The Valley of Death in Digital Servitization Projects

The “Valley of Death” in digital servitization refers to the critical and often challenging phase in a project where (huge) investments and efforts are made, but the benefits or returns are not yet realized. This period is particularly risky because it can lead to resource exhaustion, stakeholder disillusionment, or even project failure if not managed well.

UReason’s has guided numerous OEMs in servitizing their product offerings with our APM-Studio platform. We have experienced many valleys and hope that sharing our experiences with you may one day help you overcome or even better prevent this!

But first, The typical Features of the Valley of Death in Digital Servitization Projects:

1. High Initial Costs:

   – Investments in 3rd party software developers (because software development is not your core competence), sensors, platforms, and skilled personnel.
   – Costs associated with integrating digital and physical systems.

2. Limited Immediate ROI:

   – Envisioned servitization benefits, such as recurring revenue from services, take a lot more time to materialize.
   – Customers initially resist switching to service-based models.

3. Complexity and Integration Challenges:

   – Overcoming technical barriers like interoperability and cybersecurity.
   – Aligning organizational processes to support new digital service models.

4. Cultural and Organizational Resistance:

   – Internal resistance to shifting from product-based to service-based thinking.
   – Misalignment of stakeholders’ expectations or priorities (amplified by high initial costs and limited immediate ROI).

5. Uncertainty and Experimentation:

   – Lack of clear criteria and benchmarks during the early stages of the project.
   – Experimentation with business models, pricing strategies, and value propositions all new to the organisation.

In summary there are quite a few elements that can bring your digital servitization project to a halt. To successfully navigate the Valley of Death, you need a structured and strategic approach:

1. Start Small with Pilot Projects:

   – Begin with small, well-defined pilot projects to test concepts and prove feasibility.
   – Use pilots to gather data, learn from feedback, and refine offerings before scaling.

2. Secure Strong Leadership and Stakeholder Buy-In:

   – Ensure leadership is committed to the long-term vision and understands the challenges.
   – Clearly communicate the benefits of digital servitization to all stakeholders.

3. Focus on Quick Wins:

   – Identify areas where digital services can quickly deliver value to customers or internal operations.
   – Highlight early successes to build momentum and support.

4. Adopt an Agile Development Approach

   – Use iterative cycles to develop and deploy solutions incrementally.
   – Continuously test, adapt, and optimize based on real-world performance.

5. Build a Sustainable Financial Model

   – Prepare for the upfront investment and ensure the organization can sustain operations during the low-ROI phase.
   – Consider phased investments tied to milestones or customer uptake.

6. Enhance Organizational Readiness

   – Train employees in digital and servitization competencies.
   – Foster a culture that embraces innovation and change.

7. Engage with Customers Early

   – Collaborate with customers to co-create services that align with their needs.
   – Build trust and partnerships by demonstrating how digital services solve their pain points.

8. Leverage Ecosystem Partnerships

   – Work with technology providers, IoT platforms, and third-party integrators to reduce costs and accelerate development.
   – Share risk through collaborations and alliances.

9. Measure and Refine Continuously

   – Set clear KPIs and regularly assess progress.
   – Use customer feedback and operational data to make informed adjustments.

By proactively addressing the challenges in the Valley of Death, companies can transition smoothly through this difficult phase, unlocking the full potential of digital servitization and driving long-term value creation.

In having guided numerous OEMs in servitizing their product offerings with our APM-Studio platform we learned sometimes the hard way. But we are happy that we allowed our customers to accelerate their time to market and allow them to provide a (branded) solution that runs anywhere and protects their intellectual property. Are you interested to learn more about APM-Studio? Download our e-book from the link below or reach out to explore how we can collaborate and co-create with you!