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Michael Blumberg, President, Blumberg Advisory Group, reflects on the seven most crucial considerations for service managers tasked with driving additional revenue in today’s market...

Revenue growth is probably the single most important objective for executives who are responsible for managing their company’s field service organisation (FSO) as a profit center or strategic line of business. “I want to double my service revenue in the next 3-5 years” is an incantation that I hear constantly from business owners and executives.

That equates to a 20% or more growth rate per year.

Sure, this type of growth is easily achievable if the market is growing at this rate or faster. I’ve found that these high growth targets are often triggered by management’s desire to take back market share from competitors or increase the share of service revenue contribution to overall corporate revenue.

While high revenue growth in a mature or declining market is difficult, it’s not impossible. A little work is usually required to achieve this type of performance.

To understand where the emphasis is needed, let’s look at where service market programs may fall short:

#1 - Service Portfolio not meeting customer needs:

Quite often service providers fail to meet their revenue objectives because their service portfolio is no longer meeting customer requirements. In other words, they have failed to offer services tailored to their customer needs. For example, offering only next day response when customers require same day.

#2 - Pricing not optimal:

If service revenue is flat or declining, a service provider might want to look at their pricing strategy and tactics. Perhaps their service prices are no longer competitive.

On the other hand, they may be underpricing their services in relation to the value they provide.

#3 - Failure to understand competitive threats:

Many service providers, particularly those that are divisions of manufacturers, fail to understand the competitive threat of third party maintenance (TPM) companies and/or in-house service providers.

For example, they often under estimate the value that TPMs provide to their customer and/or fail to develop an effective value proposition to compete against them.

#4 - Failure to articulate value:

The single biggest reasons why customer don’t purchase service agreements is because they don’t understand their value. An FSO must ensure they have clearly articulated the value of their service offering to current and prospective customers.

Do customers the cost of downtime or the pain points that their services help solve?

It is important that FSOs not only articulate value to their customers but also make sure that their sales people understand it and sales people are provided with the appropriate sale aides and marketing collateral to support it.

#5 - Lack of communication & follow-up:

One way to increase service revenue is by improving contract renewal rates.

These rates often decline though lack of consistent communication and persistent follow-up about the value of services provided, when contracts are up for renewal, special incentives for renewing, and information on when they are about to expire.

Customers are likely to forget about their experiences even if they are positive ones after 30 days. That’s why it is important to follow-up once a month.

#6 - Not asking for referrals or testimonials:

A recent study by HubSpot, a marketing automation software provider, found that 85% of companies who achieve year over year revenue growth do so because they ask for and receive referrals from their customers. Referrals are the best and least expensive source of generating new business.

The problem is most FSOs forget to ask for them. Remember customers speak to each other. They may be involved in the same networks and trade associations, or call on each other for advice and guidance. Why not enlist them in your business development efforts, even if it is to influence their peers in other companies who already know about the services you offer.

#7 - Lack of customer appreciation:

Your customers will remain loyal to you and purchase more from you when you let them know how much you value and appreciate them.

It’s the simple things like a courtesy phone call/visit, thank you card, small gift (i.e., rewards program), or exclusive offer that let them know you value their business. These seven focus areas have one thing in common, they all benefit from market research.

Whether its information that will help redesign a service portfolio or modify pricing, market research provides an unbiased and unfiltered perspective on what customers are thinking and doing. More importantly, market research, when designed effectively will uncover valuable market intelligence that may not have otherwise been captured from a sale’s call or courtesy call made by a company executive.

By implementing all seven approaches to revenue growth, as outlined above, on a highly disciplined and consistent manner, an FSO can expect to achieve a 30% to 120% increase in sales in just one year alone.

 

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Kris Oldland talks to Felix Keiderling, General Manager responsible for Global Service Business Development and Product Management of ABB Turbocharging shortly after his presentation at the Spring Servitization Conference in Lucerne, to find out more about how ABB are approaching the introduction of an outcome based service offering for the merchant marine sector as well as for power plants.

KO: Having just given a fantastic presentation a little earlier this morning one of the things you highlighted was that you have an install base of 200,000 assets and you know exactly what is going on with each and every one of those assets.

