Servitization is a growing trend in the world, but its adoption rate differs by industry. Although servitization is already widely adopted within a range of sectors, the healthcare industry lags behind. On behalf of global asset finance company DLL and management consultancy firm Berenschot, Master Students from the Rotterdam School of Management (Erasmus University Rotterdam) explored the obstacles, benefits and success factors for healthcare original equipment manufacturers (OEMs) and hospitals associated with adopting servitization. Their findings are bundled in a newly launched report.
Servitization
Servitization entails the shift from producing and selling products to providing and selling services, or a combination of products, services and sometimes consumables. The concept is the answer to changing market needs as they shift from equipment ownership to instant access to equipment when needed.
Fabian Nullmeier, consultant Operational Excellence at Berenschot and PhD Servitization, added: “The global appetite for services has grown by 30 percent over the past 20 years relative to the Gross Domestic Product. Meanwhile, the nature of services is changing. In general, the number of people buying conventional products and services is decreasing; instead, more people are seeking to buy the outcomes that these products offer. So, rather than ‘buying a car,’ commuters want ‘mobility.’ And rather than ‘buying insurance,’ homeowners want ‘reassurance.’ Increasingly, people want access to equipment without carrying the responsibilities of ownership.”
Servitization has already been successfully implemented in multiple industries including automotive, materials handling and entertainment, where it accomplished total cost of ownership reductions and increased efficiency. While various OEMs have introduced servitization offerings, several characteristics specific to the healthcare sector have resulted in limited adoption of servitization so far. This study sought to identify key benefits, obstacles and success factors for OEMs and hospitals associated with adopting servitization. By addressing these, this study aims to accelerate the adoption of servitization in the healthcare sector.
Healthcare and Servitization
OEMs and hospitals are urged to rethink their business models and sourcing strategies since revenues are under pressure and costs are increasing rapidly. Most recently, the COVID-19 pandemic shone a spotlight on this. Benno Dijkers, New Business Development Manager Healthcare at DLL, commented: “Quality of care, efficiency, flexibility and cost reduction are at the top of today’s healthcare agenda. Although the sector is, by nature, different than other industries, I see potential in servitization for all stakeholders. From differentiating one’s product offering and increasing long-term revenues for manufacturers, to increasing flexibility and transferring risk associated with equipment failure for healthcare providers, for example.”
For the healthcare industry, servitization relates to purchasing treatments with capital intensive medical equipment as a service (pay-per-use) rather than purchasing the equipment itself. For manufacturers of equipment, this requires a new business model, and for healthcare providers, it enables the benefits of equipment usage without carrying any of the related burdens and responsibilities of ownership.
More details on the obstacles, benefits, and success factors of servitization for the healthcare sector can be found in the summary report, available in English here.