In this new series of excerpts from a recent white paper published by IFS and Noventum, now available at Field Service News, we analyze how to productise services and set the climate for the service transformation...

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Modern professionals have done commendable work of implementing Internet of Things (IoT) devices within their company. But many IoT deployments swiftly hit a stumbling block due to the lack of information ownership and enterprise-wide data access.

In a world battered by the COVID-19 outbreak, IoT is expeditiously modernizing data management initiatives.

The pandemic has drawn needed attention to the unintended consequences of pursuing business continuity through fragmented and rigid IT infrastructures. Firms used to clutch at outdated IT assets—but today, they are viewing things in reverse. Despite their previously rosy assessments of legacy IT infrastructures, many companies are now positioning cutting-edge IoT systems as core enablers for ongoing operations. Research confirms this premise, outlining “the growing focus of organizations in reducing operational costs by incorporating advanced tools and techniques that assist in effectively managing the equipment.” The sector’s demand for customized industrial IoT solutions is also growing significantly.

This commitment to prioritize IoT innovation is inevitably igniting a transformation of industry standards and implicitly—data management. As any revolutionizing force, IoT is driving “a significant shift in the requirements for storing and managing data,” according to Gartner analysts—and it strengthens the move to potentially unknown territories, such as “non-relational forms of data persistence that enable high-speed and high-volume data.”

IoT IS EXPEDITIOUSLY MODERNIZING DATA MANAGEMENT INITIATIVES DURING THE PANDEMIC

The lack of IoT standardization prevents industry players from understanding newly emergent requirements for data. It’s often aging and highly inflexible IT system landscapes that hinder a firm’s connectivity needs and real-time data collection—but so is the absence of standardization across the IoT landscape. Beyond the sheer amount of information generated by smart devices, experts not only identify IoT data as being “inherently multi-dimensional and noisy by nature,” but also tremendously perishable. The collection of IoT data can’t, therefore, fit in a traditional database. But without specialized IoT standards, professionals may find it nearly impossible to recognize shifting data requirements.

Another probable reason for not achieving value from IoT deployments is the narrow grip firms currently have on as-built information ownership. As-built data, or in experts’ words, “the information related to the raw parts, materials, and processes to build a product,” is traditionally owned by service managers. More often than not, platform owners and service-providing departments have the right to manipulate the data they are storing; alternatively, they can share a limited amount of information with select users. IoT-related efforts, however, should not only converge on the same data sets; when all aspects of business are enriched with IoT data, the company-wide involvement of stakeholders also becomes crucial. As evidenced by Christian Renaud, Research Director at 451 Research:

“The best data strategies are co-created by stakeholders including the business, the IT department, and the operations team working together.”

This type of reasoning is not foreign to industry players. From finance to research and development to sales and supply chain management, all aspects of business can capitalize on data—but if only a fraction of data is accessed, exchanged, and used wisely, IoT efforts will meet with varying degrees of success.

Many IoT-related impediments are commonly rooted in the restricted ownership of information and the lack of company-wide data access. Therefore, much of the conversation about IoT innovation centers on a fundamental question: Can professionals become custodians of data to patently facilitate the spread of information for greater stakeholder involvement?

There Is Mounting Pressure on Stakeholders To Be Looped In On the Firms IoT Efforts

Efficient data management is among the primary factors that create IoT value for stakeholders. Equally important to veritably meet stakeholder needs is—as argued by the NSW Government IoT Policy Guidance—seeking engagement. But before anything else, it’s essential to consider if the firm’s ”planned data uses [...] deliver value to the community [and provide] transparency and choice around what data is collected and how it will be used.”

As IoT programs aren’t a one-man performance, the IoT Policy Guidance broadly encourages industry players to consult with stakeholders while designing data requirements; one thing is to acknowledge the needs of each stakeholder, and another is to practically factor in their involvement.

An instructive example comes from Bright Wolf. Under the influence of company-wide IoT initiatives, this trusted provider of industrial IoT solutions recently developed Zero Waste Engineering™—a methodology that allows firms to:

• Validate the business case for a broad-gauge IoT strategy;
• Design plans that address the requirements of each stakeholder;
• Create an adaptable data processing system that communicates outcomes to stakeholders.

