25 March 2013

Successfully Implementing a Service Business Model in a Manufacturing Firm

The expected economic benefits of ‘servitization’, a popular trend among durable goods’ manufacturers designed to expand the scope of their offerings from products into through-life-cycle services, have been disputed in light of recent empirical evidence suggesting that hurdles associated with the implementation of services may even result in performance decline.

In a recent study we undertook extensive research into ten sales-and-service subsidiaries of a successfully servitized manufacturing multinational to shed light on this ‘service paradox’.  The results showed that success in setting up a service business in a manufacturing firm results from the presence of three operational capabilities that facilitate service performance. 
  1. a skill set capable of extending the relationship with the broad client base;
  2. the capability to develop sophisticated service offerings that provide better coverage of customers’ needs; and
  3. the ability to offer all the services efficiently.
Maintaining the breadth of service presence while deepening customer relationships can be a challenging balancing act, since capabilities that contribute to ‘service presence’ may conflict with the deployment of ‘service development’ and ‘service process’ capabilities. This research is outlined in a recent paper which offers to academics and practitioners of servitization a guiding framework within which to develop a comprehensive set of service capabilities, and highlights the nature of their relationships.

Ivanka Visnjic
Cambridge Service Alliance

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