ARCHIVE FOR THE ‘cost-centre-to-profit-centre’ CATEGORY

As part of an exclusive series on twenty first century service management sponsored by Advanced Field Service, Field Service News Editor Kris Oldland takes a look at how to decide when it becomes unprofitable to take on a deal…

There is also an exceptional eBook that accompanies this series which you can access by clicking here

It is the perennial internal struggle that so many field service companies face. In the race to grow your service business are you at risk at accepting business that ultimately will impact your bottom line in a negative fashion?

We have all been faced with that one bit of business that could have potentially have a wider tangible benefit for our business (such as raising our profile in front of a new sector) yet the profit margin is so tight that it makes taking that business a worthless exercise when reviewed in the cold black and white figures of a profit and loss sheet. Taking a different approach to the same challenge, can the sheer effort to maintain business viability – and keep your engineers working out in the field – become an easy temptation despite the fact that it may ultimately lead to the overall failure of a business?

All too often we witness some field service businesses being tempted to take on clients with narrow profit margins, which is a very dangerous path to tread to say the least.

To build a truly sustainable business, you need to be able to focus on the jobs, contracts and clients that are most profitable, rather than trying to be all things to all clients.

So for those responsible for enduring their field service operation remains profitable it’s absolutely critical to take the time to occasionally step back and analyse your client base. Understand each of your clients (and prospective clients) and try to identify those that fit within the two following categories…

Clients who are already profitable:

• How can you quantify for them the work that you do, so that it is recognised and suitably remunerated?
• How can you keep these clients ‘locked in’ by delivering service beyond the agreed service level agreement (SLA) but without draining your resources and revenues?

Clients who could become more profitable:

• How could you better manage the time you spend on their projects?
• Can you identify where you are providing more than you agreed within the contract and budget?
• Do you have an evidence base that will support you in negotiating with clients to pay more or expect less?

Clients who are unlikely to ever become sustainably profitable:

• How could you readdress the balance and bring these clients back within acceptable parameters?
• If the evidence shows these clients are always going to be an excessive drain on resources, do you need to make the difficult decision to agree to go your separate ways in order to free up your engineers’ valuable time for more profitable jobs?

If you can gain a better understanding of each and every client’s worth to the business, you’ll be well placed to decide where to invest your resources for optimum return, both in retaining clients and also in pursuing new business. There may be that one occasional client that it could be argued will bring greater business value to your organisation even if they fall in to the latter camp. However, even these clients must be fully understood.

The potential benefits of working with such a client can and must be translated into a quantifiable figure, and that figure should be reviewed over time to see if the initial predictions are being validated. For example if you take on one client who is a leader within their field, the theory of Social Proof should lead to some others within that field joining you also. How much is that additional business worth? More importantly does it counter balance the loss leader? If the answer is no then quite bluntly you should be walking away from it all.

Making tough decisions

Admittedly, turning work away is never easy to do, but it can also free up your expensive resources to focus on where they can bring best return. This is where it becomes absolutely essential to have transparency between divisions and to train your sales force, who are almost certainly focussed solely on revenue, to begin focussing on profit instead. It is madness to incentivise an individual on revenue from a product sale if ultimately your organisation is going to lose on service revenue in the long term.

Unfortunately the sales of product and service remain isolated in so many organisations, and even today I here anecdotally of huge service contracts being bundled in for free as ‘added value’. This is a slow train to disaster and companies still employing such a quick buck style of sales are destined for failure. Such an approach should be consigned to the 80’s where quick turn over was king.

Successful businesses in the new millennium understand the long term value proposition of service, indeed the bleeding edge companies moving towards a servitization model are showing us a path that truly benefits both client and vendor. Service is the long stay foundation on which profitable businesses are now being built upon. And whilst moving to such a model requires a radical rethink of core business strategies, modern technology plays an incredibly important part in enabling this shift.

At the most basic level your service management solution needs to give you the advantage of arming you with the evidence and information you need.

As mentioned previously, there may be good reasons to bid for contracts which you know from the start will generate very little profit: a project may have particular prestige attached to it or it may extend your portfolio by taking your practice into a new market/territory.

