1. 4/7/2016 PTCVoice: Why Manufacturers Are Shifting Their Focus From Products To Customers ­ Forbes
http://www.forbes.com/sites/ptc/2014/02/20/why­manufacturers­are­shifting­their­focus­from­products­to­customers/#7540fed110a8 1/6
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FEB 20, 2014 @ 03:56 PM 4,721 VIEWS
Cindy Elliott, PTC
Why Manufacturers
Are Shifting Their
Focus From Products
To Customers
Servitization. Servitisation. Servicization. Regardless of your preferred
spelling, the expression perfectly encapsulates a concept of immediate
urgency and opportunity for global manufacturers: transforming their
business model from being a product­dominant to a customer­centric
organization in order to maintain or recover competitive advantage.
Servitization is, in fact, becoming a major strategic driver of manufacturing
innovation today. It’s one of seven transformative forces identified in this
ebook. Business models and organizational cultures will fundamentally shift.
Traditional product lines will rapidly evolve to deliver integrated value­added
services at every stage of the customer’s value chain. It starts by putting
yourself in your customer’s shoes – asking how can new products and
services help them better achieve their business or personal goals? Then how
do you design, produce and support those offerings to yield a sustainably
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2. 4/7/2016 PTCVoice: Why Manufacturers Are Shifting Their Focus From Products To Customers ­ Forbes
http://www.forbes.com/sites/ptc/2014/02/20/why­manufacturers­are­shifting­their­focus­from­products­to­customers/#7540fed110a8 2/6
profitable business model? And how can you implement new technologies
and best practices – such as remote monitoring and performance­based
contracts – to continuously enable higher customer value and at the same
time improve your bottom line?
By focusing on the outcomes of their products and services, manufacturers
can “servitize” their business – and thereby create whole new systems of
value for customers that help lock in long­term relationships and lock out the
competition. It’s key to competitive advantage, especially in markets where
product differentiation is blurring and customer expectations for product and
service performance are expanding.
So how to optimize the servitization opportunity? Let’s look to an expert for
guidance.
Navigating Servitization
Have you read Made to Serve by Timothy Baines and Howard Lightfoot?
One of my colleagues calls this book “the Bible of servitization.” It’s a must
read for manufacturers on how to create a roadmap for servitization and
product service systems. Professor Baines, from the Aston Business School in
Birmingham, U.K., is recognized as a leading authority on servitization.

3. 4/7/2016 PTCVoice: Why Manufacturers Are Shifting Their Focus From Products To Customers ­ Forbes
http://www.forbes.com/sites/ptc/2014/02/20/why­manufacturers­are­shifting­their­focus­from­products­to­customers/#7540fed110a8 3/6
In a recent article featured in The Sunday Times of London, Baines covers the
past, present, and future of servitization. But even better, he provides
specific examples of major manufacturers creating major new value for their
customers – and even for whole countries and continents – through their
servitization strategies:
Working with Xerox ’s Managed Print Services, reports Professor
Baines, customers get “document solutions” – not just printing equipment. He
writes, “Contracts are based on pay per use, over two years or more, with risks
managed by the manufacturer, and a commitment to rolling process
improvement and cost savings.”
Rolls­Royce’s TotalCare service plan guarantees product performance by taking
responsibility for it. Rolls­Royce doesn’t simply sell an airplane engine – they sell
the hours they keep the engine up and running. This not only increases customer
intimacy and service revenues – it has identified new market opportunities.
“Services such as TotalCare,” writes Baines, “have supported the creation of new
low­cost airlines.”
By improving customer­centric service offerings focused on passenger travel
experiences, Alstom Transport of France is helping raise standards of rail
travel on Britain’s West Coast Main Line. Passengers are up by more than 30
million per year. Costs of maintenance, meanwhile, have been cut by as much as
30 percent.
The environment can also benefit from what Baines calls “manu­services.”
Servitization approaches at MAN Truck and Bus UK have helped cut
customers’ fuel consumption by at least 10 percent and CO2 emissions by up
to 15 percent.
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4. 4/7/2016 PTCVoice: Why Manufacturers Are Shifting Their Focus From Products To Customers ­ Forbes
http://www.forbes.com/sites/ptc/2014/02/20/why­manufacturers­are­shifting­their­focus­from­products­to­customers/#7540fed110a8 4/6
All of these create intertwined relationships between manufacturer and their
customer and transitions the relationship from a sales transaction to a
mutually beneficial partnership that continues to add value for both parties
throughout the entire lifecycle.
“Servitization,” Baines notes, “is not a new phenomenon brought about by the
recent recession.” The origins of “power by the hour” – as well as the term
“servitization” itself – date back to the 1960s. But the economic pressures of
late have certainly shined a spotlight on servitization. It has been shown to
give manufacturers an effective hedge against market downturns. And it can
create high barriers of entry for competition.
Customer Experience Is Key
At PTC Live Service Exchange in Anaheim, CA last June, Professor Baines
participated in a panel discussion on servitization with service leaders from
Electrolux and Renault. Something he said at the very beginning of that
session left an impression with me. Roughly paraphrasing him…
The practice of servitization is shifting the manufacturer’s primary
perspective from the product or service itself to the overall customer
experience. Everything a manufacturer does to develop a product or
deliver a service must ultimately pay off in providing the customer with the
right experience they need or anticipate from the use of the product or the
service outcome.
It’s precisely this customer experience­driven value proposition that
a manufacturer committed to servitization should sell to customers. The
promise of adding value through servitization holds continually, throughout
the product’s useful life. Ideally the manufacturer will, at every stage, over­
deliver on the servitization promise, providing a total experience that
delightfully exceeds the customer’s expectations for value.
Servitization Ahead
Need more proof of servitization’s rise? Consider that, by 2015, the share of
worldwide manufacturers using performance­based service contracts will
jump to 65 percent. By that same future date, over 70% of manufacturers will
be relying on services as a key product differentiator. These are significant
increases over current numbers and early findings in future research coming

5. 4/7/2016 PTCVoice: Why Manufacturers Are Shifting Their Focus From Products To Customers ­ Forbes
http://www.forbes.com/sites/ptc/2014/02/20/why­manufacturers­are­shifting­their­focus­from­products­to­customers/#7540fed110a8 5/6
 Reprints & Permissions
 Report Corrections
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out soon will show these numbers increasing even more. My source: Oxford
Economics’ Manufacturing Transformation Report. It presents major
findings from their 2013 survey of executives from 300 global manufacturers.
The Service Council’s 2014 Service Outlook tells more. Per their survey,
nearly two­thirds of manufacturers report that their profit margins are as
high or higher for service than for product sales. Increasing service revenue
is manufacturers’ top service goal.
Yes, “servitization” will probably continue to drive this blogger’s auto­correct
function to distraction for some time to come. But that’s just wordplay. The
much bigger truth is that a focus on servitization could very well be critical to
a manufacturer’s successful future.
For more insight on Servitization, check out Professor Baines’
presentation “Made to Serve” from PTC Live Service Exchange 2013 in
Anaheim, California last June. He is also a featured speaker this week
at PTC Live Executive Exchange in Nice, France.