Purpose: The purpose of this paper is to describe the priority of the management challenges managers and leaders in service businesses have faced during the servitization journey. The paper builds upon the work presented by West, Schmitt and Siepen (2014), West and Gaiardelli (2017) and West and Gaiardelli (2016). This is an initial study with the aim to identify some common themes and trends within the firms and highlight new areas for research. Design/Methodology/Approach: The paper is based on the results of a survey conducted with over 100 service managers across European industrial firms and supported with 20 interviews made previously by West and Gaiardelli (2016). Seven categories characterizing change management challenges in servitization were identified from the literature, and each category was associated with its specific challenges. Theoretical foundations were then used to support researchers to design the research sample and define the questionnaire’s structure, wording, and scaling. Findings: This paper provides insights into the challenges of implementing servitization strategy and prioritizes the key barriers that businesses are facing in their journey towards servitization. Originality/Value: This descriptive paper that provides a ranking of the most import barriers to servitization with insights from the 20 interviews and a survey with 111 responses

1. Exploring operational challenges for
servitization: an European survey
The Spring Servitization Conference 2018
Driving Competitiveness through Servitization
Copenhagen Business School, 14-16 May 2018
Shaun West, Paolo Gaiardelli, Ali Bigdeli & Tim Baines

2. West, Gaiardelli, Bigdeli & Baines ⎹ The Spring Servitization Conference ⎹ May 2018
Introduction
The problem and the purpose of this paper
To understand what are the best managerial approaches to adapt
organisation into efficient and effective service business
To explore the main operational challenges that service managers
face in their day-to-day activities
Purpose of this paper
What are the challenges that for service business leaders face
while executing a servitization strategy?
Problem
How servitization strategy
and its execution has to be
appropriately addressed by
service managers in their
daily activities remains
poorly understood

3. West, Gaiardelli, Bigdeli & Baines ⎹ The Spring Servitization Conference ⎹ May 2018
Methodology
A five step methodology was applied in this study
Review interviews
Create a list of
servitization barriers
Input
Previous papers/works
on servitization barriers
and challenges
Create the survey
Categorisation of
servitization barriers
Group barriers and
reduce to 5-7 questions
Analyse the survey
Rank using 5:3:1 scoring
and convert scoring to
percentage
Review the findings
Discussion
Discuss and compare
with literature
Identify conclusions &
recommendations

4. West, Gaiardelli, Bigdeli & Baines ⎹ The Spring Servitization Conference ⎹ May 2018
Input
Different types of barriers along with the servitization transformation exist
Servitization barriers are linked to different service transition stages (Baines et al., 2017)
Implementation-related
Strategy-related
Market-related
Definition of service infusion level to avoid
cannibalisation of existing businesses
(Benedettini, Swink and Neely, 2017)
The way organisations develop a servitization
strategy into their operations
(Visnjic-Kastalli and Van Looy, 2013)
The difficulties for customers / partners to
accept the service transformation process
(Steiberger; van Niel and Bourg, 2009)
Our focus

5. West, Gaiardelli, Bigdeli & Baines ⎹ The Spring Servitization Conference ⎹ May 2018
Input & review interviews
Preliminary results on implementation-based barriers to servitization
These categories were used to support the survey development
(West and Gaiardelli, 2016)
Competitors, suppliers and partners
The move to ecosystem innovation is important for
the servitization journey
Society and environment
Local rules and ’norms’ can make create barriers to
service delivery
Customers
Important to learn to work and use customer pull to
support servitization
Economic and finance
Service pricing, sale growth, margins and retention
are critical success factors
Knowledge and information
Internal sharing of know how and customer process
can reduce servitization barriers
Products and activities
Basic data and understanding is required before
moving to more advanced product-service systems
Organisational structure and culture
The businesses must have their own P&L and support
of HR to deliver the change
Implementation-based barriers were identified from Hou and Neely’s work (2013)

6. West, Gaiardelli, Bigdeli & Baines ⎹ The Spring Servitization Conference ⎹ May 2018
Create the survey
Questionnaire structure and survey process
A wide range of European manufacturing firms were targeted for the survey
Questionnaire structure
1. Company general information
2. Barriers to implementing servitization at operational level
3. Managerial approaches and tools to adapt service strategy into efficient
and effective product-service operations
Type of questions: Closed-ended (dichotomous, rank-order) + Open-ended
Type of respondents: Operations/service managers
Period: Second half of 2017
(Main) selected countries: France, Germany, Italy, Spain, Switzerland, UK

7. West, Gaiardelli, Bigdeli & Baines ⎹ The Spring Servitization Conference ⎹ May 2018
Analysis of the survey
General results
9%
19%
12%
47%
13%
Germany Italy UK Switzerland Other
111 respondents
0%
5%
10%
15%
20%
25%
30%
1 2 3 4 5 6 7
1. Competitors, suppliers and partners
2. Society and environment
3. Customers
4. Economic and finance
5. Knowledge and information
6. Products and activities (services)
7. Organisational structure and culture
Ranking approach 5:3:1
Conversion into %
Customers (3) and Organisational structures
and services (7) are the main critical aspect

8. West, Gaiardelli, Bigdeli & Baines ⎹ The Spring Servitization Conference ⎹ May 2018
Analysis of the survey
Customers
Managerial approaches and tools to adapt service strategy into efficient and effective operations
Main barriers
“Transition is hard, especially when the market is
very cost focused rather than reliability focused”
“We look for our customers problems […] we
moved our target to offer service as a product, to
what is customer value”
How to get sales to be effective in services
How to coordinate cooperation with customers
and end-users
- Strengthening the service force at the expense of the sales force
- Stimulating participation through the introduction of incentive
- Activating the service process from the moment of sale
- Taking partners’ risk by paying the customer directly in case of inefficient service

