Service as a business
– Servitization is your growth driver –
Servitization is the key to a form of business growth in which services are offered to complement products. The aim is to gain an edge over competitors, but above all to achieve greater customer loyalty and generate additional revenue through the added value provided, thereby expanding service as a business.
This goal requires expanded knowledge and changed behavior in order to successfully complete the necessary transformation processes. The targeted use of services expands existing sales markets, opens up new markets, and implements innovations with customers.
This “service” is the core of a company's strategic competitive advantage. “Knowledge” makes the difference, as does the ability to apply that knowledge to others, e.g., our customers or within our own area. What “knowledge” is currently needed? Who has it? ... in our team, on the market? We also create new solutions for growth through cooperation!
The starting point is always the customer and knowledge of their specific needs, which is best determined through collaboration. The better margins for services also result from this close support and the responsibility that the service provider shares.
There are three basic forms of service provision, which can be combined depending on the customer's needs:
- Individual services, which are usually provided personally by a specialist. This can be advice, a repair, or a conversation to provide information or recommendations on possible solutions.
- Standardized services, i.e., service contracts offered to customers for specific, defined services.
- A product with which the customer purchases the option to use the “service” offered by the product when needed. This applies to a car (service: driving/transport), a drill (service: drilling) or a coffee machine (service: brewing).
The ISS “ExpertPaper Servitization” also provides information on revenue shares, margins, and strategies of companies based on analyses by the ICV International Controller Association and other sources.
- Do you have a Servitization strategy?
Only 30% of companies have developed one, and 70% do not strategically address the market potential of services! - Do you have a Servitization maturity model?
How do you achieve growth in services?
The Servitization process - a roadmap to sustainable success
The ISS Servitization process is based on a proven 5-stage model that provides a clear roadmap for business transformation. Each stage is designed to focus on customer needs, complement services and thus create added value for the customer and the company. The focus is on the respective objective for each stage.
The success factors of a Servitization strategy are:
- A top-down “Servitization Initiative”: so that it is anchored in the company as a strategic task. This enables “co-creation”, both internally and with customers, the basis for sustainable success.
- Strategic clarity: realistically assess your own skills, resources and goals. Set priorities to achieve a balance between customer requirements and your own resources. Questioning existing structures, setting up lighthouse projects.
- Change management for a professional transformation in the company, according to the individual stages in the divisions and regions.
The five stages of the ISS Servitization process
Stage 1: Extended workbench:
Focus on technical services that support the product
Goal: Keep warranty/ guarantee costs low
Stage 2: Differentiation tool:
Focus: development of services that set the product apart from the competition.
Goal: Strengthening the market position through additional benefits
Level 3: Profit/ Business center
Focus: Services are provided from an independent business/ profit center
Objective: To tap into additional sources of revenue.
Level 4: Value-added function
Focus: Joint development of innovative solutions with customers.
Goal: Building sustainable customer relationships
Stage 5: Customer integration
Focus: Customers are actively involved in the development and provision of services.
Goal: Co-creation and optimization of customer benefits and paybacks
Various Servitization models are used in practice, with 3, 4 or 5 stages derived accordingly from different experiences.
The ISS 5-stage model is based on the respective task assigned to the service organization. It has been used for over 20 years and has proven itself in practice. Other three- and four-stage models generally place stages 2 or 4 of the ISS model in stage 3 - or focus on the different services offered as stages.
The kangaroo leap model of the ISS
The kangaroo leap embodies the ISS philosophy of continuously improving interaction with customers and aligning one's own actions with the customer's benefit. The kangaroo leap is the way to implement this philosophy in daily practice.
The innovative ISS business model helps companies to tap into new service potential. It is based on the principle of “outside-in thinking” and focuses on understanding not only the business of the direct customer, but also the needs and challenges of your customers' customers.
Interest in the customer is becoming increasingly important: how can I best support my customer in achieving their goals?
The kangaroo leap underlines the central role of customer integration of co-creation in modern service development.
Servitization – Service is a local business!
Companies that want to expand their services quickly understand that this can only be done in close cooperation with local markets. The previous practice with products is different. Of course, customer information and wishes are also recorded for products and flow into development, which then takes place centrally. Production also takes place centrally - possibly in different plants, but each at one location.
The service business works differently; proximity to the customer is a prerequisite for cooperation. This is the case for traditional (non-digital) tasks as well as for smart services. The starting point is always contact on site and the joint development of a better solution for the customer. This “co-creation process” is the basis for a long-term customer relationship ... and yes, in the digital age, remote support and control is also provided, but both sides, customer and provider, understand that a joint decision on the solution is the basis for new development or repair, as it is usually not a “standard” that comes “off the assembly line in the factory” like a product.
Against this background, the question of the business qualifications of the responsible service managers on site is relevant. Based on the company's central service strategy, it is important to define local goals and approaches based on local conditions. Who knows the customers better, their wishes and regional requirements? Who knows the customers' customers, is aware of the sensitive relationships and maintains long-term cooperation with their own local customer base on this basis? Who wants to expand their local service business ... also because customers are increasingly demanding it! ... must be familiar with market analysis and possible strategies in order to successfully develop the local market with a tailor-made service concept.
This is how Servitization strategies can be implemented locally in companies - it requires business expertise in the local team as core know-how for the growth process with customers.
How do you proceed? ... where are the growth areas ... and how do you want to leverage the potential?
Suitable Offers
For You at a Glance
Raising customer satisfaction and operational efficiency by professional service. Certificate course and module of the Certified Service Business Manager course.
How to develop, efficiently control service organizations in a future-oriented way: Management knowledge for the service practice as certificate course with Real Life Project.