AUTHOR ARCHIVES: Nick Frank

Nick Frank, Founding Partner at Si2 Partners, discusses the importance of understanding the metrics you are measuring to asses both internal performance and external perceptions of your service delivery in the eyes of your customers, and how the two are closely aligned...

As a Field Service manager, imagine having one Key Performance Indicator in your business that could predict how your customers will experience your equipment. One simple measure that your teams could use as a focus for their primary mission; to ensure customers remain satisfied, loyal and profitable. The limitations of most measures of customer satisfaction and loyalty are that they look in the rear view mirror, in that they ask questions after the fact. Far better to create a leading indicator, but how?

To get a better feel for customer satisfaction, many managers spend time in the field talking to customers and their teams.

Some will create rafts of measures to monitor and improve their operations. Their logic being a great performing team is more likely to have loyal customers. However there is a temptation to measure everything, which can start to confuse teams.

To overcome this managers bring focus through introducing key performance indicator’s (KPI’s) and dashboards to make it easier to see the issues and take action. More sophisticated businesses look towards the Balanced Score Card methodology in which a more holistic view is taken of the operation. They not only examine financial and processes efficiency, but also consider organisational capacity and customers in relation to their strategic goals.

 

This balanced approach is pretty sensible, but a can be too ‘management speak’ for the people at the sharp end of the business.

The key challenge is to create measures that drive the right behaviours and culture, and not ones where people start to find ways of working around. So it is not quite as simple as many make out. From my own experiences of managing a european service operation, I always felt it would be extremely beneficial to develop a simple measure that was:

1. Easily understood by everyone.
2. That gave us a forward view that a particular piece of equipment was potentially going to lead to severe customer irritation and dissatisfaction.

Our business was injection molding systems, and we knew that something was going wrong in the customer when the spare parts spend of the machine increased, fault reporting was high and the same problem re-occurred over a 12 month period. We created a ratio of these 3 indicators and found that at a machine level, we could start to rank problem systems and identify those that were likely to turn into an irate customer.

Our thinking was that not only could this be used by the local teams to bring focus to a specific customer issue, it also gave an indications of how well teams were managing their installed base. Unfortunately for a number of reasons we were unable to operationalize this strategy and I often wondered how effective it would have been.

Recently I heard Mark Noble, Customer Support Director at Inca speak at a Service Community meeting in the UK. Inca design and manufacture digital printers and gave themselves the goal to improve the equipment productivity and hence satisfaction of their customer base. For their technology, it is the performance of the print head that controls up to 256 ink delivery nozzles, which is critical to uptime.

By combining 3 key performance parameters of the machine, alarms, nozzle deviations and productivity, Inca could rank their equipment in terms of the likelihood to cause customer dissatisfaction. They created simple dashboards that clearly identified the priority machines to be working on.

This allowed them to identify faults before they became critical therefore reducing costs, enabling their customer support centre to identify issues more effectively, maintaining better print quality and improving the planning of engineer visits around customers production runs.

 

A second example of this approach is at Peak-Service, part of the Qiagen corporation, a €1Bn technical services supplier for medical, analytical and industrial equipment. As part of their transformation journey, they created a customer experience indicator which aggregated measures of machine utilisation, revisits, call response time and call completion time.

They used this to help focus their teams and people on the drivers of customer experience as they moved through a transformation programme. This gave them one measure, which was easy to action and could be used to demonstrate results.

This thinking shows that by using operational data that already exists in most businesses, it is possible to create leading measures that drive action. The analytical techniques are in fact relatively simple, it is more having the right mind-set to try a different approach which is the challenge.

As products become connected through the IoT, so the opportunities to gain greater insight into customer experience and satisfaction will expand. Some might call this predictive and others a big data opportunity, but the name is not important. The critical insight we gain from these examples is that these companies are applying their deep know-how of their equipment and customers business, to identify problems before they happen.

Fore-armed is fore-warned!

If you would like to enter into a deeper discussion on this topic and others, why not join other industry professionals at the Service In Industry blog.

 

---

 

Be social and share this feature

Nick Frank, Managing Partner, Frank Partners explores the importance of having a road map for harnessing the power that lies within a field service organisation...

As businesses begin to embrace the opportunities offered by the IoT, digitilisation and analytics, many are unsure what they are going to do with all that information.

Within Field Service most of the thinking is centred on driving out cost through remote diagnostics and services. But this is just the tip of the iceberg.

