What servicizing demands of a company: The need for inter-functional coordination

OEMs of capital-intensive products are increasingly servicizing their business model, that is, they lease the product to the customer while selling the service. This has led to the forward and reverse flow of products and information between the OEMs and customers. The standard practices and processes of the traditional sell-a-product model do not apply to the servicizing business model. We draw upon our experience with two servicizing OEMs and highlight the inter-functional coordination and development of new business processes needed for OEMs to successfully manage the transition from selling the product to selling the service. Specifically, we discuss the interconnected nature of the business strategy, product development, supply chain, and accounting and finance functions in managing a servicizing business model. Along with close coordination in the strategic dimensions, OEMs also need to make changes in their operational processes to manage the return flow of multiple usecycle products to profitably remanufacture them and re-lease to customers. When operational changes are implemented correctly, the servicizing model also offers several benefits that are not present in the traditional sell-a-product business model.