Deservitization:

A process whereby a company shifts from a service-centric to a product-centric business model and
logic, thus encompassing service dilution or a reduction in the relative importance of service
offerings.

Servitization is suggested to yield strategic benefits to manufacturing firms, including more stable
revenue streams, higher profitability, and improved customer satisfaction. However, Success factors
explored in extant literature include changes to offering 20 firm capabilities, changes in customer
relationships, organizational structure, and the fit between service strategies and the competitive
environment.

Types of deservitization exist.

1) Firms move back on the product-service continuum or abandon the service business.
2) Reverse servitization: firms choose to first move into customer-oriented services requiring
customer intimacy and only later build less intensive product-oriented service businesses.

The deservitization may also represent a strategic opportunity for firms to engage in reconstructive
change and realize performance enhancements by recontextualizing previous strategic pivots in a
current environment.

Industry Example:

 KONE

KONE provides elevators, escalators, and automatic building doors, as well as solutions for
modernization and maintenance to add value to buildings throughout their life cycle. And also
a global leader in the elevator and escalator industry.

Servitization and Deservitization Pivots

Key pivots
I II III IV

Managed service
Product with
solutions MSS
limited support Product-oriented
System leasing (same as POS,
(Manufacturer solutions POS
(same that POS but operating
  offers break-fix, (solution design,
but ownership is system
maintenance, implementation,
not transferred) payments are
and customer and support)
based on
support)
outcomes)
KONE KONE Supply
Elevator KONE Integrated KONE Modular
MonoSpace Chain modularity
industry solutions (2006) solutions (2011)
(1996) (2013)

Kone opened a purpose-built elevator factory in 1966 in Hyvinkää, Finland.

In 1996, KONE introduced the world’s first machine-room-less elevator, the KONE MonoSpace, and
revolutionized the industry. By far, the most effective and ecologically friendly elevator at the time
was the KONE MonoSpace. KONE eventually developed the low-rise technology for mid- and high-
rise elevators, rapidly becoming the industry standard. (Product Oriented Company)

In 2005, KONE was profitable but had fallen behind the industry leader in many key indicators. When
Matti Alahuhta became president of KONE at the beginning of 2005, he set out to organize KONE
more efficiently and boost performance throughout the board. The ONE Corporation was split up
into two distinct businesses. One remained KONE Corporation, while the other changed its name to
Cargotec Corporation.

In 2006, KONE integrated started to provide solution design, implementation, and support for the
elevator. It helped them for getting a positive customer experience. (Product of service)

So in the following years, KONE started providing Managed service solutions MSS (same as POS, but
operating system payments are based on outcomes) (Started providing Service solution)

In 2013, KONE Supply Chain modularity started System leasing (same that POS, but ownership is
not transferred)

Conclusion:

KONE deservitized from modular solutions to restore a previous strategic pivot to the supply chain
modularity business model in 2013. Because this new service division did not fully meet financial
expectations—specifically, the expected synergies with the company’s other core businesses—and
KONE decided to terminate its involvement in the service business by reducing it.