Interview with Borut Potočnik, a mentor in THINGS+ project
20. 01. 2020
Company Growth, Operations Development, Business Consulting, Mentoring, Startups, and growing companies. Experienced in though the economic environment of both more and less developed countries. Active mentor in all high-tech companies. Mission: Generating business success and competitiveness for companies from less developed regions to win on developed markets.
Servitisation for Borut is a process, converting an offer of a physical product into an offer of some service, closer to users´ actual needs, understanding, and feelings.
His advice: When you attempt to make a servitization of a product, you mustn’t look from your product to the market, but from the set of the user’s activities and situation around the direct and indirect purposes of your product. You will soon spot an activity, feeling or solution, your user is ready to pay for.
You are very familiar with the operational process of a company. Based on your experience, what can you say of the operational aspect of servitization?
Servitisation brings different processes into a company. Logically the service itself represents another parallel or extended process to the product one. It depends a lot on what type of service are we talking about – it can be sort of serial service, done in an equal way for all customers or more individually customizable. It can require the engagement of additional technology or it can be just another definition of contracted relation. The service process can be a part of the customer care process.
In one of the best of my cases - an Italian provider of safety equipment - the service part represented comprehensive statistical software integrated into customer-care which offered essential data for customer’s decisions and further actions. This service was so interesting, that my client took the first place among all regional competitors.
Is servitization just a name for improving efficiencies in product maintenance and after-sales services, or is there more to it?
There is more to it. It is a wider and different concept. Let me explain this in two examples.
First a B2B one. If you are a company installing a new production line, you can install a new machine and then gather knowledge around it. The other way is to buy a ‘solution’ to the problem and part of it, it is the product.
The other is a B2C example. Cars have always been a symbol of expression of your status. But today, more and more people are using cars just as a necessary mean of transportation. The status part is disappearing. Servicing the need to get from point A to point B in a car of a certain size with no need of ownership, legal matters, insurance, maintenance, etc for an even lower price would be an advantage. Car usage is already transforming into a service.
What is the ideal ratio between providing products and services to customers for a company?
The ideal ratio varies from case to case. Not only by sectors or products but also by the service solution chosen for a certain product. Some service including a certain product can be much wider or complex in comparison to another service containing the same product.
At what stage in its development should a company go into servitization?
Just anytime. A company should be all the time alert in market or product development possibilities. This should all the time include checking for the servitization opportunities for existing products. I would like to remind, that the term servitization is used for the process performed upon/after an existing product or a line.
Which industries are most suitable for servitization?
I don’t believe the suitability for the servitization depends on industry type as much as it depends on activities, solutions, and feelings connected to a certain product. Theoretically, everything can be suitable for servitization. Theoretically, all our private environments can be a set of services and all business environment including assets can be serviced. The decisions on servitization in practice are brought upon value-added the servitization offers to the customer and consequently to the provider.
What are some of the major benefits of servitization for a company?
The general benefit of a company is getting an additional competitive advantage.
The other one is getting more confidence and loyalty from the side of customers.
In case a company acts locally, the servitization is an appropriate tool to get higher retention of the customers. And very important is the added value. The correctly designed service would bring additional value to the customer and additional profit to the provider.
How long does it take for servitization to bring income in for the company?
We have to take into consideration some general factors here. The first one is the technical requirements of the service e.g. software or media – web content, printed material, etc. The second one is the complexity of service setup – different researches, tests, etc. And the last one is, of course, the time to market and sales speed.
What future do you see for servitization in the manufacturing sector?
I see servitization as one of the most important challenges in the manufacturing sector in the near future. It enables all the value chain elements to concentrate on their specialty. This raises the level of the overall chain competitiveness. And the end customer at the end of the chain gets his opportunity, too.
What advice would you give to the companies that are starting to implement servitization on: How to find the balance between operational and commercial aspects?
As said before, the process of servitization is similar to product development. You should go to the customers and study well all their activities, feelings and other important elements around your product. You determine what you can offer the customer to do instead of him, for him or instead of anybody third. You define the service. And you make a test. If you find it successful, you determine pricing and business model and begin with development – I mean service and marketing/sales model development.
When you attempt to make a servitization of a product you mustn’t look from your product to the market but from the set of the user’s activities and the situation around the direct and indirect purposes of your product. You will soon spot an activity, feeling or solution your user is ready to pay for.
And how to deal with the transformation from selling and manufacturing to deliver services?
That is a typical chain process and there is no common recipe on how to do that. Everyone in your staff has different perspectives, there are those who are really connected to the technological development of the product and when you go into servitization they don’t like it. What you can do is explain to them and try to convince that the product will be even better because now it is serving a better purpose and it is offering a solution. The development of dealing with the service should not be done by the same staff as the technical development of the physical part. The development should be controlled from the same point, but the focuses differ.
Data is being considered the second element of servitization. Do you think that Data Analytics as part of Digital Culture is the final aspect to be addressed in the servitization approach?
I think that for some products data is the first part that is needed to create their content, especially for the products of the future. The pure mathematical logic shows the need for data analytics engagement. It is the two dimensions we are dealing with – the product and the service data with all their attributes. The complexity dictates the usage of data analytics with the aim of getting the best results.
Do you think that the service market should be considered as a next phase in the product lifecycle or a process that goes along with the product lifecycle?
Well, it depends on how and when we decide to do it. It can normally go along the lifecycle of the product that’s mostly in the cases where they have already built a good relationship with the customer. In the other case, where the existing product’s lifecycle should be extended, enhanced or the company looks for fresh competitive advantages, the service market can be considered as the next phase of the product.
Does servitization come as part of the company’s overall digital transformation strategy?
Servitisation and overall digital transformation are not necessary elements of the same strategic step. In most cases, the service requires digital or digital enables service. This still doesn’t mean that both are done simultaneously. Well in case the company services are main product or product line it is of strategic importance that both are done from the same strategic directions. In such a case, the digital transformation is, in fact, a part of servitization.
What are the implications of the growth of servitization for the global market?
Servitisation brings another dimension into the global marketplace – between the customer and the product provider, there is a huge opportunity for the development of different network services connecting the set of customer needs and the set of products with many more links. In the number of cases, it also enables the importance of the local presence of the provider or its physical representation which ensures a more balanced value distribution of globalization.
Written by Ana Petani and Mateja Prinčič