The Impact of Servitisation on Businesses

Abstract

Commoditisation forces companies to differentiate and innovate by shifting from product-oriented business to selling product and service bundles and co-creating value with customers. This phenomenon is widely known as servitisation. Upon examining how companies in manufacturing and process industries develop their service business, it is discovered in both cases that establishing a separate service organisation is a key element when considering the success of servitisation. The challenge with this is the arising need for a global service infrastructure and capabilities to respond to local requirements. Apart from the need for service infrastructure, one can expect change resistance, questioning of change legitimacy and role conflicts from people working in the customer interface. Furthermore, even though the mindset and capabilities were there, customers might not share the same degree of servitisation which requires external alignment. Servitisation also begs the question regarding how one can monetise services which is where the concepts of value-based pricing and value-based selling become handy. Instead of basing pricing on costs or competitor prices, value-based pricing focuses on the value customers get when using the service. Furthermore, value-based selling aims to help customers to excel in their own business and to reach the goals they have originally set for themselves. Customers’ perception of value is, however, often subjective and heavily dependent on context, making value quantification and eventually communication difficult. Hence, companies have to find the right customers, have customer-centric sales personnel, create credible referencing for potential business offerings, and lastly work jointly and iteratively with customers to create value.