Using trigger points to manage your service business

Sometimes it feels like being a jack of all trades when managing a service business. On the one hand you act like a firefighter, on the other hand you know service is strategic to your business’s future earnings. That said, how do you elevate your job from the reactive to the proactive? Establishing trigger points may be the key ingredient to manage your business on an 80/20 basis. Thus, giving you the focus on interventions that matter.

Define success

When do you know you are doing a great job? In speaking to many service executives, it is not always clear what the norm is. “We want to increase service revenue by 20%”. Why 20%? Why not more? Why not less? In my blog Mind the Gap I tried to establish a norm for a maximum service revenue. In a blog by Shawn LaRocco he defined a norm for Cost to Serve. Both blogs have in common that success is put in a perspective of a norm.

Triggering the outliers

A facilities management customer of ours is processing 15,000 – 20,000 workorders per month. In the past they had a team of 30+ people in the back office validating and correcting all debriefed work orders. Based on gut feeling and experience there was a belief that 80% of the work orders did close within a bandwidth of ±5% of expectation. By formalising that bandwidth through trigger points, they now have a tool to filter the volume and start managing by exception.

Timely intervention

Apart from managing your workload on a 80/20 basis, trigger points serve as an early-warning system allowing for timely intervention. You don’t want to pay penalty cost for a missed SLA. Instead, you want a service job to be flagged if its progress jeopardises SLA attainment. E.g., a break-fix job needs to be completed within 4 hours. After 3 hours you could ping the technician to ask if completion is still on track. If not, you could provide the technician with support and/or contact the customer with a heads up.

A trigger point is thus a floor or ceiling boundary on a metric triggering an event. Using workflow, you can route the event to the mitigating personas in your organisation.

Value = Result minus Expectation

Many years ago, the value of trigger points was eloquently explained to me by university professor Meindert Flikkema. He stated that every event has both an expectation and a result. If somebody gets more than expected, then that person is happy … and vice versa.

In the context of running my own service organisation at Bosch I tweaked Meindert’s equation and added the concept of a bandwidth around expectation. Similar to the above example of ±5%, I strived to manage my operations inside the bandwidth. Inside the bandwidth I let the business run on automations. If I managed well, that would account for 80% of my workload. The outliers I routed to my attention queue. Over time trigger points would help me focus on what really matters for both my customers and my CFO. I’ll use the business driver contract profitability to illustrate the value equation and its impact.

Contract profitability in action

Suppose a customer wants to buy a full-service contract with a scope-of-work containing preventive maintenance, capped break-fix events, calibrations, software maintenance and an included set of spare parts and consumables. Using a CPQ-like tool the scope-of-work totals to a calculated cost of $75,000, a calculated revenue of $100,000 and an expected margin of 25%.

Throughout the lifecycle of the contract executed service activities will impact the cost you accrue. If those cost exceed the $75,000 you have either over-delivered or over-run on your calculated cost. Your CFO will see a less-than-expected margin contribution. If your margin is significantly more than the expected 25%, then either you are over-charging or under-delivering. Your customer may get a feeling he/she is not getting value for money. 

Tipping the trigger level should make you curious. Challenge both expectation and result. Do you have a clear understanding of cost-to-serve? Are you taking the life cycle of the product into account? Did the product owner accept your mid-life-upgrade proposal?

Pro-active

As service leader you don’t want to be told about under or over-situations by your CFO when it is too late for corrective intervention. Similarly, you don’t want you customers to churn. Trigger levels act as an early-warning system before you accrue irreversible cost or impact customer expectation negatively.

  • It’s November. Show me all contracts at 80% of calculated cost. Let’s see what service activities we can push out to ‘save’ this years’ margin contribution.
  • It’s July. We anticipated six break-fix events for a full year. We’ve already had four. We want to flag future break-fix service requests to inform the customer service agent and technician to be stricter.
  • It’s September. The year-to-date contract margin spikes at 35%. Upon investigation you find that a contracted and scheduled calibration activity has been cancelled by the customer. Instead of treating this as easy money, you engage with your customer to pre-empt contract renewal conversations.

Managing intelligent

As long as we have unplanned downtime, firefighting will remain an element of a service leaders’ job. Service execution tools are a great help to facilitate the transaction and collect service data. The true value manifests itself when you use transactional data in combination with trigger levels. Trigger levels give you that early-warning to become pro-active instead of reactive. Trigger levels add direction to your decision making. And better decision making makes you more intelligent and more strategic. Not only inside the service domain, but across your organisation.

Keeping Your Assets in Shape

Do you have this feeling that the battery of your phone drains faster and faster? Internet forums are full of testimonials and resolutions for keeping your battery in tip-top shape. How does this apply to B2B products, equipment and assets? Can asset owners monitor the performance of the equipment, and what handles do they have to maintain output/ outcome at the nominal level promised at point of sale?

For many years I’ve captured the digital and service transformation journey in a single tagline: “from fixing what breaks to knowing what works.” The message is driven by a simple principle: customers expect things to work. Even more, they expect the outcome of the asset to be stable over the lifecycle.

Another simple truth is that everything eventually deteriorates and breaks. This prompts the following questions:

  • What is the life expectancy of the asset? 
  • What do I need to do to keep the asset in shape?
  • What can I do to extend the life cycle of the asset?

