Digital Thread: Closing the Loop

For more than 25 years I’ve worked in the after-sales domain. Hardly ever I came across the words Digital Thread. That changed when PTC acquired ServiceMax a couple of months ago. I wish I had come across the Digital Thread concept a lot sooner. I’ve come to learn it as a powerful paradigm and being very useful in creating momentum for digital transformation. I get even more excited when I tie the ends of the thread and create an infinity loop.

What’s so compelling?

Having been a service executive for 25 year I’m rather practical and down-to-earth. I like to talk about service excellence, but my actions are more around service basics. When I hear a phrase like “data is the new oil”, I’m sceptical at first, immediately followed by curiosity.

I’d like to illustrate this through a research we commissioned about the rise of “Asset and Service Data Gravity“. Though friend and foe agree on the value of data, siloed organisational design and behaviour inhibits the flow of information. Since the publication of the report in 2018, I’ve seen and heard many more stories about the value of data, but I’ve always missed the handle, the story to break the siloes.

What is the ‘binding entity’ across all the business functions of an organisation? Yes, the product they sell! Some people have the idea, others design the product, next you produce it, then you sell it. Once the product goes into the ‘field’, you’ll help your customers install, operate, sustain and decommission the product. The common demeanor is the product lifecycle. 

In each phase of the lifecycle the product creates data. Instead of each organisational function creating its own siloed representation of the product, you can picture a ‘thread’ where each station passes the baton onto the next. That is a compeling message for me.

Design-for-Service

One of my favourite activities in my current job is that I get to do frequent ride alongs. I ‘staple’ myself to a service request and observe each step in the process. The eye-opening part in the ride along is the ‘field’ piece. I mean the part where either the customer, technician or depot repair operator is in front of the product, tasked to fix it.

Sometimes it appears like we ask customers, technicians and operators to perform service activities ‘blindfolded’. Some examples:

  • The engineering of the product is optimised for manufacturing but not for service.
  • The service and operating manuals are available as reference documents, but not as actionable bite-sized instructions contextual to the job at hand.
  • There is a spare parts catalogue, but finding the right part is like finding Wally. Especially when the product is a configure-to-order product.

All these bullets make it harder to service products. More effort. More cost. Less efficiency. Less margin. Lower customer experience.

With Digital Thread we can picture an alternative future. Engineering designs a product with an intended use case in mind. Maintenance engineering ‘translates’ the product design and use case into a recommended preventive maintenance scheme, spare parts kit and component MTBF. Wouldn’t it be great if all that knowledge ‘flows’ into the after-sales and service delivery function? On the same platform?

Closing the loop

Now we have a linear thread starting with the definition of a product all the way up to sustaining and augementing the product, what would happen if we close the loop? Why is that important and who benefits?

Let me tell you a true story when I managed a field service organisation. The engineering department asked me to collect 25+ data points during the debrief of every service activity. Knowing that my technicians had not signed up for the job to do admin, I needed a lever to steer the conversation.

The good news, engineering recognised the value of data once the product was in the ‘field’. The bad, the cost of collecting the data was in after-sales/ service. To solve this dilemma, I played a game. 

25 Data points equals 15 minutes admin time. Multiplied by volume. Multiplied by fully burdened cost. “Engineering, the cost of your data request is 581k per annum”. Can you guess the response? Isn’t this internal money? Endgame, engineering reviewed the list of 25+, settled on 5 questions that had an impact on value creation. Engineering funded service to collect the data. Technicians understood the reasoning of the 5 extra questions. Technicians got extra time (and pay) for retrieving the additional data points.

In all, we closed the loop, created value, balanced cost/ effort, got lasting funding and mitigated adoption. We all won.

There is more

Once engineering receives relevant and quality feedback on the performance of products in the field, you can setup a ‘plan versus actual’ process. In designing revision 1, engineering had a plan. Now the product is in the field, they receive actual. The comparison of ‘plan versus actual’ is useful in designing revision 2 of the product. This will benefit both the sale of new products as well as allow the service function to target the existing installed base with engineering and upgrade offerings.

Knowing that modern products are getting more complex and have an ever increasing digital component, establishing a closed PLM-SLM loop is critical to a sustainable and profitable business model.

Let me end with a personal note. Throughout my career it was fashionable to say “customer first”. Being in service, I deliberately voiced a counter message: “design your business processes along the axis of the product and service lifecycle”. Hence you can see why I am so enthusiastic about the Digital Thread concept and the infinity loop. For me it is a game changer.

I have no doubt why organisational siloes should, even must, work together. When you plot each organisational function on the digital thread and infinity loop, you have a simple, powerful and reinforcing visualisation. The graphic emphasises both the organisational dependencies and value amplification.

No surprise, I will repeat this message infinite times .

Digital Thread: How the Service Bill of Materials Enables Cross-selling & Upselling

It’s 2010, and an OEM has asked me to blueprint their after-sales organization. I went to our sales executive and asked, “What do we tell our customers about life expectancy and maintenance costs when we sell the product?” He looked at me with a confused look.

Why is this important? Because, if you want to cross-sell and upsell services in the after-sales domain, you need to know what value was promised when the product was sold. This is where the service manual and the Service Bill of Materials come into play.

