadmap to take advantage of servitization soon, in a low-risk manner that avoids missteps. Some industry observers say servitization is how manufacturing companies will survive. Others point out that it promises the advantages of a much improved customer experience and a more predictable business model for manufacturers. We’ll consider the practical aspects of servitization in today’s and the next four blog posts.

Fast evolution of the business model from products to services

Especially in the realm of the equipment and discrete manufacturing companies To-Increase supports, we expect servitization, enabled by the cloud and the internet of things (IoT), to become a standard business practice. If you browse around our blog, you see that we have discussed it repeatedly in different contexts, for example, in a post from June of this year.

Servitization brings one of the most fundamental business model changes in many decades. In the world of machine and equipment manufacturing, it’s directly driven by the increasingly complex business needs of manufacturers and their customers. Not even constant technical innovation and product upgrades are enough anymore to succeed and compete. Customers want more from the companies that provide them with business-critical machines and equipment. They are looking for these products to be surrounded by intelligence that enables them to maintain or increase their value. A mere equipment commodity cannot deliver that, even if it comes from a highly customer-focused company. Many organizations engage in ongoing optimization efforts to become ever more competitive and relevant. They need their machines to come along with them as they learn and adapt to new demands from their customers. Servitization, where a once firmly circumscribed product becomes a component of a flexible service offering that can evolve based on learning and insight about its performance and customer needs, can make that possible.

Leading the way on the servitization journey

We think of servitization as a transformative journey that begins with your tangible, traditional products. You find ways to augment them with supporting services, add more strongly differentiated services, and eventually deliver advanced services that can supplement or even fully replace your product offerings of today.

Some companies have already advanced far along the servitization path, including some well-known manufacturers. Providing valuable services has become a strong competitive distinction for them. For example, the Civil Aerospace division of Rolls-Royce sells TotalCare, a comprehensive maintenance and engine management service, together with the engines purchased by airlines. The company promises TotalCare customers controlled costs of owning and operating Rolls-Royce engines, better availability or uptime, a higher asset and brand value. They pay a fixed price for the amount of hours flown. This service generates more than fifty percent of Rolls-Royce’s aerospace revenue.

Another servitization success is happening at MAN, the German manufacturer of buses trucks, engines, turbomachinery, and other technical products. When it comes to vehicles, the company has made a complete turnaround from a traditional manufacturing organization to a service provider. Fleet operators no longer buy vehicles outright, but sign a service contract that comes with uptime guarantees, driver improvement training, and continuous enhancement of fuel efficiency. Customers pay a fixed, small amount per kilometer or mile driven.

MAN and its customers benefit from ongoing learning, which helps the company make better trucks and assists the customers in operating them more efficiently. IoT-connected sensors in the various systems and components of MAN trucks and buses provide a full view of how a vehicle performs on the road, enabling improvements based on real-life running conditions. Customers receive usage data for drivers, which means they can see whether a driver, for example, speeds or wastes fuel by leaving the engine running when the vehicle is stopped. Customers can send their drivers to MAN’s training courses to hone their skills.

Other posts in this series:

If you’re interested in discussing servitization and any of the issues the transition brings up, or have questions and feedback, I would love to hear from you. Get in touch with me or contact To-Increase.

 

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About Author
Luciano Cunha

Luciano Cunha

Chief Executive Officer (CEO) For Luciano, being responsible for To-Increase’s global sales and marketing means unleashing the company’s insight, innovation, and creativity to tell our story and help customers achieve their goals. On the road much of the time, he travels the world to meet with customers, understand their challenges and ambitions, and find the most effective ways to help them advance. Luciano develops and mentors our marketing and sales team, and creates strategies to help the To-Increase worldwide partner channel thrive and grow.
Making Customer Needs the Main Business Driver Luciano and his team have daily conversations with the To-Increase research and development organization to bring customers’ requirements and concerns into the road maps and design of our solutions. Luciano brings his insight to the marketing group to make sure the company’s communications resonate with customers and speak directly to their experience.
“I’m awed by customers’ innovative spirit in taking business management technology past its limits and by their generosity in letting us participate and empower them. I hope to transform our organization to become even more customer-centric than we are today. That means making more resources available to spend productive time with both our customers and partners, so we can ensure that we place into customer businesses effective solutions that fit the evolutionary stage of their operation and the way their people and processes work.”
Empowering a Global Channel
Because To-Increase only sells through partners, readying the channel to be successful in helping customers is a business-critical effort. Luciano aims to meet partners where their interests are. Partners who consider the relationship with To-Increase strategic can rely on our industry specialists to work with them as they plan their growth and serve customers. If partners prefer a less collaborative relationship, they still receive the rich To-Increase expertise and resources to ensure they win the business, perform a successful deployment, and retain a satisfied customer. In working with partners and their customers, Luciano brings to bear his experience of many years of creating successful, customer-focused business development and marketing strategies in many of the world’s countries and regions.
Enabling Customer Success in Challenging Business Environments
Looking into the near future, Luciano expects that customers will continue to expect To-Increase to help them make business sense of unfolding trends and technologies. For example, the internet of things (IoT) will thoroughly revolutionize manufacturing, engineering, and supply chains. Big data will be meaningful and valuable when decision-makers can use technology solutions to transform it into actionable business intelligence that supports key roles and business processes. Mobility will help companies become digital enterprises and move business processes forward from any location, at any time. Team To-Increase harnesses innovation to help customers translate the promise of these technologies into business results.
Before his current role, Luciano for several years was one of To-Increase’s global industry directors, responsible for our industry solutions. His experience also spans more than 17 years in IT and manufacturing management roles. These positions took him into various areas at IBM Brazil, serving as product manager for several software development companies, and included working in senior management at a manufacturing organization in the U.S.
Luciano is married with two young children. Away from work, he enjoys participating in a soccer class together with his son and daughter as well as taking relaxing walks in natural environments with his family.

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