In a new series of extracts from an excellent white paper published by IDC and sponsored by IFS, we will explore the IDC Servitization Barometer which is designed to allow field service organisations to chart their path to new revenue streams. In part one we looked at the rapid and wide reaching change that is being faced by manufacturers in all sectors, in all regions. Now in part two we look further at IDC's Servitization Maturity Framework

Would You Like to Know More? www.fieldservicenews.com subscribers can access the full white paper on the link below. 

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IDC strongly believes servitization will make or break digital transformation initiatives in physical value chains. As the concept is still relatively new to many organizations, it needs to be articulated and clarified.

To help organizations understand where they currently are on this journey and, more importantly, how to proceed to the next level, IDC has built the IDC Servitization Maturity Framework, identifying key dimensions and stages defining an organization’s readiness. In connection to this effort, IDC and IFS have cooperated for this first edition of the IDC Servitization Barometer, a data-based assessment of where companies around the globe find themselves in the servitization journey.

The barometer is fed by an IFS-sponsored survey carried out in July 2019, touching 420 companies active in the physical supply chain world. In this section, we will provide an overview of the tenets of the Maturity Framework, before deep diving into the results of the Barometer. For more detailed information on the survey, including demographics and background, please refer to the Methodology appendix. IDC believes an organization’s status as regards to servitization is defined by the five equally important dimensions described in Figure 3 below.

 

IDC believes the servitization journey can be summarized in four key stages, as shown in Figure 4.

The four stages can be described as follows:

1. Splintered. The organization struggles under a myriad of silos that lead to disjointed, manual processes. Legacy, fragmented ERP environments provide little or no visibility on operational performance. The business model is on pure product, with challenges to profitability.

2. Side-car. The organization has standardized the two chunks of the value chain (back-office and front-desk) but keeps them separated. The keyword in the company is efficiency and few add-on services are delivered. Field service is based on basic mobile capabilities and IoT stacks are at proof-of-concept stage. Growing the business is hard.
3. Joined-Up. Front-office and back-office flows have been integrated in both directions and leverage the power of advanced technologies such as IoT to feed the core systems with real-time data. In some cases, Edge capabilities bring coordinated autonomy to local sites. A suite of digital services is fully available, and business model enhancements such as pay-as-you-use and outcome-based contracts are being explored.
4. Borderless. Processes start and end outside the organization and operations and technology enable different elements of the value chain to connect. Co-creation, data-sharing and collaboration with customers, suppliers, partners from other sectors and in some cases even competitors are part and parcel of the business model.

 

Servitization - A Real Example

A few years ago, a global healthcare manufacturer was struggling with data silos and a balkanized departmental setup (Stage 1). It integrated all the systems and processes in the purchase-to-stock part of the chain and achieved a much leaner back end, allowing better forecasts. Early discussions on modernizing the support and customer front end were held as it reached Stage 2. This is where the company is now. Margins are improving, but the ability to grow is not.

 

The company decided to explore a new business model towards delivering its medical instruments to operating theater managers on a pay-per-use basis, enabling healthcare professionals to access new innovations without massive upfront investment. The objective of this manufacturer is to generate a competitive differentiation against low cost competitors.

 

New technologies and service ideas are needed to get to Stage 3. To achieve that, IoT connectivity at customer, field service management software allowing rich data capture and machine learning algorithms that shape both supply flow and product design based on customer data are needed. This will drive new revenue streams from after-sales service and parts, on top of pay-as-you-go capabilities.

 

Alongside this, the advantages of the business model change become visible to customers. Since losing patients on the operating table due to a lack of materials is a not acceptable, hospitals lean towards very large safety stocks, which generates high inventory costs that are absorbed by patients. By creating an intelligent data flow on instrument utilization, the manufacturer can ultimately make healthcare more accessible to patients.

 

The long-term horizon begins to appear. In Stage 4, the company will strive to create an adaptative digital workflow in which real-time data generated interlinked with suppliers of raw materials, sterilization companies, hospitals, and patients will drive higher levels of success in the operations room.

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Further Reading:

• Read more about Servitization and Advanced Services @ www.fieldservicenews.com/blog/tag/servitization-and-advanced-services
• Read more about Digital Transformation @ www.fieldservicenews.com/blog/tag/digital-transformation
• Read exclusive FSN features from IDC's Aly Pinder @ www.fieldservicenews.com/blog/author/aly-pinder
• Read FSN Features and News from the IFS team @ www.fieldservicenews.com/hs-search-results?term=IFS
• Find out more about the solutions IFS offer to help field service companies @ www.ifs.com
• Follow IFS on Twitter @ twitter.com/ifsuk

You can’t manage what you don’t measure. It is an oft repeated phrases amongst management professionals of all sectors. As we establish the way out of the toughest crisis our industry has ever seen, good management is crucial and that means the metrics we measure are more vital than ever. In this first article in a series of excerpts from a recent white paper published by Aquant, Edwin Pahk, VP Product Marketing and Business Development, Aquant explains more... 

Would You Like to Know More? www.fieldservicenews.com subscribers can access the full white paper on the button below. If you are yet to subscribe join 30K of your field service management peers and subscribe now by clicking the button below...

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The service landscape is facing a dramatic transformation that ranges from the need to skill up a new workforce, to the move away from a reactive break-fix work towards a predictive service model. This, coupled with the desire to limit expensive on-site visits and customer demands for enhanced SLAs, means every service moment matters.

To make this transformation a reality requires a workforce of high performers, but there are plenty of hurdles on the path to achieving this goal.

Assembling and nurturing a powerhouse service team is challenging

• Baby Boomers are in the midst of a powerful retirement wave
• There is a sizable skills gap between new recruits and those who are retiring
• High paying service jobs became less desirable over the last decade as enrolment in vocational schools declined in favor of university programs
• Millennials and Gen Z seek to work, collaborate, and develop professional skills using speedy tech tools versus long-term learning plans

And the service landscape looks different, too

• Machines are more complex and require a workforce with advanced technical skills
• Consumer demand for standardized service costs are driving more predictive service offerings

• A move towards remote diagnostics and self-service triage offerings empower the customer to handle simple issues that don’t require a technician to be dispatched

• Changing economic factors are driving renewed pressure to stabilize or cut service costs

When we peel away the layers, all of this reinforces that a high-performing workforce is a key competitive differentiator. But how do service leaders move forward in this new service

landscape? Tools that map out your workforce, providing a snapshot of your experts versus challengers, and provide guidance on how to upskill the whole team is the first step.