This blog is part 3 in a series of three:

The value promise of the product sale

My sales executive sold complex capital equipment. For each product in his portfolio, engineering provided him with technical specifications describing the output capabilities. He would ask customers for their intended use profile and select the model that had a matching output bandwidth. To not complicate his CapEx sale, he would avoid a conversation on:

  • How many years will the product be able to sustain specified output levels?
  • What is the expected decline in output levels given the customer use profile?
  • What maintenance efforts are required to sustain product specifications?

Upon delivery and title passage of the product, the buyer would have access to the operator and service manual. These provided insights into the ‘size of effort’ required to use and sustain the product. If a total cost of ownership calculation were a prerequisite to the product sale, my sales executive would defer the calculation of the OpEx piece to the after-sales department.

Total cost of ownership

I’ll skip the semantics on if we should talk about the total cost of ownership or lifecycle cost. The idea is to create an understanding of what it costs to sustain the product over a prolonged period of time while maintaining output specifications.

Once more we can draw on the intellectual property and effort from engineering. As we’ve mentioned in part 1 of this series, the service manual describes the efforts needed to maintain nominal output specifications. To put it another way for the customer, “If you maintain your product as stated in this document, we, the OEM, guarantee the output specifications.” Thus, when we cost/price those activities, we have a pretty neat approximation of the OpEx piece of TCO.

Title passage

When an OEM is in the business of CapEx sales, it will have a title passage of products. Beyond title passage, all pains and gains of the product transfer to its owner. Now it is the responsibility of the owner to act upon the instructions in the service manual. Most likely there will be a clause saying that non-compliance with these instructions ‘may’ void OEM output level guarantees. There may be a clause that voids the warranty when non-authorized parties perform maintenance activities on the product.

This is where it gets interesting and dualistic at the same time! On the one hand, the OEM bestows the risk of owning the product onto the buyer. On the other hand, the OEM wants something from the product buyer post-title passage—“buy my maintenance services.”

This happens in a context where the owner of the product has the legal right to choose to follow the user manual instructions, to ignore or deviate from them. The owner can also choose to perform the activities themselves or to outsource. If your business model is driven by title passage, you can’t force a product buyer to buy associated services. You can only entice product owners to buy your services.

Cross and upsell

The first step to cross and upsell is establishing a baseline on what comes included with the product sale and what is extra. If the product is sold with a warranty, the warranty conditions will define what is included and what is not. It is important to clarify that a warranty is predominantly promising the correct working of the product. Not a ‘free pass’ to mitigate actual wear & tear as a result of using the product.

The second step to cross and upsell is having a conversation on how the owner will use the product. When the use is exactly as envisioned by engineering, then the operating and service manual will define the maintenance standard for sustaining the output specifications. When the customer uses the product in different settings, you may want to introduce ‘bundles’ of maintenance activities associated with low, medium, and high usage. Call them bronze, silver, or gold. For more granular services you may want to use a concept like a menu card.

Once you have jointly agreed on what maintenance activities are required to sustain output specifications given said use profile, the final step is defining who does what. This is a risk versus cost conversation. Either the product owner bears the cost and risk of using the product or those are outsourced to a service provider/OEM at an agreed price.

Companies that have a large installed base of products and trained internal technicians may choose to execute the service manual activities themselves. Others may evaluate the risk versus cost differently, and buy services ranging from preventive maintenance to full service. Mastering the risk/cost conversation in conjunction with intellectual capital captured in the Service-BoM and service manual will become your toolset for cross-selling and upselling.

Digital thread

In three blogs we’ve spotlighted the Service Bill of Materials through the lenses of cross & upsell, system of record, and linking engineering to service. We’ve seen the value of the digital thread spanning engineering, manufacturing, service, and sales—proving value across the entire product lifecycle.

This article is published on Field Service Digital.

Digital Thread: How the Service Bill of Materials Drives System of Record Across the Platform

“We’ve defined ERP as the system of record for our installed base”. This a phrase we hear quite often. Is it a smart choice, and what are the consequences of this choice? When you are in the business of managing the service lifecycle of an installed base, we believe you should consider an alternative approach to system of record.

This blog is part 2 in a series of three.

Limitations of ERP

ERP is often a solid choice for the system of record for many data objects. But lesser so for products, equipment and assets that have left the building. When products hit the field and start their operational lifecycle, those products become a handle for a lot of contextual usage data. Think in terms of how is the product being used, how is it being maintained, and what touch points have we had with the product?

Bill of Materials lifecycle

Let us paint a picture of the lifecycle of the Bill of Materials (BoM). In the design phase of a product, engineering will create an engineering BoM. In the build phase, manufacturing will pull the latest revision of the engineering BoM and use it as a template to manufacture a batch of x units. All those units have the same as-built. If we use a configurator in the sales process, the as-sold may differ from the as-built. So far the information we have captured is product specific.

Post-point-of-sales, when the unit leaves the building and the customer starts using the product, the unit becomes unique. Though the engineering team may have had a specific use profile in mind when designing the product, in real life, customers use the product within (or outside) a bandwidth of the product specifications. Tracking how customers maintain and operate the product thus becomes essential to keep the product running. Being in the operational lifecycle of a product we’ll refer to the BoM as as-maintained or as-operated.

