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Discussion around Servitization has rapidly gone from understanding what the concept is to establishing how to put steps towards the advanced services strategy into practice. Here, Jan Van Veen, outlines some core practical advice for companies looking to do just that...


For the next years, many manufacturers will focus more on “how to servitize”: How to make these innovations successful? How to accelerate these transitions and stay ahead of the pack? How to escape from “business as usual”? How to prepare the organisation for such journeys? In this article, I will share an overview of critical challenges and strategies for servitization.

Servitization is a different ball game
Many manufacturing businesses have made good progress in building a common understanding and commitment to business innovation including servitization, and they have allocated resources and funding for servitization.

Now, they are experiencing that servitization is a different ball game from usual innovations and face new challenges, such as:

• Political discussions when deciding on nitiatives and investment
• New risks from uncertainty and unpredictable trends
• Forces towards ‘business as usual, with signs like “not invented here”, “that does not work in our industry”, “our clients don’t want that” and/or “this is not our core business”

The central question: How to organise for servitization
We hear and read a lot about new (digital) technologies, new disruptive business models and servitization. However, the real challenges are about organisational and human aspects:

1. How to translate these general insights into concrete and relevant initiatives?
2. How to overcome the challenges and obstacles and increase momentum?

In essence, servitization is innovating your business model, particularly when you move beyond “condition of product” related services. We need to rethink our value proposition, our target market, our position in the value chain and in the competitive landscape. We will be facing new opportunities and new risks. This requires us to be open to new thinking, new mindsets and different strategies for innovation and change. 

The problem: One innovation approach doesn’t fit all
Too often, we see successful strategies for one type of innovation being applied for other types of innovation also and therefore fail.

Before diving into best practices, let us first better understand the challenges in different phases of innovation: 1) discovery, including ideation, 2) decision-making, including resource allocation, and, 3) implementation, including development.

The “Hybrid Innovation Matrix” helps to recognise different types of innovation based on respective typical challenges so we can better choose the best strategy for each.

About the “Hybrid Innovation Matrix”
The “Hybrid Innovation Matrix” (see following page) differentiates four types of innovation with the respective challenges and strategies along two dimensions. Along the horizontal axis, we differentiate innovations within the existing business logic from those developing new business logic. In every industry and business we have prevailing business logic, which is a set of common patterns, knowledge, experience and frameworks of thinking. We use this logic to understand our environment and make decisions. This common business logic defines how we act, learn and change.





Our brains are hardwired to maintain a cognitive framework to rapidly assess their environment, filter information and make decisions. This results in a strong bias towards protecting the established business logic.

Along the vertical axis, we have the relative size of the innovation or change. In the left column, we differentiate incremental improvements from the more radical innovations that push the boundaries. In the right column, we differentiate reconfiguring and extending an existing business model from developing completely new solutions and markets with completely new business models.

I will describe the two quadrants of the “Hybrid Innovation Matrix” which are most relevant to servitization.

Adaptive and Incremental Improvements
“Adaptive and Incremental Improvements” is all about improving the performance of existing products, services and operations. Every industry has its common recipe of annual improvement of functionality, performance, speed, cost etc.

Examples:
Examples include: improvement initiatives from departments like product development, marketing service based on customer feedback following, adding new features. And PDCA, Lean, Kaizen and similar approaches to improve the quality and efficiency of our operations.

How servitization fits in:
As this is not the quadrant in which servitization takes place, I will not elaborate on this quadrant.

Pushing the Frontiers
“Pushing Frontiers” is about bigger innovations within the common business logic. In every industry, we have common pathways of how the performance of products and services develop and how (latent) customer demands evolve. We can learn from the best practices and results from others in our own industry.

Examples: 
Typical examples are:
• How advanced technology continues to develop in the world of semiconductors.
• How there are hybrid and electric transmissions in cars.
• How we now have FaceID on our phones
• How we become more predictive in sales,supply chain, manufacturing and maintenance with digital capabilities. 

How servitization fits in:
The early phases of the servitization journey fits in this quadrant. The service offering focuses on managing availability and condition of equipment in a more predictive manner.

Challenges:
Innovations in this quadrant often impact a large base of stakeholders in the organisation, advancing the knowledge in various disciplines, and involves bigger investments with bigger bets on the outcome.

A key challenge is to avoid obstacles at all levels in the organisation and a too narrow focus on, for example, only products or technology.

Discovery:
• Much higher levels of expertise, increasing the knowledge gaps between different stakeholders
• Finding strategic knowledge inside and outside the company
• Understanding a wider spectrum of (latent) customer needs beyond functional
• A too narrow focus, such as product technology or internal processes
• The commodity trap with innovations which hardly add customer value and are difficult to monetise.

Decision-making:
• Mitigating risks from an uncertain outcome with higher upfront investments
• Lack of digital and service mindset
• Political battles or polarised discussions
because of:
- The more qualitative arguments
- Uncertainty of outcome
- Lack of new expertise, prepared by the experts.

Implementation:
• Limited capacity to implement change fluidly in the operating organisation
• Lack of required expertise and knowledge
• Lack of digital and service mindset.

Reconfiguring and Extending Business Model
“Reconfiguring and Extending the Business model” involves a combination of entering new markets, applying new technologies, encountering new competitors and facing new political actors. These are new aspects, different from common and dominant business logic in a business or industry.

Examples:
Typical examples are:
• Low-cost airlines with a new value proposition and operating models
• Dell selling directly to the end-clients
• Storage solutions moving to cloud services
• Trucks manufacturers reducing fuel consumption by influencing truck drivers
• Fresenius (manufacturer of kidney dialysis equipment) operating entire dialysis centres in hospitals.

How servitization fits in:
As you can see from the examples, the more advanced phases of servitization extending the value offering beyond product availability perfectly fit in this quadrant.

Challenges:
The main challenge is to widen a peripheral vision escaping from the established dominant business logic.

Discovery:
• Being open to new knowledge, patterns, ideas and opportunities without being pulled back into ‘business- as usual’ by many forces
such as colleagues, clients, vendors, service suppliers and investors
• Recognising weak signals of potential trends, threats and opportunities, and when these become emergent
• Mitigating “conflict” with mainstream research activities
• Understanding and recognizing potential market disruption from immature and emerging alternatives (often at the low end of
the market).

Decision-making:
• Limited knowledge and uncertainty about unpredictable developments
• Battles between stakeholders in operating organisation and innovation organisation
• Stopping initiatives because of lack of shortterm results, in favour of initiatives closer to ‘business as usual’ with quicker results
• Not considering weak signals for potential threats, like market disruption
• Fear of cannibalism.

Implementation:
• Embedding new knowledge throughout the organisation
• Building new mindsets and competencies
• Mitigating “conflict” with mainstream operations
• Existing clients may not like the new solutions (yet).

Coevolution of New Solutions and Markets
“Coevolution of new solutions and markets” is about the radically new emerging solutions. Here, we see many different solutions and ideas popping up while it is still unclear which of the competing alternatives will emerge and become the dominant solution.

Examples:
Current examples of innovations in this quadrant are renewable energy, data-driven healthcare, mobility (including self-driving cars), Google Maps rapidly pushing away TomTom, and tachographs gradually being replaced by cloud-based applications. Other examples are PC’s displacing mini-computers and digital photography displacing analogue photography.

How servitization fits in:
I will not elaborate any further on this quadrant, as servitization in principle is not about developing these radical solutions. Even though for some industries there are actual opportunities and threats in this quadrant, in which servitization could play a role (like the Google Maps versus TomTom).

