Getting all the work done is more and more becoming a juggle in finding both quantity and quality of skilled resources. Forrester, IDC, TSIA, Aberdeen and The Service Council are all in unison about the technician gap. And the gap is growing.
The existing technician workforce is getting older. At the same time, the influx of new resources is not keeping up with retirement pace. A new generation prefers STEM-education and expects digital in their work-life. Though new assets are likely to have a digital twin, a lot of equipment out there pre-dates the digital age and requires legacy knowledge to keep it running for one or two more decades.
<Quote>1 in 2 UK engineering and tech firms are concerned that a shortage of engineers is a business threat – PoliticsHome – Nov 18th, 2019 </Quote>
More vocal customers and focus on customer experience is changing the characteristics of a service job. It’s not enough to only fix the product, you need to “fix” the customer too. Customers want transparency and they want you to be proactive. Above all, they want you to transform from “fixing what breaks to knowing what works”.
In solutioning the technician gap digital technology is both an enabler and driver. The availability of new capabilities is allowing us to rethink how we deliver services and even augment our business model. Having seen a lot of different technologies emerge, the big question is when to jump on the bandwagon. And when you do, don’t try to boil the ocean. As with any product, tool or software, it’s not about buying or owning it, it’s about adoption and using it.
Before you spring into action, do consider the following four questions:
What is the work of the future?
Who will do the work? Own resources, (sub) contractors or the customer?
How do you prepare people for the work they need to do?
With what tools will you equip those resources?
This paper will provide you with insights and handles to attract, retain and deploy resources in a smart and cost-effective way. Imagine what you can do today to boost your brand value.
Through sweltering heat and fierce blizzards, HVAC technicians are there to keep equipment running at peak performance. But how do you make sure you get peak performance out of your HVAC service organization year-round, year-after-year?
Here is a list of 7 tips to help you achieve excellence in your HVAC service organization.
Manage resources through all seasons
Maximize uptime of HVAC equipment
Improve margin of service operations
Drive cross & upsell
Dealing with increased HSE requirements
Sustainability, dealing with HazMat
Manage resources through all seasons
A customer requirement for heating and cooling is seasonal, resulting in an equally seasonal pattern in technician demand. Typically, a service organisation will try to balance resource capacity by doing installations, retro-fit and preventive maintenance during low season and dedicate capacity in peak season to break-fix.
Over the years HVAC organizations have acquired a lot of tribal knowledge to mitigate the daily resource juggle. Modern service execution systems will facilitate you to formalize this tribal knowledge and to upgrade your capacity planning process applying dynamic scheduling. As a result your customers will get the service they expect and your technicians will feel in control instead of being dragged from job to job.
Maximize uptime of HVAC equipment
The majority of today’s service level agreements are still stated in terms of Effort. “We will commence the fix of the malfunction in x hours”. Some contracts up the value promise to a Result. “We will deliver a fix within y hours”. To offset the risk of penalties, the latter contracts often have a section of fine print watering down the Result. What owners of HVAC equipment want is Uptime.
Combining IoT connectivity and Service Execution Management allows a service organisation to both deliver the Uptime a customer expects and to deliver that service in a cost-effective way.
Improve margin of service operations
Competition in the HVAC industry is fierce. Original Equipment Manufacturers (OEM), Third Party Maintainers (TPM) and Facility Management Companies (FCM) all operate in the same space to make a margin. A quick search on the internet tells us that a typical HVAC nett profit margin ranges from 1.4% for TPM/ FCM to 12% for OEMs. These numbers indicate that cost control is a constant driver in decision making.
To control cost you need visibility. To create visibility you need tools and processes. Though HVAC equipment may comprise of generic components, both the infinite number of configurations and wide range of commercial conditions agreed with customers define your requirements for agile service execution tools. Tools minimizing the dependency on IT support and maximizing flexibility for your markets & channels.