Service lifecycle management (SLM), fit for purpose

If we have to name one single reason why any OEM should revisit their ERP installed base system of record paradigm, it is total product lifecycle cost.

For mission-critical assets, the lifetime Opex is a multiple of product expenditure Capex. Thus, if you want to make a valuable impact on the users/buyers of your products, you need to focus on the service lifecycle.

The SLM asset record is fit for purpose. SLM connects as-engineered, as-built, as-sold, and as-maintained. In part 1 of this series, we explained how the Service-BoM sets the standard of maintenance, underpinning the value promise of product uptime and sustenance. PLM, ERP, CRM, and FSM all add data to the digital thread of the product. SLM, being on the receiving end, defines the data master for products in the field.

Enterprise data architect

Knowing that it takes both product and usage-specific data attributes to keep products running, we’d like to better understand why we’ve defined ERP as the system of record for our installed base. Is this a dogmatic, pragmatic, or conscious decision?

In the decision-making process for enterprise software, there are two factions. The business persona and the IT persona. Both weigh decisions along different (internal) metrics. Though it may seem obvious to abandon the ERP mantra from a business perspective, IT may have sufficient counterarguments not to do so.

This is where we can/should call on the help of the enterprise data architect. The enterprise data architect is key to any system of record conversation. What is primary, and what is secondary? How does data flow from one business area to the next? Does any function own data or is every function contributing data to an enterprise pool of data? The enterprise architect will be able to weigh the arguments and weigh the value of data beyond the individual functions in an organization.

Value of Asset Data

Knowing that the value of asset data is only getting bigger and bigger, we believe we are at an interesting point in time to create a digital thread of data. Focused on keeping the world running. Using the Service-BoM as a pivot. Using SLM as a system of record.

In part 3 of this series, we’ll focus on value using Service BoM and SLM data to drive cross and upsell. Teaser: when you exert a lot of effort in designing, building, and selling products, how much effort do you want to put into generating margin contribution off your installed base?

This article is published on Field Service Digital.

Digital Thread: How the Service Bill of Materials Links Engineering to Service

When we embark on a digital transformation journey in the after-sales domain, where does the process start? With the sale of the product? Commissioning of the product? First service call? We believe the foundation for the design of your service delivery processes starts in engineering.

This blog is part 1 in a series of three.

The creation of the service manual

When Engineering designs a product, they have an intended use profile in mind. That use profile defines wear-and-tear. Subsequently, the maintenance engineering function will define mitigating strategies to maintain the output specifications of the product and to sustain/prolong its lifecycle. The results are typically captured in the service manual and the Service Bill of Materials (BoM).

The golden standard of service

In a recent engagement with a prospect of ours, we asked to see the service manual of a medium-complex product to scope the service delivery business processes. Our premise: we may upsell on the service manual and promise higher value, but when we deliver less, product continuity and lifecycle may be at risk. As such, the service manual can be seen as the golden standard of service delivery.

In the 165 page pdf-document, we found a wealth of information on what to do, when to do it, and how to do it. Bill-of-materials, serviceable parts, PM-frequencies and kits, recommended consumables and spare parts, installation parameters, calibration values, and MTBF rates. We got enthusiastic. If somebody in engineering created this document, how does it ‘flow’ to after-sales? What system of record does after-sales use to be able to act upon the information in the service manual?

Digital thread

In the last decade, we’ve seen a lot of digitization initiatives driving the transformation agenda. We’ve also seen that a lot of digital data is still created and collected in silos. Engineering is digitizing product lifecycle management (PLM), manufacturing is pursuing Computer-aided manufacturing (CAD), sales are rolling out customer relationship management (CRM) and service is reshaping field service management (FSM). But how do they link to one another? Isn’t the overarching value promise of digitization the sharing of data leading to 1+1=3?

If your organization is in the business of designing, manufacturing, selling, and servicing products, then all those functions are connected through a digital thread. The carrier of the thread is the product itself. Starting as an as-engineered and subsequently transitioning into an as-built, as-sold, and as-maintained. In each stage of the lifecycle, additional information is added to the thread. Zooming out, each function will look at the digital thread through a lens to increase the value proposition.

Design for service

In our engagement with the above-mentioned prospect, we were curious how much design-for-service thought was put into the engineering phase and how that information would shape the design of the service delivery processes. Though the wealth in 165 pages of the service manual was phenomenal, the service organization had not yet invested in processes to receive the engineering baton.

The opening paragraph of the service manual provided a great narrative to introduce the baton. “Congratulations on your purchase. To protect your investment and get maximum return, we’ve defined some handles for good husbandry. This manual contains the instructions to guarantee the nominal output over its technical lifecycle”. In other words, the service manual defines the golden standard of maintenance to underpin the value promise of the product sale[1].

What Engineering documented in the 165-page service manual can be condensed in the following picture. In the first column, we find the Service-BoM. The Service-BoM is a subset of the Engineering/Manufacturing BoM. It contains only those parts that are serviceable. The manual pre-empts what skills are required to perform that serviceable activity. Can it be done by the customer, does it require a skilled technician or should the part be swapped in the field to be repaired in a depot/repair center?

With the above information from maintenance engineering, service delivery has a great blueprint defining what output its business processes should deliver. Analogously, service sales has an anchor to model cross and upsell offerings for customers having needs beyond the baseline described in the service manual.

