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Managing Service Profitability in the Age of Digital Transformation

Editor’s note: This post was co-written by Joe Kenny and Coen Jeukens.

It is an age-old dilemma for Operations Managers. Your CEO wants XX% revenue growth, your CFO wants XX% cost reduction, your CRO wants better references and higher NPS scores, and you are supposed to deliver all of this with zero additional investment, because – of course – you have been doing this for years with no additional cash, so why would you need it now?

To top all of this off, you had very little idea of where you stood, operationally or financially, at any given time. And this was due to the fact that access to real-time data, a current view into work in process, and accurate financial information was all impossible to come by.

Historical challenges for service operations

I often speak at conferences and participate in webinars, and I often relate this anecdote – in March I would lay out my operational plan, based on the most recent P&L statement I had received (January’s), intending to address performance weaknesses I had uncovered. My team would execute the plan and in May I would receive my March P&L to see if the response to January’s performance shortfalls were successful or not. It was madness.

Now, layer onto that, the fact that 30, 60, 90-day invoicing accruals were also Operation’s responsibility, even though we had an AP department. This process greatly impacted both revenue and cost, as the cost of service was consumed, but the associated revenue may not have arrived in 90 days.

Impact of digital transformation

Fast forward to today, and service operations managers have been given a lifeline—digital transformation. Digital transformation can be like a light switch, illuminating what is happening in real time, allowing service operations leaders to adapt to circumstances immediately. They can reallocate precious resources instantly, validate payment status and credit status prior to service delivery, and see and understand the impact of operational plans in real time.

Digital asset and service management platforms can provide real-time performance measurements, both foundational and top line. This includes data round first-time fix rate, mean time to repair, mean time between failures, and equipment uptime. With this data, operations managers can organize and drive for peak utilization of labor resources while ensuring that the training and quality of work are optimal. This then increases the efficiency of their organization and lowers the cost to deliver excellent service.

With today’s technology, service operations are finally on par with our commercial partners and can see and act on upsell, cross sell, renewals, and service contract extensions instantaneously. In addition, we can support sales by identifying and helping them target competitors’ equipment for targeted replacement. We are the eyes of the commercial team on the customer’s location.

Newfound financial control

Utilizing a digital solution allows for real-time tracking of labor, parts consumed, travel, and any other costs associated with a service call, regardless of whether it is a T&M call or in support of a warranty/service contract entitlement. This is a key advantage that enables service operations leaders to manage labor and parts expenses far more granularly. In addition, they can evaluate the revenue associated with the service provided to validate if the pricing is correct based on their revenue and margin targets.

This ability to understand the cost to serve on an asset or entitlement agreement in real time is a huge step forward for service operations. It gives them the data they need to truly align entitlement pricing, cost control, operational efficiency, and productivity to accurately manage and forecast their performance and address fundamental issues that are obstacles to achieving their own performance objectives.

The evolution of equipment and asset service management platforms has greatly assisted service operations professionals in attaining the insight, visibility, and control that their commercial and financial counterparts have enjoyed for decades. As asset and equipment maintenance and service becomes a larger part of most organizations’ revenue and margin contributions, it is important that they equip teams with the technology that enables them to better manage and control their operations.

Published on PTC Blog.

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.

Monetizing End-of-Life Assets

When we buy a product, we have an expectation of how long we’ll be able to use it and how much value we’ll be able to extract from it. The length of this period is traditionally governed by terms like technical and economic lifecycle. How much more value could we derive from a product with modern asset centric service lifecycle management tools? Let’s show you how to monetize the end-of-life phase of a product.

In 2010 I worked for a global OEM, selling mission critical equipment. In my first conversation with the product sales leader, I asked what value promise we made to our buyers concerning the operational and service lifecycle of our products. In short: “If product owners use the product in line with the use cases anticipated by our design and engineering team, if product owners practice good husbandry and execute all preventive maintenance instructions as laid forward in the user manuals, then our product will operate at nominal performance for the duration of the technical lifecycle.”

Wow, read that response again and spot the “ifs” and assumptions in that sentence.

There was a time when the OEM was the only one knowledgeable about the product and the owner/user wasn’t. The OEM determined the length of the technical lifecycle and the conditions for good husbandry. Today, customers are more informed and certainly more vocal. The OEM will need a better story to contextualize maintenance prescriptions and underpin replacement, retrofit, and decommissioning decisions.

