• 3,000 firms
  • Independent
  • Trusted
Save up to 70% on staff

Home » Articles » Unlocking sustainable growth through servitization

Unlocking sustainable growth through servitization

Unlocking sustainable growth through servitization

As time flies, customer interactions and service continue to change. Interactions once occurring in phone calls and in stores are now replicated – and expected to excel – online.

Along with this change is the increasing transformation of one-off products into service-based items. Servitization is a model that shifts the focus from selling products to providing value-added services alongside specific products.

More than a buzzword, it is a powerful strategy that empowers companies to adapt to the changing needs of their customers.

This article explores the concept of servitization, its different levels, and how companies can enable this transformative business model to unlock sustainable growth.

Defining servitization

Servitization involves shifting from a traditional product-centric approach to a service-oriented model.

Instead of simply selling one-off products, companies usually offer additional services and features accessed with a subscription. This converts products to as-a-service models, which can be cheaper and more efficient for the company and its customers.

Get 3 free quotes 2,300+ BPO SUPPLIERS

Servitization is a transformative business strategy that has gained significant attention in recent years. Media streaming is the most popular example of this model, with sites like Netflix and Spotify taking the lead.

Defining servitization
Defining servitization

Embodiments of servitization in various industries

Servitization is not limited to digital media or the tech industry. It has been successfully implemented across various domains, revolutionizing how businesses operate and deliver value. 

Here are other examples of how servitization has transformed different industries.

  • Manufacturing. Traditional manufacturers are now providing comprehensive solutions rather than just selling products. They offer maintenance, repairs, and upgrades, ensuring the optimal performance and longevity of the equipment they provide.
  • Banking. At the same time, banking institutions allow application programming interfaces (APIs) to offer seamless experiences with the help of web systems and FinTech apps.
  • Automotive. Car manufacturers embrace servitization by providing vehicles and value-added services such as maintenance, roadside assistance, and connected car features.

Servitization levels

Servitization is not a one-size-fits-all concept. It encompasses different levels, each representing a deeper integration of services into the core business model.

Let’s explore the three levels of servitization.

Product provision

At the basic level, companies focus on providing high-quality products to their customers.

This includes delivering reliable and technologically advanced offerings that meet the specific needs and demands of the market.

Get the complete toolkit, free

In today’s competitive landscape, product provision alone may not be sufficient to stand out from the crowd. This is since many firms nowadays pump out products at a breakneck rate, saturating the market.

After sales servicing

The next level of servitization involves offering after sales services to ensure continued product performance. This includes maintenance, repairs, spare parts availability, and customer support.

After sales services strengthen the company’s and its customers’ relationship, fostering trust and loyalty.

Advanced services

The highest level of servitization involves providing advanced services beyond product delivery and support.

This includes offering tailored solutions, predictive maintenance, data analytics, and performance optimization.

Advanced services enable companies to position themselves as strategic partners for their clients. Here, they can actively contribute to their customers’ success and address their evolving needs.

How companies can enable servitization

Companies must implement certain strategies and adopt specific approaches to embrace servitization successfully.

Here are three key factors that help companies enable servitization.

Smart products

Integrating smart technologies into products can significantly enhance their value proposition. 

Companies can collect data from their products, analyze them, and offer valuable insights to customers to form more personalized services.

Smart products enable proactive maintenance, real-time monitoring, and improved operational efficiency. YouTube Music’s “algotorial” (algorithm and editorial) practice is an example of this, where teams only maintain the engineering of their algorithms to suit their listener’s needs.

Functional equipment

In applying servitization, companies must develop tools and equipment that is durable, efficient, flexible, and adaptable to changing customer requirements.

Functional equipment allows companies to customize their offerings and provide modular solutions that can be easily upgraded or reconfigured. These tools can be either physical or digital, depending on their market.

Adaptive service model

Companies must develop an adaptive service model that aligns with the market’s changing demands to excel in servitization.

This includes staying agile and responsive to customer feedback, continually improving service quality, and exploring innovative service offerings.

Adobe[1] is a good example of this. They are one of the successful companies that changed its structure from selling one-off tools in a box to offering a monthly subscription for their software.

How companies can enable servitization

An adaptive service model ensures that companies deliver value throughout the entire customer journey.

Servitization as your product selling strategy

Servitization is not just a trend; it’s a strategic approach that can drive sustainable growth and competitive advantage. By embracing servitization, companies can unlock a multitude of benefits:

  • Enhanced customer value. Companies can deliver comprehensive solutions that meet customer needs more effectively by offering a combination of products and services.
  • Long-term relationships. Servitization enables companies to establish long-term customer partnerships, fostering loyalty and repeat business.
  • Revenue diversification. Introducing services alongside products can create new revenue streams and reduce dependence on product sales alone.

As customer expectations evolve, servitization will become even more prevalent across industries. Combining products and services will provide a competitive edge, allowing companies to deliver exceptional value and create meaningful customer experiences.

Servitization holds immense potential for businesses across industries. By embracing this transformative strategy, companies can unlock sustainable growth and position themselves as leaders in their respective markets.

Article reference:

[1] Adobe. Bansal, J., Balodi, K. C., Jain, R., & Datta, S. (2022). Strategy and business model evolution at Adobe: Competing in digital media software industry. Journal of Information Technology Teaching Cases, 0(0). https://doi.org/10.1177/20438869221116391

Get Inside Outsourcing

An insider's view on why remote and offshore staffing is radically changing the future of work.

Order now

Start your
journey today

  • Independent
  • Secure
  • Transparent

About OA

Outsource Accelerator is the trusted source of independent information, advisory and expert implementation of Business Process Outsourcing (BPO).

The #1 outsourcing authority

Outsource Accelerator offers the world’s leading aggregator marketplace for outsourcing. It specifically provides the conduit between world-leading outsourcing suppliers and the businesses – clients – across the globe.

The Outsource Accelerator website has over 5,000 articles, 450+ podcast episodes, and a comprehensive directory with 3,900+ BPO companies… all designed to make it easier for clients to learn about – and engage with – outsourcing.

About Derek Gallimore

Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014. Derek is the founder and CEO of Outsource Accelerator, and is regarded as a leading expert on all things outsourcing.

“Excellent service for outsourcing advice and expertise for my business.”

Learn more
Banner Image
Get 3 Free Quotes Verified Outsourcing Suppliers
3,000 firms.Just 2 minutes to complete.
Learn more

Connect with over 3,000 outsourcing services providers.

Banner Image

Transform your business with skilled offshore talent.

  • 3,000 firms
  • Simple
  • Transparent
Banner Image