#planversusactual Archives - Sales DNA and a Service heart

Sustainability by Design: How Service Lifecycle Management and Digital Thread Drive Efficiency

At this year’s 21st service management forum, ASAP will feature “the servitisation revolution for sustainability.” While both keywords attract attention, the road to action is less obvious. I find it positive to see a growing consensus on the ‘why’ and ‘what’ of sustainability. However, I detect a more hesitant dynamic when addressing the ‘how’ and ‘who.’ Hence, I will deliver a keynote, “Sustainability by Design,” on October 25th, sharing practical approaches to help you deliver on your sustainability ambition.

Sustainable product design

For just over 30 years, I have worked in the service domain. When I ask service leaders and technicians about the serviceability of products, it feels like poking a bear. “What did engineering have in mind when they designed this product? It is difficult to both diagnose and repair.”

By nature, service technicians are a mix of firefighter and magician: they will get the work done, one way or another. Whether that work is done efficiently, cost-effectively, or profitably is a different story. But is it sustainable? Definitely! Repairing a product is more sustainable than buying a new one.

For years, iFixit.com has been giving repairability scores to B2C products. Its purpose is to change the consumer mindset regarding sustainability. Today, sustainability awareness is embedded in right-to-repair legislation (both in the EU and the U.S.). See the iFixit Repair Manifesto here.

Shifting to the B2B world of your technicians, they could write a book on the challenges of repairability:

Why do I need two hours of labor to disassemble a product to replace a $5 component?
Why do I need special tools just to open the product?
Why does the repair kit contain parts I never use and/or cannot reuse?

These challenges are embedded in the product’s design, which brings us to the topic of design-for-service, or perhaps we should say design-for-operation. Meaning: how easy and sustainable is it to use products?

Now, we arrive at a branch:

How do we make existing products more sustainable?
How do we make new products more sustainable?

For the latter, we could start from scratch and act upon the guidelines for sustainable product design. For the former, we must accept historical/sub-optimal design decisions and establish mitigating strategies in the domain of service lifecycle management (SLM).

Service lifecycle management (SLM)

When I visit OEMs (Original Equipment Manufacturers) as a service persona, my favorite opening phrase is, “You design and build great products, and then they go into the field.” This “going into the field” will happen regardless of whether design-for-serviceability and sustainability concepts are applied during the engineering process. What I’m saying is that SLM can and should apply its own design-for-sustainability paradigm when defining processes and tooling. By doing so, the service function will achieve two goals:

The current installed base will be serviced as sustainably as possible, within product design constraints.
Data collected from the existing installed base will feed sustainability improvements for the next generation of products.

An example of a simple, efficient, and powerful way to drive sustainability is by using the mean-time-between-failure (MTBF) metric in a plan-versus-actual approach.

Suppose Engineering designs a component with an expected MTBF of 10,000 hours. This is the plan. We then produce a batch of 100 units, which go into the field. Each of those units will have a unique service lifecycle, generating live data. This is the actual. When a unit fails, Service typically repairs the component reactively. But when you start using the MTBF to predict and identify outliers, you become more sustainable:

Planned interventions are both cheaper and more sustainable than unplanned work.
Comparing actual vs. planned MTBF will help identify unplanned downtime and sustainability issues early on.
Capturing actual MTBF is a critical data point for sustainable product design.

If the actual MTBF deviates from the planned value, it doesn’t always mean Engineering was wrong. Sustainability also involves a customer component. Acting on the discrepancy may lead the OEM to advise the customer on better usage and product management.

By design

In the previous two paragraphs, I’ve addressed two facets of Sustainability by Design: a product-design facet and a process-design facet. Combining the two will boost your sustainability benefits, making 1 + 1 = 3.

Two additional concepts come into play. You could see them as building blocks of your sustainability agenda:

Digital thread: The flow of product information through all stages of its lifecycle. In other words, a thread from as-designed, as-built, as-sold, as-installed, as-maintained, and as-decommissioned.
Product Passport: The system-of-record for products in the field, capturing the data from all touchpoints over its service lifecycle.

Where the digital thread anchors product lifecycle information from engineering to service and vice versa, the Product Passport captures the service lifecycle information of each product instance in the field. Together, they create an actionable closed loop regarding a product’s health and performance. These insights help the product owner, OEM, and service organization make informed decisions about three important lifecycle choices affecting sustainability:

When to maintain a product.
When to upgrade a product.
When to replace a product and recover the residual value of the old one.

Whether sustainability is your primary or secondary driver, the technology to realize your ambition exists today. Digital Thread and Product Passport address the ‘how’ and ‘who.’ If you want to learn more, visit us at ASAP Service Management in Brescia, Italy, on October 24th and 25th, or contact us.

Published on PTC Blog.

