AUTHOR ARCHIVES: Coen Jeukins

In this new article for Field Service News, Coen Jeukens, VP of global customer transformation at ServiceMax, explains how to create a custom fitness plan to keep your assets in shape...

Do you have this feeling that the battery of your phone drains faster and faster? Internet forums are full of testimonials and resolutions for keeping your battery in tip-top shape. How does this apply to B2B products, equipment and assets? Can asset owners monitor the performance of the equipment, and what handles do they have to maintain output/ outcome at the nominal level promised at point of sale?

For many years I’ve captured the digital and service transformation journey in a single tagline: “from fixing what breaks to knowing what works.” The message is driven by a simple principle: customers expect things to work. Even more, they expect the outcome of the asset to be stable over the lifecycle.

Another simple truth is that everything eventually deteriorates and breaks. This prompts the following questions:

• What is the life expectancy of the asset?
• What do I need to do to keep the asset in shape?
• What can I do to extend the life cycle of the asset?

Building a Fitness Plan

Preventive maintenance might be the first thing that comes to mind as the way to keep your assets in shape. But what does preventive maintenance (PM) prevent? And how does it affect asset performance and life expectancy? This was a tough question to answer when one of my counterparts in procurement, who was looking to reduce the selling price of a service contract, asked me, “What will happen when we reduce the PM effort by lengthening the interval?” This was even more difficult to answer when it became a numbers game, and the purchaser asked me to prove the offset between PM and break-fix.

So where do we look next? I propose condition-based maintenance.

We know that the performance of an asset will deteriorate over time, and we know the rate of deterioration will depend on various attributes like aging and usage. Because these attributes are measurable, we can use them as levels to trigger a service intervention.

So rather than taking a one-size-fits-all approach based on time intervals, you can create a custom fitness plan for keeping your assets in shape. One that looks at the condition of the asset in relation to its expected performance. This can look like an intervention being triggered when the output of an asset or the viscosity of a lubricant drops below a certain threshold.

To continue with the fitness metaphor, we often don’t just want to stay in shape—we also want to increase our longevity and even get in better shape as we age. When it comes to your assets, this is where mid-life upgrades, booster-packs and engineering changes come into play. And in the same way that you use predefined levers to trigger service interventions, you should use these levers to trigger updates, upgrades and lifecycle extensions.

Both of these service strategies use asset health at the core of your service delivery model, steering you away from ‘fixing what breaks’ and towards ‘knowing what works.’

A Real Life Example

Imagine you have a pump and valve combination that has a nominal capacity of 140 m3/h.

If you used a preventive maintenance model that runs every 6 months, it would not take into account the age of the pump and valve combination, nor would it account for the corrosiveness of the transported materials.

But if you took a condition-based approach using IoT-connected sensors, you could measure attributes like vibration, temperature, and energy consumption and use them as indicators for asset performance. For example, if the capacity drops below 130 m3/h, a service intervention would be triggered. It’s like the pump saying: “I’m not feeling well, I need medicine.” On top of this, if you detect the pump is consistently pushed beyond original specifications, you can know that it’s necessary to initiate an upgrade conversation to safeguard asset health and durability

Asset Centricity

The common theme of these service strategies is asset centricity. It’s about putting asset health at the core of your service delivery model and continuously comparing an asset’s current output with its expected performance.

By looking at current performance, expected performance and demand, you can also advise your customers on when it’s time to downgrade or upgrade the asset. Through this asset-centric lens, you can truly become a fitness coach, advising your customers on the right fitness program that will keep their assets in tip-top shape.

Learn more about IoT and condition-based maintenance here.

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Further Reading:

• Read more about Leadership and Strategy @ www.fieldservicenews.com/leadership-and-strategy
• Read news and articles about ServiceMax @ www.fieldservicenews.com/servicemax
• Read more articles by Coen Jeukens on Field Service News @ www.fieldservicenews.com/coen-jeukens
• Find out more about ServiceMax @ www.servicemax.com/uk
• Follow ServiceMax on Twitter @ twitter.com/ServiceMax

Do you know what your maximum service revenue potential could be based on the product units your organization sells? Is your current service revenue less than this maximum? Do you have a process to upsell service contracts into your existing installed base? Coen Jeukens VP of global customer transformation at ServiceMax explains more...

If you gave one or more puzzled looks while reading that, chances are you are suffering from upsell leakage.

In my previous article on revenue leakage, I defined two types of leakage: contract and non-contract leakage. In this article, we’ll define upsell leakage. It is very likely that upsell leakage at your business could be twice as big as the other two combined.

