Forget the product and create value through servitization

Even Made in Italy products, with high symbolic value, superior quality, and envied worldwide, face the risk of commoditization. In every manufacturing sector, competition increases, the availability of products on the market grows, and the quality and accessibility of these products improve. Often, the only differentiating factor becomes price. “We produce more. We produce better. We also sell more, in terms of quantity. But in terms of value, revenue fragments into many product variants, micro-segmentation, and customization, all at increasingly lower prices. If price becomes the distinctive factor, products turn into commodities,” warns Enzo Baglieri, Professor of Innovation Management at Bocconi University and Associate Dean of the Master Division at SDA Bocconi School of Management, in his book Dimenticare il prodotto (Forget the Product). 

The Italian production system must acknowledge this phenomenon and recognize the new reality, “namely that the product is becoming a vehicle through which relationships are created, and the emerging economy, especially following widespread digitalization, is precisely an economy of relationships. Therefore, the innovation and production of physical goods can no longer be limited to creating a product that meets a specific and immediate expectation; it must focus on maximizing the value created from the relationship that materializes over time through the use of the product.” 

This maximization occurs through servitization, which is “the progressive enhancement of the product's value with services, creating combinations where the material and immaterial dimensions merge, and the industrial or final customer values the experience realized through the product-service combination.” 

Focusing on the relationship as an element of value creation, professor Baglieri explains, means that “the performance of companies that engage in servitization must be measured with a different perspective from the current short-term and transactional one. We need to build value measurement models oriented towards the long term: sustainability and servitization indeed share similar methodological approaches.” 

Although the phenomenon of servitization is not new, now is the right time to address it due to the rise of new digital technologies and artificial intelligence. These new digital technologies enable the industrialization of services. The economy of relationships and the servitization of products cannot ignore their massive implementation. 

“To understand the potential and implications of servitization, we must erase the centuries-old memory of the product and train a new category of managers, entrepreneurs, designers, and salespeople who understand the value they generate for the customer with their work and who can imagine the relationship with the customer as a longitudinal and memorable experience,” concludes Professor Baglieri. 

• Publisher: EGEA. 
• Date of Publication: June 2024. 
• ISBN: 9 788838 613531. 
• Pages: 180. 
• Format: paperback. 

For more information, and to purchase this book, CLICK HERE.