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Two decades ago high tech companies blazed a new trail that saw them move away from the traditional transactional relationships they had with their customers as they embraced service as a route to sustainable and predictable revenue.

Other industries including the copier, medical and discrete manufacturing sectors have since followed suit and the evolutionary path to becoming a service led business is now clear explains Hilbrand Rustema, Managing Director, Noventum Service Management...

Twenty years ago, high tech companies such as IBM and HP were product driven organisations that sold hardware with a product warranty service.

Their products such as PC’s and servers were often mission-critical and too complex for customers to repair themselves. Once the warranty expired, customers had to pay for spare parts and on-site field service, also known as “Time and Materials”. These high-tech companies discovered that the service business was an interesting high margins and high growth business.

They adopted a new strategy to start focusing more on the Service Business. They created a new core service business with its own profit & loss statements, with dedicated senior managers at board level.They adopted a new strategy to start focusing more on the Service Business. They created a new core service business with its own profit & loss statements, with dedicated senior managers at board level.

Their customers then discovered that rather than buying services when you have a problem, it was cheaper and less disruptive to purchase preventive maintenance services.

Eventually the high-tech companies found out that to have predictable and profitable revenue it was necessary to create services that would guarantee a certain availability of the product This was the start of a category of services called “Availability Services” and the start of “Service Level Agreements” as a business model that closely resembles that of the insurance industry when it defines a price for the service based on the risks and value as perceived by customers.

Following the high-tech industry, other industries followed a similar evolution, for example:

 

• The copier industry with companies such as Xerox and Canon, now evolved into document management solutions;
• The Medical equipment companies such as Philips Healthcare,  Siemens Healthcare and GE Healthcare that can now offer entire “Managed Hospital Services”
• Discrete manufacturing where machine manufacturers are now moving from reactive to preventive and predictive services using the Internet of Things technologies to accelerate the transformation towards more advanced services.

Since then these high-tech companies have converted themselves into full-service businesses that no longer sell only products and “Product Related Services”.

They have moved up higher in the value chain by offering “Customer Business Related Services” which we can bundle under the name Pro-Active Services.

The model below illustrates the typical evolution of a service business:

We see roughly three types of Customer Business Related Services:

 

1. Process Optimisation Services are the first typical types of services whereby process expertise is used, for example, in process advisory, process compliance services or benchmarking services. Most often, the service provider agrees upon a certain business outcome or deliverables such as an advisory report, a process compliance report or a business improvement result such as an agreed productivity improvement.
2. Business Optimisation Services address improvements in the business model of customers such as “Pay per Use” models where the technology provider also provides the financing of the technology, thereby offering the financial commitment to become an OPEX (Operational Expense) rather than a CAPEX (Capital Expenses) leaving the financing burden to the supplier who is often better able to manage the risks.
3. Business Transformation Services help customers to implement strategic changes. The expertise of the service provider includes the ability to manage change together with their customer. The ability of organisations to adapt fast enough to changing market conditions has become one of the most important drivers of success. Service providers may take over entire processes or functions and manage this with (Managed Service) or for (Business Process Outsourcing) their customer.

 

We see roughly four types of Product Related Services:

 

1. Warranty and Time & Materials Services: Service organisations typically start off offering warranty services to their products. After the warranty period, customers start to request additional services. When a service organisation responds to this request, they most likely offer time & material services.
2. Preventive maintenance: Preventive maintenance services aim to reduce the cost of time & material services. They can do so by planning ahead based on the product lifecycle and reducing the cost of delivery of services as they can be provided without urgencies.
3. Availability Services: The next step is when customers only look at when a product is available for use and consider the cost of unplanned downtime. The service provider guarantees a certain level of equipment uptime or response time. The customer will balance the perceived risk of downtime with the price they are willing to pay. The service contract or service level agreement (SLA) usually renews automatically every year and therefore generates predictable revenues for the service provider, and represents a predictable cost for the customer.

 

Once organisations start to look beyond the level of the product, they find out that they have a lot of knowledge to help their customers improve their processes and even their complete business.

 

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Rosanne Gresnigt and Hilbrand Rustema at specialist service management consultancy Noventum tackle one of the big challenges all field service organizations face - aligning the core functions of service and sales...

It’s one of the questions we hear so often. How can a company build a scalable service sales and delivery model? With increased commoditisation, pressure on growth and margins are forcing companies to think outside the box when it comes to their services.

Service businesses need savvy innovation programmes, which allow them to evolve quickly and nimbly – they need to create new customer-oriented offerings, quickly adapting to changing markets. However, navigating the right path to service transformation isn’t always straightforward. Most common approaches, Big Bang and Incremental, carry risks and yield surprisingly low success rates.

There’s an alternate path, however, increasingly being adopted by today’s more successful and forward-looking service organizations: ‘The Service Factory’.

The Service Factory approach is an agile, systematic, highly successful, low-risk approach to service transformations enabling companies to adopt innovations in tandem with today’s fast-changing customer and market needs.

How does it work?

The Service Factory approach is an analogy to an actual factory and consists of three core steps:

• Creating and maintaining a high-level vision of the future for your business with a defined portfolio of services that you want to offer to your customers
• Defining a precise architecture of your business model components that you need to sell and deliver the services in the portfolio
• Defining a roadmap in which the components are improved step-by-step according to new and changing requirements

In further detail, having developed a high-level vision of your organization’s future services portfolio, the approach requires that you break down your business into sales and delivery model components; Request Management, Diagnosis, Planning, Maintenance Engineering and Knowledge Management are examples of valuable components in your Service Factory.

