This article was written by Nick Frank, co-founder and Managing Partner of Si2 Partners. Nick’s focus is on service strategy development, servitization business models, ecosystems, innovation management, service operations, and service business development.
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. They become seduced by technology and lose sight of how to build value in their company.
Intuitively they know they must do something or potentially face disruption, as they see the industrial world-shifting due to three factors: (1) the growing awareness of the importance of data (2) the ease with which data can move through the Industrial Internet of Things, and (3) a growing trend by business leaders to make services a key part of their growth strategies.
Successful companies starting along this ‘Digital Servitization’ route, typically commence their journey with the following three basic steps:
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 what 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.
Solution-ing involves breaking the vision down into tangible projects and programs 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 of two very distinct perspectives:
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.
Having identified the customer solutions and internal process improvements, it is time to execute and deliver the products and offers. 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 program. For more thoughts on this process you can read our articles on the Art of Driving Innovative Change and Self-learning solution-focused mindset.
This article was adapted from a blog on the Service in Industry hub site which discussed ‘Digital Servitization: Breaking down the technology conundrum into easy to manage chunks’