The solution: Differentiate innovation strategies with a focus on human aspects
The challenges I described concentrate on the human factors for successful discovery, decision making and implementation. They are quite different for each type of innovation in the “Hybrid Innovation Matrix”, which means we need different strategies to be successful.

I will now describe the best practices for the two types of innovation which are most relevant for servitization.

Pushing Frontiers
The name of the game here is “Managing a wider portfolio, including higher risk projects”. The following practices will help accelerate the innovations that push the frontiers.

In general:
• Establish a clear and compelling direction in which the company is heading and how that relates to the developments in the industry and market
• Build a shared concern on developments in the industry and the importance of adapting to it
• Establish cross-functional and dedicated teams of experts for specific initiatives
• Establish dedicated project management.

Discovery:
• Use advanced techniques for finding (latent) opportunities, such as design-thinking and empathic design
• Involve external experts (consultants and new partners)

Decision-making:
• Strategic level decision making
• Maintain a balanced portfolio of different types of innovations
• Apply a stage gate and review process, with clear criteria, such as;
- What initiatives should be higher risk initiatives pushing the frontiers
- In which domains to push frontiers (technology, products, services, customer experience etc.)
- Success criteria for go/no-go for the next phases
- Level of investment in different types of initiatives
• Educate stakeholders on the decision level
• Invest in further research first
• Develop solid business cases, supported by solid information
• Use advanced risk-assessment techniques

Implementation:
• Lean startup and agile development techniques
• Co-development with your best clients
• Early involvement of stakeholders from various functions
• Develop the digital and service mindsets

Pitfalls:
• Incremental improvement techniques such as PDCA and customer feedback programmes
• Not having dedicated innovation teams

Re-configuration and extending business models
The name of the game here is running “Entrepreneurial satellite teams”.

General:
• Add a transformative direction of the company, which is fairly open
• Build a shared concern for developing business models for the next growth curves
• Being flexible in an unpredictable world
• Entrepreneurial and multi-disciplinary teams decoupled from the mainstream organisation
• Allow addressing different markets or segments for (first) success

Discovery:
• Less targeted search assignments
• Techniques to reframe and thinking in “new boxes”
• Build new and broad expertise networks outside your industry
• Experiment and learn
• External contracting or outsourcing
• Scouting for successful initiatives in the market
• Develop scenarios around weak signals

Decision making:
• Reframing of the opportunities and threats
• Decentralise decision-making
• Decision-making on vision and scenarios
• Rapid prototyping
• Acquisition of early successes in the market
• Allow competing initiatives to be pursued Implementation
• Keep the new business in entrepreneurial satellite teams
• Lean startup and agile development teams
• Co-creation with the most interesting (potential) clients

Pitfalls / what does not work:
• Decision-making and resource allocation by senior leadership in the operating organisation
• Input from customer feedback programmes
• Decision-making based on business cases and stage-gate reviews
• Early integration into the current operating organisation or business model

Conclusion and takeaways
We see an increasing number of manufacturing companies committing to business innovation and servitization and allocating resources for it. A hybrid innovation strategy, focusing on the human factors of the transition will make the difference between success and failure!

If you want to boost momentum for servitization;
• Share this with your colleagues
• Assess the ideas, initiatives, progress and obstacles with the “Hybrid Innovation Matrix”
• Build a shared concern for the need for ongoing innovations in each of the quadrants
• Put the organisational and human aspects on the strategic agenda

It is a great time to be in manufacturing. We are facing exciting opportunities to make manufacturing a stronger backbone of our service-oriented economies. We have a unique opportunity to make manufacturing a great place to work and to invest in.

Jan Van Veen is Managing Director at More Momentum. 

Jan Van Veen,  founder of MoreMomentum continues his latest exclusive Field Service News series on how companies can monetise their services and data by exploring how companies can remove the obstacles that are stopping them build momentum with their clients. 

Central question
Many manufacturers experience pressure on growth, revenue and margins. Their products and services are being commoditised. Competition from lower cost alternatives are arising. On the other hand, there are huge opportunities with new technologies, value propositions and business models.

One of the important trends is that value propositions and offerings become more data-driven and more service-oriented, which go hand in hand.

Besides predictive maintenance, most of the value from data is related to how clients use the equipment or products and to their operations and processes. Helping clients improve on this by nature is a service.

However, many manufacturers are product-driven businesses which do not fully appreciate the value that (advanced) services have for their customers and their own business.

So, one of the central questions is: How to Monetise Services and Data to Grow in a Disruptive World? The capability to monetising service and data is mission critical for sustainable performance and existence of manufacturers.

In a series of articles, we cover four  critical steps that make the difference between success and failure in monetising services and data:

• Solve bigger customer problems;
• Articulate the value;
• Build momentum with clients to adopt;
• Build internal momentum.

Developing new data-driven solutions and services is all about extending the existing business model, which leads to different challenges than many other initiatives and programs in a business. Recognising this in advance will help understand the challenges and best strategies.

In the previous articles of this series, I have described critical success factors for monetising service and data, such as Solve Bigger Problems,Better Articulate Value and Remove Obstacles for Clients to Adopt. In the end, this all has to be done by people and teams in your organization.

Common mistakes
In this article I will describe common mistakes that many companies make, which holds them back in having fluid and energising change, and to move beyond business-as-usual in their endeavours to monetise service and data.

No North-Star
Many companies, including manufacturers, do not have a clear picture of where the industry is heading and where their business is heading. It is unclear for their employees what needs to be developed and why.

More specific, for many employees it is not clear why the new service and data-driven solutions are that valuable to clients, how it would fit in the overall core business and why it should be paid for by clients. Often, the indicated direction even suggests the opposite and may give room to the logic that value added services and datadriven solutions are (free) features to support the product sales.

Just imagine how a hypothetical mission statement “… being the world’s leading manufacturer of construction equipment and engines” would help develop and monetise advanced services and data-driven solutions.

Blinkered
People in manufacturing are often biased towards products, equipment and technology. They have a narrow view on:

• Customer problems beyond the requirements for the products and equipment;
• How other actors in the industry are developing with advanced data capabilities, which could become competition to the current position of a manufacturer;
• How new technology can be applied to develop new value propositions, solutions and operating models.

This will affect how product managers, marketing and innovation will develop new services and data-driven solutions. Too often, we see that the services and solutions do not always solve a customer problem and hardly differentiate from services and solutions competitors are offering as well.

It will also affect how their colleagues in the operations (sales and delivery) understand and engage, as there is no compelling context to understand the importance of the new services and solutions, let alone be engaged.

Top-down P&L thinking
Too often, we see that developing and launching innovations, such as new advanced services and data-driven solutions, stagnate because of the decision-making habits in an organisation. Typically, we see one or more of the following:

The strategic intent from senior leadership is unclear, hardly based on a well-developed shared concern, not giving a clear path on what services and solutions to develop, nor on what the strategic priorities and objectives are, to be successful. So, employees are not really enticed to take action and therefore no change.

The strategies and plans are more short-term which emphasise short term financial objectives, leading to two different scenarios:
Financial objectives are not articulating the need for services and data-driven solutions, nor specifying which portion of these objectives should come from services and data-driven solutions. Often, employees are actually motivated to stay away from developing and launching the new services and data-driven solutions.

Or, in case the financial objectives also assign financial objectives coming from services and data-driven solutions, there is a lack of description of qualitative objectives and strategic priorities on how to arrive at those financial goals. The result is often a lack of initiatives and progress, or lack of alignment and results.

Top-down strategies from senior leadership are so specific and instructive that these actually dismiss other employees taking ownership of the plans, and/or adjusting plans and local strategies where needed.