Although we see cost control having the primary focus in HVAC, we see maturing organizations driving for revenue increase. The service agreements with low margins won via a tender process, often only contain the basics. The basics being periodical maintenance, a response promise topped with contracted rates and material discounts. To make a customer account (more) profitable, service organisations depend on their ability to cross and upsell beyond the basic contract.
Technicians being trusted advisors to your customers can act as eyes and ears to detect revenue enhancing opportunities. Capturing leads, enabling technicians to quote on-site and ultimately being able to convert a quote into a work order will attribute to your revenue growth targets. In parallel you will see that both customer experience and technician empowerment will get a boost.
According to The Service Council approximately 32% all field service work is completed by partners/ subcontractors. Though this percentage may vary per market and product segment, subcontractors play an important role in getting all the work done. Subcontractors come in all shapes. Sometimes they will compete with you, in other markets they may complement your route-to-market.
Prioritizing and assigning jobs are most probably the two most important aspects of dispatching affecting both cost and service level attainment. Make sure your dispatching console supports you in decision making while simultaneously maintaining visibility of the job progress once handed off to a subcontractor. Modern tools can alleviate the need for complex subcontractor integrations by means of allowing the subcontractor using your processes on a device of their own choosing.
Link: TSCReport-F-2016 -FSOutsourcing-04.pdf
Dealing with increased HSE requirements
“Heating, ventilation and air conditioning company, HLA Services, has been prosecuted by the Health and Safety Executive (HSE) and fined for safety failings after an employee suffered serious injuries in a fall whilst repairing an extraction unit in Newcastle.”
A headline like this is the dread for any company. Of course, you will tell your technicians how to adhere to all regulations at hiring, during onboarding and probably you will have periodical health & safety briefings throughout their tenures. Ultimately you want to create a safety culture in your organisation.
Life gets complicated when the regulations change, when procedures are different per customer location. Somehow you need to embed health and safety handles into daily operations. What if you could make those part of the work order and track compliance through a configurable set of check lists.
Beyond safety for technicians governed by measures of HSE and OSHA we see that HVAC organisations also have a responsibility to take proper care of hazardous material like refrigerants. The increasing attention for the sustainability theme is raising the bar to reduce the use of materials in general and reclaim reuse.
To achieve these goals, you need a service execution system that embeds a supply chain function. To be able to track the use of material and to instruct technicians what to do with defect, used and waste materials.
What is the ideal customer experience and when do you know you got it right? What should you measure and how should you act? In short: read the comments! As a bonus: do an e-NPS.
The real growth power of NPS is all in the follow-up
At Maximize Chicago Stephan McPhee from MilliporeSigma and Coen Jeukens from ServiceMax engaged in a discussion with service leaders on the topic of CSAT, CES and NPS. In varying degrees, we all measure customer experience. Though the different metrics may cause confusion in what you actually measure and should do.
What is the ideal customer experience?
If we briefly put aside the metric and look at what (end) customers really want, two things really stand out.
Get what you Expect
Walk the Talk
The former means a customer is getting the value it has been promised, the latter ensures the delivery is done consistently and setup for repetition.
Different methods of measuring
To measure customer satisfaction three different metrics are in use. Each catering to a different aspect of satisfaction.
NPS: will you recommend my brand?
CSAT: are you happy with the transaction I just performed?
CES: how easy is it to do business with me?
At present the most popular metric is NPS. Aly Pinder from IDC Manufacturing Insights shared his observation that more and more organisations are leaning towards Customer Effort Score as it addresses the action to remove friction, alias dissatisfaction.
Perhaps what you measure is what you get. More likely, what you measure is all you’ll get. What you don’t (or can’t) measure is lost.
H. Thomas Johnson
Read the comments
Ultimately the actionable result of any satisfaction metric is the most important piece of the process. Throughout the discussion at Maximize the same phrase came back over and over again: “read the comments”.
The numerical value of a satisfaction measurement is single dimensional: it tells you “what” your score is and how it changes over time. The comments to the score tell you about the “why”. Often the comments contain “free advice” on how to remedy dissatisfiers.
