By Mark Euwe
Managing Director The Lookingglass, former EVP of Canon Business Services and Oce Business Services, former Executive Partner Accenture.
Mark Euwe has over 30 years of experience in the Services industry, both in professional services as in manufacturing environments. With outspoken views on how to build a successful service business, Mark acts as thought leader in the domain.
Reason 1: Customers demand it
If we assume your company is focused on its clients, there can probably be no better reason to start moving forward in your service portfolio. Customers are starting to buy differently from you as a supplier. They are now starting to look for outputs instead of inputs. In other words, it no longer suffices to make your hardware product available to the client. The customer also wants you to make sure that it works properly and that it delivers at the expected output rates. Customers may demand a completely different payment model where they pay on output delivered instead of paying for ownership of the machine. Scary as it sounds, this is where your hardware product starts to become a service product.
Reason 2: Products commoditise
With rapidly developing technology and increased competition from a global market, your products may no longer be as unique as they once were. By adding services on top of your hardware products, you may differentiate your product offerings to the next level. Particularly in your local markets, you may have the advantage to be able to deliver specific value added services, that can not be matched by competitors from lower cost countries.
Reason 3: Revenue decline
As your engineering department works hard to make your products cheaper and more reliable, it becomes more and more difficult to keep your revenues at the required levels. Particularly maintenance services and spare parts business (typically highly profitable) are hit by your own engineering achievements. With new service products around your hardware products, you can start to counter the decline in mature markets.
Reason 4: Global competition
Not only do you suffer from global competition in your own industry, you may even experience competition from completely new players that use a disruptive model. Having a hardware portfolio that is complemented with a solid service product portfolio, makes it more difficult for outside players to come up with a better value proposition.
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