Service Transformation is Business Transformation – a conversation with Riccardo Necchi

What is Service Transformation?

Nick: Riccardo, thanks for making the time. You’ve got tremendous experience in service innovation and building service businesses across industrial equipment manufacturing. Let’s start simple — what is Service Transformation, in your mind?

Riccardo: I don’t think there is one single definition. It really depends on the angle you look at it from, and over my career I’ve experienced it from several different angles. But everything has to start from the customer and from the market. That’s the key element you have to follow.

You can look at Service Transformation through at least five perspectives. There’s the product perspective — how you design your machine so it can actually be serviced properly over its lifecycle. This is the “Design to Serve” discipline that every manufacturing company needs to embed into new product development — you can’t dream up a service scenario if the machine itself can’t support it. There’s the business perspective — how you create more value from the installed base, through spare parts, maintenance, upgrades, contracts, and so on. There’s the operational perspective — improving processes, responsiveness, and service performance. There’s the digital perspective — how technology enables the transformation. And of course today AI is on everyone’s lips. Everyone thinks AI can solve every problem, but that’s an opportunity, not a shortcut — you need the right environment in place before you put AI on top. And finally there’s the organizational perspective — getting different functions, countries, and even companies to work together around one Service model.

If I had to put it in one sentence: Service Transformation is about changing the way a company creates value from its installed base throughout the customer lifecycle. But the starting point is different for every company. In one company the weak link might be the Service portfolio; in another it might be Sales, processes, digital infrastructure, spare parts, organization, or governance. There isn’t a standard recipe. The direction always comes from the customer and the market — but the roadmap depends entirely on where the company is starting from.

Nick: Can I pick up on something you just said — imagination? You started with “start with the customer,” which is classic advice, but you also talked about needing to imagine what’s next. That’s the part people don’t talk about, and for me it’s the real differentiator between doing this and doing it well.

Riccardo: Customers are usually very good at telling you the problems they have today. It’s much harder for them to tell you what they’ll need in three or five years. That’s where experience and vision come in — you have to create a picture of what could come next and prepare the organization before the change becomes obvious to everyone else.

Looking back at my own path, I can see distinct eras. Before around 2016, most companies were focused on pure execution — optimizing processes, growing spare parts sales, preventive maintenance. Then came the connectivity and IoT era, when companies started collecting data from machines and building the digital infrastructure to use it. And now, from around 2025, we’re in the AI era, where the question is how you use all the information you already have to improve decision-making, troubleshooting, knowledge management, and customer interaction.

The important thing is that these steps build on each other. AI cannot fix poor processes or poor data. A company that has spent years building solid processes, CRM, installed-base data, connectivity, and knowledge is in a far better position to benefit from AI today than one that hasn’t.

What are the key elements to get right?

Nick: So if you take those perspectives and try to turn them into reality — across the last twenty-plus years and several very different companies — what have you found are the key elements to get right?

Riccardo: First, you need to understand two things: where you are today, and where the market is going. Transformation takes time, and if you wait until the market has already changed, you’re late. That’s why I make a distinction between being ready and being prepared. Being ready means everything is already in place. Being prepared means you have the capabilities, the data, the technology, the organization, and the mindset that let you respond when the market is ready — even if you don’t have tomorrow’s solution built today.

Beyond that, I see three main areas you have to get right, plus one that cuts across all of them.

The first is the service value proposition and portfolio. You need services customers genuinely value — but they also have to make business sense and be deliverable. This usually starts with the traditional building blocks — spare parts, maintenance, technical support — and moves toward upgrades, contracts, remote services, and more recurring offers. The point isn’t to create more services just because you can. It’s to understand what customers actually value, what they’re prepared to pay for, and how that’s changing.

