How to Organize for Servitization

How to Organize for Servitization

Home | Posts by Jan van Veen
Manufacturers are focusing more on “how" to servitize: How to accelerate servitization and stay ahead of the pack? How to escape from “business as usual”?
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Summary

For the next years, many manufacturers will focus more on “how to servitize”: How to make these innovations successful? How to accelerate these transitions and stay ahead of the pack? How to escape from “business as usual”? How to prepare the organisation for such journeys?

In this article, I will share an overview of critical challenges and strategies for servitization.

Servitization is a different “ball game’’

Many manufacturing businesses have made good progress in building a common understanding and commitment to business innovation including servitization, and They have  allocated resources and funding for servitization. Now, they are experiencing that servitization is a different ball game from usual innovations and face new challenges, such as:

  • Political discussions when deciding on initiatives and investment
  • New risks from uncertainty and unpredictable trends
  • Forces towards ‘business as usual, with signs like “not invented here”, “that does not work in our industry”, “our clients don’t want that” and/or “this is not our core business”

The central question: How to organise for servitization

We hear and read a lot about new (digital) technologies, new disruptive business models and servitization. However, the real challenges are about organisational and human aspects:

  • How to translate these general insights into concrete and relevant initiatives?
  • How to overcome the challenges and obstacles and increase momentum?

 In essence, servitization is innovating your business model, particularly when you move beyond “condition of product” related services.

We need to rethink our value proposition, our target market, our position in the value chain and in the competitive landscape. We will be facing new opportunities and new risks.

This requires us to be open to new thinking, new mindsets and different strategies for innovation and change.

Serivtization journey

The problem: One innovation approach doesn’t fit all

Too often, we see successful strategies for one type of innovation being applied for other types of innovation also and therefore fail.

Before diving into best practices, let us first better understand the challenges in different phases of innovation: 1) discovery, including ideation, 2) decision-making, including resource allocation, and, 3) implementation, including development.

The “Hybrid Innovation Matrix” helps to recognise different types of innovation based on respective typical challenges so we can better choose the best strategy for each.

About the “Hybrid Innovation Matrix”

The “Hybrid Innovation Matrix” differentiates four types of innovation with the respective challenges and strategies along two dimensions.

Along the horizontal axis, we differentiate innovations within the existing business logic from those developing new business logic. In every industry and business we have prevailing business logic, which is a set of common patterns, knowledge, experience and frameworks of thinking. We use this logic to understand our environment and make decisions. This common business logic defines how we act, learn and change.

Our brains are hardwired to maintain a cognitive framework to rapidly assess their environment, filter information and make decisions. This results in a strong bias towards protecting the established business logic.

Along the vertical axis, we have the relative size of the innovation or change. In the left column, we differentiate incremental improvements from the more radical innovations that push the boundaries. In the right column, we differentiate reconfiguring and extending an existing business model from developing completely new solutions and markets with completely new business models.

I will describe the two quadrants of the “Hybrid Innovation Matrix” which are most relevant to servitization.

Hybrid Innovation Matrix | moreMomentum

Adaptive and Incremental Improvements

“Adaptive and Incremental Improvements” is all about improving the performance of existing products, services and operations. Every industry has its common recipe of annual improvement of functionality, performance, speed, cost etc.

Examples:

Examples include: improvement initiatives from departments like product development, marketing service based on customer feedback following, adding new features. And PDCA, Lean, Kaizen and similar approaches to improve the quality and efficiency of our operations.

How servitization fits in:

As this is not the quadrant in which servitization takes place, I will not elaborate on this quadrant.

Pushing the Frontiers

“Pushing Frontiers” is about bigger innovations within the common business logic.

In every industry, we have common pathways of how the performance of products and services develop and how (latent) customer demands evolve.  We can learn from the best practices and results from others in our own industry.

Examples:

Typical examples are:

  • How advanced technology continues to develop in the world of semiconductors.
  • How there are hybrid and electric transmissions in cars.
  • How we now have FaceID on our phones
  • How we become more predictive in sales, supply chain, manufacturing and maintenance with digital capabilities.

How servitization fits in:

The early phases of the servitization journey fits in this quadrant. The service offering focuses on managing availability and condition of equipment in a more predictive manner.

Challenges:

Innovations in this quadrant often impact a large base of stakeholders in the organisation, advancing the knowledge in various disciplines, and involves bigger investments with bigger bets on the outcome.

A key challenge is to avoid obstacles at all levels in the organisation and a too narrow focus on, for example, only products or technology.

