5 pitfalls to avoid when adopting a servitisation strategy

03 May 2016

Many engineering and manufacturing companies are moving towards a service-centric offering – yet pitfalls abound.

UK manufacturers leads the world in servitisation – the transition from mainly selling products to using services as the basis of their competitive strategy.

This trend is likely to continue as customer needs continue to evolve and become more value-centric. 

However, servitisation is not just about business model innovation. It is about organisational transformation — whether relating to corporate culture and management attitudes, or organizational structure and business processes. This transformation often brings with it a raft of potential pitfalls.

Change in motion

1. There are significant cultural and corporate challenges. Defining the organisational structure required to support your delivery of products and services can be especially challenging. A shift of corporate mindset is also necessary to take on services – not just with your own business but also among customers and suppliers.

2. Providing services requires a long-term business strategy that must be aligned with your general business operations. Have you, for instance, considered the warranty and insurance implications?

3. There are upfront costs to consider – for example, for maintenance and repair services. Often a service centre needs to be set up and technicians need to be available to repair and maintain the customers’ broken or faulty products. Consequently the nature and availability of your workforce may well need to change.

4. Cross-company integration is key. The sale of services must be integrated companywide, as the production process and related services will span several departments. Any disconnect between production and services can therefore have serious repercussions. 

5. It’s critical that your IT systems can support and keep up with a more service-centric business model. Your IT systems will probably have been built/installed when your business was far more product-centric, so ask yourself: is it still fit for purpose?

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For more information, please contact Paul Goodman, Regional Sales Director on +44 (0)118 945 0101 or paul_goodman@jltgroup.com