However, before bidding for such work, you’ll want to quantify the risks and have measures in place to contain any losses so that they don’t overwhelm your business and become a bottomless pit. If you can draw on a solid foundation of knowledge of costs and time for previous similar contracts, you will have a better understanding of the commitment you are making and the potential risks.

With contracts of this nature, it is more important than ever to keep to the requirements set out in the SLA. Set clear expectations at the start, apply strong change control, and have a process to handle requests from the client for additional work.

This feature is part of a series exploring Service Management in the twenty first century and is accompanied by the excellent eBook The Service Management Handbook 2014 which is published by Advanced Field Service.

To Download your copy of this incredible resource click here and complete the brief form.

This feature is sponsored by:

Want to know more about Advanced Field Service? Check out their page in the Field Service News Directory by clicking this link.

 

 

Resource: Five key steps to make field service profitable PLUS James Automation Case Study
Format: PDF
Abstract: Is field service seen as a cost centre at your business? Providing field service can be a complex process, but that does not have to mean it’s unprofitable. Every field service interaction is an opportunity to not only delight customers, but also increase revenue. This resource covers five easy steps to get your field service organisation in the black this year, as well as a case study of how one field service organisation did so. click here to download this resource now.  

Making field service profitable:

Operating a service division as a profit centre rather than a cost centre has been at the top of the agenda for service professionals for many, many years. After the global economic downturn in 2008 companies cut margins as far as possible to remain competitive, making the shift to profit centre even more prominent and important.Whilst the economy has improved somewhat the ability to establish service revenue streams remains a priority, and with the technology now available acting as an enabler the move to profit centre continues at pace. With this in mind ServiceMax have put together a handy guide for companies looking to turn their service division into a profit powerhouse. The guide, which includes a case study from James Automation detailing how they increased service revenue by 30% is available to download here.

The resource also lists the key steps that you should consider if you are going to make field service profitable which include:

1. Just say no to giving away free service – a fairly obvious point but one that gets overlooked by so many companies. If your field service engineers have no visibility into whether your customers have an up to date warranty then they are either potentially missing sales opportunity  or worse giving your valuable service away for free.
2. Optimise scheduling – One of the biggest areas that field service companies can see profit drain away is through inefficient scheduling of their engineers. With modern scheduling systems being far more affordable than before it really is inexcusable for companies to still be operating with a white board and an exel spreadsheet.
3. Never lose parts ever – parts logistics can sound somewhat overwhelming, but it needn’t be. Essentially it’s just a case of keeping track of your own assets. For field service organisations who service high value equipment with expensive parts this is especially critical. Knowing your inventory in real time is essential to keeping a healthy bottom line.
4. Market better, sell better – like all businesses, you need to shout about your successes. If you have customers that value your service you absolutely need to make it easy for them to continue buying it. Defining the value proposition of your service offerings is critical and they must be clearly articulated by everything and everyone that talks to your customers. This of course includes your field service engineers so be sure to train and incentivise them to sell services in the field.
5. Go mobile – Field service is of course an inherently mobile job – so modern mobile tools are of course a natural fit for the industry. Whether it is smartphones, tablets or laptops it is important to match the right hardware and software to your own specific field service needs. The benefits of going mobile will be seen across the board and will not only improve productivity but make your field service engineers lives easier – for which they will certainly thank you.[/ordered_list]

To find out more about these five steps as well as how James Automation were able to improve there field service revenue by 30% and decreased their revenue leakage by 20% click the link below.

The field service industry continues to evolve at pace. New technologies are constantly emerging which have the potential to change the industry as we know it.

At the same time we are seeing a huge cultural shift with many seeking to realign their service division from cost centre to profit centre. To help us keep up with these changes Field Service News has put together a panel of five field service industry experts and asked them each to share their insight on the industry today. Second in the firing line is Paul White, CEO mplsystems

 

What is the biggest driver for change in field service today?

It’s all about customer expectations, today’s smart phone empowered customers expect immediate service when they want it - or they’ll switch. Delivering field service is no longer just about dispatching resources. Instead the focus is on delivering end-to-end customer service targets and reacting to changes in real time. However the reality for most organisations is still a proliferation of disconnected systems and processes that make it impossible to monitor and deliver true end-to-end service. Systems integration simply won’t fix this for most organisations, it will just result in inevitable manual data fill and mistakes – and an inability to deliver the reactivity and service that customers demand.