The digitalisation of products provides an even bigger revenue opportunity, often in ways not initially foreseen.

Many companies are turning to Service Thinking to identify the profit pools that they can exploit within their customer and industry value chains.

[quote float="left"]Many companies are turning to Service Thinking to identify the profit pools that they can exploit within their customer and industry value chains.[/quote]For example in the haulage industry, the truck itself only represents perhaps 8% of the running costs. 50% is the fuel bill and 25% the driver. Truck manufacturers such as MAN have developed servitized business models based on Telematics technologies that improve fuel consumption and turn the Truck into an operating expense.

This data driven business model has enabled early adopters such as MAN UK to grow their business by a factor 10 over the past 20 years against a declining market.

Although ‘Service Thinking’ will help identify the areas of priority, how do companies go on to figure out how to develop data driven solutions.

For example take SAVortex, a UK SME who have developed a SMART connected hand dryer with remote diagnostics.

The idea was to use connectivity to dramatically reduce maintenance costs for hand dryers in large office complexes. This they achieved, but in addition found that the data they had on the usage of the toilets was even more valuable to their customers.

Nearly everyone who goes uses a toilet also washes and dries their hands. By monitoring the usage of the hand dryers, large facility managers could infer the footfall in different areas of the building, so optimising heating, light and cleaning costs. These savings could in certain cases far outweigh those achieved within the original business model.

The question is how can we help companies make this type of leap in imagination.

A framework originally developed by IBM and reported in the Harvard Business review, can help companies explore the value of their digitalised assets. 5 patterns of innovation were identified that could be used to monetize data;

1. Add new value to existing Products:

This comes from understanding the data being produced by products and whether it is possible to generate insights from it. In particular whether these insights could add new value to us, our customers, our suppliers our competitors or players in another industry. The SAVortex hand dryer is a good example of this.

2. Combining Data within and across industries:

Is it possible to combine the product data with another data set to create new value? In the truck example the driving habits of the driver could be analysed by MAN through the telematics.

When combined with the drivers names held by the haulage company, training could be recommended to improve the capability of drivers to optimise fuel efficiency enabling profitability to be doubled!

3. Digitalising Assets:

Which assets are digital in nature and how can this feature be used to increase their value? Is it possible to turn physical assets into digital assets? An example from the field service world is that some spare parts will not be held as physical stock, but as a digital drawing. When the part is required, the drawing is down loaded to a 3D printer at the point of need for the part to be produced. This has significant implications on the business model for spare parts and where value is created.

4. Trading Data:

Can data be structured and  analysed to yield higher value information?

Again the Savortex example is a good example where the usage information of the dryer is can be sold to the facilities company due to the inherent value.

5. Codifying a Capability:

Does a company have a significant capability that can be digitalised and which others value? Many industrial companies have a huge amount of intellectual property which if put on a digital platform can yield immense value to various stakeholders. For example the bearing manufacturer SKF has many industrial apps which their customers and channel partners can download to help make their equipment more effective.

Key to success is to embark on this process with a cross functional team, adequate resources and senior management support.

With these in place, the next step is to know what data you have from your products and operations.

What data can you access but are not capturing? Do others have data that would be helpful to you and how might you collaborate with them. Then, by examining each of the five patterns, ideas begin to emerge and develop.

The creative process is greatly facilitated by two further actions;

 

1. Having a strong technology presence within the team who can understand how data can be extracted, exchanged and mashed up.
2. Having input from external parties who can bring an Out-Side in perspective to the technology and business challenges What is clear is that opportunities are growing for product companies to find new value from the data they generate.

 

With an open mind-set, some determination and a structured approach, this provides industrial companies with a significant opportunity to grow through embracing the digital economy.

[hr]

Be social and share this feature

 UK manufacturing is re-inventing itself with services as a core element of companies' growth strategies.  In an industry-led initiative, business leaders are seeking input from a wide variety of of companies to help develop a National Strategy for Manufacturing Services.  UK businesses can add their voice to the discussions via a series of free workshops.  Nick Frank, Frank and Partners, explains the strategy and how to get involved.

It is now widely accepted that technology and manufacturing impacts our economy far more than the 10% GDP often quoted. There is another 10% to be found in manufacturing services and probably a lot more, when you look at the full supply chain of support required to keep industry working. With digitalisation starting to enable dramatic changes in business models, products sales are slowly being replaced by services; ‘Power by the Hour’ being the well-known example with jet engines.

