How can industry use services as a competitive advantage?

Sic Notícias – Imagens de Marca – How To, November 24th, 2014 [in Portuguese]

More and more industrial companies offer services (product design, maintenance and monitoring of equipment, etc.) associated with their products. These initiatives have been called servitisation (Servitisation). While many industrial companies provide services , one can only talk about servitisation when there is a transformation through which companies move from a situation where they sell products and some associated services  (e.g., training, spare parts, etc.) to a situation in which they use services as the basis of their competitive strategy. In extreme cases, companies can start to sell services (or solutions) to customers, instead of products.

Servitisation can be a very important source of competitive advantage for industrial companies in developed countries, including Portugal. Among other advantages, it works as a means of differentiation and customer loyalty, allowing them to compete with low-cost producers in Asia. In fact, service activities require physical proximity to and intense interaction with customers , which are difficult traits to replicate by geographically distant competitors. They also allow a better understanding of customers’ businesses and, in this way, to offer value-added services (or solutions) that help customers improve their own businesses. This collaboration creates a virtuous circle that cements the relationship between the industrial company and its customers, creating barriers to entry for competitors based on cost.

SLab (http://www.feg.porto.ucp.pt/slab/en) studies the design of successful servitisation strategies, for example, investigating models of organization and management of service activities that are appropriate to industrial companies.