Understanding Upselling Leakage

As a service organization, you’d like all your customers to buy your premium service. Some customers will buy ‘gold’ service level for their installed base, others will be happy with ‘basic’ service. It all depends on the use case of your customer and their propensity to value the services you offer. As use cases tend to change over time, you may want to consider setting up an upselling program using the touchpoints from your service delivery.

“If you don’t ask, you don’t give them the opportunity to say yes.”

Not having such a program deprives you of revenue potential; being the delta between your current service revenue and ’gold’ service level.

Defining the Upsell Service Revenue Potential

To quantify upsell leakage we can use a mechanism known to Sales as TAM (Total Addressable Market). Suppose you sold 1,000 units at $10,000 each. Suppose a ‘gold’ service contract has an annual selling price of 12% of the unit selling price. This would put your service-TAM at $1,200,000 per annum.

Imagine your service department has 600 of those 1,000 units on their radar screen. The rest is sold via an indirect sales channel and/ or lost-out-of-sight. This gives an installed base visibility of 60%. Let’s assume those 600 units generate a service revenue of $400,000, split across:

• 10% of units are in (OEM) warranty and don’t generate revenue (yet)
• 50% of units have a bronze, silver, or gold contract generating $240,000
• 40% of units don’t have a contract and generate $160,000 in Time & Material (T&M)

With the above figures, you currently reap 33% of your service-TAM and you have an upsell potential of $800,000. Monitoring this upsell leakage metric should give you the incentive to put a revenue generation program in place.

Identifying the Metrics that Impact Upsell Leakage

In the numeric example, we’ve touched on three metrics that impact upsell leakage.

• Installed base visibility: It all begins with installed base visibility. Units not on your radar screen will not contribute to your service revenue! This is easier to manage for units sold via your organization’s direct sales channel, though it does require an effort to manage the life cycle from as-sold to as-maintained. For units sold via the indirect sales channel, you’ll have to exert extra effort to get access point-of-sale data, maybe even ‘buying’ the data.
• Attach rates: Both warranty and contracts are attached to the unit, thus driving attach rates. Attach rates are ‘boolean,’ they say something about having an attached contract, not about the amount of revenue you get through that contract. Attach rates start at the installation/ commissioning date of a unit. Either Sales makes the attached-sale at point-of-sale of the unit or the Service department drives the attaching post-point-of-sale. The driving metric for Service is to maintain a continuum of attachment throughout the life cycle of the unit.
• Service revenue contribution: Within the subset of attached contracts, you’d like to have as much revenue contribution as possible, ‘gold’ service being the holy grail. Per service contract you could have any of the following revenue contributions:
  • OEM Warranty: 0% of Service-TAM
  • Enhanced Warranty: 33% of Service-TAM (only the on-top-of OEM warranty piece)
  • Extended Warranty or Basic Service: 67% of Service-TAM
  • Gold: 100% of Service-TAM

Remedying Upsell Leakage

The overarching paradigm to growing service revenue is twofold: increasing your installed base visibility and making sure you have attached offerings to those units.

Getting visibility on units sold via the indirect channel is slightly more complicated, but once you quantify the associated service-TAM with those units, you may have the ‘funding’ to ‘buy’ the data. This may even lead to revenue sharing models with your channel partners. The last piece of the puzzle is using the visibility of the upsell leakage gap whenever you have a touchpoint with your customer.

Note that the original (service) contract has been drafted many months ago by people who are further away from the business, who could not 100% envision the service reality of today. You thus may end up in an entitlement conversation where the customer has an urgent requirement whereas the contract ‘only’ covers for the ‘basics.’ The delta is an upsell opportunity. Either resulting in an upgrade of the service contract or maybe only upgrading an incidental work order. In case the latter happens more often, you have the data points to convince the customer for the former.

Now, understanding that upsell leakage is potentially twice as big as contract and non-contract leakage together, you may have found your compelling reason to start another revenue growth project.

Learn about ServiceMax Entitlements here. 

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Further Reading:

• Read more about Leadership and Strategy @ www.fieldservicenews.com/leadership-and-strategy
• Read news and articles about ServiceMax @ www.fieldservicenews.com/servicemax
• Learn more about ServiceMax Entitlements @ www.servicemax.com/asset-360/warranty-contract-management
• Read more articles by Coen Jeukens on Field Service News @ www.fieldservicenews.com/coen-jeukens
• Find out more about ServiceMax @ www.servicemax.com/uk
• Follow ServiceMax on Twitter @ twitter.com/ServiceMax

Coen Jeukens, Chief Service Officer, D-Essence describes himself as a business leader with sales DNA and a service heart, here he outlines the knowledge he thinks every service manager should have in his tool belt when it comes to selling service both externally and internally...