But manufacturing and product related services are also facing a chronic skills shortage, which will stifle future growth. If the UK is to prosper, then it must re-think its definition of manufacturing, the skills required and the value it brings. Critical is inspiring a new generation of our best young people to choose a career in industry because they see it as ‘sexy’, fulfilling and lucrative.

These are some of the reasons why leading UK companies such as Rolls-Royce, Bombardier Transportation, Siemens, BAE Systems and Babcock International are pushing for a National Strategy for Manufacturing Services. They are not alone, having teamed up with Ministry for Business Innovation and Skills, industry trade bodies as well as well as thought leaders from Cranfield, Aston and Cambridge universities. The fact that this initiative is led by industry is critical. Industry sees that with the mainstreaming of IoT technologies and the coming of a new millennial generation, which is more technology savvy and attuned to collaboration and networking, a new way to compete needs to be found.

As Dave Benbow, Head of Engineering for Services at Rolls-Royce and co-chair of the initiative passionately puts it;
“Collaborative development of capability in through-life engineering services will be key to future success in a world where technical innovation is demanded in both products and services.”

The truth is that we have to re-invent manufacturing in order to compete in the global market. Recently an excellent article in the Economist, ’How does Deutschland do digital?’ highlighted how Trumpf, a leading global supplier of machine tools, is building a new business vision based on ‘software and data’. The global market for what some call ‘through-life engineering services’ and others would describe as ‘making things work better for longer, delivering lifetime value from products, assets and infrastructure’, is worth over £1 trillion and the UK is estimated to only have maybe 5% of this share. It is clear that this sector will be key to manufacturing productivity and high value jobs in the circular economy of the future.

 

A recent study by Cranfield University revealed that in this market segment, the salaries are generally 55% higher than the UK industrial average! It is clear that with a bit of imagination, Manufacturing has the potential to be very attractive to young people with an incredibly diverse range of evolving well paid careers.

However it is also clear that if the UK wants to do more than just compete, it must be far more ambitious at a National level. As a nation we need to:

• Develop skills and behaviors that encourage the multi-functional and collaborative needs of the future work force
• Innovate better tools and techniques for data integration and analysis
• Create formal standards that enables knowledge transfer across industries and through the supply chain
• Revolutionize the supply chain to adapt to the circular economy

In short we need a National Strategy for the UK, where thinking and language on the specific actions the UK needs to succeed are aligned across the nation. Solutions to this challenge have become possible as the key stakeholders combine behind one initiative to develop manufacturing services as a driver for growth.

Now in a series of workshops led by the EPRSC Centre for Innovative Manufacturing at Cranfield, a series of free workshops are being held across the country to gain your input. We want businesses from the wide variety of industries that make up the UK’s industrial fabric, to talk and describe their needs. You will have a chance to mix with leaders in Services and learn about the business models developed by some of the leaders of UK’s industry. We need your feedback to develop a strategy that is truly representative of UK industry.

If you would like more information on this initiative you can contact Nick Frank,  a member of the steering group, at nick.frank@frank-partners.com or you can sign-up directly on the Through-life Engineering Services website.

 

---

 

Be social and share this article

September is a busy time for conferences, and if you are in the UK there's an opportunity to attend two very down to earth events.  Here’s a preview by Nick Frank,  who also reports on the latest developments in a campaign to re-invent manufacturing and service in the UK.

30th September: The Service Community

Hosted by the Aston University in Birmingham. A very different event for service industry professionals. We are expecting over 40 participants to discuss and debate how Big Data is being used to affect customer outcomes. Practitioners from Rolls Royce, Pitney Bowes and Inca will be discussing their personal experiences.  In addition we will have a view of the future from Andreas Schroeder of the Aston Business School. This event is unique: there are no sponsors, no hidden agendas, just professionals talking to professionals…a true community. To sign up see the Service Community website

6th October: Creating Value through Service.

A one-day conference hosed by the Cambridge Service Alliance . Although a paid conference, I always find the CSA events well worth going to as they present ideas that are on the leading edge of services development in industry.

Something up in UK manufacturing

There is something up in the UK which will have tremendous implication on field service in the future. I was at the House Commons with Professor Raj Roy and his team from Cranfield as well as senior leaders from some of the UK’s leading manufacturing and engineering companies when they presented a case for a National Policy for Through Life Engineering Services to MPs.