Another standard procedure for getting stakeholder involvement is to identify a Data Governance Champion—or more precisely, a senior leader that has the ability to “create a steering committee to establish policies [...] around data,” experts say.

Such methods facilitate the flow of data across the firm as they build potent data transmission links between departments while creating trusted networks and demonstrating value—which triggers the company-wide involvement of stakeholders.

To a certain extent, wide-ranging participation in IoT innovation demands revised organizational policies on data management; without an evolving data model that opens access to information, the business is siloed. Yet it’s not always the incapacity of a firm’s leadership to dissolve data barriers that hinders information sharing. Sometimes, permission to access data exists predominantly in pockets.

The Lack of Data Ownership Is Getting Renewed Attention

Having partial ownership of data cripples many efforts at unified IoT strategies—at a minimum, it contributes to the quick proliferation of misinformation across the firm.

It’s not uncommon for organizations to experience a lack of data owners. Remarkably enough, data can be under the exclusive control of the service-providing department (or platform owner)—even if it doesn’t necessarily own the given data.

Still and all, many organizations have managed to assign data owners for their assets—only to restrict enterprise-wide access in order to limit the exposure to security risks. Today, there is a solution to this problem: Blockchain of Things protects data ownership and privacy of end-users. “With proof of ownership and distributed data transactions,” a study reveals, “blockchain technology provides a natural channel for trade between data producers.”

Firms are essentially adjusting to data ownership issues by understanding that it doesn’t always matter who holds title to data; as specialists suggest, a better question to ask now is: “Who can access it?”.

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Further Reading:

• Read more about Digital Transformation @ www.fieldservicenews.com/digital-transformation
• Learn more about Copperberg @ www.copperberg.com
• Read more about Data Management @ www.fieldservicenews.com/data-management
• Connect with Teodora Gaici on LinkedIn @ linkedin.com/teodoragaici
• Follow Copperberg on Twitter @ twitter.com/CopperbergAB

In this exclusive article for Field Service News, Michael Blumberg, President of Blumberg Advisory Group, analyzes how remote support tools will continue to provide lots of benefits to organizations in the field service sector in the post-pandemic world.

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One of the ways that Field Service Organizations (FSOs) have been able to overcome the challenges of Covid-19 is through the provision of Remote Support, also known as Touchless Service. This represents a viable way for FSOs to renegotiate SLAs and to effectively resolve customers’ service issues where restrictions exist. Although remote support has been around for some time, it was not always the preferred solution. Covid-19 has made the provision of remote support a necessity.

Since the onset of the pandemic, there has been an increase in the use of remote support tools to deliver a Touchless Service experience. The increase can be measured in terms of the number of companies using these tools and applications, the frequency in which they are used, and the applications in which they are used. Originally perceived as an application for delivering 2^nd tier expert support, remote support tools are now used in a broad array of service situations from installations, to depot repair, to site surveys and application support.

Many industry participants wonder how remote support tools will be utilized Post COVID. Will FSOs abandon Touchless Service for a more traditional onsite experience? The answer is no. Touchless Service is now becoming table stakes for FSOs. This is because remote support tools offer a lot of benefits to a service organization and the customer. One of the biggest benefits is it eliminates friction, and friction is caused when there are a lot of touches, steps, or time involved in completing a task or process. Remote support tools enable FSOs to reduce or eliminate technician travel time which allows them to complete more calls per day.

REMOTE SUPPORT  WILL CONTINUE TO PROVIDE VALUE TO ORGANISATIONS AND CUSTOMERS POST COVID

No doubt, FSOs will need to incorporate Touchless Service into their overall business strategy. The specifics of how and when remote support will be deployed will depend in part on the industry or vertical market. Key considerations include the complexity, criticality, and safety issues involved in supporting the install base. Touchless Service is appropriate for supporting equipment in an environment that’s not complex and where the customer is willing and capable of participating in the service resolution process.  However, a more complex service environment, one that is mission-critical and presents safety concerns or requires specialized skills or certification, will likely mandate an onsite service visit. Nevertheless, remote support tools can still play a critical role in providing expert assistance in either case.