In the boardroom Let us start with an example of a typical business plan review meeting:

• Exhibit A: our targets are more ambitious than our current performance.
• Exhibit B: we face increased competition, increased customer volatility and shorter product life cycles leading to declining market share and diminishing attach rates.

Now suppose the CEO invites you, the field service manager, to pitch a solution to this non-sustainable situation.

Are you prepared? Will your message and vocabulary resonate with the board members?

For as long as I can remember, field service managers bring a message of reality about healthy and sustainable profit margins - about attach rates and trusted relationships.

What do you think the sales manager brought forward as solution? A message of hope: “if we introduce a new model, add a new feature or drop the price, we will regain market share”.

When it comes to choice, a message of hope prevails over one of reality.

What makes the clock tick?

The ugly truth of corporate economics: it’s all about sales and success is measured in revenue figures.

Add to that the sales perception that after-sales does not exist without an initial sale and you know the picking order is set. Also factor in mind that most CEO’s have a sales background.

Sales targets

Sales is a big numbers game. Product hero’s playing with capital expenditures.

Going for the win is putting in a peak performance in a short period of time, balancing effort and reward. Asking sales to include Opex related  propositions in the sale does sound altruistic considering that doing so complicates, lengthens and may jeopardise the sale. What about profitability?

In the sales mind-set profitability is not a driver or performance indicator. Not because they don’t care, far from that. Because in most customer organisations the decision making unit for both Capex and Opex are different entities optimising their own silo.

Profitability, who cares? Certainly not sales.

Funnelling leads and Qualification

Sales vocabulary uses words like suspect, prospect, lead and qualification. Elias Lewis has put these words in context in 1898 when he conceived the sales funnel. This funnel is engrained in every sales process. It is in the DNA of sales people to convert leads into a sale.

One of the most important steps in the sales process is the qualification of a lead. Here sales balances effort with reward. When service starts feeding the funnel, it is crucial to know the difference between a lead in the eyes of a field service engineer and a lead according to sales.

In the eyes of sales service-leads are a big bag of small peanuts.

Converting those requires a lot of effort with small reward. For sales to follow-up on service-leads, those leads need enrichment and qualification.

What we need to grow sales? Leads, more leads and qualified leads.

Window of opportunity

Though the clock ticks sales, typical sales solutions to the corporate challenge fail to reverse declining market share or do so at the expense of profitability.

In both cases the course is not sustainable. This is good news as it provides the opening for the field service manager to come forward with his ideas.

Remember, growing sales is an operational process.

Growing your business is changing your business model.

Find the right tune

Although ideas have been voiced for many years at field service conferences, they will be new for sales once rephrased in sales vocabulary. It will become a customer touch points game with roles for hero’s and ambassadors. It is the perseverance of sales to get to a customer on board. It is the caring mindset of service to keep a customer happy. It is their joint effort to come up with new business.

Find the right mix between sales DNA and a service heart to develop new business.

How will sales react? As long as the field service manager doesn’t gloat over his profit contribution and trustworthy customer relationships … and sales can stay in the lead, then sales will go along.

Field service managers can lead by following.

 

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The profit contribution of services compared to product profits has been the subject of many workshops over the past decade. Still, achieving a true shift in sales focus is a “Groundhog day” experience writes Coen Jeukens, Service Contract Manager, Bosch Security Systems...

At the Copperberg April 2016 UK Field Service Summit service industry experts had their own groundhog day experience when discussing the “Demand generation” topic: what can the service manager do to go beyond the daily break-fix mode towards cross and upselling.

In five consecutive rounds the same discussion was reiterated varying the contributing industry experts. The individual rounds revolved around common convictions like:

Should we dilute customer trust created by service engineers with potential alienation when stepping into a commercial role;

• Service is about helping customers, not selling to customers;
• Service and sales have different counter parts and decision making units;
• What is a meaningful incentive for service people to spot sales revenue and vice versa;
• Service and sales people have different DNA.

When looking at the discussions at an aggregate level, demand generation is possible when taking the following recommendations to heart:

Use service engineer more as a brand ambassador than sales-lite;

• Empower service engineer to become a hero on site;
• Incentivise customer feedback instead of monetizing prospects/ leads;
• Feed customer feedback into marketing function;
• Creation of a “product” development function for services;
• As service manager, do not boast yourself as being a profit centre, but emphasise your contributing role in co-creation with sales.

