Annoyingly to some, Servitisation continues to be the word getting thrown around meeting rooms across the manufacturing sector. Capital equipment manufacturers are being ‘forced’ to explore the servitisation of typically product orientated lines. This means “adding more services to a product” and focussing in on customer experience and continuity. No matter what your opinion on Servitisation is, the transformation within some environments is undeniable.
‘There is no such thing as service industries. There are only industries whose service components are greater or less than those of other industries. Everybody is in services’.
Theodore Levitt, Harvard Business Review, 1972
Smart manufacturers are realising they can increase customer loyalty and gain a greater share of profits across product life-cycles by creating associated services around their goods. Companies have gained excellent reputations on building products and selling them, however when margins are squeezed there is a limit to what they can do with that product to continue to increase profits.
Servitisation comes into play by turning the service division from a ‘cost centre’ into a ‘profit centre’.
Instead of offering basic warranties and having the service team meet those agreements, companies are packaging their service agreements with the products when they’re sold. They can then charge more and make real profit from their clients while benefitting from more accurate forecasts (proactive rather than reactive), giving their clients peace of mind for longer.
Some companies have this setup in place so well that service revenues far outweigh product revenues and can be confirmed for much longer periods. Implementing this whole idea is well underway in IT and other high-tech industries, but many organisations in the medical industry seem to be behind the curve with adopting it. The question is why? Is this because there is always such a need for their products that this issue just doesn’t come up as much? As there are constant innovations in the medical sector there is always technology to sell – reducing the need to lengthen product life-cycles.
What is happening in the meditech world?
GE Healthcare is an example of a well-known manufacturer who continue to storm the medical device market with the servitisation of their profits. They offer remote monitoring and maintenance of their own equipment and will even service other manufacturers’ devices too. In addition, they offer consultancy services that help clients specific budget and fit out an entire hospital in the process.
Though who can blame organisations for feeling daunted when looking at servitisation. It can seem like quite a task, just the impact it has on staffing and resource alone could be enough to put you off:
- Lengthened sales cycles: Spending more time getting to know customer needs and providing service extras… takes more time! This is a big cultural shift and the amount of sales resource required will go up.
- Cultural shift: Can your current workforce fit with this new mindset and do they have the skills to do it immediately. How much investment is needed into upskilling or retraining?
- Recruitment: You may need whole new classes of people. You need sales people that can sell both a product and a service and you need service people who can interpret and make sense of new processes. Finding people with these sets of skills isn’t easy, especially in an industry that hasn’t fully got on board with this concept yet.
At some point ‘servitisation’ will truly impact the medical industry and how they view service divisions. Having the right people in place to take advantage of the increased revenues will be key.
Getting prepared for servitisation
FMC Meditech are well positioned to ensure business leaders can drive medical companies forward in this area. If you’d like to get in touch to discuss skills for servitisation, get in touch with me at email@example.com or visit our website at www.fmcmeditech.com