Servitization and field service will transform industrial manufacturing

Andy Neely is a director at the University of Cambridge and one of the foremost thinkers on concepts around performance management and measurement, especially in the manufacturing industry. His post from late November 2013 entitled “What is servitization?” Is still one of the highest-ranked items on Google for the term “servitization,” and his definition of the idea is one of the clearest you’ll find:

It involves firms -- often manufacturing firms -- developing the capabilities they need to provide services and solutions that supplement their traditional product’s offering.

Essentially, then, it’s the idea of beginning to develop revenue streams from service, as opposed to simply from product.

This has been happening for a little over a decade by now and is transforming field service management in the process. You can thank one of the bigger economic downturns in history for the origin point, in some ways.

Toyota, for example, is considered a leader globally in ‘servitization’ business models. They’ve admitted that one of the only ways they survived the 2008 recession was by bundling advanced services package with their primary offering, i.e. selling cars.

Manufacturing firms in all verticals had traditionally been disconnected from the actual providing of service -- that usually fell to third-party contractors or agent-based teams whose jobs were totally independent of the sales and product side of the business.

Now, though, many companies strive to get a full ecosystem on customers:

• The customer buys the core product
• The customer also buys a long-term service agreement from the company as well

It’s logical: two sales vs. one sale.

But it represents a major transformation in field service management for a few different reasons:

Seat at the table

This is an important concept in any business; ‘seat at the table’ refers to the stakeholders who get brought in on key decisions, usually because their units are tied to revenue and growth. For decades, service lines didn’t have a seat at the table -- often because the service, as noted above, was provided by third-party vendors. Now service lines are contributing to overall company margins (and often at a higher clip than product lines), and as a result, service is earning their ‘seat at the table’ and attention from senior management teams. This is a sea change in terms of resources that your field service management organization can pursue. (In fact, we’ve put together a white paper on driving revenue from field service management; it’s available here. Consult it for some ideas -- and as always, let us know if we can help.)

Strategic decision-making

Effectively managed field service provides the overall business a good deal of advantages, including:

• Strong customer experience
• Access to reams of data on customers and industrial machine performance
• Technicians as referral engines for your business

Those three ideas just scratch the surface of what good field service management, powered by increasing servitization, can accomplish -- and right there, you have tons of revenue potential from customer experience, Big Data, and streamlined sales and marketing efforts.

You could argue that the three most transformative elements of field service in the past decade or so are:

• Internet of Things technology
• Mobile adoption rates
• Servitization increasing within the industry

Taken together, they allow field service organizations to do predictive maintenance and improve the customer experience with better inventory, tracking, and invoicing. None of it even takes place, though, if companies hadn’t started down the servitization path of bundling service offerings with product offerings. Once that began to happen on a larger scale in manufacturing, the flood gates were open for a transformation of field service.

For ideas on how to make the case for a field service management solution, download our eBook.

Written by Shloma Baum