 

Which technology has had the biggest impact on the field service industry in the last 5 years?

The ability to deploy affordable field service apps on standard mobile consumer smart phones and tablets rather than expensive dedicated devices has had the biggest impact, enabling an entirely new generation of connected field service solutions. You can now equip field staff to support customer engagement activities, track on-site attendance and feed back into HR, monitor time in the field for improved financial management, as well as provide specialist telematics services - all via flexible smart phone apps. However, these will still require integration to avoid the kind of piecemeal approach that inevitably leads to efficiencies, with vital customer data getting stuck in individual departments.

 

What is the most important consideration when moving from cost centres to profit centres?

Turning field service from a cost centre into a profit centre demands an end-to-end approach that’s reactive to customer requests and strengthens loyalty by driving out errors. This then empowers those people who spend most time with your customers – your field service staff – to identify and action the right cross sell and upsell opportunities with your loyal customers. An engineer fixing the lighting, for example, may notice that an air conditioning system also needs work – so it’s important that they have the sales mechanisms in place to immediately recommend and action repairs.

 

Who is Paul White? 

Paul White joined mplsystems as Chief Executive Officer in May 2005. Paul has spent the last 20 years working in and around the Field Service and Contact Centre industry and is one of the industry pioneers in the creation of affordable service management and CRM and Customer Service contact centre solutions. Prior to joining mplsystems Paul was the founding CEO of BT Contact Central, which, over 4 years, grew into a global business across UK, Europe and Asia Pacific. Whilst at BT, Paul was responsible for designing some of the largest CRM and Customer Service solutions in Europe and had major roles in systems architecture, product management and sales.

 

To read this full panel debate and much more download a free digital copy of our quarterly magazine. Click here to register.

 

 

 

 

The field service industry continues to evolve at pace. New technologies are constantly emerging which have the potential to change the industry as we know it.

At the same time we are seeing a huge cultural shift with many seeking to realign their service division from cost centre to profit centre. To help us keep up with these changes Field Service News has put together a panel of five field service industry experts and asked them each to share their insight on the industry today. First up is Ian Mapp, Director with Wyser Stewart...

What is the biggest driver for change in field service today?

Field service has always coped with constrained resources – in terms of manpower and investment in spare parts inventory - and the recent harsh economic times have been very tough for many, both OEMs and independent maintainers. Those now poised to grow have continued to invest through the downturn, particularly in skills development, and that will now enable them to out-compete others.

With no money to waste themselves, customers are more demanding in the standards they expect and less tolerant of poor performance. This has accelerated a trend already entrenched for a number of years. Plus, bad news travels further and faster than ever via social media. Equivalent stories about exceptionally good service (they do exist!) do not travel as far or as fast. Service organisations will have to learn to live in this unbalanced environment, obsess about quality and focus on protecting and communicating hard-won reputations. It as a discriminator when customers choose suppliers.

Which technology has had the biggest impact on the field service industry in the last 5 years?

In my opinion, it is all about the mobility revolution. Specifically, the intersection of two trends. The higher adoption of mobile devices by service organisations, and the explosive growth of smartphone usage amongst customers – 72% of the UK population according to a 2013 Deloitte survey, up 14% in just 10 months. The result of near ubiquitous use means more enthusiastic acceptance by technicians and engineers of a mobile device as an integral part of their everyday work. Maybe “grudging acceptance” is still more prevalent than “enthusiastic acceptance” in some organisations and industries!

Once upon a time, and not that long ago, mobile devices – typically ruggedised – were seen as the sign of a tech-savvy, forward-thinking service provider. Today, that has been turned on its head and organisations that do not deploy mobiles – more commonly consumer-grade or BYOD – are seen as laggards.

What is the most important consideration when moving from cost centre to profit centre? 

That’s simple. Independent maintainers are, by definition, driven by profitable service provision. For OEMs, the profits on after-sales services are frequently higher than products sales, and servitization has become an obvious strategy to maintain financial performance. For some it is a matter of survival and so it is a “no brainer”. The question becomes ‘how-to’ and not ‘whether-to’. Particularly as more product categories become commoditised, and manufacturers are unable to compete simply on product quality.