Contextual maintenance prescriptions

In 2020 I wrote a blog based on a question from a product owner who wanted to reduce its maintenance cost. “What happens to the performance of my product when I skip a preventive maintenance cycle or increase it from 12 to 18 months?”

Representing the OEM, this was a tough one. I could repeat the prescribed maintenance instructions, but I had neither carrot nor stick to convince the customer to adhere to these instructions and buy my maintenance services. If I gave in, I would certainly lose preventive maintenance revenue; if I held my ground, I might win in the short term, to lose the bigger picture. What I needed was a mechanism to consider the age of the product as well as the wear-and-tear.

Managing aging products

Creating such a mechanism and developing a contextual rationale for maintaining aging products is relevant for both OEMs and product owners. To underpin the answer to the question is: “What is the tipping point where to continue to invest in the current product versus going for a newer product?”

During the warranty period, asset owners expect their products to work without any substantial maintenance cost. As the product ages towards mid- and end-of-life, those expectations shift. To monetize those shifting expectations, an OEM will need an asset centric service model. Meaning, knowing where the products are, in what state and how they are being used.

What does this look like? If each touchpoint with an asset during its service lifecycle represents an activity. If each activity requires an effort. If each effort has both a cost and revenue component, then you can paint a picture of the cost-to-serve that product over its lifecycle. When you start comparing actual cost/revenue against planned cost/revenue, then you will have the data points for decision-making. In a full transparency mode, customers will have the same information, leading to balanced buyer-seller investment decisions.

Informed investment decisions

To understand how an OEM can monetize end-of-life situations, it is necessary to flip the point-of-view to the asset owner.

Suppose a customer purchased a product a couple of years back, to fulfill specific use cases. The buyer made certain choices to maintain the product to protect that investment. At any point in the lifecycle of the product, the owner needs to decide:

Do I continue using the current product in gradually degrading mode?
Do I retrofit or upgrade the product boosting performance and/or lifespan?
Do I decommission the old product and buy a new one?

To make an informed decision, one considers:

The product is getting older in calendar years
Product output/ performance is dropping below a certain clip level
The cost to maintain the product is higher than the value it generates
The use cases for the product may change over time

Ideally, one would have tools to make a forward-looking statement. A tool answering the question: “Considering all of the above, how much opex and capex do I need to spend on my product to keep it in working order?” Such a tool exists!

Multi-year maintenance plan

In the 1970s a method called the “House Condition Survey” was created in the UK to determine the technical state of buildings and to derive subsequent maintenance plans. Not based on abstract/generic, OEM-sourced maintenance prescriptions, but based on the actual state of the equipment in the context of its use, wear, and tear.

In the Netherlands this methodology has been refined in a norm NEN 2767, with a so-called Multi-Year Maintenance Plan (MYMP) as primary output. The asset owner can ask a service provider to execute ‘textbook’ preventive maintenance and contract an additional MYMP. The MYMP will serve a forward-looking opex/capex statement for budget planning and risk mitigation purposes. For the service provider the MYMP serves as input to defining sales strategies monetizing end-of-life.

Monetizing end-of-life

Now we have the data points to construct a forward-looking statement and we understand the interest of the product owner, the OEM can build an end-of-life services portfolio:

Upscaling textbook preventive maintenance to condition-based maintenance
Selling retrofits and performance booster packages
Subscription offerings to keep the product on latest engineering revision and software level
Buy-back of older products and sell them as refurbished units
Cannibalize decommissioned products for component and precious-metal recovery

With the above services portfolio, both OEM and asset owner have a toolbox to monetize the end-of-life of a product. Deployment of the tool is not a one-size-fits-all but is contextual to the actual behaviour of a product in the field. Knowing where those products are, in what state and how they are being used, is at the foundation of lifecycle monetization.

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.

How to Keep Frontline Field Service Techs Engaged and Boost Productivity

Problem solving, we are consistently told, is one of the key skills of the modern workforce. That ability to recognize a problem and find creative ways to fix it, is surely worth something. Given the on-going challenges around skilled labor (there doesn’t seem to be one industry where this is not an issue), this is key.

But organizationally, there’s a problem. On a macro level, only 31% of employees report they are engaged, enthusiastic, and energized by their work, according to Gartner, while global consultancy BCG says the current skills ecosystem “is broken.” Individual employees are struggling with engagement, enthusiasm, and energy, while organizations struggle with getting the work done and meeting contractual obligations. Clearly something needs to be done. And this applies to field service, as much as any other industry.