9. West, Gaiardelli, Bigdeli & Baines ⎹ The Spring Servitization Conference ⎹ May 2018
Analysis of the survey
Organisational structure and culture
Managerial approaches and tools to adapt service strategy into efficient and effective operations
Main barriers
“Local empowerment is a hard to achieve but it
means effective and efficient service provision”
“By being separate we are able to be effective for
the customer”
How to educate managers to think of service as
a real business
How to get R&D to consider the whole
equipment life-cycle
- Promoting of services with presentations of success stories
- Activating of simple service projects with high profitability
- Introducing of “ad hoc” training projects and incentive systems

10. West, Gaiardelli, Bigdeli & Baines ⎹ The Spring Servitization Conference ⎹ May 2018
Analysis of the survey
Less critical challenges
Economic and finance
- Review cost and margins from the pre-sale
- From a cost-plus to a customer value approach
- Analyze value generation from functional activities
and/or services
Knowledge and information
- Adoption of open platforms
- Introduction of standard and common processes
Products and activities (services)
- Information sharing
- Customer segmentation
- Training programs West, Gaiardelli, Bigdeli & Baines, 2018
Analysis of the survey
Knowledge and information
Managerial approaches and tools to adapt service strategy into efficient and effective operations
Main barriers
“[…] move to cross learning from the “ad hoc”
knowledge management systems of today”
“How do we move to “service as a product”
rather than just customer services? Through a
PSS based on Knowledge Management”
How to better share know-how
How to share service feedback with the
equipment designers
§ Adopting of open platforms that support the sharing of data, information and ideas among internal
functions and partners
§ Introducing standard and common processes to enable sharing data
What new project management skills are
needed
West, Gaiardelli, Bigdeli & Baines, 2018
Analysis of the survey
Products and activities (services)
Managerial approaches and tools to adapt service strategy into efficient and effective operations
Main barriers
“Keep working on the installed base and
improving market data, this is key”
“Add service to create a PSS that has a positive
feedback loop to NPD has been our biggest
challenge in our service transformation journey”
How to professionalise service delivery
How to understand the installed base
§ Creating opportunities for the exchange and sharing of asset information and data with customers
§ Segmenting customers and configuring customized offer plans to better meet customer expectations
§ Introducing of training plans aimed at improving technical and relational
West, Gaiardelli, Bigdeli & Baines, 2018
Analysis of the survey
Competitors, suppliers and partners
Managerial approaches and tools to adapt service strategy into efficient and effective operations
Main barriers
“We prefer to encourage our partners to do it
directly! Actually, such a strategy involves losing
part of our service profits, but it’s the best way”
“We must use an ecosystem view to help us work
together better, but this is a mind-set change!”
How to expand capabilities
How to coordinate cooperation in the supply
chain
§ Creating an ecosystem/alliance approach based on co-creation and co-delivery of services
§ Selecting only partners with the same business approach
§ Adopting common processes based upon modularized structures, together with transparent and shared
monitoring, control and incentive systems
§ Sharing benefits and obligations among the partners

11. West, Gaiardelli, Bigdeli & Baines ⎹ The Spring Servitization Conference ⎹ May 2018
Analysis of the survey
Less critical challenges
Society and environment
- Finance and control functions from the pre-sale
- Adopt business plans and economic and financial
analyses
- Use cost/pricing schemes based on standard
modular components
Competitors, suppliers and partners
- Create an ecosystem/alliance approach
- Select partners with the same business approach
- Adopt common processes and structures
- Share benefits and obligations
West, Gaiardelli, Bigdeli & Baines, 2018
Analysis of the survey
Society and environment
Managerial approaches and tools to adapt service strategy into efficient and effective operations
Main barriers
“Some regions were harder […]. However, some
other regions were easier, because management
support came”
“We offer free of charge solutions to support the
loyalty of final customers and help to strengthen
our relationship with the front-end partners”
How to convert free to fee (change internal and
external mentality)
How to deal with conflicting demands to
standardise and localise
§ Introducing finance and control function from the pre-sale phase
§ Adopting of business plans and economic and financial analyses to evaluate the internal cost and
estimate the value added by the services
§ Using of cost and pricing schemes based on standard modular components
West, Gaiardelli, Bigdeli & Baines, 2018
Analysis of the survey
Economic and finance
Managerial approaches and tools to adapt service strategy into efficient and effective operations
Main barriers
“Analyses carried out by the commercial
department demonstrated that service increases
customer retention and margins”
“Giving the top management the growth story of
service business was the best argument to
convince them to get on-board”
How to move away from cost-plus / hours-
based
How to consider margins and to price effectively
§ Introducing reviewing of cost and margins calculation from the pre-sale
§ Changing of pricing policies, from a cost-plus vision to a customer value approach.
§ Analysing value generation from functional activities and/or services.

12. West, Gaiardelli, Bigdeli & Baines ⎹ The Spring Servitization Conference ⎹ May 2018
Conclusions and recommendations
Servitization transformation through change management is an important theme
Managers have practical challenges in implementing servitization
The most critical barriers are: with customers and internal culture
Sharing know-how and information remains problematic
Research into the individual
challenges to:
- Create a more detailed
understanding of the
barriers and possible
solutions
- Provide practical support
for service leadersEvermore practical approaches and tools are needed

13. West, Gaiardelli, Bigdeli & Baines ⎹ The Spring Servitization Conference ⎹ May 2018
Thanks for your time!
Questions over coffee…