WHAT DOES SERVITIZATION

MEAN TO YOU?

Exploring servitization and what

it can do for your business.
WHAT IS Asking what servitization means in the wider
business community can elicit a wide variety of
IT’S HAPPENING EVERYWHERE,
IN A VARIETY OF WAYS
SERVITIZATION?
responses. These range from the brutally honest
“I have absolutely no idea” and “A difficult word to WELL-KNOWN NAMES ARE ADAPTING AS CHALLENGERS ENTER
spell?” to more educated guesses such as “Selling
an outcome, rather than just a product.”
Selling performance
Dr Tim Baines, Professor of Operations Strategy,
provides a more knowledgeable answer: Smartphone-as-a-service “The really interesting examples are where
manufacturers move up the servitization staircase”,
Some everyday examples include Apple, which used
“LET’S TAKE THINGS FROM A to simply sell devices with the option of an add-on
comments Tim, “providing services that not only
maintain the condition of the product, but actually
MANUFACTURER’S PERSPECTIVE. FOR A warranty. It now bundles an extended warranty, support the business processes of the customer’s
MANUFACTURING COMPANY, SERVITIZATION technical support and automatic device upgrades for
a flat monthly fee. In short, smartphone as-a-service.
outcome-based contracts. They’re the ones that tend to
IS SIMPLY ABOUT COMPETING THROUGH excite people the most, because they have long-term
commercial and environmental sustainability.”
SERVICES AS WELL AS PRODUCTS—
BUILDING ITS REVENUE STREAM THROUGH A good example of this is IFS customer, Jotun,
a leading coatings manufacturer based in Norway.
SERVICES RATHER THAN PRODUCTS ALONE.” Car subscriptions One of Jotun’s largest markets is the coating of
ship’s hulls.
In the automotive industry, manufacturers including
Mercedes, BMW, Fiat and Volvo all now offer Jotun’s analysis service isolates the impact of a
Learn how other car-as-a-service subscriptions with the option to swap ship’s underwater surface on its energy efficiency
companies are using models, subject to what customers want or need at any by tracking relative changes in the relationship
servitization and what particular time. While industry challenger Cluno goes between the power delivered to the propeller and
the advantages would further, offering a range of car models you can move speed through water over time.
be for your business. between, including everything but the fuel.
Jotun has developed a set-up for performance-
Discover more based contracting where they either document
that high hull performance has been delivered, or
return the additional investment in the hull
Light not lightbulbs performance solution.
Philips no longer sells lightbulbs to Schiphol Airport Customers are in effect paying for delivered high
in Amsterdam, it sells light. The airport pays for performance—not for paint with the promise of
the light it uses, while Philips remains the owner of high performance.
all fixtures and installations, and together with its
partner Cofely, is responsible for performance.

The airport has been able to benefit from an

upgrade to the lighting in its terminals, using new
energy-efficient LED lamps that reduce electricity
consumption—something that would have been
much more financially difficult to achieve without
the servitization model.

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 A STUDY BY ASTON BUSINESS
WHY SHOULD Quite simply, to increase revenue, enable
growth and maintain relevance.
SCHOOL FOUND
5 TO 10% INCREASE IN GROWTH RATES
YOU CONSIDER Traditionally, if you are thinking about increasing
25 TO 30% REDUCTION IN COSTS
SERVITIZATION? revenue, the usual aim is to increase sales of your
products, but that typically requires investment in FOR COMPANIES ADOPTING A
plant, marketing and operational staff. Whereas SERVITIZATION MODEL
selling a service in addition to your product or
selling the outcome to your customer increases
FOR THEIR BUSINESS
Map your servitization revenue without the capital investment.
vision for the future and
start the internal cultural In every developed economy across the world,
change needed to become services massively outstrips the goods sector.
more servicing-centric. It is clear that there is the opportunity for growth.
Discover more

of Rolls-Royce’s revenue
50% now comes from services
rather than just products.