Through Life Engineering Services can be described as ‘Engineering for Life’ – making things work better for longer; delivering lifetime value from products, assets and infrastructure

Cranfield’s EPSRC Centre for Innovative Manufacturing has been working on the engineering expertise that underpins the ability for companies to provide their customers with AVAILABILITY and/or OUTCOME based contracts. These contracts reflect a world where customers no longer want to purchase the asset, but are redefining their needs in terms of outcomes - Rolls Royce’s Power by the Hour is one of the best known examples.

Research has shown that the TES market in the UK generated £23bn revenues for the UK. The exciting thing for the UK is that politicians, technology and industry are starting to realise that manufacturing must re-invent itself, if it is to be sustainable and competitive. They see that manufacturing is no longer just about the product. With the IoT, data and analytics it has become much much more fuzzy. This has tremendous implications for field service. A National Policy will speed up this change and hence the new skills sets required to effectively operate in these re-defined business environment. We will return to this subject at a later date.

Welcome back from summer!!

 

---

 

Be social and share news of these events

The next event of the Service Community will be the held on the 30th September 2015 from 12.30 to 17.00. We are very lucky to be hosted by the Aston Business School, where Professor Tim Baines, Director of the Aston Centre for Servitization Research and Practice leads one of the largest UK teams looking to support UK manufacturing be more successful through service based business models.

This special event is themed on a current key industry issue:

‘Using Big Data to achieve successful customer Outcomes’

Dr Andreas Schroeder from the Aston Business School will provide a perspective based on leading edge research as to how to overcome the challenges of leveraging the big data opportunity to deliver successful  customer outcomes.

We will then hear from industry speakers as to the hands on challenges their companies have faced in using data to create competitive advantage.

• Andrew Harrison will be talking about the how Rolls Royce Aerospace use the data they collect from their engines to deliver new services and reduce costs
• Jeremy Harpham from Pitney Bowes will present the role data is playing as this household brand transforms itself into a leading global e-commerce provider
• Marc Noble will tell us about the role data has played in  Inca Digital’s journey to service excellence

The format will be very informal to encourage as much dialogue as possible, and if there is time we will have a Panel Q&A.

To register your interest and reserve a place – please send your contact details to TheServiceCommunity@gmail.com

Please tell your colleagues about the event, which is free of charge.

For details of our last event in April where  35 professionals met at Fujitsu, Stevenage, see this link.

And for more background on this unique community of like minded people, see this link

 

---

 

Be social and share this story

Implementing mobile apps alongside developing a good understanding of your customers can pave the way to harnessing the power of IoT, writes consultant Nick Frank.

The key to monetising the Internet of Things (IoT) and Big Data is not to focus on the technology itself, but the impact on customers’ business processes and business model. However, many companies do not find it easy to imagine how their business model might change. Many are lost in the technical jargon and the abstract nature of data and analytics.

Mobile apps present a pragmatic way forward for industrial companies to understand how connectivity technologies and data can make a difference to their business. By their very nature, mobile apps affect how people “do stuff” and so the business rationale is often easier to define and quantify. As managers and leaders become savvier about apps, their imagination starts to kick in and they see the possibilities new technologies can have on their customers’ business success.

But what exactly is a mobile app? A mobile app is a software programme designed to run on mobile devices such as smartphones and tablet computers. They can be relatively simple such as the weather app on your phone, or they can be tremendously complex such as running a VMI business with its own databases, analytics, integrating a number of legacy systems. Gartner a leading technology research and advisory company, expects that by 2017 mobile apps will be downloaded more than 268 billion times and mobile apps users will provide personalised data streams to more than 100 apps and services every day. Mobile apps have already become truly integrated into most people’s lives. Although the same is not yet true of business, perceptions are rapidly changing. Undoubtedly driven by their everyday life experiences, managers are starting to imagine the value apps can bring to their own business by linking people with processes and systems more effectively.

Talk to leading providers of mobile apps and they will tell you it is not a case of building an app that replaces an existing process. Yes, the app is something new, but if it does not make that process more efficient, then it has minimal value. Often the mistake many companies make is that they see mobile apps as a separate marketing tool or feature. Companies who successfully implement mobile applications take a more strategic perspective and see the app as being embedded within the business processes. These companies first examine their existing workflows in detail to uncover improvement opportunities. Then, they identify the business benefits they expect to receive from the solution and create the metrics that demonstrate value after the rollout. And finally, these organisations pay attention to the deployment in terms of end-user acceptance, testing, implementation and change management.