Building a Fitness Plan

Preventive maintenance might be the first thing that comes to mind as the way to keep your assets in shape. But what does preventive maintenance (PM) prevent? And how does it affect asset performance and life expectancy? This was a tough question to answer when one of my counterparts in procurement, who was looking to reduce the selling price of a service contract, asked me, “What will happen when we reduce the PM effort by lengthening the interval?” This was even more difficult to answer when it became a numbers game, and the purchaser asked me to prove the offset between PM and break-fix. 

So where do we look next? I propose condition-based maintenance.  

We know that the performance of an asset will deteriorate over time, and we know the rate of deterioration will depend on various attributes like aging and usage. Because these attributes are measurable, we can use them as levels to trigger a service intervention. 

So rather than taking a one-size-fits-all approach based on time intervals, you can create a custom fitness plan for keeping your assets in shape. One that looks at the condition of the asset in relation to its expected performance. This can look like an intervention being triggered when the output of an asset or the viscosity of a lubricant drops below a certain threshold. 

To continue with the fitness metaphor, we often don’t just want to stay in shape—we also want to increase our longevity and even get in better shape as we age. When it comes to your assets, this is where mid-life upgrades, booster-packs and engineering changes come into play. And in the same way you use predefined levers to trigger service interventions, you should use these levers to trigger updates, upgrades and lifecycle extensions.

Both of these service strategies use asset health at the core of your service delivery model, steering you away from ‘fixing what breaks’ and towards ‘knowing what works.’

A Real Life Example

Imagine you have a pump and valve combination that has a nominal capacity of 140 m3/h.

If you used a preventive maintenance model that runs every 6 months, it would not take into account the age of the pump and valve combination, nor would it account for the corrosiveness of the transported materials. 

But if you took a condition-based approach using IoT-connected sensors, you could measure attributes like vibration, temperature, and energy consumption and use them as indicators for asset performance. For example, if the capacity drops below 130 m3/h, a service intervention would be triggered. It’s like the pump saying: “I’m not feeling well, I need a medicine.” On top of this, if you detect the pump is consistently pushed beyond original specifications, you can know that it’s necessary to initiate an upgrade conversation to safeguard asset health and durability.

Asset Centricity

The common theme of these service strategies is asset centricity. It’s about putting asset health at the core of your service delivery model and continuously comparing an asset’s current output with its expected performance.

By looking at current performance, expected performance and demand, you can also advise your customers on when it’s time to downgrade or upgrade the asset. Through this asset-centric lens you can truly become a fitness coach, advising your customers on the right fitness program that will keep their assets in tip-top shape.Learn more about IoT and condition-based maintenance here.

Should I Buy An Asset-Centric Solution or Build It?

It takes twice as long, at twice the cost and you will only get half of the expected functionality.” Many times, we have heard this proverbial phrase. And even if it is true, does it automatically mean you will go for the buy-variant? We’ve learned that decision-making consists of weighing many pros and cons. In this blog, we’ll provide you with a set of arguments to take into consideration.

More than just the financials (The Mindset Matters)

In our experience, a build-versus-buy decision is both multi-faceted and multi-stakeholder. To give you an example: A business leader will typically look for business process support and time to value. An IT leader may have a preference to stay on the same platform and exert control through the deployment of internal IT resources. Procurement will weigh the risk profile and continuity of the vendor base. The security officer may focus on secure, compliant transfer and storage of the business data. And finance? From finance, we expect that they will compare the cost of build versus buy in relation to the budgeting cycle.

What you have here is a mix of different personas, each with different priorities and objectives. So, how to tackle this, how to move forward? You can start to untangle this Gordian knot by genuinely trying to understand and acknowledge each stakeholder’s position.

One word of caution. However accurate the numbers are that you come up with. As you are zooming in on the pros and cons with the goal of creating a viable comparison, you need to do your homework and not only gather the facts but also be aware that each stakeholder has a different motivation.

As a business leader from Bosch said so eloquently:

“I don’t care about the make and model of the tool. I’ve got a business to run” – business leader at Bosch

We started this blog by outlining the various personas that each have their own priorities, but at the end of the day, there is one common goal: keeping the business running—today and tomorrow. And to do this, you need a solution that can either be built or bought.

What are the hidden and obvious costs?

Let’s start with the most rational comparison: the financial axis. For sure the first and foremost thing finance wants to do is compare the cost of build versus buy. The purchasing cost is easy to identify. It’s the figure at the bottom of the vendor’s quotation. What is on the build side of the equation is more elusive. If building software is not your core business, it is difficult to grasp what effort goes into creating and maintaining a business application. When we see stakeholders evaluating the financials of build versus buy, typically only a fraction of the build costs turn up in the comparison. The reputed tip of the iceberg.

Together with a number of prospects, we created a model to help identify and uncover how far the iceberg extends under the waterline, in other words—to make the hidden cost elements visible. While building the model, we had to face difficult questions such as:

  • How much effort does it take to retrieve the data points?
  • Is it even possible to obtain an insight into the below-sea-level items?
  • To what extent will a complete view of the build cost influence the decision-making?

In close collaboration, we discovered two findings:

  1. Apart from any numeric comparison, getting a complete picture of all cost elements proved to be extremely insightful and changed how both scenarios are evaluated.
  2. Appraising the ‘submerged’ cost elements is essential in defining the tipping point.

Evaluating build versus buy

When making a build-versus-buy decision business leaders strive to get a complete picture of the cost aspects and understand the impact on the business as a whole. But how do they know that? This is where the iceberg comes into play.