FSOs also need to decide when to deploy or emphasize the softer skills involved in maintaining high levels of customer loyalty and satisfaction. After all, the human connection is important and it’s just not the same with remote support, even if it involves video.   As such, FSOs should evaluate the critical touchpoints during the customer journey where an in-person site visit is both appropriate and valuable. These can be planned or ad-hoc or by exception. For example, in reoccurring service issues or during a service event that occurs less than 90 days before service contract renewal. In these instances, the technician servs as a brand ambassador and trusted advisor to the customer.

FSOs may also want to consider how they monetize their investment in remote support technologies. The ability to monetize will depend on the economics of service delivery, customer willingness to pay, or the competitive practices within a specific service market. In other words, there are use cases where it could be more economical for an FSO to provide remote support as part of a basic service offering and not charge extra while there are other use cases that justify offering it as part of a premium-priced, value-added service. Assuming monetization is an objective, then there are several steps that an FSO needs to accomplish First, they need to gain clarity about the value-in-use of remote support. They need to be able to clearly articulate this value to their customers. The second step is to construct service offerings with different price points. Third, conduct market research to validate there’s a value to the customer and the customer is willing to pay for theses services. Fourth, determine the addressable market for the service. Lastly, create a go-to-market plan and roll-out the new offering to a select group of pilot customers.

Remote support will continue to provide a trifecta of value in our post-pandemic world. Value driver #1 is that it dramatically improves the customer experience. Customers receive faster service and are more engaged in the service resolution process. Value driver #2 is that it optimizes service delivery, so an FSO can do more with fewer people. Remote support frees technicians from travel which means one technician can handle more service request per day. Value driver #3 is increased technician productivity. Less time on the road means more time resolving customers' issues remotely, which leads to more calls completed per day.

It is important that FSOs view the rollout of remote support solutions from a strategic perspective not simply as another application within their technicians or tech support personnels’ tool kit. Remote support has implications for various aspects of the service business and stakeholders. Due diligence is required when it comes to integrating remote support into the overall service business strategy since the return on investment can be significant.

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Further Reading:

• Read more about Digital Transformation @ www.fieldservicenews.com/digital-transformation
• Read more exclusive articles by Michael Blumberg @ www.fieldservicenews.com/michael-blumberg
• Read about the impact of COVID-19 on the field service sector @ www.fieldservicenews.com/covid-19
• Follow Michael Blumberg on Twitter @ twitter.com/blumberg1
• Connect with Michael Blumberg directly by email @ michaelblumberg@blumbergadvisor.com

Nick Frank, Managing Partner and co-founder of Si2 Partners, tackles some of our perceptions around the understanding of how we can interpret data within our teams and puts forward some important questions field service managers must consider as we enter an age of digitalisation... 

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We assume that young people know about data because they are digital natives. Many of us believe senior managers understand all the information around them because of their experiences. But are these perceptions true? Maybe one reason that many organisations struggle to truly incorporate digital into their DNA, is that they are not challenging these assumptions as to how data savvy their people really are. To be successful in the modern data age, we believe that many organisations should go back to basics and equip all their people with the fundamental skills that enables them to turn data into insight into action.

In 2015, the World Economic Forum who organise the Davos conference, published an article “Are digital natives really good at using technology?” Their conclusion was that so called digital natives may be adept at communicating via social media, texting and using apps, but   “……they were basically clueless about the logic underlying how the search engine organises and displays results”.

This is just one example of getting confused between technology and the data outcomes of technology.

Another example we are living through is the current COVID pandemic.  How often have you heard our political leaders tripping up over the statistics they are using to guide their actions?  So bad has it got that many journalists have begun to specialise in explaining the statistics to citizens who are frankly confused.

It’s not just leaders and millennials that have these issue. Over the past 18 months Si2 has been running workshops for over 150 mid-level business professionals on how to turn a ‘business problem in a data solution’.  It does not matter on the sector whether that be banking, financial or industrial, perhaps 70% of participants had a very basic level of data problem solving. By this we observed that they did not have a structured approach to analytics and were very limited in their understanding of data visualisation, basic statistics and storytelling. The result was a tendency to:

1. Jump to conclusions based on gut feel and not data
2. A very passive approach to the use data and a lack of critical thinking
   
   

The important thing to understand is that these are well educated professionals, but very few appear to have been taught skills around working with data or understand how to integrate knowledge management into their work environment.

