Servitization in Industry Flashcards
Servitization is slowly increasing in importance, and shift the focus from ownership to use of resources, equipment, products,
How has our relationship with products changed in the past years? (Example with the cars from lecture)
Over the past years, the relationship with physical products has shifted from mere ownership to focusing on what we can do with them. For example, the traditional emphasis on possessing a vehicle has evolved into a more dynamic approach centred on the experiences and services cars can provide. This change is reflected in the rise of shared mobility services, carpooling, ride-hailing apps, and a growing interest in electric and autonomous vehicles. Instead of simply owning a car, people increasingly value the convenience, flexibility, and functionalities of modern automotive technologies and services. This shift underscores a broader trend toward a service-oriented and experiential perspective in the automotive industry.
Before we needed to have a lot of knowledge about the car or have a technician but now as we move toward a more service-centered we don’t need to have this as the company takes care of this.
What are some drivers from the customer’s point of view to move towards a more service-oriented system?
From ownership to accessibility:
Value Associated with Use, Not Ownership:
In modern markets, there’s a shift in consumer perception of value. Rather than placing the highest value on owning a product outright, there’s an increasing emphasis on the utility and experience derived from using the product or service.
This trend is evident in various industries, including transportation (ride-sharing services instead of owning a car), software (cloud-based subscriptions instead of owning software licenses), and even in the fashion industry with clothing rental services.
It aligns with a broader shift towards a “sharing economy” or “access economy,” where consumers prioritize access to goods and services over owning them.
Increasing Specialization in Product Technologies:
Products today often incorporate sophisticated technologies that require specialized knowledge for development, operation, and maintenance.
This trend is particularly evident in fields such as information technology, healthcare, and manufacturing. For example, advancements in artificial intelligence, biotechnology, and automation require specialized expertise.
The increasing complexity of technologies often necessitates collaboration among experts and interdisciplinary teams to create and maintain cutting-edge products.
Explain one global driver towards servitization?
One global driver towards servitization concerns climate change and responsible use of resources. The adoption of the Polluter Pays Principle (PPP) and the broader emphasis on sustainable business practices. As the world grapples with the challenges of climate change and resource depletion, businesses are under increasing pressure to minimize their environmental impact and contribute to a more sustainable future.
3 aspects: Environmental Responsibility and Circular Economy, Extended Product Life and Resource Efficiency, Economic Incentives for Sustainable Practices
There are two trends within servitization, what are those?
- Value in using rather than owning Products
- Responsibility transferred from User to Provider
Explain the trend of Responsibility transferred from User to Provider
There is a noticeable trend where manufacturers are taking on more responsibility for their products throughout the entire lifecycle. This shift is driven by various factors, including regulatory changes, consumer expectations, and a broader recognition of the environmental and social impact of products. Manufacturers are adapting by adopting more sustainable and responsible business practices.
Explain the Implications of servitization for industry.
Focus on Customer Relationship Through Life:
Shifting the focus towards the entire lifecycle of the product, from production to end-of-life services, places a higher value on long-term relationships with customers.
This approach emphasizes continuous engagement, customer satisfaction, and understanding evolving needs over time.
Increased Importance of Product Functionality:
The availability and functionality of the product become crucial aspects as the focus extends beyond the initial sale. Ensuring that the product delivers consistent and reliable performance over its entire lifecycle becomes a priority to maintain customer satisfaction.
Increased Ownership After Production - Risk and Opportunity:
Risk (Revenue from Spare Parts Sales):
Relying heavily on revenue from spare parts sales can be risky, especially if the demand for spare parts diminishes over time. There is a potential revenue decline if the product becomes obsolete or if customers shift towards newer models, impacting the spare parts market.
Opportunity (Maintain Relationship and Technology Control): Increased ownership after production presents an opportunity to maintain a strong relationship with customers by providing ongoing support and services.
Retaining control of technologies in the field allows for better monitoring, data collection, and insights into product performance, enabling proactive maintenance and upgrades.
Mention examples of services concerning products.
Service platforms -support,
upgrades- smartphones and cars, adaption,
integration, leasing,
insurance,
subscription, life-style - garmin, health app
Mention examples of services concerning production.
Condition based
maitenance,
coordination, leasing,
flexibility,
upgradeability
How has the dynamic between manufacturing and the adoption of servitization transformed?
Before industrialization services and products were related closely but after industrialization this changed but is now on the way back to cope with responsibilities and new demands from customers.
Give examples of PSS.
Customized kitchens and carpenters
What does the new supply chain look like?
What are the consequences for manufacturers when moving to a PSS?
Consequences for manufactures:
*Shifting to servitization impact
* Business models – the way to offer solutions and ensure revenue
*Shifting preferences and behaviour of users
* Creates, and threatens, established products and business models
*Obsolesence
* Technology in products have largely different life cycles.
*Concurrent Change
* Few, if any, companies can transform themselves (only), suppliers, customers and often
regulations and legislation need to transform simultaneously (change takes time)
What is the problem with obsolescence?
Explain two companies who have succeded with creating a service strategy, and how they have succeded.
Apple and fairphone, created modular strategies to benefit themselves in different ways.
What is the definition of a PSS?
“Product Service Systems, put simply, are when a firm offers a mix of both products and
services, in comparison to the traditional focus on products”
Explain the different types of PSS.
What is circular economy?
- Circular Economy focus on
”closing” the loop by re-using
material and recources. - Circular Economy incentivises
companies to retain
ownership through life.
When moving from linear economy to circular economy there are new design features to address, what are these?
