It's early days for servitization

Brian Sommer Profile picture for user brianssommer May 14, 2020
Why can’t we get smarter products that tell us when they need care and feeding? Some technologies are running well ahead of the ability of product makers to incorporate them into their products and into their support offerings.


Servitization is one of those words that was really popular a couple of years ago, but the issue is (and should be) front and center again. Most of the prior conversations involved commercial servitization concepts. Examples included: locomotive power-as-a-service, turbine engines-as-a-service, and scores of preventative maintenance examples of capital equipment.

When you think of servitization, it should conjure up an outcome, not a product. The outcomes people and organizations desire of most products are things like reliability, uninterrupted up-time, dependability, etc.   We don’t want things that surprise us with unscheduled down-time, untimely failures, additional costs (e.g., the spoilage of food when a refrigeration unit fails), etc.  The servitization move is intended to take the surprise and other negative consequences of product ownership/usage away.

Servitization is not just bundling an extended warranty to a product sale. It’s about a manufacturer possessing intimate knowledge of how a product is being used by a customer and the condition of that item. Additionally, servitization requires the maker to have algorithms and other software to swiftly detect potential issues and to dispatch repair/replenishment items and personnel when required. Customers that want uninterrupted product up-time won’t like waiting weeks for a scheduled repair to occur.

Servitization is proactive and predictive not after-the-fact. It should embrace repair, replenishment, status, wear, and other attributes. It should be customer-friendly and driven by lots and lots of data. It needs tools that make sense of the data while capturing other lessons from field technicians and others involved in optimizing the value these products deliver.

But today’s servitization world is still in the early stages and fights are occurring between product buyers and makers as to who owns and has access to the data collected. And some devices are capturing more data than just what is needed to monitor a product’s condition and incurring wrath from the product user (e.g., farm equipment that is mapping a farmer’s fields and selling this information to seed companies without necessarily compensating the farmer).  Early stages indeed.

Early days

Unfortunately, we’re still in the early stages of the servitization movement. As makers grope their way forward, some will make mistakes. Some makers will:

  • Try to ignore the service changes possible and resolutely offer only a product
  • Over-reach in their collection, use and sale of a customer’s data
  • Not alter their processes to materially improve the outcomes a customer wants/needs (e.g., does it do any good that the machine is noting an imminent failure if the customer must manually schedule a service call that can only be done during office hours and will not occur for 2-3 weeks?)
  • Create a one-size-fits-all approach to servitization (e.g., they don’t allow others to perform needed repairs or require the strict use of their own supplies/parts)
  • Etc.

During the current COVID-19 lockdowns, it has been clear that consumer applications of servitization are even further behind their commercial brethren. In one month, I experienced:

  • My internet modem failed with no warning and at a bad time. Because it didn’t have sensors within it to warn me (or my ISP) of the unacceptable level of heat building up within it, it unexpectedly failed just a couple of hours before I had to conduct a critical Zoom conference. My internet provider could have learned of the impending failure days beforehand and sent me a replacement ahead of time if their equipment had embedded sensors and their systems could monitor potential failures. As a consequence, I spent an hour on the phone getting them to acknowledge that the device had indeed failed. Then, I spent a couple of hours driving around to their retail store and an electronics superstore to get a replacement. Their systems were so bad they sent me on a wild goose chase to get a replacement device that they didn’t even stock. While I made my Zoom call with 3 minutes to spare, I wished my Internet provider could spell servitization, learn what it means and develop processes, applications, workflow, sensors, etc. to make it a reality.
  • My microwave developed a problem where it would start cooking when you opened the door. Not being a fan of irradiating myself, I had to debug the problem myself as the oven didn’t even provide an error code. Thanks to the Internet, I found out that I needed a new Interlock Switch. I ordered one, cracked open the oven and replaced the bad one. No servitization there!
  • My dryer suffered four failures in April. Interestingly, this 11-year old machine actually displayed error codes. I replaced the thermal fuse, thermistor and motherboard all because of different error codes. When the door hinge broke, I didn’t need a code to help me diagnose that problem. At no point did I interact with the equipment manufacturer as all breakdowns occurred on the weekend (of course) and their parts department is only open during banking hours. Not exactly a positive service experience.
  • My HVAC system keep tripping the circuit breaker. Since I don’t like sticking my hands into a 240V electric system, I called the installer for this 18-month unit to come out and fix the problem. This had been an issue from its installation and I was determined to see it fixed once and for all. Mind you, my AC unit send me email messages with the fault code and the installer also gets these. Yet, they didn’t seem to care. Worse, the problem turned out to be a nicked piece of wiring insulation that was shorting. Had I not been so insistent, my house could have burned down. By the way, the earliest that the tech could get out to see me was 8 days after I called. Not a great servitization story as the monitoring, messaging, etc. still couldn’t produce a repair technician in a timely manner.

Servitization implies more than just notification of a problem. It would be great if more products had:

  • Sensors that monitored the health of the device
  • Technology to communicate with the maker and the customer whenever a failure was imminent or that service was degrading
  • Preemptively provided service and parts BEFORE the solution outright failed
  • Access to AI/ML tools to help calculate probabilities of service disruption and mathematically deduce the likely causes
  • A service and parts organization behind it so that repairs can be completed the same day as a failure. When machines are not working, there is no as-a-service occurring.

When done well, servitization creates a different, better set of experiences for the customer, whether they are big corporations or the household down the street.  The end goal of any as-a-service solution should be one very happy customer. In the consumer world, we’re nowhere near that reality now.

A study in servitization 

Recently, IT research firm IDC and ERP vendor IFS teamed up to study servitization. IFS has a number of preventative maintenance, IoT and other related solutions.

IDC queried some 420 companies to collect their data.  What did they find? Some of the study’s finding include:

  • Less than 5% of firms have achieved ‘servitization nirvana’ in 2019 (This would represent a fully integrated value chain that extends all the way from the maker to the final end customer).
  • Top line growth, wider margins and customer retention growth were markedly better with those firms that had servitization solutions

IDC also identified a four-stage maturity model for servitization. It reflects everything from highly disjointed solutions on one extreme to fully integrated/seamless solutions on the other. Many of the firms they surveyed were still in the earlier stages of deploying their servitization solutions.

The report is a detailed and interesting read. It also contains some solid methods for categorizing a firm’s progress towards servitization.  IFS is making it available here (registration required).   

My take

We’re in the early innings of this ball game. Here are just some of the issues we all must ponder re: servitization:

  • There’s lots of work left to be done with some firms not even started on their servitization efforts
  • Too many solutions appear one-dimensional: too oriented towards the maker’s wants and not the varied needs of their customers
  • Consumer solutions are way behind commercial counterparts
  • Some industries have to start thinking about consumers (e.g., We’re not people to an airline. We’re ‘revenue air miles’) before they can conceptualize their future servitization offerings

Well, enough of this article...I’ve got to go and see what other appliances broke in our house today….

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