Without turning into servitization the industry will not be able to compete at global level.

Technologies and new ways of thinking business models are rapidly changing the whole industry world, which has to adapt, and the best way is through servitization.

Let’s see than what we mean with the word servitization, which are the main advantages and some concrete examples.

What is servitization?

It indicates the joint offer of products and services. It is a process involving innovation in both skills and processes of a company, so creating value by moving from selling products to selling product-service systems.

This means that the company producing a good will have to turn to another manufacturer of services, or enabling technologies, so as to create a complete product to offer to the customer.

Synergies can therefore rise, working on common projects that support the entire economic sector: it is not a single customer who asks for an ad hoc solution, but it becomes a need to develop a complete product together.

Why going for this transformation?

The main reason, is the convenience: for the producer, it turns into a USP (Unique Selling Proposition, or an exclusive); for the customer, it means combining products and services without having to look for a third party.

At today, it is no longer enough just to sell a product: international competition (hence, global) significantly lowers the profit margins on sales; therefore, it is necessary to offer different services, or the option to rent. It is therefore a question of approaching product to the new mode of “Sharing economy“, thanks to technologies and innovations allowing it even with good profit margins.

Consequently, when servitization applies at industrial level, the relationship with the customer changes: he buys the use of the product, rather than selling it itself. Even for the company the way of billing renews: instead of getting profits from a sale, they come from related services.

Furthermore, this implies saving time for the customer, who can gat what he really needs without having to organize himself hereafter; as clients already know the products, their specific needs and costs, they are even able to value the overall product.

servitization cooperation companies

Industry servitization advantages

Adopting this new approach implies, for a corporate, several benefits, which include:

  • Customer loyalty; in fact, the relationship does not end after the sale, but remains constant in the time.
  • wider market; especially for machine tools costs are often quite high, and not accessible o everyone. However, in the case of long-term rental, the cost is considerably reduced.
  • Incomes come even from servicing. 
  • There is a proper and complete knowledge of technical faults and their kind, thus, improving new machineries.

Even the customer will have several advantages, the main are:

  • immediately lower costs, in fact, the investment is not as expensive as the purchase.
  • There is no risk of obsolescence of the machinery, rather, it has greater flexibility in order to be able to access more innovative products.
  • no need to look for an expert technician, as the assistance comes straight from the producer.

Concrete examples of servitization

In order to understand the importance of this new way of doing business, let’s take a very practical example: tractor manufacturers. In some areas of Lombardy are really numerous, with a large market.

The tractor will then be sold to farms of different sizes and with special needs. If the farm extends, for example, on large hectares of land, it could be useful to the tractor had a GPS system that guides the farmer, perhaps to avoid him passing and revising on the same field.

Or it could be useful for the tractor to have sensors that help to recognize a field sown, in order to avoid damaging crops in any way, even if only by mistake.

You might also be interested: robotics in agriculture

Of course, the tractor manufacturer alone will not be able to develop all these technologies that, instead, with the support of experts, could achieve with great success and above all by offering a truly unique product to the customer.

The economies of scale that this creates can bring real benefit to all parties involved.

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