If you’re in manufacturing, and want to make more money, you might find help from a surprisingly obvious place.
Many manufacturers have made the move from just making things (product-based) to servicing the things they make (servitization)—and there’s a lot of money in that.
With computerized maintenance management software (CMMS), you can organize and optimize the services that will become the backbone of your new strategy.
As a maintenance manager, you probably already have the knowledge that can take you from product to service-centric. If you’re a maintenance manager who knows how to use a CMMS, you’re ahead of the curve, because the same things you use your CMMS for can also work with servitization.
What is servitization?
Servitization is all about shifting your focus. It’s the expansion from making, to doing. You don’t just manufacture a product, you also monitor it, maintain it, and provide other services related to your product.
To phrase things in terms of the five Ws (who, what, where, why, when), a product-centric strategy focuses mostly on the “what”: what you make, and sell, to the customer.
Servitization expands its focus to the other Ws:
- Who you’ll send to service the product
- When they’ll fix it
- Why it broke (if you’ve got IoT sensors and predictive maintenance)
- Where you can offer your customer further help (e.g., do they need training with your product?)
Image courtesy of Microsoft
How valuable is the servitization shift? A 2013 Aston University study found that servitization powered a 5-10% YoY growth, with products and services equally splitting the revenue increase. Servitization benefited customers, too, to the tune of a 25-30% decrease in costs.
An Accenture study found that “$9 billion in after-sales revenues produced $2 billion in profits for General Motors.” What’s astounding about that is the fact that it outpaces car sales profits during the same time.
4 successful servitization examples
If you look for servitization examples, you’ll see IBM and Rolls-Royce mentioned most frequently. Those are great examples, as are two other companies who’ve made servitization work for them: Philips and Trisep.
1. Rolls-Royce: The ultimate servitization example
Rolls-Royce is frequently cited as the gold standard of servitization. The automaker also makes airplane engines (who knew? I sure didn’t…), and had great success with moving that sector of their business from product to service-oriented.
Instead of just selling airplane engines, Rolls-Royce started a “Power by the Hour” program, where airlines lease the engines, and pay for the time they’re using them.
As part of that lease, Rolls-Royce monitors the engines, and provides all necessary maintenance. Thus, Rolls-Royce customers are paying for a range of services (the use of the engine, its upkeep), rather than the product itself (the engine).
Rolls-Royce has contracts with numerous airlines, including Singapore Airlines, Malaysian Airlines, Nippon Airways, Cathay Pacific Airways, and Thai Airlines. And that’s just in the Pacific. That’s a lot of engines on a lot of planes. The sort of dashboard you get from CMMS vendors such as Bigfoot or eMaint is a necessity when you’re managing that many assets.
2. Philips: Innovation and you and servitization
Electronics giant Philips doesn’t just manufacture lightbulbs, it uses servitization to make them sustainable.
Amsterdam-Schiphol, a major Dutch airport, wanted to install LED lighting, but the bulbs were expensive. Philips used a servitization model to make the lighting change more affordable. Instead of selling the bulbs as a product, Philips retained ownership of the bulbs, and charged Amsterdam-Shiphol instead for the light, and the service that keeps them working. By installing IoT sensors, Philips can monitor the bulbs, and send service technicians out when necessary.
CMMS software enables an IoT-empowered serivitization strategy, such as the one Philips implemented at Amsterdam Schiphol. For example, CMMS vendor, UpKeep partners with IoT sensor company Monnit. Monnit’s wireless sensors send messages to the software when an asset meets failure conditions, or seems like it’s headed for downtime. The software then sends a notification to the maintenance team.
Servitization could make this process even more efficient. “Right now, the software finds out an asset is broken, alerts UpKeep, and we contact the manufacturer to fix it,” says UpKeep founder, Ryan Chan.
A service-based manufacturer, however, would have an advantage here. “With a servitization model, instead of pinging the management team or the software, the sensor pings the manufacturer and says ‘hey, the bulb is out, you need to go fix it.'”