 

One such app developer, Lextech, even coined ROA, or “Return on App,” as a tool for measuring the value of the mobile app versus the investment in it. To make sure app projects are worthwhile, Lextech helps their clients find apps that provide a 100% ROA within 12 months or less. It is this emphasis on understanding what the mobile app can do for the business that is critical to success. This success can be measured in terms of cost saving, new revenues, customer satisfaction or even employee satisfaction.

The great thing about mobile apps is that they provide solutions to make life easier for employees on the move. Whether that be to automate a process or have access to relevant data, these solutions use the internet/telecoms infrastructure to increase the flexibility and effectiveness of people while they are outside the normal company IT infrastructure. These efficiencies can be easily quantified within the operation and when multiplied across many people, can have a significant financial impact. This makes building the investment plan and decision making much easier to push through than more intangible IoT/strategy/business model projects.

 

Often companies start with automating the workflow because clear time savings can be demonstrated and measured. For example, SKF, the leading worldwide manufacturer and supplier of precision bearings, spindles and seals, knew that their factory inspectors recorded huge quantities of information on paper forms and clipboards. They replaced their paper based inspection processes with an intuitive app that enabled data to be collected and automatically downloaded into the factories reporting systems, thus reducing the reporting time by 70%. But often there are many other benefits that are not anticipated. In this case, nearly real-time inspection enabled faster decision-making on quality issues, which in the end translated to better margins. Highly skilled employees were able to focus on adding value rather than administration. (Source: Lextech)

For example an industrial services company with over 100,000 employees in 150 countries had field workers who often needed to order materials for their clients that could range from cleaning supplies to HVAC systems. When they reviewed their workflow, it was apparent that the process was complex and inconsistent as it involved a mix of email, PDF attachments and phone calls. They defined a very clear metric, which was to reduce the turnaround time for a PO. Their solution was to replace the existing legacy system by developing a dedicated app that enabled the field worker to directly enter the relevant details, submit the request, and the manager to be alerted to approve the PO. By dramatically speeding up the PO process, not only has customer frustration declined, but cash flow has improved through faster invoicing.

 

But if we step back from these examples, what do we see? Companies are learning how to effectively use data and technology to improve their internal business processes. This journey is more cultural than technological. It is about companies and people not getting overly excited by technology for technology’s sake, but keeping their focus on the users and the business outcomes. Switch this same emphasis to their customers’ business, and they will be much better positioned to monetize the new technologies entering our everyday work environment at an exponential rate.

This change in mind-set is very real, even for companies that have already integrated data and intelligence into their own business model. For example in a recent FSN interview, Dave Gordon from Rolls Royce’s Defence business described how, even in a very sophisticated data driven business, the design of a fuel management app had a deeper impact on the business than he first imagined. The app itself came from a desire to better utilise the vast quantities of information being generated from their service contracts, which told them how efficiently their aircraft were being flown. Fuel consumption is a huge part of the total operating costs for all their defence customers, so designing a mobile app which ‘brought to life’ this data could help their customers significantly reduce their fuel bills. By using mobile app technology, they were able to work outside the existing IT architecture, which allowed greater creativity without losing out on security. Finally, the practical nature of the app caught the imagination of the Board of Directors, who appreciated the opportunities that data analytics and connectivity could bring to their customers.

 

The mobile app is just the tip of the iceberg. The amount of information and know-how successful industrial companies possess cannot be underestimated. One reason industrial brands are so robust is because they have delivered value, knowledge and outcomes over many years. For many businesses, the growth of digital services around mobile apps and IoT is a strategic imperative. Especially in industries that have complex supply chains requiring large quantities of technical information, the opportunity to gain competitive advantage through a knowledge platform that supports the supply chain ecosystem is significant.

 

In a recent Harvard Business Review article, Filippo Zingariello, Director of Global Strategic Development at SKF described how their SKF Insight programme is critical to delivering value to customers in mission critical applications. This programme has a specific goal, “Bearing Health Management will make it simpler and more convenient for customers to conduct condition monitoring and increase reliability, simplify maintenance, extend bearing life and cut total life cycle costs.” SKF has developed 45 different iPad apps that enable customers to access the data and intelligence of their assets. With over a half million machines connected to the SKF cloud, mobile apps are one of the enabling technologies for a new SKF business models based on outcomes and intelligence.