How do you achieve that?

FK: Well, we do not have a real-time information about all turbochargers.

But basically, knowledge about the installed based is at the core of our business considering the long life cycles over which vessels and power plants are operated. In order to do this we have an intelligent product and service database for specific application data covering from cradle to grave the whole process. I.e. from day one how we manufacture with what materials, through to where it is installed, on which engines and then keeping track of the lifecycle of the asset - how we’ve serviced it, if there are any upgrades and also technical information such as the estimated running hours and scheduled maintenance.

All this information creates value in particular for our long-term customers as we can be available where and when the customer needs us, with the right parts and the right people, very effectively.

KO: The business model that you described today generated a significant chunk of the revenue from service, has that always been the case, i.e. has service always been a key element within your business model?

FK: Yes it has. From Day 1 on, if you look at the harsh operational environments these engines are operating in, of course our turbo chargers also face these environments - so wear and tear is always occurring and we have always had to do regular maintenance because of that.

Due to this, from the beginning service has been an important part of our business approach and our success.

KO: And has it also always been a driver for you strategically? Or was there a customer pull as well?

FK: In one sense, it was a clear strategic decision especially when we looked at how manufacturing was moving to Asia and the big growth in logistics that was coming along with that. The merchant marine sector that we support is also driving this demand for regular maintenance for turbochargers as well.

So whilst it was a strategic decision in that we saw this market developing and positioned ourselves accordingly, there was also the move to implement our service solutions globally which was in part a reaction to the changing demands of our customers.

 

KO: When you were speaking earlier on today you alluded to such change and that the shift in market forces had allowed to put yourselves in the position where you can begin to explore the potential of an outcome based solutions model - what exactly does that look like for your division in ABB and what is that appeals to you in such a model?

FK:We see certain things happening in the market- one is that uptake of service agreements is picking up in pure numbers, customers are increasingly willing to outsource their service needs to service providers, and in particular to the OEM.

Secondly, we see that there is an interest in customers engaging in much longer term service agreements because they see the leverage of reducing their total cost of ownership over the asset lifecycle by also outsourcing the associated risks.

 

Then thirdly, there is the customisation possibility that you have within the scope of these lifecycle agreements - customers are willing to engage if you can truly support their operations and are willing to adjust to their needs.

KO: Finally, one other area that was brought up in your presentation, was digital transformation, which is one of the buzz-terms of 2017 it seems, but what does digital transformation mean for ABB both company wide and in your division?

FK: From top down, ABB has recently announced ABB Ability as the platform where we plan to connect all Internet of Things related services, products and people into this one common platform to ultimately enable our customers to know more, do more, do better, together with us. Then talking about our own specific unit, we are of course part of that process and we are looking into blending our excellence in global service execution, with digital customer solutions to support customers’ operations to be most reliable and efficient.

These solutions are in the development and are yet to come to the market

 

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Jan Van Veen, continues his latest exclusive Field Service News series exploring the winning habits of long lasting achievers by outlining how a compelling direction can accelerate change...

Following our introductory article about the 4 Winning Habits in the previous publication of Field Service News, I will now elaborate on the first winning habit: Direction:

A common mistake: Lack of clarity where the company is heading 

A couple of years ago, I spoke with the management team of an international manufacturer of medical devices. They were disappointed because their employees were not taking the initiative to educate themselves on “digital” and IT related topics and to develop the business.

They knew that technology would continue to shift the market dramatically.

They even had a vision: to transition from a device manufacturer to a healthcare IT service provider. Unfortunately, little happened. Employees were too busy with operational fire-fighting and the initiatives they did start had hardly any relation to the company’s future and little coherence between them.

An important reason for this failure was that their vision was not clear and concrete enough for the employees to act upon. They were still unclear about what an IT service provider even was. Which customer problems would they solve? What kind of offerings needed to be developed? What capabilities would they need to develop? And which competencies?

As business leaders, we often think that it’s obvious to our teams what changes are needed in the business and why. After all, we spend a lot of time discussing challenges, priorities and ongoing initiatives. We typically have clear financial objectives for the next few years and other qualitative objectives like “being #1 choice of the customer”.