In progressive organisations we see an embedded process to review the comments on a periodical basis, linked to their continuous improvement programme.
While most organisations have embedded customer satisfaction measurements in their modus operandi, a growing number of organisations is mirroring the NPS philosophy to their own employees.
Your own employees hold an invaluable wealth of improvement opportunities. Ideas to improve their own work and to be better equipped when dealing with customers. If you find a way to tap into this potential, you will see that happy employees indeed make happy customers.
Happy employees ensure happy customers. And happy customers ensure happy shareholders, in that order
Simon Sinek (leadership expert)
If you want to receive more insights into how ServiceMax embeds satisfaction measurements into every aspect of Service Execution, do contact us.
Do you want to own a car, or do you want to drive it? Do you want to buy and maintain a piece of equipment, or do you want to operate it?
In our business practise we often have these conversations when reminiscing on what really matters to end-users. We tend to believe it’s about outcomes and value, call it Servitisation. Still we see a lot of conventional decision making focussed on the product and associated Capex.
Voice of the Customer
According to a research by Accenture[i] around 10% of the life cycle cost is linked to designed and acquisition. The other 90% of cost is incurred during maintain, operate and disposal. Thus, it is not surprisingly that we witness an increase in customer awareness concerning the maintain and operate phase of a product.
The maintain and operate phase is as important to the customer as it is to the supplier. Witnessing dwindling margins on the product sale, suppliers are (re)focussing on the profitable margin contribution of maintain and operate services. At the same time customers are trying to reduce their operational expenditures. Focussing on the voice of the customer is often the path to finding a long-term partnership compared to short-term commercial “victories” of either party.
We want to reduce our operational expense but realise that we need the supplier in the long run.
Why should I own the Product
The road to servitisation often starts with a simple question: “if I only want the value/ outcome of a product, why should I bear the risks of owning it while the supplier holds all the knowledge about the product”.
Rolls Royce “invented” Power-by-the-hour offering because the Royal Airforce demanded a fixed cost per hour in 1962.
Philips created Pay-per-Lux in 2015 as a result of an academic experiment with Schiphol Airport only requesting light.
Bosch Siemens Hausgeräte offers refrigeration-as-a-service to housing corporations reducing total cost of ownership while at the same time minimising ecological footprint.
The common thread in the above three examples is that these manufacturers transformed their business model from one based on Capex and Title Passage to one based on Pay-per-Use and partnership.
It’s a matter of looking at a bigger picture beyond the typical functional boundaries inside any organisation:
Apart from the one-time-sale, what is the “win” for a manufacturer in selling a piece of equipment the customer is not able to use?
Apart from a short-term saving, what is the “win” of a discount for a customer when it stiffens innovation?
The transformation towards outcome-based service contracts enables both manufacturer and customer to define mutual and sustainable value.
A Product is the carrier of its Outcome
Leap of Faith
To a certain extent buying/ selling a Service rather than a Product is a leap of faith. Both manufacturer and customer are in for a paradigm shift.
A manufacturer will have to recalibrate from the concept of infrequent revenue recognition to sustainable margin contribution.
A customer will have to disconnect the outcome of a product from owning it.
Thus, we see manufacturers and customers not completely abandoning the Capex & Title Passage business model, but we see them adding a business model based on outcome-based services once their mindset embraces the bilateral value promise.
Gartner[ii] expects that by 2023, 25% of commercial or industrial OEMs will offer IoT-connected product(s) via outcome-based service contracts
Seconding the transformation towards outcome-based services is the rise[iii] of the role of the Chief Revenue Officer (CRO). With a lesser margin contribution from the product sale organisations are looking at means to tie in the margin contribution of services. With a CRO organisations are putting all their eggs in one basket regarding to drive sustainable and profitable revenue growth. Companies with a CRO are leading with outcome- and subscription-based service offerings.
Digital and Connected
In an outcome-based model the focus shifts from Owning to Using. Digital technology and connected products are the key enablers in understanding and managing product usage.