Design for improvement

The service manual also serves another very important purpose; improvement. Improvement in two directions. Engineering giving handles to service and service giving feedback to engineering. As an illustration, I’ll use the mean time between failures (MTBF) column in the above table.

When Engineering designs a product, they typically have an idea of the lifecycle/MTBF of used components. Those values initially are theoretical numbers. Call them Plan. When the product hits the field in larger numbers, empirical values will trickle in. Call them Actual. When Actual is within a narrow margin of Plan, we say this is expected behavior. When it falls outside the margin, we call it an outlier. Understanding the root cause of the delta between Plan and Actual will enable you to drive improvement by process design.

  • Maybe the product was not installed properly
  • Maybe the product was not used as intended
  • Maybe engineering was wrong
  • Maybe service delivery was not in line with the service manual
  • Maybe the customer pushed out a preventive maintenance cycle
  • Maybe non-approved spares have been used

Actionable Service-BoM

What started as a trivial ask “can you share the service manual of a medium complex product” resulted in a pivotal conversation bridging engineering and service. The service manual is no longer a static 165-page pdf-document sitting in a knowledge repository. It is now an actionable document driving improvement and value in both the service and engineering domains.

[1] When selling products with a transfer-of-title, the risk of maintaining the product transfers to the buyer. Thus, the buyer becomes responsible to mitigate that risk in order to continue receiving the outcome/value of the product. The buyer may purchase maintenance services from OEM or choose differently. Read further in part 3 of this Digital Thread series.

This article is published on Field Service Digital.

Where are my spares?

Last week the European field service community convened for the first time in large numbers at WBR Field Service in Amsterdam. We had a lot of catching up to do. Apart from topics addressing the next big thing, the down-to-earth conversations had a common theme: where are my spare parts? Covid-19, Ever Given, and geo-political instability are disrupting supply chains. As a result, our service engineers are struggling to keep the world running due to missing parts.

We apologize for the inconvenience

My colleague brought her car for regular service. Due to the unavailability of spares, her car was in repair for five weeks. In the meanwhile, she got a rental. Guess what that costs? Guess what it does to brand and customer experience?

My out-of-warranty high-tech desk lamp showed intermittent behavior ten months ago. Customer support told me that due to a shortage of tools and materials they could not help me other than putting me on hold. After many touch points and mounting emotional pressure, they’ve sent me a new lamp for free. Though relieved I finally have light again, I’m not sure about a repeat purchase.

Last week a heavy truck made an illegal u-turn on an important thoroughfare in our city, overturning multiple traffic lights. Due to supply chain disruptions, repair material is due to arrive in three months. Now the intersection is partially blocked and traffic during rush hour has to be managed by traffic officers. Can you imagine the traffic congestion and productivity hours lost?

Supply disruptions are here to stay

For many years we’ve taken smooth and lean supply chain execution for granted. As a result, most field service initiatives were about optimizing the labor component and deploying smart technology. Recent events trigger a wake-up call. Spares availability is back on the agenda.

For a lot of service organizations, spare parts cost is the second largest cost component after labor cost. With increasing and consistent supply chain disruptions, spare parts availability is becoming distractor number one. This is preventing organizations from keeping their installed base up and running. This is causing organizations to default on SLA and contractual obligations.

Of all the supply chain-related challenges, the two most discussed topics at WBR Amsterdam were:

  • How do we get sufficient parts for our service commitments?
  • And, in case we have a shortage, how do we prioritize parts availability?

Alternative sourcing

Everything that comes out of an asset after a service intervention represents a residual value. That value increases when your normal parts supply gets disrupted.

In my career, I’ve experienced that those reverse materials tend to disappear in a ‘grey circuit’ when not facilitating my technicians with an easy and guided admin for proper reverse routing and handling.

What I formerly saw as a hassle to manage, now becomes a welcome additional source of supply. Apart from solving the sheer availability of parts, the lower cost of refurbished parts allows me to offer differentiated pricing when using parts. I can now choose from new, equal-to-new, certified-spare-part, and used-class. This provides me with both a commercial advantage as well as a cost reduction. I win on multiple axes.

Spread the wealth

Even with an additional source of supply through reverse channels, I still had situations where the demand for parts was larger than the supply. My challenge is how do I spread the wealth of available material over all my demanding customers?

My most extreme situation where supply and demand were out of sync, was when I faced a quality-related recall. Overnight, all existing asset owners would demand a retrofit while my supply chain was restocking on the new revision level. I felt a need to prioritize both internal business objectives and customer entitlements.

Typical supply chain solutions allowed me to deploy first-come-first-serve. Advanced service execution systems enabled me to prioritize based on Account and Service Contract attributes. For example, platinum customers first, or contracts up for renewal in the next 6 months first. Contingent to my business objectives I could spread the wealth and manage the risks of scarcity.

Inconvenience alleviated

Supply chain disruptions and mismatches between supply and demand for spares will continue to cause inconveniences. With modern-day tools, we can alleviate the pain and remove the arbitrariness of scarcity.

It’s a bit like waiting in the queue at a call center. We don’t like waiting, but at least we have visibility on the queue. And if that is too long, we can upgrade our service level to get the benefits of a priority queue.

