Servitization: The Game Changer


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Servitization is a word that didn’t make it to any dictionary, but is the solitary game changer of business, as we know it today.

What is Servitization?
The word isn’t even in the dictionary. Yet this one word has singularly altered the fundamentals of conducting business in this age. Let me try and give you a simplified understanding of the biggest transformation to hit business since the change from the barter system to money.

‘Servitization’ was coined by professors Sandra Vandermerwe and Juan Rada in 1988 in their article entitled “Servitization of Business: Adding value by adding service”. These two eminent scholars iterated the gradual shift that was taking place in the business world, from a manufacturing/product based business model to one that included service and support as part of the product package for the customer.

The term ‘Servitization’ has since been used very sparingly, but its meaning has had the biggest impact on business today. It is the basis for the most important concept of business – Customer Value.

Evolution of Servitization
In the 1980’s, Servitization was initially focused on the manufacturing industry. With new business entrants increasing the competition and reducing marketshare, companies needed an innovative way to attract the customer. Bundling service to the product was seen as a good way to lure them in. It was no more than just another sales gimmick, till businesses realized the potential of service and the value it brought to the customer. It emerged as the new strategic option for competitive advantage, not only to acquire the customer but to also retain them.

Customer Value
Today servitization has transformed competitive dynamics in business. It is no longer about how good a product is; it is more about how well the customer can be supported. Support for the customer not just after sales, but also in the design of the product to ensure it delivers as per the customer’s requirements. What began as a challenge for product managers, to include service as part of the product offering, is today second nature to them.

Apple is a perfect example of this. Their products are all about the customer. They are designed to support the need of the day. Every feature is focused on making life easier for the customer. Their after sales service takes this support to the next level.

Servitization is all about creating a value proposition for the customer, before and after the sale.


Sunil Panikker
Sunil Panikker is a business consultant specializing in customer service, operations and business strategy. He has honed his expertise over 30 years of experience, working in senior management positions, with companies having global footprints, and responsibilities that have been cross-functional & multi-locational. His blog shares the experience and expertise assimilated from managing customer experience across multiple diverse industries.


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