WTF is Servitisation and why should you care?
"Bullshit. Of course, you can make it a subscription. You just factor the cost of the custom fab into the overall cost of the contract."
This was the heated debate I found myself eavesdropping on at a recent industry event. Intrigued, I couldn't resist joining the conversation. The discussion had sparked from a presentation on servitisation we'd all just sat through.
Old mate was arguing that the high cost of implementing their equipment made it impossible to integrate those costs into a servitisation model. It got me thinking—how many Aussie SME manufacturers are grappling with this very dilemma? But before we delve into that, let's first unpack what servitisation really means.
Servitisation is more than a business model; it's a paradigm shift. Imagine a world where you're not just selling a machine but also offering a suite of services that go hand-in-hand with it. These services could range from basic maintenance to advanced operational optimisation. The idea is to create a more holistic solution that meets the customer's needs more comprehensively. It's like going from being a simple pub that offers just beers to becoming a community hub that offers live music, trivia nights, and gourmet food.
Now, why should you even consider this? Well, for starters, servitisation can be a powerful tool for customer retention. In a market flooded with options, offering additional services can turn a one-time buyer into a lifelong customer. It's akin to forming a footy team where the players are so satisfied with the coaching, facilities, and overall environment that they have no reason to look elsewhere. Moreover, servitisation opens up new avenues for recurring revenue. It's not just about making a sale; it's about forming a relationship that will generate income over a longer period.
But how do you get started? The first step is understanding what your customers actually need. It's not enough to assume; you have to engage with them, much like a good bartender knows not just what drinks you order, but also when to offer you a new cocktail you haven't tried yet. Technology also plays a crucial role here. The Internet of Things (IoT) and data analytics can provide real-time insights into how your product is being used, which can be invaluable in tailoring your services.
To give you an idea of how impactful servitisation can be, let's look at GE Healthcare. Back in 2000 they began taking their high-end medical imaging equipment like MRI and CT scanners and offering them as a service rather than a one-time purchase. This approach has multiple benefits. For hospitals, especially those in rural or underfunded areas, the service model eliminates the burden of high upfront costs. It also ensures that healthcare providers always have access to the latest technology without the need for frequent, costly upgrades. The service includes regular maintenance, reducing the burden on hospital staff. The impact? Improved healthcare outcomes, financial flexibility for hospitals, and wider access to quality healthcare services.
However, the journey isn't without its challenges. One of the most significant hurdles is the cultural shift within the organisation. Moving from a product-centric to a service-centric mindset is a monumental change. It's like asking a lifelong rugby player to suddenly switch to playing AFL; the basics might be similar, but the game's entire dynamics are different. Resource allocation is another issue. Services often require a different skill set and even different personnel, which means you might need to hire or train your existing team members in new competencies.
Now, let's talk about the global perspective. Countries like Germany and the UK have been pioneers in integrating servitisation into their manufacturing sectors. They've done this through strong public-private partnerships and significant investments in R&D. Australia has the opportunity to learn from these nations. We could foster a culture of innovation and collaboration between the government, educational institutions, and the industry to accelerate the adoption of servitisation down under.
So, as an Aussie SME manufacturing leader, here are some thought-provoking questions to consider:
Have you evaluated how servitisation could fit into your current business model, especially when it comes to spreading out initial costs over a contract term?
How prepared is your team for the cultural and operational shifts that servitisation will bring?
Are you ready to leverage technology like IoT and data analytics to make your servitisation model more efficient and customer-centric?
Servitisation is not just a trend; it's the future. The question isn't so much whether you should adopt it, but how and when. The global shifts are evident, and those who don't adapt risk being left behind. So, are you ready to take the plunge?