When working with prospects and customers to uncover the true cost for them, we found the iceberg to be an educational exercise and a great conversational framework to understand all aspects of business application creation and usage. Different areas in the framework have different owners and they don’t all have the same agenda, e.g. the cost for software developers falls within the IT department, whereas cloud-subscription fees come out of the line of business budget.

Our framework requires input from all areas that DIY touches on. By doing so, it also reveals the mindset and priorities of the different stakeholders and provides insight into the evaluation criteria of the build-versus-buy decision. As such it will be an eye-opener and helps to align all stakeholders.

Conscious Competence Learning Matrix

‘Hidden’ costs impact the tipping point

The hidden or underwater costs play a significant role in determining the tipping point. It’s a matter of simple mathematics. The more you can exclude hidden costs from the equation, the more your decision will lean towards build. This conclusion led us to investigate why one would exclude hidden costs. We found:

  • The effort to retrieve the hidden cost is too high.

What to do about it: This is fairly easy to mitigate. To find your way out of this impasse, think about using estimates and guesstimates as an alternative to actuals. As long as your data is ‘good enough’, you can still use it to make good decisions. Thus, not creating an exact cost comparison, but a probable comparison.

  • We don’t want to include hidden costs.

What to do about it: This finding is more of a political and commercial nature. Here it matters who you are talking to. You can imagine that a sales rep who is trying to sell the buy-scenario has an avid interest in having as many costs associated with the build-scenario and vice versa. To overcome this potential conflict of interest, we co-developed the cost comparison model. As a result, we know that all cost elements in the model are relevant to the decision-making. When we encounter a persona saying that a particular cost element is non-retrievable, we have solid arguments to go into challenger mode.

A blend of arguments

We started this blog by explaining that a build-versus-buy decision spans multiple departments and stakeholders, and we gave the financial aspect the most weight when it comes to making the choice. There are certainly other factors that play a role in the decision, such as time to value, feature richness and risk, but ultimately, all of these aspects affect the total cost to build.

For several of our prospects, the co-developed framework has been instrumental in finding an answer when faced with the question Do I Build or Do I Buy?

build costs

If you want to find out what other aspects are influencing the build-versus-buy decision, check out our Build-Versus-Buy Guide here.

This article is published in ServiceMax Field Service Digital on June 22nd, 2021

Why Are Sales Leaders Taking Over Service?

For a couple of years now, I’ve been writing about the convergence of Sales and Service. Service, with all its touchpoints during the operational life cycle of a product, has a tremendous capacity for value creation. To reap that value, Service needs a little more Sales DNA. Likewise, Sales needs a little more heart for Service. With a shift from revenue contribution to margin contribution, we see Sales ‘taking over’ the Service Revenue agenda.

You Now Report into Sales

A true story. I’ve had extensive experience running service departments. In all those years my main objectives were focused on service delivery and operational excellence. Over time, I saw an increased interest in service margin and service revenue. When my former organization updated my business objectives with a service revenue target, that goal came as part of a package deal: “you now report into Sales.”

Initially, I did not understand how reporting into Service or Sales when having a service revenue target would make a difference. At that time, the prevailing current was that revenue generation was the prerogative of Sales. Service was seen as a delivery engine focussed on operational gain.

Over the years, I’ve witnessed a dynamic between Sales and Service when it comes to the ‘claiming’ of business case benefits. Lately, a CEO put the reasoning into works while we presented the business benefits of a digital and service transformation project to his executive team. The CEO attributed productivity and cost savings to operations and service. He associated revenue targets with sales. When our business case showed significant revenue benefits through improving installed base visibility and attach rates, sales were the first to claim credits and ownership. For sales, these two improvements translate into touchpoints and conversion. This duo is the bread-and-butter of the sales process.

Bridging Sales and Service

Though sales leaders may be taking over the revenue growth agenda, we all know there is a huge difference between selling products and selling services. The engagement model is different. The buyer role is different. The appraisal of Capex versus Opex has a different impact on decision-making, etc. Most of all, it’s a simple numbers game. Sales revenue is big numbers, service revenue is smaller numbers: Guess who will be seen as the hero?

Any CFO can tell you that services, despite carrying a lower revenue amount, often have a significantly higher margin contribution. What if we were to start incentivizing salespeople with a margin contribution target rather than a revenue target? Great idea? Too radical? Maybe such a move could swing the pendulum in the opposite direction. If all your salespeople were selling services, you would forget you need an initial product sale to make the model work.

So we are back to an earlier blog post I wrote about the importance of Sales and Service Working in Collaboration. The initial product sale is like an ‘entry ticket’ to selling adjacent services. Using the analogy of a theme park, say Universal Studios or Legoland, once you are inside and start spending money, that’s where the EBIT is made. It is the achievement of ticket sales to get you inside. It is the effort of the entertainers to keep you inside as long as possible…and spend money. Are both roles different? Yes. Is one role more important than the other? No.

Building a Portfolio of Lifecycle Revenue Generators

We can transpose the analogy of a theme park to the world products and services by illustrating two common situations:

  • Product sales over-promises: Making it hard(er) for service to sell attached services. In effect, you’re trading high-margin contribution activities for a lower margin contribution.
  • Services portfolio not appealing enough: Making it hard(er) to generate service revenue and providing customers with reasons to churn.

Both examples should compel any product/services company to rethink their revenue generation and margin contribution ‘building blocks.

More and more sales leaders are understanding that revenue generation spans the entire lifecycle of the sold product. The realization that the post-sales value proposition has a symbiotic relationship with the pre-sales value proposition, triggers sales leaders to claim control of the services portfolio and the lifecycle go-to-market strategy.

