Is making something to sell enough to keep manufacturers in business? In an increasingly competitive and innovative global manufacturing market, manufacturing companies need to add value to what they produce to help ensure their success.
This requires a shift in emphasis, away from selling a product to selling a whole product-as-service system. This process is known as servitisation.
“In the age of the customer, manufacturers must adapt,” advises Jeremy Hacking of Finch Electronics. “To gain a competitive advantage means finding ways to enhance what you can offer by wrapping your product in a surrounding service.”
How Does Servitisation Work?
Servitisation may sound like jargon, but in fact it is a logical step.
“For a business to remain competitive when emerging markets are mounting a formidable challenge to both designers and manufacturers, it must find ways to differentiate itself”
The solution is to include additional services as part of what it provides. This helps retain a firm customer base, while making it stand out from the competition.
“Beyond basic product provision, servitisation can offer either intermediate benefits such as product repair and customer help, or a more comprehensive, advanced model, involving integrated solutions such as pay per use,” explains Jeremy.
“Essentially, this is an enhanced form of customer service,” says Jeremy, “meeting increased customer demands and by doing this, building customer loyalty.”
One example is Alstrom, the designers of the Virgin Pendolino trains. As part of their offer, they undertook the repair and maintenance of the tracks on which the new trains would run.
Another servitisation model is that of Rolls Royce’s power by the hour service. Instead of simply manufacturing aero engines, the company now effectively sells the power the engines produce to its customers and undertakes all maintenance and support as part of its offer.
The Shift in Mindset
“There are challenges to adopting the servitisation model,” cautions Jeremy. “It requires a shift in a company’s whole approach, away from a simpler make it and sell it philosophy.”
Jeremy points out that it may also reduce profit margins in the short-term. “It takes time to develop and you should treat it as a long-term strategy.”
“To a large extent, servitisation may not be something manufacturers can avoid in the future, with the forward momentum of technology and the spread of the internet of things”
“The growth of smart devices, and the increasingly sophisticated interface between customer and product may mean that, for manufacturers, servitisation may become the only acceptable standard for many products,” Jeremy concludes.
For related content, please read Manufacturers: Are You Failing to Monetise Your Innovations?