Learn about ServiceMax’s solutions for spare parts, returns and depot repair management:

Continue reading about spare parts planning and supply chain disruption:

This article is published on Field Service Digital.

Rental in Transition

Last week I went to Riga to participate in the annual convention of the European Rental Association. With the theme ‘Rental in Transition’ the convention rightfully worded the pivotal junction in time. Fuelled by the European Green Deal we are poised to rebuild our economy towards net zero emmisions. This means construction will boom requiring lots of construction equipment. The big challenge for OEM, dealer, rental and construction companies will be to manage the installed base of construction equipment from a carbon footprint and emmisions perspective.

Collective bargaining

When the representative of the EU, the consultant from the Boston Consulting Group and the chairman of the European Construction Industry Federation talked about the need and drivers for transition, I had this nagging question. Suppose I own a construction equipment fleet of 1b$, the majority still being internal combustion engine (ICE) based, how do I monetise that investment if the awarding of new construction jobs is based on lower carbon footprint and emission levels?

This is big. This is a challenge of major proportions. Though the delegates subscribed to the mid-term sustainability and transformation goals, for the short-term there’s that ominous questionmark of the how-to. The impact and magnititude of the sustainability transition shows how OEM, dealer, rental, construction companies and legislators are intertwined. This requires a serious dose of collective bargaining.

Preparing for the transition

Regardless of how the transition is going to pan out, for all players in the value chain it is imperative to prepare for the transition. It will become increasingly important to understand the usage profile of construction equipment versus generic equipment attributes.

Let me explain with an example in the car rental industry. When you rent a car it typically comes with a mileage allotment per day. If you drive more, you pay more. If you drive less you still pay the daily rate. You could also split the rental model in an ‘availability’ and ‘usage’ component. Especially if the usage component drives carbon and emissions output, splitting the rental model can motivate the user for a more sustainable use.

This simple example sits at the core of asset-centric business models. It’s not about owning of having an asset, it’s about using it. See here the incentive to digitally transform your business and get access to equipment usage information. Bye the way, if you are catering to the larger construction companies, you will know that providing the usage data of construction equipment is a critical element of the rental service.

Carbon offsetting

Most of the delegates flew to Riga. Upon buying their airline ticket each had a possibility to purchase the carbon-offsetting option. How many did buy that option? Today the majority of the rental companies offer a similar carbon-offsetting option for rental equipment. How often is that option selected? A brief survey amonst the delegates revealed the non-scientific value of ±5%. Rental today is a very price sensitive industry.

When I look at the construction deadlock in my own country, the Netherlands, I see that each new project must submit a carbon and emissions overview before even getting a building permit. We heard the EU representative make remarks along similar lines. “We will use carrot and stick”. And we know of sustainability-forefront-cities only awarding projects to eco-frontrunners.

Does this mean that we can only use electric or hydrogen based equipment for future construction projects? Contemplating on the sheer size of the sustainability challenge, the answer will be ‘no’. There simply isn’t enough construction equipment to get all the work done. But if you want to continue using ICE equipment, you need to get smart at carbon-offsetting options. At the conference we heard that a CO2 calculator is a good start, but we need to make it easier to use and equipment usage based.

Beyond Equipment

For the mid and longer term we have an adject challenge when replacing ICE equipment with electric and hydrogen based alternatives. For ICE equipment we can build on the existing infrastructure of fosile fuels. And for remote locations we can very easy offer a fuel management option. 

If we want to deploy electric and hydrogen based equipment, it often means we have to supply the complete EV or hydrogen powertrain as well. This implies that the rental paradigm will change from equipment rental to complete solutions rental. From an asset management and equipment availability perspective that will mean that the complexity will increase. This will feed the argument for accelerated digital transformation.

In completely different acumen we could label this as ‘servitisation’. When the contractor needs to excavate 100 tonnes of rock, he’ll need an excavator, dumpster truck and complete power train. As food for thought for rental, would it be too far off to start selling electricity/ hydrogen as well?

Beyond Riga

It was great to be in Riga. To hear so many people in the industry. The challenge is big. Yes, there are some threats. Yes, there is a level of denial and green-washing too. On the other hand, the challenge provides a great number of opportunities too. Those who embrace those challenges and embark on their digital transformation journey, those will have the upper hand in a rental market that is in transition.

This article is published on Field Service Digital.

Previous blog on rental.

Managing product recalls – five keys to success

As an equipment manufacturer, you hope a product recall never happens. In reality, most OEMs have their share of misfortune. The recent example of Philips apnea machines shows how complex a recall process can be. How it can get out of hand. How it can impact your brand experience. Instead of trying to avoid product recalls it is better to be prepared for them.

Preparing for the unlikely

Every product is designed with a set of checks and balances. In the final stages, before general availability, Quality Control assesses safety and fit-for-purpose. Once the product hits the market in grand(er) volumes, the OEM will receive a much larger dataset telling how the product performs and behaves in real-life situations. That is, if the OEM has set up a channel to listen.

When you’re in the middle of a product recall, all stakeholders will be aligned and feel the sense of urgency of using data to mitigate the quality issue. If you hadn’t setup a data collection process, the ability to reconstruct the data is limited and likely comes at a high cost. You’ll also have to be mindful that a product recall is a period of anxiety to both the OEM executives as well as the owners of the affected products.