It starts with creating full visibility of how a piece of equipment performs in the business context of your customer and how costs are incurred in doing so. Next, you’ll need to have a set of levers to be able to influence the both maintenance and operate activities. Lastly, you’ll need to understand how your customer will make money by using the outcome in order define a pricing model.
In a business model based on title passage and transfer of risk to customer there is a lesser motivation for the supplier to invest in digital and connectivity. The greater the motivation is in an outcome-based model where all maintain and operate risks remain with the supplier. Technology becomes a means and necessity to mitigate those risks.
Digital stream lines operations
Connectivity creates visibility and transparency
Customers expect things to work
A second reason to invest in digital and connectivity is an increasing customer expectation that products simply must work. This implies two things:
Prevent a product from breaking.
When it does break, minimise the impact on operations.
Using technology allows us to pre-empt a failure and to minimise the impact of downtime on operations.
In an outcome-based business model both customer and supplier have an aligned interest to ensure availability of the outcome “when needed”. The last two words are essential, because no matter how much you’ll invest in preventing downtime, ultimately any product will break or need maintenance. Thus, it’s the combination of technology and understanding the outcome requirements of your customer that defines the ability to monetise outcomes.
With new outcome-based variants in the offing, we often hear the doubt: “What happens when the outcome is made available by supplier, but it’s not utilised by customer”.
For nearly two decades we are familiar with the copying machines example where you pay per copy. Over the years copier companies have perfected their outcome-based model with their customers to mutual benefit. The mechanisms they have created:
Provide consultancy and software solutions to make better and more usage of the deployed copying machines.
If utilisation goes up, the copying machine is replaced by a larger model and the former model is deployed at customers with a smaller demand.
Use price breaks and contract duration to cater to customer cost predictability expectation.
Going back to our own examples. An airline buying power-by-the-hour has a genuine interest to fly the planes. A building owner buying pay-per-lux or refrigeration can only last when having tenants. If you can find the right driver to bill your outcome, outcome-based services are the way forward. In the end we want to use products. We need medical equipment because we value life. We require construction equipment because we need buildings to live and work. We need transportation means because we want to travel. Looking forward, the Gartner prediction may be conservative.
[i] Insight into Asset Lifecyle and Total Cost of Ownership – Accenture 2012
[ii] Critical Capabilities for Field Service Management, Gartner 2019 – G00436216
[iii] Anticipating the Information Needs of the Chief Revenue Officer in 2023, Gartner 2012, G00239551,
Beim Aufbau und der Umgestaltung einer Serviceorganisation wird unweigerlich das Thema des Umgangs mit externen Dienstleistern und Partnern (Contractors) zur Sprache kommen. Ob es nun darum geht, zu skalieren, flexibler zu werden oder die Kosten zu senken – die meisten Diskussionen drehen sich um das „Wie“. Wie können wir eine Vielzahl potenzieller Partner verwalten und gleichzeitig die Kontrolle über Kunden und deren Erfahrungen behalten? Und was können wir tun, um die Chancen einer Zusammenarbeit zu maximieren und die Risiken zu minimieren?
Um das richtige Gleichgewicht zu finden, definieren wir in der Regel zunächst Begriffe wie Outsourcing / Insourcing und (Sub-) Auftragnehmer / Partner. Je nachdem, ob Sie ein OEM (Original Equipment Manufacturer), ein Third Party Maintainer (TPM), ein Anlagenbetreiber oder ein Facility Manager (FM) sind, ergeben sich unterschiedliche Auswirkungen.
Wenn Sie also Vertragspartner zu Ihrem Ökosystem hinzufügen möchten, müssen Sie die Regeln für die Einbeziehung klar festlegen und diese mit unterstützenden Tools und Prozessen festigen. Diese Regeln können an Bedingungen geknüpft sein, die je nach Region, Produktgruppe, Art des Auftrags usw. variieren.
