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The Rise of Servitization in a Post-Pandemic World

William van Zweeden

The COVID-19 pandemic has undoubtedly reshaped the way industries operate and forced businesses to reassess their strategies. One concept that has gained significant traction during this period is servitization. While servitization has been a topic of discussion for years, the pandemic has highlighted its importance and potential benefits for businesses. In this blog, we explore the rise of servitization in a post-pandemic world, examining its significance and the key takeaways from recent research.

The Importance of Closer Working Relationships

The pandemic underscored the need for closer collaboration between service providers and customers. As industries faced unprecedented challenges, the integration of business ecosystems became essential. Companies across different sectors engaged in co-creation and innovation, exemplified by collaborations like Dyson and JCB partnering to address ventilator shortages in the UK. This closer integration allowed for a more meaningful and tangible way of working together, emphasizing the growing shift towards servitization.

People working together at a table in an office

Servitization's Urgency

The pandemic has made the path towards servitization even more urgent. The closer relationship between service providers and customers has highlighted the need for a more comprehensive approach that considers various business units such as finance, marketing, and distribution. Solution providers like HSO have played a crucial role in guiding their clients on how to develop servitized offerings that encompass all these areas. The pandemic has accelerated the adoption of servitization as businesses seek to better serve their customers' needs in challenging times.

Person working at a laptop.

Outcome-Based Services and Economic Challenges

While servitization offers numerous advantages, there are also potential risks associated with outcome-based service models. Industries that had embraced these models, such as aviation with pay-per-mile or power-by-the-hour approaches, faced significant economic challenges during the pandemic. The sudden grounding of planes due to border closures resulted in major revenue declines for service providers operating under outcome-based service agreements. This highlights the importance of finding the right balance and considering the potential risks when implementing servitized offerings.

The findings revealed that 68% of companies had a servitized offering within their portfolio, and 72% were actively developing one.

Research Findings

Field Service News Research conducted a study together with HSO to assess the impact of the pandemic on servitization and the industry's appetite for its adoption. The study categorized respondents into three groups: companies with a servitized element in their service portfolio, companies actively working towards developing one, and companies without a servitized element. The findings revealed that 68% of companies had a servitized offering within their portfolio, and 72% were actively developing one. These numbers indicate a steady increase in the adoption of servitization, suggesting that the pandemic did not hinder its growth and may have even accelerated it.

Continued Growth of Servitization

The research also indicated a consistent growth in the adoption of servitization over the last three years, with 58% of companies adopting it in 2020, 64% in 2021, and 68% in 2022. This upward trend suggests that servitization is gaining traction in the post-pandemic world. However, it's important to note that the study's respondents primarily consisted of service management professionals engaged in sophisticated industry discussions, which might contribute to the higher prevalence of servitization among them.

The COVID-19 pandemic has emphasized the importance of servitization in a post-pandemic world. The need for closer collaboration between service providers and customers, as well as the urgency to adapt to changing circumstances, has accelerated the adoption of servitized offerings. While there are risks associated with outcome-based service models, businesses continue to recognize the benefits of servitization and are actively developing strategies to implement it. As industries evolve and adapt to new challenges, servitization is becoming an essential part of their service portfolios, offering improved customer satisfaction and long-term partnerships.

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