In our practise, we see that companies that come prepared experience lower costs and higher customer loyalty. These benefits are incentivising other OEMs to follow suit. Especially when the pace of launching new products is increasing and quality assurance is under duress.

Gaining installed base visibility

In an ideal world, any OEM would love to know where each product sold is installed, in what state it is, and how it is being used. The value of that data will enable the OEM to develop better products, be more efficient in their service delivery, and increase their service revenue through hyper-personalized service offerings.

In the real world, we see a lot of OEMs struggling with their installed base visibility. And this is a real problem. If you don’t see your installed base, how do you expect to be efficient in service delivery and driving revenue from that base? It becomes really problematic when you have a quality issue with a product and you don’t know where they are.

Managing the indirect sales channel

The apnea case shows the recall struggle in its extreme. On the one hand the OEM has a medical compliance obligation to manage the product recall and replacement. On the other hand, the OEM has no visibility on who owns them, because the bulk of the units were sold via the indirect sales channel. 

Though the OEM does not have visibility on the end-user of the affected units, the OEM does have a record of the serial numbers sent to the dealers/resellers. Those dealer/ resellers ‘own’ the commercial relationship with the end-user, potentially having sold a service contract too. In this model, the OEM is the orchestrator of the recall, whereas the dealer/resellers are the eyes, ears and hands.

Prioritizing the roll out

Once the OEM has diagnosed the product issue and created an engineering change, the complete supply chain needs restocking. First, the faulty components need to be recalled, to avoid a widening of the quality issue. Then, the new components start to fill the pipeline to enable the roll-out. 

Because the production of the new component version needs to ramp up, there is a constrained supply in the early days of the recall, which is a form of service campaign. At the same time, vocal customers will demand instant replacement. Scarcity will require the OEM to make choices and communicate them.

If the OEM only has information on shipping volumes to dealers/resellers, prioritization options are coarse. That becomes more apparent when the dealer/reseller has sold a ‘gold’ contract to the end-user. The end-user has a perception that it purchased an OEM product with an associated gold contract, oblivious to the fact that both elements are delivered by two different commercial and legal entities. That becomes an interesting prioritization puzzle and can become a cause for discontent when not accounted for.

Monitoring the service campaign

Now let’s assume you are in the middle of rolling out the engineering change to your installed base. How do you know you are done? When have you successfully completed the product recall and can you prove that you are compliant?

Based on our conversations with OEMs, we’re hearing a need for a workbench-like tool to slice the installed based according to multiple and changing criteria, while maintaining an overview of progress and cost. Last but not least, having tools to prove you’ve done the work and communicate that to the involved stakeholders. At ServiceMax, we’ve bundled these capabilities as Service Campaigns enabling any OEM to be prepared and enabled for future product recalls.

This article is published on Diginomica and Field Service Digital.

Standardization vs Flexibility: How to Shape Your Service Transformation

Last month I celebrated my five year anniversary working for a field service software company. Having had a prior history of 25 years in service delivery and service sales, many service transformation engagements have been a trip down memory lane. As former business leader I too sought for modern tools to replace my legacy business processes. When software vendors showed me their capabilties, they showed the happy path. As service-firefighter I knew that real life needed contingencies for not-so-happy.

You are special

When you’ve run a service organisation for multiple years, you’ve built a routine of tools and processes to get the job done. If, like me, you had limited access to budget, your business processes will be a hodgepodge of makeshift tools.

And then, either by design or by the turn of events, your company is in a digital and service transformation process evaluating standard software. The happy path looks great. It’s easy and it’s efficient. But something doesn’t feel right. Your business is more complex. You have many variants and exceptions. You are special.

Of course you can ask the software vendor to demo all those exceptions, but do you really want to re-create your legacy business processes with modern tools? Or, do you want to make use of the new tool capabilities to challenge your legacy processes?

Common global process

One of the big drivers for new tooling is standardisation. Not only can you rationalise your current IT-stack, you can also ‘clean-up’ the sprawl of business process exceptions. In transformation journeys I often hear verbage like ‘common global process’. When I do hear this, I try to understand how will employees and customers will benefit from a common global process.

Do customers want a standard one-size-fits-all process, or do they want a contextual transaction? Do employees want a business process that is cast in iron, or do they need a level of flexibility to address the unforeseen? This brings me to the theme of this blog: is the happy path really so happy or do we essentially need something different?

Contextual processes

At the Copperberg Power of 50 event we talked about “managing the hybrid service paradigm”. If on the one end of the scale we have forces driving a common global process, then hyper-personalisation is pulling towards the other end. The good news is that technology can help us find the middle ground. One does not have to go at the expense of the other.

If we picture the blend of interests:

  • Business and IT leaders want to exercise control over the execution of business processes. 
  • Employees need a level of autonomy in how they deliver their work to cater to expecting and vocal customers.
  • Customer expect services to be delivered situational to their business impact … and those tend to fluctuate.

The above three actors operate in shifting contexts. Because priorities tend to change over time, we advise business leaders to enable and empower employees deploying contextual workflow beyond the happy path. Because it is beyond the happy path where friction, inefficiencies and dissastisfaction manisfests itself.