3. IBM: Think…about servitization
IBM’s example shows how servitization can save a business. For decades, IBM was product-centered. It was so product-centered, in fact, that “IBM” was once synonymous with “computer.” Case in point? HAL-9000, of “2001” fame, got his name because H-A-L is one letter off of I-B-M.
But I CAN switch to a service-oriented business strategy, Dave!
In the 1990s, however, IBM shifted its focus to services. When Louis Gerstner started as CEO of IBM in 1993, the company’s stock had dropped by $31 a share in a six-year period. The rise of the PC had eaten into their traditional market share, and that trend wasn’t going away.
IBM changed its focus from making computers to providing services, and the strategy was highly lucrative. Where services accounted for 11% of sales in 1992, they made up 60% of IBM’s sales by 1997. It also went from being the No. 1 computer manufacturer in the world, to being the No. 1 provider of IT services. By 2001, servitization was a major factor in helping IBM record $8 billion in overall profits.
Getting to this point, however, requires a lot of coordination—exactly the type of coordination that computerized maintenance management software provides. With the scheduling and work order management functions of a CMMS, managers and technicians both know where they need to go, what they need to do, and when.
Instead of depending on a messy whiteboard schedule or an Excel spreadsheet, managers can easily match the right technician to the right time slot. And thanks to work order management, technicians will have all the information they need about a task available in their CMMS app.
4. Trisep: Enriching products with service
I asked UpKeep’s Chan how software can help with the journey from being product to service-oriented. Before founding UpKeep, Chan worked with Trisep, a manufacturer of water purification membranes. Trisep used a servitization strategy, where it sold an entire service package, rather than just a membrane. “You’d purchase the equipment from them, but you’d get setup and support with it. Trisep’s field service engineers would go out and help you design a system.”
Trisep’s product was a part of the package, and the services drove that package. And it’s a good CMMS that can drive those services.
UpKeep, like all CMMS software, is perfectly suited for servitization. “The whole idea of the servitization model is that we don’t just manufacture equipment and put it into someone’s hands,” Chan notes. “We’re going to also make sure the customer’s on track with their maintenance.”
The information a CMMS captures, from work orders to failure codes, can make sure a servitization-based company knows what services to provide, when.
Servitization and CMMS: You complete me
You can sum up the relationship between servitization and CMMS software with the most overused romantic cliche of the late ’90s:
To take the metaphor further, servitization is a great idea…just like Tom Cruise. But servitization (also like Tom Cruise) has its problems. Take his crazy couch rant, or the fact that he’s part of the Church of Scientology, an oft-criticized religious organization.
Tom Cruise in a Scientology promotional video. He’s like their Pope.
But those problems can be fixed. In Tom’s case, it was a few good decisions by his agent (mock yourself in “Tropic Thunder”; try to kill the only person less likable than Tom Cruise in “Valkyrie”).
In servitization’s case, the fix is adding a CMMS.
There’s ample research to suggest that software and servitization are made for each other. Cambridge University Service Alliance piece finds that 67% of equipment manufacturers put dashboards in their list of top five technologies that make servitization possible.
Atos Consulting finds that businesses that change to servitization struggle with two things: KPI’s and information management.
- They found that KPIs tended to “lag behind” in companies that changed to a service-oriented business model.
- Information management also suffered: “where real-life service oriented processes are added in a company’s scope, the core information systems only slowly and marginally adds service processes.”
KPIs and information management are both instances where a CMMS shines.
Maintenance management software already captures service processes—and makes them easily searchable— through service history tracking. That feature becomes even more useful when you consider how service history tracking can help you preserve tribal knowledge when workers retire.
As for KPIs, any company that’s been careful about their CMMS software implementation has mostly likely already developed them.
Your experiences with servitization
If you’re interested in other ways CMMS software can help you make service into a profit center, check out these other Capterra posts:
- 4 Phenomenal Maintenance Connection Alternatives
- 9 Ways A CMMS Streamlines Maintenance
- How Reliability Centered Maintenance Can Save You Millions
Has your company made the switch to servitization? If so, I’d love to hear about your experiences in the comments below!
Looking for Field Service Management software? Check out Capterra's list of the best Field Service Management software solutions.