Over the past few years, there has been a significant transformation in the manufacturing industry known as Servitization; it is now a prominent trend for 2024. This shift represents a departure from the conventional focus on producing goods, towards a more service-centric approach.

Anna De Carolis, Junior Assistant Professor, Manufacturing Group
Claudia Aurisano, Research fellow, Manufacturing Group
School of Management, Politecnico di Milano

Servitization introduces services into the core business model, offering manufacturers a distinct mean to stand out in today’s highly competitive market.

Servitization is the process through which manufacturers transition from selling products to delivering comprehensive solutions that include not only the physical product but also a range of associated services. This strategic evolution is driven by the recognition that customers increasingly value outcomes and experiences over mere ownership of products. By providing a bundle of services alongside their products, manufacturers can better meet customer needs and foster long-term relationships.

For manufacturers, embracing servitization signifies a strategic pivot extending beyond mere product sales to the building of enduring customer relationships. This transition demands a reassessment of business models, internal processes, and a cultural shift within organizations. Manufacturers are evolving into solution providers, committed to meeting the growing needs of their customers across the entire product lifecycle. On the flip side, customers stand to gain from this transformation with enriched value propositions. Instead of engaging in one-off transactions, they gain access to a suite of services that optimize the performance, durability, and efficiency of their purchased products.

From a market perspective, servitization offers significant competitive differentiation. Manufacturers can distinguish themselves in a crowded marketplace by offering a distinctive blend of products and services. This approach fosters stronger customer relationships through ongoing support and value provision, leading to heightened loyalty. Moreover, it facilitates the evolution from a transactional model to a subscription-based or pay-per-use model, generating more predictable and recurring revenue streams. Additionally, by maintaining deeper engagement throughout the product lifecycle, manufacturers gain invaluable insights into customer behavior, enabling them to tailor services and products more effectively, thereby fostering enhanced customer satisfaction.

Furthermore, from an environmental standpoint, servitization encourages a focus on product longevity, repairability, and sustainability, aligning with the growing demand for eco-friendly and socially responsible practices.

Overall, the sale of services linked to products is reshaping the manufacturing market by offering new revenue streams, strengthening customer relationships, driving differentiation, fostering innovation, and promoting a more customer-centric approach to business.

Servitization is critical for the manufacturing industry’s future success because it aligns with the changing expectations of modern consumers. In an era where customer experience and outcomes matter more than ever, manufacturers must evolve to remain competitive. This shift not only ensures the survival of traditional manufacturing firms but also positions them as leaders in an era where service excellence is paramount.

At Politecnico di Milano the Manufacturing Group of the School of Management aims to transfer its scientific knowledge to industrial companies, with services that favor the business’ evolution through the servitization model.

Our consultancy services in Business Development guide companies in creating value by identifying new services to complement their products or by transforming the product itself into a service, adopting a customer-centric business model focused on loyalty.

By leveraging scientific knowledge on service evolution, forward-thinking companies can easily adapt to the ever-growing needs of customers, diversifying their business models through digital technologies that enable them to ride the service economy wave.