Why industrial manufacturers are stalling on servitisation – and what it will take to scale

That tension sits at the heart of the current market. A decade ago, many manufacturers expected services to become a much larger part of their business, but only a minority had a strategy to make that happen. Today, the position has changed. Strategic intent is far more widespread. Most organisations express a clear ambition to grow their service business. But the challenge is no longer defining the strategy. It is executing it.

Progress is real, but maturity is still uneven

The sector has advanced in meaningful ways. As our recent research on servitisation shows, connected products, AI, IoT, and robotics have matured rapidly. Most organisations now have emerging service portfolios and early recurring revenue models in place. Out Our study identified four stages of maturity, ranging from transactional aftermarket services and proactive digitally enabled services, through to output-based performance services and platform-based service ecosystems.

But maturity is not evenly distributed. The clearest pattern in our research is that most firms remain concentrated in Stage 2: proactive and digitally enabled services. In fact, 78 percent of firms operate predominantly at this level, even though all aspire to progress towards Stage 3 or 4 within five to ten years. That matters because the leap from Stage 2 to Stage 3 is not incremental. It requires a different operating model, different incentives, a different approach to risk, and a different type of customer relationship.

This is why technology alone is not enough. According to our respondents, servitisation does not fail due to a shortage of ideas or technical resources within organisations. It fails because too many organisations are not designed to scale advanced service models. Connected products and digital monitoring may be in place, but the surrounding governance, skills, data integration, and delivery systems often remain too fragmented to support outcome-based offerings.

Why organisations stall

A set of structural barriers persist across sectors and maturity levels. The first is the strategy-to-execution gap. Centrally defined service portfolios often lose clarity as they move through divisional structures and local markets. Regional teams must reinterpret or reinvent the strategy for their customers, often without strong enough feedback loops to the centre. Over time, this creates a widening disconnect between strategic ambition and operational reality.

The second barrier is fragmented data. This is the most consistently cited technical constraint in our research. Connected products generate growing volumes of data, but organisations still struggle to harmonise information across business units, systems, and regions. In many cases, acquisitions have left manufacturers with a patchwork of legacy platforms, inconsistent standards, and unclear ownership. That fragmentation directly undermines the services many leaders want to scale – including predictive maintenance, fleet insights, lifecycle optimisation, and outcome-based agreements.

The third barrier is more strategic. Nearly two thirds of executives rank customer expectations as the primary driver of their servitisation ambitions. Yet the real trigger for action is often competitive pressure rather than customer pull. This creates an underlying tension. Leaders want to see themselves as customer-led, but many only commit when competitors force their hand. When ambition and activation are misaligned, investment becomes cautious, commercial models remain immature, and monetisation of advanced service offerings is harder to scale.

What more advanced organisations do differently

The stronger performers are not simply better at developing service concepts; they are better at building the organisational system behind them. They make deliberate choices about where to play, which customers and markets to target, and how far along the maturity curve they intend to move. They define a focused value proposition rather than spreading effort across disconnected pilots. And they invest in the enabling capabilities required to make services repeatable and scalable.

That capability system has several elements. It includes a structured service innovation engine, so that promising ideas do not remain dependent on a handful of individuals. It requires a stronger digital and data foundation, with harmonised information and platforms that support diagnostics, insight generation, and delivery execution. And it depends on a service delivery engine fit for purpose, including planning, workforce management, tooling, customer service, and supply chain capabilities aligned to recurring and outcome-driven models.

More advanced organisations also redesign the operating model. They align governance, roles, incentives, and decision rights around the service agenda. They clarify ownership of the customer relationship. They recognise that finance must understand subscription economics and that product teams must integrate service thinking earlier in development. In short, they behave like service-driven businesses, not simply product businesses with additional digital features.

What leaders should do next

The pathway set in our research is practical and disciplined. First, choose where to play. Broad ambition is not enough. Organisations need explicit choices about target segments, intended business outcomes, and the level of maturity they are trying to reach. Without that clarity, service initiatives remain disconnected.

Second, define the value proposition with greater precision. Leaders need to be clear about what they will deliver, to whom, and why it matters. Many manufacturers fall into ‘pilot purgatory’, spreading effort across isolated experiments that consume resources but never scale. A coherent portfolio brings focus and helps distinguish what should be prioritised from what should be stopped.

Third, build the enabling capabilities and sequence them properly – avoiding the familiar mistakes: investing in advanced analytics before data is harmonised, piloting outcome-based services without a clear operating model, or building digital tools that frontline teams do not use. A realistic roadmap matters because it creates momentum while avoiding technical and organisational debt.

The next phase will be defined by organisational readiness

The opportunity remains substantial. AI and automation, electrification, sustainability regulation, and autonomy will all expand the scope of what industrial services can become. But our conclusion is unambiguous: organisational readiness will remain the make-or-break factor. The firms that move ahead will not necessarily be those with the most advanced technology or the largest budgets. They will be those that build coherence across strategy, capabilities, governance, and culture. Servitisation is a system. It succeeds when those elements reinforce one another.

For industrial leaders, success hinges on their ability to scale services. Those that act deliberately will shape the service-led industrial landscape ahead. Those that delay risk watching others define it.