The Gartner 2020 Magic Quadrant for Field Service Management Paints a Picture of Progress

Oct 15, 2020 • Features • Digital Transformation • field service management • IFS • Sarah Nicastro

Sarah Nicastro, IFS, reflect’s on the recently published Gartner 2020 Magic Quadrant for Field Service Management and the positive trends it shows for our industry...

The Gartner 2020 Magic Quadrant for Field Service Management is a highly-anticipated piece of research each year, both for the vendors hoping they’ve achieved a prominent placement and for those in the industry who rely on the Magic Quadrant to help steer their technology investments for the upcoming year(s).

As I read through the Gartner 2020 Magic Quadrant for Field Service Management, I was impressed by the progress the report illustrated not only as it relates to the technology provided by the vendors evaluated but by the statistics that painted a picture of significant progress by service organisations.

I’ve been interviewing service leaders from businesses across a wide variety of industries for more than twelve years. What has been clear to me over the past few years is the seismic shift taking place as service becomes a strategic differentiator for businesses in almost every industry. My personal collection of conversation after conversation reveals immense progress is reflected in some of the research shared in the Gartner 2020 Magic Quadrant for Field Service Management.

OUTCOMES-BASED SERVICE TAKES HOLD

In Gartner’s strategic planning assumptions, shared at the beginning of the report, Gartner states that, “By 2025, over 50% of equipment manufacturers will offer outcomes-based service contracts that rely on access to digital twin data, up from less than 20% in 2019.”

In a later section of the report that shares survey results from 84 customers of 14 vendors evaluated, Gartner reveals that, “One third of respondents are already using this model, up from 19%, and 34% intend to offer this model within the next 12 to 24 months.” We know that Servitization and outcomes-based service are the future – but we also know they are not easy evolutions and take time.

SOFTWARE USE ADVANCES TO MEET SERVICE NEEDS

As service organisations continue on the path to outcomes-based service, more advanced technologies must enable the delivery of those outcomes. The software vendors featured on the Gartner 2020 Magic Quadrant for Field Service Management have evolved quite a bit over the last couple with some of the solutions becoming simultaneously more sophisticated and simpler to use.

Gartner shares two other strategic planning assumptions that reflect more advanced technology demands. First, “By 2025, 50% of field service management deployments will include mobile augmented reality collaboration and knowledge sharing tools – up from less than 10% in 2019.” We’ve seen even more enthusiastic adoption of AR since COVID-19 struck and I wouldn’t be surprised if the number in 2025 is even higher than 50%.

In the survey of 84 customers from the 14 vendors, 64% of respondents are using or plan to use knowledge management within 12 months. Both AR and knowledge management hold great potential in a number of critical areas for field service organisations: improving customer experience, increasing productivity, more efficient training, and the prevention of loss of uncaptured knowledge as older workers retire.

Gartner also shared that “algorithms and bots will schedule over two-thirds of field service work for field service providers dependent on automated schedule optimisation, up from less than 25% in 2019.” In the survey results, Gartner revealed that “Sixty-three percent of the respondents (up from 39%) indicated that they were already offering their customers a means to self-serve.”

Moreover, the report states that “In 2017, Gartner predicted that, by 2020, 10% of emergency field service work would be both triaged and scheduled by AI, up from less than 1% in 2017. Of the surveyed reference customers this year, 23% indicated that they already schedule some work automatically.” Respondents also stated that “the overall average number of technicians handled by each dispatcher was 47, compared with the 21 reported by respondents to the survey conducted for the 2019 Magic Quadrant.”

We see here an interest and readiness from field service organisations to leverage more advanced tools, which I believe stems from a recognition that doing so is essential in order to remain competitive and successful.

It’s also interesting to keep in mind that much of the work for this report was completed prior to the real impact of COVID-19. While the challenges of the pandemic are vast, I do also believe that once we’ve recovered, we will see an acceleration of innovation among field service organisations because navigating the challenges has resulted in more openness to change, increased agility, and greater recognition of the importance of technology.

Cultural Misalignment and Poor Vendor Advice Among Top Reasons for Digital Transformation Derailment, IFS Study Finds

Sep 10, 2020 • News • Artificial intelligence • Digital Transformation • IFS • Technology

As digital transformation spend is increasing around the world, businesses look for technology vendors whose ethics (29 percent) and culture (23 percent) align with their own. Interestingly, these considerations trump innovation in the ranking of desirable traits, demonstrating that having a similar cultural view of the world is playing a larger role in the selection process.