Now you are thinking: is this the job description of a Chief Revenue Officer (CRO)? Yes, you are close. When a buyer applies a concept like total cost of ownership (TCO) in weighing a purchase, then the response on the sales side converges in the responsibilities of a CRO.

Is it bad for Service when Sales leaders are taking over? I believe not. I think Sales and Service have different but complementary skills to drive the revenue growth agenda. Sales DNA finds Service Heart!

This article is published in Diginomica on June 9th, 2021 and ServiceMax Field Service Digital on June 17th, 2021

Frontline Revenue: Take Your Field Service Lead Program to the Next Level

In our first article, we discussed tactics for getting technicians onboard with the idea of selling. While technician lead generation programs don’t involve a big investment in technology, they do require change management and training. Once technicians are ready to extend their role as trusted advisors into recommending and quoting new products and services, how do you ensure they do a great job and stick with it?

Follow these five tips to accelerate your technician lead generation program.

1. Don’t Make Your Technicians Chase Their Leads

As noted in the first article, the black hole of lead follow-up can be a major failure point in lead generation programs. If a technician submits a lead, they shouldn’t have to chase the responsible parties on follow-up status. This is particularly true if the lead is tied to an actual conversation with or recommendation made to the customer thereby implying that the technician’s reputation is at stake. Technicians don’t need to see every lead be successful, they just need to know that their effort is being followed up on and this can be done effectively via improved communication or opportunity tracking tools.

2. Push for Sales Accountability

The monetary value of a service lead might not compare with that of a regular sales opportunity. This might be enough to detract salespeople from following up on service-generated leads. Therefore, it’s essential that sales leadership is bought into driving accountability for a service lead program. An easy way to do this is to show the impact that top-performing regions or districts are having when it comes to top-line revenue. If sales isn’t motivated by that performance, business leadership will be.

3. Compensation – Make it Timely

Most organizations develop a financial reward system for field service technicians based on leads closed. Some offer incentives for the volume of leads generated. The issue is that most programs stop here. While the field technician cares about the amount of recognition received, they care more about getting recognized quickly and painlessly. They shouldn’t have to fight for the recognition or have to wait for it for a considerable amount of time. Therefore, it’s essential that the reward system developed, monetary or otherwise, is efficient enough to deliver the reward to the field technician in an expedited manner.

4. Keep an Eye on Activity-Based Metrics

Activity drives results and it is essential to track activity-based metrics as leading indicators of program success. These metrics could include participation rates, referrals per technician, and average cycle or follow-up time for leads. Organizations might also want to consider a technician confidence index or survey to measure the health of their lead program. Such a survey would measure how confident the technicians are in their ability to get paid on leads. The higher the confidence, the greater the activity.

5. Leverage Your Top Performers to Drive Increased Interest

Some organizations consider lead scoreboards to gamify lead generation. In most instances, top-performing technicians or branches are identified in terms of activity and business impact. The true impact of these scoreboards is uncertain as this is tied to your organization’s culture and the mindset of the technicians. That said, it is effective to have your top performers share their success stories and best practices with other technicians. Not only is the content useful and valuable for the other technicians but it also comes from a party that they trust.

Our Global Customer Transformation team is happy to learn more about your program and offer insight and knowledge on where it can be strengthened.

This article is published in ServiceMax Field Service Digital on June 10th, 2021

Frontline Revenue: Starting a Field Service Lead Program

Field service organizations are under pressure to complement operational and customer-facing improvements with commercial results. As a result, many organizations are looking at their front-line field service personnel to identify new business opportunities or sell when in front of the customer. It’s safe to say that most organizations currently have some form of a field service lead program in place and more are beginning to equip their technicians with the tools necessary to recognize leads or to sell.

The debate on whether technicians should or shouldn’t be selling can evoke a great deal of passion from the CSO and technician community. What is true is that field service customers are more accepting of a sales approach (advice, lead, quote) from a field service technician if they have a relationship with that technician or if that technician has resolved their current challenge and is working to provide them with additional value.

Interestingly, research from the Aberdeen Group found that best-in-class service organizations were twice as likely as peers to incentivize technicians to identify cross-sell and up-sell opportunities. These same best-in-class firms realized a 7 percent year-over-year increase in service revenue, compared to 3 percent for average and 1 percent for laggards.

This increase in service revenue could be explained by the positive feedback loop that happens between technicians who are empowered to sell and salespeople who actively pursue service-driven sales opportunities.

Even if technicians aren’t directly selling, it is beneficial to have your field service teams capture and share installed base information as well as opportunities that can drive additional value for customers. These opportunities can come in the form of follow-up work attached to a preventive maintenance or inspection visit, or a competitive replacement opportunity when that asset is nearing its end of useful life.

In building a field service lead generation program, there are several best practices to consider:

1. Have a Dedicated Lead Management Process and Support it With Technology

Lead generation must be easy and effective if the field service team is going to bother with the added responsibility. Field service technicians will abandon the process immediately if it doesn’t work. Typically, the two major failure points occur around lead follow-up by sales and lead-affiliated compensation for field service technicians. A lot of the core areas of lead management can be automated with the aid of mobile and CRM solutions. That said, there must be well thought out process for how leads are managed throughout the entire sales cycle, all the way from identification to closure.

Be mindful of the fact that sales and service people have a different definition of a lead. A salesperson is used to selling big things with big intervals, whereas a service person identifies multiple smaller opportunities. A typical response from a salesperson is to disqualify a service lead as being too small (for the effort). Consider establishing a function that bundles multiple service leads into a larger package and then hand over that package to sales.

