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Servitization is the new normal


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What does it take to shift from a focus on products to one on services? Fruitful discussions, best practices & many new insights at our Servitization event in Rotterdam. Many thanks to our friends for sharing their successes and hurdles along the way. Very inspiring evening generating and sharing knowledge, find the presentation here.

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Servitization is the new normal

  1. 1. Me,Anna Servitization is the ‘new’ normal. Introduction to the results of a research to Servitization by Anna van der Togt & Livework
  2. 2. We invited business leaders from 7 sectors to get inspired and discuss the topic servitization.
  3. 3. The evening revolved around The Topic: Servitization ...the process through which (originally) product focused companies change their strategies and value proposition to services.
  4. 4. The business drivers written on post-its by participants divided in four categories Why shift to services? - Participants Client increase client loyalty have contact with the client on a daily basis Economic maintain a premium price level make business across the total product life-cycle damp cyclical streams of income Competitive differentiate from competitors Environmental be able to provide better products that last longer --> sustainable
  5. 5. In the context of B2B product oriented companies: Why shift to services? The bigger picture: Responsibly using resources Business drivers: Increasing value through services Client drivers: Getting solutions that provide support B2B Clients want solutions that provide support. Not only by alleviating some of the product-related burdens, but also by supporting them in achieving their key goals. Offering integrated product-service solutions potentially is about shifting your role from supplier to trusted partner. This allows your clients to focus on achieving the best results for their customers by jointly applying core capabilities and sharing responsibility. By offering integrated product-service solutions rather than products, companies increase the value of their offer. The proposition is no longer evaluated on its quality and associated costs, but on its value for the client’s overall process. This total package differentiates the company from its competitors and it allows greater profit margins to be made. Moreover, servitization contributes to provide a way to create long-lasting client relationships. Servitization can be a solution to the supposed conflict between economic growth and environmental considerations. By providing use or result of a product rather than ownership of the product, the supplier can eliminate incentives to produce products that must constantly be replaced. Thus reducing waste.
  6. 6. Before deciding where to shift to... What is the current situation? Pure Services Clients pay for the expertise of a service provider (no products) Result Oriented Services Clients pay for the result of a product (or of a combination of products) Use Oriented Services Clients pay for the (best) use of a product Possession Oriented Services Clients pay for a product that lasts as long as possible Pure Products Clients pay for a product The attendees from B2B product focused companies all indicated that the majority of their portfolio could be plotted around pure products and possession oriented services. The use oriented services were mostly trainings. Some participants indicated that their portfolio included services that could be considered result oriented. However, these are accompanied by extensive contracts causing the risks and burdens to remain with the client. Therefore it is questionable whether these type of offerings are truly a shift from product to client focus.
  7. 7. Pure Services Clients pay for the expertise of a service provider (no products) Result Oriented Services Clients pay for the result of a product (or of a combination of products) Use Oriented Services Clients pay for the (best) use of a product Possession Oriented Services Clients pay for a product that lasts as long as possible Pure Products Clients pay for a product Most of the unacknowledged messiahs attending the evening hoped that the majority of their company’s portfolio would shift towards use- or result oriented services. They want their organizations to shift its focus from the physical design and production to providing solutions that fit the client and its context. How far should you servitize? The service aspirations are...
  8. 8. How far should you servitize? Challenges in the shift to services Overcoming Resistance Most of the attendees emphasized that their biggest difficulty is changing their own organizations & ecosystem. People are too stuck in their product focus and structures and there is no mindset present that fits a service provider. Reinventing the Business Designing the business side of a servitization shift is hard. The business model has to be reinvented, new types of contracts need to be found and the shift of risk needs to be well thought through. A clearly-defined service strategy is paramount. However, to formulate this vision the company needs a new shared language and a thorough understanding of their client’s operations. Offering Complete Solutions Clients want servitizing companies to unburden them from product related activities, want them to share responsibility and would like them reach their goals. For that reason, servitization is all about offering integrated solutions. The challenge in providing solutions is recognizing what a client (unknowingly) wants and needs and taking care of “everything” (e.g. maintenance, upgrades, repair, returns, energy etc.).
  9. 9. How to tackle these challenges? A Livework Case for Servitization
  10. 10. Differentiating the In 2014 Kone targeted ambitious growth targets for their services business. To do this Kone needed to differentiate their offer in the market and re-think their sales approach to grow their business. Working across four European countries Livework helped Kone define a new maintenance offer and create a consultative sales approach. This offer and approach has lead to higher sales conversions, new digital sales and service tools and the streamlining of back office work driving efficiency. “Truly customer centric insight lead to higher quality of concept. Collaboration with management was high and effective Integration with business teams much better than other Kone design projects” Ralf Thierling , Head of Maintenance Services Kone, Europe maintenance service offer
  11. 11. Prototyping & testing Set principles Design new offer Implementation
  12. 12. And now... Our hunger for knowledge concerning servitization is far from satisfied. We were very much inspired by your stories and would like to continue the conversation. Let’s keep sharing insights and explore new business models, collaborations, strategies, systems and ways of working together.
  13. 13. To Conclude. We want to thank all the participants of the wonderful evening for their enthusiasm and contribution. Servitization will be on the business agenda for the foreseeable future. Using design thinking can bring another level of capabilities to organizations by bringing in the crucial human perspective that makes any endeavor towards services more relevant.
  14. 14. Want to know More? Published White-papers The results of Anna’s graduation project for Livework are published in three white-papers. Find them on Livework’s website: whitepapers/servitization/ Presentation & Drawings This presentation and scans of the beautiful drawings can be found on Livework’s website: collections/servitization-is-the-new- normal/ Get in Touch! Do you want to sit down with Livework? Please give us a call Melvin Brand Flu +31 655 767 278 Erik Roscam Abbing +31 624 518 462 Anna van derTogt +31 655 968 367