This is not the same as engineers being transformed into salespeople, as is often imagined. Many OEMs do not properly credit their service departments with revenue for their work. A notional accounting transfer is made, one that does not reflect the true commercial value. This gives a misleading impression of the service operation’s financial viability. Resolving this anomaly - to give an accurate baseline – and training service managers in financial disciplines are critical transformational steps.

Who is Ian Mapp...

Ian is a veteran of customer service - both in the provision of software applications and consultancy, and in actual service delivery. He has worked with companies large and small, both in the UK and internationally over 25 years. Presently, he is providing specialised customer service and customer experience consulting services to “people-powered” organisations through his company Wyser Stewart.

 

 

 

 

 

Moving the field service division from being a cost centre to a profit centre is a shift that many companies are trying to undertake and something most service management experts suggest wherever possible.

There are fantastic opportunities for establishing revenue streams from your field service engineers but remember you employed them for their technical skills not their outstanding flair for sales. In fact, the likelihood is that many members of your mobile workforce may not be natural salesman and may find these additional requirements outside of their comfort zone.

To help you encourage your field service engineers to be more comfortable with the added expectation of becoming revenue generators Field Service News looks at five tips that you can role out to your field service engineers to help them grow and nurture their inner salesman.

Remember that the field service engineer is the expert

Field service engineers are knights in shining armour. Invariably they have been dispatched to fix a problem in your customers’ lives. Whether it be in the working environment or the home environment, your field service engineers are the experts that will get your customers’ back on track. As such they are given trusted advisor status from the moment they arrive on site.

Perhaps the most important and often hardest thing for a salesman to achieve is to gain the trust of their prospective clients. The field service engineer with their status as trusted advisor has broken down this first barrier immediately and is therefore in a great position to sell additional services or products.

Field service engineers who may not feel comfortable selling in a direct face to face environment (which can certainly be daunting for the inexperienced) should be reminded of their ‘trusted advisor’ status and be encouraged to draw confidence from this elevated position. In sales, confidence is absolutely everything.

Honesty is ALWAYS the best policy

Okay so your field service engineer is aware of the power of his position as a trusted advisor and is a super confident natural salesman.

Great, this gives him a perfect opportunity for that first time sale but as any good sales organisation will attest, whilst the first sales is important it is repeat business from your customer base that is absolutely vital to future proof your business.

Therefore it is essential that your field service engineer doesn’t taint the image of trusted advisor and only uses his position to sell your client products or services that are of genuine value to them.

Your clients are not stupid and if they are sold something that they didn’t necessarily need or at a price that is out of kilter with standard market rates, more often than not they won’t bother phoning you up to complain, they’ll simply take their business elsewhere.

However, if your field service engineer provides your clients with solutions to problems they need on a fair and honest basis, you will find that repeat sales will remain steady for years and years.

Don’t try to be a SALESMAN

If we were to ask you to describe a salesman how many of you would say loud tie, cocky attitude, and with a seemingly inexhaustible supply of cheesy lines? (Looking just like the chap at the top of this feature perhaps?)

Well, for a start remember not all salesmen are estate agents or second hand car dealers.

In fact you’ll probably find that those estate agents or second hand car dealers that fit into this stereotype of the ‘classic’ salesman are amongst the poorest performing in their respective field.

Whilst there are a number of sales techniques whether it be SPIN, AIDCA, DIPIDA or any of other acronym out there, the simple fact remains that the best sales people play to their strengths and are just themselves.

Sales needn’t be any more complicated than understanding your customers’ problem and offering them a solution. Your field service engineers should be better placed than any salesman to achieve this and don’t need to try to be something they’re not.

Educate your field service engineers on all your products

Your company may operate a number of related or even disparate solutions and your field service engineers are perfectly placed to cross sell if they have a broader understanding of your full product set beyond their own area of expertise.

Field service engineers are the greatest conduit that you have to your customers.

They are right there, talking to customers face to face, with a unique opportunity to gain insight into their needs. Whilst their primary role is to remedy a problem, and their secondary role may be a direct sale, a potential third role could be to be to open up cross selling opportunities into other areas of the business.

