A Short Story about Servitization: Part 2

Aug 10, 2015 • Features • future of field service • Dr. Michael Provost • Servitization

As someone who has been involved in the growing trend towards Servitization and Advanced Services since their inception, Dr Michael Provost is perfectly placed to help make sense of what can be a complex topic in his new book “Everything Works Wonderfully: an Overview of Servitization and Physical Asset Management” (www.everythingworkswonderfully.com).
Mike’s book begins with an excellent short story that helps define Servitization in a clear and concise way. Click here to read the first part. Now Field Service News is pleased to publish the conclusion…

A Short Story (continued)

Peter Carpenter* managed to book some time with Anna Edwards* and they met two weeks later. Over coffee and sandwiches in Anna’s office, Peter went through the thinking he had been doing and showed Anna the ‘elevator speech’ that he had quickly put together during the train journey to HQ.

Anna stared at this for a minute or two before turning to Peter with a broad smile on her face. “I think you’ve cracked it, Peter!” she exclaimed. “I can see it now: our customers want what our power units do, not what they are. If we sell reliable power, not units, our customers will come to us rather than the competition to get what they really want and will pay us a fair price instead of ringing me up at all hours of the day and night demanding yet more concessions.”

“You realise, Anna, that this will mean the company will have to change its thinking, from top to bottom.” said Peter. “For example, we won’t be able to rely on profits from spares sales to offset any losses made on unit sales because spares usage will appear on our books, not the customers’. Our units will have to consume fewer spares than they do now. Engineering and Manufacturing will have to listen to inputs from Spares and Repairs and we will need to put comprehensive and robust systems in place to gather, store, process and output information about how our units are working in the field. It’s a whole different mindset and some of the current managers won’t get it.” “Don’t worry, Peter!” retorted Anna. “Those that don’t buy into this will either have to change their thinking or leave. I’ll need a plan, a budget and a list of the people you think you’ll need to help you for the next Board meeting, to which you are invited.”

It’s a whole different mindset and some of the current managers won’t get it.

“Would you like to be the director in charge of this?” Anna added. “Of course, Anna!” exclaimed Peter. “This looks like a real challenge and, with your backing, we can build this into something that will completely transform the organisation. It will also get me away from all the jobs that need doing at home.” They both laughed. “What do you think of Helen’s design for a logo?” enquired Peter, as he turned to leave. “I thought it showed real flair and imagination.” “That could be your first decision.” replied Anna. “Let’s discuss it with Marketing before the meeting.”

The Board poured cold water on Peter’s presentation, but Anna insisted that Peter’s initiative had to be pursued, made Peter the Board member responsible and gave him her full support. The next few years were hard, but genuine progress was made by Peter and his team and even the most sceptical Board members couldn’t brush aside the company’s much improved financial state. Peter set up a subsidiary to ensure that the initiative grew without being stifled by the old guard, who saw their power and status threatened and pushed back hard. As predicted, those who didn’t fit into the new culture either left voluntarily or were asked to go.

MW4 grew rapidly: many managers and employees saw it as an opportunity to escape from the limitations imposed by existing corporate structures, the company was able to recruit many good people with the skills it required and those involved relished the chance to contribute fresh ideas. Eventually, as the market responded positively to the new way the organisation conducted its business and built more constructive relationships with its customers, sales and profits rose, the City started to take notice and the share price began to rise rapidly. Anna knew that she had turned the corner when she overheard a long-serving manager talk about product sales as the entry ticket to the true market, which was satisfying real customer needs rather than merely selling clever bits of metal.

The true market was satisfying real customer needs rather than merely selling clever bits of metal.

Customers began to ring Anna up with fulsome praise rather than complaints and the press and investment analysts began writing long, glowing articles about the ‘new’ Precision Powerplants*, which began to be seen as a model company that pointed the way to the future rather than a relic of past glories. Peter and Anna were in great demand to speak at industry and government events as other companies sought to emulate Precision Powerplant’s success. Marketing even produced a very concise summary of MW4, inspired by Japanese Haiku poetry: “We will both prosper if you buy what our products do, not what they are”.

Anna was just finishing off her last cup of ‘canteen cappuccino’ when Peter breezed in. “The Oracle has spoken!” he exclaimed. “I am the new boss! It wouldn’t have happened without your unwavering support over the last ten years, Anna. Thanks for everything!” Anna stood up to shake Peter’s hand, knowing that the company would grow and prosper under Peter’s wise guidance. As she left for the last time, a thought struck her as she turned on the windscreen wipers: perhaps she should use the proceeds from selling some of her share options to buy that villa near Saint-Tropez that Chris had seen advertised in the FT. It would make a good surprise birthday present for him and provide a much-needed bolthole from the atrocious UK weather.

* Note: the company and characters are fictitious, but the scenarios are based on experience.

Please note that this short story has been previously published in the following:-
Provost, M. (2014). Everything Works Wonderfully: an Overview of Servitization and Physical Asset Management - a Short Story. Asset Management and Maintenance Journal, Volume 27, Issue 5, September 2014, pp. 43-45. Mornington, Victoria, Australia: Engineering Information Transfer Pty Ltd.