Through these examples, we have seen how mobile apps are initially used by businesses to connect their employees to their business systems so they can deliver value more effectively. As that insight into the customer’s business model grows, so mobile apps become an important enabler for customers to connect with its products and services. In this way mobile apps are not just an interesting little icon on a screen. Rather, they are an important enabler for mind-set changes that will enable companies to harness the power of the IoT and analytics technologies.

 

---

 

Be social and share this feature

Good-bye products, hello services? The IoT and connected products means companies will  need to monetise IoTs, says consultant Nick Frank.

‘Assets will no longer be bought, but provided as a service!,’ brainstormed a senior UK manufacturing executive at a recent workshop on UK manufacturing facilitated by Cranfield University. If true, the whole nature of manufacturing, engineering and service will change forever.
We already see that the data generated by digitalisation is beginning to blur the distinction between products and services, two mega-trends are driving us further in this direction:

1. IoT and connected products are becoming part of our everyday thinking: As the Internet and smartphones have become integrated into our lives, so the idea of connected products has become the norm. Significant investments from industry heavyweights such GE, Siemens, PTC & Microsoft have created a hype that this is an opportunity not to be overlooked.
2. Governments will legislate for the Circular Economy: Who is not aware of the environmental challenges that we face on our planet today. No longer can we dig up resources, turn them into products and then throw them away. Now we have to recycle our assets and ensure they stay at the highest value. Governments are starting to legislate for what is called this Circular Economy in the way they manage large infrastructure investments such as rail infrastructure and defence.

A key challenge for companies is how to react to these big ideas in a way which is relevant to today’s business and society. The current approach appears to be a fixation on technology: ‘Think what the IoT could do for you by monitoring your fridge or health through your Apple Watch’.[quote float="left"]A key challenge for companies is how to react to these big ideas in a way which is relevant to today’s business and society.

This is great for stimulating our imagination, but does not help monetise the technology. The key is to mix this imagination, with a deep understanding of the customers’ business model and processes. Then figure out how to apply your technical or business knowledge to improve whatever it is your customer is trying to achieve.

Often this is called Service Thinking, yet most engineering and manufacturing companies actually struggle with it. Yes, these companies look at the customer needs, but they fail to deeply understand how their customers make money and the available profit pools in their industry’s supply chain.

However, increasingly we can see successful examples of how companies are using Service Thinking to expand their horizons.

I recently met with Gerard Shaw who is MD of a small Northern Irish company, LISTO, who style themselves as ‘Cloud Data Innovators’ . His goal is to find people with big imagination and insight, and help them develop solutions. He told me of a 3rd party service company who provided maintenance for air-conditioning systems covering multiple brands. In a very competitive market, their key customers were telling them not to just meet the agreed SLA’s, but to actively optimise their energy and maintenance costs. By monitoring two standard outputs found on all brands – first whether a unit is running and secondly pressure across the filter - they could understand the performance of that unit.

Through connecting units using standard telecoms technology to a web portal, they can now see failures and react before their customers report it. They can see poor performance and plan in visits, so reducing their own operational costs. When performance of a unit is poor, they can put together a business case for their customers on why they should purchase a new unit. A very simple solution, based on knowing what was important to the customer, and the critical data that could make a difference.

 

At the other extreme is MAN Truck UK who used Service Thinking to grow their business from £50M to £550M over a period of 20 years. Faced with the challenge of a declining market, the management team worked with their key customers to understand that the truck is only 10% of the annual running cost. Their customers wanted them to tackle the real issue that made a difference to their profitability. This was fuel, which accounts for 45% of their costs and the driver another 29%. MAN knew a 10% saving in fuel consumption, could double the annual profit per truck for the haulier.

Initially they developed a full maintenance contract to optimise performance, a key element of which was the telematics data systems that were just starting to be designed into the truck’s controls. They then had the insight to invest in the telematics infrastructure, allowing them such a high level of control that they could offer the truck as a leasing service. Plus the data they created on how the driver was performing enabled them to further reduce fuel consumption and decrease insurance premiums.

In both examples technology was not the route to the solution. The answers lay in a deep understanding of the customers’ business model and figuring out how to make a real difference to their profitability. Sounds simple, but not always so easy. As more companies master Service Thinking, then maybe we are getting closer to the day when most assets are delivered as a service.

 

---

 

Be social and share this feature

Held at Fujitsu Stevenage, this event brought together 35 service professionals from around the country who listened to and discussed four excellent presentations covering various aspects of Outcome Based Services.