Discovery:

  • Much higher levels of expertise, increasing the knowledge gaps between different stakeholders
  • Finding strategic knowledge inside and outside the company
  • Understanding a wider spectrum of (latent) customer needs beyond functional
  • A too narrow focus, such as product technology or internal processes
  • The commodity trap with innovations which hardly add customer value and are difficult to monetise

Decision-making:

  • Mitigating risks from an uncertain outcome with higher upfront investments
  • Lack of digital and service mindset
  • Political battles or polarised discussions because of:
    • The more qualitative arguments
    • Uncertainty of outcome
    • Lack of new expertise, prepared by the experts

Implementation:

  • Limited capacity to implement change fluidly in the operating organisation
  • Lack of required expertise and knowledge
  • Lack of digital and service mindset

Reconfiguring and Extending Business Model

“Reconfiguring and Extending the Business model” involves a combination of entering new markets, applying new technologies, encountering new competitors and facing new political actors. These are new aspects, different from common and dominant business logic in a business or industry.

Examples:

Typical examples are:

  • Low-cost airlines with a new value proposition and operating models
  • Dell selling directly to the end-clients
  • Storage solutions moving to cloud services
  • Trucks manufacturers reducing fuel consumption by influencing truck drivers
  • Fresenius (manufacturer of kidney dialysis equipment) operating entire dialysis centres in hospitals

How servitization fits in:

As you can see from the examples, the more advanced phases of servitization extending the value offering beyond product availability perfectly fit in this quadrant.

Challenges:

The main challenge is to widen a peripheral vision escaping from the established dominant business logic.

Discovery:

  • Being open to new knowledge, patterns, ideas and opportunities without being pulled back into ‘business- as usual’ by many forces such as colleagues, clients, vendors, service suppliers and investors
  • Recognising weak signals of potential trends, threats and opportunities, and when these become emergent
  • Mitigating “conflict” with mainstream research activities
  • Understanding and recognising potential market disruption from immature and emerging alternatives (often at the low end of the market)

Decision-making:

  • Limited knowledge and uncertainty about unpredictable developments
  • Battles between stakeholders in operating organisation and innovation organisation
  • Stopping initiatives because of lack of short-term results, in favour of initiatives closer to ‘business as usual’ with quicker results
  • Not considering weak signals for potential threats, like market disruption
  • Fear of cannibalism

Implementation:

  • Embedding new knowledge throughout the organisation
  • Building new mindsets and competencies
  • Mitigating “conflict” with mainstream operations
  • Existing clients may not like the new solutions (yet)

Coevolution of New Solutions and Markets

“Coevolution of new solutions and markets” is about the radically new emerging solutions. Here, we see many different solutions and ideas popping up while it is still unclear which of the competing alternatives will emerge and become the dominant solution.

Examples:

Current examples of innovations in this quadrant are renewable energy, data-driven healthcare, mobility (including self-driving cars), Google Maps rapidly pushing away TomTom, and tachographs gradually being replaced by cloud-based applications. Other examples are PC’s displacing mini-computers and digital photography displacing analogue photography.

How servitization fits in:

I will not elaborate any further on this quadrant, as servitization in principle is not about developing these radical solutions. Even though for some industries there are actual opportunities and threats in this quadrant, in which servitization could play a role (like the Google Maps versus TomTom).

The solution: Differentiate innovation strategies with a focus on human aspects

The challenges I described concentrate on the human factors for successful discovery, decision-making and implementation. They are quite different for each type of innovation in the “Hybrid Innovation Matrix”, which means we need different strategies to be successful.

I will now describe the best practices for the two types of innovation which are most relevant for servitization.

Pushing Frontiers

The name of the game here is “Managing a wider portfolio, including higher risk projects”. The following practices will help accelerate the innovations that push the frontiers.

In general:

  • Establish a clear and compelling direction in which the company is heading and how that relates to the developments in the industry and market
  • Build a shared concern on developments in the industry and the importance of adapting to it
  • Establish cross-functional and dedicated teams of experts for specific initiatives
  • Establish dedicated project management

Discovery:

  • Use advanced techniques for finding (latent) opportunities, such as design-thinking and empathic design
  • Involve external experts (consultants and new partners)

 Decision-making:

  • Strategic level decision making
  • Maintain a balanced portfolio of different types of innovations
  • Apply a stage gate and review process, with clear criteria, such as;
    • What initiatives should be higher risk initiatives pushing the frontiers
    • In which domains to push frontiers (technology, products, services, customer experience etc.)
    • Success criteria for go/no-go for the next phases
    • Level of investment in different types of initiatives
  • Educate stakeholders on the decision level
  • Invest in further research first
  • Develop solid business cases, supported by solid information
  • Use advanced risk-assessment techniques

Implementation:

  • Lean startup and agile development techniques
  • Co-development with your best clients
  • Early involvement of stakeholders from various functions
  • Develop the digital and service mindsets

Pitfalls:

  • Incremental improvement techniques such as PDCA and customer feedback programmes
  • Not having dedicated innovation teams

Re-configuration and extending business models

The name of the game here is running “Entrepreneurial satellite teams”.