Ähnlich wie bei der Beziehung zu Ihren Lieferanten werden Sie wahrscheinlich ein unterschiedliches Maß an „Nähe“ zu Service-Vertragspartnern haben. Diese Beziehung ist definiert durch die Verfügbarkeit von Partnern und deren Wettbewerbsposition gegenüber Ihrem Endkunden.
Zudem bieten Servicepartner heute die Flexibilität, verschiedene Servicemodelle umzusetzen: Partner
verwenden Werkzeuge und Prozesse von einem OEM
bringen ihre eigenen Geräte in die Prozesse des OEM ein
verwenden ihre eigenen Tools und Prozesse – Arbeitsaufträge werden als Blackbox eingeplant
verwenden ihre eigenen Tools und Prozesse – Aufträge werden mit vollständiger Transparenz eingeplant
Diese Flexibilität erlaubt Ihnen, Ihre Partner gezielt so einzusetzen, dass Sie mehr Kunden besser bedienen können.
Sie haben nun mehr Flexibilität, Servicepartner zu nutzen, wie können Sie dennoch das Kundenerlebnis steuern? Einige unserer Kunden wünschen eine konsistente Servicebereitstellung, ohne dass der Endkunde weiß, ob der Service von ihrer Organisation oder von einem Partner erbracht wird. Andere Kunden möchten die Unterschiede zwischen den Serviceleistern hervorheben und dies als Wettbewerbsvorteil nutzen.
Um erfolgreich das Kundenerlebnis zu messen, müssen eine höhere Sichtbarkeit geschaffen, die Performance der Serviceleistungen gemessen und einheitliche KPIs für alle Serviceerbringungen definiert werden. Wenn Sie Daten gemeinsam nutzen, ohne über deren Interpretation „verhandeln“ zu müssen, können Sie Ihre Geschäftsziele an den Geschäftszielen Ihrer Servicepartner ausrichten. Infolgedessen gewinnen Sie, Ihr Contractor gewinnt und Ihr Endkunde gewinnt.
Abgesehen von strategischen, kaufmännischen und technischen Aspekten ist die Steuerung eines Servicepartners wie die Steuerung der Serviceerbringung. Bis zu einem gewissen Grad sollten Sie die Arbeit externer Ressourcen auf ähnliche Weise messen wie die Arbeit Ihrer internen Mitarbeiter. Ihr Endkunde soll das erhalten, worauf er Anspruch hat, gleichzeitig möchten Sie eine angemessene Marge erzielen.
Da Servicevertragspartner zu marktüblichen Konditionen arbeiten, sollten Sie sich auf die folgenden drei Messgrößen konzentrieren, da diese die Kundenerfahrung, die Serviceerbringung und die Leistung der Auftragnehmer am unmittelbarsten beeinflussen:
First-Time Fix: Ist die Servicequalität gut, wurde das Problem sofort behoben?
Mittlere Reparaturzeit: Wie lange dauert es, bis das System wieder verfügbar ist?
Net Promoter Score: Ist der Endkunde mit dem Service zufrieden?
How are your service operations doing and where do you see the improvement potential?
In facilitating many transformation journeys, we are privy to conversations with excutives and people in the field alike. In bridging everything in between we discover a wealth of ideas and point of views. The instrument we use: the ride along.
Going in the field
In many organisations it is common for a manager/ executive to “go into the field” as part of the onboarding process; to get to know the business. The ride along builds and expands on similar learning objectives.
“Staple” yourself to a service request, follow each step in the process and observe
Merging different views on the business
Because executives, managers and people in the field have different experiences and scope of responsibility each has a different appraisal of the state op operations. The ride along taps into the diversity of views to create a more holistic and shared business objective. In parallel the discussion facilitates understanding and buy in.
A ride along has the potential to transcend priorities and experiences across functional silos and hierarchies. A ride along creates mutual understanding and paves the way for adoption and value delivery.
Understanding the As-Is
Doing a ride along is literally observing a process end-to-end and asking tonnes of “why” questions. We find that people are often able to explain “what” they do and “how” they do it. Getting to the “why” is important as it gives insight into people’s understanding of what they do and how that links to their perception of the overall business objectives.