The top two vendor traits selected were specialist industry expertise (32 percent) and long-term solutions (30 percent). This is unsurprising, considering poor advice from vendors tops the list of why digital transformation projects fail at 37 percent, according to a research study from global enterprise applications company IFS.

Combined with poor vendor advice, technology selection teams, especially among businesses with revenues around the one-billion-dollar mark, are also being pressured by senior management to select well-known vendors even when they are a poor fit for the company’s actual needs.

Despite the uncertainties caused by the COVID-19 pandemic, a majority of companies are planning to increase their digital transformation spend, according to study findings earlier this year. With more businesses investing, with the aim of driving revenue post pandemic, the cost of failure is high and it’s becoming even more important to get investment right.

37 percent say poor vendor advice is the main reason why digital transformation projects fail

A resounding 48 percent of respondents at companies with revenues between 850–950 million US$ stated that they had been forced by senior management or the board of directors to use a well-known vendor that was a poor technological fit.

“The fact that a non-tangible such as ethics is ranked among the top three vendor traits is inextricably linked to the fact that poor advice from vendors was rated as the top reason for failure,” IFS Chief Customer Officer Michael Ouissi said. “Companies investing in technology should expect their vendors to adhere to sound sales and marketing practices based squarely in actual customer value.”

With a focus on previous experiences from past digital transformation projects, the study finds that budgets and timelines are two major pain points. Respondents indicate that failure in past projects makes management more reluctant to engage in future digital transformation efforts, with budget overruns topping the list of reasons management may put the brakes on critical projects at 28 percent and 26 percent saying blown timelines on past projects have made management more risk averse.

Further analysis of the findings shows that success of these digital transformation projects primarily hinges on finding the right technological fit (44 percent) and establishing clear objectives (50 percent). In fact, the top-three vendor trust factors highlighted by respondents are on-time delivery (44 percent), support before, during and after project completion (41 percent), and delivering projects faster to value (35 percent).

AI and Automation Power Latest Release of IFS Customer Engagement Software

Sep 03, 2020 • News • Artificial intelligence • Digital Transformation • IFS • Technology

IFS, the global enterprise applications company, announces the availability of new and enhanced capabilities in its customer engagement software enabling companies to respond to the challenges facing the traditional call center and transform their customer engagement. IFS is leading the way for service organizations to become knowledge and outcome centric throughout the entirety of the service experience.

Forward-thinking companies have become customer obsessed knowing that new business and customer retention rely on it. IFS’s customer experience applications are engineered to provide visibility and context for the customer, the contact center, and the service organization throughout the service cycle, through technology that is easy to deploy, configure, and use. This includes enriching work processes with automation and AI capabilities to ready companies for a future where self-service will be at the start of 85 percent of customer interactions by 2022, up from 48 percent in 2019.

The importance of engaging customers through a single, unified experience across every channel—voice, e-mail, chat and social—has never been greater. IFS believes companies overlook this area at their peril. Gartner notes:* “By 2022, 50 percent of large organizations will have still failed to unify engagement channels. This will result in the continuation of a disjointed and siloed customer experience that lacks context.

highly configurable and integrated omnichannel hub to IMPROVE CUSTOMER EXPERIENCEs

In this latest release, businesses can enjoy:

A smooth transition from a telephony-based support center to a full omni-channel contact hub in a matter of days—complete with a customer service agent desktop
A new customer engagement studio that allows companies to configure their own customer service desktop while eliminating the need for costly one-off customizations
Simple integration to enterprise resource planning (ERP) and field service management (FSM) applications, agents are empowered to handle issues rapidly, driving front-office productivity by an average of over 40 percent

“As businesses use service offerings to power their way to growth in the new normal, the imperative has never been greater to focus on the customer experience,” said Marne Martin, President of IFS Service Management. “Businesses need a single view of a customer, yes, but they also need a complete service management solution that delivers on the service outcome that a customer expects in order to drive net promotor score, sustainability, and growth. This is where IFS is leading the way to deliver sustainable outcomes and knowledge-based service, which is the future for more and more service businesses.”

IFS’s latest investments in customer experience also include remote assistance and “On My Way” to provide a complete customer management solution for businesses looking to grow their service capability and transform their customer experience.