However, many of us do not provide a clear and compelling picture of where we should be heading and why, or how our organisation should look in a couple of years. So, what is missing?

• There are too few emotional triggers to spur our teams to be highly passionate and motivated.
• Our teams lack insight into which initiatives make sense and how they can contribute. The quality and quantity of the initiatives is far from optimal and there is a lack of coherence between them.
• Our staff have too many reasons to fear the downside of upcoming changes, or at least be uncertain about them. This pushes people into a defensive mode, which is destructive for change and innovation.

The solution: Establish a clear and compelling direction to accelerate change

Our research clearly shows that winning and dynamic manufacturers have declared a clear and compelling direction which results in high momentum for continuous, easy change from the inside.

This makes them more successful today and in the future. Ideally, this direction consists of:

 

• A meaningful mission
• A bold and inspiring strategic intent
• A concrete picture of the future state of the business

Engage your people with a meaningful mission

A compelling and meaningful mission expresses passion for a cause and has the best of intentions. It declares how you will be relevant for society or your target customers and connects to heart and mind. It also gives a clear indication of how to evolve the business and why. An important benefit of a meaningful mission is that all employees become highly engaged and passionate – they are proud to be part of such an organisation.

Tesla’s original mission was to “accelerate the world’s transition to sustainable transport by bringing compelling mass market electric cars to market as soon as possible”. Although you could argue whether “sustainable energy” is unique and differentiating for Tesla, it does trigger a lot of passion and eagerness in their staff. It also gives strong direction to their strategy, initiatives and focus. It shouts that Tesla will lead the automotive industry of the future with new technology, infrastructure and products on a global scale. Tesla will be visible, dominant and disruptive.

Rally your people with a bold objective 

Most leading companies have a bold objective or strategic intent which rallies their employees. They touch emotions, pride and potentially even the sense of doing right. And they drive focus on initiatives to innovate the business.

Well known examples are:

 

• Amazon: Every book ever printed, in any language, all available in less than 60 seconds.
• Google: Organize the world’s information and make it universally accessible and useful.
• Microsoft: “A computer on every desk and in every home.”
• Twitter: To become “the pulse of the planet”.
• Nike: “Beat Adidas”
• •Even though he’s not a company, John F. Kennedy: “Land a man on the moon by the end of this decade and return him safely”.

Some important characteristics of a good strategic intent are:

 

• They are externally oriented,
• They are hard to achieve, but not impossible,
• They trigger the imagination of employees (and shareholders),
• They define a “bigger game”, in which there is a prize to win

It will require hard work and moving away from comfort zones. Every step the team takes closer to the objective will give them a sense of pride, of belonging and will motivate them to take the next steps.

Focus and coherence with a picture of future state

Too often our vision of how the future business will look is too high level and vague for most of our staff.

They remain unclear about where the company is heading. How will it look in 5 years? Which clients will they be targeting? What are those customers’ needs? What kind of solutions will they be offering? How will they fit in, if at all?

Imagine the amount of momentum for ongoing change and innovation your teams could have, if they all shared the same concrete picture of the company’s future.

Including:

 

• The key industry trends, such as technology, impact on clients, the changing power of competitors, and potential new entrants.
• Changing needs of clients and other market segments that have not yet been served.
• Shifts in key stakeholders, of the client organisations they’ll be working with.
• Change of value propositions and offerings.
• Change of organisational capabilities and people competencies.
• Change of required technology.

Benefits

Winning companies benefit by having a clear and compelling direction in place. They have created the foundation for proud, engaged and committed employees who want to walk the extra mile, get out of their comfort zone and make innovation happen.

Their employees develop the right initiatives and understand the initiatives of others. This is crucial for coherency and alignment in the organisation without needing to dictate ideas and decisions from the top.

And finally, their employees have much less fear and uncertainty about the personal impact on them of upcoming changes, and therefore are much more open to drive change.