The remaining 30% of participants had a good grasp of data, but again no formal education in how to use data. They had picked up techniques and understanding as they grew into their jobs, or professionally they have a numerical background such as engineering, sciences or software. And within this group, maybe only 1-2% had developed the skills and vocabulary to talk to a Data Scientist about how to develop sophisticated analytical solutions such as machine learning.

The point is that if leaders really believe that ‘data is the new oil’, then they need people who appreciate and understand how to use data to drive insights and then action. 

So what should organisations do?

Perhaps they should take a leaf out of the technology companies playbook and make data competency a fundamental capability that each employee must exhibit. For example, in many the job descriptions even for non-technical roles you will often find reference to experiences with data tools (beyond excel) and data driven problem solving.

These successful companies work hard to ensure that their employees are supported in four key areas:

1. Mindset: Many businesses have leaders who are ‘talking the talk’ on data, but how many actually know how to use data themselves. The data driven mindset is one which goes from the very top of an organisation to the very bottom and embedded in the organisations culture.
   
   
2. Process & Statistics: Most people do not know how to move from identifying a business problem to solving that problem with the data they have. They need guidance and training in how to define the problem, the data they need and how to view it to gain insight. A basic understanding of how numbers work also helps.
   
   
3. Storytelling: is crucial in turning ideas from the creative data thinking process and turning it into real actions that make impact. Often the most data proficient professionals reduce the power of their analysis through failing to clearly communicate impact and required action.
   
   
4. Tools: Everyone uses Excel, however often lack of knowledge of other types of tools that can create great visualisations, save enormous amounts of time during the data cleaning process or are the basic building blocks of analytics.

The good news is that most of us have picked up some of these skills informally, as we progress through our working and professional lives. With a little reflection, some basic frameworks and practice, it is possible to dramatically improve our use of data in creatively solving business problems.

At Si2Partners we have a series of On-Line and face to face workshops that can help your people understand data, drive insight and make an impact. If you would like to learn more on this or the or the Service Leaders Network, then contact Nick on the links below. 

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Further Reading:

• Read more about Digital Transformation @ https://www.fieldservicenews.com/blog/tag/digital-transformation
• Read more exclusive FSN articles by Nick Frank @ https://www.fieldservicenews.com/blog/author/nick-frank
• Connect with Nick Frank directly on email @ nick.frank@si2partners.com
• Connect with Nick on LinkedIn @ https://www.linkedin.com/in/nick-frank-2756a51/
• Follow Si2 Partners on twitter @ https://twitter.com/Si2Partners
• Find out more about the Service Leaders Network @ https://serviceinindustry.com/service-leaders-network
• Find out more about the work of S12 Partners @ https://si2partners.com/

 

Sam Klaidman, Principal Advisor with Middlesex Consulting, reflects on the drivers behind why your customers buy the service service contracts you offer, and outlines if and how that has changed since the pandemic...

For over 20 years, I was the Vice President of Service for two companies. In one company I had global responsibility and in the other I was responsible for the Americas. To keep up to date with industry trends, I attended local, and some Global, AFSMI meetings and I read as many service-related articles as I could find.

I was always jealous of people who published articles and got their name “out there.”   Then I retired and started my own consulting business. I felt like the time was right for me to share my ideas and collected information with my peers.

Thanks to an introduction from a friend, I was able to get an article published in the September 2008 issue of American Laboratory. The topic I chose was “Why Companies Sell Service Contracts and Why People Buy Them.” Since then, I have written 16 articles and whitepapers and posted approximately 220 blog posts. Most of these were about some aspect of the business of Field Service. Yet when I searched through the 220 post titles, I realized that I had never updated my original article even though our industry has gone through major changes since the original piece was published.

 

Buying a service contract pre-COVID

Before COVID, the people who purchased service contracts were Manager level. They had day to day responsibility for whatever their equipment was being used for. In that first article, I listed the four reasons why people purchased contracts:

• Maximize Uptime
• Predictable costs
• Peace of Mind
• No hassle

When I have an assignment to grow service revenue, I survey customers and ask them to rate these same four characteristics where one is most important. Here are the results of three of my pre-COVID engagements:

The first and last columns are part of the same survey for the same client. The last column is for a small number of customers with many instruments that provide the company with excess testing capacity. Yet the managers were interested in a service contract for all their instruments! Not because they were worried about maximizing equipment uptime, but because they were interested in minimizing their daily hassles. They were willing to spend company money to reduce their job-related stress.