Each component is then looked at from the following perspectives:

• Management Practices
• Processes
• Performance Metrics
• IT functionality

Businesses implementing this approach must:

• Have a clear vision of how the business will develop in years to come.
• Set out well-defined long-term business objectives
• Develop an understanding of what components are required and what they should look like.

Using this holistic approach, businesses can embark on an ongoing process whereby a new component is implemented every 6-8 weeks.

As such, the Service Factory is a high-paced, focused approach involving fixing, raising and maturing the level of the business, component by component.

Where to begin?

A thorough assessment of the business is a good place to begin.

Companies can start by benchmarking Key Performance Indicators (KPIs) like Customer Experience, Productivity, Gross Profit Margins and Growth Rates against top performers in their industry and proven standards.

This will enable the company to identify what the biggest areas for improvement are. As a next step, a more qualitative assessment can help to identify the root causes of under-performance and best practices.

By prioritizing the opportunities that are derived from such assessment, based on time/complexity to implement and expected added value for the company, a service transformation roadmap can be created.By prioritizing the opportunities that are derived from such assessment, based on time/complexity to implement and expected added value for the company, a service transformation roadmap can be created.

As Europe’s leading Service Management experts, Noventum has developed a comprehensive library of industry benchmarks and best practice industry standards for components covering all the major capabilities of a Service Factory.

They are developed and updated frequently based on our research activities and our work with leading service businesses across the globe.

Start with Self Assessment:

To help you move forward we're pleased to offer you access to our free online self-assessment tool which covers a limited scope of functional service business areas which is available @ www.noventum.eu/fsm-assessment-demo

This assessment will take approximately 30 minutes of your time and then upon completion of the assessment, you will directly gain access to your personalized report of opportunities that could help you to improve your own business and get your sales and service operations more closely aligned.

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Across December and January we asked our readers to nominate candidates for the inaugural #FSN20, a list of the twenty most influential people in field service. We received nominations from across the globe through social media, email and even a phone call or two directly into the news-desk.

Armed with a list of candidates, a Field Service News panel selected the final list of twenty based on the number of nominations, their impact on the industry (past, present and future) and their sphere of influence in both the physical and digital world.

After much long deliberation, heartful debate (read arguing) and enormous amounts of coffee we managed to whittle our list down to a final twenty which we pleased to present to you here the inaugural edition of the #FSN20. You may not agree with our selection and if you don’t tell us, tell your friends, tell your colleagues, hell tell the world – because at the heart of it that’s what this list is all about, getting people talking about excellence in field service and raising the profile of those leading us to a better future.

We are now announcing who made the list in alphabetical order in four sections across four days. So without further ado we are pleased to bring you the final five of the #FSN20

Aly Pinder, Senior Research Analyst, Aberdeen

One of the most prolific authors in the industry and also one of the nicest guys in Field Service to boot. Pinder had more nominations for this list than any other candidate, which speaks volumes.

Having written or co-authored over 50 research reports, and benchmarked more than 4,000 service executives across 5 years with Aberdeen, he writes and speaks with authority and understanding and is widely respected across the market.

Follow Aly @Pinderjr

 

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Bill Pollock, President and Principal Consulting Analyst, Strategies For Growth

Pollock is one of the industry’s most respected authors and commentators with a long and distinguished career focused on field service.

Having worked for Gartner, Aberdeen and been a founding partner of The Service Council, his analysis is highly sought after and he has authored some of the most detailed research available in the industry. His white papers, blogs and posts are widely read across the globe.

Follow Bill @SFGOnService

 

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Hilbrand Rustema, Managing Director, Noventum Service Management

Co-author of seminal service book, “Service Economics” and managing director of one of Europe’s most prominent Service Management consultancies, Noventum Service Management, Rustema has been at the heart of evolving service thinking across the continent for many years and remains at the forefront of the sector today.

Follow Hilbrand @bynoventum

 

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Steve Street, IT Security & Infrastructure Architect, IBM

Steve Street, IT Security/Infrastructure Architect, IBM – In a long industrious career with computing giants IBM Steve has been an excellent servant to service science. He has worked with many of the key leaders and thinkers in this area including Professors Irene Ng, Scott Sampson and fellow Cambridge University Alumni Andy Neely on a wide range of initiatives to unite academia, government and industry in the development and promotion of service science as a discipline.

He remains a key figure in the evolution of the area and his work is shaping the way leading organisations are seeking to deliver services.

Follow Steve @SteveDStreet

 

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Martin Summerhayes, Head of Strategy and Business Development, Fujitsu

One of a few on the list that started their a career as a service engineer, Summerhayes’ career has been quite remarkable.

He was the man who devised HP’s service strategy which became a billion dollar proposition, he has advised London’s Metropolitan police force working with local and national government, paramilitary and commercial companies, before taking on his current role as Head of Strategy for Fujitsu. And he still finds time to take a proactive role in promoting service excellence in the UK nonprofit group, The Service Community.

Follow Martin @martinsummerhay

 

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Special Mention - Steve Downton, Downton Consulting

Whilst Downton sadly passed away in 2013 his long-standing legacy remains both in the approach he developed to service as outlined in the book, ”Service Economics”, which he co-authored with Hilbrand Rustema and Jan Van Veen, as well as in the non-profit organisation he created, ”The Service Community”, which continues to operate as a significant organisation dedicated to sharing best practices amongst service companies operating the UK.

Steve’s impact on the field service industries will be long felt.

 

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See the rest of the list here: Part One, Part Two, Part Three

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