General:

  • Add a transformative direction of the company, which is fairly open
  • Build a shared concern for developing business models for the next growth curves
  • Being flexible in an unpredictable world
  • Entrepreneurial and multi-disciplinary teams decoupled from the mainstream organisation
  • Allow addressing different markets or segments for (first) success

Discovery:

  • Less targeted search assignments
  • Techniques to reframe and thinking in “new boxes”
  • Build new and broad expertise networks outside your industry
  • Experiment and learn
  • External contracting or outsourcing
  • Scouting for successful initiatives in the market
  • Develop scenarios around weak signals

Decision making:

  • Reframing of the opportunities and threats
  • Decentralise decision-making
  • Decision-making on vision and scenarios
  • Rapid prototyping
  • Acquisition of early successes in the market
  • Allow competing initiatives to be pursued

Implementation

  • Keep the new business in entrepreneurial satellite teams
  • Lean startup and agile development teams
  • Co-creation with the most interesting (potential) clients

Pitfalls / what does not work:

  • Decision-making and resource allocation by senior leadership in the operating organisation
  • Input from customer feedback programmes
  • Decision-making based on business cases and stage-gate reviews
  • Early integration into the current operating organisation or business model

Conclusion and takeaways

We see an increasing number of manufacturing companies committing to business innovation and servitization and allocating resources for it.

A hybrid innovation strategy, focusing on the human factors of the transition will make the difference between success and failure!

If you want to boost momentum for servitization;

  • Share this with your colleagues
  • Assess the ideas, initiatives, progress and obstacles with the “Hybrid Innovation Matrix
  • Build a shared concern for the need for ongoing innovations in each of the quadrants
  • Put the organisational and human aspects on the strategic agenda

It is a great time to be in manufacturing. We are facing exciting opportunities to make manufacturing a stronger backbone of our service-oriented economies. We have a unique opportunity to make manufacturing a great place to work and to invest in.

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If you liked this article, you may also like the following articles, on the same topic.

Key note: Is it now the time to transition to XaaS (Anything-as-a-Service)?

XaaS or Product-as-a-Service in itself is not a value proposition. It is part of the solution to deliver value, it’s a business model.

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How to Organize for Servitization

Manufacturers are focusing more on “how” to servitize: How to accelerate servitization and stay ahead of the pack? How to escape from “business as usual”?

Stay up to date

Receive the latest insights and updates.

Free Discovery Session

Find out how you can increase momentum for innovation and change to navigate disruption in your industry.

A personal session with our founder - Jan van Veen, who is a business transformation expert and recognised as one of the top 20 Influencers in service by FieldServiceNews

WHO WE ARE

moreMomentum is an international advisory and training firm. We specialise in working with manufacturers who are looking for quicker and more radical business innovation to thrive in today’s disruptive world.

Our mission is to enable manufacturers to strengthen their position as the backbone of our economy.

Remove Obstacles for Clients to use your New Offerings

Remove Obstacles for Clients to use your New Offerings

Home | Posts by Jan van Veen
If obstacles to adopt your the new solutions are high for your clients, they may not use them or delay it. The result is limited commercial success.
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The central question: How to Monetise Services and Data

Many manufacturers experience pressure on growth, revenue and margins. Their products and services are being commoditised. Competition from lower cost alternatives are arising. On the other hand, there are huge opportunities with new technologies, value propositions and business models.

One of the important trends is that value proposition and offerings become more data-driven and more service-oriented. However, many manufacturers are product-driven businesses which do not fully appreciate the value that service has for their customers and own business.

So, one of the central questions is: How to Monetise Services and Data in order to Grow in a Disruptive World? The capability to monetising service and IoT is mission critical for sustainable performance and existence of manufacturing.