The Essence

If you assume this is about better telling your staff what to do and getting them on board, you have already missed the point: It is about creating a constructive and forward-thinking environment where your staff take the right initiatives and bring them to practice. Changes come from the ‘bottom-up’. I believe this is the power of combining business innovation on one hand, and talent development and empowerment on the other.

Are you interested in learning more about these 4 winning habits, having access to practical examples, and understanding how to implement them? Then Follow our next articles over the coming months and join us for one of our half-day Boardroom Sessions in Birmingham,

Manchester, Germany or the Netherlands. Reserve your seat @ http://fs-ne.ws/tvds30eenO6

 

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In the Big Discussion we will take one topic, bring together three leading experts on that topic and put four key questions to them to help us better understand its potential impact on the field service sector...

This issue our topic is the relationship between Service and Sales and our experts are Nick Frank of Si2 Partners, Michael Blumberg of Blumberg Advisory Group and Jim Baston of BBA Consulting

In the first instalment of this topic our experts answered the question "It is often said service technicians are the greatest salesmen – what are your views on this?" the second time out the question was Is there a difference between selling service and selling products? and last time around the answered the question Is incentivising service technicians to “sell” opening up new revenue streams or putting their “trusted advisor” status at risk?

Now for the final question of this important topic...

 

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What impact does the rising uptake in outcome based services have on the relationship between service and sales?

 

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Selling outcome based services requires greater collaboration and communication between service and sales than ever before. Service needs to understand and support the solution that the sales force crafts for the customer.

The sales force needs to have a clear understanding of the capabilities of the service team to craft the right solution.

Basically, service and sales must work as a team. In addition, the service organisation must be proficient at sales so they can add-on additional services to better meet outcomes as these opportunities present themselves.

 

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Outcome based services require one of the most sophisticated sales processes as the deliverable is a business outcome, not a well-defined ‘thing’.

Hence the whole process of defining the outcome and configuring a profitable delivery model is very different from a transactional product based sales process. The implications of switching to outcome based business models will challenge almost every aspect of the organisation in terms of mind-set & culture, skills & capabilities and processes & tools.

As the service organisation is such an integral part of the commercial success, it must be closely involved in the sales process from two perspectives. The first is to ensure that within the co-creation process that a delivery model is developed which profitably dovetails into the customer’s operations.

Secondly and probably more importantly, during the sales/co-creation process , to have people within the discussion that convinces the customer that you are the right business partner to deliver an outcome based contract.

 

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In outcome based services, the service company generally is providing an agreed to outcome for a set fee and therefore takes the risk for delivering on their promise at a cost that they can profit from.

Any recommendations for improvements in delivering on that promise more effectively will typically benefit the service company rather than the customer. In these cases, therefore, the results of the field service professional’s efforts are internally focused.

Sales, however, remains externally focused. Their role is to bring more opportunities to the service organisation.

Therefore, the relationship between service and sales can be summarised as follows: In outcome based services, sales is responsible for generating the top line revenue by increasing the number of contracts whereas service is responsible for enhancing the profits on that revenue by improving their efficiency at delivering on those contracts.

 

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Nick Frank & Dag Gronevik of Si2 Partners explore the importance of face to face contact in management and ask if more business leaders should consider moving away from traditional training methodologies towards more free-flowing, dialogue based means of communication within their teams...

Winston Churchill stated ‘Meeting jaw to jaw is better than war’ This great leader understood that people can be influenced in two ways: either their minds have been opened or their heart broken. Opening minds requires talk, exchange of views and reflection. The ‘fear’ alternative of forcing conformity through hierarchies is in the long term destructive.

As a leader, what’s your style? Jaw Jaw or War War?

In today’s world this is a serious issue, as business leaders struggle to keep up with the technology whirlwind that is engulfing every aspect of our lives.

Leaders need to figure out how they adapt to the changing environment around them and in particular how their organisations and people can evolve.

Traditionalists tell their people they must change, offering incentives, assuming that people know exactly what is expected of them. Most people recognise that in world of the millennial and the internet, this approach is becoming less effective. Human beings are a contrary lot and cannot be told how to THINK. But how they THINK can be influenced by what we SAY and what we DO.