 

Why Measure Individual Workforce Performance?

Service companies need to zoom in and out when it comes to KPIs Organizations have dashboards and charts to measure the service KPIs of the entire team, but few are zooming in to look at individual performance. Big picture knowledge is essential, but without visibility into great performers (service heroes) versus those who would benefit from training or upskilling (challengers) it’s hard to create service plans that address the root cause of workforce issues.

You likely know the shortlist of service heroes.

They are saved to your favorite contacts. And you may have a training plan for a few of the team members you know are struggling. What about the other 98% of the team? How are they really performing, and what do they need to do to level up and develop the skills and confidence of your superstars?

There are some obvious signs that members of your service workforce could use additional training. For example, those who regularly require repeat visits to remedy less complex issues is an obvious sign. What about more subtle indicators?

Some on the team may appear to check all the right boxes but may be struggling in other ways, such as racking up high parts costs by swapping out parts until the job is fixed.

This is where workforce measurement helps make sense of employee data by analyzing KPIs in a way that really matters. It can spot inconsistencies in service quality among the team and help you pinpoint who needs training and who is in the best position to provide mentoring.

But, there’s a caveat! Before you can get here, you need to measure the right things the right way.

 

Do the KPIs You Measure Provide the Right Insights?

We see you shaking your head. Service organizations already spend quite a bit of time and effort tracking workforce KPIs, and most service leaders keep a constant eye on those numbers.

But right now those KPIs tend to be narrowly focused on single measurements such as productivity or first time fix, and they don’t provide a holistic snapshot.

Without zooming out for a 360-degree view, measuring in isolation often leads to systemic and costly service issues. Instead of focusing solely on “what” to measure, it’s more important to ask “how” you are measuring. Do you have access  to the right mix of information to measure what really matters? That should include understanding metrics at a macro level across the organization and on an individual level. Take a deep dive into your data.

Does one KPI improve, only to have another fall below target? Not analyzing the right data, or not doing so in the right way, can be just as harmful as not measuring at all.

In the next feature in this series, we will look at the five key KPIs that, when understood in relation to each other, can provide an accurate snapshot of what’s really going on with your service teams.

 

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Further Reading:

• Read more about Leadership and Strategy @ www.fieldservicenews.com/blog/tag/leadership-and-strategy
• Read more about Managing the Mobile Workforce @ www.fieldservicenews.com/blog/tag/managing-the-mobile-workforce
• Read more news and articles featuring Aquant @ www.fieldservicenews.com/hs-search-results?term=aquant
• Connect with Edwin Pahk on LinkedIN @ https://www.linkedin.com/in/edwin-pahk-8a066515/
• Find out more about the solutions Aquant offer to help field service companies @ www.aquant.io/
• Follow Aquant on Twitter @ twitter.com/Aquant_io

As part of an exclusive Field Service News presentation with the team at Space1 Kris Oldland talks to Francesco Benvenuto of OverIT the creators of Space1 and augmented reality tool designed for field service organisations to find out the difference between Augmented, Merged and Mixed Reality technologies as well as discussing the importance of Artificial Intelligence when it comes to the application of such technologies...

Would You Like to Know More? www.fieldservicenews.com subscribers can access the full presentation by clicking the button below. If you are yet to subscribe the button below will take you to our subscription page, where you can see the range of subscription options available. 

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Different Technologies, With Different Applications Within Field Service

When it comes to dialling in the experience required directly to your field service engineers or technicians, we are becoming more familiar with the processes and the technology. However, what can be confusing in identifying the solution your business needs is the various terms which, to the layperson at least, appear to largely to be synonyms. But is this necessarily the case?

"There is a technical difference," explains Francesco Benvenuto, OverIT when this question was put to him during a recent presentation of the Space1 Augmented Reality solution designed by the team behind Field Service Management solution OverIT.

"Augmented reality is a little different from mixed reality and very different from virtual reality. With Space1, we can leverage the three technologies in different application areas.

 

"Many of our clients are leveraging virtual reality so they can create a reproduction of a real environment giving them the ability to train an employee in safe conditions..."

     - Francesco Benvenuto, OverIT

 

"I would say that today, augmented reality is a technology that is ready to be used in the field for maintenance activities for training also for presenting service related reports. Mixed reality I would say that slightly behind augmented reality in terms of its readiness to be used in the field which is mainly with due to restrictions on the hardware side of the equation.

"When it comes to virtual reality, mostly our clients using VR within Space1 for training, many of our clients are leveraging virtual reality so they can create a reproduction of a real environment giving them the ability to train an employee in safe conditions.

Of course, during the last four months, where we've seen digital transformation accelerate as a result of the pandemic and remote assistance tools have been at the forefront of that. However, before this period, there has always been something of a slight reluctance to fully embrace augmented reality solutions within field service than might have been perhaps anticipated.

There have always been some nagging doubts. It felt there were just a couple of dots that needed to be connected before AR could indeed live up to its potential as a cornerstone of field service delivery technology. For me, one of those critical dots was the knowledge management piece.

This was something that leapt out of the presentation given by Benvenuto and his colleagues. Artificial Intelligence impressively powered the knowledge management aspects of the Space1 solution. As soon as I saw the solution being demonstrated, I could see that indeed, AI was potentially the one tool that could join an awful lot of those dots together. 

As Benvenuto said during the Q&A, "we see that artificial intelligence today is making our solution stand out from other products that are available in the market. We are using artificial intelligence because we believe that it's very important. Companies are facing challenges to be able to store such information, and with so many employees are leaving the company, it's often hard to find new workers.

"Also, it's getting harder and harder also due to the complexity of the assets that are being maintained on field to be able to store such data. So knowledge management, artificial intelligence, augmented reality are really key in helping organizations to solve this issue."

