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Why the channel must think outside the box with servitisation

In the midst of changing technologies, firms should dream big and look to offer services alongside their products

Virtual impression of cloud services

Among the perks of holiday shopping is picking up a few presents for yourself; a little reward for the thought and money we spend on others each year. I believe businesses should think in the same way. They should treat the new year as an opportunity to consider how to future-proof their business and think outside the box about the technologies they can harness to improve their services, operations and expand revenue streams.

When faced with the cornucopia of tech available today, the biggest challenge is knowing what systems will be most relevant, and which will yield the biggest return-on-investment (ROI). However, with a fixation on developing new products and bringing them to market at speed, businesses can often be blind to some of the wider opportunities for expansion; this is where we may start to see change. Industry 4.0 - a broad term that encompasses everything from 3D printing to the Internet of Things (IoT) - is one such development.

As IoT takes off, we now find digital embedded in everyday products, from fridges and cars to the essential processes' businesses rely on; payroll, expenses and tax. Now, firms have a once-in-a-generation chance to diversify their business models, taking advantage of the rise of 'servitisation' - a relatively recent concept adopted by manufacturers to deliver a service component in tandem with their traditional product. By expanding and improving the range of services offered alongside products, businesses are providing added value to customers, securing orders and boosting profitability.

In simple terms, servitisation ensures that the customer has more reasons to stay using and purchasing from the business for longer, by developing a broader offering of services that supplement the product being sold. Rather than the customer relationship ending with the sale of an item, servitisation enables businesses to expand the scope within which they can earn revenue on a longer-term basis, examples of which include the use of monitoring and diagnostics, predictive maintenance, pay-per-use models, and a host of other smart services.

There's nothing particularly new about this concept. But it's especially relevant today as competition within tech-centric industries increases, and technology becomes an underlying factor behind a growing range of B2C and B2B services. Something as mundane as a washing machine could generate long-tail revenues from, say, the sale of washing powder, spare parts or maintenance contracts. Or indeed, the introduction of smart appliances with home connect technology means customers no longer need to report a fault or a service - the device orders the part and books the engineer for you. Today, businesses need to think beyond and outside the box to stay relevant and front-of-mind for their customers - if they don't, someone else soon will.

The potential for servitisation is exciting and limitless, but that doesn't mean it's for everyone. At its very core, lies data: a commodity which is under increasing scrutiny. Therefore trust, in data quality and security, is a central success factor to the servitisation trend. Not only is it increasing the number of touchpoints a business has with its customers, but also strengthens the relationship and expected ROI. Businesses need to ensure the trust factor is secure before spreading themselves too thinly, and potentially opening them up to venerability.

To make a success of servitisation, or, indeed, of any of the new technologies on the market, organisations need to be ambitious, bold and far-sighted. The value lies in being able to look beyond the current product offering and explore the scope for additional services that make you indispensable; enhanced customer service, delivery options or analytic capabilities can be the competitive leverage that makes the final difference. As businesses face an uncertain economic and political future in the year ahead, they must dream big and stay one step ahead of the competition. The rise of servitisation and the opportunity to create a range of new, value-added services is a trend that no business can afford to ignore.

Klaus-Michael Vogelberg is chief technology officer (CTO) at Sage

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