In a series of articles, we cover 4 critical steps that make the difference between success and failure in monetising Services and Data:

  1. Solve bigger customer problems, which is about creating significantly more value for customers
  2. Articulate the value
  3. Remove obstacles for clients to adopt your solutions
  4. Build internal momentum for monetisation

Common mistakes

Too often we see that with (new) services, the new solutions and features we launch are not always that easy to start using for our clients. If the obstacles to adopt are too big and not solved, less clients will use it or will delay using it significantly, and in the meantime will not see the real value, in turn creating more obstacles and resistance, resulting in limited commercial success.

If you encounter such signals, it may not always be easy to get a clear picture whether;

  1. Your clients simply do not have the problem that your solution is trying to solve
  2. Your solution is not adequately fixing the problem compared to other solutions
  3. There are serious constraints in applying your solution, even if it is a good solution

So, caution is advised in these situations not to jump to wrong conclusions.

For the sake of this article, let us assume a) and b).

 

The obstacles in applying your solution can be categorised as follows:

Lack of money

The new solution you are offering appears to be too expensive for your client. It is seen as too big an investment and/or recurring cost in relation to the value they perceive will be received. It could be that the issue is more related to the perception of the value, how well that has been articulated (see previous article on ‘Better Articulate the Value’) or that you are not talking to the right decision makers in your client’s organisation.

Lack of skills

Using the new solutions are too complex and difficult for your client, as they are complex to use and require a lot of training to acquire the necessary skills.

Lack of access

Often, the new solutions can only be used and generate value in certain circumstances. Commonly overlooked is that applying the new solutions and receiving value from it, often requires:

  • A significant change in the way of working by staff, which triggers too much resistance
  • A significant overhaul of the processes and information flow
  • A change in the structure of the organisation and roles, with some staff even losing their role/ job

Lack of time

For many new solutions, it takes time and effort to make sure they are adequately used and embedded in the organisation. If the pressure from daily business and other projects is high, it easily happens that adopting the new solutions is put on the back burner and falls off the radar.

Risk

In essence, there could be two main sources of perceived risk:

  • The risk that the solution does not work as expected and hence does not bring value
  • The more social risk of sticking out your neck for change which might not be accepted by stakeholders

Too often we focus on the technical part of our new solution or features, and do not give other client needs and obstacles enough consideration, when:

  • Gaining customer insight into their bigger problems
  • Developing a remarkable solution to solve these bigger customer problems
  • How and with whom we discuss the client problems, and promote and sell our solutions

An interesting example is a major metal wholesaler that is looking into adding extra value to industrial clients by not only offering standard trade sizes, but other services too. They also offer services like cutting, drilling, bending and even picking packages for direct delivery into different locations in the manufacturing process for their clients. This really solves a lot of challenges for low-volume-high-mix manufacturers.

However, using these services means that equipment and people doing the pre-manufacturing work becomes redundant or they have to change their role. It also means inventory goes down, which changes the (perception of the) stability and contingency in the production line, depending on an external party.

The result was that initially most clients did not buy the new offerings, regardless of the well-articulated (financial) benefits and business cases. At some point, stakeholders started doubting the potential of the added value services and whether to abandon the initiative or not.

Some practical solutions

Manufacturers that are quite successful in launching and growing customer adoption of the new solutions and features, have the following good practices:

  1. The have a broader view on the bigger customer problems and challenges beyond the functional requirements of equipment. They better understand the operational and change challenges and therefore have a more integral view on what it takes to improve on these problems and challenges. Important obstacles are included in the design instead of as an afterthought.
  2. They develop a more concrete and remarkable solution to solve the bigger customer problems. Where needed, the obstacles (in using the new solutions) are already designed into the solution. For example:
    1. They focus more on simplifying the solution, making it easier to use with less training and implementation effort for their clients.
    2. Their solution is more than a technical solution and includes support in implementing and maintaining a new way of working.
    3. They offer an ascending engagement model in which customers step-by-step can implement and use portions of the overall solution. This way they can mitigate risk, reduce the change challenge and allow their organisation to become familiar with the new way of thinking and working. Simplify the solution and ease of use.
    4. They involve the right stakeholders in the client’s organisation – who have a stake in the problem being solved, in the decision-making phase and in the implementation phase.

Further to the metal wholesaler example above, the next steps of the added services portfolio were to:

  • Organise open workshops for clients, discussing trends and changes in the sector, and some best practices and success stories.
  • Workshops with the client’s key stakeholders to get a full picture of the journey of maturing their manufacturing operation, supply chain, plant layout, equipment, competencies and people. And then use the information to develop a road-map on how to step-by-step develop. It also helped to get stakeholders on the same page and engaged.
  • Provide project management and change management practices and resources.
  • Organise pilot tests, get used to new ways of working and building trust.
  • Offering ongoing performance management dashboards to get full visibility and transparency of performance, progress and issues. This helped preventing blame for every incident, and also helped to feed a continuous improvement programme.