 

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Further Reading:

• Read more about Digital Transformation @ www.fieldservicenews.com/blog/tag/digital-transformation
• Read more about Augmented Reality and Remote Services @ www.fieldservicenews.com/hs-search-results?term=Aumented+Reality
• Read exclusive FSN news and features about OverIT & Space1 @ www.fieldservicenews.com/blog/overit
• Find out about the Space1 and OverIT solutions @ www.overit.it/
• Request a demo of Space1 @ www.overit.it/en/request-demo/
• Follow OverIT on Twitter @ twitter.com/OverITSpA
• Connect with Francesco Benvenuto on LinkedIN @ www.linkedin.com/in/benvenutofrancesco/

In a new series of extracts from an excellent white paper published by IDC and sponsored by IFS, we will explore the IDC Servitization Barometer which is designed to allow field service organisations to chart their path to new revenue streams. In part one we look at the rapid and wide reaching change that is being faced by manufacturers in all sectors, in all regions...

Would You Like to Know More? www.fieldservicenews.com subscribers can access the full white paper on the link below. 

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Sponsored by:

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, IFS who may contact you for legitimate business reasons to discuss the content of this content. 

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Production-oriented industries anchored in physical value chains are undergoing a process of deep transformation. Business leaders must find new ways to adapt to rapidly changing customer expectations and volatile market conditions. Rethinking the approach to ideation, innovation, and new product and service development is critical to maintaining top- and bottom-line growth.

Digital transformation initiatives are being rolled out with the end goal of making enterprises “Borderless.” This means the powering of a digital network that integrates internal and external silos to deliver more value to the ecosystem, including employees, customers, suppliers, and partners.

IDC research (see figure 1 below) indicates that digital organizations in production-oriented industries are benefitting from strong growth in terms of revenue and profit. Non-digital organizations struggle.

 

As digital transformation evolves from a cluster of one-off projects to the generation of new business models, business leaders are required to deliver the associated business outcomes from digital investments. In fact, in a recent IDC survey 65% of CEOs stated that they were under considerable pressure to craft and execute a successful digital transformation strategy that enables financial growth in their organizations.

In production-oriented industries, success is dependent on the ability to bring a much stronger service value proposition to play. Servitization is therefore turning into a top agenda item in this sector, with 82% of firms actively exploring or moving to servitize their businesses. The transition towards servitization in these industries is potentially motivated by the fact that the respondents expect the average proportion of annual revenue generated from services versus products to double from 8% in 2019 to 16% in 2022.

IDC describes servitization as the process whereby organizations with physical value chains enhance their products with — and ultimately package them within — advanced services such as digital applications and payment models based on consumption or outcome. According to IDC’s research, there is a strong correlation between servitization maturity and revenue growth. All organizations in the most advanced stage of servitization have reported growth in the top line in the past year, often over 5%. On the other hand, the revenues from 88% of organizations in the earliest stage of servitization maturity have either decreased or stayed the same in the past 12 months.

 

"Servitization is a journey and its end stage is the creation of an end-to-end value chain..."

 

In most organizations, servitization is a critical element of the overall digital transformation. It involves a transformation of the core systems, leveraging emerging technologies such as IoT and machine learning, which in turn enable organizations to access real-time data from the ecosystem and transform it into actionable insights.

Servitization is a journey and its end stage is the creation of an end-to-end value chain. This can only be enabled by driving interoperability at the application level, where the ERP systems underpinning the supply chain are seamlessly connected to the applications enabling field service and contact center agents, as well as the sensors collecting data from deployed products. The outcome is a continuous flow of relevant information across front-office and back-office to increase operational performance and new revenue streams based on data-driven services. Figure 2 (below) illustrates some of the benefits that servitization could deliver to production-oriented organizations and their end customers.

 

Examples of companies heading towards servitization include:

• An Israeli-based industrial valves manufacturer embedded IoT modules in its products, allowing it to charge customers based on volumes of liquid processed. The customer can program the valves for remote manual operation or set a machine-learning algorithm to do that. This increases efficiency in the industrial operations.
• A forklift maker connected one of its products to a cloud backend with GPS tracking, offering its logistic customers remote maintenance services and a fleet management service to locate its forklifts.
• A global defense and security provider offered aircraft fleet maintenance and repair services. In order to ensure high availability of the equipment for its customers, this organization has linked the systems that underpin the maintenance and repair cycle to its enterprise resource planning (ERP) applications. The outcome is the delivery of an effective fleet readiness management to customers and the generation of new revenue streams coming from more after-sales services and improved customer satisfaction.

Based on discussions with companies in the sectors impacted, IDC believes changes in business models are part and parcel of servitization. These can be played out in three ways:

• Augmentation of product-based revenue with additional service revenue going beyond traditional services (maintenance, break-fix etc.) to include data-driven digital services (e.g., Fleet management service above)
• Partial or complete switch from upfront sales towards consumption or outcome-based models (e.g., “pay-per-liquid volume processed”)
• Monetization of proprietary data through licensing to third party (e.g., a car manufacturer selling access to driving behavior data to an insurer)

While complexity and impact on overall organization changes between the three approaches, IDC believes that all these new approaches to business models signal that a servitization journey is on the way and positive effects for the top and bottom line are a consequence of those.

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Further Reading:

• Read more about Servitization and Advanced Services @ www.fieldservicenews.com/blog/tag/servitization-and-advanced-services
• Read more about Digital Transformation @ www.fieldservicenews.com/blog/tag/digital-transformation
• Read exclusive FSN features from IDC's Aly Pinder @ www.fieldservicenews.com/blog/author/aly-pinder
• Read FSN Features and News from the IFS team @ www.fieldservicenews.com/hs-search-results?term=IFS
• Find out more about the solutions IFS offer to help field service companies @ www.ifs.com
• Follow IFS on Twitter @ twitter.com/ifsuk

BT Final Mile Client Account Director, Mark West, reflects on the importance of zero-touch final mile logistics solutions in a post pandemic world...

The importance of being able to get the right parts to the engineer at the right time has

always been a significant challenge for field service organisations. However, as we move from a period of lockdown into a period of continued uncertainty around social distancing, there are additional challenges to last-mile parts delivery that we may never have considered only a few months ago.