Service teams have been dealing with changes for some time now, especially an aging workforce and competing for new talent. Creating working environments that engage service techs, especially the millennial and Gen Z generations, means rethinking not just roles and the structure of work but also the very tools that workers can and want to use.

A London School of Economics (LSE) report last year suggested that Gen Z, for example, has very specific expectations of working environments and digital tools. Younger employees want access to the same modern technology they use at work as they do in their personal lives as they use. The reports says that these include “a lack of tolerance for latency in communication,” as well as “a frustration with legacy solutions and the inability to expediently source information.”

In field service, we have seen this same scenario play out, especially within organizations with limited to no digital transformation. As a Service Council report finds, organizations are facing a staffing issues due to challenges around job roles and tasks, as much as the availability of skills in the market.

“Difficulties with technician hiring and retention, and loss of [institutional] knowledge through retirement, are likely here to stay,” says the report, adding that 80% of field service techs claim that administration and paperwork is their least favorite part of the job.

By recognizing employee pain points, field service leaders can utilize tools to not just ease burdens but actually improve employee experiences. This in turn can reduce wasted time and improve overall first-time fix rates, a key metric when it comes to managing customer experiences. In the words Sir Richard Branson, if you’re good to your employees, they will be good to your customers.

Digital tools and collaboration

Another growing issue among service techs is so many experienced people are retiring or near retirement age. While digital tools can help with knowledge transfer, they can also drive engagement. Through automated knowledge capture and collation of repair work (no matter how obscure) from colleagues, combined with remote access to the latest tools, parts and methodologies, employees will always feel they have the ability to grow in their work and manage previously challenging field jobs.

With AI-enabled tools to manage admin tasks and mobile devices providing frontline service techs with information at their fingertips, there is an opportunity to dramatically improve customer interactions and collaboration. Today’s customers seek an expedited and on-demand service experience, and this extends to field service interactions. This can sometimes translate into a growing preference for self-service options and a desire for faster resolution times on issues they can manage independently. Customers and employees alike want choice and autonomy.

The key here is how to use technology to enable customers, putting powerful collaboration capabilities in their hands, while also enabling service teams to optimize the coordination and management of any technical support work. Tools that enable technicians to collaborate with experts can lead to improved resolution for customers, whether service techs are on-site or working in a remote capacity.

Embracing change

Ultimately, the traditional field service model is evolving fast to include multiple channels and personas. Customers are more vocal and better informed, making service delivery contextual to channels and personas. This demands digital capabilities to manage the different workloads. For any field service technician, knowing your organization has your back by giving you all the right gadgets and tools required to do the job efficiently, has to be a fundamental requirement.

Certainly, with a younger cohort, there is an expectation. Digital tools are essential for frontline service techs to not just have information at their fingertips but also to help manage relationships with customers. Mobile apps, for example, should be used to enable service techs to manage work schedules, complete complex work orders, present service reports for customer signature and provide dynamic pricing of labor, parts, and products in the field.

It is the familiarity with personal technology that service technicians want in the workplace, featuring powerful field service tools that can design and deploy business processes across multiple platforms and devices. It means a low barrier to entry with minimal learning, while delivering a level of functionality that dispels any concerns over laborious administration or the ability to communicate through multiple channels.

Equipping technicians with the right tools and knowledge to resolve issues efficiently and minimize the need for repeat visits is key to satisfaction and AI has a role to play here too. On job completion, generative AI, for example, can summarize the interactions and work performed, to capture and store the knowledge for future reference or even for reporting purposes. It can also support technicians to deliver better experience, speeding-up resolution times by analyzing historical service data and equipment schematics, suggesting potential solutions to technicians in real-time.

These tools also help to provide frontline service techs with a progression path. Upskilling and retraining is increasingly important to workforce retention – 50% of today’s global working population needs to upskill or reskill to stay competitive, says BCG.

The future happiness of frontline service techs relies on three key themes. Firstly, that job satisfaction and autonomy is driven by successful engagements with customers. Secondly, this is only achieved through modern digital tools and services, enabling optimized working conditions and customer self-service and remote service provision. Thirdly, service techs do not want to stand still. They want to collaborate and to learn. The key to service improvements is keeping both your employees and customers happy.

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.

Back to the Future: Should Service Execution begin with the handover from Engineering?

I had the privilege to present to the Advanced Manufacturing Research Centre (AMRC) of the University of Sheffield. Their website is packed with tags like “tomorrow done better”, “shaping the future of manufacturing”, and “world-leading technology experts”. What better place to discuss the topic of Design-for-Service with an audience immersed in Design-for-Manufacturability (DFM)? Allow me to share a back-to-the-future story.

