Nick Frank, Si2 Partners and Harald Wasserman explore the growing conversation around digital servitization as they attempt to break down the whole challenge around digitalisation into smaller more practical actions which leaders can take to make themselves more competitive...
The increased accessibility of digital technologies is accelerating the shift from product to service led growth strategies.
The problem is that many leaders are confused by the jargon and unclear how to leverage these opportunities Intuitively they know they must do something or potentially face disruption, as they see the industrial world shifting in 3 major ways:
- The growing awareness of the importance of data and the accessibility of powerful analytics technology means that most business leaders recognise the value of data. GDPR is an excellent example of this awareness at a legislative level
- The Industrial Internet of Things has transformed how we can move data around the world
- That the role of services in industrial business is being increasingly perceived as strategic rather than tactical, as companies want to capture more value and monetise their data through Service-led business models
Successful companies starting along this ‘Digital Servitisation’ route, typically start their journey with the following three basic steps:
- Discovery: opening up their eyes to the possibilities
- Solutioning: developing and piloting tangible ideas
- Business Plan: to fund the scale up and the often associated organisation transformation
Understanding the potential impact of these trends on your business and developing a compelling vision is an important first step.
A mistake many companies make is to start with Technology first, creating platforms and offering services they assume the customer wants.
If they started with the customer and industry need and then worked back to how they add value through technology and know-how, they are much more likely to be successful.
The Discovery phase can be facilitated by three simple methodologies to identify the profit pools that will pay for your investments; Value Mapping your customer and industry supply chain, examining your Points of Selling in the product life-cycle, and finally a review of the data you currently create and will/can create in the future.
Solutioning involves breaking the vision down into tangible projects and programmes that deliver something real.
Although understanding customers enables us to quantify the opportunities and set priorities, figuring out where to focus a Digital Servitisation strategy that flows across organisational silo’s is not so easy. One way is to see the impact from two very distinct perspectives:
1. Technology Digitalisation:
That product and supporting operational infrastructures are designed to produce data that can be collected, analysed and then monetized through service-based business models. Generally, technology is used in one of two ways:
- Technology in the product and company infrastructure that enables Digital Support, such as remote diagnostics or predictive maintenance.
- Capabilities and technologies in the organisation that enables Data Analytics, such machine learning, visual analytics and business intelligence technologies.
2. Back Office Digitalisation:
The tools we use to manage our business back-office which sustain and improve margins /profits. Examples might be Service Management solutions, CRM and ERP. Generally, there are two aspects to consider in terms of system & process development:
- To enable Customer Management, making customer data transparent and so breaking down silos.
- Enable Business Process Automation: so reducing cost and often leading to improved customer experience.
3. Combining Technology and Back-office Digitalisation:
When products and infrastructure that collect, analyse and action data, are fully integrated with the back-office process, we can explore what new business models such as Digital Servitisation can deliver in terms of value
Having identified the customer solutions and internal process improvements, it is time to execute and deliver the products and offering.
We require a business plan which defines Where we will target, with What, When and Who in the target organisations and How the delivery model will deliver excellence.
This is a process in its own right and one which we call Customer Focused Business Development.
It involves working through a structured approach to customer segmentation, defining the service product portfolio that is relevant to specific customer profiles, the GoTo market or sales strategy that will be most effective, and the service delivery model that drives profitability.
Digital Servitisation does not all have to be done at once, nor is it necessarily a linear process. An agile approach in small pilots or sprints that overcome specific hurdles are a good way to drive small incremental changes towards a larger goal.
The key to success is to use cross-functional teams with a breadth of expertise and experience coupled with a logical framework to cut through complexity. In our experience, it is possible to run through these 3 phases between 3-6 months depending on the complexity and ambition of the business.
The key to success is to use cross-functional teams with a breadth of expertise and experience coupled with a logical framework to cut through complexity.
Don’t be put off by technology jargon, and if in doubt always come back to the customer value as your guiding light through the complexity of change.
Once you have developed your direction, execution of the transformation strategy is more akin to a major change programme. For more thoughts on this process, you can read our FSN articles on the Art of Driving Innovative Change and Self-learning solution-focused mindset.
If you would like to know more about how Si2’s Digital Servitisation programme can help you unlock the data and know-how of your business, then please contact us Nick Frank or Harald Wasserman who can be reached at firstname.lastname@example.org
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