As a very important adjacent benefit we see that the ride along instrument creates understanding and appreciation between all functions and roles involved in your service operation:
Horizontal: a process is typically a relay of activities spun across multiple functions. By sharing ride along findings across those functions any sub optimisation behaviour can be tabled.
Vertical: on the one hand we see executives/ managers operate at a greater distance from day-to-day service operations while on the other hand people in the field may feel detached from the office. Exchange of ride along findings brings your people closer to each other.
We see that people are genuinely inclined to change for the benefit of another person once they understand the issues & objectives of the other.
Small things having a big impact
When asking why people work as they do today with an open mindset, we tend to hear loads of smaller improvement opportunities that typically don’t make it to executive level. In the field people talk and care about the small things. Considering that most operational people in the service domain are customer facing, ideas from those people often have a proportionally large impact on customer satisfaction and thus customer value perception. Thus, those ideas are a valuable addition to the big things priming the agenda of executives.
“My management has a different perception on how we do our work. We use all kind of work arounds to get work done. Small things could make us so much more effective”
Technician during a ride along (2019)
Repeat and Improve
Transforming your business is a journey requiring frequent check points to see if everybody is still on board and if the original value promise materialises. The ride along proves to be a valuable instrument.
Thus, at ServiceMax we encourage and assist customers to perform ride along ‘s on a repetitive basis. In the first ride along we establish a baseline and project a trajectory of benefit potential. In all subsequent ride along’s we observe how the customer is using and adopting ServiceMax.
The repetition allows you to see progress and make it visible to all stakeholders. The repetition also allows you to spot obstacles and mitigate them in a timely fashion. Finally, the ride along facilitates the dialogue to push the needle for continuous improvement.
“Our people now better understand how each plays a role in the bigger picture. As a result, they feel part of a team and have inspired each other to improve. We will do a ride along next year.”
When building and transforming a service delivery organization, inevitably the topic of dealing with contractors and partners will come up. Whether the goal is to scale, to be more flexible or to reduce cost, we find most discussions revolve around the how. How do we manage a plethora of potential partners while maintaining control of customers and their experiences?
Our customers often say that in today’s competitive environment it is not a matter if they should work with partners, but how to go about it. Dealing with partners is a commercial reality whereby those partners can represent both an opportunity as well as a threat. What do we do to maximize the opportunity and to minimize the threat?
In order to strike the right balance, we typically start by defining terms like outsourcing/insourcing, and (sub)contractor/partners. There are different implications depending on whether you are an original equipment manufacturer (OEM), a third-party maintainer (TPM), an asset operator or a facility manager (FM).
So, if you want to add contracted partners to your ecosystem you have to clearly set the engagement rules and solidify them with supporting tools and processes. Above all, our customers tell us these rules are conditional. They may differ per geography, per product group, per job type, etc.
Tier your Partners
Similar to the relationship you have with your suppliers, you will likely maintain diverse levels of “closeness” with third-party partners. This is defined by the availability of partners and their competitive position in relation to your end customer.
In the past we’ve seen that once you’ve found a partner that also might work for other organizations, you’ve entered into the “battle” of whose tools and processes to use. Today, we see that our customers are asking for tools and processes flexible enough to cater to various models:
Contractors use tools and processes from an OEM
Contractors bring their own devices and hooks into the OEM’s processes
Contractors use their own tools and processes, and jobs are dispatched as black box
Contractors use their own tools and processes, and jobs are dispatched with full visibility
Having this flexibility at your fingertips allows you to tier your partners and leverage your ability to serve more customers better.
Controlling the customer experience
With the increased capability to leverage contractors in various configurations, how do you manage the customer experience? Some of our customers want a consistent service delivery where the end-customer is oblivious to whom the delivering entity is: your internal organization, or a contractor or subcontractor. Other customers want to emphasize the differences between delivery entities, using it as a competitive advantage.
