Turning Costs into Growth through Servitization

Services shouldn’t be viewed as an added cost but rather as an opportunity to expand your business

For manufacturers, the pressure to be a bit cheaper, better or faster than the competition is constantly on. However, it does not often happen that manufacturers get a chance to set their organization apart by evolving or expanding their entire business model.

In the past, disruption in the form of things such as industrialization presented an opportunity for manufacturers to make adjustments – allowing them to pursue new opportunities and improve margins. Now, the disruptive forces introduced by digital, as well as physical innovation, have opened up a possibility for manufacturers to adopt servitization – a business model focused on revenue generation through a service offering rather than just selling a product.

Why is now the right time to consider servitization?

Although it has always been possible to sell services, it has only recently become a financially sound decision for manufacturers. There are three core components that came together to create this opportunity. The first one being the ability to create networks of factory assets at a drastically lowered cost which has been enabled by the introduction of IoT sensors as well as the cloud-hosted platforms they relay information to. Next is the ramping up of industrial data gathering, management and analysis capabilities. Ultimately, the market has evolved in such a way that an increasing number of customers are looking to purchase a service rather than a physical product in order to keep the total cost of ownership, as well as maintenance expenses, predictable and manageable.

At the core of the servitization model are the automated, remotely monitored and guided service processes that are all enabled by IoT. Companies are able to minimize the amount of maintenance calls by leveraging remote monitoring and self-healing. This allows substantial cost reduction since a large number of issues can be resolved without ever setting up a service visit. With preventative maintenance, you can further improve customer satisfaction by employing machine learning and AI to surface future issues early and prevent downtime and the costly break/fix cycle. Still, when the situation truly calls for a technician to be dispatched, they can be sure to have all the necessary information about the issue as well as the appropriate equipment and replacement parts.

The true value of servitization, however, lays in its ability to expand upon the traditional manufacturing business model. By focusing on adding services around the primary offering, manufacturers can take entirely new avenues to improving their margins. Shifting to a service-based model can not only help you widen the spectrum of customers you can reach – but also deepen relationships with current ones. Added to that is the fact that service models that supports product sales will improve cross-selling of services such as support, maintenance or analytics.

Get the most out of digital transformation with Microsoft Dynamics 365

By unifying ERP and CRM on a single platform, Microsoft Dynamics 365 empowers your service and sales teams with full visibility into the customer assets and engagement history. Ensure high customer satisfaction with fast issue resolution enabled both by high visibility and machine learning that is able to suggest troubleshooting steps and pinpoint the root of the issue accurately and efficiently.

By introducing these capabilities into their value offering, organizations will have a variety of avenues at their disposal that they can choose when looking to further differentiate from the competition. Through these additional services, organizations can establish themselves as an advisor to the customers they serve. Increasing the amount of customer interaction after the sale and fostering an atmosphere of cooperation with the client will help you secure future business as well as acquire valuable feedback that will help you further improve and innovate.

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