Paralysis by control
Top-down control mechanisms from the last few decades are a huge obstacle for fluid and energising change in an organisation and therefore hinder the initiatives like monetising services and data. More specifically, we often see the following patterns;
Internal conflict of interest in the product sales teams, because they are often incentivised on sales volume.

It does not make sense for them to sell complicated service contracts. It hardly affects their commission, consumes a lot of time and may even put their product sales deals at risk. Instead, it is more beneficial to please their clients by offering discounted services.

In case there is a separate service sales team, for the same reason, there are often internal arguments on who owns the client and what is the best plan forward with each client. In the worst case, this even leads to having different faces towards the clients, leaving them confused and with a bad customer experience.

Control mechanisms that are too strict create an unsafe environment in which employees show defensive and risk-avoiding behaviour. Instead of trying, learning and being successful in monetising new services and data-driven solutions, they instead become complacent and resistant.

Typical signs are pointing fingers to other teams to take action, declaring that the new services and solutions are not the core business, that customers don’t want to pay and referring to other companies who have tried and failed.

Some solutions
Many things come into play when increasing momentum for monetizing (new) services and data, and preventing existence of too many obstacles and resistance. In general, the more adaptive and fluid change in a business, the easier a specific innovation on service and data.

We have seen that leading manufacturers have adopted 4 winning habits which sets them apart. These winning habits define how both operation and innovation is lead. In the next paragraphs I will describe the 4 winning habits in relation to monetising services and data.

"People in manufacturing are often biased towards products, equipment and technology..."

Direction
Leading companies have a transformative vision and mission on where the business is heading, what needs to change and develop, and why this is important considering the changes in the industry. This is a quite a holistic picture in which all stakeholders and entities in the business can relate and get direction on how to develop themselves, their teams, their department and their business unit.

It provides an outside-in picture on how the business is and will be relevant to a certain industry and customers. It explicitly points out how the business will add value to clients and that this requires certain technology, (data-driven) solutions and services.
Now imagine how the following mission statement will drive the development and implementation of new services and data-driven solutions: “Our purpose is to enable healthcare providers to increase value by empowering them on their journey towards expanding precision medicine, transforming care delivery and improving patient experience, all enabled by digitalizing healthcare.” 

Discovery
Here I want to focus on two phases on innovating your services and datadriven solutions: the development phase (including ideation, selection and design) and the implementation phase

For design purpose
In general, the envisioned services and data-driven solutions differ significantly from current business logic, mindset and operations in your business. Even though anyone in the organisation could raise great ideas, it is crucial that the development of the new services and solutions are done by dedicated teams with the right expertise and focus.

They need to ensure they are open-minded and unbounded by current (and old) business logic and pathways. In terms of discovery, this means they should:

Talk with other stakeholders in client organisations (rather than the ones your organisation normally speaks with) - for example, the CFO, CEO, VP, Innovation, commercial leaders, etc. Build a new expert-network outside the organisation - which is outside the current network of partners, suppliers and clients - including the academic experts and consultants in areas you usually have no relationships with and talk about topics other than current technology, products and service, and more about major trends, visions of the future industry,key challenges and strategies of different actors in your and adjacent industries.

This will not only help to obtain more ideas for future success, it will also help to change perspectives and business logic within the innovation teams and the rest of the organisation, by sharing these insights.

For implementation purpose
Once the new solutions and services have been designed and developed to a scalable offering, it probably needs to be embedded in the existing organisation. Now, the risks of resistance or complacency may come into play.

The more developed the mindsets and habits are on “digital” and change, the more fluid the implementation and change will be. This can be promoted massively by strong Discovery habits: Involving key players in the operating organisation, well in advance of the implementation, into the initiatives for launching new services and datadriven solutions - for example, by having a frequent dialogue on shared concern and discussing the alternatives to solve these concerns. This can be done by frequent conversations or including them in the extended innovation team.

Having everyone involved in discovery activities that do not require too much expertise and dedication, for example, by having colleagues; Have broader conversations in their day-to-day conversations with clients, suppliers and partners. You can provide them with topics and questions to help open the conversations

Joining events with customers where you discuss trends, visions, needs and how they see your added value. Join conferences within your own industry and even other industries and sharing new insights and learning points from the expert teams, painting a picture of what is going on in the outside world, how this may impact your business and how this will/could be addressed.

Decision making
In line with the mission, vision and direction leadership of leading manufacturers, have a clear strategic intent on:
Result objectives - for example, overall growth aspirations that new services and data-driven solutions are crucial and how much business is expected to come from these new services and solutions. Strategic objectives on which offerings and capabilities need to be developed.

Next, they have a clear (top-down) strategy which articulates crucial choices on how to achieve these objectives in a few phases. This should provide a common roadmap on which offerings to develop, how to sell them, to whom and by whom, how to organise marketing, sales and delivery, and which obstacles to overcome.

This strategy should address all stakeholders (including R&D, marketing, product-sales, service sales and service delivery) who have direct influence on implementation and success.

With this top-down strategy, still, a lot is left open on how to achieve the objectives. Local teams are empowered to develop their local roadmap and strategy, and to take full ownership of the local development, learning, capability development and execution. This will allow them to mitigate local strengths, weaknesses, opportunities, threats and market circumstances.

Dialogue
With a constructive and forward dialogue between individuals, teams and departments, issues are solved in a fundamental and sustainable manner, hence building capabilities to perform.

For monetising service and data, this means that: Ideally, services and data-driven solutions are being sold at point of sale (when equipment is sold) - maybe not the full package, but the entry level offering which will be the first step to the next level mature offerings. Commission structure of sales people needs to be designed in such a way that it promotes the right focus and behaviour.

I have seen quite a few examples where equipment sales people were quite successful in selling service contracts once the commission they would receive was tied to the sale of a service contract.

Sales people who sell advanced services and data-driven solutions need to have specific skills and background, which are not necessarily the same as skills required for selling the products and maintenance services. Most stateof-the art sales techniques such as Solution Selling, Challenger Selling or Value Selling, assume a fluid and educated dialogue on related business domains.

Often, these conversations should happen with other stakeholders at the client organisation, maybe at higher seniority levels. The different teams need to have the confidence and safe environment to learn and develop these skills and knowledge, and become fluent in these conversations and sales approaches.

Different teams in your organisation need to be “in the same boat” without conflicts of interest. We currently see more and more companies aligning targets and incentive schemes, in which common and shared objectives prevail above individual targets.
Full transparency in key performance indicators on progress and results is required, to have all stakeholders have the necessary insights to be able to take ownership and accountability and intervene when/where needed.

Benefits
The leading manufacturers, ahead of the game, have built momentum for continuous and easy change from the inside, moving beyond “business-asusual”. Their teams are passionate and eager to perform, learn and pursue opportunities. Instead of resisting new ways of thinking about customer challenges, customer value and their business, they focus on customers and pursue opportunities to increase value.

Monetising services and data has become a logical part of their overall vision and strategy. They are better in solving bigger customer problems, better at articulating the value for customers and in removing obstacles for their clients to adopt the new solutions. As a result, they better differentiate themselves – in the eyes of their customers - from their competitors. They perform better and have more resources to keep innovating their business and hence grow in our disruptive world.

Boost your monetisation If you want to accelerate the monetisation of your (new) services and datadriven solutions, I would like to recommend:

• Review your business alongside common mistakes and suggested solutions, and add the discrepancies to your strategy;
• Download the scorecard How to Monetise Services and Data here;
• Book a Discovery Call with Jan van Veen;
• Join our upcoming Impulse Sessions on How to Monetise Service and Data. These are full day interactive meetings with like-minded peers during which we will exchange experience, insights and challenges.