Unlocking Revenue Potential Across Teams: A Cross-Functional Approach

Your company designs and builds great products. For each product sold, you’re making a margin. In a market with growing competition and vocal customers, that margin is under pressure and tempering EBIT growth. At the same time, you hear about healthy margins on services. To satisfy your CFO and shareholders you want to tap into this service lifecycle margin contribution. Consequently, we see OEM organizations turning their attention to service revenue growth. And when they do, what personas will drive the revenue growth agenda?

To help answer that question, here’s a story: About 15 years ago I met a salesperson at an event rejoicing ‘the day of sales and after-sales’. With conviction I explained the value of after-sales services. He was very resolute: “If there is so much margin in selling services and we crave bonuses, why aren’t we jumping on the service bandwagon?” Less than two weeks later another salesperson shook my belief in service value by saying “Profitability, who cares? Certainly not sales.”

These two experiences have humbled me toward the revenue growth agenda. True, service may have a more favorable margin contribution than product sales. Still, you first need to make the initial product sale before you can sell after-market services. Hence, the revenue growth agenda is not an either product or service play, but a joint effort.

To quantify the EBIT/margin contribution potential of a joint revenue play, we’ve developed the mind-the-gap exercise. What if you have visibility of all units sold? What if all product owners have a commercial service lifecycle relationship with you? What if all those service contracts are of type ‘gold’? Compare this maximum, this total addressable market (TAM) with your current service revenue. Either you ‘claim’ this gap…or somebody else will.

Playing a different tune

As simple as it sounds, knowing the gap is existential. As a company you’ll have to make an informed decision where you want to generate margin contribution, how you want to fuel EBIT and deliver on shareholder expectation. What portion of the lifecycle margin contribution do you ‘claim’ as OEM, grant to the indirect sales channel or to our competitors?

The underlying paradigm of service lifecycle revenue is that customers buy products to use them, to derive value from its output/outcome. This drives asset owners to mitigate product-downtime, and, as products become more complex, they will rely on service organizations who can guarantee uptime. This is where the OEM, as designer of the product and owner of the intellectual property, must make a business model choice: do we sell-and-forget or do we sell-and-service? And once that decision is made, multiple personas come into play to underpin revenue growth:

Engineering
Sales
Service/After-Market

Engineering

It makes a big difference if you design a new product for a sell-and-forget model versus sell-and-service. In the former, you optimize the design for manufacturing and focus on the margin contribution from the product sales (capex). Any after-market revenue is incidental, non-recurring and non-predictable. The installation, maintenance and operating manual are packaged in the product sale as mandatory deliverable, not as intellectual property you can monetize.

In a sell-and-service model you optimize product design for serviceability and operability. Since you have a vested revenue interest in supporting the product throughout its entire lifecycle (opex), you’ll make deliberate decisions on how and who can sustain the product.

Do we repair on component or module level?
Is this a self-service activity or does it require trained/ certified resources?
Can we fix this fault code via remote, onsite or depot-service?
Is firmware embedded, open-source or firewalled?
Do we design for retrofitting and upgrades?

Ultimately, one can plot all those service design decisions in a lifecycle chart. Each node represents a touchpoint, an activity, an effort, a cost and a revenue. This engineering plan-view is the basis for revenue generation/margin contribution in sales and service.

Sales

In a sell-and-forget model, sales may choose not to complicate the sale by talking about lifecycle opex. As a result, after-market revenue and margin contribution are unpredictable.

In a sell-and-service model, sales have a choice to generate revenue/margin contribution through a mix of capex and opex. The more engineering embraces design-for-service, the larger the lifecycle services portfolio, the more sales opportunities.

The engineering-lifecycle-view is both a great tool to educate prospects on what to expect during the operational lifecycle, as well as an instrument for cross and upselling. Once the prospect ‘acknowledges’ the lifecycle chart, it becomes a matter of visiting the nodes and ask: “will you do it yourself or shall I do it for you?”

Thirdly, this engineering-lifecycle-view is a pivotal building block in reshaping the relationship between OEM and distributors/resellers. Once you can visualize and quantify the revenue potential of after-market, OEM and reseller can renegotiate the dealership agreement, sharing profit and partnering in joint service delivery, upholding product quality and brand perception.

Service/After-Market

Once products are in the field, actual product behavior can be measured. Because each customer use is different, service delivery personas need (near) real-time tools to detect deltas between plan and actual.

Without such tools, you’ll probably deliver free service. According to Aberdeen State of Service this amounts up to 14% of your service cost. Call it leakage or missed revenue.

Without comparing plan versus actual on installed product level, you may miss out on the customer context and upsell potential. For example, when my car goes for maintenance, the mechanic can tell me if I drove my car according to engineering specifications or if my actual wear-and-tear is different. It may come as no surprise that informed and empowered technicians are the best salesmen, advising me to replace components, suggest an upgrade, or buy a new product.