The Benefit
Manufacturers that are better in building momentum with their clients to adapt to their new solutions, see that their customers fluidly adopt new solutions and have a fairly high pace of scaling up. Hence, these manufacturers generate more new revenue streams with higher margins and differentiate more from their competition.

Give monetisation of Services and Data an Impulse

If you want to accelerate the monetisation of your (new) Services and Data, join our upcoming Impulse Sessions on “How to Monetise Service and Data”. These are full day interactive meetings with like-minded peers during which we will exchange experiences, insights and challenges.

Book your seat here

Essence

Our value is not only in the developing and offering of great solutions to our customers’ big problems, it is about how our clients use and benefit from our solutions.

 

You can also wathch the video

Stay up to date

Receive the latest insights and updates.

If you liked this article, you may also like the following articles, on the same topic.

Why is it important to monetise services

Value propositions in manufacturing are becoming more data-driven and more service-oriented. It is critical to capture to generate new revenue streams.

Solve Bigger Customer Problems

A common mistake is solving small problems of customers. These are necessary improvements, but will not bring any growth or opportunities to monetise.

Articulate the Value You Offer

Too often we see that (new) services, solutions or features are promoted without connecting the dots to their bigger problems.

Panel discussion: How to transform your field service into a profit centre?

Success depends on the level of collaboration and support from all stakeholders.The name of the game is establishing a shared concern and goal first.

Panel discussion: Drive service revenue and growth with personalised services

New technologies offer great opportunities to improve customer experience and perceived value. When done in a differentiating way, this can drive revenue.

Guest Blog: Driving Revenue Growth without Losing Sight of Customers

“How do service leaders grow service revenue while still keeping the needs of customers involved?” And at the same time work on many other priorities.

Remove Obstacles for Clients to use your New Offerings

If obstacles to adopt your the new solutions are high for your clients, they may not use them or delay it. The result is limited commercial success.

Stay up to date

Receive the latest insights and updates.

Free Discovery Session

Find out how you can increase momentum for innovation and change to navigate disruption in your industry.

A personal session with our founder - Jan van Veen, who is a business transformation expert and recognised as one of the top 20 Influencers in service by FieldServiceNews

WHO WE ARE

moreMomentum is an international advisory and training firm. We specialise in working with manufacturers who are looking for quicker and more radical business innovation to thrive in today’s disruptive world.

Our mission is to enable manufacturers to strengthen their position as the backbone of our economy.

Articulate the Value You Offer

Articulate the Value You Offer

Home | Posts by Jan van Veen
Too often we see that (new) services, solutions or features are promoted without connecting the dots to their bigger problems.
You can also wathch the video

Common mistakes in the industry

Too often we see that (new) services, solutions or features are promoted without connecting the dots to their bigger problems.

For example, a client of mine – a major equipment manufacturer – experienced the power of explicitly connecting the dots. They were launching the first version of a portal to serve DIY clients which had their own maintenance departments. They initially presented the benefit of the portal with many online manuals (version 1 of the portal) as a way to save time every time a maintenance engineer of their client would need to find the right manual. It appeared to be tough to sell paid subscriptions for this portal.
Only when the manufacturer articulated their view of the key problems of their clients’ maintenance departments and how the portal would solve these problems, did the clients get really interested. The dominant problems of the maintenance departments were not finding manuals, but the daily pressure to increase availability and uptime at shrinking budgets and that that their engineers had slow learning curves due to low volume of certain problem-solving work. A portal which would evolve into a broad toolset for best practices, trouble-shooting and maintenance management was considered a crucial asset.

Furthermore, we often see manufacturers thinking and talking about features and activities, instead of customer value. Clients only pay for the value they perceive, not for what you do.
A striking example were field service engineers of another client, who would spend a full day in pairs to install equipment which was already delivered a couple of days before. A few days after installation, another colleague would visit the client for training and commissioning. The two engineers would unpack all components and assemble the components, connect it to a couple of other devices from different brands which involved many integration issues, connect their equipment to the computer network – which involved loads of security and networking issues which the engineers had to solve with IT departments – which by nature tend to be reluctant.
And here is how they briefed their client when they started the job: “We are here to unbox the components, put the bits and pieces together and make sure everything is there, so the trainer is ready to go……” . Their client did not even know what kind of complex integration problems the engineers were solving. Actually, their client even wondered why his supplier did not have more mature and efficient processes to get the job done. And by no means are the engineers to blame for this.