The service engineer as brand ambassador

Comparing the amount of customer touch points and level of client trust, service engineers do have an edge over sales representatives.

Though it sounds tempting to dual use service engineers as sales-lite, don’t do it.

Engineers gain their stature through technical competence and stamina to prolong the operational performance of a piece of equipment. As such the engineer is the perfect ambassador for brand loyalty.

 

In analogy with politics, the ambassador is an important player in a multi-faceted sales game: the ambassador provides intelligence, sales translates intel into leads and deals, while fencing the ambassador’s neutrality.

When contemplating to add a sales role to service engineers, do balance the risk and reward. Bear in mind that from a decision-making unit (DMU) perspective the service engineers’ counterpart is the end user and not the asset owner/ buyer. At best the end user will decide on OPEX matters.

When it comes to CAPEX the end users’ role diminishes to that of influencer.

Hero on site

Other reasons not to mingle sales and service objectives are the differences in DNA and aspirations. A sales representative strives to become trusted business advisor in order to generate long-term revenues.

A service engineer by default has a long-term relationship, a high level of trust and an advisory role. The service engineer wants to be the hero on site, he wants to be able to help.

• As a hero on site and brand ambassador, the service engineer can use his stature to open doors and generate leads on two levels:
• OPEX leads: consumables and wear & tear components
• CAPEX leads: generate demand for new offerings

Empowerment is the key on both levels:

• OPEX leads: It is easy for a service engineer to convince an end- user to buy small maintenance related components. It makes him a hero if he can supply and install them right away. Any “delay” in conversion of lead into sales not only deteriorates the sales momentum, it also affects the hero status of the engineer.
• CAPEX leads: In his default mode, the service engineer will try to fix the existing equipment compared to suggesting a replacement or new buy. When hinting towards the latter, the service engineer puts his hero status at risk because the conversion of the lead into a sale falls outside his control. Nothing is more deadly for a hero than raising an expectation he can’t deliver.

Incentivise customer feedback

Frequent customer touch points and a high level of trust put your service engineer in a unique position to be the eyes and ears of your organisation. Capitalising on that position requires a multi-tired approach.

In analogy with the concepts of “big data”, capturing the sensory output of the service engineer is step one. The interpretation of that data into a lead is step two. The conversion into a sale is step three.

When the collection of data is driven by an intended use for sales, you may not only miss out on many subtleties of customer feedback, but also bias the observation with short-term gains.

Apart from asking your service engineer to collect specific data that is not in his DNA, you may also risk the neutrality of your ambassador/ hero.Ideally you may incentivise your service engineers to collect customer intelligence and feedback regardless of its conversion into sales.

Feed marketing

Information collected by service engineers is a valuable addition to the data input of your marketing function. Once in your marketing process it augments existing data and will result in better quality leads.

Better leads are more prone to be picked up by sales. Follow up by sales will make the service engineer feel taken seriously.

Not only will this boast his hero on site stature, he will also use his trust with the customer to make him decide positively on the sale. Knowing service engineers have access to high quality and individual customer intelligence, using that information may also inspire you to rethink the workings of marketing.

 

Markets are less homogeneous than a decade ago. New technologies and the growing importance of customer experience will even further individualise customer behaviour.

Services development function

Acknowledging declining profit margins and fierce competition on products, transitioning to a more customer/ services centric earnings model is the logical way to go. The customer intelligence and feedback from your ambassadors and heroes will become vital in understanding his needs.

Where your products development department can tell you everything about your products and their roadmap, any service engineer can tell you how your customers use those products and how customers experience their use.

The combination of product and its use open up new sales opportunities. As use is the dominant factor, the appearance of the offering is customer specific.

Setting up and embedding a services development function in your organisation will enable you to add service revenue streams in an efficient manner.

Your service engineers will be the prime suppliers of input to your service development function. Similarly to proving input to your marketing function, the engineer and customer will feel appreciated when they receive feedback that their information is taken seriously.

Service as contributing centre

In achieving demand generation, adding sales roles and goals to the service department may sound as a logical thing to do.

The profit contribution promise may even tempt you further.

Apart from the considerations in the previous paragraphs, beware that the creation of a secondary sales channel does invoke competition between the sales and service department. A competition that more likely will emphasise differences and prejudice than seeking the common ground.

 

Success lies in positioning your service department as a contributing centre. Let sales be in the lead. Use the traction of the sales department to get organisational and CEO buy in.

Make sales the internal hero by feeding them with high quality service engineer data.

Empower your service engineer and make him the external hero.

As finishing touch, invest in a service marketing and services development function. Sales and service seek the commonality and acknowledge each other’s strength.

 

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