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Servitization/ Asset Monetization - Manufacturing Industry Business Transforming Models

In the past few years, customer service concepts and strategies have penetrated every industry segment. While some industries have touched the surface of this vast area some have gone ahead to invent innovative stratagems to engage customers, bring home the laurels of repeat business and record breaking NPS. Manufacturing industries including industrial machine manufacturers, automotive and chemical sectors are also investing heavily to stay competitive and provide proactive integrated and omnipresent customer service. In the recent years, taking a step forward in the 'Game of Service', Manufacturing organizations started maneuvering product centric services as a differentiating factor in the market. This mantra popularly known as 'Servitization' slowly became the key business model for Manufacturers looking at bringing revenue as a part of their service operations. 

As the name sounds interesting, 'Servitization' has multiple flavors which have been adopted by manufacturers to commoditize SERVICE. Some of these types are -
  • Regular Service - Selling parts and consumables and providing customer services for the same.
  • Product Oriented Service - Providing revenue generating services on top of the sold product like Installation, Upgrades of the Product, Maintenance (Cleaning, Periodic Checks, Maintenance Servicing etc.), Diagnosis, User Training, Product Consulting and Customer Help Desk Service etc.
  • Advanced Service Oriented Service - This model includes bundling advanced services with product delivery like:-

1. Renting the product or Use- oriented Services - In this model, manufacturers own the asset while the product is used by the end users in a pay per use model. The manufacturer, as the owner of the asset continues to repair, maintain and manage it while the customers enjoy the product usage without the worry of maintaining the same. This revenue generating model guarantees customer success with the product and a long-term relationship with the customer. Furthermore, this strategy entails harnessing the customer consumption analytics for better product propositions and greater NPS. While this is a great example of Servitization, very few organizations have adopted this modus operandi.

2. Asset Monetization - In this most popular model of Servitization, manufacturers generate revenue out of sold Installed Base by means of:-

- Proactive Maintenance via external devices like Internet of Things driven asset maintenance

- On- field generation of Service leads for the Installed Base (e.g. Extended Service Warranty)

- Artificial Intelligence powered Asset analytics based on consumption, service history and breakdown patterns for predictive maintenance, renewals and/ or possible replacements.

- On- field generation of Cross/ Up Sell product and/ or spare parts leads. 

After a look at the flavors of Servitization, let's take a quick look at some of the benefits associated with this game changing business model. What is making heads turn towards this strategy - 
  • Taking off the product support related burden from customer hands. In this proposition, customers can focus on their services rather than product while being assured that the same will be best taken care of.
  • Greater and better Net Promoter Score. With manufacturers taking responsibility for product services like installation, diagnostics etc. the risk of failure/ breakdown of the asset decreases thereby helping customers focus on other aspects of their business.
  • Increased lifetime of the Product - With IoT or AI powered asset monitoring and proactive services the upkeep and shelf life of the asset increases which in turn leads to reduction in maintenance and operational costs.
  • Better Customer Retention rate - Servitization not only helps better the NPS but also in bringing repeat business or long-term retention of the customer. With proactive services, risk free assets and greater time for key business aspects customer loyalty to the manufacturer is strengthened.
  • Stabilized and Increased Revenue - While Servitization brings the best total cost for the customer, it is one of the best methods of expanding revenue channels for the manufacturer. 

While Servitization appears to be a plum revenue minting approach, the sauce for its success rests in few things - A good technology which can Monitor, Manage, Analyze, Integrate and Respond to Asset/ Service needs, a careful deliberation on which business model will click, harnessing the power of devices (like IoT, AI, Data Storage), a good field service management stratagem for not only servicing but for revenue generation actions, making Field Technicians the champions of the organization.

Historically, Servitization has been extremely successful for organizations like Rolls Royce, Philips and Xerox who have capitalized on Customer Service efficiently. With this concept again getting rekindled, manufacturers have started moving focus from products to product- service bundles. In this era of competitive times, this change being inevitable, not only requires a concerted mindset change across manufacturer and customer but also a careful deliberation for the right selection of the Servitization model. This accoutered with right technology can help manufacturers address Whines and Shine!

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