Many traditional PUDO (pick up drop off) points that were regularly utilised by field service engineers in local stores around the country are, for the time being at least, no longer viable. For those that remain, the requirements of social distancing mean significant additional delays in accessing the parts stored behind a counter.

New Challenges for Final Mile Service Logistics

Even many of the traditional locations for lockerbox  solutions, especially those at supermarkets, for instance, are currently inaccessible as the areas in which they are placed become part of the long snaking queues as space becomes a premium in this current socially distanced world.

"The impact of the Covid-19 pandemic has hit the field service sector worse than anything we have ever had to face before..."

Overcoming this challenge has been a critical task for many UK field service organisations, and we have been hugely proud here at BT to play our part in helping keep the service supply chain flowing. Especially in this most critical of periods as we all pull together to try to move towards economic recovery.

Let’s make no bones about this. The impact of the Covid-19 pandemic has hit the field service sector worse than anything we have ever had to face before. A lot of engineers were furloughed.  Drops in volume of fifty per cent became a common scenario. There were a lot of experiences where companies with European warehouses were moving a lot of freight in ahead of the UK lockdown, but then they couldn’t get access to the stock. This resulted in a significant lack of stock within the UK which of course further impacted engineers being able to do their jobs.

The advantage that we were able to bring to our customers who were utilising our locker-based solutions was that our premises are unattended, our technology allows us to produce a safe environment which doesn’t require human intervention.

Additionally, as we have utilised our existing infrastructure and sites for the lockers, our locations are fully secure, with excellent road connections and provide twenty-four seven access. So we have had quite a few companies who have come to us that we had been speaking with across the last four to six months, who suddenly found their need was far more urgent.

Proud to Play Our Part During the Pandemic

Fortunately, we were able to help, which has allowed these companies to keep their parts supply chain moving even during these most testing of times.

When we look at the position that many suppliers were in, they didn’t want, or even couldn’t have people coming into their branches, so they were closing these down. However, they could still deliver themselves, with their drivers into a locker solution allowing them to provide the goods needed within a zero-touch environment.

"We are proud that we were able to play our role in supporting critical organisations that were fundamental to nationwide effort to overcome the challenges of Covid-19..."

This allows for minimal impact from the actual handling involved, and then the engineer can

collect the parts at their convenience.

Looking back at the peak of the lockdown crisis, we are proud that we were able to play our role in supporting critical organisations that were fundamental to nationwide effort to overcome the challenges of Covid-19. Throughout the lockdown, we are running at 100% operational. We’ve got clients in the health care industry who service lifesaving equipment that needed to be repaired.

We also have clients in telecommunications and infrastructure that were vital cogs in the process of fighting the pandemic. Even some companies that you might not at first glance think are critical such as printing companies or laundry companies.

Still, these companies all have contracts within the NHS directly and have been essential to keeping everything moving.

Now, as we move into the recovery period, many of these companies who will be essential to keeping the helping us kick-start the economic recovery. There will be significant amounts of the lost capacity to be recovered for all service companies.

In addition to this, history shows us that in times of economic downturn, there is always increased pressure on service and maintenance agreements as the focus moves away from substantial investment in new assets onto maintaining existing assets.

Perhaps the most significant pressure to be felt as we move into this next phase of recovery will on the service supply chain. We need to readjust to a global supply chain that had mostly been turned off overnight; it will take time to get everything fully back up to speed.

However, as our customers have found even at the height of the crisis, the last-mile element of the service supply chain logistics is one part of the equation that fortunately can be relatively easily overcome and with over 1,800 intelligent locker sites available across the UK, we are there to help the field service sector as we move into the recovery.

Further Reading:

• Read more about service logistics @ www.fieldservicenews.com/blog/tag/parts-pricing-and-logistics

• Read more about the impact of Covid-19 on the Field Service Sector @ www.fieldservicenews.com/en-gb/covid-19-0

• Read more exclusive FSN articles from the BT Final Mile team @  www.fieldservicenews.com/hs-search-results?term=BT+Final+Mile

• Find out about how BT Final Mile solutions can help your service operation @ www.finalmile.bt.com

• Follow BT Final Mile on twitter @  twitter.com/BTBusiness

• Connect with Mark West on LinkedIN @ www.linkedin.com/in/mark-west

  
  

Professor Tim Baines, Director of the Advanced Services Group, Aston University and Dr. Ali Zia Bigdeli, Senior Lecturer in Industrial Services Innovation at Aston University argue manufacturing should embrace services as part of its post-COVID-19 strategy.

Change, a 1985 paper argued, can be characterised as a “punctuated equilibrium”: long periods of relative calm and small incremental alterations that are interrupted by brief, but radical, seismic shifts. COVID-19 means that we are now living through one of those revolutionary moments.

Advanced Services and Positive Business

But that also means that there is an opportunity to look at things in a new way. For the past 20 years, we’ve been conducting research and advising manufacturers to compete through services – activities aimed at solving customers’ problems – rather than simply just pushing boxes out of the factory.

And our reasons are simple: services are good for business, good for the economy and environment, and good for society. Now accounting for 80% of the UK’s economic output, services have grown by 30% over the past 20 years. By comparison, gross domestic product (GDP) generated from selling products has contracted – a trend that is being replicated in every developed economy across the world.

But it has been a slow and sometimes painful journey – “What is this thing called servitization,” we are asked. “And how do you spell it?!” Up until now, change in this field, like in so many others, has been evolutionary, somewhat incremental and exploratory. But then arrives a global pandemic that shatters the equilibrium and stimulates radical innovation.

These are challenging times, and it’s important not to make light of the struggles facing the global economy. Business activity is currently polarised around sector and geography. On the one hand are manufacturers who support the food and health sectors and have never been busier. On the other are those businesses linked to the aerospace, automotive, and oil and gas industries which are being forced to mothball facilities and lay off staff in their tens of thousands.

For some, the implications are so severe that they may not survive. Even those that are doing well are having to deal with a reduced workforce, social distancing in the workplace, and the economic fallout of customers being unable to pay their bills.

