Three Perspectives On Successfully 'Servitizing' Your Business

According to Ewan McIntyre of Gartner, “The Covid-19 crisis has shifted CMOs’ focus from customer acquisition to customer retention and growth.” It is no surprise that many companies now try to create lifetime customers instead of one-off sales. Converting products into services has been a successful strategy pursued not only by software companies but also by direct-to-consumer (D2C) brands like Dollar Shave Club.

This “servitization” strategy creates an ongoing relationship with customers, builds up intelligence by an ever-growing stream of user data and offers a much more predictable revenue stream. But is it for you? Here are three things to think about before diving into servitization. 

1. Create a company vision around selling services instead of just offering customer service. 

Building a vision around service and experience can fundamentally change the way your organization delivers value to its customers. Just take a look at how thinking in terms of services changed the software industry in the last decades. Attracted by a piracy-free way of selling their product to customers, software companies replaced the installable software discs with access to hosted environments, protecting their IP by giving access to the software without distributing the code. With this, companies started changing their business model from license fees to subscriptions. A miracle move that proved a true revolution in business, it aligned the benefits of a recurring revenue model with a service that includes stable access to software, automatic updates, backups and much more. 

However, it’s commonplace to see more “customer service” than “customer experience” departments, where the first looks more like a call-complaint-cost center. It’s a fix to broken operational processes, which handles problems with pre- or post-purchase events.

Companies can evolve from a “service as a necessity” to a “service as a business” way of working, where services not only enhance a company’s product, but they improve it to become its main value driver. How?

Start with enhancing the product. To deliver more customer value, for example, a car manufacturer can offer its customers an online service to configure their car online or a system to book service appointments for it. To make that happen, adaptations in the production line, marketing and network of partners have to be made.

Embrace the service-as-a-business concept. In my opinion, an example of a truly service-oriented company is Maven Clinic, a healthcare provider dedicated to women’s health. Its vision to support mothers in their maternity journey puts the organization’s service at the center of the business by aligning all needs during pregnancy. Through fixed packages, families access many services, including clinic referrals, birth planning and even back-to-work coaching.

2. Focus on an extraordinary and intentional customer experience.

In the past years, the world has witnessed a service revolution, especially in the mobility sector.

Geely, owner of Volvo, among other commercial auto companies, launched Lynk & Co in 2020 in Europe — a flexible car as a service company, where primary drivers own their vehicles and sublet them to authorized drivers. What sets this automaker apart is the service built around the brand: a platform to share and manage your car and a membership program with built-in insurance. The result is a unique customer experience. The benefit for the organization? A revenue model based on the miles driven, a community of avid ambassadors and a unique position in a market that’s mainly driven by feature innovation, not concept innovation. 

Seamless and delightful experiences are the norm now.

Delivering services in a desirable, feasible and viable way will require organizations to orchestrate their delivery from check-in to checkout. Focus on having the right capabilities to design, operate and manage services, and align the organization around a service blueprint and great customer experience. 

Create a service design department that relentlessly designs all aspects of the customer experiences at all touchpoints of the journey: from evaluating to buying, from first-time onboarding to recurring users, and from happy users to ambassadors of the service. By service blueprinting, you can see what kind of organization and technology you need in order to create an incredible experience instead of the other way round. 

3. Gain incredible insight into customers’ needs instead of product features. 

Customers don’t want 8-millimeter drills; they want an 8-millimeter hole. It’s easy to mistake a product for a customer’s need. Designing a service doesn’t mean offering the same product with a subscription model attached to it; servitizing starts with a new perspective on the job the customer is trying to accomplish.  

For example, when Amazon took over PillPack — a service that bundles the individual pills of several treatments into one pre-packed daily dose, delivered at home — the company really went beyond selling medicines online. I believe the insight was clear: People don’t want all sorts of treatments sold separately. They want a way of adhering in a simple and smooth way to the doctor’s prescription. 

Get strategic knowledge about your customer’s “job to be done.”

To successfully servitize your offering, revisit your customers’ needs and get a clear understanding of the job customers are trying to achieve involving your product. You’ll need to deliver better on that job, not build a slicker, cheaper, more beautiful product. 

To get that insight, you’ll need to know what other products they use in combination with yours, what friction they experience when consuming your products, how regularly they use them and much more. To do so, you will probably need to combine both big data from sales and small data from interviews and surveys. 

Get perspective on your own servitization now.

No matter what business you’re in, servitization might be an incredible opportunity. Customers love great services designed with care, and servitizing your business may be a source to not only grow market share and revenue but also create happier and loyal customers — creating more resilience in your business.