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:

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.

Digital Thread: How the Service Bill of Materials Links Engineering to Service

When we embark on a digital transformation journey in the after-sales domain, where does the process start? With the sale of the product? Commissioning of the product? First service call? We believe the foundation for the design of your service delivery processes starts in engineering.

This blog is part 1 in a series of three.

The creation of the service manual

When Engineering designs a product, they have an intended use profile in mind. That use profile defines wear-and-tear. Subsequently, the maintenance engineering function will define mitigating strategies to maintain the output specifications of the product and to sustain/prolong its lifecycle. The results are typically captured in the service manual and the Service Bill of Materials (BoM).

The golden standard of service

In a recent engagement with a prospect of ours, we asked to see the service manual of a medium-complex product to scope the service delivery business processes. Our premise: we may upsell on the service manual and promise higher value, but when we deliver less, product continuity and lifecycle may be at risk. As such, the service manual can be seen as the golden standard of service delivery.

In the 165 page pdf-document, we found a wealth of information on what to do, when to do it, and how to do it. Bill-of-materials, serviceable parts, PM-frequencies and kits, recommended consumables and spare parts, installation parameters, calibration values, and MTBF rates. We got enthusiastic. If somebody in engineering created this document, how does it ‘flow’ to after-sales? What system of record does after-sales use to be able to act upon the information in the service manual?

Digital thread

In the last decade, we’ve seen a lot of digitization initiatives driving the transformation agenda. We’ve also seen that a lot of digital data is still created and collected in silos. Engineering is digitizing product lifecycle management (PLM), manufacturing is pursuing Computer-aided manufacturing (CAD), sales are rolling out customer relationship management (CRM) and service is reshaping field service management (FSM). But how do they link to one another? Isn’t the overarching value promise of digitization the sharing of data leading to 1+1=3?

If your organization is in the business of designing, manufacturing, selling, and servicing products, then all those functions are connected through a digital thread. The carrier of the thread is the product itself. Starting as an as-engineered and subsequently transitioning into an as-built, as-sold, and as-maintained. In each stage of the lifecycle, additional information is added to the thread. Zooming out, each function will look at the digital thread through a lens to increase the value proposition.

Design for service

In our engagement with the above-mentioned prospect, we were curious how much design-for-service thought was put into the engineering phase and how that information would shape the design of the service delivery processes. Though the wealth in 165 pages of the service manual was phenomenal, the service organization had not yet invested in processes to receive the engineering baton.

The opening paragraph of the service manual provided a great narrative to introduce the baton. “Congratulations on your purchase. To protect your investment and get maximum return, we’ve defined some handles for good husbandry. This manual contains the instructions to guarantee the nominal output over its technical lifecycle”. In other words, the service manual defines the golden standard of maintenance to underpin the value promise of the product sale[1].

What Engineering documented in the 165-page service manual can be condensed in the following picture. In the first column, we find the Service-BoM. The Service-BoM is a subset of the Engineering/Manufacturing BoM. It contains only those parts that are serviceable. The manual pre-empts what skills are required to perform that serviceable activity. Can it be done by the customer, does it require a skilled technician or should the part be swapped in the field to be repaired in a depot/repair center?

With the above information from maintenance engineering, service delivery has a great blueprint defining what output its business processes should deliver. Analogously, service sales has an anchor to model cross and upsell offerings for customers having needs beyond the baseline described in the service manual.

Design for improvement

The service manual also serves another very important purpose; improvement. Improvement in two directions. Engineering giving handles to service and service giving feedback to engineering. As an illustration, I’ll use the mean time between failures (MTBF) column in the above table.

When Engineering designs a product, they typically have an idea of the lifecycle/MTBF of used components. Those values initially are theoretical numbers. Call them Plan. When the product hits the field in larger numbers, empirical values will trickle in. Call them Actual. When Actual is within a narrow margin of Plan, we say this is expected behavior. When it falls outside the margin, we call it an outlier. Understanding the root cause of the delta between Plan and Actual will enable you to drive improvement by process design.

  • Maybe the product was not installed properly
  • Maybe the product was not used as intended
  • Maybe engineering was wrong
  • Maybe service delivery was not in line with the service manual
  • Maybe the customer pushed out a preventive maintenance cycle
  • Maybe non-approved spares have been used

Actionable Service-BoM

What started as a trivial ask “can you share the service manual of a medium complex product” resulted in a pivotal conversation bridging engineering and service. The service manual is no longer a static 165-page pdf-document sitting in a knowledge repository. It is now an actionable document driving improvement and value in both the service and engineering domains.

[1] When selling products with a transfer-of-title, the risk of maintaining the product transfers to the buyer. Thus, the buyer becomes responsible to mitigate that risk in order to continue receiving the outcome/value of the product. The buyer may purchase maintenance services from OEM or choose differently. Read further in part 3 of this Digital Thread series.

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