Opdateret: 28. apr.
After having scratched six equipment-based servitization models on the surface, we've arrived at the final post. In this post we will round off the series, touch upon hybrid/partial models and dig a bit into the challenges of servitization.
This post is part of our series on equipment-based servitization models for Original Equipment Manufacturers (OEMs) and Value-Adding Resellers (VARs).
In this series, we have explored six different servitization models that OEMs can adopt to increase revenue, improve customer satisfaction, and promote sustainability. These models include subscription-/renting-based models, usage-based models, outcome-based models, value-based models, shared services, and asset-light services.
Through our exploration of each model, we have seen that they each offer unique benefits for both OEMs and their customers. For example, subscription-/renting-based models provide a steady revenue stream, while usage-based models allow customers to pay only for what they use, and outcome-based models align the OEM's incentives with the customer's desired outcomes. Shared services and asset-light services allows for providing services to a wider range of customers while promoting resource efficiency and reducing waste.
Data utilisation has also emerged as a key factor in optimising each servitization model, enabling accurate billing and trust, predictive maintenance, and improved customer experiences. By utilising data, OEMs can better understand customer behaviour, usage patterns, and equipment performance, allowing them to design better products and services and deliver them more efficiently.
Financing is also an important consideration for OEMs when implementing servitization models. Depending on the model, financing needs can vary from cash flow financing to off-balance sheet financing. OEMs must carefully consider their financing options to ensure that the model is profitable and sustainable in the long term.
Finally, we have seen that servitization can play a vital role in promoting sustainability and reducing environmental impact. By incentivising resource efficiency and extending the lifespan of products and equipment, servitization models can help OEMs to reduce their carbon footprint and contribute to a more sustainable business model.
As OEMs look to the future, servitization models will likely play an increasingly important role in driving growth, improving customer satisfaction, and promoting sustainability. By carefully considering the benefits and challenges of each model, and prioritising data utilisation and financing needs, OEMs can successfully implement servitization models and meet the evolving needs of their customers in a profitable and sustainable way.
Hybrid Models and Partial Servitization
While servitization models offer many benefits, some OEMs may prefer to maintain some level of traditional product sales while adopting servitization models. In such cases, hybrid models or partial servitization can be implemented to offer customers the right mix of traditional purchase models and servitization models.
Hybrid servitization models are a type of business model that combines elements of both product-based and service-based offerings. In these models, companies provide customers with both physical products and additional services that enhance the value of those products.
Partial servitization models are another option, where customers pay for a portion of the product upfront and the remaining amount is billed based on usage. This model can be especially useful for customers who prefer to own the equipment but want the benefits of a pay-per-use model, such as predictable costs and reduced financial risk.
However, hybrid models and partial servitization models come with their own set of challenges. OEMs must carefully consider the cost and complexity of managing a variety of sales models, as well as the impact on their financials and customer relationships. Additionally, hybrid models may require additional resources to manage billing and customer support for multiple models, if not supported by a specialised platform.
In conclusion, hybrid models and partial servitization models can offer customers the benefits of both traditional purchase models and servitization models. While these models come with their own set of challenges, they can be an effective way for OEMs to capture a larger market share and offer customers greater flexibility, while moving slowly into full servitization. By conducting market research and carefully managing the complexity of multiple sales models, OEMs can successfully implement hybrid models and stay ahead of the competition.
We will dive deeper into this in future posts.
Challenges & drawback of Servitization
While servitization models offer numerous benefits for OEMs and their customers, they also come with several challenges and potential drawbacks that need to be considered before implementing such a strategy. We will dive further into these in a future blog post, but just to get you down to earth:
Implementing a servitization model can be expensive, particularly for OEMs who may need to invest in new technology, infrastructure, and personnel. Additionally, servitization models may require more frequent equipment upgrades and maintenance, which can add to the overall cost.
Servitization models rely heavily on data collection and management. Ensuring that data is accurate, secure, and compliant with privacy regulations can be a significant challenge. Moreover, analysing large volumes of data can be time-consuming and require significant resources.
Servitization models can involve significant performance risk for OEMs, if not structured correctly. Particularly if they offer usage-, outcome-, or value-based models. E.g., if the customer decides not to use the product, or if the product or service fails to deliver the desired outcomes or value, the OEM may be liable for the costs or penalties.
Implementing a servitization model can require significant changes to an organisation's culture, like ability to work across organisational boundaries and to its processes, and systems. This can be challenging for OEMs, particularly those with a long history of traditional product-based business models.
Servitization models require new skills and expertise, particularly in data analytics, customer service, and business model innovation. OEMs must recruit and train personnel with these skills to ensure successful implementation.
Servitization models may be subject to specific regulations, particularly if they involve new types of contracts, pricing models, or data management practices. OEMs must ensure compliance with applicable regulations and legal requirements.
Business model sustainability
Servitization models may require significant ongoing investments to maintain and update infrastructure, technology, and personnel. OEMs must ensure that the model is financially sustainable in the long term and can generate sufficient revenue to cover costs.
Overall, while servitization models offer many benefits, they also require careful planning, significant investment, and ongoing management to ensure successful implementation and sustainable business operations.
As lightly described in each post, Valueport.io is equipped to help OEMs succeed with all covered equipment-based servitization models. Valueport.io can help OEMs overcome the challenges of servitization models in several ways:
Expertise and Knowledge
Valueport.io has extensive expertise and knowledge in the area of servitization, including developing and implementing servitization models. This expertise can help OEMs navigate the challenges of servitization and ensure that they develop and implement models that are sustainable, profitable, and meet the evolving needs of their customers.
Valueport.io has servitization-relevant data capabilities, which can help OEMs optimise their servitization models by providing insights into customer usage patterns, equipment performance, and other key metrics. This data can be used to develop more effective pricing strategies, optimise equipment maintenance schedules, and identify opportunities to improve the overall customer experience.
Valueport.io can help OEMs secure the financing they need to implement servitization models effectively, as we understand the financier’s capabilities and restrictions and provide them with relevant enablers. This may include off-balance sheet financing, cash flow financing, and other financing options that are tailored to the specific needs of the OEM.
Platform for Service Delivery
Valueport.io provides a platform for delivering services to customers, including usage tracking, billing, and customer support. This platform can help OEMs streamline their service delivery processes, reduce administrative overheads, and provide a better overall customer experience.
Overall, Valueport.io can help OEMs overcome the challenges of equipment-based servitization models by providing the complete capability with expertise, critical functionality, and financing options. By partnering with Valueport.io, OEMs can successfully implement servitization models and meet the evolving needs of their customers in a sustainable and profitable way.
Thanks for reading!