2. Establish the ‘Why’ and Enable it With Training

Change management is essential in the rollout of any new program. Poor attention to this often leads to unsuccessful adoption of the program and poor attainment of desired goals. Field service technicians will likely resist when asked to participate in lead generation as they will see this as a proxy to selling. Therefore, organizations need to prepare these technicians for the program and then reinforce the impact of the program to all stakeholders, including the customer.

Once the purpose has been established, the ‘how’ of lead generation needs to be reinforced with training sessions and materials. Preferably training content and scripts are available on-demand for technicians to refresh their knowledge as needed. Its also essential that relevant instructional content is developed for multiple parties in the field service chain, starting with the technicians and moving up to supervisors and regional leaders.

In addition to the ‘corporate why’ and training, it is worthwhile to tap into a deep-rooted want from technicians to be a hero on site. If a technician sees a lead, passes it on to sales and sales takes action, then the technician’s advisory role is reinforced. If sales does not act, the customer will bug the technician with follow-up questions that they cannot answer, making the technician lose face.

3. Don’t Forget to Communicate Customer Impact

In this day and age of mobile content and self-service portals, it might seem silly to develop flyers and brochures to reinforce the message of a field service lead program, but these methods do work. The message is simple, the more a program is discussed and reinforced, the more it is adopted. In addition to reinforcing steps, best practices, and procedures, it’s also beneficial to reinforce the value of the program in the form of technician success stories or customer results. What’s even more impactful is an actual testimonial from a customer of how the extra time spent by a front-line technician directly impacted the customer’s results and outcome.

4. Make it Easy

This applies to all levels of the field service lead lifecycle – from the creation of leads to follow-up to closure and associated reward. When it comes to lead creation, the capture process must be simple and not require a whole host of clicks. A simple field in debrief that allows the technician to capture notes and images is usually sufficient to get started. Additional information can be sought once the field service lead program gets off the ground.

Many ServiceMax customers have developed and grown lead generation programs into significant revenue contributors. These programs don’t require a great deal of investment from a technology point of view, but they do require leadership, a rigorous process, and a focus on change.

In the next frontline revenue article, we’ll provide some ways to take your field service lead program to the next level.

This article is published in ServiceMax Field Service Digital on June 3rd, 2021

Mind the Gap

At Maximize we discussed the topic of Enhancing the commercial maturity of your services business. In that conversation we spoke about ‘the Gap’. The Gap between your current service revenue and the maximum revenue you could achieve when every unit sold would have an associated ‘gold’ contract. This Gap is rather simple to calculate, and it won’t surprise me if the size of the Gap becomes a compelling reason to act.

The Gap

Why is it so important to acknowledge and quantify the Gap? If we don’t want to be like Alice in Wonderland, we need to know both our point of departure and the desired future state. 

We see more and more service executives having a revenue growth target. In the grand scheme of both service transformation and margin contribution, this makes perfect sense. As much as it makes sense, a growth ambition of eg. 20% is ‘only’ directional and not linked to a potential. To make your service revenue growth ambition actionable you need handles; metrics to monitor, levers to pull. The benefit of defining the Gap is, it is SMARTspecific, measurable, actionable, realistic and time-bound).

Let me illustrate this with the analogy of market share. Suppose you say you want to grow your market share by 20%, it makes a huge difference if your current share is 10% or 70%.

Where sales use market share, in the service domain we can use a blend of installed base visibility and attach rate. If you know where 50% of the units sold are installed, and of those units 60% have an associated service contract, you’re addressing 30% of the ‘market’. If those service contracts are a blend of warranty, bronze, silver and gold, your actual reach might be 15-20% of total addressable service market (TAM).

The above example is providing you with two things:

  • A compelling reason to act
  • Three mitigating handles

Compelling reason to Act

Let’s do some role play.

Suppose you are a service executive. You have a steady service revenue stream growing at the same rate of product sales. Your new management tasks you to grow faster than product sales, you need to grow your service revenue by 20%. What is your first response? How? Why 20%? The Gap will help you evaluate the feasibility of your new business objective. The Gap can also help you include other stakeholders in reaching your objectives. Think about sales leadership and portfolio development.

Suppose you are the sales leader. You work hard to maintain and grow market share. Growing market share by 20% is, to put it mildly, challenging. That challenge will only get bigger when your CFO changes the paradigm to margin contribution. To understand the dependency between sales and service I’ll flip to point-of-view towards the buyer of your product & services. From an asset owner’s perspective between 8-12%[1] of the life cycle cost are related to the purchase of the asset. The remainder is associated with maintenance and operational cost. This insight should trigger you and your CEO/CFO to rethink where you want to create your margin. It’s less about the one-time sale & margin of a product, and more about being able to create customer lock in throughout the life cycle of that product. Long-term contracts will deliver recurring revenue and margin contribution. The Gap is the quantification of what you are missing out on compared to a life cycle approach.

Suppose you are responsible for the product & services portfolio. Today you have a mix of warranty, bronze silver and gold. Each of those offerings has a different revenue/ margin contribution. Of course, you’d like all asset owners to buy your gold contract. The size of the Gap may be an indication to what extent your current portfolio aligns with the needs of the asset owners. Once you understand that an asset owner is more interested in using a product than owning it, your current service portfolio may need an upgrade.

