Month: December 2020

How to Maintain and Protect Your Brand as an OEM

You make great products. You have a strong brand. But how do you maintain those products and protect your brand beyond the point of sale? What do you do when customers demand more through CX or regulators demand more through compliance or channels partners struggle to deliver consistent service? The good news is modern field service management systems provide you with the tools to manage and overcome these challenges.

Trending in 2021

At the close of each year, a lot of people ask me to make some predictions for the new year. Honestly, with some extreme disruptions in 2020, it is hard to single out a theme for 2021. Though I do see a consistent trend over the last decade. A trend that will very much drive the OEM transformation agenda: how do we extend our value proposition beyond the revenue of the product sales? Margin contribution on product sales is dwindling. Thus, it is logical that your CFO is eying service margins and tasking you with service revenue growth. So, let’s focus on two 2021 topics to achieve those goals.

  1. Improve your installed base visibility across all your sales channels
  2. Support your product throughout its life cycle

And by focussing on these two, you’ll get a lot of adjacent benefits too.

Step 1: Invest in Installed Base Visibility and Effective Channel Partners

To exert a maximum level of control over the value an OEM can provide to its customers, an OEM may have the ambition to own each step of the value chain. The commercial reality is that a network of partners and competitors is involved in the value creation. This may result in a battle over the ownership of the customer relationship. Especially when we consider the underlying paradigm: the one who owns the relationship owns the levers to CX and sustainable revenue.

The key enabler to value creation is your Installed Base Visibility. It is pretty straight forward. If you want to create value from the products you sell, you need to know where they are and how they are being used. Without visibility, your service delivery will be in the blind. Without a relationship, your revenue streams will be unpredictable.

We see more and more OEMs investing in installed base visibility. This starts with shifting from margin contribution through product sales to margin contribution through using the product.  The increased margin contribution pays for the investment and buy-in from the channel partners.

Are you curious about what installed base visibility brings to the bottom line? See what Schneider Electric was able to achieve here.

Step 2: Support Your Product Throughout Its Life Cycle

Who knows your product best? You, the OEM. You designed it and built it, so it seems you are best qualified to support its use during its life cycle. Hence the previous paragraph, you need to know where your installed base is and in what condition.

For each product, we know that the true test comes when it is used by real customers. No matter how well designed and built it is, actual customers seem to use products in more different ways than you have anticipated. Whether the feedback is coming to you via the quality department, service interactions, or through an autonomous engineering department, your products do get revisions and engineering changes.

Some of these changes are for liability and compliance. Others may enhance the function of the product, potentially driving more value. Thus, you have multiple reasons to reach out to your installed base. And when you do so, you want to track what portion of that base you have reached.

Two to Tango

The combination of installed base visibility and product life cycle support form an ideal tango to strengthen your brand. Though the commercial reality of your channel strategy may impact your ability to reach out to your installed base, asset-centric field service management tools make it much easier to visualize and manage your assets. Extending those tools to your channel partners will make it easier to share and grow the value creation for your customers.

Whether you decide to take tango lessons in 2021 or not, at least put some thought into the beauty and joy of the dance. I promise you; your customers will like it.

This article is published in ServiceMax Field Service Digital on December 17th, 2020

Back to the Future with Design-for-Service

“Yes, it’s really happening!”. That was my feeling when a customer of ServiceMax contacted me to enlighten them on the Design-for-Service concept. Six years ago, they started their service transformation journey to get Visibility and Control. Now they are moving the needle towards Excellence and Growth. What makes this ask even more ‘special’, is that it is the engineering department that wants to know what service needs to deliver value.

Black swan

Most of us will have plenty of examples where engineering asks technicians to record all kind of diagnostics, reason and fault codes during the service execution. What happens with that data? Will the technician feel taken seriously when servicing yet another piece of equipment that is engineered for manufacturing?

Thus, you can imagine my positive surprise when engineering wants to ‘learn’ what service needs and what modern service execution tools are capable of. It is a true win-win when both service and engineering are seeking the joint benefit of their siloed effort. 

  1. Technicians will get a return on their administrative effort when they see that it results in easier-to-maintain products.
  2. Engineering will get the justification to fund their design-for-service effort when they see that service can improve the margin and drive new revenue streams.

Attach Rates

The concept of design-for-service is not new. Still many organisations only apply design-for-manufacturing. The latter concept drives for cost optimisation in the manufacturing process of a product at the expense of a potential higher maintenance cost over the life cycle of the product. Design-for-service optimises both the manufacturing and the maintenance aspects of a product. Yes, I hear you. What about TCO, total cost of ownership? TCO is great, but TCO only works when capital expenditures (Capex) and operating expenses (Opex) are evaluated by a single entity.

Cutting a few corners and dialling it down into a single metric, have a look at your Attach Rates. You can imagine that when engineering puts more effort/ cost into the design of the product, the selling price of the product goes up. Balancing the effort equation, you have the maintenance cost going down due to better quality and more efficient maintenance delivery. On top of that, the engineering effort may also result in the creation of new types of service offerings like availability services and data-monetisation. To reap the benefits post point of sales, you need to have or get your customer ‘attached’.

Attach Rate: the percentage of your installed base that has an associated service contract with your organisation

Getting ‘attached’ customers might be easier when you sell your product via your own direct sales channel versus units sold via your indirect channel, read dealers and resellers. That all changes when engineering starts including concepts like ‘digital activation’ of the product.

Serviceability

When engineering defines the Product, the result is captured in a BOM (Bill of Material). So far, nothing new, this is design-for-manufacturing 101. When we start designing-for-service, we need to make a number of explicit decisions. Amongst those I’m highlighting two of them:

  1. What components from the BOM are serviceable?
  2. What service delivery model is applicable for that component?

First, is the product serviceable at all? If it remains a single unit, you have made the implicit choice to exchange the whole unit with the option to have the defect unit repaired or scrapped at a depot. This model may be a fit for some products but the larger, expensive and critical the product, the more you’ll need to ‘open the box’.

Second, in the BOM you’ll have to identify those components that are serviceable. For each component in the Service-BOM or SPL (Spare Parts List) you’ll have to classify the part.

  1. FRU: Field Replaceable Unit – the repair/ replace of the component requires specialised skills of a technician
  2. CRU: Customer Replaceable Unit – the repair/ replace of the component can be done by any customer (no explicit skills required)
  3. DRU: Depot Repairable Unit – the repair cannot be done in the field, but requires the asset to come to a depot where dedicated skills, tooling and components are available

Old-school textbook?

I’ve come to learn the above two service design considerations when I stumbled into my first service job at IBM in 1993. Though I did not grasp the full impact at first, the more I talk to today’s customers, the more I am convinced we need to re-establish the handshake with engineering to deliver above and beyond the service value promise. 

Handshake

In my session with this customer, I had conversation with a very adept, eager and forward-looking engineer. He understood the consequences of engineering choices for the service delivery … and ultimately the impact to cost, revenue and customer expectation.

Next, he wanted to know how service delivery constraints and possibilities would impact his engineering process. It was clear to him that state-of-the-art service execution tooling, with a high degree of asset centricity would enable him to create a positive ROI for his design-for-service efforts.

This article is published in ServiceMax Field Service Digital on December 10th, 2020