Practical Insights: Bringing Servitization and Networkization to Life

Let’s explore compelling examples to demonstrate the transformative potential of Servitization and Networkization. These illustrations will highlight how businesses can move beyond traditional product-based models to embrace solutions that prioritize usage, flexibility, and enhanced customer experiences, driving innovation and value creation in today’s dynamic markets.

• Vehicle Leasing vs. Vehicle-As-A-Service: Understanding the Shift

  • Vehicle under Leasing

    • Overview: The customer enters a financial arrangement to pay a fixed monthly fee to use a vehicle for a specified term (e.g., 2–5 years). At the end of the lease term, the customer typically returns the vehicle, purchases it at a residual value, or renews the lease.

    • Key Features:

      Ownership: The leasing company retains ownership of the vehicle.

      Payment: Fixed periodic payments unrelated to usage or performance.

      Services: Maintenance, insurance, and other costs may or may not be included, depending on the contract.

      Focus: Providing access to the car as a physical asset.

    • Example: A customer leases a sedan for $400 per month for 36 months, with a mileage cap of 12,000 miles per year. Exceeding this limit incurs additional fees. Maintenance and insurance are the customer's responsibility unless specified.

    • Summary: Leasing is asset-centric, focusing on affordability and fixed-term access to a vehicle, catering to those who prefer not to purchase outright. However, there's typically no consistent service reliability and performance assurance across the leasing lifecycle.

  • Vehicle under Servitization and Networkization Model

    • Overview: This approach shifts from owning or leasing a car to providing Vehicle-As-A-Service (VaaS). Customers pay for the value or outcomes offered by the vehicle rather than the vehicle itself.

    • Key Features:

      Ownership: The service provider retains ownership of the car (similar to leasing).

      Payment: Dynamic, usage-based, or subscription models tailored to individual needs (totally different to Leasing).

      Services Included: Comprehensive coverage, including maintenance, insurance, connectivity, and roadside assistance.

      Focus: Offering a mobility service, prioritizing outcomes and user experience over ownership.

    • Example: A customer subscribes to a mobility service for $0.30 per mile. This subscription offers access to a variety of vehicle models and includes bundled services such as insurance, maintenance, and real-time navigation assistance, and hallmarks of Servitization. In addition, vehicles are equipped with IoT devices that continuously provide real-time data on vehicle health and localization. This enables proactive maintenance recommendations, ensures seamless service continuity, and facilitates timely interventions. Value fluctuations (appreciation or depreciation) are monitored, delivering comprehensive “asset traceability”, one of the key characteristics of Networkization.

    • Summary: Servitization emphasizes service and outcomes, while Networkization enables service continuity, traceability and compliance.

Additional Examples of Networkization

• Smart Home Appliances

  • Servitization: Appliance manufacturers transition from selling products like washing machines or refrigerators to offering them as a service. Customers subscribe to use these appliances, with services such as maintenance, upgrades, and even replacements seamlessly included in the subscription model.

  • Networkization: These appliances evolve into “service nodes” within the provider’s virtual network, no longer just delivered products. They continuously report on uptime, enable predictive maintenance interventions, track upgrades and downgrades affecting appreciations or depreciations of the appliance, and ensure precise localization.

• Industrial Equipment-as-a-Service

  • Servitization: Companies offer industrial machinery, such as forklifts, on a pay-per-use basis. This includes not only the equipment itself but also comprehensive support services like maintenance, ensuring uptime, and operational efficiency commitment (SLA).

  • Networkization: Suppose that an electric forklift is delivered to a specific customer’s location, and it’s equipped with IoT connectivity to monitor real-time location, usage, status, and battery performance. The IoT device tracks critical metrics such as hours of operation, uptime, and energy consumption, enabling precise billing based on actual usage. Furthermore, the battery pack's health and degradation are continuously assessed. If the battery requires replacement, the system automatically triggers maintenance activity, ensuring minimal downtime and agreed SLA. From a financial perspective, because the servitized forklift continue being property of the service provider, replacing the battery obligates recording a partial depreciation of the old pack and an appreciation for the new one, reflecting the forklift’s evolving value over its lifecycle. This transforms the equipment into a service node within a virtual network, where its location, performance, and financial valuation are seamlessly integrated to ensure accurate financial reporting and compliance.

• Healthcare Devices

  • Servitization: Medical equipment providers offer devices such as anesthesia workstation as a service, bundling the equipment with regular software updates, maintenance, and consumable supplies like anesthetic drugs. This ensures hospitals and clinics can access the latest technology without upfront capital investments and drugs inventory administration.

  • Networkization: These anesthesia workstations, along with their consumable supplies, are integrated into a healthcare virtual network, enabling real-time monitoring and management to support patient care through timely interventions. This transformation shifts the provider's role from simply delivering equipment and anesthesia supplies to managing a comprehensive anesthesia network operation. The network ensures continuous availability, predictive maintenance, and performance optimization while simplifying compliance with regulatory standards and data security protocols. This model enhances accountability and operational efficiency, aligning equipment usage with patient outcomes.