Over the past two years, IFS has seen strong growth in its service management business with more than 50 percent of revenues coming from its field service customer base in the first half of 2020. New license sales across its service management applications, including its recognized FSM offering, grew by more than 150 percent in first half 2020 compared to first half 2019.

Future Proofing Spare Parts Inventory Management

Aug 11, 2020 • Features • Michael Blumberg • Exel Computer Systems • IFS • Mize • Parts Pricing and Logistics • Carl Cridland

The world of spare parts has been woefully neglected for too long within the field service conversation. Fortunately, that is beginning to change dramatically as companies start to face up to the importance of having excellent visibility into...

The world of field service has always been a complicated industry to optimize. There are so many moving parts, both literally and figuratively. Ours is a sector which sits against a backdrop of constant rapid change and innovation. Often the critical question is how do we ensure that the elements we introduce to improve our service operations today are also solutions that can be future-proofed to ensure that they will continue to allow us to thrive tomorrow?

Yet in 2020 that question is ever more critical than ever.

We are now focused on building a new-normal after months of severe restrictions due to COVID lockdowns. As we do so, a real spotlight has been placed above the inadequacies that many field service organizations have when it comes to their spare parts and inventory management.

While the world is still reeling from the impact of COVID, and while uncertainties of a second wave loom large over our head, we could be forgiven for hunkering down and getting by as best we can. The reality though is that now is the time to take stock. Now is the time to assess the holes in our service operations that lead to inefficiencies. And for many field service organizations that means that now is the time to establish the right processes and implement the tools that allow us to banish the headache of poor-parts management forever.

"The key to planning for a robust future impervious to a future scenario that may supply chains being effected, as we saw earlier this year, is to leverage the tools that are already available that critically can provide visibility into an organization's spare parts inventory..."

One approach that has been at the heart of digital transformation for many organizations in the manufacturing sector is to ensure their field service management solutions are deeply embedded within an Enterprise Resource Planning (ERP) tool. One such solution is Eagle Field Service, which is part of Exel Computing's broader ERP solution.

As Carl Cridland, Senior Marketing Executive, Exel, Computing Systems explains. "Eagle Field Service is unique, in that it is an element of a larger suite of ERP software, the functionality of this larger suite of ERP can be included in your Eagle Field Service installation as a single, comprehensive solution – extending the functionality of your Field Service Management (FSM) solution to meet the wider needs of your business."

The more extensive suite of ERP software that Exel provide, EFACS E/8 – was developed to meet the needs of manufacturers across a wide range of industries, including Aerospace & Automotive. These are industries that require accurate and comprehensive stock management functionality, down to the level of complete traceability. With the Aerospace industry being particularly hard hit, such granular levels of visibility have been crucial as major organizations have had to get a firm grip on what is and what isn't going to be possible in terms of plotting their path to recovery.

In the automotive industry, another that was cruelly impacted by the pandemic, such visibility into spare parts inventory has possibly been even more crucial. For many of the major automotive manufacturers, at the peak of the lockdown, the only aspects of their business that remained fully operational were the lucrative and always in demand spare parts and maintenance operations.

"The final part of the equation is to take visibility from the back office and into the hands of the engineer..."

"These industries also work on 'LEAN' and 'Just in Time' principals," Cridland explains. "They must keep stock levels low in order to maintain cashflow and save cost on storage but must also manage supply chains accurately to ensure customer expectations are met, or even exceeded. It is for these reasons Exel can provide the functionality to easily meet the needs of Field Service providers whether they be in Aerospace, Automotive or any other industry with similar requirements."

The key to planning for a robust future impervious to a future scenario that may supply chains being effected, as we saw earlier this year, is to leverage the tools that are already available that critically can provide visibility into an organization's spare parts inventory.

As Michael Blumberg, Chief Marketing Officer, Mize explains, "Durable Equipment Manufacturers can future proof against poor parts management by ensuring that parts are readily available, easy to find, and easy to order or purchase when they are needed."

"Applications such as inventory tracking, parts locators, customer portals, and electronic parts catalogs facilitate this outcome," Blumberg adds. "By implementing these solutions, manufacturers can minimize equipment downtime, ensure a high first-time fix rate, and increase aftermarket service revenue."

Indeed, once implemented, a vast amount of the pain of inventory management can be removed via automation.

