Why industrial companies get stuck in servitisation – and what it takes to scale

There is little doubt that servitisation has become strategically essential. Digital technologies such as connected products, IoT, AI, and data analytics have advanced rapidly. Most industrial companies today already offer some form of digital services and recurring revenue streams. Yet progress continues to stall. A new study from PA Consulting shows that 78 per cent of industrial companies remain stuck at an early stage, where they provide proactive and digitally enabled services but struggle to move towards business models built around customer outcomes or entirely new commercial models. Achieving that transition requires a fundamentally different operating model, new incentives, a different approach to risk, and a new type of customer relationship.

The technology itself is rarely the bottleneck. Servitisation does not typically fail because of a lack of ideas or technology, but because organisations are not built to scale advanced service models.

Three recurring barriers stand out:

Gap between strategy and execution

Central ambitions lose momentum when they encounter local structures, incentives, and competing priorities. The result is fragmented initiatives rather than a coherent business transformation.

Disconnected data

Connected products generate vast amounts of information, but legacy system landscapes, acquisitions, and data silos prevent many companies from using data in an integrated way. This limits the ability to scale everything from predictive maintenance to performance-based contracts.

Unclear drivers

Two-thirds of executives cite customer expectations as the main driver of change, but in practice, competitive pressure is often what truly triggers transformation. This creates tension that leads to cautious investments and half-developed business models.

The recipe for successful servitisation

The companies that successfully transition towards new value propositions take a different approach. Rather than focusing on individual services, they build integrated systems around them. They make clear choices about which customers and markets to prioritise, define scalable value propositions, and stop allocating resources to pilot projects that never move beyond the testing phase. Most importantly, they build capabilities in the right sequence: first establishing a stable digital and data foundation, then adding advanced analytics and AI, followed by delivery capabilities designed for recurring and outcome-based business models.

At the same time, they adapt their operating models. Governance structures, incentives, and roles are aligned to support the service business. Customer relationships become clearer, finance functions adapt to subscription-based logic, and product development integrates services from the beginning.

The next phase will be determined by organisational readiness. AI, automation, electrification, and sustainability requirements will continue driving change. However, success will not be determined by technology or investment levels alone, but by how effectively strategy, capabilities, governance, and culture work together. Servitisation only functions at scale when all parts operate as one system.

The consequences are already becoming visible. Price competition is intensifying while Asian competitors continue moving further up the value chain, combining products with digital services and new contractual models.

Three priorities are critical for leaders aiming to succeed with servitisation:

• Set a clear direction – make deliberate choices around target segments and ambition
• Define the value proposition – avoid spreading resources across initiatives that cannot scale
• Build capabilities in the right order – establish the data foundation before advanced analytics and ensure the organisation can deliver effectively

For industrial leaders, the challenge ultimately comes down to scaling the service business successfully. Those who act decisively will shape the future industrial services landscape. Those who hesitate risk adapting to rules defined by others.

Read the article in IndustriNyheter in Swedish.