It’s time to get serious about servitization

As consumers, we are now used to the as-a-service model in our everyday lives. When was the last time you bought a CD or DVD? I can’t remember because my whole family stream everything. My sons and I even get my razor blades and shaving cream as-a-service. Of course, I still seem to be paying for everything, but that’s a different story!

This concept of selling an outcome as a service is commonly known as Servitization, and it is increasingly expanding from a consumer model to a broader business approach where the capital expense of a piece of equipment is often a barrier to buyers. It is often far more attractive to have access to the same equipment but pay monthly based on usage metrics like hours of usage, or throughput.

Through servitization, manufacturers are finding ways of getting closer to their customers with new business models. They do this by creating an ongoing relationship based on a monthly transaction monetarized by such things as usage, throughput, uptime or utilization, rather than a one-time transaction or sale with responsibility for maintenance on the service provider.

Servitization requires smarter products

To enable servitization, equipment manufacturers must create more intelligent products to capture the information required to bill the customer accurately. They also need to ensure the equipment is always working and have the data available to predict required maintenance before it breaks down. Embedded Internet of Things (IOT) enables sensors to capture pertinent information such as usage, throughput and equipment performance to drive the as-a-service business process.

By creating a digital twin of the equipment, both the manufacturer and customer can monitor the performance and leverage machine learning algorithms to identify how efficiently it is being used.

The business value of servitization

When you turn services into a growing, vibrant part of your business, you can open new sources of revenue and improve margins while simultaneously staving off commoditization and making sustainability a differentiator.

Let’s use a fictional example of a company that manufactures washing machines and wants to introduce a “wash-as-a-service” model, where they bill customers based on the number of washes the machine performs monthly.

If like me, the customer is a family of five who use the washing machine daily they would pay more than a single person who uses it once a week. But the common denominator is that the washing machine must work at peak performance whenever it is needed.

Reinventing the service models

This new service offering requires outcome-based contracts that include performance measurements of wash cycles and Service Level Agreements (SLAs) with 100 percent availability.

To build an immersive customer experience, an app could provide real-time data about their wash cycle: when it has finished, how many have been run that month, cost, carbon footprint and how well the machine has performed.

This information is also leveraged by the manufacturer and a third-party maintenance organization to manage the end-to-end service lifecycle by integrating all aspects, from installation management, warranty, service ticketing, field service, in-house repairs, billing, and finance.

The service will also reduce the overall environmental impact of the machine by tracking energy and water consumption, as well as managing de-commissioning and recycling to keep the equipment within the circular economy.

Service precision to reduce costs and improve customer experience

The availability of machine data  helps the manufacturer and service partner to rethink service management operations by leveraging AI enabled advanced scheduling to prioritize engagements, improve resource utilization, and reduce travel times.

When a service technician is sent to repair a machine, they have all the necessary parts and the breakdown information at their fingertips on a mobile device. They can even be walked through the repair by leveraging augmented reality glasses meaning that the problem can be resolved in one sitting without lengthy delays caused by ordering equipment after the appointment.

Revolutionizing equipment ROI by increasing performance and extending equipment life

With improved visibility from IOT sensors designed into the washing machine, the manufacturer can now continuously monitor the performance of all equipment in use. This enables them to track the health, and performance against the SLAs.

They can also leverage the data from across all machines and use artificial intelligence algorithms to identify trends and predict risk of failure. They can then propose preventative maintenance approaches to reduce breakdowns and increase customer service. This information can also be fed back into the R and D teams to design out any common issues in the next iteration of the machine.

Now that is a full cycle washing service

It is clear that the as-a-service business model is here to stay both in our personal lives, and increasingly, to drive across-the-board gains for today’s businesses.

To discover how to plot your route toward service management excellence, download a recent Copperberg whitepaper, “Finding servitization success through service management transformation”.