As Cridland explains "Functionality, such as automatic reorder limits – whereby parameters are set that when items reach their minimum threshold an order is placed. That order can be placed without human intervention if necessary, via a workflow which has the potential to weigh the benefits of purchasing from supplier A, B or C dependant on, say - cost, supplier reliability and due date. Should senior management want visibility on orders placed over, say £1000, the workflow would email or text the required staff and await sign-off before purchase."

The final part of the equation is to take visibility from the back office and into the hands of the engineer. Indeed, placing the tools into the hands of the engineer so that they can check availability and even order parts while on-site with the customer is critical.

"Such levels of engineer autonomy were what defined best-in-class service operations throughout the height of the lockdowns, and this is likely to continue as we look forward to the new normal..."

Of course, the primary aim of any field service call is always the first-time-fix. However, when this is not possible, the ability for the engineer to take proactive action that allows the customer to see that everything possible is being done to get them back operational as soon as possible is an essential aspect of ensuring strong on-going customer relationships.

The Eagle Field Service mobile solution, for example, provides engineers with the capability to manage their stock inventories along with placing purchase order requests and the ability to move stock to another engineer. Stock deliveries can be routed to the engineer's address, a dropbox, the customers' site or an ad-hoc address. Engineers can also have the option of purchasing locally.

This flexibility can empower an engineer to make the best decision for the customer while out in the field. It should also be noted that such levels of engineer autonomy were what defined best-in-class service operations throughout the height of the lockdowns, and this is likely to continue as we look forward to the new normal.

"The primary objective of Eagle Field Service is to get the right engineer to the right place, at the right time with the right kit," Cridland adds. "Spare parts management is absolutely integral to the success of any field service operation."

Service Operations Excellence Depends on Upgraded Process & Dataflows

Aug 07, 2020 • Features • IDC • White Paper • IFS • Servitization and Advanced Services

In the final feature in our 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...

In part one we looked at the rapid and wide reaching change that is being faced by manufacturers in all sectors, in all regions. In part two we looked further at IDC's Servitization Maturity Framework. Now in part three see how the broad maturity of the sector against this model. In part three see how the broad maturity of the sector against this model. Now in the final feature of the series we start to see best practices emerging...

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

Screenshot 2020-07-15 at 23.00.22

Sponsored by:

IFS Logo (CMYK)-1 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.

Service operations capabilities are at the heart of successful transformations. IDC believes that much of the focus in recent years has been on providing staff with good tools to deliver basic services, rather than creating new services and updating the flows to support those.

One example is mobile access. The first chart in Figure 9 shows how the spread in choice between good performers (Stage 3 and 4) and subpar performers (Stage 1 and 2) is very thin. Most companies across all sizes have managed to provide their field workers with decent capabilities, even if only providing augmented features.

On the other hand, innovation on service portfolio is overall a far more immature topic. Approximately half of the companies surveyed offer maintenance contracts at best. Another 30% augment this with financing, which means barely 20% are focused on innovating services. On top of that, there is a very large rift in regard to service creation between good performers (Stage 3 and 4) and subpar performers (Stage 1 and 2), as shown in the second chart in Figure 10. 70% of the slow performers have haphazard approaches to service creation, the complete reverse of what Borderless and Joined-Up enterprises do.

Screenshot 2020-07-16 at 22.37.33

Another key discerning element in service operations excellence is the ability to have a two-way process and data flows between service management and back-office functions. 40% of the organizations surveyed have zero interlink of key systems (ERP, FSM, supply chain), suggesting a fully fragmented value chain, and just 15% have two-way links, meaning manual or sensor-based input from field service processes triggers information updates and actions in ERP and supply chain systems.

The final key success factor is related to skillsets, both in the field worker group and in the leadership team.

Field workers need to be not only apt at using and understanding technology, but also enthusiastic about expanding their knowledge and abilities at a much faster pace. Annual training and “experience” are not enough when product updates happen monthly over-the-air and digital applications are part of the portfolio.
Lack of know-how or internal capabilities to run a services business is ranked as the number one hurdle to servitization. IDC believes it is very hard for companies in production-oriented industries to hire executives that are capable of innovating on the service side of the house.