Essence It’s not about making money from new services and data-driven solutions; it’s about being highly relevant and valuable to clients in a sustainable manner and empowering your people to do the same.

It goes without saying that if you deliver value for money, you also get money for value.

Jan Van Veen is Managing Director at MoreMomentum. 

Jan Van Veen continues his latest exclusive Field Service News series on how companies can monetise their services and data by exploring how companies can remove the obstacles that are stopping them build momentum with their clients...

 

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Catch up with the previous articles in this series How to Monetise Services and IoT and How To Monetise Services And IoT: Better Articulate Value now! 

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Central question

Many manufacturers experience pressure on growth, revenue and margins.

Their products and services are being commoditised. Competition from lower cost alternatives are arising. On the other hand, there are huge opportunities with new technologies, value propositions and business models.

One of the important trends is that value proposition and offerings become more data-driven and more service-oriented. However, many manufacturers are product-driven businesses which do not fully appreciate the value that service has for their customers and own business.

So, one of the central questions is: How to Monetise Services and Data in order to Grow in a Disruptive World? The capability to monetising service and IoT is mission critical for sustainable performance and existence of manufacturing.

In a series of articles, we cover 4 critical steps that make the difference between success and failure in monetising Services and Data:

1. Solve bigger customer problems, which is about creating significantly more value for customers. 
2. Articulate the value
3. Build momentum with clients to adopt
4. Build internal momentum for monetisation

 

Common mistakes

Too often we see that with (new) services, the new solutions and features we launch are not always that easy to start using for our clients. If the obstacles to adopt are too big and not solved, less clients will use it or will delay using it significantly, and in the meantime will not see the real value, in turn creating more obstacles and resistance, resulting in limited commercial success.

If you encounter such signals, it may not always be easy to get a clear picture whether;

1. Your clients simply do not have the problem that your solution is trying to solve
2. Your solution is not adequately fixing the problem compared to other solutions
3. There are serious constraints in applying your solution, even if it is a good solution

So, caution is advised in these situations not to jump to wrong conclusions.

For the sake of this article, let us assume 1) and 2).

The obstacles in applying your solution can be categorised as follows:

 

Lack of money

The new solution you are offering appears to be too expensive for your client.

It is seen as too big an investment and/or recurring cost in relation to the value they perceive will be received.

It could be that the issue is more related to the perception of the value, how well that has been articulated (see previous article on ‘Better Articulate the Value’) or that you are not talking to the right decision makers in your client’s organisation.

 

Lack of skills

Using the new solutions are too complex and difficult for your client, as they are complex to use and require a lot of training to acquire the necessary skills.

 

Lack of access

Often, the new solutions can only be used and generate value in certain circumstances.

Commonly overlooked is that applying the new solutions and receiving value from it, often requires:

• A significant change in the way of working by staff, which triggers too much resistance
• A significant overhaul of the processes and information flow
• A change in the structure of the organisation and roles, with some staff even losing their role/ job

 

Lack of time

For many new solutions, it takes time and effort to make sure they are adequately used and embedded in the organisation. If the pressure from daily business and other projects is high, it easily happens that adopting the new solutions is put on the back burner and falls off the radar.

 

Risk

In essence, there could be two main sources of perceived risk:

• The risk that the solution does not work as expected and hence does not bring value
• The more social risk of sticking out your neck for change which might not be accepted by stakeholders
• Too often we focus on the technical part of our new solution or features, and do not give other client needs and obstacles enough consideration,  when:
• Gaining customer insight into their bigger problems
• Developing a remarkable solution to solve these bigger customer problems
• How and with whom we discuss the client problems, and promote and sell our solutions

An interesting example is a major metal wholesaler that is looking into adding extra value to industrial clients by not only offering standard trade sizes, but other services too.

They also offer services like cutting, drilling, bending and even picking packages for direct delivery into different locations in the manufacturing  for their clients. This really solves a lot of challenges for low-volume high-mix manufacturers.

However, using these services means that equipment and people doing the pre-manufacturing work becomes redundant or they have to change their role. It also means inventory goes down, which changes the (perception of the) stability and contingency in the production line, depending on an external party.

The result was that initially most clients did not buy the new offerings, regardless of the well-articulated (financial) benefits and business cases.

At some point, stakeholders started doubting the potential of the added value services and whether to abandon the initiative or not.

 

Some practical solutions

Manufacturers that are quite successful in launching and growing customer adoption of the new solutions and features, have the following good practices:

1. The have a broader view on the bigger customer problems and challenges beyond the functional requirements of equipment. They better understand the operational and change challenges and therefore have a more integral view on what it takes to improve on these problems and challenges. Important obstacles are included in the design instead of as an afterthought.

2. They develop a more concrete and remarkable solution to solve the bigger customer problems. Where needed, the obstacles (in using the new solutions) are already designed into the solution.

For example:

a. They focus more on simplifying the solution, making it easier to use with less training and implementation effort for their clients.

b. Their solution is more than a technical solution and includes support in implementing and maintaining a new way of working.

 c. They offer an ascending engagement model in which customers step-by-step can implement and use portions of the overall solution. This way they can mitigate risk, reduce the change challenge and allow their organisation to become familiar with the new way of thinking and working. Simplify the solution and ease of use.

 

3. They involve the right stakeholders in the client’s organisation – who have a stake in the problem being solved, in the decision-making phase and in the implementation phase.

Further to the metal wholesaler example above, the next steps of the added services portfolio were to:

• Organise open workshops for clients, discussing trends and changes in the sector, and some best practices and success stories.
• Workshops with the client’s key stakeholders to get a full picture of the journey of maturing their manufacturing operation, supply chain, plant layout, equipment, competencies and people. And then use the information to develop a road-map on how to step-by-step develop. It also helped to get stakeholders on the same page and engaged.
• Provide project management and change management practices and resources.
• Organise pilot tests, get used to new ways of working and building trust.
• Offering ongoing performance management dashboards to get full visibility and transparency of performance, progress and issues. This helped preventing blame for every incident, and also helped to feed a continuous improvement programme.

 

The Benefit

Manufacturers that are better in building momentum with their clients to adapt to their new solutions, see that their customers fluidly adopt new solutions and have a fairly high pace of scaling up.

Hence, these manufacturers generate more new revenue streams with higher margins and differentiate more from their competition.

 

Give monetisation of Services and Data an Impulse

If you want to accelerate the monetisation of your (new) Services and Data, join our upcoming Impulse Sessions on “How to Monetise Service and Data”.

These are full day interactive meetings with like-minded peers during which we will exchange experiences, insights and challenges.

Book your seat @ http://fs-ne.ws/5gyg30mWzze

 

Essence

Our value is not only in the developing and offering of great solutions to our customers’ big problems, it is about how our clients use and benefit from our solutions.

 

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 Jan Van Veen is founder of MoreMomentum 

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Jan Van Veen continues his latest exclusive Field Service News series on how companies can monetise their services with IoT as he turns his attention to something many companies struggle with - better articulating their value proposition...

Central question: How to monetise Services & IoT

Many manufacturers experience pressure on growth, revenue and margins.

Their products and services are being commoditised. Competition from lower-cost alternatives are arising. On the other hand, there are huge opportunities with new technologies, value propositions and business models.

One of the important trends is that value proposition and offerings become more data-driven and more service oriented. However, many manufacturers are product-driven businesses which do not fully appreciate the value service has for their customers and own business.

So, one of the central questions is: How to Monetise Services and IoT in order to Grow in a Disruptive World?