Some practical solutions

You can easily start improving on these common mistakes:

  • Build a compelling story of your view of your customers challenges, opportunities and problems, which is validated by (a segment of) your customers. Relate this as much as possible to strategic or crucial priorities of your clients.
    Include a view on how your clients could best pursue these opportunities and solve these problems. Don’t make this a big thing, just start with a first strawman version and let it grow in time.
  • Link the characteristics and benefits of your solutions and services to the view of your customers.
  • If possible, quantify the benefits in terms of the strategic or critical priorities.
  • Ensure that your value story is well articulated in your messaging to (the specific segments of) your clients and is consistent across all touch points. This may involve some staff training.

The Benefit

Manufacturers which are better in solving bigger customer problems, better articulating the value for customers and staff and have higher momentum for change and monetisation see that they generate more new revenue streams and differentiate more – in the eyes of their customers – from their competitors. They perform better and have more resources to keep innovating their business and hence grow in our disruptive world.

Essence

Great offerings and solutions won’t sell themselves.

It’s the various colleagues together that drive the value perception and sell the solutions, because they are eager and passionate to perform, learn, develop and make new things happen. Without encountering unnecessary obstacles which reduce confidence and maintain internal conflicts of interest.

You can also wathch the video

Stay up to date

Receive the latest insights and updates.

If you liked this article, you may also like the following articles, on the same topic.

Why is it important to monetise services

Value propositions in manufacturing are becoming more data-driven and more service-oriented. It is critical to capture to generate new revenue streams.

Solve Bigger Customer Problems

A common mistake is solving small problems of customers. These are necessary improvements, but will not bring any growth or opportunities to monetise.

Articulate the Value You Offer

Too often we see that (new) services, solutions or features are promoted without connecting the dots to their bigger problems.

Panel discussion: How to transform your field service into a profit centre?

Success depends on the level of collaboration and support from all stakeholders.The name of the game is establishing a shared concern and goal first.

Panel discussion: Drive service revenue and growth with personalised services

New technologies offer great opportunities to improve customer experience and perceived value. When done in a differentiating way, this can drive revenue.

Guest Blog: Driving Revenue Growth without Losing Sight of Customers

“How do service leaders grow service revenue while still keeping the needs of customers involved?” And at the same time work on many other priorities.

Remove Obstacles for Clients to use your New Offerings

If obstacles to adopt your the new solutions are high for your clients, they may not use them or delay it. The result is limited commercial success.

Stay up to date

Receive the latest insights and updates.

Free Discovery Session

Find out how you can increase momentum for innovation and change to navigate disruption in your industry.

A personal session with our founder - Jan van Veen, who is a business transformation expert and recognised as one of the top 20 Influencers in service by FieldServiceNews

WHO WE ARE

moreMomentum is an international advisory and training firm. We specialise in working with manufacturers who are looking for quicker and more radical business innovation to thrive in today’s disruptive world.

Our mission is to enable manufacturers to strengthen their position as the backbone of our economy.

Solve Bigger Customer Problems

Solve Bigger Customer Problems

Home | Posts by Jan van Veen
A common mistake is solving small problems of customers. These are necessary improvements, but will not bring any growth or opportunities to monetise.
You can also wathch the video

Related Content: 
More about Monetising Service

Central question: How to monetise Services and Data

Many manufacturers experience pressure on growth, revenue and margins. Their products and services are being commoditised. Competition from lower cost alternatives are arising. On the other hand, there are huge opportunities with new technologies, value propositions and business models.

One of the important trends is that value proposition and offerings become more data-driven and more service oriented. However, many manufacturers are product-driven businesses which do not fully appreciate the value service has for their customers and own business.

So, one of the central questions is: How to Monetise Services and Data in order to Grow in a Disruptive World? The capability to monetising service and IoT is mission-critical for sustainable performance and existence of manufacturing:

In a series of articles, we cover 3 critical steps which make the difference between success and failure in monetising services and Data:

  1. Solve bigger customer problems, which is all about creating significantly more value for customers.
  2. Articulate the value
  3. Build internal momentum for monetisation

Common mistakes in the industry

One of the common mistakes is focussing on only the small problems of customers and making small incremental improvements of the services or solutions. These are typically the standard logical next step improvement most of the competitors bring to the market as well. These are necessary improvements – adding features to your solutions – to sustain your market position. However, there is a big chance they will not bring any growth or opportunities to monetise. Just think of the new features car-manufacturers add to their new models. And our weekly updates on our computers and office-software, without paying more.