As Churchill knew, the way to change is to talk without fear of conflict.

In our own experience as business leaders, we have always placed a strong focus on communication, and in particular on meeting our people eye-ball to eye-ball. In hindsight the easy part is to meet, but how to turn this into true engagement?

In management speak, leaders turn to techniques such as ‘Off-Site’ meetings, ‘work shops’ or 1 on 1’s.

However, having worked as business leaders ourselves and now providing expert support to others, it is clear that to be successful, leaders must transfer control and responsibility to the team to find the solution for themselves.

 

Bluntly put, it means stop using PowerPoint material and similar to control direction (& remember details) and instead, start to think on your feet to develop free flowing yet structured debates. This is an approach many business leaders do not feel comfortable with, but it is critical if you want to engage people to change.

We call this slightly chaotic yet structured approach to group problem solving the ‘Boot Camp’. It is where a cross section of different individuals come together as a team to solve complex problems where the solution is not clear to all. It’s not meant to be a comfortable cosy environment, but one where everyone is challenged to find solutions under time pressure.

But how to achieve this outcome? There are at least five key areas to focus on:

[ordered_list style="decimal"]

1. Problem Definition and Outcomes: It may sound an obvious starting point, but clearly defining the problem, the business context and the expected outcome, is key to bringing smart people together to solve problems. In our experience don’t be afraid to take your time in this process, as it is the start of aligning your teams thinking and language behind a common challenge. Be very grounded in your approach so people find it relevant to their roles. A good way to think about the context is to define what is working in the business, and then what is not working. Break the problem into 4-5 related discussions about real tangible issues your team faces. In our experiences, the more tangible you make the discussion through use cases and everyday examples, the more you will channel the energy of your team towards the outcome you desire.
2. Generate Energy and Curiosity: This is where preparation really pays off. From the way you prime and prepare the participants, to the environment in which you work, all will help you engage interest and action. Most important is to remember that energy comes from people who talk and are active in the debate. Avoid lengthy detailed power points, in fact try to do without. Not using supporting material requires far more detailed preparation, but the result is an environment where the conversation, discussion and decision making, seem to effortlessly move towards your objectives.

3. Debate and Create: It’s when people are talking that they can create solutions together. Plan out the types of discussions and debate, which will move the participants towards your goal. Create opportunities where people can engage with each other. Bring in external perspectives to challenge thinking and the current paradigm. Invite input from customers or suppliers to build focus and urgency. Above all do not be afraid to alter the agenda as you move through the process.

   As long as you have a very clear view on the outcomes you expect, you can flex the conversation to suit the circumstances and the energy of the participants.

4.  Create Allies: It’s important to remember that building relationships will magnify the leaders impact on the business. Avoid the ‘yes, but’ syndrome and emphasise the positive. It is the alliances and relationships that are built that are critical to your success. No one person can change an organisation. Getting to the key influencers through creating a critical mass of thinking is vital.

5. Articulate Results: Great conversation will come to little, unless it is captured and channelled into actions. It is extremely powerful when the participants articulate the outcomes and present to senior management team. This brings focus to the collaboration, as well as a bit of edge to your event.[/ordered_list]

If you would like to know more about the Boot Camp process that helps you create engagement and commitment to tough business problems, please contact Nick Frank or Dag Gronevik through info@Si2partners.com

 

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In the Big Discussion we will take one topic, bring together three leading experts on that topic and put four key questions to them to help us better understand its potential impact on the field service sector...

This issue our topic is the relationship between Service and Sales and our experts are Nick Frank of Si2 Partners, Michael Blumberg of Blumberg Advisory Group and Jim Baston of BBA Consulting

In the first instalment of this topic our experts answered the question "It is often said service technicians are the greatest salesmen – what are your views on this?" and the second time out the question was Is there a difference between selling service and selling products?

and now onto the third question of the topic...

 

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Is incentivising service technicians to “sell” opening up new revenue streams or putting their “trusted advisor” status at risk?

 

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Technicians represent a ready and available channel for generating incremental service revenues.

After all, they are at the customer site almost every day.