The capability to monetising service and IoT is mission-critical for sustainable performance and existence of manufacturing:

In a series of articles, we cover 3 critical steps which make the difference between success and failure in monetising services and IoT:

1. Solve bigger customer problems, which is all about creating significantly more value for customers.
2. Articulate the value
3. Build internal momentum for monetisation

 

Common mistakes

Too often we see that (new) services, solutions or features are promoted without connecting the dots to their bigger problems.

For example, a client of mine – a major equipment manufacturer – experienced the power of explicitly connecting the dots. They were launching the first version of a portal to serve DIY clients which had their own maintenance departments.

They initially presented the benefit of the portal with many online manuals (version 1 of the portal) as a way to save time every time a maintenance engineer of their client would need to find the right manual. It appeared to be tough to sell paid subscriptions for this portal.

Only when the manufacturer articulated their view of the key problems of their clients’ maintenance departments and how the portal would solve these problems, did the clients get really interested.

The dominant problems of the maintenance departments were not finding manuals, but the daily pressure to increase availability and uptime at shrinking budgets and that, that their engineers had slow learning curves due to low volume of certain problem-solving work.

 

"A portal which would evolve into a broad toolset for best practices, troubleshooting and maintenance management was considered a crucial asset..."

 

A portal which would evolve into a broad toolset for best practices, troubleshooting and maintenance management was considered a crucial asset.

Furthermore, we often see manufacturers thinking and talking about features and activities, instead of customer value. Clients only pay for the value they perceive, not for what you do.

A striking example were field service engineers of another client, who would spend a full day in pairs to install equipment which was already delivered a  couple of days before. A few days after installation, another colleague would visit the client for training and commissioning.

The two engineers would unpack all components and assemble the components, connect it to a couple of other devices from different brands which involved many integration issues, connect their equipment to the computer network – which involved loads of security and networking issues which the engineers had to solve with IT departments – which by nature tend to be reluctant.

And here is how they briefed their client when they started the job: “We are here to unbox the components, put the bits and pieces together and make sure everything is there, so the trainer is ready to go……”

Their client did not even know what kind of complex integration problems the engineers were solving. Actually, their client even wondered why his supplier did not have more mature and efficient processes to get the job done. And by no means are the engineers to blame for this.

 

Some practical solutions

You can easily start improving on these common mistakes:

Build a compelling story of your view of your customers' challenges, opportunities and problems, which is validated by (a segment of) your customers. Relate this as much as possible to strategic or crucial priorities of your clients.

• Include a view on how your clients could best pursue these opportunities and solve these problems. Don’t make this a big thing, just start with a first strawman version and let it grow in time.
• Link the characteristics and benefits of your solutions and services to the view of your customers.
• If possible, quantify the benefits in terms of the strategic or critical priorities.
• Ensure that your value story is well articulated in your messaging to (the specific segments of) your clients and is consistent across all touch points. This may involve some staff training..

 

The Benefit

Manufacturers which are better in articulating their value see that both customer-facing personnel and their clients better see the value, better appreciate the value and therefore also find it more logical pay for this value.

Hence, these manufacturers generate more new revenue streams with higher margins and differentiate more from their competition.

 

Give monetisation of services and IoT an Impulse

If you want to accelerate the monetisation of your (new) services and IoT, join our upcoming Impulse Sessions on “How to Monetise Service and IoT”. These are full day interactive meetings with like-minded peers, during which we will exchange experience, insights and challenges.

Book your seat @ https://moremomentum.eu/impulse-sessions/ 

 

Essence

Delivering value to customers does not automatically also capture the value – that is, monetise the value delivered. If the delivered value is not clearly articulated for clients (and staff), both will take it for granted or maybe even not recognise it.

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Jan Van Veen, is Founder of MoreMomentum

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Jan Van Veen, Managing Director, moreMomentum, continues his series of articles looking at how service organisations can drive revenue from their services by harnessing the IoT...

Solve bigger customer problems

In the previous issue of Field Service News, I wrote an introduction on the topic “How to Monetise Services and IoT”, covering the dilemma of many business leaders in manufacturing.

In this article, I will elaborate on the first of the three critical steps which often make the difference between success and failure:

• SOLVE BIGGER CUSTOMER PROBLEMS
• Articulate the value
• Build internal momentum for monetisation

Common mistakes in the industry

One of the common mistakes is focusing on the smaller problems and making only small incremental improvements to services or solutions.

 

"One of the common mistakes is focusing on the smaller problems and making only small incremental improvements to services or solutions..."

 

These are typically the standard next step improvements most competitors bring to the market as well. Although these are also necessary improvements – adding features to your solutions - to sustain your market position, they are unlikely to bring about significant growth or opportunities required to monetise. For example, think of new features that car manufacturers introduce to their new models or weekly computer software updates that occur without paying more.

Another common mistake is focusing too much on only the availability and use of the equipment. In most situations, the extra value is having a broader impact of the value creation process for our clients. In most industries, the purchase, financing, and maintenance of equipment is a small portion of the overall budget.

 

Truck manufacturers as an example

As an example, while the sale of trucks was shrinking dramatically, leading truck manufacturers like MAN, DAF and Scania discovered that discounting the trucks did not have that much of an impact. One of the biggest challenges for truck operators was reducing fuel consumption. The leading truck manufacturers took this challenge beyond aero-dynamics and engine efficiency, and developed data-driven services to reduce fuel consumption by improving the way truck drivers drove the trucks.

 

Discovering the bigger customer problems

The ideal practice is to:

• Solve the bigger problems in a significantly better or more efficient way for clients, or
• Solve any new significant problems for our clients

Before developing new services and solutions, it is crucial to have a deeper understanding of the challenges and problems that your clients face. The following activities will prevent any bias from long-standing experience and business norms:

• Reframe addressable customer needs with your team and colleagues who are involved. The aim is to have a broader view and scope on customer needs. Explicitly ban objections against the idea of servicing those needs.
• Focus on actual “jobs-to-do” for your clients and areas where they are struggling or could improve. For example, improving uptime may not be that relevant for clients with a low utilisation rate. Whether you carry out professional customer research or not, it is always good if various colleagues have frequent open conversations with different stakeholders about views on the industry, trends, challenges etc. Sharing the following simple diagram during such conversations is helpful for you and your clients to keep the dialogue open.
• Explore how your clients are solving problems and what suppliers are helping them.
• Also, explore the needs and challenges of the customers of your customers. This will give more insight into your customer’s needs.
• Explore what needs you could/should be addressed now and in the future. With these insights, you can extend and enhance your vision, strategies and roadmap for innovating your services and generating new revenue streams.

 

The Benefit

Manufacturers that solve the bigger problems can better articulate the value for customers and staff, have higher momentum for change and monetisation, generate new revenue streams and differentiate themselves more from the competition.

 

"Manufacturers that solve the bigger problems can better articulate the value for customers and staff, have higher momentum for change and monetisation..."

 

]They perform better and have more resources to keep innovating their business, enabling growth in a sometimes disruptive world.

Monetisation of services and IoT – Impulse Session

If you want to accelerate the monetisation of your (new) services and IoT, join our upcoming Impulse Sessions on “How to Monetise Service and IoT”. These are full-day interactive meetings with like-minded peers during which we will exchange our experiences, insights, and challenges.

Book your seat @ http://fs-ne.ws/1pMC30lpssC

Essence

Great offerings and solutions won’t sell themselves!

It is various colleagues together that drive the value perception and sell the solutions, because of their eagerness and passion to perform, learn, develop and make new things happen, as well as avoid unnecessary obstacles that cause internal conflicts of interest and reduce confidence.