Three mitigating handles

To mitigate the Gap, we’ve identified three handles:

  • Installed Base Visibility
  • Attach Rate
  • Service offering

The first one, installed base visibility, builds on a variant of Peter Drucker’s quote “if you can’t measure it, you can’t manage it”. You need to know where your assets are, and in what condition to be able to sell associated services. The bigger the Gap, the bigger your motivation should be to invest in an asset life cycle database. Documenting the As-Built, As-Sold and As-Maintained. And yes, this may be more work when your organisation sells products through an indirect sales channel. The Gap may justify the investment.

The second and third handle go hand-in-hand. Once you have visibility of the installed units, you can start targeting those with your services portfolio. Important to realise, not the product specifications and characteristics are leading in the service offering, but the use-profile of that product. For the same product, wear and tear can be completely different, based on how the product is being used. This realisation emphasises the need to collect data throughout the operational life cycle of an asset. If sales says, ‘each touch point is an opportunity’, service can extend that paradigm with ‘each data point is an opportunity’.

Is it doable?

Absolutely! A target of 20% service revenue increase may sound abstract when you get it. In this blog we tried to break that task into manageable pieces. Standard service metrics will allow you to monitor installed base and attach rates. Introducing the Gap helps you to quantify your revenue growth potential. The Gap will create both the compelling reason to act and the arguments to convince other stakeholders to jointly work on this revenue growth target.

Please share your victories with us.


[1] Source: Insight… Accenture and total cost of ownership (2012)

This article is published in ServiceMax Field Service Digital on May 11th, 2021 and Field Technologies.

Maximize Virtual Round Tables – Recap

On the Maximize agenda we offered set of 12 round tables spanning a range from covid implications to asset centric business models. From technician skill profiles to commercial maturity. These topics fuelled a wide range of conversations. In this blog we’ll try to give you a taste. Want more? Have a look at the Maximize recordings here: https://www.servicemax.com/maximize/

From short trial to longer-term innovation: lessons/ practices from COVID that will persist

A little over a year ago we learnt about Covid-19. Denial, anger, bargaining, depression and acceptance. We’ve been through it all. Covid-19 drove a number of changes in the way service was delivered and consumed. Organisations quickly deployed new solutions and digital technologies to enable their workers to continue to deliver service to their customers. 

In this round table the participants shared what changes are merely short-term adjustments or disruptions to the normal and which ones are longer-term innovations that are here to stay.

No surprise employee safety, compliance and remote service are high on the list of the more permanent changes. The underlying business issues were there all along, only Covid-19 amplified and accelerated the change.

What Covid-19 has also shown us, disruption has many forms. So better prepare to be agile and resilient. As a final thought: how is your organisation going to handle the backlog of push-out work orders? How are you going to prioritise while meeting your contractual obligations?

Recommended Maximize sessions:

  • Keynote: Making your Service Business Resilient with ServiceMax
  • Business Transformation: Listen to Your Assets: The Benefits of Using Asset Data for Business Outcomes

Recommended readings:

  • Transforming Field Service When the “Field” Has Changed (March 11th, 2021)
  • The Year Ahead for Energy: 3 Paths to Success Post-Covid-19 (March 9th, 2021)
  • 8 Considerations for Your Remote Support Program (February 4th, 2021)
  • How Will AR & VR Impact the Future of Field Service Management? (December 22nd, 2021)

The technician profile: changing role, changing skillsets – where do we find them?

Assets are changing. Service work is changing. The nature of customer relationships is changing. Has the technician skillset changed to match the evolution of service taking place? 

We ask a lot of our technicians. We ask them to be our brand ambassador. They want to be a hero on site. Maybe then best ‘gift’ we can give technicians is empowerment. To give them tools allowing them to engage with the right information at their fingertips. With a right balance between autonomy for the technician and control for the manager.

Is that possible? Sure. The discussion showed plenty of examples of how the combination of state-of-the-art service execution tools and empowerment drives adoption … and thus the projected business results. Once people see transformation in action, the mindset will follow leading to an intrinsic motivation.

Recommended Maximize sessions:

  • Keynote: Building Resilient Relationships. Being a Technician during the Pandemic
  • MaxTalk: Save my Bacon – Remote Assistant in the Field

Recommended readings:

  • 2021 Predictions for Chief Service Officers (December 15th, 2020)
  • Technician Advice to CSOs: 3 Interesting Takeaways from Our Inaugural Tech Talk Event (August 25th, 2020)

Enhancing the commercial maturity of your services business

Now most service organisations have a revenue target, we found it interesting to have a conversation on commercial maturity. You seemed to agree. We had a great turn out at our round table and engaging conversations.

Why is commercial maturity so important? Because margin contribution stemming from operational excellence is not enough. Organisations feel the pressure of margin erosion and commoditisation. In parallel there is a constant drive for growth. And with more vocal customers it is adamant to constantly ride the waves commerce.

We asked the participants to self-assess their current maturity using a poll. Defining a low maturity as a predominantly product focussed organisation selling services as an afterthought. On the other end of the scale, we positioned companies where both sales and service revenue generating activities are managed in unison over the life cycle of the product/ equipment/ asset.

To make the maturity assessment tangible and actionable we’d given the participants a simple calculation exercise. Suppose you have an installed base visibility of 100% and an attach rate of 100% ‘gold’ contracts. Meaning all installed products have an associated all-inclusive service tier. How much revenue would that amount to? Do we have your attention? 

Now compare this figure with your current services revenue. The goal of this exercise is to define the ‘gap’ and to use the gap as an instrument to drive your commercial maturity journey. 