Blindfolded

Service Blindfold challenge: Win $1000 cash.

About two years back, we interviewed a contingent of field service technicians. We asked them what makes them happy and what puts them off.

In short, technicians love to be the hero-on-site, fixing technology and keeping the world running.

On the flip side, they dislike going on a job blindfolded, with their hands cuffed and not being empowered to do their job.

To elevate a technician’s role from reactive fire-fighter to proactive savior, first and foremost, we need to give them tools to see. This includes understanding what the product is, its current state, and how it is being utilized. Rather than immediately entering repair mode, it’s crucial to provide engineers with access to product engineering data, using this information so that they can diagnose the problem effectively. This is where the handover between engineering and service unfolds.

Intellectual property

When Engineering designs a product, they have specific use cases, product output, and performance in mind. For an original equipment manufacturer (OEM) the entire design and engineering thought process is considered intellectual property (IP), leading to the creation of great products. It’s the IP that sets their product apart from the competition.

Then those products go into the field and buyers start using them. This is where the rubber hits the road. Does the product in the field behave like it was designed to in the development lab?

Products in the field are best taken care of by Service. The more information Service knows about the engineering IP, the more efficient and effective Service can be in managing and supporting the operational lifecycle of the product. When mastered, you can even use Service as the primary revenue model.

The IP can also flow from Service to Engineering. Throughout the operational lifecycle of a product, the Service team has multiple touch points with the product. Each touch point generates data. This data is on the actual behavior and performance of the product.

Now we have two sets of data; the planned data from Engineering and the actual data gathered from Service. This opens up a plethora of instruments for continuous improvement. This improvement includes data for personnel in engineering, quality control, sales, product planning, supply chain, service sales, and service delivery.

Handover from Engineering

Not only in this Advanced Manufacturing Research Centre (AMRC) discussion– but in practically all conversations we have with OEMs– we often get to a point where product focus and service focus end up on two ends of a scale. It’s as if they are being treated as mutually exclusive; which should not be the case.

There is a middle ground. Through the use of technology to hand over the engineering IP to Service and have Service embed that IP in their service execution processes we remove the blindfold. This is best illustrated through the function of maintenance engineering.

Maintenance engineering defines how to maintain the product, it sustains the product performance and output. Service translates the engineering-BoM into a service-BoM, identifies spare parts & kits, and creates preventive maintenance schemas. They also bundle installation, maintenance, and operating manuals.

The good news is, the technology to hand over engineering data to Service in a clear and digestable format is there. Even better, most OEMs have a maintenance engineering function created in their IP making the barrier for entry low.

Back to the Future

Since November last year, I’ve been using the maintenance engineering narrative more forthrightly. I’m fascinated by the responses I get from customers, prospects, and researchers. First, a deafening silence, then comprehension and realization. It’s all so logical. It’s all so prognostic. So why haven’t we jumped on the bandwagon?

To get a feeling of the engineering-service-handshake in 2023, we spoke to 50 service business leaders at Copperberg Field Service Forum. We started with an easy question. How many pages does the maintenance manual of a medium complex product have in your organization? The response: anything between 20-2,000 pages.

We progressed to the more difficult questions. What information is in that document? Where is the document stored? Who reads it? Why? Why not? Does the content bring value? Should one use it? The conversation was not meant to create anxiety, but to make one see how existing engineering IP could be leveraged better in the service domain.

It’s today’s technology that makes it possible to act on the handover from engineering to service, to apply the maintainability concepts in service execution, and to reap the business benefits. This puts the ball back in the court of OEMs. Do you want to remain silent or do you want to act now? Do you want to walk the talk?

I am guessing that this will not be our last conversation on this topic.

See why service needs to be a team sport: Learn More

This article is published on Field Service Digital and PTC Blog.

How OEMs Can Service Products Sold Through Indirect Sales Channels

Imagine you are an Original Equipment Manufacturer (OEM) who designs and manufactures fantastic products. You sell these products through a combination of direct and indirect sales channels. But because you don’t control the end-customer relationship, you don’t know how to best ‘serve’ products in the field. In other words, you have limited visibility into where your products are, in what state they’re in, and how they are being used. This reduced visibility impairs you in managing service costs, growing service revenue, and driving customer satisfaction. Let me tell you how you can regain control over your installed base.

