CFOs as the Driving Force Behind the Shift to a “Servitized Business Model”
The Time to Act is Now: 61% of Customers State They Want to Be Served, and 70% Believe They Will Be Within the Next 3 Years for Value, Service, and Reliability.
IFS, the world’s leading enterprise cloud software provider, announced today the results of its latest global research, which surveyed 2,000 senior decision-makers (VP and above) across the manufacturing, services, telecommunications, energy and resources, construction and engineering, and aerospace and defense sectors.
In the company’s latest overview, IFS highlighted the importance of AI in generating and driving business value through servitization.
The Role of CFOs in the Transition to Servitization
The survey identifies specific executives as facilitators of the transition and promoters of organizational alignment.
The survey highlights the role of the Chief Financial Officer (CFO) following the Chief Executive Officer (CEO) at 35%. The CFO is seen as the guardian of the company’s resilience, financial stability, and the financial controller of technological investments. CFOs understand the importance of transitioning to servitization to ensure greater predictability of revenues, expenses, and external costs. For this reason, they are positioned to become the leaders in identifying cross-functional business initiatives that will generate a competitive advantage.
At the heart of the servitization business case, the CFO focuses on three components: faster and more cost-effective time to market, greater visibility and predictability of revenues and CAPEX, and better alignment of the organization among personnel, processes, and technology. This alignment is not only to support processes but also to provide the insights necessary to evaluate and optimize their progress within the business and the company.
CFOs are the most eager to transition to servitized models, with 32% expressing a desire to do so within the next year. This indicates that the change is not only necessary but will also bring benefits to the business, with progress and success measured by a servitized balance sheet.
They are also the most likely to assert that their role is central to the change, as they understand how technology can deeply reach into the organization and make it more technology-oriented when developing products and services. Two areas that CFOs prioritize when considering servitized business processes are product research and development (34%), followed by service research and development (32%).
Expected Outcomes of Servitization
The primary outcome CFOs aim to achieve from servitization is improved decision-making based on insights (32%), highlighting why artificial intelligence is their top technological priority (49%). AI enables faster, more accurate, and data-driven inputs in strategic decisions impacting profits.
Technology as a revenue growth tool makes fiscal sense.
For example, Enterprise Asset Management (EAM) is essential for successful servitization (34%): assets undergoing predictive maintenance will last longer, experience less downtime, and incur lower expenses.
Field Service Management (FSM) solutions (40%) maximize profitable revenue streams and reduce service lifecycle costs through optimized workforce scheduling and planning.
Similarly, the wealth of data on connected assets that can be leveraged through automation, ML, IoT, and end-to-end connectivity— all “must-implements” for the CFO— explains why CFOs have emerged as strong proponents of technology and servitization.
CFOs have a high level of confidence (42%) in the organization’s readiness, indicating that processes are in place and good progress is being made on the servitization journey. However, they still face organizational impacts (23%) regarding people and processes or technological needs to overcome, making the CHRO the second most important executive for driving and enabling transformation.
The CHRO’s Perspective on Servitization
CHROs tend to be more cautious about the organization’s readiness for servitization and are aware that transitioning from a product-centric to a service-centric mindset within their organization poses a significant implementation challenge (42%).
On the other hand, CHROs agree with CFOs that customer demand for servitization is currently high and expected to continue growing. They also share the CFO’s view that technology is a critical factor for success, with artificial intelligence being their top choice (50%).
Comment by Alex Rumble
Alex Rumble, SVP of Corporate Communications, Product Marketing, AR, & CI at IFS, said: “Over the past decade, the role of the CFO has evolved tremendously, shifting from financial reporting to understanding and influencing business strategies and aiding in transformation.” Rumble added: “Our research clearly illustrates this point, showing that CFOs not only understand the positive impact of aligning the company with customer expectations but also the broader business value that results. Today, CFOs are visionary advocates for change and digital transformation, contributing to the predictability of revenues and costs—ultimately the holy grail for CFOs, but still reliant on technology.”
Collaboration Between CFO and CHRO
CFOs and Chief Human Resources Officers (CHROs) can collaborate to be a driving force that not only accelerates servitization but also prepares the entire organization for success. CHROs need to act as the second line to catalyze cultural transformation, bridging the gap between business and human resources, ensuring that the communication and execution of strategy is not confined to C-level executives.
*Research conducted by Censuswide in June 2023, surveying a sample of 2,000 senior decision-makers from companies in the manufacturing, services, energy & utilities, construction & engineering, aerospace & defense, and telecommunications sectors in the UK, the US, Germany, the UAE, Japan, France, and the Nordic countries.