Drawing Inspiration from Telcos and Utilities

The roots of Servitization are traced back to models pioneered by Telecommunications (Telcos) and Utility companies, early adopters of subscription models and usage-based pricing. These industries didn't just sell services; “they built extensive infrastructures to serve vast customer bases, often numbering in the millions, spread across expansive networks”. Their commitment extended beyond initial sales or Service Fulfillment to ensuring high-quality services or Service Assurance throughout each customer's lifecycle, a responsibility that required developing advanced systems to quote, sell, deliver, manage, and maintain service reliability at scale.

For Telcos, success meant more than just providing a phone or internet connection; it involved constructing and maintaining a robust network to deliver services through millions of devices, such as telephones, mobile devices, modems, and routers, operational at the network's edge. This "Customer Bridge", laid the groundwork for Networkization, the comprehensive, ongoing responsibility for Telcos to maintain operational quality across a distributed network that reaches directly into customers' homes and businesses.

By mastering this Network Management or Customer Bridge approach, Telcos ensured service continuity, preserved customer premise equipment, secured recurring revenue, and upheld customer satisfaction. Today, this foundational model of Networkization serves as an essential blueprint for other industries adopting service-based models.

Servitization vs. Networkization: A Defining Distinction

As companies embrace Servitization, they are encountering an equally transformative concept: Networkization. While Servitization focuses on enhancing products by bundling goods and services, such as maintenance, upgrades, and usage-based pricing, Networkization is about the comprehensive management of these services and goods across a distributed network, reaching beyond the vendor's premises and directly into customers' homes and businesses, the “Customer Bridge”.

• Servitization

  • Definition: Transforms traditional product-based businesses into service-oriented models offering physical goods as ongoing services, where revenue streams are derived from usage, subscriptions, or service consumption rather than outright product sales.

  • Key Shift: The seller retains ownership of the goods while delivering value as a service over time.

  • Example: A car company provides vehicles through a subscription service where customers pay for access, usage, and bundled benefits such as insurance, maintenance, and roadside assistance. Rather than making a one-time sale, the manufacturer retains ownership and takes ongoing responsibility for ensuring the car is continuously available and fully supported to meet the customer's needs.

• Networkization

  • Definition: A collateral effect of Servitization, where the goods sold as services become part of a virtual network of service-oriented goods and services. These goods must communicate and interact to deliver the service's full value on a scale, ensuring traceability, consistent service reliability and performance across diverse customer locations.

  • Key Shift: Servitized goods become part of a system of assets, forming a virtual network that should be supported during the lifecycle of the service.

  • Example: In the car subscription model, vehicles are part of a mobility network. Each car shares real-time data, location, usage and maintenance needs to ensure service uptime and preserve Service Provider assets.

But how many companies adopting Servitization are genuinely equipped to sustain robust Customer Bridges, connecting themselves with the services and equipment operating at the edge of that Virtual Network?

The Challenge of Networkization: New Demands for Modern Industries

As industries like automotive, manufacturing, and technology adopt Servitization, they are also beginning to embrace Networkization. Managing Customer-Premise Equipment (CPE) alongside seamless, customer-facing service delivery is no longer limited to Telcos. By combining these elements, these sectors are moving beyond simple transactions to establish enduring, value-rich partnerships that redefine customer experience while building resilience and sustainable growth in a service-driven era.

What does It entail to serve millions of Customers across vast Networks?

Serving millions of customers distributed across expansive networks demands a robust framework that blends Servitization and Networkization to deliver value consistently and efficiently.

• Servitization transforms physical goods into services, shifting responsibility to the Provider for delivering value throughout the service's lifecycle. Core component:

  • A Quote-to-Cash (Q2C) system. It facilitates quoting, sales, order management, product and service fulfillment, billing, and payment processing. By ensuring accurate revenue capture and charging for complex service-based offerings, the Q2C system maintains alignment between service delivery and usage, preventing revenue leakage.