80% Global, 15% local and 5% situational

At the Copperberg Power of 50 event, we saw a video of service technicians Amy and Jake from DormaKaba. They talked about how every day is different, how they need trust and empowerment to get the work done. What this means? If we want happy customers and technicians, we need to abandon the belief in a happy path and move towards contextual business process behaviour.

Guiding many transformation journeys for our customers, we’ve seen we can strike a balance between business process standardisation and situational flexibility using modern workflow techniques. We call this 80% global, 15% local and 5% situational.

  • Global: Despite the uniqueness of service businesses there is a core of commonality in business processes. This core will ensure that global leaders are able to roll-up the data for decision making purposes.
  • Local: Instead of standardising everything, we have to be mindful that localisations exist for a reason. It’s often the commercial reality that a local product-market combination that dictates how we need to do business with those customers. Without localisations a company may not be able to do business.
  • Situational: Echoing the words of Amy “every day is different”, we may have agreed upon a process, but in day-to-day operations we encounter unforeseen situations. Instead of responding with a freeze we need enable and empower employees to make informed decisions to maintain a flow, to keep the world running.

Adoption drives Value   

The happy path is what any software tool can support. Implementing the happy path may even seem to be the preferred transformation path. The value-proof is in eating the pudding. When you deploy the happy path it is very likely you will encounter the adoption hurdles assosciated with local and situational variants. Needless to say: no adoption, no value.Thus, the way forward is to account for local, contextual and situational workflows. When you ask for your next demo, do ask to deviate from the happy path. Ask how the software facilitates the excpetions. What insights and visibility will be available to the users, such they can make informed decisions? Decisions that align with your overall company objectives.

This article is published on Field Service Digital.

Maximising Asset Availability for Rental Equipment

Four years ago we moved to the country side and bought an old farmhouse on a large plot of land. Having big construction and landscaping plans we regularly rented all kind of equipment to get the job done. The journey I experienced was tough for the companies that rent out equipment and for my DIY-projects progress. I wish some of these rental companies had state-of-the-art service execution systems, such they could drive both a better customer experience and value delivery.

Job and Equipment planning is tough

The most important thing I’ve learnt in those four years of home improvement is that a piece of rental equipment is ‘just’ a small piece of the planning puzzle. As an example, for my landscaping an element of the work was the relocation of a lot of dirt. For this I needed a (mini) excavator. The availability of the excavator was intricately entangled with ten or more other planning items. You can imagine my surprise/ frustration when the excavator wasn’t available on its due date … and the alternative had only half the capacity.

This is one of many examples I accumulated over four years. As a result I’ve become proficient in reverse engineering the processes of the rental agencies. It’s tough for rental agencies too. If only they had better visibility and planning tools. Speaking of the devil, I happen to work for a company that provides those tools and has implemented them in both business-to-business and business-to-consumer contexts.

The happy path

A rental fleet represents a significant investment so it may sound obvious to know where all that equipment is, and in what state. When you visit a rental yard or a construction site it becomes clear that knowing what-is-where is not that easy. If my personal experiences are representative for equipment visibilty, then WYSIWYG is a rather common implementation.

WYSIWYG works fine when the rental process follows the happy path. Meaning: actual pickup and return date are as planned/ booked; equipment doesn’t break and/or require servicing; no conflicts between availability and demand for equipment.

Going back to my landscaping job and the excavator. With half the capacity, my rental period mathematically doubled. With half the capacity, interlinked activities got pushed out as well causing additional delays. In the end my rental period tripled. Because ‘my’ excavator originally was booked by another customer, the rental agency phoned me in the third week to expedite its return. I was not happy, and certainly I did not pay anymore than the original contracted amount.

Does this sound familiar? Can you imagine how much it costs for a rental agency to mitigate the not-so-happy-path? Cost in headcount and lost revenue generation?

Reducing Turn-Around-Time?

Knowing that a piece of rental equipment is only making money when it is rented out, a key driver is to reduce the so-called turn-around-time (TAT). The time it takes to clean, inspect and service an equipment after its return, making it available for the next customer.

Suppose you have a rental fleet valued at 1b$, then your daily cost for interest and depreciation are roughly half a million $ per day (based on a annuity scheme at 4% interest and five year term). Thus if you can turn TAT-days into rental-days, cost-days become revenue-days. Suppose each piece of equipment has four rental periods per year, and you reduce your TAT by one day, you save 2m$ in cost. Add your sales margin and we’re talking serious numbers when renting out equipment back-to-back.

Defining servicing priorities

This brings us to the most challenging issue in the rental business. Instead of reducing the TAT for every equipment upon return using FiFo, you want to prioritise those units that have an adjacent rental period. By applying prioritisation rules, you can better plan the capacity of the rental return and servicing functions as well as making sure that the most revenue generating units as turned around first.

An example of the non-priortised 

We’ve seen examples where excavators, dumpster trucks and cranes not having an adjacent renter are ‘left’ at the customer site post rental period to save yard space. To ‘free-up’ capacity for the turn-around team in favour of ‘hot rentals’.

Managing the lifecycle of the equipment?

Rental equipment can have a rough life. Let me be honest. I sweated ‘my’ excavator to an extent I would not have done if I owned the excavator. In setting their rates, rental companies take these use cases into account. After each rental period there is a decision to be made: do we maintain the existing equipment or do we replace it?

