Why it’s not about Products (but Services) in Manufacturing

Stef Knaepkens
Chief Strategy Officer (CSO) / Director BeLux

“What is now proved was once only imagined – William Blake”

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Products vs. services. Maybe it’s a battle of generations? Let’s take a car as an example. Older generations typically want to own a car, maybe even two. The result? In the Netherlands alone, 8 million cars stand idle for 23 hours per day. But the younger generation have a different take on things here. Fueled by technologies like Uber and Netflix, they are accustomed to instant access to services, ideally at a low cost. With respect to mobility, they just want to get from A to B. They don’t want to worry about insurance, maintenance, purchasing or selling a car. All they care about is the experience – their trip must be totally hassle-free. This example highlights a trend that it is no longer about delivering a great product, but increasingly about delivering a great service experience. And this trend goes beyond consumer products. For B2B products, the desire to pay-for-use is becoming the new norm. But what does all this mean for product manufacturers?

Servitization

A major consumption shift is taking place on a global scale and you can see it gradually emerging everywhere. According to McKinsey [1], there are three main drivers: “consumption as access rather than possession, consumption as an expression of individual identity, and consumption as a matter of ethical concern”.  Where companies used to talk about ‘their’ customers, the logic is totally reversed. Individuals choose ‘their’ companies and want them to act exactly the way they envisage. They expect fast and on-the-spot proactive services that are highly customized to their individual needs. This new consumer doesn’t want to possess products. They want to have access to services that are produced according to strict ethical norms. This means you have to combine transparency, flexibility and utility in a compelling offering.

In the first few years after 2000, the first wave of servitization in B2B markets was mainly driven by business economics. Let’s take outsourcing as an example. Outsourcing decreased the capital requirements for companies and turned fixed costs into variable costs. Factories became externalized, logistics and IT were outsourced, and administration was moved to global Shared Service Centers. The value chain became a chain of services, but customers were still buying cars, houses, lawn mowers and CDs. In the next wave of servitization, individual consumers are starting to dictate how supply chains should operate. Today’s marketeers already understand the ultimate customer segment consists of a single customer. The single-customer segment is demanding, since they want everything they desire. They want it now, and they want it flawless. If not, they just switch brands and spread the word through powerful social networks. They fast-forward commercials and they listen to each other’s recommendations. In other words: a company brand is only as good as their latest customer experience.

Customer Engagement layers

Let’s go back to the example of reserving a car. Requesting a customer to fill in a paper form, digital PDF or even an online form is nowhere near an Uber-like experience. Customers want to tell where they are, where they want to go, and they want to know other details like if the ride supports a specific purpose. Of course, they want to do this via an app on their mobile devices, because they don’t want to fire up their laptop first and then visit a website. Designing the best Customer Engagement layer is an iterative process of (UX) designing, building and communicating. But it does not stop here. Once you are live, you need to measure the experience levels. We rely on our partnership with Giarte and their eXperience Level Agreement (XLA) method to ask for feedback via surveys. We also measure where customers drop off, and which parts of your experience are most used. After analyzing this data, the cycle starts over again. Creating flawless experiences takes time.

It’s all about reliability

Let’s assume we’ve successfully managed to reserve a car via a great Customer Engagement layer. But after I step into the car and turn on the ignition, the car won’t start. There and then, I make a promise to myself: I will NEVER reserve a car via this service again! These days, customers are prepared to switch brands in a heartbeat. In moving from supplying products to providing services, it will become even more important for systems to be 100% reliable. Vital components should be monitored continuously and in case of expected breakdowns, engineers should apply fixes to ensure service degradations are prevented.

The described example situation is also applicable to manufacturers of elevators, conveyor belts, computer chips and medical/farming equipment, etc. To achieve that 100% reliability, it’s widely known that IoT (Internet of Things) can help. However, according to McKinsey, the challenge is not how to amass high volumes of IoT data, but the challenge is how to bring context to that data and use it to drive workflows. We believe that delivering the promise of 100% reliability requires a combination of a solid IoT capability and a world-class workflow platform supporting Field Service operations.

How the ServiceNow platform can help

ServiceNow provides a platform with strong capabilities in both the Customer Engagement and workflow layer:

• Customer Engagement layer
  ServiceNow offers a native mobile and desktop engagement layer. Intelligent features like chatbots, search, etc. ensure customers directly end up where they need to be to request a service or receive an answer to their question. Although ServiceNow already provides an Out-Of-The-Box and very intuitive Customer Experience, customization is also possible. We can even tailor the solution to the needs of specific personas and include an experience measurement solution, with even more native features yet to come.

• Workflow layer
  ServiceNow provides a powerful Out-Of-The-Box Field Service Management (FSM) module, ensuring anomalies detected via IoT trigger maintenance activities that can be easily planned and assigned to the right engineer. Engineers receive all required information on their mobile devices and have instant access to the knowledge base so they can perform maintenance tasks asap. In that way, you ensure continuous availability of your assets.

Ready for servitization?

Are you a manufacturer that is ready to shift from providing products to services? Or have you already started this transition? Then please reach out to us! We can help you build great customer experiences.

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[1] McKinsey, ’True Gen’: Generation Z and its implications for companies

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