Disrupting the old norms

How appealing the old norms may now seem. Until just a few months ago, most executives within manufacturing organisations had a rather passive, established view of services. For us, it was frustrating, but comfortingly familiar.

We could work with these manufacturers to help them better understand the value of services, influence key decision-makers and then hopefully get a chance to support their innovation of new business models, technologies and organisational structures. But we often experienced an equilibrium – the harder we helped manufacturing executives to push for more services, the harder the system pushed back.

Now, however, that equilibrium is being disrupted.Take performance advisory services. These are services that allow manufacturers to use digital technologies to gain insight into how customers use their products, and then offer data and/or intelligence back to that customer on how to gain more value from those products.

"The end of this period of disruption will bring a new set of norms, and it’s beyond belief that we will return to the days of simply shifting boxes..."

An example of this type of service is Siemens’ monitoring of the condition of airport baggage carts. The company gathers acoustic and vibration data from rail-mounted luggage carts around the airport and uses this data to assess the likelihood of breakdowns before they happen.

Breakdowns cost time and money. So spotting potential breakdowns in advance saves airport operators the penalties that must be paid when luggage isn’t loaded onto flights on time, and improves the passenger experience through the punctual delivery of baggage.We have seen a wealth of technically excellent digital systems like this. Most, however, have so far failed to be commercially viable and manufacturers have been reluctant to invest in and push them to customers. But in the current climate, that may change.

As well as opening up a huge new market opportunity, these services could be far more profitable than simply selling the products themselves. Such services can also develop enviable intimacy with and loyalty from customers as the provider is able to address their customers’ demands and problems much more quickly and effectively.

And now times are changing, the economic potential of services is becoming more visible. Indeed, remote support and performance advisory services – helpdesks, remote support for breakdowns, digital installations – provide obvious solutions in an age of social distancing, remote working and lockdowns.

Customers either want remote advice on how to fix problems themselves, or they want the manufacturer to remotely fix and upgrade their equipment. It’s not all about technology, of course – customers still value speaking to a person, just not face to face. But manufacturers no longer need to gamble as much on selling these new systems; customers actively are seeking them. Both parties are starting to look at the bigger picture, and services are proving vitally important to both.

Accelerated change

For some time yet, change will be accelerated and hastened. The end of this period of disruption will bring a new set of norms, and it’s beyond belief that we will return to the days of simply shifting boxes. At the very least, business plans will need to include how to deal with disruption – whether it’s related to health, the economy or the environment.

The opportunities that this creates for services are potentially dramatic. Services are in the midst of radical change and, of course, we all look forward to returning to those long periods of relative calm. However, in so many ways, things will never be the same. Business models for manufacturers will have been disrupted, and there will be new and different conversations about the value of services. These business models have the potential to deliver huge value, and a level of resilience that we may never see again for production-based ways of competing.

Further Reading:

• Read more articles by Tim Baines @ https://www.fieldservicenews.com/tim+baines
• Read more articles by Ali Zia Bigdeli @ https://www.fieldservicenews.com/AliZiaBigdeli
• Find out more about the World Servitization Conference @ https://www.advancedservicesgroup.co.uk/wsc2020
• Read more articles about servitization @ https://www.fieldservicenews.com/servitization
• This article first appeared The Conversation.com here
• Follow the work of the Advanced Services Group @ www.advancedservicesgroup.co.uk/
• Follow the Advanced Services Group @ twitter.com/theasgroup

Michael Blumberg offers us an exclusive analysis of the research he has recently conducted to identify trends amongst service organisations when it comes to service contract revenue that shows the secret is 'all about the asks'...

Mize recently conducted a study among service executives and warranty professionals who are involved in marketing and selling service contracts and extended warranty (SC/EW) programs. The findings validate which strategies and tactics offer the best results which in turn will help managers and executives become more effective in marketing and selling extended warranty/service programs.

A total of 96 service contract and warranty professionals have participated in our survey.  Just over two-thirds (68%) of the survey respondents were representative of the B2B segment. The remaining 32% were from the B2C segment.

Essential Key Performance Indicators Amongst Field Service Organisations

Attach and Renewal rates are the primary Key Performance Indicators that companies rely on to evaluate the success of their Service Contract and Extended Warranty Programs.   A small percentage of respondents (15%) reported attach rates in the range of 51% to 70%.  Most respondents (45%) reported attached rates of 26% to 70%).  

Concerning renewal rates, while a majority (71.5%) of the respondent’s report renewal rates of less than 50%, over one-quarter have renewal rates of 76% or higher.  Half of these respondents have renewal rates over 90% demonstrating that this level of performance is possible.

Higher attach and renewal rates were observed among respondents from the B2B segment. This is attributable to the fact that companies in the B2B segment are often more engaged with customers during and post-sale than those in the B2C segment.   B2B companies may have multiple interactions with a customer before, during, and after the sale then B2C companies.  For example, in the purchase of a refrigerator, the retailer may have only one chance, usually at the point of sale, to sell an extended warranty during the point of sale.  In contrast, the seller of Construction Equipment may have multiple interactions with the customer throughout the lifecycle of the equipment. This increases their opportunities the seller must upsell, and cross-sell extended service programs.

Configuration

One of the key drives of successful Extended Warranty programs is Contract Configuration. This term, configuration refers to:

• the length of contract coverage,
• level of customization,
• processes/services engaged
• resources deployed in delivering the services
• entitlement levels offered.

With respect to length of coverage, most respondents (82%) surveyed to date indicate the typical length of SC/EW programs is equal to or less than three (3) years.  Among these respondents, slightly more than half (48.0%) offer programs that range in length between 1-2 years, while 52% have programs of 3-4 years in length.  The survey results suggest SC/EW programs have a shorter coverage period within B2B than B2C.   Slightly more than half of the B2B respondents offer programs that are 1-2 years compared to only 18% of B2C respondents. 

Customization

In terms the level of customization provided, over three quarters of the respondents offer SC/EW with some level of configuration.  While approximately one-half (54%) offer mostly Standard Configuration, they also indicate that some of the programs have some level of customization.  However, only 18% offer mostly Customized programs or entirely customized programs.  The remaining respondents offer only a standard configuration.  Customized programs are more prevalent within the B2B sector than B2C.  Nearly 82% of B2B respondents offer programs with some level of configuration while only 44% in B2C.