 

 

Changes in customer’s wants and needs now

Today, the reasons people want service contracts are more varied than ever before. When it comes to buying hardware service contracts, we are seeing two significant changes:

1. The purchasing decision is being made by a more senior individual than the department manager.
2. The reasons to buy a contract are frequently based on more and different strategic factors than in the past. They are as varied as the reasons they purchased your product as well as the high-level strategic goals of the company.

Here are some of the challenges that most business executives (including your customers) are dealing with today and which will continue for the foreseeable future:

• Grow revenue and reduce costs
• Minimize CapEx
• Digitize their business
• Introduce a servitization business model
• Mitigate known and unknown business risks
• Provide a safe and secure environment for their employees
• Figure out how to retrain key employees
• Deal with an aging workforce

Your customer’s challenges will result in changes to how you create, price, and deliver your services in 2021 and beyond. Here are a few well know changes:

• Enable customer self service
• Move to a blended workforce of direct and contract field engineers
• Migrate from a transactional to an outcome driven service organization
• Innovate to embrace the notion of touchless service
• Personalized and multichannel services

 

Changes in the Sales environment

These three snippets from a recent report, 2021 Predictions for Sales Leaders: THE YEAR OF VALUE, highlight some of the changes that sellers must be prepared to manage. These conclusions are generic and impact both product and service selling:

1. In 2020, CFOs got more involved with every purchase being made and every dollar of spend was scrutinized. Those who were able to quantify the outcomes associated with their spend were able to get their projects completed. Those that were not able to articulate value saw their projects overlooked by those who had a higher level of perceived value to the business.
2. To succeed in virtual B2B sales cycles in the coming year and beyond, it’s critical that CROs (Chief Revenue Officers) work with their sales leadership to ensure that their teams are intentional in discussing and quantifying value early in buying conversations and that every opportunity is substantiated with the strongest business case possible based on true economic impact and outcomes. To thread the value conversion through the full customer journey and ensure retention and expansion remain positive, sales leaders will also need to work with the customer success leaders to ensure that the company is proactive in communicating the outcomes of their solutions in order to maintain renewals NRR (Net Recurring Revenue) remains high.
3. Unlike in the beginning of 2020, sellers can no longer take clients to hockey games or dinner to build rapport. Instead, all information sharing happens digitally, via email or a web conference. You have minutes, not hours, to make an impact. According to McKinsey, “digital self-service and remote rep interactions are likely to be the dominant elements of the B2B go-to-market going forward, when selling to both SMBs and large enterprises.” And 89% of companies expect these changes to stick, anticipating they will need to sustain these virtual go-to-market models for 12+ months, per McKinsey.

 

Selling services now and post-COVID

The best time to sell a service contract is at the time of equipment sale. This is because your product sales teams are dealing with customers with the same issues your service sellers are experiencing. But the product people have successfully addressed their prospects challenges when presenting and closing your product sales. Therefore, the sales team can integrate your services into the overall justification (use case) and close the product and service sale at the same time if they are professionally trained and properly compensated. Also, adding services into the use case will likely differentiate your company and help close the deal.

Obviously, we all have a sizeable number of service contracts which are already in place and renew every year or so. If you are experiencing difficulties in securing renewals on a timely basis, then I suggest you spend some quality time with your sales management peer and get some help on how to dig out customer’s most pressing challenges. You can then present your solutions in a way that shows the customer how you can help them achieve their objectives while feeling that they are minimizing their personal risk.

If you find that there is a large gap between what you are offering and what you believe the customers want, then you have to put on your service marketing hat and find out their needs and the price they are willing to pay. Then you must update your offerings and create new value propositions for each customer segment and the services and contracts you want them to buy. Sometimes you can do it all by yourself and sometimes you will need a more experienced consultant to interview a representative number of customers and find out what your customers are willing to pay for. The consulting investment is generally minor compared to the contract sales you achieve.

Whatever you do, you must make sure that your contracts and other services create enough value for your customers so they will find it exceedingly difficult to move to a time and materials model or worse, move to a third party vendor.