The second is people and organization, and honestly this has become more important to me every year. You can have an excellent Service concept, but if Sales can’t sell it, Engineering isn’t aligned, or the regional Service organization can’t deliver it, you don’t have a scalable business. A real example: you can design a very good service contract, but if the organization can’t execute it — or can only execute it in a few places — the contract is meaningless. Earlier in my career I worked on fairly focused technical and product topics. Over time the scope kept widening — platforms, processes, digital infrastructure, then multiple companies and countries at once. And the wider the scope, the more the people side matters. People need to understand the direction, be involved, and feel they’re genuinely part of the transformation — protagonists of it, not bystanders.

The third is the digital and data backbone. This is what’s evolved through those three eras I mentioned — from process optimization, to connectivity and installed-base data, to intelligence. Today you need a single entry point for the customer — a portal or an app that brings together documentation, spare parts ordering, machine data, everything — structured almost like a pyramid, so different people see the data relevant to them: high-level KPIs for leadership, OEE-type data for production people, ordering and documentation for maintenance teams.

And the transversal element that ties it all together is governance and execution discipline. You need a clear vision, a roadmap, priorities, ownership, and meaningful KPIs. Otherwise you end up with plenty of good projects — but not a real transformation.

Nick: You mentioned earlier that moving from reactive to predictive service changes the relationship with the customer quite fundamentally.

Riccardo: Exactly. Reactive service is simple — the customer needs a part, you deliver it quickly. Predictive service is different: you’re committing to anticipate a failure before it happens, which means the relationship with the customer has to be much closer, and your company is exposed to more risk. You need the organization and the tools to actually help the customer avoid that failure. That’s a real shift, and it needs people — not fewer of them, but people doing a different job: managing the relationship, interpreting the data, and interacting with decision-makers on the customer side.

Where do many organizations struggle?

Nick: You’ve now driven Service Transformation across several very different organizations, which is unusual. Is there a common pattern in where things go wrong?

Riccardo: I don’t think the problem is a lack of ideas — there are always plenty of ideas. The problem is making them work together. I see four recurring struggles.

The first is trying to do too many things at once. CRM, IoT, new services, new KPIs, organizational change, process projects — all running in parallel. They can all be good initiatives individually, but the sequence matters. Some things need to be in place before others can create value, which is exactly why the vision and the roadmap matter so much — you need to know where you’re going and move toward it step by step.

The second, and probably the biggest, is silo thinking. Sales looks at Sales. Engineering looks at Engineering. Service looks only at Service. IT has its own priorities, and regional organizations have theirs. If everyone only optimizes their own perimeter, it becomes very difficult to build something transversal that’s aligned around the same customer and business objectives.

The third is scaling. Something can work very well in one country, one business unit, or one product line, and simply not translate to another — because the organization, capabilities, processes, or even the customer’s readiness are different. I remember starting a service contract offer in the US that worked well, while other parts of the world weren’t ready for it at all — not the organization, and not the customer. That readiness gap can exist even inside a single company, between regions or even between plants.

The fourth is the gap between strategy and execution. The direction can be perfectly clear, but the organization may not yet have the processes, skills, data, incentives, or governance to execute it consistently.

And I’d add — a roadmap shouldn’t be treated as a rigid checklist. During a transformation you learn, conditions change, and priorities shift. For me, a transformation can still be successful even if the original roadmap changes, as long as the organization has created value and moved to a stronger position than where it started.

Nick: So how do you actually pull people out of those silos in practice?

Riccardo: First, you fix the dream — the vision. Then you build the plan, involve the people, and fix priorities for execution. Critically, that plan has to be validated and supported from the top — by the ownership, the leadership team, the CEO. If it comes only from the bottom, nobody takes ownership of it. Once the vision is validated, you have your three streams — service portfolio, people and organization, digital backbone — and you manage them transversally, making sure R&D knows what’s happening in the service portfolio, IT understands what Service actually needs, and so on. It’s part project management — making sure people deliver what they committed to — and part project leadership: keeping people engaged and connected to the leadership team’s intent. Sometimes, as the leader, you also have to be willing to step back and let others take the credit — so the people doing the work feel they’re the protagonists of the transformation, not you.