Flexibility of Terms

Slightly less than half (48%) of the respondents surveyed indicate that they provide their customers with the ability to terminate their contracts after they are purchased.  Among those who allow early termination, the majority (58%) allow for termination with penalties.  Higher attach rates and renewal rates are associated with companies that provide ability to terminate early.  

Approximately one-half (52%) of the respondents surveyed provide their customers with the ability to negotiate the price paid for service contracts. Higher attach and renewal rates were observed among companies who provide customers with the ability to negotiate.  This practice is more common within the B2B Segment.

Processes

When it comes to processes covered, most (86%) respondents will correct failures that customers experience during the coverage period. Other types of processes engaged as reported by 20% to 30% of respondents include preventive maintenance, calibration, planned inspections, consumable replacement, recalls, and remote product monitoring.  

In delivering these services, most respondents provide the following resources as part of the SC/EW program:

• Spare Parts (64%)
• Advanced exchange/parts swap (54%)
• Onsite Field Service (82%)
• Depot Repair (50%)
• Remote Support (57%)

A smaller percentage of respondents also offer Diagnostic tools (14%) and loaners (7%) as part of the SC/EW configuration.

Entitlements

Entitlements are another aspect of SC/EW configuration that customers will consider in their purchase. Entitlements can be viewed as the level of service they can expect to receive once a problem or claim is reported.   Almost one-half of the respondents (43%) provide a field service response time guarantee. Another 39% include guaranteed parts delivery time.  Other types of entitlements that maybe found with an SC/EW configuration include resolution time guarantee (21%) and telephone response time (36%) and loaner if problem can’t be resolved within 24 hours (18%).

Frequency of Communications

Survey respondents typically notify customers that their SC/EW programs are up for renewal. One half (50%) of the respondents indicate they provide more than 75-days advanced notification; 16% provide 90 days or more notification. Higher renewal rates observed among companies that provide 90 t0 76 days advanced notification. Two-thirds (68%) of respondents provide only 1-2 advanced notifications. The remaining 32% provide 3 or more notifications.  Higher Renewal Rates are observed among respondent who provide 3 or more notifications

Front Line Personnel & Automation

A majority (54.2%) of respondents involve front line service personnel in the sale of SC/EW contracts.  Approximately, two-thirds (68%) provide formal sales training while less than half (46.2%) use automation to facilitate the ability front line service personnel to sell SC/EW programs. Higher attach rates and renewals are cited among respondents that use automation to facilitate sale by front line service personnel

Summary & Implications

In summary, the more distinctions a company can make about its SC/EW program, the more likely customers will be to purchase it. In other words, customers consider the value of a service contract before they purchase it.  This maybe an “eye-opener” for manufacturers and their channel partners who take the view that a warranty is a warranty. Just because customers purchase their product doesn’t mean that they’ll purchase the SC/EW.

As the survey results indicate, the key drivers of a successful SC/EW program are level of customization, coverage and configuration, flexibility of terms, frequency of communication, use of front-line service personnel in sales process, and use of automation.  When it comes to selling service contracts and extended warranty programs, it’s about the asks. These observations underscore the importance of implementing solutions that enable Durable Equipment Manufacturers and their Channel parts to set up, sell, administer, track, and analyze various service programs.

Further Reading:

• Read more exclusive FSN articles by Michael Blumberg @ www.fieldservicenews.com/blog/author/michael-blumberg
• Read more about MIze @ www.fieldservicenews.com/blog/all-about-mize
• Read more about research into field service management @ research.fieldservicenews.com
• Read more about Service Innovation & Design @ www.fieldservicenews.com/blog/tag/service-innovation-and-design
• Connect with Michael Blumberg on LInkedIN @ www.linkedin.com/in/blumberg1/
• Folllow Mize on twitter @ twitter.com/mizecom
• Find out more about the solutions offered by Mize @ m-ize.com

Now is absolutely the time we need to start treating our Business to Business Accounts the same as our Business to Customers accounts writes Strategies for Growth^SM Bill Pollock...

Until only recently, the services purchase/acquisition cycle was a fairly closed-loop, highly structured, and oftentimes formal process. Potential clients obtained most of their decision-making data and informational input directly from the vendors, sought the top-level recommendations of published hardware and software buyer’s guides and directories, and picked up on the latest “buzz” at industry trade shows or via services trade publications – all were and still are powerful and rich resources (albeit, virtual trade shows will just have to do until the end of the current pandemic) .

This was the way services decisions had been supported and made for decades. But then, the Internet and social media changed everything – including the means by which information is gathered, reviewed, and analysed, the criteria by which potential vendors are evaluated and selected, and even the way in which customers position themselves as potential buyers in a largely buyer’s market.

The White House Office of Consumer Affairs has reported that dissatisfied customers will tell between nine and 15 people about their negative experience, with about 13 percent telling more than 20 people. Satisfied customers, on the other hand, will only tell about four to six people about their positive experience. Therefore, according to the report, customer service failures are likely to be communicated two-and-a-half times more often than customer service successes. As a result, services organisations will need to maintain a ratio of roughly 2.5:1 satisfied vs. dissatisfied customers just to break even in terms of word-of-mouth customer service feedback (i.e., 71 percent customer satisfaction). 

In all likelihood, customers will become even more critical – and communicative – about their service experiences in the future, based on the widespread usage of social media tools and technology devices. This presents a new front for services organisations to address in an increasingly social media-influenced marketplace; however, there are many other challenges that also must be addressed.

The Three Most Daunting Challenges to Field Service Organisations

The three most uniquely daunting challenges faced by services organisations over the past few decades include the following:

• Transforming themselves from manufacturer/OEM cost centers to strategic lines of business (i.e., with their own executive-level management and P&L responsibility).
• Shifting their operational focus from company-centric to customer-centric, whereby the customer represents the focal point of their universe.
• Learning how to treat their business-to-business (B2B) accounts with the same high level of service and support that other vendors use to treat their business-to-consumer (B2C) customers.