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Jan Van Veen, is Managing Director, moreMomentum, 

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Jan Van Veen of moremomentum concludes his series of articles on the 4 Winning Habits of successful service organisations focusing on the fourth and final winning habit: Discovery...

Following our introductory article about the 4 Winning Habits in the previous publication of ‘Field Service News’, I will now elaborate on the fourth winning habit: Discovery.

Common mistake: Being blind-folded

Humankind by nature tends to be fairly blind-folded, by its strong focus on opportunities and threats in the short term and directly related to its current situation. Companies often enforce this behaviour by:

• Low adoption of the first three winning habits (Direction, Dialogue, Decision-making).
• Not allowing time and resources in discovery and innovation, focusing on the exploitation of the current business model.
• Detailed and top-down control of exact discovery topics and assignments.
• Leaving all discovery activities for dedicated and specialized teams close to the board.

The consequences are critical for the sustainable performance and business innovations we need to thrive in a disruptive world. We tend to:

• Overlook longer-term opportunities and issues and misinterpret the potential impact of these.
• Overlook the real issue behind symptoms and fight the symptoms instead.
• Limit our options for solving problems or pursuing new opportunities and get stuck.
• Encounter resistance when developing and implementing new solutions.

In the past we have seen many businesses missing the boat - and we still do.

Just imagine what would happen if:

• Nokia and Blackberry did recognise that maybe, business-users at some point could expect touch screens, apps, multi-media and full connectivity.
• Polaroid did consider that digital cameras would become affordable for consumers.
• Airliners did understand that low-cost airlines could become attractive to business travellers as well.

The solution: All employees discover the future with an open mind

Leading companies drive their ongoing success with a strong habit of continuously discovering new opportunities and challenges.

Their discovery habits outperform the lagging companies, by:

1. Bringing the outside in
2. Using many sources
3. Involving involve all employees and many external stakeholders.

1. Bringing the outside in:

Every company has an eye open to the outside. They investigate trends with customers, competitors and technology. However, many miss opportunities and trends as they tend to be too focussed on:

• Topics with an immediate impact on current performance, less on future performance.
• Current needs of their best clients and less on future needs or on other market segments.
• Actions of competitors, less on what they potentially could do in the future.
• Trends with clear signs and high probability, less on trends with less clarity or probability.
• What they know for sure, less what they do not know. After all, staff are being paid for what they know”, not for what they do not know.

Leading manufacturers bring the outside in through the following practices.

Explore beyond business as usual:

The key is to be looking for (potential) trends and changes which do not directly relate to the current business model and operations. These insights will help prepare the business well in advance and to be the first to benefit from the change.

Leading companies also address the following in their discovery habits:

Market:

• Current and future needs of market segments which they do not serve, particularly if they appear not to be so profitable at the moment.
• (Latent) needs of their current clients, beyond the needs which they fulfil with their current products and services.
• Current and potential future needs of the clients of their clients.

Competition:

• Changing visions and strategies of competitors, other actors in the value chain and potential new entrants into the industry.
• Trends in adjacent industries and industries like data, algorithm-driven industries.

New technology:

 

• Emerging technologies with a low rate of adoption and application, like big-data, augmented reality artificial intelligence and how these will impact their (future) clients.
• Obstacles which currently prevent rapid adoption of the new technology and how these obstacles could be solved in the future.
• Economics, social demographics, politics, natural resources, workforce etcetera.

 

Explore weak signals:

Many lagging companies make themselves vulnerable to disruption by disregarding the weak signals. They tend to assess emerging technologies on their current possibilities and threats. They often see many reasons the impact will not be that high, for example, because of poor performance, high cost and narrow practical applications.

Many lagging companies make themselves vulnerable to disruption by disregarding the weak signals.We tend to disregard the scenarios that these obstacles may disappear in the coming years and how the adoption of the emerging technology could accelerate rapidly.

Many disruptive changes take one or more decades of exponential development and growth. In the first phases, the change and its impact seems to be insignificant. However, at some point, it quite quickly becomes significant and in a few years becomes main-stream. For many, this change comes out of the blue and is totally unexpected.

Leading companies explicitly focus on the weak signals. They are the first to see changes accelerating and obstacles for adoption of new solutions being eliminated. At the right time, they assess if they are ready for the change and are the first to act on the new opportunities and challenges.

Thinking in scenarios:

It is a challenge to tell in advance which trends and changes will really become real and have an impact on our business and which trends will only be hype or just stall. I think it is key that we accept the fact that we do not know. The

challenge is not making sure you do know, but that we are prepared to sense and respond in time.

Leading companies continuously develop and maintain scenarios for potential trends, changes and alternative solutions to respond. They understand which signals to be on the lookout for.

2. Many sources 

Leading companies see their innovation and changes being fed from many different sources for in-depth and broad discovery.

Internal and external sources

People with different backgrounds and opinions add value to getting new insights and arriving at better decisions. The most successful companies actually include many internal resources, which traditionally the lagging companies tend to disregard, like:

 

• Employees from other cultures, with different values, views and experiences.
• Employees who have a lot of experience from other industries.
• Employees from specific departments like R&D, service, finance, compliance and employees at lower ranks.

 

Leading companies also activate a broader network of external sources, including those they hardly meet during daily business. They actively seek to exchange insights with:

 

• Peers from completely different industries.
• Clients of clients of clients.
• Peers from other companies serving the same value chain.
• Experts and academics from different domains.
• Other stakeholders of client-organisations, who are not talking about the products and services.

 

Experiments

Leading companies not only talk and think about potential challenges, opportunities and solutions. That would lead to paralysis by analysis. They also learn by doing by:

 

• Innovate and develop step-by-step, starting with a first minimal viable solution and running rapid cycles of learning, adjusting and taking the solution to the next level. These are the Lean Startup and Agile approaches.
• Doing experiments, where we learn from what could happen in certain circumstances with certain solutions. These provide new insights which can be included in further decision-making on the direction and timing of a solution.

 

Experiences and failures

Leading companies learn from the things they did which did not work. They rapidly adjust and find new ways. They emphasize that it’s all about the learning, not about the failure. Their employees are more open to trying new solutions and practices, discovering and pursuing new opportunities, also when the results are not yet certain.

More and more companies cultivate the belief that failure is an option.

More and more companies cultivate the belief that failure is an option.For example, they organise failure-celebration-sessions, where colleagues present a failure, what they learned from it and how they would adjust their approach.

Another approach is not to use the word “failure”, but “discovery” or similar.

Like Edison said: “I did not fail, I just discovered 10,000 things that do not work.” This seems to work better than only reframing “failure”, even more so in cultures where losing face is a major factor.

3. The power of everyone in some discovery-mode

The most dynamic businesses empower all employees to do research, explore and define new ideas to improve and innovate, not a small specialised team dedicated for this job.

Everyone Contributes

Everyone in the organisation owns part of innovation and change, whether it is about implementation or identifying new ways to improve. They all have and search for the necessary insights. They all read, talk with peers from other companies and clients, do experiments, visit conferences, do external training and conduct their discovery projects.

This engages them to own the ideas and the execution.

Exchange and share

However, they do not discover everything themselves. They also exchange insights, experiences, opportunities and challenges they have discovered, hence learning from their colleagues and having their colleagues learn from them. This happens through collaboration tools, meetings within and amongst project teams and other in company events.

Bottom-up and Top-down

Everyone, within boundaries, takes their own initiatives to explore certain topics. Some discovery assignments come from higher management levels. This way they are committed to the effort it takes and to the outcome the generate and their colleagues generate.

Benefits

These open and forward-looking discovery habits make an organisation much more adaptive to any new opportunities, challenges and solutions.