The customer appetite is there, whether they are

businesses or end-consumers. They desire:

• flexibility and reassurance (guaranteed uptime,

penalty clauses, defined outcomes, SLAs)

• quality assurance (automatic upgrades

to latest standard)

• manageable costs (predictable monthly

charges with no surprises)

All of which, for you, equates to more long-term,

predictable, regular income.

<< 3 >>
WHAT STOPS More often than not, the biggest inhibitor is
cultural change. There is history and heritage
within manufacturing that companies exist to
COMPANIES make things, that this is where main revenue
EMBRACING is derived and services are an optional bolt-on
that provide less significant income.
SERVITIZATION? To get started in servitization in your business you
need to think differently and ask yourself: what do
my products do? And then ask yourself, how could
I supply what they do as a service?

A change of mindset is required, to move the

perception of servitization as a threat to an
opportunity, and along with it a change of business
KPIs and organizational structure. The reality that many find difficult is that servitization
requires transformation within your company, and
this needs to be carefully managed. For example, do
“WE’RE SELLING SERVICES? WHAT ABOUT OUR ASSETS?” you buy in a services company or start from scratch?
How will you finance the move from a bumpy schedule
Let’s look at the example of Rolls-Royce. When
to more predictable income streams? And what about
it sells a gas turbine with a total care contract,
skill sets? Where do you retrain and where do
it always sells the gas turbine—just not always
you recruit?
directly to the end customer. It can be sold to a
leasing house or perhaps a financing house, who The old break/fix model of service provision as a cost
then has an arrangement with the customer for that to the business changes dramatically in a servitized
asset. Complementary services are built on by model. Here, driving usage is critical and an activity
Rolls-Royce to generate growth and revenue. for which some companies are using their field service
teams. Whether there is a good match of skills, or even
the desire to make this shift in orientation for those
who can, is a common problem for companies trying
Watch the webinar to see to change their business models in this way.
how to overcome the
typical challenges of
servitization.
Discover more

<< 4 >>
HOW CAN THESE BARRIERS BE HOW CAN I GET STARTED? WHERE WE ARE
BROKEN? WHAT IS THE BEST
PATH FORWARD? You can achieve this by using a Services Vision
Template, which can be completed by executives AMERICAS
In our experience, the best first-step into servitization to support building consensus (helping to debate +1 888 437 4968
is to combat that lack of awareness, understanding and explain possible futures) and governance
and alignment amongst stakeholders in your ASIA PACIFIC
(representing future states).
organization (as shown in those quotes at the start +65 63 33 33 00
of this e-book). EUROPE EAST
+48 22 577 45 00
Your strategy should begin with a vision and mission
—what is to be achieved and why we’re doing it— EUROPE CENTRAL
that everyone can buy into, then lay out actions or +49 9131 77 340
initiatives in a chronological order to express how
you’ll realise this new way forward. UK & IRELAND
+44 1494 428 900

CONTACT US FRANCE, BENELUX AND IBERICA

+33 3 89 50 72 72
You can learn more about it and access a copy within our
whitepaper, SERVITIZATION VISIONING: How to create MIDDLE EAST AND AFRICA
an illustrative vision for a manufacturing organization +971 4390 0888
seeking to compete through services. NORDICS
+46 13 460 4000
Take a look at it today for clarity on how you can bring
servitization to your company.

ABOUT IFS
IFS develops and delivers enterprise software for customers around
the world who manufacture and distribute goods, build and maintain
assets, and manage service-focused operations. The industry
expertise of our people and solutions, together with a commitment to
delivering value to every one of our customers, has made IFS a
recognized leader and the most recommended supplier in our sector.
Our team of 3,700 employees and growing ecosystem of partners
support more than 10,000 customers around the world to challenge
the status quo and realize their competitive advantage. Learn more
about how our enterprise software solutions can help your business
today at ifs.com

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