Surely there have also been other equally daunting challenges facing the services industry throughout this period, such as:

• The globalization of business operations
• A volatile cycle of economic upturns and downturns
• The proliferation of new technologies and applications
• The continuing shakeout of marginal performers, and the resultant consolidation within market sectors
• The widespread growth of social media for business purposes

However, while all of these business game-changers ultimately impact all business segments, the three challenges in the op list above focus uniquely on the services sector.

The Industry’s Success in Dealing with These Challenges

The main distinction between these two sets of challenges is that while the general influences of the economy, technology, market consolidation, and social media continue to impact all businesses from the outside in, the three challenges unique to the services industry are serving to transform services organizations from the inside out. As a result, the entire complexion of the services sector continues to morph on a virtually constant basis.

Let’s examine each of our three challenges with respect to their impact on the services industry.

Over the past 25 years or so, most services organisations have come to recognise that the “service as a cost center” business model is essentially outdated. Myriad books have been read – and conferences, seminars, and workshops attended – by enough managers to assure that the vast majority of services organisations have been able to successfully make the move from an historical manufacturer/OEM cost center to a more state-of-the-art profit center. All it took for this transformation to take place was for some of the larger and more progressive organisations to successfully bridge the chasm, coupled with the creation of third- and fourth-party organisations with no other line of business aside from service, and the ultimate introduction of a whole new genre of technology-driven, leaner operating upstart companies that did not carry the cost-center mindset of their predecessors. 

"Many of the service executives, managers, technicians, and general services staffs have never looked previously at their business accounts as “consumers” in the past..."

Shifting from a company-centric to a customer-centric focus was the next most daunting challenge to be addressed by services organisations on a wide-scale basis – though not always voluntarily. Some objection came from those steeped in a long-term R&D tradition where technology, manufacturing, production, and processes took precedence over customer service and support. Nonetheless, the need to focus on the customer has been satisfactorily addressed by the vast majority of today’s services organisations. 

The third challenge, however, is perhaps the most daunting of all, because it flies in the face of every marketing and promotional primer ever published, read, or taught. That is, the importance of treating your B2B accounts as if they were B2C customers. Many of the service executives, managers, technicians, and general services staffs have never looked previously at their business accounts as “consumers” in the past. But that’s what they really are – and that’s how they act when they collect information to support their buying decisions when they evaluate alternative vendors and products, narrow their “long lists” down to “short lists,” and make their final purchase decisions and/or recommendations.

In the past, businesses typically employed an entirely different process than consumers did to make their business-related product and service decisions. There was generally an elongated evaluation process, followed by an equally elongated negotiation process, ultimately leading to an acquisition decision that was approved by a committee or purchasing department. Business managers generally utilized resources such as comparative product/service reviews produced by research analyst firms to compare alternative offerings, then they typically would dissolve into committees and groups chartered to make the final purchase recommendations. Sales calls and marketing collateral provided by each of the short-listed manufacturer/OEMs and services organisations were also relied on heavily (as they still are today). 

However, the overall process was oftentimes slow, repetitive, incomplete, and short of the full complement of information it should have taken to support the decision-making process. Further, many of the short-listed vendors would typically only compare their products and services to those offered by their closest “like” competitors, oftentimes ignoring some of the otherwise applicable “new technology” solutions providers. But, as they say, times have changed. 

The Convergence of B2B and B2C:

The primary reason why the “like-company comparison” no longer holds up can be explained in just a few words and selected brand names, e.g., the Internet, Google, LinkedIn, Twitter, Amazon, QVC, Federal Express, UPS. Of course, there are many other paradigms that may be just as illustrative, but these are representative examples of what has helped transform the “B” aspect of the B2B equation into a “C.”

The Internet has become the great equalizer, i.e., the means by which businesses (the B’s) and consumers (the C’s) have been afforded equal data and information access, availability, and use. Prior to the introduction of the Internet, businesses and consumers operated in two entirely different worlds; but now, businesses and consumers have an equally powerful tool to support their product and service decision-making processes.

Further, search engines like Google, Yahoo!, Bing, and others can equally empower both types of customers in their ability to search out the best products and services available to them. No longer would businesses need to rely primarily on printed or electronic buyer’s guides, directories, and product/service overviews published by research analyst firms. Nor would consumers need to focus exclusively on Consumer Reports, newspaper articles, and television advertising to obtain their purchasing information. Not that these sources aren’t rich and resourceful – they entirely are. But today, there are numerous websites, blogs, trade associations, and general e-mail communications, posts and tweets that are powerful additional sources of comparative information that is helpful in making a final decision.

"The question arises: Wouldn’t it be nice if all of the B2B business vendors offered the same capabilities as the B2C vendors?"

Then there are the companies that have taken the functionality of these Web-based tools to the highest levels. Companies such as Amazon that, every time you log in, tell you what you’ve bought in the past; what others who have bought the same items as you have also bought; what new items similar to the ones you have bought in the past are now available, and so on. They can even provide you with time-related reminders for purchasing (e.g., birthdays, holidays, anniversaries) and alternative shipping options for the items you have purchased.

The question arises: Wouldn’t it be nice if all of the B2B business vendors offered the same capabilities as the B2C vendors? For example, letting their customers know what comparable businesses have ordered in terms of related items, bundled product/consumables packages, extended service coverage agreements. Or reminding them that they may need to renew or extend their service agreement, stock up on consumables, or consider migrating to a newer model or version. Some companies already provide these services, but certainly it would be great if there were more businesses that did. 

Companies like QVC and the Home Shopping Network have also maximized their use of the Internet’s communications capabilities by making not only the buying process easy – but the returns process as well. For example, you might purchase an item from QVC via telephone, computer, or electronic device. Once you obtain a customer number, it’s all very easy to place an order. The overall customer experience is then heightened even further by the high level of communications provided to the consumer, receipt of a near-instant e-mail confirmation of the order, subsequent follow-up e-mails when the item is shipped, if it is on backorder, etc. Even the return process is easy with companies like QVC. If it doesn’t work out, one can simply return the item in the same packaging along with the supplied mailing label, with return-receipt and credit notification sent in a timely manner. 

Again, an equivalent B2B experience here would be an outstanding way to focus on your business customers. 