They shape a huge army of open-minded, engaged and change-oriented employees. This is mission-critical for any company that wants to thrive in a rapidly changing and complex world.

The Essence

It’s not about having smart analysts and experts creating smart intelligence.

It’s about having passionate and engaged employees learning and discovering and making great ideas work.

Want to know more? access our eBook: How to Thrive in a Disruptive World - an eBook of 42 pages about disruption, the 4 winning habits for momentum in continuous and rapid change and 3 case studies (including Mars Drinks and Volvo Penta) Field Service News subscriber can access the eBook @ http://fs-ne.ws/AcQf30jhl0S

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In this latest of his Momentum Case Studies, Jan van Veen, co-founder of moreMomentum, interviews proven leaders across the globe who are successfully implementing the 4 Winning Habits to lead innovative, energised and engaged teams.

Here the case study examines a global leader serving the mining and oil & gas industries. Much of their recent success has come because they take services very seriously, being seen as a knowledge partner to help their customers improve operational efficiency, reduce risks and increase profitability.

The challenges faced

The company operates in traditionally slow-moving industries with large incumbent players and has become a leader by creating a strong service business which now generates a significant portion of total revenues, deepens customer relationships and creates resilience during economic downturns.

However, it has now spotted that a potentially significant disruptive threat could emerge from ‘big data’ and data analytics technologies, enabling new types of services. In the past, they would have considered taking five years to develop new equipment to be fast for the industry, but now understands that when it comes to future services, the speed of innovation needs to be higher.

Senior management is very aware that customers will move away if they see a better way of doing things, so the company must adapt if it is to stay a market leader.

The Strategy

The company has entered a period of change. To meet the disruptive threat ahead it must be visionary: to redesign itself and its culture so it can move much faster to keep ahead, enthusiastically embracing digital technologies with a focus on the end-to-end customer experience. In fact, it has to re-imagine its relationship with its customers so that rather than selling products, it provides ways to help its customers improve their operational processes and even their business models.

The company has demonstrated success from the 4 Winning Habits for Momentum so far, but now they need to take it to another level. Here we will show how they are using each of the 4 Winning Habits in the implementation of its strategy, creating Momentum for long-term sustainable success.

Direction – the common cause that everyone can get behind

The company management has recognised that, at a time of change, a compelling vision describing their role to help customers be more profitable is important to pull everyone together in the same direction. It is being spread throughout the company using both traditional townhall meetings, the company intranet as well as new digital social sharing methods such as Salesforce, Chatter and Yammer.

It helps operational messages fit into context if there is a beacon for people to move towards if there is a vision of what the company will look like in five yearVP of Service Marketing: “It helps operational messages fit into context if there is a beacon for people to move towards if there is a vision of what the company will look like in five years, what the industry will be like, what our company will be like. Otherwise, you have isolated initiatives”.

To push the new company direction, the company has been busy hiring a new CEO, CMO and CDO (Chief Digital Officer), all with experience in driving innovation. The Board understands the need for change, but the company can be a supertanker which takes time to turn. However, it is also aware that the competitive landscape can change quite quickly.

Dialogue – open discussion at and between all levels to encourage new ideas

Digital initiatives are at the centre of this company’s reinvention, so senior managers are heavily involved in steering new ideas, to get behind them and also to prevent them from breaking current business streams.

Across the company, at least 75% of targets and incentives are collective, leading to limited silo thinking between teams since they’re all in the same boat. Where there is friction, it’s usually because goals have been set too narrowly and issues fall between the silos. As a result, there is much less politics than might be expected in a large company and a higher level of transparency on performance.

This all helps create a culture of trust with less finger pointing and blame.

VP of Service Marketing: “Rather than looking for blame, people look at how to fix issues and learn from mistakes. It works well due to open dialogue. People don’t feel threatened and are not so eager to hide problems”.

Decision-making – local decision-making empowerment

The company has always had a decentralised structure. Different markets are quite autonomous and allowed to make their own local sales decisions, choosing which sales and marketing initiatives in which to participate based on market needs. This has been a successful approach so far, but staff at all levels and across the business will need to now be included in the decision making processes if the company is to continue adapting at a fast enough pace.

Discovery – Looking for new trends, opportunities and threats (internal and external)

The newly established Digital Office is a powerhouse of new ideas to add new technology to client relationships, including tools such as the Internet of Things devices and data analytics. It has been set up to operate somewhat separately from the mainstream company in order to be free from ‘business as usual’ thinking.

Companies, middle managers actually, are often quick to kill new products they see as a threat to the status quo and that’s why it’s good to have a Chief Digital Officer, tasked to create change and disruptionVP of Service Marketing: “Companies, middle managers actually, are often quick to kill new products they see as a threat to the status quo and that’s why it’s good to have a CDO, tasked to create change and disruption. We might all be comfortable with how things are today and not want to change it but I’m damn sure there’s someone out there who wants to kill our business model, and will be aided and abetted by our customers if they see a better way of doing things”.

The company has even started trying new approaches to R&D, such as hackathons.

VP of Service Marketing: “When I first heard of hackathons I have to admit I was sceptical, but from what I’ve seen they actually allow people to look at problems in new ways and get people involved who would never normally be involved, and maybe redesign the way of doing things. And for big companies, that’s what we have to do, because our competitors don’t worry about the fact we have an established base and products, they’re actually thinking ‘How can I change the industry to make money? They don’t care if it destroys our business’”.

The company has also started involving customers in its processes, for example with surveys. They keep the company honest about its achievements, drive change and allow them to spot systemic issues. The voice of the customer can be very powerful.

Next Steps:

Change is an ongoing process at this manufacturing company, but they recognise the need to accelerate the pace of change to a new level and then make it ‘business as usual’ – a revolution in the mining sector!

The 4 Winning Habits for Momentum will be key. They are working on a clearer picture of the future state of the company, to give stronger Direction to the business units and local staff for local Decisionmaking.

Dialogue with staff will improve, so personal objectives will be better aligned to the strategy and not be so focussed on purely financial targets, but also learning, collaboration and Discovery of new opportunities. If they can do all this, then they will truly be creating a revolution in mining.

Outcomes

The huge growth in the service business at the company has brought enormous benefits for their customers, made the company a trusted ‘knowledge partner’ and expertly positioned them to forge ahead into digital transformation.

People buy from them now because of the advice they give and their approach to improving their customers’ businesses. For instance, mining equipment runs 24/7/365 and downtime can cost many €100,000s per day so, they have redesigned parts, consumables and field services to reduce the time it takes to change them, so reducing costs for their customers.

Energy efficiency has been another focus, as has the charging model – customers pay for service contracts by the ton, so they know their costs in advance. These changes epitomise the innovations that the company has achieved, and there are many more on the way.

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Jan Van Veen, Managing Director, moreMomentum explains how field service companies can thrive in a disruptive industry...

The key challenge

In the manufacturing sector, a popular topic is the potential disruption, driven by:

• New technologies like artificial intelligence, Internet of things and augmented reality
• New technology specific to the equipment we offer
• Changing customers
• Emerging markets
• New entrants into the industry

And the potentially disruptive new value offerings, operating models and business models which could emerge.

As manufacturers, we run the risk of missing the boat, so the question is: Disrupt or Be Disrupted? Most of the companies will not be able to disrupt but certainly, need to know how to thrive in a disruptive world.

In my view, the following is required to be successful:

1. Full understanding of disruption and its potential impact for the business
2. Clarity on what needs to change in your business to thrive in a disruptive industry
3. The high pace of continuous change to innovate and execute

However, too often I see misconceptions about disruption and disruptive innovation, a lack of clarity on what needs to change and too slow a pace of change.