However, service technicians may become over-zealous or pushy about selling, and jeopardise their “trusted advice” status, if they lack proper sales training or if their performance measurement system and company culture are too focused on sales.

 

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A sales professional is a very different person from the service expert in terms of how they think and what motivates them. The service person is more motivated by relationship and recognition of their skills and it is this that allows them to develop the trust-based relationships that make them so special from a commercial perspective.

Companies should use this relationship to increase value, but be aware that as soon as the balance swings from supporting customer success to earning a sales commission, this trust immediately evaporates. To be successful, the question of incentives is critical yet very contextual to the business environment and company culture. Rarely is sales commission the answer as service peoples are not typically sales animals.

Usually having incentives through management objectives or even reward and recognition will encourage the desired behaviours without risking the Trusted Advisor relationship

 

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I am very wary about incentivising service professionals for making recommendations. When we provide commissions or other forms of compensation for selling services to the customer, it sends a message that promoting a service to the customer is an act outside of their normal job.

We are asking them to provide “something extra”. It’s the “while you are there” approach. If making recommendations that will benefit the customer are perceived as an “add on” activity, then this suggests that service professionals can opt out. As I indicated above, I see promoting services as a service itself and therefore as much a part of the job as everything else that they do. Incentives can also encourage the field service professional to make recommendations for the wrong reasons (to get the commission as opposed to acting in the best interests of the customer).

Evidence also suggests that incentivising can actually discourage the type of behaviour it was intended to boost. Daniel Pink’s book Drive – The Surprising Truth About What Motivates Us (New York: Riverhead Books, 2009), provides a wonderful and often counter intuitive account of the impact of extrinsic rewards on employee performance.

Finally, what if the customer asks? What does the field service professional tell their customer if asked if they are getting compensated for make the recommendation? The customer may feel uncomfortable if the technician answers yes. How would you feel if you found out that your auto mechanic was commissioned on all parts sold?

 

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Look out for the final part of this series when we ask our panel "What impact does the rising uptake in outcome based services have on the relationship between service and sales?"

 

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In the Big Discussion we will take one topic, bring together three leading experts on that topic and put four key questions to them to help us better understand its potential impact on the field service sector...

This issue our topic is the relationship between Service and Sales and our experts are Nick Frank of Si2 Partners, Michael Blumberg of Blumberg Advisory Group and Jim Baston of BBA Consulting

In the first instalment of this topic our experts answered the question "It is often said service technicians are the greatest salesmen – what are your views on this?"

and now onto the second question of the topic...

 

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Is there a difference between selling service and selling products?

 

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Yes, there is an enormous difference.

Selling products requires the salesperson to focus on the form, fit, and function of the product and how it meets the customer’s needs. Selling products is about selling the tangible.

Selling services requires the salesperson to focus on how the service can help the customer solve a problem, improve their situation, or achieve a better outcome.

More importantly, it is about selling the intangible.

 

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In general yes, but not always.

If a service is very tightly defined in terms of the value proposition and delivery, then it can follow a very similar feature/benefit selling process of a product. In other words selling against a tightly defined customer specification. An example of a service sold in this way might be an extended warranty.

The difference comes when the customer need is less well defined. Here the selling process moves towards addressing a business problem and involves an element of co-creation between the customer and supplier.

The more co-creation that is required, the more business orientated the discussion becomes. Not only is the sales process very different in terms of the discussion and detail, but also the management level at which the decision maker sits tends to be more senior. So yes, the more co-creation is required, the greater the difference.

 

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In technical terms, there is a difference between selling service and selling products. You can touch and feel a product. You can see and hear it operate. You can see the craftsmanship in its features.

Selling a product often involves helping the customer see the benefits in the product’s attributes and purchase decisions rely on both the trust built by the seller and the product’s features and track record.

A service, on the other hand, may not necessarily be seen, felt or heard. Good service may even result in the absence of something (fewer unexpected outages, less downtime or fewer complaints for example). Selling a service is more about helping the customer see the benefits of the experience the service will create for them. Success in selling tangibles depends on the salesperson’s ability to help the customer envision the experience the service will provide. Purchase decisions for services tend to rely more heavily – if not exclusively – on the customer’s trust of the seller.

