Servitization – (Re)Dawn of the XaaS

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Warren Buffett said, “Price is what you pay. Value is what you get.” Could servitization, the “everything-as-a-service,” be the dawn of the new value delivery and business model for your company?

In today’s dynamic manufacturing business environment, digital transformation is inevitable. Survival dictates the move from a rigid-scope, capital-intensive, legacy practice of managing products and services, to a responsive, adaptable, agile, and intelligent alternative. Digital connectivity in the physical world is the norm across shared mobility, connectivity services, feature upgrades, omnichannel strategies, and subscription-driven new digital business models.

Accelerated by the internet of things (IoT), driven by connected technology at its heart, servitization is the process of creating value by adding services to physical products. Decades ago, Rolls-Royce created its “power-by-the-hour” concept, which sold fully-maintained aero engine use by the hour rather than by the unit. Fast forward into the 21st century and you see Michelin charging car fleet operators by the kilometer driven, rather than just selling tires. Consequently, Michelin is investing in developing longer-lasting tires!

Think this is limited to only the business-2-business (B2B) world? Think again! There are different levels of servitization, ranging from simply adding a bundled service or maintenance contract to a physical product, to a completely integrated outcome-based approach that has been designed collaboratively by the supplier and customer. Servitization is built on the foundations of becoming customer focused with strong relationships and trust.

With industry boundaries being redefined, and customer service being a key parameter of differentiation in this new world of relentless globalization and free trade, Capgemini has found automation of business model in a way that can be scaled and yet highly intelligent. We’ve worked on unique cases from smart boiler maintenance, to sensors reporting back consumption, usage or equipment problems from remote sites and assets from engines on planes feeding data via satellite used to predict and prevent problems that require downtime.

Turning products into services in this age of digitalization opens new possibilities in areas you’ve probably not considered. There are increased additional costs in the short term and revenue will be deferred when one makes a move to a subscription model rather than initial sale-and-service model. These can be hard for some organizations to absorb and justify. Yet, servitization results in lower cost competitors, increased customer lifetime value, increased margins and lower churn rates. Would you want –

  • A better overall customer experience while bearing a lower total cost of ownership?
  • Produce more reliable products and keep recurring customer service revenues?
  • High degree of collaboration and intimacy between customers and suppliers?

As part of Capgemini’s Accelerated Solutions Environment, and Innovation Days, we contextualize multi-actor perspectives that pronounce the importance and implications of relationships with existing and potential ecosystem actors in business as a result of technological developments. In large companies with an SAP landscape, the business case for SAP S/4HANA often rests on delivering new business models, and amongst the most popular of these is servitization! The logic is clear – More revenues, sticky clients, improved margin, and the openness to integration that comes with a platform such as S/4HANA, SAP Cloud Platform and the SAP C/4HANA suite. Capgemini, together with SAP Intelligent Technologies and Analytics, provides all the components needed for a world-class servitization solution. From modelling complex bundles of products and services, automated feedback of sensor metrics relevant to asset uptime, usage, telemetry data, or complex sales and billing, we do it all in a single, streamlined solution.

End:

The Intelligent Enterprise journey is all about the move from exclusivity of products and services to the world of value! That’s why, at Capgemini, we are building a renewable enterprise! To turn into an outcome provider, conquer the ecosystem of products, productization, services and after-market servitization, see our demos and accelerators live in action, visit us at our Capgemini Applied Innovation Exchange Centers, or contact David LowsonBrad Little, Elisabetta Spontoni, or me directly.

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