servitization of the field service industry

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The field service management landscape is changing and it’s powered by servitization.

Enterprise organizations across multiple industries are embracing servitization as a natural next step in transformative business. With profit margins reducing and operating costs rising in our rapidly changing, technologically charged world, embracing new ways of doing business is a clear strategic move.

Servitization is defined by Tim Baines of the Aston Business School as the “innovation of an organization’s capabilities and processes to better create mutual value through a shift from selling product to selling product-service systems.” The key to unlocking the potential of servitization, Professor Baines says in an interview with Field Service News, is in understanding that it “embraces business model innovation, organizational change and new technology adoption.”

Whether you traditionally have not provided a service offering, you operate your service division as a cost center or you are looking to shift your focus from products to services, servitization creates a value stream that can give your organization a unique selling proposition. But, you are most likely already convinced of this. If this is the case, what are next steps to help you on your path to servitization enlightenment?

1. Apply the “service is life” philosophy

Delivering service may seem easy, but doing it in the best way possible to drive costs out and utilize resources more efficiently requires an optimized service chain and a “service is life” mentality. Servitization is not really an operations strategy. It might be a strategy for revenue improvement but the delivery aspect of service should not be diminished, it should rather be an area of focus.

Great service businesses tend to be very close to their customers. Their customers identify with their brand loyalty because of relationships, product performance, aftermarket service or the perfect combination of the three. Your organization should approach service proactively, as opposed to reactively, and should be constantly measuring and improving based on results. Additionally, you need to have a continual process improvement program in place, and develop human capital through certification training or subsidized external training programs.

2. Develop and implement a change management strategy

Preconceived thoughts and resistance to change will differ between the departments and hierarchies within your organization. Lack of service-based organizational structure will only make this resistance stronger. Communicating and executing through typical hierarchical structures will not work, as your organization looks to adopt a servitization model.

Consider implementing a change management strategy that deals with knowledge transfer and training on customer processes and value creation. Top management must act as a sponsor, and the creation of a separate service business unit or P&L is needed to enforce significance.

There is no recipe for change management when it comes to servitization. Every organization starts at a different point in their journey and must adjust accordingly. The key is to recognize this and plan accordingly.

3. Optimize your processes

Optimizing the entire service supply chain from human capital to parts and logistics operations is imperative to delivering service excellence in a servitization model. Optimizing the workforce essentially means putting the right resource at the right cost in the right place at the right time, delivering to customer expectation without significant cost to your organization. End-to-end field service management (FSM) systems provide solid process management for unused parts, replenishment of parts usage, optimum stocking level across the supply chain and adequate parts planning and forecasting for modeling needs based on expected demand and past usage. Processes should also include real-time measuring and monitoring of service execution so that you can move to a ‘management by exception model’ rather than providing reactive service to customers.

The world is changing. It’s not enough to just sell a product and then provide service if something breaks. Customers expect more. Even the process of evaluating and buying a product has changed dramatically. Products are often commoditized. Product margins can be quite thin. There is very little differentiation in the product features alone. Convenience is key for buyers, and often times it is the aftermarket service that becomes the competitive differentiator.

The process of buying has changed, the criteria for product selection has changed and the expectation for aftermarket service has changed. This really is a transformation in service and understanding the potential of servitization puts you on the right path to staying ahead of the rapid change. To find out more how the changing field service landscape is powering servitization and how your organization can benefit, download the white paper, “The changing field service management landscape is powering servitization.”


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