The Business Case for Digital Servitization Projects

Digital servitization is the process where companies enhance their traditional product offerings by integrating digital technologies and value-added services. A very successful early example of digital servitization is the TotalCare program of Rolls-Royce. It provides a comprehensive service offering for customers of its aircraft engines. The service uses the in-flight data of the engines and algorithms to provide predictable maintenance (costs), optimized engine performance, and minimized downtime over the lifecycle of an engine.
Digital servitization products/solutions generally provide customers with holistic (complete) solutions rather than standalone products, creating new revenue streams and competitive advantages for device/equipment manufacturers and allowing them to ‘move’ closer to their customers.

The Business Case for Digital Servitization Projects leading to products and solutions is typically based around a number of key items:

• Increased Revenue Streams
  

  Composed of:
  Subscription Models: Transitioning to as-a-service models (e.g., product-as-a-service or like Rolls-Royce puts it: ‘Power by the Hour’) enables predictable, recurring revenue. But note that this is not an instant changeover!
  New Services: Offering digital services like remote monitoring, predictive maintenance, and performance optimization. Allowing you to bring your knowledge to the ‘fingertips’ of your users.
  Cross-Selling Opportunities: Digital platforms/solutions can bundle products and services, increasing sales of complementary solutions.

• Enhanced Customer Value
  

  Enabled by:
  Improved Uptime: Predictive maintenance reduces equipment downtime, allows your customer to better plan which in turn increases customer satisfaction. (We have some nice examples of this with our Control Valve App!).
  Outcome-Based Models: Where customers pay for results (e.g., hours of operation, energy savings), directly aligning value delivery with customer goals.

• Operational Efficiency
  

  Enabled by:
  Data-Driven Insights: More data from your devices/equipment provides more/additional means to unleash analytics technologies and AI. Allowing your customer to potentially optimize processes, reduce waste and energy consumption.
  Reduced Costs: Remote monitoring and proactive interventions will lower maintenance and operational costs.
  Automation: Automated service delivery reduces manual effort and possible human error if issues with your devices/equipment go unseen.

• Market Differentiation
  

  By providing:
  Competitive Edge: Digital servitization solutions typically position a company as an innovative leader in its industry.
  Customer Lock-In: in providing fully integrated, high-value services, your customers are less likely to switch to products of your competitors.
  Brand Loyalty: Enhanced user experiences and value-added services foster stronger customer relationships.

• Scalability and Flexibility
  

  Providing:
  Scale: Digital, cloud based, platforms can scale your product/solution offerings across geographies or industries. (And then there is elasticity of scale which is a complete different story – not related to a business case – which can be a technology enabler.)
  Modular Services: Flexibility to add or remove services based on market demand.
  Reach: Cloud-based services enable easy expansion to new geographies without significant physical infrastructure investments.

• Sustainability Goals
  

  Supporting you and your customers in the area of:
  Energy Efficiency: Digital monitoring enables enhanced insights in energy/resource usage and can support efficiency programs.
  Regulatory Compliance: Helping you and your customers meet increasing environmental and sustainability regulations.

Conclusion

Digital servitization aligns with the evolving needs of customers and markets by blending products, services, and digital technologies. It ensures long-term business sustainability, increased profitability, and much stronger customer relationships, making it a strategic imperative for forward-looking companies. Are you forward-looking and would you like to explore how we can collaborate and co-create your digital solutions with you? Let’s schedule a meeting!