How Technology Will Accelerate Manufacturers’ Shift to Servitization

We have reached a watershed moment for technology. Day by day, innovation and connectivity have crept into our daily lives, irrevocably impacting the way we work, communicate and consume products. Along the way, we have begun to move away from past beliefs that things alone are the value, and toward a future where sustainability and the intelligent usage of things is the true value. This fundamental shift toward a more usage-based economy is called servitization, the transition from selling products to selling the output or value that products deliver, and it’s completely changing the way businesses operate and serve their customers.

Today’s consumer increasingly no longer values the ownership of a product, but instead the access of a product when it’s needed – leaving customers with the freedom to invest time and money elsewhere when it’s not. From the replacement of CD and DVD collections with subscription-based streaming services like Spotify or Netflix, to the usage-based costs of car-sharing services like Uber and Lyft, this new generation of customers is impacting industries worldwide, and it’s directly affecting original equipment manufacturers (OEMs).

That’s why we created our latest Orange Paper, “How Technology Will Accelerate Manufacturers’ Shift to Servitization,” to better understand how servitization, also known as product-as-a-service, is forcing manufacturers to redefine the way they do business, requiring both culture and process changes across the entire organization. In fact, according to IDC, 30 percent of G2000 manufacturers will offer products-as-a-service by the end of 2019 in order to meet mounting customer expectations, differentiate their portfolios, strengthen customer loyalty and ensure the long-term financial viability of their businesses.[1]

The connected nature of newly manufactured products, coupled with ever-evolving customer expectations, is accelerating the deployment of new business models that allow OEMs to capitalize on the business opportunity servitization presents. But, with a long-tail of disconnected products in the field – products that will remain in service for at least the next decade – they must focus on optimizing the performance of their current service operations while simultaneously preparing for the shift to servitization.

There’s an urgency to adopt new business models that support this shift, and it’s clear that customer expectations and other aforementioned factors are driving OEMs to change they way they do business – but are manufacturers ready to transform? In this paper, we’re taking a closer look at some of the challenges and opportunities around these new business models and uncovering how technology will accelerate manufacturers’ shift toward servitization. Key topics include:

  • How to achieve servitization while optimizing current service models
  • Best practices for building a technology stack suitable for servitization
  • Advice on partnering with brands to seamlessly start this transformation

Whether customers are demanding this now or in the future, the expectation for improved reliability and availability – all with lower total cost of ownership – is putting OEMs in the hot seat, which is why progressive companies are building up their technology stacks to develop and test new business models that support products-as-a-service. That’s why leading OEMs are turning to analysts, academics, management consulting firms and technology providers to help them on this journey.

Download our newest Orange Paper to get a closer look at some of the challenges and opportunities around these new business models and uncover how technology will accelerate manufacturers’ shift toward servitization.

[1] IDC, Servitization and Service Parts in the Age of Ecosystems, Doc # US43378419, Jun. 2019