The Permanent Emergence of the “C” Account

It is no longer good enough to tell your accounts that your organisation is no worse than any of your similar competitors (the “like-company comparison). If you do, you will risk hearing something in return such as, “I understand that. But what I don’t understand is why you can’t provide me with as much past, present, and future order information as Amazon or process my return – and return credit – as quickly as American Express!” 

By simply delivering the same-old, same-old treatment to your accounts, you are guaranteed to continue treating them as B’s. However, your accounts have become accustomed to being treated as C’s. Your customers – empowered by the Internet, its evolving technology, and the explosion of related apps, devices, and social media tools – have already crossed that bridge; now’s the perfect time for your services organisation to do the same!

Further Reading:

• Read more exclusive FSN features from Bill Pollock @ www.fieldservicenews.com/blog/author/bill-pollock
• Read more about Service Innovation and Design @ www.fieldservicenews.com/blog/tag/service-innovation-and-design
• Read more about Leadership and Strategy @ www.fieldservicenews.com/blog/tag/leadership-and-strategy
• Connect with Bill Pollock on LinkedIn @ www.linkedin.com/in/bill-pollock-b74874/
• Follow Bill Pillock on Twitter @ https://twitter.com/sfgonservice
• Follow Bill Pollock's Personal Blog @ pollockonservice.com/

As our industry is desperately seeking avenues to return to normality, FieldAware’s COO Steve Mason brings to the table an interesting solution...

As businesses continue to evolve their operating practices in the age of Covid-19, service organizations worldwide are resuming their operations in response to relaxed lockdown measures. In many locations, the introduction of Track and Trace protocols enables authorities to identify who a positive COVID-19 person has been in close contact. Once identified, they instruct exposed individuals to self-isolate and to get tested themselves. These new measures aggressively limit the exposure to COVID-19 and enable the suppression of uncontrolled virus breakouts.    

As part of reopening plans, many countries have successfully implemented Social Bubbles. In these “bubbles,” individuals agree to only have contact with a small group of others and practice social distancing with everyone else. The idea is to break transmission chains so that nobody within the bubble gets infected or, importantly, if somebody within the bubble is infected, the number of people to test is smaller and the virus is not transmitted into the wider population.

So, what does Track and Trace and Social Bubbles have to do with field service and service organizations? 

At the heart of field service is the delivery of work to customers at commercial facilities, private homes, or in open, often public, locations. This necessary public interaction creates an environment where field techs have a higher propensity to come into proximity with infected COVID-19 contacts. The result and impact on service organizations:

• A customer becomes infected, and the field resources that have been in close contact with that customer are part of the Track and Trace investigation.
• The tech becomes infected themselves, and the Track and Trace investigation includes other service team members and the customers they interacted with while providing service.

Either scenario creates an inevitable event that your field resources will have to self-isolate due to the evolving Track and Trace investigation protocols associated with COVID-19 exposure.

The question isn’t whether your techs will need to self-isolate. Rather, how do you reduce the number impacted at any one time and simultaneously minimize the impact on your service business?

Enter the concept of Service Bubbles. In the fight against COVID-19 service bubbles provides several key benefits:

1. For individuals, it reduces the risk of exposure and infection.
2. It provides a mechanism to manage the impact an exposure has on the available workforce for service organizations.
3. For society, it contains the exposure and potential spread of an infection to a smaller number of members in the Service Bubble.

How do you set up Service Bubbles?

There are three primary ways to create service bubbles, and you mix and match options depending on business demands.

• Physical Service Bubbles are created by creating small service areas and assigning individual resources and crews to work. You build up these smaller areas until you achieve complete coverage of your original service areas.
• Logical Service Bubbles are created by using permits to allocate different customers to different resources. Once configured, a pre-determined resource can only service that customer.
• Shift-based Service Bubbles are created by allocating resources to work at different times of the day. Setting the working hours for each resource to reflect their correct shift hours, and adjusting their shifts over time ensures no overlap.  

In addition to the different ways to create Service Bubbles, you can also use permits to limit further which resources can work at specific customer locations. By restricting the number of resources visiting a customer location, you minimize the resources required to self-isolate as part of a Track and Trace investigation if a customer tests positive.

The smaller team sizes require constructing teams to fully consider the skills necessary to service customers in a particular area. You want to avoid having to send experts into different Service Bubbles to resolve complex problems. Appropriately allocated experts have the benefit of keeping the integrity of your Service Bubble strategy, minimizing Track and Trace risk, while increasing first time fix rates.

Tactics used to avoid overexposing include:

• Defining Skills against all your field resources and creating a Schedule Policy to utilize these Skills Rules. Planners and the Smart Scheduler will only assign jobs to techs with prerequisite skills.  
• Ensuring knowledge management capabilities are fully enabled for field resources to have access via smartphone to provide access to customer and asset history; technical manuals; specification sheets; FAQ’s; and other artifacts to reduce the need for expert involvement.
• For advanced organizations, using Augmented Reality to give access to your experts remotely. Using smart devices and even googles for a pool of experts to see what is happening on-site remotely and guiding technicians to fix more complex problems or unfamiliar systems.   

Setting up and managing an effective Service Bubble operation can be difficult if you do not have a modern application and technology. FieldAware with its configuration flexibility, enables organizations to efficiently and effectively set up and administer Service Bubbles, increasing the team’s operational resilience and protecting against having vast numbers of the team self-isolating.  

Once suspended and Track and Trace protocols are lifted, you can revert to your original service model by merely assigning your resources back to their original service areas and removing the customer annotated permits. Once updated, your system will automatically revert to your original service model.

Further Reading:

• Read more about Field Service and Covid-19 Recovery @ www.fieldservicenews.com/en-gb/covid-19-0
• Read more about Service Innovation and Design @ www.fieldservicenews.com/blog/tag/service-innovation-and-design
• Read more FSN exclusive articles from the team at FieldAware @ www.fieldservicenews.com/blog/fieldaware
• Connect with Steve Mason on LinkedIN @ www.linkedin.com/in/stevemason3
• Follow FieldAware on Twitter @ twitter.com/fieldaware
• Find out more about the solutions FieldAware offer @ www.fieldaware.com