Design of a Servitization Strategy
Purpose
The following application exercise seeks to integrate in a practical way the knowledge, methods, and tools indicated in this work to strengthen the possible learning and its subsequent use in academic, business, and entrepreneurial contexts. This exercise consists of two phases:
1. Identification, analysis, and design of a service business opportunity based on Chapter 2: Servitization: An Assessment Holistic Perspective.
2. Design of the service proposal for adding value to the business applying the knowledge contained in Chapter 1: The Service Value Chain.
Outcome
Design project of a servitization strategy.
General Guidelines
Considering the categories (23) of Manufacturing Industries contained in the International Standard Industrial Classification of all economic activities (ISIC) of the United Nations that are indicated in Table A.1.
Table A.1 ISIC manufacturing industries
Category | Product |
1 | Preparation of food products |
2 | Preparation of beverages |
3 | Manufacture of tobacco products |
4 | Manufacture of textile products |
5 | Manufacture of clothing |
6 | Manufacture of leather products and related products |
7 | Wood production and manufacture of wood and cork products, except furniture; manufacture of articles of straw and plaiting materials |
8 | Manufacture of paper and paper products |
9 | Printing and playback of recordings |
10 | Manufacture of coke and refined petroleum products |
11 | Manufacture of chemical substances and products |
12 | Manufacture of pharmaceutical products, medicinal chemical substances, and botanical products for pharmaceutical use |
13 | Manufacture of rubber and plastic products |
14 | Manufacture of base metals |
15 | Manufacture of fabricated metal products, except machinery and equipment |
16 | Manufacture of computer, electronic, and optical products |
17 | Manufacture of electrical equipment |
18 | Manufacture of machinery and equipment n.e.c. |
19 | Manufacture of motor vehicles, trailers, and semitrailers |
20 | Manufacture of other types of transport equipment |
21 | Furniture manufacturing |
22 | Other manufacturing industries |
Source: UN. 2009. International Standard Industrial Classification of All Economic Activities (ISIC), Rev.4, Statistical Papers (Ser. M), New York, NY: UN.
Part 1
Select from the previous list, an economic activity of your interest to design a servitization strategy and apply the holistic valuation perspective, described in Chapter 2 and formatted below:
1. Motivation for the adoption of the servitization strategy. Previous analysis of organizational values and personal beliefs.
What value will the service bring to my business?
What is the managerial attitude of adding a service environment to the business?
2. Valuation perspective. Identify in the selected economic activity the integral value chain of the business (valuation tree) and, from the principles and valuation criteria, define the corresponding categories of productive activities following the top-down method.
NOTE: In this part of the application exercise, the case of the pharmaceutical industry described in Chapter 2 could serve as guidance and support.
3. Service Business Opportunity. Analyze the service option identified in the previous step and substantiate the business opportunity focusing attention on (a) the end user and (b) the market opportunity following the next steps:
(a) End user:
• Needs and expectations (tastes and preferences)
• Market inefficiencies (quality of service)
• Market players (competitors)
• Market size and purchasing power (sufficiency)
(b) Market opportunity:
• The service proposal (attractiveness and added value)
• Resources required (availability)
• Financial feasibility (indicators)
• Net present value (NPV)
• Internal rate of return (IRR)
• EBITDA
4. Adoption decision. Analyze the service business opportunity proposal defined in the previous point, determine the possible functional areas of the organization with which to consult and agree on the proposal before making the addition decision, and include it in the strategic objectives of the company for the resource allocation and implementation.
Part 2
Design the service proposal identified, reconciled and adopted in phase 1 and 3 on the content: The Systematic and Transversal Service of Chapter 1, both following the strategic vision of the service scheme of the business model:
Final Acknowledgment
Upon completing this application exercise, the reader will have appropriated the knowledge, processes, and procedures covered in this work and required for the design and development of a servitization strategy. You will have a preliminary project to refine and agree on for consideration as a strategic objective of a company, and you will have fulfilled the purpose of this professional and academic experience.