What is servitization (or rather digital servitization)?

“Servitization” is the strategy with which customers are offered value-added services integrated into the products, such as to make them lose the concept of the product itself. This could be the maintenance service, a specific highly functional mode of payment for the customer’s needs (ex.pay per use, pay per performance), technical training services, etc.  

This kind of strategy aiming at differentiation from competitors started as early as the 1970s when Bristol Siddely Engines, acquired by Rolls-Royce (aircraft and marine engines) launched a “pay-per-flying-hour contacts” business model instead of selling aircraft. Later on, during the 1990s, IBM shifts from selling hardware to selling Information Technology services and Xerox, instead of selling copiers, offers a pay-per-use service (case pay-per-Copy). 

Apparently, Sandra Vandermerwe and Juan Rada authored the word in their article “Servitization of Business: Adding Value by Adding Services” published by the European Management Journal in 1988. 

Thus, today, the real innovation is the digitization and connectivity in servitization, which are leading us toward a real revolution in the economic paradigm. 

Introducing the opportunities arising from 4.0 technologies, particularly related to smart products, we face an acceleration in the collection and processing of data related to product performances, customer usage patterns, individual expectations and needs, and, simultaneously, in offering product adaptation. AI, Big Data, predictive maintenance… just to name a few examples. 

This is a strategic opportunity to foster the competitiveness of manufacturing companies that can benefit from higher margins typical of service offerings and build competitive barriers on customers against players outside their market. Digital servitization (we like to call it servitization 4.0) can also foster aggregations with other players, both with specialisations precisely in 4.0 technologies and in a circular and sharing economy logic.

What are the differences between Servitization Manager and Innovation Manager?

The figure of the Innovation Manager, contemplated in the 2019 Italian Budget Law, is deemed decisive to innovate the companies of the future. 

Indeed, the Innovation Manager contributes to the technological acceleration of a company and guides its change toward an increase in competitiveness. 

The Servitization Manager is familiar with 4.0 technologies and innovations and focuses all his attention on using these technologies to gather more information about the customer (empathy 4.0) and designing service products as close as possible to the real needs of the customer. He then plans strategies for launching such product-services into the market and follows through their implementation by intervening to support other stakeholders. 

Servitization Managers are strategic figures especially for manufacturing companies, as they hold the knowledge and skills that usually lack in such companies, which are traditionally focused on the excellence of the product. 

Thanks to the Servitization Manager the company is supported in shifting from a “product-oriented” to a “customer-oriented” company, and this is thanks to the implementation of the new business model and the adoption of the necessary technologies.