Servitization: The Changing Face of Manufacturing & Service

Once upon a time, the manufacturing service chain was comparatively black and white: manufacturers would make things for people, and service companies would do things for people. Not any more.

Today, boundaries are blurring, as trailblazing manufacturers embark on a transformation known as ‘servitization’.

During a recent webinar, we asked Dr. Howard Lightfoot, manager of the Operations Excellence Institute at Cranfield University, what servitization means, and why it’s becoming such a competitive priority for the manufacturing industry as a whole. He explained:

“In recent years, more and more manufacturers are competing through a portfolio of integrated products and services. This is a conscious and explicit strategy for manufacturers, with the provision of product-centric services providing a main differentiating factor in the marketplace. And it’s this which has become known as the servitization of manufacturing.”

The nature of servitization

Servitization has been a long time coming. In fact, as Dr. Lightfoot argues in his book, Made to Serve, academics have been encouraging manufacturers to focus on the customer end of the supply chain for over two decades.

If companies have been slow on the uptake, it could be because the move from making products to delivering product-centric services is no small shift – it means transforming both your organisational structure and processes.

At Cranfield University, Dr Lightfoot investigated a number of pioneering companies that were excelling in servitization, including Rolls Royce, Xerox and the London Underground. He found that these organisations followed a common competitive strategy, with greater emphasis placed on customer intimacy. In fact, the strategy aimed to push performance in three key areas:

1. Customer Intimacy. Combining detailed customer knowledge with operational flexibility, to create the best total solution for the customer.
2. Operational Excellence. Controlling processes to effectively deliver the best total cost to the customer.
3. Product Leadership. Selling the best product on the market.

The three services of servitization

Dr Lightfoot also examined the various services offered by servitized organisations. He divided these services into three types: base, intermediate and advanced. The more advanced the service, the more value offered to the customer – for example:

1. Base Services: Product Provision
2. Intermediate Services: Product Repair, Condition Monitoring, Field Service and Customer Help Desk
3. Advanced Services: Pay Per Use, Fleet Management, Availability Contract and Integrated Solution

As product providers climb through this service hierarchy, they take on more responsibility and risk. As Dr Lightfoot says:

“If you’re offering an availability contract, and the customer is paying you on that basis, you have to ensure that you can deliver against that. What you get paid depends on what you provide. It’s not a case of ‘you sell the product, it breaks, and you fix it’ – those are the old days. You don’t see that in a modern servitized world.”

Technology – at the heart of servitization

What makes for a successful servitization strategy?

One thing that all the servitization pioneers Dr Lightfoot studied had in common was their use of connected technology to inform and improve use, maintenance and repair actions.

This technology enabled a higher level of service delivery, tailored to the customer’s individual product needs. Dr. Lightfoot mapped the typical process:

• Monitor. Transducers, data storage and fault code generation are used to continuously sense critical product systems and subsystems.
• Transmit. Base and fault code data are periodically transmitted by the product either via satellite, GRPS, radio, internet or cell phone.
• Store. The data is stored by the organisation on either hard or soft storage systems.
• Analyse. The data is diagnosed and analysed to predict future product behaviour and usage trends.
• Respond. The company determines appropriate interventions such as offering a repair/replacement, contacting the customer, modifying product design or drafting a contingency plan.

Servitization is being accelerated by the IoT

It’s not just high-value capital equipment (such as Rolls-Royce’s TotalCare for civil aerospace) that’s driving servitization. The Internet of Things (IoT), while still in the early stages of adoption, is turning the physical world into a digital information centre – one of the cornerstones of Industry 4.0.

Think sat-navs, speed cameras, pace-makers, helmets and even toasters – these ‘smart’ connected objects collect huge volumes of data for their manufacturers and can amend their service depending on the behaviour of the world around them.

Simply put? The technology needed to drive servitization is increasingly widespread, and it’s rapidly blurring traditional industry boundaries. Dr. Lightfoot offers the following example:

“Industry boundaries are being redefined. You start with a truck, but it becomes a smart truck. Why? Because it’s been networked with CAN bus, which you can then use to collect data with a smart connection, typically cellular. This smart product can then be integrated into fleet management systems; so instead of being in the business of selling trucks, you’re moving towards providing fleet management.”

The future of manufacturing customer service

At Salesforce, we’re helping companies in every industry become more customer-centric, and differentiate on service – from triggering service actions through Machine2Machine connectivity to enhancing customer experiences with AI, all from a single connected platform.

To help you blaze your own path, we surveyed nearly 300 manufacturing customer service professionals to understand the trends shaping the future of the industry. Discover the habits of top manufacturing customer service teams, and download the full report.