For example whilst recently having a field service engineer visit me to fix an issue with my phone line, I got into a conversation about broadband speeds.

The field service engineer was knowledgeable and gave me some good advice about moving to fibre optic internet (as well as other options for improving my broadband). He also worked for a rival company to my current broadband provider.

If he had been able to arrange an appointment for me to get fibre optic broadband installed I probably would have scheduled something there and then. If he had been able to arrange a call with a member of his company’s broadband sales team I would probably have agreed to a call and would have been a very warm prospect.

As it was he did neither and the likelihood is I will now remain with my existing provider and upgrade my service, because it is the easier option for me and I like most consumers will opt for the solution that requires the least hassle.

Yet had the field service engineer had the tools and incentive he could have sold me into another service his company provide as he had the knowledge and opportunity.

Give them the tools to succeed.

Which leads us into our final point, if you want to your field service engineers to become revenue generators, you need to give them the tools they need to achieve this. Fortunately the technology is all there waiting for you.

Key needs will include form creation and signature capture, access to ordering systems and of course payment collection. All of these can be found as apps that sit on smart devices operating on both Android and Apple’s iOS and can sit on a plethora of devices .

However, perhaps the most important consideration is to establish a transparent means of communication and interaction across all divisions of the company.

Whether this is a sophisticated cloud based end-to-end software solution or a simpler processed based solution that makes use of your existing assets, if you are expecting your field service engineers to become revenue generators you need to give them the tools to succeed.

 

 

When building, developing or establishing a service business there are numerous factors that need to be considered. However, the most fundamental strategy to ensure service excellence is delivered remains one of the simplest. The customer needs to be at the heart of all your endeavours. This fact was at the top of the agenda during a recent webinar that was hosted by the Aberdeen group and Trimble FSM.

During the session some very interesting points were made by Aberdeen Analyst Aly Pinder during a Q&A session. Indeed Pinder asserts that best-in-class businesses are united in putting the customer at the centre of their field service operations.

Whilst field service has always been an undertaking with the customer at its centre, across the industry globally we are currently seeing a renewed focus on improving the customer experience. Simultaneously field service technologies become more and more refined enabling vast improvements in managing and monitoring how service is delivered.

Furthermore communicating these improvements to the customer base is another factor in building a reputation for such service excellence.

In PInders words  “Providing better customer reporting is essential and it is important to relay the data that you’re collecting back to the customer, allowing them to effectively be an advocate and partner of your business.”

In fact Pinder provided a neat example of this highlighting those companies that are now applying predictive or preventative maintenance. Such companies have a fantastic story of delivering such advanced customer service through adopting such a proactive approach, and the customer really should be made aware of it. A satisfied customer, who feels reassured that they are in competent hands with their service organisation is fantastic ambassador with the potential to help drive higher levels of engagement between the two parties moving forward.

Another interesting point that Pinder makes is that within the mobile workforce there are different skill sets, beyond those that we would consider essential to the field engineer’s role, that are exploitable. For example some of your field engineers may be particularly effective salesmen with a natural gregarious demeanour, an obvious asset. Yet not all field engineers may be so comfortable to don a salesman’s hat. However, there are other opportunities beyond direct selling. Field technicians are in touch with the customer and those less suited to sales can add value bringing in customer data from the field.

Some companies have moved towards incentivising their field staff, although Pinder advises stepping carefully down this path.

Pinder comments: “This is not necessarily the right thing to do for every company as you need to understand the skill set of your technicians and understand which technicians could be good sellers and which aren’t…” 

However he also identifies the benefits of this route also adding:

“For those organisations that understand the skill sets of their technicians, incentivise technicians that are really good at selling and incentivise those that aren’t good at selling at bringing that data back in and passing that along to the sales and marketing team.”

Perhaps the biggest issue in the shift from cost centre to profit centre that Pinder identified was the devaluing of the service experience.

There are many different elements of a field service organisation that can deeply affect the customer experience and both sales and marketing can have a major impact. Often, sales representatives will bundle service in for free as part of the overall sale. Pinder believes this is a dangerous path to follow.