One key to managing the customer experience is creating visibility, measuring performance and managing KPIs across all delivery entities. Sharing data points without having to “negotiate” on their interpretation will allow you to align your business objectives with your contractors’ business objectives. As a result, you win, your contractor wins and your end-customer wins.
Apart from strategic, commercial and technical aspects, controlling a contractor is like controlling service delivery. To a certain degree, you should measure work performed by external resources in a similar fashion as jobs done by your own internal employees. You want to ensure your end-customer gets what he or she is entitled to while you make a decent margin.
As contractors operate at arm’s length, consider focussing on the following three metrics as they have the most direct impact on customer experience, service delivery and contractor performance:
First-Time Fix: Is the quality of service good, has the problem been solved right away?
Mean Time to Repair: Is the delivery done in a cost efficient way?
Net Promoter Score: Is the end-customer happy with the service delivery?
Living apart together
Working with contractors is a bit like living apart, together. You have both overlapping and differing interests. By bringing the conversation to the “how to” level you can remove a lot of threats and weaknesses and focus on the strengths and opportunities. In the end, we all want to serve more customers, better.
Increasing machine uptime is at the core of what we do for our customers. We know that more than anything, our customers rely on machines to be online and fully functional in order to deliver results. From the small parts that make up a gamma ray machine to the pipe used in oil extraction, each part contributes to the general function and health of a machine. When the focus of service shifts to outcomes, it is not the value of the product/equipment that drives the equation. Even small and inexpensive components such as a pump or valve may have a tremendous impact. Service is a key component of a machine’s functionality, regardless of the size of the component, and as an organization we are laser-focused on minimizing unplanned downtime to ensure machines deliver positive results.
This perspective is driven by the need for tangible results and marks a tremendous shift in the industry we’ve witnessed over the past couple of years to outcomes over products. An outcomes-based model is where manufacturers focus on selling outcomes of a particular product rather than selling the actual product. For a solar panel farm, for example, the outcome is hours of energy created. Service teams and service providers will someday operate according to this model: instead of promising reactive repairs, service organizations will be responsible for ensuring that equipment is consistently delivering a valuable outcome by maintaining it proactively. Essentially, both the manufacturer and the service providers will be laser-focused on one thing: tangible results.
Here are three reasons why results are more valuable than the product itself – hint: it has to do with their value add past the point of sale:
Uptime Has a Direct Effect on a Company’s Bottom line: Equipment can have every cutting-edge capability in the world, but unless that machine is running smoothly and consistently, it isn’t contributing to company productivity. Like an old consumer appliance that sits stagnant collecting dust, equipment plagued by repairs and downtime draws valuable resources away from the company mission, whether that is to serve patients or facilitate renewable energy sources.
Steady Streams of Revenue: In an outcomes-based model, OEMs have the opportunity to continue providing service well past the point of sale, generating a regular cadence of income for the entire machine’s lifecycle. Since the goal is not only machine uptime but machine output, a product never leaves the cycle of service. Many companies already have service contracts in place which ensure a schedule of service in return of a regularly billed fee.
Customers Value Results, and So Should You: Delivering memorable, superior customer service alongside your product offering is pivotal in customer retention, service delivery, and contract renewals. A company who delivers outcomes and always-on machines differentiates themselves from competitors by providing their customers with more than reactive repairs. Customers are receiving more than machine repair, but peace of mind and the ability to rely on projected bottom lines. In the end, this is a less risky, and more valuable model of service.
Each of these key reasons proves a central point: the future of field service is only as strong as the outcomes it produces. And as the industry moves towards an outcomes-based model, machine uptime, productivity and efficiency becomes a meaningful reality down to each and every small part.
Today most service executives have a revenue growth target. After having delivered cost reductions for decades, the switch to delivering revenue growth is easier said than done. Where cost control stays within the current paradigm, growing revenue requires an entrepreneurial mindset.