The excellent speaker this time around were:

• Veronica Martinez a globally eminent researcher in the area of Servitisation, presented an overview of the research she has been doing with the Cambridge Service Alliance. She told us how some of the worlds leading brands have approached developing Outcome Based Services, giving an exceedingly deep insight into the change process. Brilliant for any manager working on service transformation!
• Alex Bill gave his perspective of developing Outcome Based Service at the coal face. As a service professional in a major Power Generation OEM, he gave us insights into how the business model to make money is not as simple as just selling a service.
• Des Evans, the Ex CEO of MAN UK gave us the business perspective on servitisation, with insights from his 23 year journey to grow the business from £55M to £550M. It was a must ‘hear’ for anyone selling service concepts to their board.
• Chris Farnath Director International at Allocate Software, shared his own personal journey in leading business change toward outcome based services in the IT/Software world. Again incredibly useful to understand how he is approaching the ‘messy’ challenge of service transformation.

Thanks to all the participants for a great networking and discussion event

For a personal perspective on the event, read Martin Summerhayes’ account below which is also published in his personal blog.

 

---

 

Service Community Conference - Outcome Based Services

[quote]“The purpose of a business is to get and keep a customer. Without customers, no amount of engineering wizardry, clever financing, or operations expertise can keep a company going.” ― Theodore Levitt

 

The first Service Community event for 2015 was held this week. There are two Service Community conferences that are held every year. They were first started by a wonderful consultant and friend, Steve Downton, many years ago and have continued to be popular and thought provoking events. Unfortunately, Steve lost his battle with cancer last year and a number of the core members of the community [including myself] decided to keep the event going - as much in Steve’s memory - as well as it gives a fantastic, open forum to share ideas, the latest thinking and case studies from the world of Services.

One of the key differentiators to other events, is that it brings together service practitioners to discuss and share ideas, changes in markets, share best practices and case studies. It is not an event where people come to try to sell products, services or companies - this is not what the Service Community is about.

So what do we mean by Services? We mean Services in the broadest sense possible. There were delegates from the widest spectrums of industries, including: Cambridge Service Alliance, Power Generation, Aston Business School, Construction, Cancer technology treatment, Sports Goods Technology, Logistics, Digital Photography, Soft Drinks manufacturer and then the traditional IT software and IT Services businesses.

 

What brought us together for this conference? The theme was “Outcome Based Services (OBS)”.

A number of points struck me during the series of four presentations and follow up discussions during the event. Obviously, the first point to mention, is what on earth are Outcome Based Services? The following points highlight the key elements of Outcome Based Services:

1. Predetermined results and predictable costs defined in agreement with the customer and are a reflection of the customers business: 

One example quoted related to the transport industry. The traditional approach is to pay separately for the truck, servicing, tyres, risk certification and then the fuel and driver. The customer then has to try to find the best deals for each of these elements. In addition, something I did not know is that a truck is only productive 25% of the time i.e. actually on the road delivering products and goods and hence making money. The OBS approach is to provide the vehicle and charge the customer on “price per kilometre”.

2. Protection of the client’s investments: 

One of the concepts discussed was leasing the product and having all of the associated services wrapped around it in a single charge. For example, the Rolls Royce model used to lease aero-engines which was shared at a previous event.

3. Short, medium and long-term savings adapted to changing client needs: 

One example was based on the savings from the production of electricity for the national grid using gas turbines. The customer could pay for either short term availability [how quickly you can turn on/off a turbine], medium term savings from the use of fuel, or even longer term savings from the ability to have upgrades build into the outcome based charging model which means the product stays in useful 2-5 years longer.

4. Use of methodologies, tools and processes to deliver outcome commitments and continual productivity improvements: 

The presentation from the University of Cambridge Service Alliance included a Service Strategy model - with examples where different customers had started the journey to “OBS”, In addition, the presenter talked about you might have to segment your customers as only some would be interested in OBS; that Risk Management and how you would deliver exactly what was required [the example given was the tonnage of rock removed by an explosives company] was critical and even giving away low margin services for “free” to be able to maintain a “sticky” relationship with your customers.

5. Operational excellence through the use of best practices, regularly reviewed to ensure their long-term applicability: 

The final example was a software company that realised that the current, traditional approach of implementing software solutions was not meeting the needs of their customers and has started on a journey to change the complete services landscape across their organisation to focus on “Adoption”. They had attended and worked with the leading industry experts, learnt the best practices and were implementing them in their organisation. The key to their success, though, was that the entire Operations Board of the company was behind the move.