Eyes on the Prize — What Borderless Enterprises Teach Us

Assessing the status quo is important. But what should companies aim for? What are the benefits of becoming a Borderless enterprise and the traits defining one? The in-depth Barometer research allows us to start answering those questions:

Companies should start investing in a long-term service vision. 90% of the best performing companies expect business model revolutions in three years with pay-per-use, outcome-based services, and ecosystem monetization all playing a role. This compares to 15% in the sample average. They also already generate 12% of their revenue from services, versus an 8% average.
Front-end capabilities must be proactively built. The ability to immediately route calls from the contact center to engineering support is a strong indicator of leading organizations. Similarly, Borderless companies have often managed to build fully automated troubleshooting capabilities for end customers. Data is automatically synced from in-field products to the cloud, issues are logged, and solutions proactively offered.
Strategic partnerships are critical drivers to success in servitization. Becoming a Borderless organization requires an ecosystem approach to the development of data-driven digital services. Organizations at the most advanced stage of servitization maturity are monetizing co-creation initiatives to enrich their services portfolio by leveraging the capabilities of partners in adjacent industries.

Figure 11 (below) shows other traits as well as the immediate benefits of being a Borderless enterprise. Much higher profitability and above-average revenue growth are both enjoyed by these types of companies.

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While it is true that real Borderless enterprises are relatively hard to come by, it is imperative that businesses look to them as examples and start acting now. At the Joined-Up stage (Stage 3), roughly one-third of companies in the market are within striking distance. IDC believes many members of this group are very likely to “up-rank” in a two to three-year horizon. Remaining in the bottom ranks would mean becoming pigeonholed in a low-margin, low-growth mode for the foreseeable future.

Getting the Low-Hanging Fruit

IDC maintains that some low-hanging fruits can be achieved even by moving up from the lower stages of servitization. Figure 12 provides a summary of the potential gains and likely roadblocks on the path towards a Borderless enterprise. While there are multiple ways to move along the servitization journey, some common patterns start to appear. In particular:

Strong profitability and sustained revenue acceleration are visible from Stage 3 onwards. As almost 50% of buyers sit in Stage 2, it is recommended that they build expectations around those KPIs as they connect their whole value chain. Failing KPIs would be a sign that the journey is not progressing
The last, trickiest roadblock is linked to decision making. Transformation towards a service-first business model will eventually pass through the leadership. In the Barometer survey, 85% of respondents said they were part of a decision-making group that typically involves Head of Products, Head of Services, and often Head of Operations, plus the IT side of the organization. Building the right “dream team” dynamics will be crucial to ensure success in the final stages.

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IDC Advice to End Buyers in Production-Oriented Industries

On a backdrop of subsiding demand for traditional products, IDC sees a clear trend emerging towards augmenting products with services, and ultimately transforming traditional physical supply chains into open ecosystem value chains. This transformation process is called servitization, and it is to be understood as a subset to digital initiatives.

While only a few have achieved the servitization “nirvana” of the Borderless enterprise, more than a third of companies globally are already Joined-Up, poised to get within striking distance of that vision soon. Those fast movers already have proof-points to show for it, including:

Service revenues that are on average one-third larger than their peers’ as a proportion of total revenue
5X more chance of accelerating top line growth above 5% yearly
Much greater likelihood of showing profitability improvements thanks to DX initiatives

IDC recommends every company in all physical value chains get moving as soon as possible. Laggards are likely to find themselves pigeonholed in low-profit niches within the next two years if they fail to do so. Based on our research, IDC recommends the following strategic and tactical best practices.

Strategic Best Practices

Work with the leadership to build a “dream team” involving Head of Products, Head of Services, Head of Operations and CIO/CDO that aligns early on strategic objectives for servitization. This transformation process will impact all those departments (and more). While initial attempts can work without coordination, data shows that internal conflicts are the biggest obstacle in Stage 3 and beyond.
Be proactive in customer-centricity. No servitization can happen without a strong, ultra-connected customer engagement function. Even good performers appear to struggle to go beyond basic tools and processes. Combining customer metrics with operational scores and above all being ready to invest in staff and technology from day one is highly recommended.
Set key performance indicators and make them public. IDC research shows that revenue growth accelerates when crossing the chasm to servitization. Financials can be volatile, though, especially on a quarterly basis and even more so when business model change hits. Measuring other items such as the percentage of service revenue in each division, field service worker satisfaction, and net promoter score is recommended to keep a steady pace and not lose sight of the end goals.