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Further Reading:

• Read more about the impact of COVID19 on the field service sector @ https://www.fieldservicenews.com/hs-search-results?term=covid
• Read more about Service Innovation and Design @ https://www.fieldservicenews.com/blog/tag/service-innovation-and-design
• Read our exclusive series of articles exploring the findings of our research study on the pandemic @ https://research.fieldservicenews.com/
• Read more exclusive FSN articles by Sam Klaidman @ https://www.fieldservicenews.com/blog/author/sam-klaidman
• Connect with Sam Klaidman on LinkedIN @ https://www.linkedin.com/in/samklaidman/
• Find out more about Sam Klaidman's work with Middlesex Consulting @ https://middlesexconsulting.com/

 

In this final excerpt from a recent white paper published by Appify, now available at Field Service News, we break down the budgeting and division of labor...

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Want to know more? Field Service News Subscribers can access a White Paper on this topic on the link below.

If you have yet to subscribe click the button below to join 30K of your field service management professional peers and subscribe now to access this content and our entire premium content library now!

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Data usage note: By accessing this content you consent to the contact details submitted when you registered as a subscriber to fieldservicenews.com to be shared with the listed sponsor of this premium content Appify who may contact you for legitimate business reasons to discuss the content of this white paper, as per the terms and conditions of your subscription agreement which you opted into in line with GDPR regulations and is an ongoing condition of subscription.

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In the third excerpt from a recent white paper published by Appify we discuss the resources and technology investments for field service....

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Want to know more? Field Service News Subscribers can access a White Paper on this topic on the link below.

If you have yet to subscribe click the button below to join 30K of your field service management professional peers and subscribe now to access this content and our entire premium content library now!

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Data usage note: By accessing this content you consent to the contact details submitted when you registered as a subscriber to fieldservicenews.com to be shared with the listed sponsor of this premium content Appify who may contact you for legitimate business reasons to discuss the content of this white paper, as per the terms and conditions of your subscription agreement which you opted into in line with GDPR regulations and is an ongoing condition of subscription.

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>Prior to his death, Bill Pollock, left a number of articles to be published post-humously, his parting gift for the industry he served which such devotion for many years. Here, is the final article in that series, and is full of wit and insight in equal measure as anyone who has read Bill's work would of course expect... 

Well … How should I say this?

After more than 40 years covering the Field Services community, I’ve finally lost my Internet connection!

It’s been a great ride, and I’ve greatly appreciated the encouragement and support I’ve received from Kris Oldland and Field Service News over the years.

The way I’ve figured it, I’ve written more than 40 pieces for FSN, as well as having appeared in several Handy Little Books, Big Discussions, Podcasts and a video or two.

In addition, Kris and I were really kindred spirits (i.e., long before I actually became a spirit)! We both write extensively; we’re both Type A workers (actually, Kris is a Type A+ worker – he’ll leave you gasping in his dust!); and we’re both strong music aficionados!

In fact, Kris and I shared nearly equal reverence for our favorite guitar players – Kris likes Tommy Emmanuel, and I had always leaned more toward John Lennon, George Harrison, Roger McGuinn and Tom Petty. In fact, my prized possession among my 15 electric and acoustic guitars was my 1993 replica Rickenbacker 12-string electric, accompanied by the Roger McGuinn Jangle Box. I wasn’t anywhere near as good as my “fab four” – but I still got the jangle out of my 12-string!

But, enough about my personal life! Now would be better served by sharing some of my final words of wisdom!

Having covered the services sector for more than 40 years, I’ve actually reflected some flashes of wisdom over the years, some of which I would like to share with you (that is, since I won’t be writing any more articles for FSN in the future). Let me leave you with “10 Things to be Painfully Aware Of” as you move through your own respective careers [Note: Please excuse the dangling participle – good grammar isn’t necessarily at the top of my list anymore!]:

 

