From Products to Services: A holistic approach

by NIck Frank on April 13, 2010

Looking at the research and writing on industrial companies who want to develop services as part of their business, there seems to be significant work in specific areas of the field, but not much that develops a holistic roadmap for the development of services in product centric companies.

There is now a significant body of work driven by the manufacturing community around the need to make a clear strategic choice. For example, can a manufacturing company continue to create value through its products and manufacturing processes, or does it need to look to Services to create differentiation?

Research shows that for industrial companies below 3000 people, those which offer services are likely to have higher revenues and profitability. In a 2009 AIM Working Paper Andrew Neely of Cambridge University highlights that there are 5 different levels of Product-Service systems that describe the relationship between Product and Service within a company.

On the other hand the B2B marketing community has taken a more pragmatic business orientated approach. For example in a 2008 Harvard Business Review article (subscription required), W. Ulaga & W. Reinartz argue that there are 4 key steps that must be completed to profitably develop services.

  1. Recognise you are already a service company
  2. Industrialise the back office
  3. Create a Service Savvy Sales Force
  4. Focus on Customer Processes

Combining both approaches takes us on a more holistic pathway that has three key steps:

  1. Clarify your Strategy: without knowing were you are and where you want to go you are lost
  2. Plan to cross the Organisational Gap: your strategy analysis from step 1 should highlight where your key challenges lie. Plan for these challenges as you need to deliver fundamental organisational change
  3. Execution through Leadership: Vital to success, strong leadership needs to drive execution of the chosen strategy (which can be aided by using the 4 step processes as a guide to the delivery of business goals).

This is not rocket science, but is the basics of a pragmatic and realistic approach to develop any services business.

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