Another common mistake is focussing too much on availability and the use of the equipment. In most situations, the real extra value is having a broader impact of the value creation process of our clients. In most industries, the purchase, financing and maintenance of equipments is a small portion of the overall budget.

How some truck manufacturers solved this

For example, while the sales of trucks were shrinking dramatically, leading truck manufacturers like MAN, DAF and Scania discovered that discounting the trucks did not have much impact. One of the big challenges for truck operators was reducing fuel consumption. The leading truck manufacturers took this challenge beyond aero-dynamics and engine efficiency and developed data-driven services to reduce fuel consumption by improving the way truck-drivers drove the trucks.

Discovering the bigger customer problems

So, the ideal practice is to either:

  • Solve the bigger customer problems in a significantly better or more efficient way for clients
  • Or to solve new big problems of our clients

Before developing the new services and solutions, it is crucial to have a deep understanding of the challenges and problems of your clients. The following activities will prevent any bias from long standing experience and business as usual:

  • Reframe addressable customer needs with your team and colleagues who are involved. The aim is to have a broader view and scope on customer’s needs. Explicitly ban any type of objections against the idea of servicing those needs.

Focus on so-called actual “jobs-to-do” of your clients and where they are struggling or could do much better. For example, improving uptime may not be that relevant for clients with low utilisation rate. Whether you will do customer research with professional agencies or not, it’s always good if various colleagues have frequent open conversations with different stakeholders, discussing views on the industry, trends, challenges et cetera. Just sharing the following simple diagram during such conversations are helpful for you, your colleagues and clients to keep the dialogue open.

  • Explore how they are solving these problems and jobs and which (types of) suppliers are helping them now.
  • Also explore the needs and challenges of the customers of your customers.
  • This will give a lot more insight on customer needs. Next is to explore is which needs you could and should be addressing now and in the future. With these insights you can extend and enhance your vision, strategise and roadmap for innovating your services and generating new revenue streams

The Benefit

Manufacturers which are better in solving bigger customer problems, better articulating the value for customers and staff and have higher momentum for change and monetisation see that they generate more new revenue streams and differentiate more – in the eyes of their customers – from their competitors. They perform better and have more resources to keep innovating their business and hence grow in our disruptive world.

Give monetisation of services and data an Impulse

If you want to accelerate the monetisation of your (new) services and data, join our upcoming Impulse Sessions on “How to Monetise Service and IoT”. These are full day interactive meetings with like-minded peers, during which we will exchange experience, insights and challenges.

Book your seat here

Essence

Great offerings and solutions won’t sell themselves.

It’s the various colleagues together that drive the value perception and sell the solutions, because they are eager and passionate to perform, learn, develop and make new things happen. Without encountering unnecessary obstacles which reduce confidence and maintain internal conflicts of interest.

You can also wathch the video

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If you liked this article, you may also like the following articles, on the same topic.

Why is it important to monetise services

Value propositions in manufacturing are becoming more data-driven and more service-oriented. It is critical to capture to generate new revenue streams.

Solve Bigger Customer Problems

A common mistake is solving small problems of customers. These are necessary improvements, but will not bring any growth or opportunities to monetise.

Articulate the Value You Offer

Too often we see that (new) services, solutions or features are promoted without connecting the dots to their bigger problems.

Panel discussion: How to transform your field service into a profit centre?

Success depends on the level of collaboration and support from all stakeholders.The name of the game is establishing a shared concern and goal first.

Panel discussion: Drive service revenue and growth with personalised services

New technologies offer great opportunities to improve customer experience and perceived value. When done in a differentiating way, this can drive revenue.

Guest Blog: Driving Revenue Growth without Losing Sight of Customers

“How do service leaders grow service revenue while still keeping the needs of customers involved?” And at the same time work on many other priorities.

Remove Obstacles for Clients to use your New Offerings

If obstacles to adopt your the new solutions are high for your clients, they may not use them or delay it. The result is limited commercial success.

Stay up to date

Receive the latest insights and updates.

Free Discovery Session

Find out how you can increase momentum for innovation and change to navigate disruption in your industry.

A personal session with our founder - Jan van Veen, who is a business transformation expert and recognised as one of the top 20 Influencers in service by FieldServiceNews

WHO WE ARE

moreMomentum is an international advisory and training firm. We specialise in working with manufacturers who are looking for quicker and more radical business innovation to thrive in today’s disruptive world.

