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Posts Tagged ‘work performance’

Servitization: Selling Usability and Performance


Image Source: Anete Lusina | Pexels

Sell the mobility, not the vehicle! Sell the light, not the lamp! Sell the cooling, not the AC!

In a continuously changing market with intense competitiveness and constant shifts in the customer’s behavior, traditional manufacturers have to keep adapting and innovating to maintain their positions. 

An innovative business strategy that shifts the traditional way of doing business is servitization, a process through which the producers go from a product based model to a Product-Service System (PSS). Companies are no longer producing and selling products alone. They are selling services, integrated solutions, and an overall greater experience for the end consumer.

According to Miying Yang and Steve Evans’ study on “product-service system business model archetypes and sustainability,” a generally agreed-upon way to classify the PSS is to include it in one of the following models:

  1. Product-Oriented – when the provider sells the product that ends in the buyer’s ownership. Other services such as consultancy or maintenance can be sold.
  2. Use-Oriented – when a business provides customers with the utility of a product while keeping its ownership. Examples are renting or leasing.  
  3. Result-Oriented – when the company sells the results of a product or the value being delivered to the customer. The customer only buying the consumed light instead of lighting products is a relevant example of this typology.

To remain relevant in an always-evolving environment, companies should seize every opportunity to enhance their performance and obtain competitive advantages. Servitization is a win-win model benefiting all the involved parties that’s  why an increasing number of businesses are approaching it. 

Competing through advanced services is, first of all, an opportunity for growth and profitability as the revenue streams are more diverse. By offering complimentary ongoing services, the income gates certain stability due to recurring and incremental revenue streams.

The relations with the clients are strengthened as their satisfaction is increasing and their loyalty is drive-up. Greater alignment with the customer needs facilitates a long-term relationship and a better relationship with the customers means higher barriers to competition.

Using a servitization model can become an important source of insights for further innovation because providers are still connected to their service which eases the detection of improvements and can spark ideas for new services. Additionally, services are more labor-dependent and less visible which makes them more challenging to replicate and become a sustainable source of competitive advantage.

With all the above benefits also come challenges that companies face in their process to adopt servitization. The biggest problem results from the aversion to change. Old habits die hard while shifting towards servitization requires fundamental changes in the way companies are doing business, affecting every aspect from the strategic approach to everyday operations.

It is a time-consuming transition that needs to be done gradually to avoid putting pressure on the enterprise’s resources. Also, it requires adjustments in the existing capabilities, new technologies need to be deployed to support the services offered, and the employees need to develop related competencies.  Customers’ perception is another challenge that companies face, as clients may be reluctant to adopt an unfamiliar servitized solution. 

Selling Performance: Pay-per-lux and Power by the Hour

Philips Lighting, currently activating as Signify launched the ‘Pay-per-lux’ model, a ‘lighting-as-a-service’ offer for its customers. Signify handles the entire lighting service – design, installation, maintenance, and upgrades while the customers pay a monthly service fee for light. The program considers circular principles and uses advanced technologies like AI and the Internet of Things. In this model, Signify keeps the ownership of the lighting systems and offers a five-year performance contract, which is based on a series of key performance indicators such as light level, uptime, and energy savings.

The solution was first deployed for the National Union of Students from the United Kingdom. Signify is responsible for the lighting system for 15 years, while NUS pays a quarterly fee. As a result, the energy costs have been minimized while the technologies used are continuously updated, and annual checks are done to assess the system’s health and prevent maintenance. 

Rolls-Royce manufactures engines for the aviation industry and implements a servitization model named Power by the hour through which customers have access to a service package by a dollar-per-flying-hour payment mechanism. CareServices solution offers a variety of services to customers such as engine monitoring to predict potential maintenance problems and ensure the aircraft is ready to fly on time, efficiency services to balance the low fuel consumption with optimized flight operations, asset and safety management solutions, in addition to world-class customer support.

The most recent service agreement has been signed with South Korean airline T’way Air. It will benefit from a service concept based on predictability and reliability that will secure the cost of operating, maintaining, and enhancing aircraft availability.

To sum up, there are many other companies from different industries that are moving their focus towards servitization. Even though it is not shielded from risk, the model can create significant benefits in relation to resource efficiency, growth, customer relationship, resilience, and impact on competitiveness. For a traditional manufacturer, a gradual transition from product commercialization to a servitize offering can become a decisive factor in its long-term sustainability.

To ensure a smoother transition from the traditional way of doing business to servitization, join the Certified Strategy and Business Planning Professional course offered by The KPI Institute. Develop the right plan and strategy for your business in achieving servitization. For further details, visit

Mental health at work: How organizations can promote and show support


Mental health at work has now become an important area of concern for several organizations. Half of working adults worldwide have admitted experiencing anxiety about job security, stress caused by changes at work, loneliness, and difficulty balancing work and life due to the COVID-19 pandemic, according to the mental health data published by the World Economic Forum.

Mental health issues affect not only one’s quality of life but also work performance and productivity. Studies cited in a Unite for Sight report show that psychological issues lead to reduced income, “lowered individual productivity due to unemployment, missed work, and reduced productivity at work.”

The effects of mental health issues on workers go beyond the offices. The Black Dog Institute, a medical research institute in Australia specializing in mental health, reported that the Australian economy alone loses more than $12 billion each year due to mental health challenges. Such economic losses support the findings by the World Health Organization (WHO), which states that the cost of depression and anxiety to the global economy is US$ 1 trillion per year in lost productivity.

What organizations can do

According to WHO, among the factors affecting the mental health of employees are poor communication and management practices, limited participation in decision-making, long or inflexible working hours, and lack of team cohesion. Bullying and psychological harassment are also listed as well-known causes of work-related stress and related mental health problems. 

Given that information, how can organizations take care of their employees’ mental health? Taking action on this matter requires an entirely different and mostly less-traveled or less successful path.

The Chartered Institute of Personnel and Development or CIPD reports in their Health and Well-being at Work Survey in 2019 that just one in 10 (or 9%) of organizations in the UK have a standalone mental health policy for employees. 

Marcela Prescan, a performance management expert at The KPI Institute, previously wrote that performance management does focus most of its practice on the human element. She explained that a performance management system is anchored on homogeneity, which can mean several things, including having “a common understanding of the organization’s mission,” “communication that exceeds the boundaries of formality and begets familiarity,” and a “full grasp of the role and responsibilities that come with being part of a community.”

With that in mind, performance management may recognize and include the needs of employees in terms of their mental health.

Memish (2017) emphasized in their study that it is important to focus on the promotion and prevention side. According to them, “The Canadian Standard (Mental Health Commission of Canada, 2013) was the only guideline that adhered to all levels of the integrated approach and included extensive guidance and practical tools for the implementation of recommendations at each of these levels.”

This is the model in the Standard that shows how mental health is promoted at the organizational level.

In the diagram, the model envisions psychological well-being promotion and is implemented through key drivers and strategic pillars as an umbrella to the thirteen workplace factors. These factors are the more targeted areas to achieve the vision. As mentioned by the Standard, “addressing these factors as listed on Figure A.1 effectively has the potential to positively impact worker mental health, psychological safety, and participation. This in turn can improve productivity and bottom line results (p. 19).”

At the individual level, employees can start with small steps. The Mental Health Foundation in the UK recommends that they discuss their feelings to gather support, remain physically active to keep the brain healthy, take a break, ask for help, and reflect and value one’s strengths, uniqueness, and relationships.


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