Servitization in a post-pandemic world
Servitization has been a major area of discussion within our industry for many years, but as we recover from the pandemic and enter the new normal, is servitization more important than ever? Or did the massive disruption we saw across recent years expose the dangers of outcome-based service models?
In some ways, perhaps servitization in our industry is more imperative than ever before. The one thing that the pandemic created was a need for closer working relationships between service providers and their customers.
Suddenly, when all industries were facing unprecedented new challenges as the world locked down in response to the pandemic, the need for closer integration across business ecosystems was laid fully bare for all to see.
In all corners of industry, we saw companies engaging in co-creation towards new solutions.
We saw innovation between companies in completely different industrial spheres. The collaboration between Dyson and JCB to build ventilators to overcome a shortage within the UK is a good example.
We also saw it clearly amongst solution providers, such as our partner on this study, HSO, working closely alongside their clients to help them understand how they can leverage the powerful tools within the Microsoft Dynamics cloud platform, so that they can better serve their customer’s needs in the challenging and unprecedented backdrop of the pandemic.
With a depth of experience that draws across multiple-industry disciplines that span manufacturing, energy, construction and retail, their operational knowledge is as one would expect- detailed and well-refined.
However, perhaps it is in their understanding of technology across a broader business ecosystem within finance, marketing and distribution that saw many of their customers lean on them for guidance on how to best build a servitized offering that encompasses all of these business units.
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"Servitization is often closely aligned with what many see as its ultimate end point – outcome-based services."
In a sense, the pandemic, having brought service providers and their customers closer, has meant the path towards servitization has been made even more urgent. This approach of closer integration allowed us to embrace a more meaningful way of working together, which offered a more tangible view into what the growing shift to servitization that has been building as an industrial movement across the last decade might look like.
Yet, there is a flip side.
Servitization is often closely aligned with what many see as its ultimate end point – outcome-based services.
However, it was amongst those industries that had moved almost entirely into an outcome-based service approach that there was perhaps the most significant economic anguish experienced during the pandemic.
In sectors where there had been a move to a pay-per-x model, the sudden abrupt shutdown of industry for months at a time left many service providers exposed to major revenue declines.
Take aviation, for example, where the power-by-the-hour model that Rolls Royce introduced has become an almost de facto approach to service operations. When the vast majority of planes are grounded as borders come crashing down across the world, the pay-per-mile approach meant that servitized revenues fell off the cliff.
With this in mind, Field Service News Research felt it was an important time to reassess the appetite in the industry to understand if the pandemic was seen as the catalyst for us to embrace servitization or, instead, an indication that we had pushed too far away from a break-fix status quo.
Either way, it is time for us to pause and reflect on the most pragmatic steps forward for our industry.
Across the pages of this report, we will present to you the findings of the first phase of this study, which is based on quantitative survey data. These responses represent 190 service management professionals across the globe from multiple industries, including aviation, manufacturing, mining and aggregates, oil and gas, utilities, power generation and more.
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