The math behind the decision is simple: is the earning capacity of the equipment more or less than the cost to sustain it? To make the equation come to live, you need both historical data and forward looking data.

Keeping a record of historical data is pretty much possible in any business tool. For the forward looking piece you’ll need a tool that supports asset centric use cases for your assets.

  • Plotting the future preventive maintenance activities
  • Plotting the future calibration and certification activities
  • Aligning future service interventions such they don’t break or clash with rental periods
  • Create reporting that depicts plan versus actual versus outlook on equipment level

In the past four years I’ve learnt a lot about the rental business. Though a rental fleet is a significant asset on the balance sheet, in rental operations we still see a lot of appointment centric and reactive business practices. Modern day tools allow rental companies to apply asset centric business practices. Becoming proactive and getting a better return on the asset investment.

This article is published on Field Service Digital.

Why you should put service campaigns at the heart of your go-to-market

It’s common sense that owners of products, equipment and assets want a maximum of uptime at minimal operational cost. But how much emphasis does this get in the procurement cycle? For many buyers, it is difficult to define the service requirements over a multi year lifecycle. At the same time, buyers do have implicit expectations regarding lifecycle support, often derived from brand perceptions. This is a nice mix for OEM’s to strategize on.

The bulk of lifecycle cost is in operating the asset

To create an asset lifecycle strategy we will have to look at it from cradle to grave, including both the OEM and the asset owner’s perspective. In the following picture you can see the cost elements that go into each phase.

Lifecycle of assets and costs © ServiceMax

What you can see in the picture is that the cost of operating and maintaining the asset is typically a multiple of the cost of acquiring the asset. In the image from Accenture below, the ratio between product expenditure (capex) and the service expenditures (opex) comes to life. For example, if you had purchased a piece of industrial equipment for $1m, you would spend an additional $7.3m over its lifecycle to keep it running.

Initial product purchase relative to total product lifecycle cost © ServiceMax

Nominal output of the asset

Let’s go back one step. Why does somebody buy an asset? Not for the pleasure of owning it, but to use it. In using it, the asset produces a nominal output/outcome, and that generates value for the asset owner. To maintain the nominal output while wear-and-tear is degrading the asset, a mitigating lifecycle strategy needs to be put in place to secure the value potential of the asset. The following picture shows a typical asset lifecycle.

Typical asset lifecycle © ServiceMax

In this picture you’ll see service interventions like preventive maintenance and break-fix that serve the purpose of uptime. An intervention like an engineering change serves the purpose of prolonging the lifecycle of the asset as well as potentially boosting the original nominal output.

  • Extending lifecycle: mid-life upgrade, retrofit or overhaul.
  • Expanding output: booster-packs, product or software upgrades.

Product engineering beyond Point-of-Sale

Both extending the lifecycle and expanding the nominal output of an asset can be plotted against the continuous process of product engineering. Once a product hits the street, engineering receives feedback on its use through quality, warranty and maintenance channels.

Acting on asset feedback, engineering can design newer revisions of that product as well as define upgrade and booster offerings for the existing installed base.

For some OEM’s the asset feedback loop is an integral part of their Go-to-Market. Imagine you operate in an very competitive and tech savvy market. Timing is essential in building market share. At ServiceMax, we’ve come across OEM’s that go GA with a product when engineering is at 80%. They use the service organization to ‘bestow’ the customer with goodness and attention to make up for the missing 20%. In doing so, the service organization retrieves relevant intelligence to complete the engineering process. As part of the deal, the customer gets the benefit of both the latest technology as well as engineering changes post-point-of-sale. A win-win for both OEM and asset owner.

Using the product lifecyle as a means to customer intimacy

Whether you launch your product at 80% engineering completeness or at 100%, most OEM’s will continue to engineer their product beyond GA. The question is, how would you like to make those product improvements and engineering changes accessible to your existing installed base. In other words, have you setup a process to manage asset lifecycle service campaigns?

Service campaigns can stem from two different emotions. A negative and a positive one. In the end, when you manage your campaigns well, you’ll achieve higher levels of customer intimacy.

  • Negative emotions: These are quality and complaint driven engineering changes. A customer expects a certain quality and nominal output level, but is not getting it. The customer expects the supplier to fix it as quick as possible at no extra cost. Though a complaint and quality issue may start as a negative emotion, an OEM’s capability to act on it determines if the emotion remains negative or turns positive. In addition, service campaign capabilities will deliver efficiency and compliance benefits to the OEM.
  • Positive emotions: These are engineering changes that will enhance the capabilities of the asset. As such, you go above and beyond the nominal output specifications promised at point-of-sale. In general customers will perceive this as a positive, adding credibility to the OEM’s leadership and brand value. With service campaigns an OEM can reinforce that positive emotion as well as monetize it.

Service campaigns drive pro-active service

If customers buy assets to use them, OEM’s are very well positioned to facilitate the usage of those assets throughout their lifecycle. The OEM designed the product. The OEM has all the expert knowledge of how and why the product works. Now, if the OEM gets feedback on how each individual asset performs in the field, the OEM is sitting on a gold mine of data, ready to be servitized and monetized. The vehicle to deliver those services to the installed base is called – service campaigns.

This article is published on Diginomica.