Service-led strategies delivering measurable gains

The Economic and Social Research Council funded project called ‘Understanding how servitization can impact UK economic productivity and environmental performance’ has been carried out by leading academics from Aston Business School, the University of Warwick and Lancaster University.  

The findings have been published in a report called DESIGN, MAKE & SERVE: The Big Business Case for Servitization aimed at helping businesses realise the economic and environmental benefits of adopting a service-led model.  

The report lands at a pivotal moment for UK manufacturing and shows that after decades of global industrial shift, rising competitive pressure, and growing sustainability demands, the evidence now provides the strongest UK-specific case for accelerating servitization.  

It reveals that service-led, digitally enabled business models not only meet today’s commercial realities but are also one of the most powerful levers available to deliver the government’s productivity ambitions set out in its industrial strategy, helping manufacturers raise productivity, strengthen supply-chain resilience, and compete globally. 

It is also timely because UK manufacturers are under pressure to adapt, and for the first time, business and policy leaders now have rigorous, long-term UK data showing why shifting toward services delivers commercial, productivity, and environmental gains.  

Servitization is the process of innovating an industrial firm’s business model to compete through services, rather than relying solely on products. It involves integrating products with services, in various combinations, in order to provide outcomes to the customer. 

The evidence presented in the report confirms that service-led strategies are delivering measurable financial gains for businesses. For every small shift (one percentage-point increase) in the share of revenue earned from services rather than products, firms experience over 2% total revenue growth, almost 2% profit growth. 

It shows that even a modest rise in a company’s “servitization intensity”, such as shifting just a few percent of revenue toward services or upgrading a small part of existing service work into more advanced offerings, is linked to major performance gains.  

Firms making this shift typically see almost 8% higher profits and over 5% growth in productivity. These improvements come from companies using their people, technology, and equipment more effectively as they move toward service-led business models.  

In the UK, there has been an erosion of high-value industrial capability, export capacity, and supply-chain resilience. Researchers believe that if this trend continues unchecked, as much as a further 3-4% of GDP could be at risk over the next decade. 

The report comes against the backdrop of some 20% of manufacturing leaving the UK to China and elsewhere. 

Professor of operations strategy at Aston University and the co-founder and executive director of the advanced services group, Tim Baines, said: “Manufacturing has been steadily declining in recent years and productivity in the UK is very low. This report shows that servitization can add value to businesses and create a change in future prosperity. 

“We know that digital technologies such as AI offer powerful new tools, but without commercial models to capture their value, they risk becoming another transient advantage.  

“Servitization changes the game. It monetises AI and digital technologies, deepens customer relationships, builds recurring revenue, enables the circular economy, and shifts competition from price to value in use. However, realising this potential will require more than isolated initiatives or gradual change. Incremental adoption will be too slow to capture the opportunity.  

“The risk of inaction is greater still. Servitization is amongst the strongest levers available to UK manufacturers. With the right leadership and support, it can position the UK as a global leader in industrial services – and secure a resilient, competitive future.” 

Professor of Digital strategy and services innovation at Lancaster University, Dr Andreas Schroeder, said: “High-quality products and specialist industrial expertise are among the UK’s greatest strengths, but in a product-only market they don’t always translate into fair reward. Servitization unlocks that value. It enables manufacturers to wrap services, advice and performance commitments around their products—rewarding quality, driving customer loyalty, and creating high-skill jobs in the process.” 

The study was based on a UK-wide survey of manufacturing companies in sectors like automotive, aerospace, and machinery. 

Further information can be found here:

‘Understanding how servitization can impact UK economic productivity and environmental performance’ can be viewed at www.advancedservicesgroup.co.uk/resources/white-papers/the-big-business-case-for-servitization/

The government’s industrial strategy can be viewed at www.gov.uk/government/publications/industrial-strategy
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