Tactical Best Practices

Put together a small “Services Tiger Team” as soon as possible. The team should be comprised of mid-senior members across the “dream team” divisions, including IT. Its key objectives should be to review and classify existing services, related processes, and profitability (Phase 1) and to ideate new offerings to test in the market within twelve months (Phase 2). For the sake of iteration, multi-year launches are not recommended.
Perform a complete review of your data flows end-to-end. To test how well connected your backoffice and front-desk are, first pick your best-selling product. Then analyze whether contact center and field service agents have consistent information about parts availability, whether they can directly augment or modify information in back-office systems, whether potential IoT or third-party component supplier data is consistent, etc. This will quickly highlight bottlenecks in process and information.
3. Kill all of your IoT projects that don’t generate events in either service management or ERP/ supply chain systems. Focusing efforts on actionable data is a must. Chances are you already have IoT data collection from end products or the supply chain in place — often without a production use case. IDC recommends ruthlessly eliminating those to make space for IoT projects subordinated to the launch of new service offerings.

The Beginning of a Servitization Journey

Jul 31, 2020 • Features • IDC • White Paper • Digital Transformation • IFS • Servitization and Advanced Services

We continue our 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...

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

Screenshot 2020-07-15 at 23.00.22

Sponsored by:

First Results From the Servitization Barometer

Now that we have established the requirements and benefits associated with servitization, it’s time to provide an overview of the current maturity status in this area. How far along in adoption and understanding are enterprises out there? Based on the Barometer results (Figure 5 below), IDC can confidently say that we are at the beginning of the journey.

Based on IDC’s benchmark, 50% of organizations find themselves at Stage 2 (Side-Car), and another 14% are stuck in the nightmare of Splintered operations (Stage 1). A third of companies interviewed have started joining up their value chains (Stage 3), and less than 5% have reached “Nirvana” (Stage 4) and already opened up their service platforms to the ecosystem.

These results are broadly in line with how those organizations talk about their current status:

The wave is coming. The clear majority (91%) of organizations are either planning or already rolling out servitization initiatives. However, only 9% are blending most or all their product portfolio with advanced services.
Services will trigger the wave. Services generated on average 8% of the total revenue among physical value chain companies interviewed. This was slightly higher at 11% for companies with >$1B annual revenue. As with servitization plans, expectations are tilting to growth. On average, organizations expected services to account for 16% of total revenue in three years. This was a global trend consistent across all geographies. Organizations at more advanced stages of the servitization journey expect faster growth in that direction (see Figure 6 below).

Revenue growth will depend on services. 38% of the organizations surveyed reported zero or negative revenue growth for the twelve months ending in July 2019. Another 53% were growing below 4% yearly and less than one company out of ten more than 5% yearly. This means even small improvements in services contribution can do wonders for growth trajectory. In fact, according to this Barometer, organizations that are more advanced in their servitization journey are already perceiving significantly higher revenue growth than their peers (see Figure 7 below).

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Best performers leverage data and strategic partnerships. The barometer reveals that organizations in Stages 3 and 4 are going beyond the traditional repair and maintenance services, as they are striving to grasp the new revenue streams linked to data-driven digital services that they deliver either by themselves or in collaboration with partners in adjacent industries (see Figure 8 below).

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A Deeper Look at Servitization Maturity

Servitization maturity is not equally spread across all types of companies. Nor is maturity equal across dimensions. The key findings on how IDC-assessed readiness changed in the organizations we talked to are:

Large companies are moving faster. Among organizations with less than $500 million in revenue, only 10% reached Stage 3 or 4. This contrasts with more than 50% in companies with $500–$1 billion annual revenue and more than 80% in companies with >$1 billion revenue.
Servitization is a cross-vertical topic. Sector of operation did not appear to influence the overall servitization speed, a sign that the topic is relevant in all physical value chains.
Some differences exist at the geographical level. Controlling for company size, organizations based in the UK, the US, and France appear slightly more advanced than counterparts in the Nordics and Germany. The first three countries reported between 40% and 50% of companies at Stage 3 or 4, versus approximately 25% in the latter two.

Digital and Customer Engagement are Areas of Concern

Key learnings gained by looking at readiness levels by dimension (Figure 5) include the following:

Intelligent IoT and service operations maturity track very closely to overall readiness. Service operation maturity is quintessential to servitization, so no big surprise here (see section below). However, IDC detected slightly higher than expected developments in the IoT space. Survey results showed that significant or complete portions of portfolio are already IoT-connected in 60% of organizations. However, data showed that the rarer ability to connect supply chain and production facilities was a much more important indicator of servitization maturity

