Servitization – as defined by Aston Business School – is the concept of manufacturers offering services tightly coupled to their products and hence moving from a transactional to a relationship based business model.
These services are typically classified as below:
‧ Basic (provide spare parts)
‧ Intermediate (maintenance/repair/overhaul etc.)
‧ Advanced technology-enabled services (the outcome is based on the capability)
– An example of this is Alstom’s “TrainLife Services”, where Alstom provides trains; equipment; depots; train cleaning, and preparation. It is responsible for project management, implementation of all the new technology or the new workflow. It also manages third parties e.g. the freight companies, cleaning operators etc. on its customers’ behalf. The manufacturer looking for maximum impact on both top and bottom lines is ideally striving to deliver advanced services with long-term contracts. The traditional approach to develop market offerings is just not good enough as the scope and complexity, to deliver these intermediate and advanced services, increases significantly.
Service development in need of a fresh look
While product development tends to be managed centrally and driven by technology, service development needs much closer involvement from key customers, partners, other departments and the local field units, particularly sales and delivery.
Often, service development may not be a planned process as the manufacturer needs to respond on an ad-hoc basis to rapidly evolving customer needs and/or delivery constraints from other departments and suppliers.
Compared to new product development, new service development needs a more flexible and iterative process so that the whole organisation is adept at managing innovation.
Operationalising innovation is key
To manage service development successfully, the development process will need to be re-imagined to operationalise innovation and embed the right culture across the organisation.
Three simple steps can help operationalise innovation:
- Democratise ideation – pervasion innovation culture. As R&D won’t be the sole source to generate new ideas, the ideation process should be open to not only all departments within the company, but beyond the four walls as well. A central ‘ideas bank’ is required to ensure new opportunities are identified and exploited ahead of the competition.
- Prototype at scale – evaluate ideas rapidly. All the ideas need to quickly move through their lifecycle to sift through the most promising and ensure limited resources are focused on them to build real services. The notion of so-called concepts need to be introduced in order to gauge the feasibility of translating ideas into real services, based on the ability of the organisation and its partners to meet the specifications (features, cost, delivery teams, deployment time and partner teams etc.).
- Portfolio approach – balance between line and disruptive offers. The portfolio approach is essential to ensure that new offers are aligned to the corporate strategy, especially as the sources for innovation increase dramatically. There should be a healthy balance between extensions/ packaging changes to current runners and bringing disruptive new technologies to life.
Servitization fundamentally changes the definition of the market offering and necessitates a fresh look on the service development process.
Operationalising innovation is central to effectively and efficiently managing the change in the service development process.
Vikram Singla is Business Development Director at Oracle in London, UK
This article first appeared in the Manufacturer Magazine Feb 2016
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Service in Industry or its owner
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