Convergence of manufacturing and service industries: “Servitization”

“PAY PER WASH!” It is a promotional phrase for Winterhalter, a German business dishwasher company. As companies can collect customer usage information about their products through the Internet of Things, they can sell their products in a different aspect than before. It is now possible to establish strategies in terms of ‘services’, not tangible products. This is called ‘servitization’.

Servitization refers to the servitization of all products. The Internet of Things is attached to the product to collect data on how often and how much customers use the product, enabling the creation of intangible services in tangible products. This is why dishwasher company Winterhalter can not only sell the dishwasher itself but also sell a service called “washing dishes.” The “eye” and “ear” of the Internet of Things attached to the dishwasher transmit data on customers’ usage patterns in real time. Customers can decide how much they want to wash the dishes online and use the dishwasher by paying only at that frequency. Through these services, manufacturers can continue to form contact points with customers even after selling products, and block the possibility that customers will turn to competitors’ products. This leads to stable income from companies, and customers also do not have to spend a large sum of money to prepare dishwashers in the early stages. They only pay when using the product, so they can experience the service at a lower cost.

A home thermometer developed by U.S. wearable device manufacturer KINSA does not simply show a child’s body temperature in numbers. When the child’s body temperature is measured, the KINSA smart thermometer is linked to the smartphone app to provide information on what the child is in and what measures are needed based on changes in body temperature that have been measured.

Servitization is a strategy to maximize consumer satisfaction by providing appropriate follow-up services after product sales. Through service titration, traditional manufacturers can be reborn as service companies by converging services into value chains. This process entails significant risks. However, as traditional manufacturers are increasingly losing the added value of the manufacturing process with the 4th Industrial Revolution, they are trying to implement a strategy to improve profitability by providing follow-up services.

The highest value a company gains from digital transformation (DT) is to gain new customers by creating value that provides new experiences to customers through business model innovation. In order to secure a comparative advantage by executing “Servitization”, it will be necessary to understand customers and subsequent industries and secure service continuity.


Categories: Tech&Innovation