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Backoffice is ahead of other areas, but integration with the front-end is missing. The base is decent: more than 85% of the sample have already standardized their processes. Half of them did so in a siloed fashion, half integrating multiple departments. Acceptance of change is the keyword for more than 70% organizations — a sign that enthusiasm is lacking. The real gap, however, is integration of the back-office and field service systems. Just 10% reported full work order integration and as many as 45% confessed to having only manual data integration, which really means no integration at all.
Customer engagement mindset is still far away. There is a lot of work to do around customercentricity, as only 50% of organizations are set up properly with either Net Promoter Score (NPS) alone or combined with advanced techniques. 40% collect anecdotal customer feedback and 10% measure only operational metrics. This reverberates in lacking technology investments on customer experience. 55% of companies reported phone, email, or basic Web portals as the only channels. IDC maintains that this is directly linked to the hit-and-miss DX attitude of the past few years, especially in midmarket companies.

Introducing the IDC Servitization Barometer

Jul 24, 2020 • Features • IDC • White Paper • Digital Transformation • IFS • Servitization and Advanced Services

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.

Screenshot 2020-07-15 at 23.00.22

Sponsored by:

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.

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

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The four stages can be described as follows:

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.
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.
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.
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.

Panasonic Ensures Customer Experience Consistency With IFS Remote Assistance

Jul 20, 2020 • News • Panasonic • Remote Assistance • Digital Transformation • IFS • Software

IFS, the global enterprise applications company, announces that Panasonic Appliances Air-Conditioning Europe, a leading provider of heating and cooling solutions, has chosen IFS Remote Assistance™, to enable installers, field technicians, engineers and customers to share real-life situational context with remote product experts so that hands-on service and repair instructions can be visually demonstrated and acted upon.

With a company-wide, strategic shift toward a servitized, subscription-based business model, the Panasonic Appliances Air-Conditioning Europe business, comprised of sales, support and technical service staff across Europe, needed a central software solution to ensure a consistently excellent service experience for its clients.

A MERGED-REALITY SOLUTION FROM IFS TO PROVIDE REMOTE PRODUCT SUPPORT

With IFS Remote Assistance, Panasonic Heating & Cooling Solutions is able to remotely diagnose issues, ensure real-time knowledge sharing, and significantly speed up repair rates, which was typically seven days. By reducing or even eliminating the need to make site visits, the company is also able to lower travel costs and environmental impact.

“Our investment in the IFS solution is part of a larger strategy to transform our business mindset from product-centric to service-centric and to develop the maturity of our service organization,” Head of European Service at Panasonic Appliances Air-Conditioning Europe Karl Lowe said. “With IFS Remote Assistance, we are leveraging state-of-the-art technology to unleash the full potential of our highly skilled workforce, regardless of where they are based. Not only are we able to navigate constraints, we are actually able to improve repair rates and access real-time performance data to help us gauge and improve our service.”

Alain Laing, Managing Director, IFS UK and Ireland, added, “Across the globe, we are seeing visionary manufacturers invest in technology to enable a servitized business model. We are thrilled to be part of Panasonic’s transformation journey and look forward to doing our part to provide the tools they need so they can ensure the safety of its workforce and a great customer experience.”

Strategic Priorities in Production-Oriented Industries

Jul 17, 2020 • Features • IDC • White Paper • Digital Transformation • IFS • Servitization and Advanced Services

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.

Screenshot 2020-07-15 at 23.00.22

Sponsored by:

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.

Screenshot 2020-07-15 at 22.46.49

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.

Screenshot 2020-07-15 at 22.48.23

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.

ARCHIVE FOR THE ‘ifs’ CATEGORY

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SOFTWARE USE ADVANCES TO MEET SERVICE NEEDS

Further Reading:

37 percent say poor vendor advice is the main reason why digital transformation projects fail

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highly configurable and integrated omnichannel hub to IMPROVE CUSTOMER EXPERIENCEs

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Further Reading:

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

Eyes on the Prize — What Borderless Enterprises Teach Us

Getting the Low-Hanging Fruit

IDC Advice to End Buyers in Production-Oriented Industries

Strategic Best Practices

Tactical Best Practices

Further Reading:

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

First Results From the Servitization Barometer

A Deeper Look at Servitization Maturity

Digital and Customer Engagement are Areas of Concern

Further Reading:

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

Servitization - A Real Example

Further Reading:

A MERGED-REALITY SOLUTION FROM IFS TO PROVIDE REMOTE PRODUCT SUPPORT

Further Reading:

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

Further Reading:

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