Servitization isn’t just a hot topic in technology – it’s a business model that can have a profound impact on the way many businesses operate today. In this post, we’ll cover what exactly servitization means, how companies have implemented servitization models and how Bolt Data Connect can make it possible for your organization.
What is Servitization?
Servitization is the continuation of a trend that has been taking place for nearly 2 decades. For those in the technology field we remember every company having racks of servers and their own computing infrastructure delivering internal applications from ERP to email. Over the years these companies and most technologies have moved to the cloud and all that infrastructure has been replaced by an AWS, Azure, GCP, Rackspace, etc. login screen. All that cost and complexity has shifted from significant capital investments to an operational cost based on what you consume.
Servitization is focused on delivering an outcome rather than product and services. The old adage “you don’t buy a drill because you want one, you want a hole”. Servitization is selling you holes, without you worrying about drills, drill bits, and keeping them functional.
At its essence, servitization is a business model that involves companies shifting their focus from selling products to selling services. Companies no longer place the value of what they’re selling on the physical product, but instead the service the product provides. Servitization has commonly been referred to as asset-as-a-service or product-as-a-service. This shift is driven by a number of factors, including:
- Increased competition in the market: Companies have to stay ahead of competitors by offering their product or service at lower price points, showcasing innovative features or leveraging superior product quality.
- Evolving customer needs: Customers have come to expect for businesses to not only provide prompt customer service, but also to keep up with their needs and develop life-centric solutions. (Harvard Business Review, 2022)
- Rapid advancement in technology: Advancements in technologies, such as AI and IoT, have made it possible for companies to reinvent their products by incorporating sensors and connectivity to improve product performance and enhance product capabilities.
- Predictable cost models: Manufacturing has been experienced ever lowering margins, and in this environment fixed capital investments and unpredictable service costs irrespective of output and revenue are a challenge. Servitization shifts the burden to the service provider and ties costs closely to production. With asset data using Bolt Data Connect the service provider can effectively manage this risk and charge a premium in return.
One key aspect of servitization is the ability to collect and analyze asset data from the products a company sells. This asset data can be used to improve the services that companies offer and to create new revenue streams. By analyzing this data, companies can improve their understanding of their customers’ needs and tailor their services accordingly.
Additionally, they can use this asset data to optimize their operations and improve the efficiency of their assets. To collect and analyze asset data, companies can use a variety of methods such as IoT sensors, remote monitoring and data analytics software. By leveraging these methods, companies can gain valuable insights into usage patterns, performance metrics and maintenance needs.
4 Examples of Servitization Business Models
The possibilities are truly endless for the types of companies that could benefit from servitization business models. Some examples of companies in various industries that have successfully implemented servitization include:
Commercial Printing: Leading commercial printer manufacturers have made the switch to a servitization model by offering managed print services. This includes not only the sale of printers and copiers, but also maintenance, repair and supply management services. Also, commercial printer manufacturers are able to lease their printers to businesses and charge them per page printed rather than selling the printer outright.
Medical Devices and Equipment: Global medical device and equipment manufacturers have servitized their business by offering healthcare providers the option to pay for their equipment per use. For instance, a hospital would pay for each MRI scan instead of purchasing the actual MRI machine. Additional service agreements to maintain the expensive equipment are also available to increase the MRI machine’s uptime.
Automobiles: Automobile manufacturers, including super luxury brands, are taking advantage of the benefits of servitization by developing pay-per-use plans for the use of comfort features in their automobiles. When a consumer purchases a vehicle, certain features such as heated seats, can only be used by paying for the time used. In turn, consumers are able to purchase vehicles with all available comfort features included at a lower initial price.
Heavy Construction Machinery: Since heavy construction machinery is typically designed for specialized use but is quite costly, manufacturers are able to offer their machinery to a wider range of customers by charging per use. For instance, a heavy construction machinery manufacturer could charge a construction customer by the day for a bulldozer. By doing this, customers have access to the machinery they need at a price point they can afford.
How Bolt Data Connect Enables Servitization
The biggest challenge most companies face when transitioning to a servitization business model is finding a platform that can support their transition. While some solutions can connect to their assets, they aren’t able to provide actionable insights or apply business context rules. Bolt Data Connect enables servitization by providing a way to easily collect and analyze data from their products directly on the Salesforce platform. It allows companies to collect data from their products in real-time, and then analyze that data to gain insights into how the products are being used. This asset data can be used to:
- Improve the services that companies offer to identify and create new revenue streams
- Understand asset usage with tools such as digital twin visualizations, data live streams and native Salesforce reporting capabilities
- Automate customer invoice creation based on customizable conditions such as product usage
Additionally, Bolt Data Connect allows companies to quickly and easily connect their assets to Salesforce. This means that companies can start collecting and analyzing data from their assets right away, without having to spend a lot of time and resources on connectivity, setup and integration.
Starting the Journey to Servitization
Over the last 15+ years, service companies have invested in field service and customer service technologies in order to lower operational costs and standardize service. With these investments, companies now have accurate metrics giving visibility to business performance, and as a result, they’ve begun their journey to servitization without realizing it. The next phase in the journey to servitization is focusing on the outcomes and improving those metrics. Operational performance will only deliver small, incremental improvements, however, moving from reactive to prescriptive service is key to significantly improving results.
To keep up with the pace of change and stay competitve, servitization business models are becoming increasingly important. By shifting focus from selling products to selling services, companies can gain a competitive advantage and create new revenue streams. To help your organization complete the transition to servitization, Bolt Data Connect can help connect assets quickly, monitor asset usage and invoice customers for use – all without ever leaving Salesforce.
If you’re interested in learning more about how Bolt Data Connect can help your company enable servitization, don’t hesitate to get in touch with us.