Faced with saturation of their core product markets, companies in search of growth are increasingly turning to services.1 A few companies have enjoyed success with this approach — General Electric Co., IBM Corp., Siemens AG and Hewlett-Packard Co., for example. GE’s Transportation Systems division had stable revenues and operating profits between 1999 and 2002, despite absorbing a drop of more than 60% in the number of locomotives it sold. Between 1996 and 2002, revenue from services climbed from $500 million to about $1.5 billion, a trend that the division expects will continue.
Not all product manufacturers are so fortunate. Intel Corp., for instance, spent $150 million to launch a unit whose function was to set up data centers to host Web sites for companies. After three years, Intel shut down the unit and announced that it was refocusing on its core microprocessor business.2 Similarly, Boeing Capital Corp., the financial services subsidiary of Boeing Co., recently reined in its efforts to provide financial services to other industries.3
A systematic approach to creating services-led growth can help managers of product companies improve the odds of success. Companies must begin by redefining their markets in terms of customer activities and customer outcomes instead of products and services. By mapping the customer-activity chain and relating the map to a service-opportunity matrix,... To read the complete article, login or sign-up using the form below.
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