What if … you are the CEO of a successful manufacturing business? And what if, despite years of success, a strong track record and some category leading products, you saw your growth slowing and your margins cut year after year? Across the sector and around the world, the current strategic response from manufacturers has been to build a service wrapper around their core products. As a result, ‘Servitisation’ as it’s known, has proven that these businesses can respond to the ongoing challenge of commoditisation by moving from transactional relationships to long-term shared value partnerships. It’s also shown the way to unlocking new revenue streams.
Back to our ‘what if…’. As a CEO you are confident that Servitisation is the right course to pursue.
The real question is: how do you build a model that best suits your business, your product set and your customers?
1. You need to pick the right products.
There needs to be a clearly beneficial relationship between the product and the potential service. Philips with its Light as a Service offer, and Rolls Royce with their IntelligentEngine vision are incredible case studies for identifying leveraging this exact relationship. They both took the core benefit their product – providing light in the case of Philips, providing performance in the case to Rolls Royce – and created a service offer that focuses on, even enhances, that core benefit.
2. Address people, process and platform challenges.
Building a service requires a whole new operating model and cultural mindset to co-exist with your current BAU. And you’ll have to re-educate your market to accept you as a credible service provider, as well as stretch yourself into new markets with new competitors.
However, what’s often left off the table in this challenge is the brand. Leaning into your brand is an essential factor in delivering success. Your brand provides a clear guide on why your company exists in the first place. Integrating it into any Servitisation strategy allows you to filter and focus when exploring service offer opportunities; it means you can distinguish the benefits of your offer to both your colleagues and the end user; and gives you a clear story to the market about why this service and why now. At Rufus we strongly believe that it’s your brand that makes the difference, and our work with B2C, B2B and B2B2C brands has proved time and time again that a business with a clear understanding of their brand is a confident, differentiated and successful business.
We’ve learned that the essential task is to tightly weave the service offer into your brand’s purpose and ensure the service experience delivers your brand promise. That gives your business a reason to do something and your customers a reason to believe. Here are the three things that consistently make a difference:
Find your purpose to frame your response
Everything starts with ‘why’. If this is news to you, then take a look at Simon Sinek’s book, Start with Why [link]. Why you exist – your purpose – is the foundation everything else is built on. It allows to frame what you do – your proposition – and then how you do it – your experience. With these three elements in place, you have what you need to select the right service offers for your brand and create an experience that cannot be copied. They let you filter out the ‘me too’ ideas and the ideas that might look good on paper but could cause a credibility gap in the market. And because the proof of the pudding is in the eating, they let you create an end user experience that delivers the original promise of your brand – the reason you started making things in the first place.
Know your target users
As with product manufacturing, service users are not typically the same people who buy from you, but they have an influence on the initial purchase decision and any renewal decisions. Nor can you assume a direct translation from needs and behaviours from the product itself to the service. The best, most successful brands are able to both design for specific near-term unmet needs and anticipate future, evolving, usage behaviours. So the same rigour you’d apply to R&D, product design and testing and, ongoing improvement, needs to be applied to your service design. Your service is as valuable and articulate an expression of your brand as your product set, so it needs the same focus and care.
Support and integrate new thinking
At its core, Servitisation is a strategic design problem. As already noted, it will force the creation of a new parallel operating model, it will require new management methods, new skill sets and partnerships and the mindset of continuous improvement, flexibility and adaptability. Creating and delivering a service creates a real-time data driven connection with your users, and through this connection you’ll quickly learn that what was exciting and break through yesterday becomes a baseline expectation tomorrow. Failure to meet and even exceed expectations will hit your brand just as hard as your revenues, and once you lose credibility it’s very hard to win back. And that means design becomes a strategic function, helping you to create an operating model that understands changing needs and behaviours in real-time, and delivers an experience that continues to lead the way.
From service blueprinting to ecosystem maps, from user journeys to experience concepts, and from investment case building to measurement frameworks, we’ve always used design as a strategic and operational tool. Adopting not just these tools, but the mindset and skill set they require, has helped our clients deliver real benefits to users, positive and measurable impact on revenue and ensure their brands are category leaders.
And lastly, it’s rewarding. An organisation with a clear brand purpose is a confident and exciting place to work. It’s a place where colleagues are excited by and engaged with the challenges of BAU, where they can see a reason for their efforts beyond their pay cheque. Leaning into your brand when embarking on such a fundamental shift as Servitisation will continue that sense of purpose, ensuring engagement and get the best from everyone involved.