Understanding Customer Value

Perspectives On Servitization

Understanding the motivation that drives customer decisions is critical for manufacturers seeking to add value through services.

Identifying customer needs is an important first step in designing service offerings and operations capabilities for service delivery. From a customer perspective, servitization can be seen as a “make or buy” decision. For example, a customer may choose to conduct an activity internally or procure it as a service from the product manufacturer or from a third party service provider. The following table indicates some of the customer needs that can motivate the outsourcing of activities.

Understanding the Customer “make or buy” Process


Typical motives for outsourcing include focusing resources on core activities and reducing capital tied to non-core activities. Addressing these requires service design to focus on seamlessly supporting the customer value creation and extending the revenue model to allow for accessing resources “as a service”. The competencies of manufacturers can also be a powerful way for customers to reduce time to market, mitigate operational risks and access talent needed to optimize processes. Additional motives for outsourcing can be to manage capacity and increase scalability of operations. For service providers this requires careful considerations to increase the flexibility of resources and manage the uncertainty of demand in the customer portfolio.