10. If you’re not already hard-wired for the services industry, it’s time to look for another profession.
11. If you think you’re already doing enough in support of your customers, you’re wrong; if you think you can do better, you’re right.
12. If you’ve adopted a “wait-and-see” attitude toward the implementation of new technology, you can assume that your top competitors have already done so.
13. When building your strategic marketing plan, don’t look back at your competitors for guidance; look forward to meeting your customers’ needs, requirements and expectations.
14. Don’t just pay “lip service” to word-of-mouth; build it directly into your services marketing plan.
15. Yesterday’s leader in your marketplace may not be around tomorrow; today’s leader may follow in the path of yesterday’s leaders; tomorrow’s leader may not even be in your marketspace today.
16. Don’t conduct a customer needs and requirements/satisfaction survey because you have to; do it because you need to.
17. Implement improvements when your market performance is not doing particularly well; but remember, it’s even easier to spend the time and resources to make improvements when things are going well.
18. If you discover something “broken” in your organization, fix it; but if you identify something stellar that your organization is doing, let the world know about it.
19. Don’t think of strategic services planning as a bunch of one-offs; build your plan on a foundation of synergy, collaboration and linkage.

 

If these top 10 items aren’t enough to get you through life, then I’ll see you on the other side soon! Otherwise, it may take some time.

In any event, goodbye to all my friends and associates in the global services community. It was a pleasure working with all of you toward the common good!

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Further Reading:

Read more excellent insight from this true industry giant:

• What is the difference between good and great customer service?

• Identifying the differences between customers’ wants and needs

• Yesterday, Today, Tomorrow

• Does Your FSM Initiative Require a “Mid-Course Correction”?

• Customers’ reliance on the services your field technicians provide

• Time to Raise the Bar in Field Service

• A CUSTOMER PROBLEM OR A PROBLEM CUSTOMER?

 

Software-as-a-service has become well established, and recently a trend to sell Product-as-a-Service has emerged. PaaS is often sold in a similar way to products with limited additional services provided. From our perspective, this makes PaaS a rental service rather than a new form of servitization with value co-creation, as it reinforces an arm’s length relationship, Dr Christopher Ganz and Prof Dr Shaun West share their analysis... 

Servitization and the concept of ‘Product as a Service’

Servitization is a current trend in industry, which aims to increase the service business volume in companies by offering their customers more, particularly more advanced types of services. Digitalization goes hand in hand with this trend and supports these innovations. Many of the benefits of digitalization come from collecting data that offers insights into the customer’s needs. Such insights and resulting actions can be beneficially offered as services. The links between servitization and product service systems (PSS) are not new and are shown in Figure 1.

Figure 1: The degree of servitization increases as we move to product-service system [1]

 

As part of servitization, many companies are currently advertising a variant they refer to as ‘Product-as-a-Service’. This is a machine rental agreement where the supplier keeps ownership of the asset and rents the machine to the customer. The customer is obliged to pay the 'rent' but not obliged to use the equipment. This analysis is similar to a real-option contract based on the "take or pay" concept. It means that the maintenance costs (and risks) are transferred to the provider, however, it lacks many of the aspects of advanced services associated with servitization. PaaS also keeps the relationship between customer and provider at arm's length and therefore does not align with the value-cocreation (and delivery) as defined by Service-Dominant logic. When we consider Tukker’s Product-Service System (PSS) framework (Figure 2), the positioning is within the "product-oriented" position, one step from the pure product although it does lend itself to positions further to the right.

 

Figure 2: The PSS continuum [2]

 

PaaS can’t be discussed without mentioning Rolls Royce’s ‘power by the hour’ concept. Apart from the fact that this concept dates back two decades, it is not example of PaaS as the asset is actually owned by a bank and leased to the airline that uses it. It is a way to buy the maintenance based on operational hours consumed on the machine and often includes value-adding aspects, such as swap-out engines and operational advice for the turbines.

 

Financial optimization

While a PaaS model is easily advertised, to set up a business model that actually creates value is not a simple task. In its essence, the PaaS model comes down to whose balance sheet the asset is on. In a traditional product sale, the product is owned and operated by the customer. All risks are with the plant owner. In its simplest form, PaaS is a rental or leasing agreement that changes the distribution (or shape) of the cashflows. The customer benefits from an improved Return on Asset (RoA), not by increasing the returns, but by reducing the value of the assets. This optimizes the KPI without addressing its intention, which is to increase the return. Furthermore, the value does not indicate that more can be done with fewer assets (e.g., improvements in operational efficiency), it’s doing it with someone else’s assets.