Our mission is to enable manufacturers to strengthen their position as the backbone of our economy.

Why is it important to monetise services

Why is it important to monetise services

Home | Posts by Jan van Veen
Value propositions in manufacturing are becoming more data-driven and more service-oriented. It is critical to capture to generate new revenue streams.
You can also wathch the video

It’s a great time to be in Manufacturing. A lot is going on in the manufacturing sectors.

On the one hand, many manufacturers experience pressure on growth, revenue and margins. Their products and services are being commoditised. Competition from lower cost alternatives are arising. On the other hand, there are huge opportunities with new technologies, value propositions and business models.

One of the important trends is that value proposition and offerings become more data-driven and more service oriented. Services are becoming more pro-active, predictive and performance-based. Advanced services are extending beyond maintenance and availability of the equipment and towards customers’ overall value creation process. Potentially the products will even be offered as a service in the near future.

However, many manufacturers are product-driven businesses which do not fully appreciate the value service has for their customers and own business.

Monetising Services -DilemmaOne scenario: In the continuous battle to win the (products and/or consumables) business of clients and to justify higher prices, many manufacturers have been adding a lot of services free of charge. For example, pre-sales consultancy, application support, extended warranty, discounted maintenance contracts, training of the users.
As a result, the overall costs to sell products have been increasing, while the prices and market-share may have been declining. This is not a sustainable approach any more.

Another scenario: Due to new (data) technology and customer expectations, business models and core business will shift. Manufacturers will develop and grow service and data capabilities with new, expanding teams. Cost-level and structure will change.
Without additional revenue-streams it will become impossible to continue this shift.

How to Monetise Services in order to Grow in a Disruptive World?

The capability to monetising service is mission-critical for sustainable performance and existence of manufacturing:

We hear and read many aspects and strategies around monetising services and data. In our experience, we have seen 3 critical steps which make the difference between success and failure:

  • Solve bigger customer problems:
  • Articulate the value
  • Build internal momentum for monetisation

These aspects are critical to get other aspects, like sales and business models will follow. We will further discuss these three steps in following articles.

The Benefit of monetising services

Manufacturers which are better in solving bigger customer problems, better articulating the value for customers and staff and have higher momentum for change and monetisation see that they generate more new revenue streams and differentiate more – in the eyes of their customers – from their competitors. They perform better and have more resources to keep innovating their business and hence grow in our disruptive world.

 

Essence

Great offerings and solutions won’t sell themselves.

It’s the various colleagues together that drive the value perception and sell the solutions, because they are eager and passionate to perform, learn, develop and make new things happen. Without encountering unnecessary obstacles which reduce confidence and maintain internal conflicts of interest.

You can also wathch the video

Stay up to date

Receive the latest insights and updates.

If you liked this article, you may also like the following articles, on the same topic.

Why is it important to monetise services

Value propositions in manufacturing are becoming more data-driven and more service-oriented. It is critical to capture to generate new revenue streams.

Solve Bigger Customer Problems

A common mistake is solving small problems of customers. These are necessary improvements, but will not bring any growth or opportunities to monetise.

Articulate the Value You Offer

Too often we see that (new) services, solutions or features are promoted without connecting the dots to their bigger problems.

Panel discussion: How to transform your field service into a profit centre?

Success depends on the level of collaboration and support from all stakeholders.The name of the game is establishing a shared concern and goal first.

Panel discussion: Drive service revenue and growth with personalised services

New technologies offer great opportunities to improve customer experience and perceived value. When done in a differentiating way, this can drive revenue.

Guest Blog: Driving Revenue Growth without Losing Sight of Customers

“How do service leaders grow service revenue while still keeping the needs of customers involved?” And at the same time work on many other priorities.

Remove Obstacles for Clients to use your New Offerings

If obstacles to adopt your the new solutions are high for your clients, they may not use them or delay it. The result is limited commercial success.

Stay up to date

Receive the latest insights and updates.

Free Discovery Session

Find out how you can increase momentum for innovation and change to navigate disruption in your industry.

A personal session with our founder - Jan van Veen, who is a business transformation expert and recognised as one of the top 20 Influencers in service by FieldServiceNews

WHO WE ARE

moreMomentum is an international advisory and training firm. We specialise in working with manufacturers who are looking for quicker and more radical business innovation to thrive in today’s disruptive world.

Our mission is to enable manufacturers to strengthen their position as the backbone of our economy.