The ‘servitisation strategy’ explained – lean, green but largely unseen

In August we published a series of blogs that explained the ubiquitisation strategy.  This is one of the nine operations strategies we briefly discuss on pages 375-377.  We thought it important to provide greater insight into this strategy and hence the series of blogs on the topic.  We are now going to do the same with regards the servitisation strategy.  But unlike the concept of ubiquitisation, servitisation is something we have already blogged about – as you will see from our tag cloud.  So what we are now doing is presenting this like a ‘chapter’ from the book, in order to systematically explain the concept.

In recent years, it has become apparent that many manufacturing firms are deriving a significant proportion of their revenues from the provision of services.   These services range from obvious activities such as product maintenance and servicing, to less obvious ones such as consulting, logistics, and real estate. In other words, there is a shift by manufacturers down stream along the supply, or value, chain. Linked to this is another noticeable trend in many industry sectors, namely the concept of “contracting for capability”. This is especially marked in public sector procurement and military procurement. This refers to customers not buying products but contracting with suppliers for the outputs their products deliver. The most high profile example of which is Rolls Royce’s “power by the hour”, wherein airlines or air forces pay Rolls Royce a fixed price per engine flight hour.   Hence there are many forms of servitisation, as it varies across different industry sectors and by the range of services offered.

In this series of blogs we plan to:

  • define servitisation
  • outline how this strategy has emerged
  • identify the main reasons for firms adopting this strategy
  • discuss the challenges and impact of servitisation
  • identify and explain different types of servitisation
  • explain the concept of a ‘product-service system’ and the range of such systems
  • explain servitisation’s ‘green credentials’
  • provide operations insights from firms that have adopted and implemented servitisation
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