Of course, we know that not all asset owners will buy the gold tier. More likely we have a mix of warranty, part sales, installations, break-fix, field change requests, inspections/ calibrations, preventive maintenance and availability services. Each of these services has a different revenue and margin contribution. If you want to maximize your revenue, you’ll have to revisit your current services portfolio and how you present these offerings.

Recommended Maximize sessions:

  • Asset360: How to Unlock New Revenue Streams with Warranty and Contract management
  • Business Transformation: How to Protect and Increase Your Service Revenue Stream with an Eye on Servitization
  • Business Transformation: How to Revitalize Your Service Portfolio for CEx and Growth

Recommended readings:

  • The key to Sales and Service working in collaboration (January 26th, 2021)
  • 5 Ways to identify new revenue streams in Service (November 24th, 2020)
  • Upsell leakage: Everything you need to know (November 19th, 2020)
  • How to sell Customers on the value of preventive maintenance (July 9th, 2020)

The installed base’s role in lifecycle management

Peter Drucker said: “if you can’t measure it, you can’t manage it”. We could say the same thing about the installed base. If you don’t know where your product is, in what condition and how it is being used, how can you excel in service? How can you serve asset owners over the lifecycle of the product?

A survey by Accenture stipulated that over the lifecycle of industrial assets approximately 8-12% of the cost is related to the purchase of the equipment. The rest is maintenance and operating cost. These numbers should convince any OEM to step up to the plate and offer life cycle services.

What do you do when you sell a significant number of units via the indirect sales channel, via dealers and resellers? Value chain actors that may shield their installed base data. The engineering change request may come to rescue. As OEM you have a legitimate reason to reach out to the asset owners, whether it is quality related or if the change enhances the capabilities of your product.

Recommended Maximize sessions:

  • Asset360: How to Unlock New Revenue Streams with Warranty and Contract management
  • Business Transformation: How to Revitalize Your Service Portfolio for CEx and Growth

Recommended readings:

  • 3 Steps to make engineering change management easier (March 2nd, 2021)
  • How to maintain and protect your brand as an OEM (December 17th, 2020)
  • Looking for Design-for-Service? Start here (December 10th, 2020)
  • How to sell Customers on the value of preventive maintenance (July 9th, 2020)

This article is published in ServiceMax Field Service Digital on April 15th, 2021

Maximize Virtual Round Tables – behind the scenes

For more than a year now we’ve been having these virtual meetings. We don’t know about you, but virtual triggers mixed feelings within us. On the one hand it is convenient and efficient. On the other hand, we really miss the live interaction and the ability to continue the conversation beyond the scope of a session. So, the biggest ‘reward’ you’ve given us at this year’s Maximize is your level of participation and engagement both during and post sessions. Thank you!

Get up early, stay up late

On the Maximize agenda we offered set of 12 round tables spanning a range from covid implications to asset centric business models. From technician skill profiles to commercial maturity. Yes, we were aware that some of these sessions may have occurred at an early or late time. We noticed that the value of the topic has not held you back to set your alarm clock or delay a meal or two.

In the ‘old days’ we may have continued the conversation over a drink or en-route to a next session. This year you found us on LinkedIn, via your account manager or direct message. The conversation will continue! For those that want to browse topics beyond the 12 round table sessions, do have a look at our blog repository: Field Service Digital.

The reward of preparation

In the days leading up to the round tables we look at the registrations. There’s always an element of hope and surprise. We’ve put a lot of thought in the 12 topics and of course we hope to receive confirmation about our choice. We saw counters going up, quickly, and way beyond numbers we would have during live events. This encourages us and confirms our service ‘compass’.

T minus 15 minutes. We launch our session applications and do a last check. Slides, poll, camera, microphone. Putting a ‘do not disturb’ sign on the door to inform house mates.

Fun fact: I had my son (11 years) colour a sign for me. On the one side it says, ‘knock on the other ‘do not disturb’. Because he created the sign, he felt involved in the new house rules. Few are the occasions when he barges in when I’m in call.

We’re live. Automatically my eye goes to the number of participants. How many people are showing up? Over the course of Covid we’ve seen the percentages varying. Today is a good day. I feel good.

Touching base

In preparation of the roundtable, we’ve created content. More than we can cover in the allotted time. We’ve prepared a dialogue structure. But no matter how much we prepare, we don’t know where participants will direct the conversation. We do anticipate though.

It’s our intention to provide both value and engagement. We do have an expectation, so the first thing we do is touching base. Who is in the call? Knowing that is important, because we understand that value is defined in the eyes of the beholder.

In a world of physical gatherings, I would have done a round of introductions to get a bearing of the group. In a virtual world I resort to a poll, knowing it is harder to put each participant on the spot. Comfort level and technical setup do play a role. The poll is easy and safe.

Engagement

When we chose the topic for the round table, we believe it is an important topic. Registrations and actual participation confirm (or shatter) that belief. The real litmus test is getting engagement.

W ask the first question: “why is commercial maturity important for your organisation and what is its impact?” Those first seconds are ‘killing’. What if nobody responds? What if everybody wants to speak at the same time? How do we give every participant a fair share of attention when we can only see a subset of participants? We wish we could see you all in person. We wish we could see your body language.

We feel a big relief when the flow of the conversation starts going. The discussion becomes a show of examples. We’ve prepared a few to ‘fuel’ the conversation. Ultimately your own examples are the best. Those examples add to the value and practicality. 