When sales people need to grow revenue, their first response will be “Give me a new product, with more features at a better price point. And yes, we need a marketing budget too.” Let’s transpose this mindset to the service domain.
Give Me a New Product
Take a look at your current services portfolio. When is the last time you reviewed this portfolio? How did the services in your portfolio come to be? Was it an internal push or did you create a dialogue with your customer to develop these services?
Whether we use the word disruption or not, there are several changes to take into consideration.
There are two significant trends we see at play today.
From Product to Output to Outcome based services
From Reactive and Preventive to Condition-based and Predictive services
Give Me More Features
At home you may have a lot of products laden with features you do not use. Those features have been added by the supplier to cater to a multitude of use-cases. You may have a comparable situation with the “features” on your services portfolio.
In growing revenue, the most important thing is to have a dialogue with your customer to change the feature push into a feature pull.
A preventive maintenance example:
You can split the preventive maintenance job into three pieces:
The execution of preventive maintenance
Creating a report on the findings and activities done
Communicating about the job
Many customers see the execution of preventive maintenance becoming a commodity. They expect to get a report free of charge but will acknowledge its value increasing from a compliance point of view. The eye opener may be communication. When offering choices like email, telephone, video conference or communication on site, a growing group of customers will choose the latter. With equipment becoming so complex, customers want an expect to say something sensible about it. Often this visit turns out to be the largest cross and upselling opportunity.
We see two growth levers:
Suppliers adding communication “features” enter in a dialogue of value and drive new revenue streams
Suppliers adding features enabled by service and digital transformation are more connected to their customers leading to more sustainable revenue
At a Better Price Point
We’ve heard various asset operators say: “Less service is more”. Meaning, the lesser a piece of equipment requires servicing, the more the operator can drive value from its use.
We also hear that OEMs providing basis break-fix and preventive maintenance services saying that these services are becoming commoditised and are under severe price pressure.
Of course, you should continue your efforts in improving your internal efficiency and curbing your cost, but the move forward is to develop services higher up in the value chain.
We see a shift:
From Price to Total Cost of Ownership (TCO) to Value based proposals
We Need a Marketing Budget
In Sales, growing revenue is driven by touch points, leads and conversion of those leads into a sale. In Service we have plenty of touch points and we are driven by customer satisfaction.
We drive incremental sales while performing a maintenance job
We use customer satisfaction to the benefit of higher renewal rates attach rates post point-of-sales
Though these two actions do increase revenue, they build on existing customers in the service domain. To grow revenue further, you need to tap into a base beyond your existing service customers.
Sell services at time of product/ equipment sales
Sell services to adjacent and competitor equipment
To convince these “new” customers you need to be able to articulate how good and valuable your services are. Call it marketing.
In its latest report Gartner predicts that “by 2020, more than 40% of field service work will be performed by technicians who are not employees of the organization that has direct contact with the customer.” Whether this development is one of choice or industry dynamics, the ultimate questions are:
What impact does this have on my ability to deliver consistent service?
How to maintain a unified face to the customer?
Insourcing/ outsourcing issues are not new, though the drivers to do so have varied wildly over the last three decades:
Cost and head count targets
Business process outsourcing
As of late we see an acceleration in the shift driven by three trends:
Customers are more aware and have multiple service providers to choose from.
Increased ICT and Field Service Management (FSM) capabilities create a greater number of more capable service providers.
Healthy profit margins on services attract existing and new entrepreneurs to get a piece of the cake.
The consequence of this shift is that a legacy 1:1 relationship between customer and supplier turns into a many-to-many relationship. Customers have a greater selection of suppliers, and suppliers can reach out into new markets.
Scaling your service delivery capabilities
The threat of existing customers going to the competition and the opportunity to win customers in competitors’ markets drives the scaling of your service delivery capabilities. You’ll not only need to be able to vary the volume of your workforce, you’ll also need to be able to modify your business processes and workflow on the fly, based on real-time metrics. In this regard Gartner’s prediction is multi-angled and serves as a good compelling reason to act.