By consequence, manufacturers tend to make inadequate assessments and develop inadequate strategies, allowing leading competitors and new entrants into the industry to take the lead.

In this article, I will focus on what disruptive innovation is, the impact and how to prevent typical pitfalls.

What is disruption?

Disruptive innovation is a nasty beast. We have seen quite a few strong brands (almost) disappearing because of disruption, like Kodak, Nokia, IBM computers and Polaroid to mention a few.

For clarity, I’d like to categorize innovation along two dimensions:

• Impact: mainstream versus disruptive
• Scope: Customer value versus internal capabilities

Mainstream innovation

Mainstream innovations annually improve the value of products and services (including the related internal capabilities) as expected by the market. The aim is to increase our value and margins by better serving our best clients.

These innovations can be small and incremental or more radical.

Examples of incremental mainstream innovations are improved fuel consumption of cars engines, improved uptime of the equipment we sell through more reliable equipment and better maintenance.

Examples of more radical mainstream innovations are cars going electric and our services becoming more predictive and performance basedExamples of more radical mainstream innovations are cars going electric and our services becoming more predictive and performance-based.

Manufacturers that fall behind the competition, have not been disrupted yet The majority of the manufacturing companies are too slow in driving the mainstream innovation and see leading competitors achieving higher growth rates, higher margins, more service – recurring and stable – revenue and higher customer loyalties being ahead of the game. As Jack Welsh said: “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.”

Disruptive innovation

Disruptive innovations break with the ongoing and upward trend of improving value. There are two ways of disruptive innovation: offering lower value at a lower price for the low-end market or offering lower-barrier solution opening new market segments which have not been served so far.

At the early stages, disruptive products and services serve a small niche, often at a lower value level.

These solutions will follow a mainstream innovation journey, increasing value and price. Gradually the products or services become a viable alternative for a larger portion of the markets.

Examples of low-end disruptions are the low-cost airlines, which offer flights at lower service levels and lower prices. This is quite attractive for business travellers who do not want to pay a premium price for meals and convenience.

One example of new market disruptions in which a new product or service serves other needs are the PC’s, which after some time started competing against the mainframes. Another example is salesforce.com, which offered so much more flexibility and lower cost of ownership than the traditional on-premise CRM systems.

Innovating internal capabilities

New technology enables us to develop new organizational capabilities.

For example, the low-cost airlines have adopted quite different operating models which allow them to consistently fly at much lower cost and hence maintain good margins at a low price level. For service operations, we see many manufacturers developing capabilities like remote service, connectivity, big-data and algorithms and predicting failures.

These, in themselves, are not value propositions and have no value for customers. However, these can be crucial capabilities for new service propositions.

Innovating external (customer) value

For maximum impact focus on customer value, not on capabilities

The real impact to drive competitive value is by addressing unmet needs or barriers to use new technology or solutions with a new product, services or integrated solutions. Examples are:

• How Rolls Royce offers a zero-disruption proposition for aerospace engines in which clients only pay per flight hour
• How MAN reduces fuel consumption by improving driving behaviour
• How Caterpillar helps managing a construction plant and will ensure at every stage of the construction the right number of the required equipment is available.

Besides the services and products, we can also increase value by enhancing customer experience, our brand and (lower) price levels.

Why does this matter?

At the early stages of a disruption, incumbents may see the new products and services entering their market.

However, compared to business-as-usual, the new products and services are relevant for a small niche only, the market volumes are small and the added value often is much lower. Their best clients are not interested.

At the early stages of a disruption, incumbents may see the new products and services entering their market.Above that, there are so many trends and new innovations, it is hard to predict which ones will become successful. This, together with the pressure to optimize top-line and bottom line and adequately serving our best clients, means it is easy to ignore the signs and consider them as irrelevant.

Disruption most often comes from outside your industry

Historically it appears that often incumbents beat new entrants when it’s about mainstream innovations, as they will defend their main business with valuable clients. However, when it’s about disruptive innovation, new entrants disrupt the industry and incumbents only start to respond (in panic) when it’s too late.

The new entrants have built the knowledge, capabilities and the brand which makes it tough for incumbents to catch up in time.

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Field Service News' Big Discussion has a simple premise - we take one key topic, bring together three leading experts on that topic and then put three core questions to them to help us better understand its potential impact on the field service sector...

This issue our topic is the what to expect in 2018 and our experts are Michael Blumberg, Blumberg Advisory, Bill Pollock, Strategies for GrowthSM and Jan Van Veen, moreMomentum

The first question we tackled was What is the biggest challenge facing field service companies in the next 12 months?

Our second big question in the series was What is the biggest opportunity facing field service companies in the next 12 months?

And now onto the final question in this instalment of the Big Discussion...

What one technology do you think will have the biggest impact in the next 12 months?

Bill Pollock: Clearly, Artificial Intelligence (AI) and Machine Learning (ML) will have the biggest impact on field service in the next 12 months. In fact, while some field service companies are still debating whether or not to implement Augmented Reality (AR), the more progressive – and aggressive – services organisations are already embarking on their respective AI and ML implementation programs.

The application of AI for positively impacting key services-related areas such as customer experience and workforce productivity, while also allowing companies to move from a preventive maintenance to a predictive maintenance service model will be stunning! In addition, many organisations are already beginning to realise the benefits of using AI and ML for improving their overall service parts management activities, as well as for supporting data-driven decisions by allowing them to process, understand and share information that they didn’t even know they could cultivate as recently as just a year or two ago.

One caveat, though: services managers will need to closely align with their companies’ CTO and CIO before embarking on an AI/ML program, as their respective knowledge of the technical aspects of these “new” technologies will certainly help throughout both the decision-making and implementation processes.

AI and ML are not a fad – they are here to stay, and now is the time for field service companies to embark on that journey.

Jan Van Veen: I try to think of one technology that will impact on all companies. This depends on the industry and where the field service is on the continuum from reactive maintenance to advanced services. Also, the impact of new technologies will always be over a longer period of time.

I do observe that most field service organisations have little view on the impact of Augmented Intelligence and Deep Learning systems which can process and learn from unstructured information in writing and speech. These systems are now having practical applications in various sectors, including technical services.

We have already seen Doctor Watson of IBM massively beating the smartest people in the game ‘Jeopardy’ (search for it on YouTube). Dr Watson is already providing quite accessible web services to use the functionality and have their first field service solutions.

This technology will not only completely reshape our knowledge systems and the scarce skill sets we need for remote diagnostics, it will also be a crucial vehicle for developing advanced data-driven value propositions.

I hope to see more and more manufacturers engaging with a few trusted clients and the right data-driven partners to explore the opportunities from this technology.

Michael Blumberg: I think blockchain technology will have the biggest impact on the Field Service Industry in the next 12 months. A brief definition of the blockchain is that it is a decentralized and distributed digital ledger used to permanently record transactions across data, text, video, or audio files. It is extremely secure and scalable.

The blockchain includes within it the concept of a “smart contract”, a series of if-then statements related to a transaction.

This makes it the ideal technology for building an IoT platform. The blockchain can be used to record sensor data and then trigger service events (i.e., field service dispatch, parts shipment, corrective actions, etc.) based on smart contracts. These transactions can also be monetized in real-time; like a virtual cash register. Any disputes can be resolved by verifying the blockchain transaction itself.

This is just one of many use cases for block chain technology in the Field Service Industry. Other use cases include asset tracking, spare parts authentication, knowledge content sharing, and SLA management. 2018 will be the year where these use cases are implemented in field service and produce measurable results which eventually lead to large-scale adoption within the field service industry.

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