Such rental / leasing models are mostly done through financial intermediaries because the supplier is penalized in their balance sheet for carrying the customer’s assets. It is to be noted, that these services need to be accounted for financially. While the lower entry cost may look attractive for a customer, the repeated rental payments may finally sum up to far more than what the initial investment would have been. The total cost of ownership over the lifetime is generally required for a customer to decide whether such an arrangement makes financial sense.

 

Advanced services contracts

PaaS arrangements are cited in the context of advanced services, i.e., predictive maintenance, energy optimization, etc. Since the asset is still on the balance sheet of the supplier, it is in the supplier’s interest to keep it healthy. In fact, it should be in the interest of all stakeholders to run the asset optimally. Such advanced services can be framed as service contracts, regardless of whose balance sheet the asset is on. These service contracts can also be framed as performance-based business models, where the service supplier still has an interest to maximize the asset’s performance, even though they don’t own it.

Other services based on process support can also be integrated. Here, coffee equipment manufacturers have been successful in creating a range of value propositions to improve the availability of quality coffee. In a number of cases, they have done this by creating deeper relationships and partnerships with dealers and coffee shop operators. Other industrial examples have been Caterpillar who both sell and rent machines and support process support, asset efficiency services and, to some degree, process delegation services. Hilti also provides advanced services based on tool-box and Hilti-Connect models

 

Figure 3: Classification of industrial services can provide hints to how to build advanced services [1]

 

Pay per use

An expansion of the PaaS model, where the rent is paid by calendar time, there are other models that tie the payment to operation. Pay per use, pay per kilometer, pay per products produced are things being discussed. It is to be noted, that such models move part of the operational risk to the supplier without any influence on the operational decisions. It is of course in the interest of the customer to outsource some of the operational risk, but it is questionable whether the corresponding remuneration to the supplier is factored into such contracts. If not, this is surely not a commercially successful model for the supplier.

Xerox introduced the concept when providing copiers to companies, at a ‘per page’ expense. Customers bought the contract when photocopies were slow, low quality, and expensive. The rapid development of copiers led to a massive increase of photocopies over more than ten years. Swapping printers for more performant models was seen as a benefit by the customers, while the increased capacity of these machines led to more copies being made. While a customer may not have bought a new machine if they had owned it, Xerox benefitted greatly from providing the capacity to increase their own revenues by copying more.

 

Utilization sharing

One area where PaaS models make a lot of sense is when the utilization of an asset can be increased. A pay per use model makes sense if several customers can use the asset. A good example is cloud computing: a cloud provider can offer the infrastructure or platform as a service by giving a number of customers access to the computing infrastructure in a data center. Computing or storage capacity that is not utilized by one customer can easily be re-allocated to another customer. The utilization of the data center infrastructure is much higher in such an arrangement than if every customer buys equipment that covers their maximum capacity requirements.

For example, GE Energy offered a rotor access option to their advanced Planned-and-Unplanned maintenance agreements. For a fee, the customer gained access to a fully bladed rotor; this had significant value following a rotor failure, in effect providing a real-option contract to the customer. Additionally, taking the access agreement reduced the cost of insurance for the power producer.

 

Summary

Many PaaS approaches in the industry have failed, or do not provide a breakthrough in service revenues. We claim that this is mainly due to the misinterpretations we have explained above, that do not result in a positive business case for the supplier. Nevertheless, PaaS can offer advanced service delivery bases when integrated with other service-based concepts where use- or result-oriented value propositions are factored into the PSS continuum. Alternatively, it allows more creative value propositions based on process support services, asset efficiency services, or process delegation services.

 

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References: 

[1] (Based on Vandermerwe and Rada, 1988)

[2] Based on Tukker 2004

[3] based on Kowalkowski & Ulaga, 2017)

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Further Reading:

• Read further academic commentary on the service sector @ https://www.fieldservicenews.com/blog/tag/the-view-from-academia
• Read more articles authored by Dr Shaun West @ https://www.fieldservicenews.com/blog/the-digital-twin-as-an-enabler-for-new-service-base-value-propositions
• Read more about servitization @ https://www.fieldservicenews.com/blog/tag/servitization-and-advanced-services
• Connect with Prof. Dr. West on LinkedIn @ https://www.linkedin.com/in/shaunwest/?originalSubdomain=ch
• Connect with Dr. Christopher Ganz on LinkedIn @ https://www.linkedin.com/in/christopher-ganz/