Companies that can offer customers more than just products are able to thrive in today’s competitive market. By expanding their offerings to include value-added services, these companies are able to achieve higher profits, greater customer loyalty and a better understanding of their customers’ needs.
Services are becoming an increasingly important part of businesses, as companies look to avoid the risk and cost associated with product lifecycle failures. However, moving into service territory can be difficult – for example, expanding into asset efficiency services. It’s also important to remember that customers may not want to change their existing behavior and loyalty to a company may be hard to gain. Instead, successful companies take a gradual approach by demonstrating results first before scaling rapidly.
Many consumer and industrial products companies start the transition by offering services that are tailored to meet customer demand and extend the product’s life cycle. These services are seen as an extension of the product, and the company’s focus is on designing, manufacturing, and selling hardware. ‘Service leaders’ typically recognise the need to develop their services as a separate business line, establish distinct P&L accountability, develop differentiated processes and capabilities for services, and dedicate resources in marketing, sales, operations, and R&D to follow a distinct service strategy. Growing services as a business requires a certain degree of ring-fencing initially with a separate team and dedicated resources.
To create a service-focused company, it is important to have a common focus and mind-set across the product and service teams. By focusing on the whole value chain, processes are put in place that improve competitiveness and value creation for the entire company. Quality data from products is used to improve service offerings, while market leaders are also working with ecosystem partners to develop new services. These collaborations will help drive increased profits in the future.