Client Advice
Servitization: Transforming the Automotive Industry and What It Means for Talent
After four decades in the automotive industry, including automotive recruitment, I've witnessed numerous transformations across our sector. But none has been as profound as what we're experiencing today with servitization – a fundamental shift that's revolutionising how automotive businesses operate and the talent they need.
What exactly is servitization?
Servitization represents a strategic pivot from solely selling products to offering comprehensive outcome-based services. Rather than the traditional one-off transaction model, manufacturers now provide "outcomes as a service" where customers pay for usage, uptime, or utilisation while the provider maintains ownership and handles operational responsibilities.
Rolls-Royce exemplifies this approach perfectly with their TotalCare® service, where airlines pay by the hour for engine flight time rather than purchasing engines outright. This aligns manufacturer and customer interests, unlike traditional models where manufacturers ironically benefit from products requiring frequent repairs.
In the automotive industry, servitization means offering not just vehicles but also maintenance, repair, leasing, connectivity, and mobility solutions to meet evolving customer needs. It's less about the vehicle itself and more about the total experience and value it delivers.
Why servitization matters to automotive
The shift toward servitization isn't merely a trend; it's becoming essential for competitive survival. Recent research indicates significant growth potential, with revenue from outcome-based service models expected to grow from 25% to 41% over the next five years, according to Syncron's research.
Understanding this transformation is critical for automotive professionals. We're moving from an industry focused primarily on vehicle sales to one equally concerned with ongoing service relationships. While horsepower and torque still matter, the competitive edge increasingly comes from flexibility, convenience, personalisation, and sustainability.
The diverse landscape of automotive servitization
The range of servitization models in the automotive industry is remarkably diverse:
Fleet Management-as-a-Service: Companies like ARI, LeasePlan, and Ford offer comprehensive fleet management services. Ford's Fleet Management provides telematics and data services enabling businesses to track their fleet's performance, usage, and service needs.
Mobility-as-a-Service: Uber and Lyft have transformed personal transportation, offering ride-hailing services that eliminate the need for car ownership. Traditional manufacturers are responding – BMW and Daimler merged their mobility services to create "Jurbey," while GM launched "Maven."
Maintenance and Repair Services: Automakers like BMW and Mercedes offer maintenance packages that provide regular service and repairs for a fixed fee. Audi's "Audi Care" package covers routine maintenance for a specific period or mileage.
Software Updates and Connected Services: Tesla leads in providing over-the-air software updates and connected services. GM's OnStar system and BMW's iDrive updates offer suites of connected services, including automatic crash response, navigation, and vehicle diagnostics.
Car Subscription Models: Volvo and Toyota offer subscription models where customers get a car with insurance, maintenance, and roadside assistance included in a monthly fee. Porsche's "Porsche Passport" provides on-demand access to a variety of Porsche models.
The technology driving servitization
What's made servitization feasible now? The answer lies in Industry 4.0 technologies. According to Deloitte, smart factories implementing these initiatives have witnessed impressive gains – 10-12% improvements in output, utilisation, and labour productivity.
Several key technologies are enabling this transformation:
Internet of Things (IoT): Connected vehicles can now transmit operational data continuously, enabling proactive service interventions.
Artificial Intelligence and Machine Learning: These technologies help process massive amounts of data to identify patterns and predict maintenance needs.
Big Data Analytics and Cloud Computing: These platforms allow for the management of the vast amounts of information generated by connected vehicles.
Products now return valuable data on their use, enabling predictive maintenance before failures occur. This connectivity benefits customers through enhanced experiences while lowering operational costs.
New talent requirements
For those of us in recruitment, this transformation introduces exciting challenges. The automotive workforce is evolving beyond traditional roles as new positions emerge requiring hybrid skill sets:
Data and Analytics Expertise: Data analysts who understand vehicle systems, data scientists capable of building predictive maintenance models, and business intelligence specialists who can translate data into actionable insights.
Technology Integration Skills: IoT specialists with automotive engineering knowledge, cloud computing experts, and cybersecurity professionals specialising in connected vehicle protection.
Customer-Centric Roles: Customer success managers with technical backgrounds, experience designers focused on digital vehicle interfaces, and service relationship managers.
Business Model Innovation: Subscription and service model experts, outcome-based pricing specialists, and digital transformation leaders.
This transition requires strategic alignment throughout organisations, from top management down. Servitization cannot simply be layered onto traditional manufacturing models; it demands a fundamental rethinking of operations.
Challenges and benefits
Servitization poses unique hurdles, including organisational resistance, systems integration challenges, infrastructure development needs, and regulatory considerations. Despite these challenges, the benefits are compelling:
For Consumers:
• Personalised services tailored to individual preferences
• Convenience and flexibility with services delivered to the doorstep
• Reduced total cost of ownership for many use cases
• Access to the latest technology without major capital investment
For Manufacturers:
• Enhanced customer satisfaction through stronger relationships
• Revenue diversification, reducing dependency on single income sources
• Competitive differentiation in a crowded market
• Improved product development through real-time performance data
For Retail Dealers:
• Stable, recurring revenue streams beyond traditional sales commissions
• Enhanced customer retention through ongoing service relationships
• New revenue opportunities from digital service offerings
• Reduced dependency on new vehicle inventory and traditional sales cycles
Looking forward
As the automotive industry accelerates down the path of change, the age-old metrics of horsepower and torque are gradually giving way to more experience-driven value propositions. Servitization is redefining the relationship between automakers and consumers, with flexibility, convenience, personalisation, mobility, and sustainability taking the driver's seat.
I'm genuinely excited about what servitization means for talent acquisition. We will see unprecedented demand for candidates who understand both the technical and service aspects of the industry. Those who can bridge these worlds will be highly sought after.
Developing complementary skills that support servitization will be essential for automotive professionals looking to remain relevant. Technical expertise must now be balanced with customer-centric thinking, data analytics capabilities, and service-oriented mindsets.
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