• Networkization takes the next step, focusing on managing the Customer Bridge, the interaction with services and equipment, on a massive scale, often at the “Edge of the Virtual Network” where millions of customer endpoints reside. Key components:

  • Service Continuity Support Systems: Proactively monitor and rapidly solve issues to maintain uninterrupted service delivery and uphold high service standards. These systems leverage real-time data from IoT devices and advanced analytics to detect potential issues before they escalate, ensuring timely maintenance and swift problem resolution. By addressing service disruptions efficiently, organizations not only enhance operational reliability but also foster customer trust and satisfaction, building stronger long-term relationships.

  • Fixed Asset Management and Traceability: Vendor-owned equipment deployed at customer premises must be meticulously tracked and managed throughout its lifecycle to ensure compliance, operational reliability, and accountability. This includes accounting for changes due to upgrades, downgrades, and replacements, which impact the asset’s value through appreciation or depreciation. For example, replacing or upgrading equipment under RMA (Return Merchandise Authorization) or warranty processes must be accurately logged to reflect the asset's evolving financial and operational state. Advanced tracking systems and real-time monitoring are critical to ensure that these processes align with contractual obligations, regulatory standards, and inventory accuracy. By maintaining precise asset traceability, organizations can optimize lifecycle management, and reduce risks associated with lost or unaccounted assets.

• Shared components between Servitization and Networkization. These shared elements enable seamless integration and optimization of service delivery across both paradigms:

  • High-Availability Mediation: By capturing and processing real-time information from bundled services and goods, Mediation enables predictive maintenance, enhances operational efficiency, and drives service optimization. It achieves this by seamlessly orchestrating and synchronizing data flows across systems while tackling the challenges of multiprotocol communication, dynamic data management, and high-demand environments. This ensures resilient, scalable, and reliable operations, even in complex ecosystems.

  • Revenue Assurance: Ensuring the integrity of revenue streams is paramount in highly interconnected and dynamic environments. Consistency between Service Fulfillment and Billing Start Dates, as well as alignment with Service Uptime, is essential to avoid discrepancies and foster customer trust. Accurate data processing translates usage into revenue seamlessly, while robust reconciliation mechanisms prevent revenue leakage across complex, cross-network transactions. By synchronizing billing processes with real-time service performance and contractual obligations, organizations can enhance revenue accuracy, minimize disputes, and ensure that customers are billed fairly and transparently for the services they receive.

By seamlessly integrating the distinct responsibilities, core components, and demarcation points of Servitization and Networkization, businesses can efficiently manage expansive Virtual Networks or Customer Bridges, ensuring consistent and high-quality service delivery, and drive sustainable revenue growth. This harmonization enables organizations to enhance operational agility, optimize asset utilization, and deliver superior customer experiences, all while adapting to the complexities of interconnected, service-driven ecosystems.

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.

Conclusion: Embracing Networkization for Future Sucess

As industries evolve through Servitization, they enter the era of Networkization, where managing expansive, service-driven networks becomes essential. The challenges once unique to telecoms are now universal: maintaining complex networks, ensuring seamless service delivery, and securing sustainable revenue streams across all services and goods at the edge of the virtual networks or Customer Bridges.

Are you ready to lead in a Networkized world? As every device and service continue linked to the Service Provider, mastering virtual networks is no longer optional, it's crucial. Customer Bridge is here to help you navigate these complexities. We'll work with you to address key pain points like operational inefficiencies, service disruptions, asset management challenges, data integration hurdles, and revenue leakage. Together, we'll build the robust infrastructure and processes needed to position your business at the forefront of innovation and ensure long-term success across the following takeaways:

• Implement or improve Quote-to-Cash systems.

• Design Service Continuity Support Systems.

• Enhance Fixed Asset Management and Traceability.

• Leverage Mediation facilities.

• Ensure Revenue Assurance. 

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