THE MIGRATION TO SERVICES There is a strong business case formanufacturing co mpanies to create new services: not only can

services deliverprofitable growth, but they can also provide superior strategic positioning. Companies are often able to charge a premium or drive preference throughproducts that are accompanied by services, as it is often the services thatmake the custome r experience unique. Se 2 DELIVERING PRODUCTIVITY GAINS VIA SERVICES One area in whichcompanie s develop and deliver services is by helping their clients driveefficiency and producti vity gains. Given its history as an oldline American industrial company, who would thinkthat mainstay customers of Cate rpillar would include U.S. Cellular, Land Roverand Bombardier Aerospace? CAT Logis tics's growth over the past two decadeshas been driven by the desire to "Help other companies lower distributioncosts while improving customer service, asset utilizatio n, and brand loyalty."What does it take for companies to market new, innovative ca pabilities as aservice? First, the organization must recognize the value such speciali zedcapabilities hold for its customers, and build a business model that capturesthe r equisite value for both parties. Through a service model where the customer pays for units of chilled airinstead of a cquiring the machines, the service guarantees greater equipmentuptime. Recognized an opportunity to not only provide products to its clients but alsoa servi ce: supplychain solutions, an area of expertise that it realized it couldmarket "To help other c ompanies lower distribution costs while improvingcustomer service, asset utilization , and brand loyalty." CAT Logistics wasformed, and for the past 20 years it has sold differentiated supply chainsolutions, offering "Competitive advantage and attractive returns for theenterprise and our customers." CAT Logistics's business model lever agesproprietary warehousing and manufacturing supplychain managementsoftware, and sells those capabilities to its customers, many of w hom neverhad a demand for Caterpillar's bread-and-butter productsheavy machinery. These offerings manifest as services that provide access to new customers, ortruly i nnovative platforms that create access to new customers for theplatform creator's c ustomers, as in the case of Apple's App Store. There are numerous examples of companies that have found ways to createvalue b

y providing a "One-stopshop" of providers looking to deliver a serviceor customers who want to receive a s ervice. 1 Additionally, services that drive customer engagement allow the company tohave a better understanding of customer needs, because it is more activelyinvolved in th e conversation and customer experience than if it wereexclusively a passive product manufacturer and marketer. Expanding beyond one's core capabilities to building new service platformsthat fost er a sense of community around your brand or around a particularindustry requires a deep understanding of the challenges facing yourcustomers, as well as an approa ch for managing and delivering such services. CONCLUSION By now, the point should be clear: services offer a way to addvalue t o your organization, especially when they enable customers to becomemore produc tive, access new customers, and build brand loyalty throughplatforms that drive a s ense of community. Entering the services arena is certainly not for the faint of heart, but becauseso ma ny of these types of services can be automated, they have the potentialto be highly accretive to the bottom line.