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