New research charting the servitization journey of companies shows a significant gap in progress between firms with only 3% surveyed at a stage of maturity.
The study, instigated by IFS and extrapolated by global analyst firm IDC, surveyed 420 global manufacturing companies, active across the physical value chain, who were at varying stages of their servitization strategy.
From the data, IDC developed a Servitization Maturity Framework (The IDC Servitization Barometer) comprising four levels that segments companies based on their level of adoption.
The Four Stages of Servitization Adoption
The ‘Splintered’ stage, and the lowest level, represented 14% of firms.Typically these companies operated in silos, running dis-jointed, manual processes and fragmented business systems producing little or no visibility in performance.
The next stage, ‘Side-Car’, was the largest representation of companies (49%). Here firms had standardised their back and front office operations but were yet to integrate the two.
‘Joined-up’ companies have integrated front and back offices in both directions and have progressed to leverage technologies such as IoT to feed core systems with real data. This segment was represented by 39% of firms surveyed.
Only 3% of canvassed firms operating at the fourth ‘Borderless’ stage (or “Servitization Nirvana,” the report says). These companies have processes that start and end outside of the organisation with operations and technology facilitating the connection between different elements of the value chain.
However, IDC said those firms at the ‘Joined-Up’ stage, who were exhibiting some, but not all elements of a servitization strategy, for example an integrated back and front office and the use of IoT, were still able to show significant financial proof-points, with service revenues - on average - one third larger than their peers’ as a proportion of total revenue.
“Organisations that bundled projects with services or offered their capabilities in a consumption-mode are already enjoying competitive advantages,” Phil Carter, Chief Analyst at IDC Europe and one of the authors of the report says. “Manufacturers engaging in this transformation should demand applications that are natively connected across the full value chain, from the shop floor to customer support and service.”
IFS carried out the survey in July 2019 and the President of the firm’s Service Management Business Unit Marne Martin said IDC’s maturity framework identified the key barriers firms are facing in their quest for full servitization adoption. “The IDC Servitization Barometer lays out the key hurdles facing many manufacturing organisations,” she says, “including the lack of internal know-how and the perrenial problem of running legacy, disjointed business systems.”