Establishing a digital thread

A couple of years back, a premium brand of energy control systems sold its products based on a sell-and-forget model. That model had become the default modus operandi because:

The business sold a substantial volume of units through indirect sales channels
The company had a legacy of product leadership

This sell-and-forget model caused two major issues:

OEM perspective – the margin contribution of product sales was insufficient to achieve the brand’s EBIT target. Tapping into the margin of services would make It possible to meet and exceed that target.
Customer perspective – the new generation of products was getting more complex. Product owners became more dependent on OEM knowledge and services to sustain the product, to protect the investment.

To mitigate both internal and external challenges, the OEM changed Its model to sell-and-service. Historically, the OEM had access to the as-designed and as-built. Through its transformation journey, it established an as-maintained. In effect, the OEM created a digital thread spanning factory and field.

Indirect sales

You may have noticed a (deliberate) omission in the digital thread above. Namely the as-sold. When an OEM sells products via the indirect sales channel, another legal/commercial entity controls the sales process. This entity will ‘own’ the customer relationship. It will know where the products are, in what state they are in, and how they are being used.

The fact that another legal commercial entity controls the sales process does not mean the OEM is at a loss. Far from that. The product bears the OEM logo. It is the value promise of the product that prompts a user to buy it. Who is better at explaining what the product can do and how to install, operate and maintain the product? Yes, the OEM. The OEM owns the product relationship because it knows how to sustain the product.

Sustaining modern products

When we look at the build of modern-day products, we see that every product engineered post-year 2000 has a digital component next to its mechanical and electrical parts. To sustain a contemporary product, one will need three types of skills.

The OEM as the creator of the product may be the most knowledgeable party to sustain the product on all three levels. Where we see third-party actors becoming competitors on the mechanical and electrical plane, the digital component remains the ‘home turf’ for the OEM. This is where we will focus on re-establishing the thread.

Re-establishing the thread

In the B2C world, maybe the most evocative example is the iPhone. Every phone requires a digital activation. This allows Apple to build a product relationship regardless of sales channel. Through this product relationship, Apple knows where Its products are, in what state they’re in and how they are being used. Apple uses this information to exert control over the product and service lifecycle.

Car maintenance is another example where the product relationship is more determinative than the customer relationship. When you need service for your car, the service provider will ask for your license plate number. The as-built, as-sold, and as-maintained are all linked to your license plate. When the customer relationship changes, the product-related digital thread remains constant. It’s the information in the digital thread that enables control over the product and service lifecycle. Control over items like maintenance intervals, PM-kits, troubleshooting, engineering changes, recalls, consumables, calibration values and software upgrades. All these service lifecycle activities cater to the longevity of the car, and thus the original value proposition of the OEM.

Redefining value creation

When an OEM is dependent on indirect sales channels to push products into the field, what can the OEM do with the data and control obtained through the product relationship?

Threat: The OEM claims the data and uses it to bypass the commercial relationship. If dealers/resellers don’t get their cut, they will stop selling the product.
Opportunity: The data value is shared to augment the commercial relationship. The data is used to create new revenue/value streams beyond the capabilities of each of the standalone entities.

A similar redefinition of value needs to be negotiated with the product owner. An OEM can’t simply grab product data. When Xerox invented remote monitoring for copiers in 1997, owners blocked the outgoing port. Procurement wanted to have control over the purchasing of toners and drums over premium-priced OEM consumables. This example shows that if product data represents a value, the OEM should give something in return.

OEM, it’s your brand

As the OEM you design and manufacture fantastic products. When in the field, they have your logo on them. Product owners will judge your brand on how you’ve organized your service delivery. If you’re dependent on an indirect sales channel to sell and service your products, you can leverage the product relationship to augment the commercial relationship. The tools to build a digital thread are there.

To learn more about establishing a digital thread for field service, read Understanding the Digital Thread & the Role of Service in the Asset Lifecycle.

This article is published on Field Service Digital and PTC Blog.

Digital Thread: Closing the Loop

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

What’s so compelling?

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

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

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

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

Design-for-Service

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

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

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

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

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

Closing the loop

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

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

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

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

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

There is more

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

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

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

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

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

This article is published on Field Service Digital and PTC Blog.

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

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

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

This blog is part 3 in a series of three:

Part 1 – How the Service Bill of Materials Links Engineering to Service
Part 2 – How the Service Bill of Materials Drives System of Record Platforms

The value promise of the product sale

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

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

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

Total cost of ownership

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

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

Title passage

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

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

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

Cross and upsell

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

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

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

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

Digital thread

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

This article is published on Field Service Digital.