By Nick Frank and Harald Wassermann
The increased accessibility of digital technologies is accelerating the shift from product to service led growth strategies. The problem is that many leaders are confused by the jargon and unclear how to leverage these opportunities
Intuitively they know they must do something or potentially face disruption, as they see the industrial world shifting in 3 major ways: (1) The growing awareness of the importance of data (2) The ease with which data can move through the Industrial Internet of (3) A growing trend by business leaders to make services a key part of their growth strategies.
Successful companies starting along this ‘Digital Servitisation’ route, typically commence their journey with the following three basic steps:
- Discovery: Opening up their eyes to the possibilities
- Solutioning: Developing and piloting a tangible idea
- Pilot & Scale up: Service offer developed, pilot, validate business case, then scale
Understanding the potential impact of these trends on your business and developing a compelling vision is an important first step. A mistake many companies make is to start with technology first, creating platforms and offering services they assume the customer wants. If they started with the customer and industry need and then worked back to how they add value through technology and know-how, they are much more likely to be successful. The Discovery phase can be facilitated by three simple methodologies to identify the profit pools that will pay for your investments; Value Mapping your customer and industry supply chain, examining your Points of Selling in the product life-cycle, and, finally, a review of the data you currently create and will/can create in the future.
Solutioning involves breaking the vision down into tangible projects and programmes that deliver something real. Although understanding customers enables us to quantify the opportunities and set priorities, figuring out where to focus a Digital Servitization strategy that flows across organizational silos is not so easy. One way is to see the impact from two very distinct perspectives:
- Installed Base Digitization: That products and supporting operational infrastructures are designed to produce data that can be collected, analyzed and then monetized through service-based business models. Generally, technology is used in one of two ways:
- Technology in the product and company infrastructure that enables Digital Support, such as remote diagnostics or predictive maintenance.
- Capabilities and technologies in the organization that enable Data Analytics, such as machine learning, visual analytics, and business intelligence technologies.
- Process Digitization: The tools we use to manage our business back-office which sustain and improve margins /profits. Examples might be Service Management solutions, CRM and ERP. Generally, there are two aspects to consider in terms of system & process development
- To enable Customer Management, making customer data transparent and so breaking down silos.
- To enable Business Process Automation, so reducing cost and often leading to improved customer experience.
Combining Installed Base and Process Digitization: When products and infrastructure that collect, analyze and action data, are fully integrated with the back-office process, we can explore what new business models such as Digital Servitization can deliver in terms of value to customers.
PILOT & SCALE-UP
Having identified the customer solutions and internal process improvements, it is time to execute and deliver the products and offering. We require a business plan which defines Where we will target, with What, When and Who in the target organizations and How the delivery model will deliver excellence. This is a process in its own right and one which we call Customer Focused Business Development. It involves working through a structured approach to customer segmentation, defining the service product portfolio that is relevant to specific customer profiles, the GoTo market or sales strategy that will be most effective, and the service delivery model that drives profitability.
Digital Servitization does not all have to be done at once, nor is it necessarily a linear process. An agile approach in small pilots or sprints that overcome specific hurdles is a good way to drive small incremental changes towards a larger goal.
In our experience, it is possible to run through these 3 phases between 3-6 months depending on the complexity and ambition of the business. The key to success is to use cross-functional teams with a breadth of expertise and experience coupled with a logical framework to cut through complexity. Don’t be put off by technology jargon, and if in doubt always come back to the customer value as your guiding light through the complexity of change.
Once you have developed your direction, execution of the transformation strategy is more akin to a major change programme. For more thoughts on this process you can read our articles on the Art of Driving Innovative Change and Self-learning solution focused mindset.
You can download a long version of this article with the full methodology. Download Roadmap to Digital Servitization
Nick Frank is Managing Partner at Si2 Partners, a consultancy helping clients leverage services to win in industrial markets. Nick is an expert in Service Transformation, specifically helping organizations use technology to find new value within their customer’s value chain, facilitating boot camps to help teams solve challenging problems, and business assessments to kick-start the change process. Contact Nick Frank on firstname.lastname@example.org
Harald Wassermann is a Partner at Si2 Partners and an expert in Service Strategies and Service Business Engineering. Harald specializes in helping clients unleash their true service potential combining strategy, operations, process and change management in a holistic business (re-)engineering approach. Contact Harald Wassermann on email@example.com
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