Servitization of Business: Adding Value by Adding Services

Vandermerwe, S., Rada, J. (1988)

European Mannagement Journal; Volume 6; No 4; pp 314-324
DOI: 10.1016/0263-2373(88)90033-3
More and more corporations throughout the world are adding value to their core corporate offerings through services. The trend is pervading almost all industries, is customer demand-driven, and perceived by corporations as sharpening their competitive edges. Modern corporations are increasingly offering fuller market packages or “bundles” of customer-focussed combinations of goods, services, support, self-service, and knowledge. But services are beginning to dominate. This movement is termed the “servitization of business” by authors Sandra Vandermerwe and Juan Rada, and is clearly a powerful new feature of total market strategy being adopted by the best companies. It is leading to new relationships between them and their customers. Giving many real-life examples, the authors assess the main motives driving corporations to servitization, and point out that its cumulative effects are changing the competitive dynamics in which managers will have to operate. The special challenge for top managers is how to blend services into the overall strategies of the company.

Defines “servitization”. given as “moving from the old and outdated focus on goods or services to integrated “bundles” or systems, as they are some- times referred to, with services in the lead role”

““Servitization” is largely being driven by customers. In that sense, it is no different from any other market-driven approach to corporate strategy. Previously though, the focus was on customers needs and satisfying these needs mainly through core business activities. Now the emphasis is more on establishing and maintaining a relationship between the corporations and their customer base through broader offerings.”

“Servitization as a competitive tool:

  • setting up barriers to competitors
  • setting up barriers to customers (minimise the risk of them changing to competitors)
  • creating dependencies
  • differentiating the product offering
  • diffusing new innovations”


“Back to the strategic basis:

  • What business are we in?
  • What business could we be in?
  • What business should we be in?
  • Who else could be in it?
  • What business do we want to be in?

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