My overall definition of Outcome Based Services based on the presentations and examples given would be:

Outcome Based Services are where you as the Service Provider, COMMIT to providing high-quality; customer defined and reflective of THEIR business; services; aligned with predetermined service levels and fixed prices, where there is a Shared Risk and Reward strategy in place for both supplier and customer.

 

---

 

Be social and share this report

Have you ever had a great business idea, and found yourself saying ‘Oh that’s just a bit beyond our capability’. Shame, as you have already talked yourself out of it before you have even started!

But if a project seems a little too big for your business, perhaps give it a second chance by exploring partners that can make up for your capabilities gap. Service Management expert Nick Frank, Principal at Frank Partners explains more... 

Many businesses utilise local partners or agents to sell and service their products in regions outside their organisations reach. This arms length type relationship is OK until you start wanting to develop more advanced service offerings, which may require a far deeper integration between the product side of your company and the customer facing service operations.

Value propositions such as uptime guarantees, vendor managed inventory or outcome based services require far more interaction between the manufacturer the agent and potentially multiple partners. But this ‘intra-dependency’ also makes the relationship between the partners more complex.

 

Take the fastener manufacturing company that was asked by a major Automotive OEM to supply every single nut, bolt, rivet, screw and clip for a particular car platform. Rather than supplying 10 part numbers, they now had to supply 450 most of which they now had to buy-in! How do you go from manufacturer to a ‘just-in-time’ delivery partner with a global supply base in just 3 months?

Their solution was to use a 3^rd party logistics provider to move parts from all over Europe to a point of fit in the factory, while they focussed on Application Engineering Services, Purchasing and Programme Management. They challenged their mind-set and built a supplier ecosystem that included many of their competitors.

As the business developed some competitors even became key customers and suddenly relationships were not quite as simple as before. It shows that with a bit of creativity, an advanced service offering can be delivered that goes beyond the initial core capabilities.

So how can an organisation provide solutions for complex customer business problems that at first sight appear to be beyond their capability?

Recently I worked with a small UK SME who embarked on creating an ecosystem to deliver an IoT technology platform that enables smaller equipment suppliers to deliver remote services such as diagnostics and upgrades. MAC Solutions is a £2M+ UK supplier of industrial router solutions.

Together with one of its 
key supplier eWON (www.ewon.biz), the company identified an opportunity to provide a remote service solution to SME equipment manufacturers. This went beyond the router and cloud technologies it currently supplied and involved the integration of Historians, Alarm Management Analytics and other new data technologies. MAC Solutions realised they did not have all the capabilities in house and that they would need to develop an ecosystem of up to eight expert partners to deliver their vision.

 

As they brought the partners together, it became clear that inter-relationships became more complex and could not be managed as a traditional customer/supplier discussion. They developed a framework that helped them think clearly through the process of developing their service solution.

It essentially linked together standard business tools that enabled clearer business thinking through 4 key steps:

1. Understand the Value Chain and the market: The basic business analysis that should be in gaining a deep insight into the markets, customer value and the current business context. This understanding becomes very important when it comes to agreeing pricing mechanisms with different partners
2.  Define the complex problem to be solved and the ecosystem solution: in other words the basic building blocks of the solution, so that a clear vision, mission and strategy can be articulated and actioned. This involves clearly defining the Business Opportunity, Value Proposition, Product Service Solution and the Roles & Responsibilities within the partner ecosystem.
3. A clear plan of how to execute and develop the solution: For example develop a detailed business plan to drive the allocation of resources and actions. How will you use pilot projects to develop your solution? Develop the Value Delivery Model that defines the commercial interactions within the ecosystem. This would cover the sales model, delivery model, people and competencies, customer experience, organisation, partnerships and contracts, pricing, revenue sharing schemes and procurement
4.  Test for Resilience: Develop mechanisms for ensuring that the business plan is resilient in terms of business risk and partner/customer fit

The framework they developed, undoubtedly helped them move through the complex process of developing a network of partners that can deliver results. The result has been that MAC-Solutions were able to pilot their proposition with a supplier of washing systems for rail networks.

Their story shows how it is possible for even small organisations to develop service propositions that appear to be beyond their capability by developing an ecosystem of partners.

MAC-Solutions will be telling the story in more detail at the Spring Servitisation Conference to be held at Aston Business School in May 2015.

 

---

 

Be social and share this feature