Team play

Based on the above, we can ascertain that service revenue growth is not owned by a single persona, but it is a team play. The team can use the mind-the-gap exercise to quantify the revenue potential. Once that potential is defined, your CFO and shareholders will certainly task one of those personas to drive the EBIT contribution.

Published on PTC Blog.

Using Engineering Information to Achieve a More Efficient Service Delivery

In my previous blog, I wrote about the blindfold-challenge; sending a service technician into the field with impaired visibility on an installed product, scarce access to knowledge, and poor spare parts support. The challenge hit a nerve with many based on our numerous responses. This challenge proved that getting the job done is more than having a customer service department and a sophisticated scheduling tool. You need insights into the installed product such as how it was engineered, how it was installed, and how it is maintained and used.

In this blog, I will go over using engineering information such as asset-centricity, asset lifecycle, and real-life information for efficient service delivery.

Asset Centricity

Can you imagine how frustrating it is for a technician, to be sent on a job, showing up and feeling the pressure to perform a miracle in the absence of essential product information? This is the reality of the traditional reactive-break-fix model. Not only does this model affect the technician, but it also aggravates customers, service managers, and CFOs.

Customers expect their products to work, and if they don’t, they insist on an instant and first-time fix. Service managers care about utilization and cost, only to get inefficiency caused by technicians scrouging for information and parts. CFOs want predictable earnings, only to get margin contribution at a risk due to unplanned service costs.

The alternative to the above blockers is embracing the concept of asset centricity. Instead of hopping from one isolated reactive incident to the next, we want to position the installed product at the core of the service delivery model. With asset centricity, we collect and connect the data from all the interactions we have with the product over its lifecycle. As a result, we can deliver proactive, predictive, and prescriptive services. Instead of fixing what breaks, we’ll know what works.

Wider perspective

With an asset centric approach, the technician will have a lifecycle view of a product. Meaning, having visibility of all historical and upcoming service events for those products. These insights put the current job in a wider perspective. The bigger picture allows the technician to make better decisions and deliver service faster, better, and cheaper. This will allow the technician to know what was installed and how the product is being maintained and used. They will also know what engineering changes and upgrades are available for that product.

Having a wider perspective on the As-Installed and As-Maintained is already a tremendous help to the technician, still an important piece of information is missing; the plan, the reference.

When the product was designed, the engineers had a specific use case in mind. Based on that use case, the maintenance engineering function defines the service-BoM, the spare parts list, maintenance intervals, and a whole array of reference documents. This maintenance engineering data will enable the service delivery organization to plan the work and get the job done. When putting this information in the hands of the technician, the technician would both be informed and empowered for success, removing the metaphorical blindfold.

A visual representation of the function of maintenance engineering

Plan versus Actual Data

When a product is ‘in the field’ it generates data on how it performs and what maintenance interventions it incurs. This is called “actual” data. The reference data from maintenance engineering serves as “plan” data. When you set up your service delivery organization to combine both sets of data, you have created a powerful tool to manage the service lifecycle of your installed base. At PTC we call this service lifecycle management (SLM).

“Plan” data will help you to prepare, be effective, and be efficient. When the actual data equals plan data, you’re on course. When they don’t equal each other, you trigger a mitigating action. There are a few reasons this may occur. It could be the customers are using the product differently than the intended use case or not all prescribed maintenance procedures were followed. It also could be the engineers had a different perception of real-life data. Whatever the cause, managing the data is at the core of successful service lifecycle management.

Efficient service delivery

Let’s give some examples of successful service lifecycle management through the lens of today’s three service delivery challenges.

Technician shortage: Almost every service organization is in search of technicians. Getting the job done is generally treated as a capacity and utilization problem. However, when organizations remove the blindfold and empower technicians it not only leads to achieving efficiency but also creates a more fulfilling job leading to more applicants.
Identifying the right part: When we ask technicians about their main pains, the identification of spare parts is in the top 3. In selecting a field service management (FSM) tool – optimizing for the labor component – is often the primary focus, but we fail to realize that parts cost is 40-60% of service cost. If you have a better record of the installed and maintained bill-of-material, your identification process would be more effective leading to a faster, better, and more efficient fix.
Knowing what must be done: Modern-day products are getting more and more complex. Good to know that engineering has defined instructions, dos, and don’ts to sustain the outcome of a product. When we use this data as a reference when we install and maintain an instance of a product, we can provide the technician with contextual information needed to perform the tasks without being blindfolded.

If you would like to hear more context and interact with experts from PTC, please join us in person at the High Tech Campus in Eindhoven on March 15th or tune in to the PTC Talks on April 12th.

This article is published on Field Service Digital.