Recent years have seen a burgeoning integration between operational technologies and IT, transforming modern machinery into "smart," interconnected components within entire production systems. This evolution significantly enhances industrial assets, which now encompass not only physical machinery but also the valuable data they generate.
In the B2C sector, the concept of servitization is firmly established, with consumers now accustomed to monthly payments for both products and services. Examples include the common practice of leasing copiers or Haier’s innovative pay-per-use washing machine model “WashPass”. However, achieving this transition—offering a product as a service—relies heavily on data. Connected machinery provides continuous data streams, enabling suppliers to measure actual product usage and thus transform a tangible asset into a valued service.
Business Model Innovation: some examples from the past
The shift to a "service-oriented" sales strategy seems inevitable, and as literature often shows that the simplest solutions tend to prevail. It is interesting to consider how disruptive business models in the past have significantly changed market dynamics.
Emblematic examples include Netflix surpassing Blockbuster and Kodak losing its leadership in an almost monopolistic market. Netflix's success story highlights the importance of allowing users to access goods or services independently. Kodak's case represents strategic myopia: excessive focus on the physical product prevented the company from seizing technological innovation opportunities.
This does not necessarily mean that servitization in the B2B market will cause market imbalances, but it certainly is a new strategy with the potential to do so.
Numerous other examples show companies that have successfully leveraged a shift in consumer mindset. Today, in the manufacturing sector, signs of a paradigm shift are increasingly evident. A growing number of entrepreneurs are integrating digital technologies into their machines, shifting their offerings from mere products to selling "productivity" to their customers. This evolution reflects a profound transformation in how companies conceive and market their products, increasingly focusing on solutions that generate continuous value and improve their customers' operational efficiency.
Servitization in the B2B World
While "renting" is now well-established in the consumer world, there is still a lot of resistance and reluctance from entrepreneurs in the industrial business world to adopt this business model. Servitization means transitioning from purchasing a physical asset to using it; thus, "productive capacity" becomes the valuation metric. An emblematic example in the industrial field is Rolls-Royce aircraft engines, where guaranteed flight hours are purchased, ensured by the manufacturer's efficiency and maintenance.
However, the servitization process is closely linked to digitalization, essential for remotely monitoring and managing machines, optimizing their use, and developing and integrating additional services that enrich the offering.
"Servitization revolutionizes the traditional sales model: you no longer buy the asset, but its productive potential."
The concept of servitization arises from the need to adapt to a continuously evolving economic landscape, where economic crises and technological acceleration push companies to reinvent their business models. On one hand, the global economic crisis has reduced the spending capacity of consumers and companies, making the acquisition of durable goods less attractive; on the other, technological progress has enabled the development of innovative and personalized services.
How has Rolls-Royce's organizational structure changed after servitization?
The servitization process has led Rolls-Royce to deeply review its organizational structure. One key change was the introduction of the Blue Data Thread digital platform, which collects and analyzes engine performance data in real-time. This platform enhances the company's ability to offer predictive maintenance services, ensuring operational efficiency for customers.
Blue Data Thread connects every Rolls-Royce engine with airline operations, maintenance workshops, and production factories. The bidirectional data collection includes monitoring engine health, real-time flight conditions, and maintenance data. Predictive maintenance algorithms based on multiple variables allow precise predictions of maintenance times, down to individual engine components. This approach has significantly reduced unplanned maintenance operations, increasing engine utilization time and reducing operational costs for airlines.
Implementing the servitization strategy was a gradual process, starting in the late 1990s with the first long-term service contracts. This laid the foundation for a more comprehensive transformation, accelerated in 2018 with the partnership with QOCO Systems. Adopting the "Blue Data Thread" required several phases, including integration with existing maintenance systems and staff training, with some initial implementations completed in a few months.
Conclusions
Servitization represents a revolution in how industrial products are conceived and marketed. Shifting the focus from selling physical goods to providing data- and performance-based services allows companies to offer greater continuous value to their customers. Rolls-Royce's transformation is a clear example: through the implementation of digital platforms and the adoption of innovative business models, operational efficiency can be improved, and costs reduced. In an ever-evolving market, embracing servitization is not just a beneficial strategy but a necessity to remain competitive and meet the new demands of consumers and companies.
