Manufacturing companies search for new ways of generating profits in the rapidly changing and highly competitive global markets. Is servitization the answer? Maintenance, digitalization and R&D support are examples of the wide range of services that are offered to cover the life span of a product. Servitization offers a possibility to differentiate from the competitors and a remedy to the deteriorating profit margins of product sales. Studies show that a too modest service strategy can result in financial losses while opting for a bold strategy with advanced services supports profitability.
Service business is inherently people focused. Developing and delivering services requires substantial input and involvement from not only customers but also employees. My master’s thesis on servitization in the manufacturing industry shows that involving employees from a very early stage of the process is crucial for the success. Employees have a significant role in implementing servitization strategies. There is a lot of tacit knowledge in the organization and this knowledge is transferred through collective sensemaking and meaning making and not so much through documentation. Bringing together tacit knowledge and the servitization plans supports the creation of a shared vision between managers and employees.
Often, servitization calls for an organizational change and with change comes support and resistance. Some individuals and teams in the organization view servitization as an enabler of the future success of the organization while others look at it as an unnecessary obstacle and extra work in their day-to-day work. Creating a shared vision is, therefore, important in leading change. When managers pay attention to the ways by which employees make sense of services and servitization plans, the potential of successful implementation is increased.
The implementation of servitization strategies can be supported by flexible organizational structures, well-planned rewarding systems and management’s readiness to do self-reflection of the impact of their change communication. In other words, close attention to leading the process of implementation of servitization is needed.
Päivi Eskelinen
Master’s Thesis Title:
“Organizational Change and Servitization: Employee Sensemaking in the Manufacturing Industry.”
Thesis supervisor: Päivi Eriksson