Value

In the conversation we elevate to 30,000 feet for a broader perspective, only to descend rapidly. We’d like to give you handles you can use tomorrow. The best praise we can get is when you say you have learnt something new and/or you are able to put those handles to use.

Let me give you one example from the Commercial Maturity roundtable. In the poll we asked the participants to assess their current commercial maturity on a scale from low to high. Later we provided a practical handle to compare current service revenue against the maximum obtainable service revenue. The gap between the two may inspire you to re-assess your maturity … or even more powerful, to use the gap to define your compelling reason to act (more about the gap in my next blog ‘Mind the Gap’).

Call to action

Why do we host roundtables? Why do you participate in roundtables? We do hope we can mutually agree that it is because we want to action business issues and challenges. The roundtable is an instrument. 

We can imagine that we’ve given you food for thought. We recognise you need to digest. We understand you want to get more information, to compare and involve additional stakeholders. Feel free to reach out and make use of our resources and expertise.

Developing Engineering Change Strategies for CX and Customer Engagement

Each time when you launch an engineering change (EC) campaign you’ll have to balance brand image, quality and cost. In my previous blog 3 Steps to Make Engineering Change Management Easier (FSD, March 2nd, 2021), I added two additional business drivers: customer engagement and upsell revenue. I promised to elaborate on EC strategies, on how to use the EC touch points to further your business objectives.

But first I want to say thanks to a reader who helped me frame the two different emotions associated with an engineering change: the ‘positive’ and the ‘negative’ engineering change.

  • Negative: the EC is triggered by a quality issue or a complaint.
  • Positive: the EC improves the specifications/ capabilities of the original product.

Does the emotion matter? Yes, it does and maybe it shouldn’t matter that much. Let me explain.

When the negative emotion is associated with cost and a perceived reduction of CX & brand value, its mitigation is deemed operational. Getting your act together. When using the EC as an instrument to exceed expectations, the positive emotion will trigger growth driven stakeholders to jump on the bandwagon. With a comprehensive EC strategy, you can nudge the negative to the positive side too.

“There’s no such thing as bad publicity” – P.T. Barnum (1810 – 1891) 

Creating a plan

Creating an engineering change strategy is a subset of product life cycle management. During the operational life cycle of a product many things can happen. Some of these occurrences are pre-conceived and/or planned. Some will happen ‘as you go’. Simply because it is nearly impossible to predict how a product will behave in each and individual use context.

Creating a plan is like preparing for the unknown. The good news is that the unknown can be moulded into a limited number of buckets:

  • The product does not deliver on its as-sold and nominal attributes
  • The product is used in a context beyond its nominal attributes
  • New product capabilities enhance the nominal specifications

For each of the three buckets you can create a communication channel with your installed base and define a follow-up workflow. As a potential response to each of the three buckets:

  • Document and investigate the gap, provide a product fix … or change the expectation.
  • Investigate the use context of the product and re-evaluate the product specifications. Advise on product replacement or product upgrade possibilities.
  • Filter the installed base on those customers that will perceive the enhanced specifications as a value add.

Each of these workflows impacts cost, revenue and CSAT. Most of all, you build a communication relationship with your installed base, managing customer experience over the life cycle … and beyond. Just imagine your EC strategy becoming the proactive/ predictive instrument to avoid unplanned downtime.

What does your customer buy and expect?

Words like strategy and lifecycle imply a longer timeframe. This requires us to revisit the original value promise made at point of sale. Is that promise a one-off or a longer-term commitment? The answer will impact your EC strategy.

If the sales value promise is a one-off, the customer buys the product as-is with an optional limited warranty. Because warranty is an integral part of the product sale, we need to define both coverage and period. Also, we must be mindful of expectations and regulations.

  • In Japan the phrase “Quality is included” drives EC and lifecycle services to high expectations with ample opportunities to monetise them.
  • In Germany the warranty construct is decomposed in two definitions “Gewährleistung” and “Garantie”. The former relates to a defect and/or violation of regulations, the latter is a voluntary value promise.
  • When you buy a product from a AAA-brand you’ll likely have a different lifecycle support expectation over a B-brand.

With the above components it becomes clear that you’ll need a product lifecycle vision with an EC strategy spinoff.

A steady flow of engineering changes waiting for a framework

Now, let’s expand the horizon beyond the warranty period. Your customer may have bought a product. What your customer needs is the output and outcome of that product, preferably over a longer period of time. Over that time entropy and technology advancement are the biggest drivers for engineering changes. 

Knowing you’ll have a steady flow of ECs you’ll need a framework to manage them. Even more so when we’ve learnt in the previous blog that ECs often occur in an environment of constraints. You’ll need to make choices of who gets scarcity first, knowing this will impact cost, revenue and CSAT. 

Scarcity is a multi-facetted ‘beast’. It can work both for and against you. Thus, one more reason to put a lot of thought into defining an EC strategy.

“There is only one thing in the world worse than being talked about, and that is not being talked about.” – Oscar Wilde

Every touch point is an opportunity

In the world of sales and engagement the mantra is: every touch point is an opportunity. Throughout the operational life cycle of a product there are many touch points. When you can explain entropy and technology advancement in its use context, when you have a compelling engineering change strategy and when you can embed that EC strategy in your service portfolio, then you’ll get the level of engagement and life cycle partnership you seek. Driving cost, revenue and CSAT to both party’s satisfaction.

This article is published in ServiceMax Field Service Digital on May 4th, 2021