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      2 min read

      Why Servitization Practices are Moving from a Product Focus to a Service-First Model

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      Seemingly every company touts a customer-first focus. Though for manufacturers, an accurate admission is that their concentration is squarely on their products. It’s a common trap: manufacturers have people and processed that primarily think from the product vantage, with systems and technology infrastructure that keeps this mindset prominent.

      Is this a profitable way forward?

      Trends are indicating it’s not.

      Many manufacturers are planning for a (near) future where they will become service companies that also sell products. This action of servitization, or a service-first model, calls for a thorough transformation of their business. Market intelligence analyst International Data Corporation (IDC) defines servitization as product as a service, which includes selling usage, uptime, power by the hour, remote monitoring, and service analytics. The driver behind this new mindset has been enabled by the Internet of Things (IoT) and connected products, which have provided manufacturers with real-time data on the product that can be turned into insights, outcomes and, ultimately, new services and products.

      According to IDC's 2017 Product and Service Innovation Survey, the top two business priorities for manufacturers in the next three to four years are improving sales and revenue generation and expanding to new markets. These goals will be sped up by manufacturers innovating their service offerings, creating an enhanced value proposition for the customer. This will require transforming their mindset and their go-to-market approach. Many industries are being adversely affected by product commoditization of products, impacting their ability to both grow revenue and/or move into new markets. An area of differentiation in this environment is the services that can be provided, and relationships that are built with customers. Brand loyalty is rapidly eroding; an impacting factor being anything touching technology, with many competitors offering similar products, hitting the market simultaneously. Providing customers value through service enables manufacturers to get closer to the customer and builds bonds, and brand loyalty, that’s lasting.

      The IDC study’s premise is that manufacturers can evolve from being primarily product focused to partnering with customers to deliver value through service. This transformation involves the entire organization and demands manufacturers rethink value and what the future of their business should look like.

      "The search for new revenue streams has driven manufacturers to think about new ways they can deliver value to customers. In an environment where products can quickly become a commodity, the ability to solve customer problems and provide enhanced experiences has created an environment where manufacturers have begun to explore service-first model," said Aly Pinder, program director Service Innovation and Connected Products. "Transforming from a product focus to a service-first model, however, demands that manufacturers rethink the entire way they have been doing business. This is not just another initiative or product launch. Manufacturers need to bring the whole team to the table in order to successfully evolve to a state of selling services and not just products.”

      Discover more. Attend the webinar “Create Enhanced Customer Experiences by Reimagining Service Lifecycle Management,” with guest presenter Aly Pinder himself. The event’s June 25th, 2020 at 1 PM EST/12 PM CST


      Watch Webinar Recording


      Tim Nissen

      Tim Nissen has built companies through marketing in categories including technology, manufacturing, energy, commercial real estate and business services.