Servitization Momentum Is Increasing

We attended a very good event at Cranfield University last week (details in earlier blog post). The faculty, staff, guest speakers and audience members were great and the quality of discussion was excellent. Cranfield are taking a leading position in this field and it shows in the expertise of the team there and the Product Service Systems (PSS) programmes underway. Cambridge are also doing some important work in this area and a presentation from one of the guest speakers, Guangjie Ren, a PhD graduate from their Institute of Manufacturing was particularly insightful.

One important take away from the session is that the study and application of servitization is accelerating. Another is that its been a long time coming and is more complex than was originally anticipated. Governments are increasing funding in this area, research institutions are expanding their programmes and businesses are becoming much more aware and active.

The net effect of both increased inputs (funding and research) and increased outputs (organisational and marketplace change) is that more companies are doing more in the whole area of service innovation, at a faster pace, than ever before.

There are various potential reasons why this acceleration is occurring now. One is the general accumulation of research and experience since the term servitization was first coined in 1988 – time and scale may have reached a tipping point. Another more likely explanation for the timing  is that the economic background and the commoditizing impact of global competition has focused attention on ways to differentiate and innovate through services.

Innovation + Services

Innovation is one of the most powerful and creative forces of human nature, it has literally changed the world (for good and ill). In the commercial environment, innovation has been widely applied to and analysed against products and processes. More recently, significant study has been given to the impact of innovation on services.  Services are both major drivers of innovation and products of it.

We are currently working on some programmes that develop the relationship between innovation and services and will share some interesting highlights in upcoming blog posts starting below:

Services as an Innovation Enabler

Innovations can be loosely grouped into two catagories – incremental innovations and disruptive innovations. The development of a radical new product, process or service is often the outcome of a disruptive innovation.

Disruptive products are often built upon new, unproven or incomplete technologies and designs. Many such products stall or fail during the transition from a working prototype to a saleable comodity. This is where services can play a critical role as an innovation enabler. Services can bridge the gap between an innovative new product and a potential customers ability to use it effectively (or at all).

A great example of this exists in the early years of the photographic industry. The first generation of photography technologies and products were based upon copper and then glass plates that captured and stored still pictures. Altough these plates went through a number of incremental improvements (innovations) over a period of decades they remained expensive and cumbersome thus limiting the camera market to professionals and dedicated amateurs.

In the 1880s a disruptive new innovation began to gain some following, roll film. This promised to make cameras significantly easier to use, much more portable and less expensive to own and operate. The charge was led by one George Eastman, who saw that roll film could alter the entire market for photography products by expanding their use from the professionals to everybody.

But like many radical new innovations, refining the technology and bringing the product to market was difficult. Having made great progress on the roll film itself  and the camera that would utilize it, a gap still existed. The ordinary user could now take a photograph without specialist training but they could not be realistically expected to open and replace the roll film (let alone develop it).

One solution was to engineer the camera and film to make them user changable (something which would happen but would take time), the other solution was to servitize the camera. This is exactly what Eastman did. He launched his new camera, called the Kodak, with a complete service wrapper whereby the user purchased the camera with a 100 picture roll film already installed and once they had use all of these photos they returned the camera as a complete unit to the Eastman Company who would then return it to the customer with a new film installed and the set of developed photographs (for a healthy fee).

In this example the service was not only a profitable business model, it was the innovation enabler that made the product ready for market use. Total customer solutions have a long history then and todays product developers must consider service as a core part of the innovation cycle.

Steve