Product Innovation Through Servitization

The purpose and process of servitization is to move from a product based business model to a more integrated product/service one. The objective is to create a product-service continuum, this is a circular relationship where products create service opportunities which in turn create product opportunities, which create service opportunities and so on.

This cycle obviously improves business opportunities and powers increased sales and revenues (of both product and service) but it also has a more fundemental impact on the product – it becomes a major change agent and driver of product innovation. The reasons for this are pretty straightforward but worth exploring all the same.

Service creation, development and delivery are all about understanding your customer. You begin by seeing your customer through the eyes of your product and evolve to seeing your product through the eyes of your customer – this is a very significant stage and is the basis for servitization. As you learn more about how your customer views and uses your product you begin to create services around it. These new services should bring more business value to the customer (otherwise they won’t be willing to pay for them) and more business revenue to your own business. But they also do something else – they bring you ever closer to your customer and their business needs and objectives.

This is because unlike products, services are primarily people driven. They provide a more human relationship between the product provider and the customer. This in turn provides more insight into the customer. The greater the level of service integration with the customer the greater the insight and this leads almost inevitably to one of the most fundemental aspects of product innovation – fulfilling a customer need.

The service insight drawn from customer interactions and observations therefore, must be structured, planned and given a formal role in the product development process. Unfortunately, this does not happen in most businesses at the level possible. Typically, the only formal service process that feeds into the product development process is fault reporting and management. In this case a customer reports a fault with the product and (if the support infrastructure is well designed) this leads to a product improvement. This is a very reactive process (although critically important) and misses a much greater level of insight available.

Instead, your service personnel must be always looking at how the product is used by the customer, how it fits into the customers larger eco-system and business processes and how it could do better. This requires something of a cultural shift, a change of mindset, and it takes some work to implement effectively. But, once in place, it can drive significant product innovation through a better understanding of what the customer wants and needs.

Steve