“When a sale is given away for free your ability to deliver that ‘exceptional service experience’ is greatly devalued. Therefore, ensuring your sales organisation understands the value of service internally and that they can communicate that to your end customers is important.”  Pinder commented.

One additional area that perhaps doesn’t get the credit that it deserves for its impact on the final impact on customer experience is engineering and design. Pinder also identified this as a two way street.

“Best-in-class organisations pull in data from technicians, give that back to engineering and design and have those teams create products that fulfil customer needs. The technician incorporates the insight provided by customers to create a product or new service that is tailored to customer needs.”

Whilst best-in-class companies push the boundaries of service excellence, at the other end of the scale there are three common issues that Aberdeen have identified that field service companies are not meeting which result in dissatisfied customers. These were:

The technician did not resolve the issue first time, The wait for the appointment was too long, The technician didn’t show up for the appointment at all

Companies can address these fundamental problems and improve the customer experience they deliver simply by making sure the technician to be sent to the appointment has the correct skills set and tools for the job and ensuring communication with the customer around appointment times is accurate and reliable.

Discussing this Mark Forrest, general manager of Trimble Field Service Management commented:

“Achieving customer satisfaction in today’s marketplace is tough. On-time performance is the Holy Grail – problems must be solved the first time, and solved effectively. As a result, more and more organisations are beginning to realise the value of ‘intelligent scheduling’ - incorporating technician knowledge, parts availability, and capacity into their scheduling processes to ensure that the technician arriving on site is actually the person who can resolve the customer’s issue first time.”

He continued: “Businesses can address the challenge of making better in-day decisions by utilising a work management self-learning tool. To avoid large data set-up exercises of skill sets and work areas, a self-learning tool supports the assignment of work orders to the field technicians by remembering who has the right skills and their usual work areas. The user also has the ability to enquire what has been learnt by the system and correct it.”

A full recording of the webinar can be downloaded here 

Find out more about Trimble including video, news and features in our directory listing here.

To download the full report please visit www.trimble.com/fsm  

 

It can make or break your service business growth strategy, yet it’s surprising how many service leaders do not appreciate the impact a separate service P&L can have on changing the mind-set of their people.

Many just focus on what they believe is the best way to maximise their corporate value. Yes it’s important to ensure we have the systems to manage the value of our enterprise, but we also need to consider the impact of measures on the performance of our people.

Take Textron Fastening Systems who were a $1.8bn global manufacturer of nuts, bolts, rivets, screws and plastic clips. Their European business became the sole supplier of fasteners to the Ford Fiesta, providing an integrated solution consisting of manufacturing, purchasing, logistics and engineering services. As far from their manufacturing core, it was set up with it’s own P&L and dedicated team. They succeeded due to their focus and separation from the main manufacturing business.

But once this $30million service business was stable, we decided to re-integrate it back into the core business. So a dedicated team, was re-deployed back into the operational silo’s of Engineering, Logistics, Purchasing , IT and Sales. What a disaster and I say that as this case study is from my own experiences. We lost focus, drive, energy and sales. Our biggest competitor, who set up a separate service business, grew to 5 times our revenue, from exactly the same starting point in time and experience. 15 years on the Textron Fastening Systems no longer exists, having been bought by Private Equity and then broken up. Ironically the remains of the service business have survived but without growth.

For me this was a very salutatory lesson about the importance of focus. But its not so simple as saying that for an industrial company to succeed you must have a separate P&L or Business Unit.

It depends on the strategic goals of the business and also where it is in the transformation process. For example companies such as Rolls Royce & BAE with over 50% of their revenues from services see it as such an integral part of their business model, they do not have a stand alone services division.

So if you are pondering how best to manage your corporate value and looking to make the profit/cost centre call, you might ask yourself 2 questions:

1. In your future business model how integrated will be your products and services offering.
2. Is organisational focus the key challenge facing your service transformation programme.

Having a sound service strategy is key to make the transformation to a sustainable high growth profitable service business. If you want to read  more about how real companies achieve this goal, you can look at the Bobst case study on www.noventum.eu

Read part one of this series, Creating value through services: Where to Start? here  

Read Part Three of this series, Finding nuggets of customer gold here