It's Not Only About Product. The Four Rules of Service
"Faire. Savoir faire. Savoir faire faire. Faire savoir. These are the principles that my French grandmother taught me when I was 11," says Angelo Gaja, the Italian king of Barbaresco wine. In wine-making, Italy has an industrial know-how that drives national exports. In some sectors of the Made in Italy, such as food & beverage, product quality counts a lot. Having a quality product is a basic requirement to achieve competitive advantage. But it is also true that today a having a great product is not enough. The rules of global competition are more and more based on price competition. So how can you stay ahead of the competition, if you don't want to cut prices?
Servitization is the answer. This term refers to the ability of companies to transform their orientation from production and sale of physical products to toward product service, which enables the creation of value for the customer and the company alike. Companies adopting this process develop services that have the aim of satisfying the needs of consumers beyond price, and thus improve business performance in the medium-to-long term. This change requires overcoming the traditional division between goods and services, in order to implement integrated supply delivery systems or packages. So the focus is no longer on the quality/price ratio, but on the price/benefit ratio that can be offered to the consumer. The benefit offered can be of three types: functional, tied to a practical problem to be solved; informational, linked to the information that can be provided: experiential, connected with the hedonic flow of experiences the product-service can bring to the consumer's life.
How do companies implement this change? Such a question was at the base of the research study "Servitization in the food & beverage industry", which analyzed quantitative and qualitative data of the best- and worst-performing companies the past 10 years. By studying their business models, we have sought to ascertain the main drivers of servitization. According to our study, companies striving for servitization can follow four simple rules.
First. Focus on ease of use and accompany the consumer throughout the process. Consumers are looking for easy-to-use solutions that simplify their lives and at the same time form a comprehensive supply package that will accompany him/her in various stages of consumption.
Second. Optimize the combination of slowness and speed. There is slowness that needs to be respected in the production process, but delivery to the market, transport and distribution need to be quick. Managing this combination more effectively can increase servitization.
Third. Open up relationships within the industry that are both upstream and downstream. Companies are no longer isolated, they are activating processes of co-creation with customers, when they collect feedback and make products that take into account these suggestions. At the same time, they maintain very strong relationships with their suppliers that play the role of actual business partners.
Fourth. Set communication as a service. Communication as well no longer revolves around the product, but provides information, for instance, on the traceability of products and the territory of origin.
Servitization is becoming an increasingly intentional and explicit strategy, which in order to work well must involve the whole company and not a single function, even in sectors where the role of industrial manufacturing is more pronounced. In other words, in addition to technological know-how, there is value in knowing how to serve the consumer.