In practical terms I don’t think that this difference is very important when a field service professional makes a recommendation as a trusted advisor. In most cases the field service professional has high levels of trust from both a personal and a professional perspective. The approaches that he or she uses to justify the recommendation will be the same whether product or service.

 

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Look out for the next part of this series when we ask our panel "Is incentivising service technicians to 'sell' opening up new revenue streams or putting their “trusted advisor” status at risk?

 

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In the Big Discussion we will take one topic, bring together three leading experts on that topic and put four key questions to them to help us better understand its potential impact on the field service sector...

This issue our topic is the relationship between Service and Sales and our experts are Nick Frank of Si2 Partners, Michael Blumberg of Blumberg Advisory Group and Jim Baston of BBA Consulting

So with three fantastic experts lined up lets dive straight into the first question of the series...

 

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It is often said service technicians are the greatest salesmen – what are your views on this?

 

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Service technicians bring a perspective and outlook that makes them great at sales in certain situations. For example, where the sale solves a critical problem for the customer.

Basically, customers appreciate the fact that service technicians are problem solvers and place the customer’s need first. As a result, the service technician has trust and credibility with the customer.

In turn, the customer is highly likely to act on the service technician’s recommendations. Sometimes, the only way a technician can solve the customer’s problem is by having them buy something new like a spare part, new piece of equipment, or value-added service offering.

In these situations, the sale is not viewed as a sale at all by the customer but merely as an attempt by the technician to solve the customer’s problem.

 

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To believe service technicians are the greatest salesmen is to misunderstand the true skills of sales professionals. These are people who have the skills, mind-set and drive required to identify and close new customer opportunities.

It is very different from the more nurturing and customer focused individuals usually found in field service. That said, selling is a team effort and many people are involved in to the GoTo market process. In some respect everyone sells the company and the service technician has an important a role as anyone else. Through being the person who sees the customer more than pretty much anyone else in the organisation, they are ideally positioned to advise the customer on services that can improve value, or identify new opportunities.

But playing an active role in the sales process should not be confused with the sales professional who is accountable for closing deals.

 

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I guess it depends on your definition of “salesperson”. If you mean the ability to recognise opportunities and be successful in helping the customer make a decision to purchase, then this statement is true.

Field service professionals are in a unique position. They understand the technology and where it is going. They know the equipment the customer has and what they are trying to achieve. They have proximity to the customer and generally high levels of trust.

However, I have concerns over the term “salespeople” when it comes to field service professionals.

I take the perspective that when a field service professional brings a product or service that will benefit the customer in some way to that customer’s attention, then that is a service rather than a sale. It’s part of the value that the field service professional brings. It is every bit as important as that field service professional’s ability to troubleshoot and repair.

Those field service professionals that recognise this are usually very successful because they see their role as helping the customer and the customer has confidence in the validity of their recommendations and trust in their motives.

 

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Look out for the next part of this series when we ask our panel "Is there a difference between selling service and selling products?"

 

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Coen Jeukens, CSO, D-Essence, explores the developing world of Products as a Service and the increasing drive both from customer pull and vendor push towards outcome based business and service models...

When we need light, we buy a bulb. When we need a hole, we buy a drill. It is so engrained in our thinking to own products whilst we actually need the outcome. More and more we see upstart businesses cater to this “new” demand. They sell a product as a service (PAAS). How are you preparing your organisation to sell your product as a service?

We move water 

At the After:Market 2016 event in Wiesbaden a German manufacturer of pumps introduced his company with the words “we move water”.

With those simple words he set the stage for his PAAS business model. Selling the pump is not his goal; it is a means to start an outcome-based discussion with his client.

In doing so he enters in a conversation where he truly understands what drives his customer. Because the conversation goes beyond the pump, he has created a new business model where he earns money with moving water.

The additional benefit is for the environment. Instead of designing your product for repeat sales you will wind down a track where you deliver outcome at a minimal material/ energy footprint.

Transforming legacy businesses is possible 

Understanding the effort it takes to transform a legacy business, University of Cambridge professor Andy Neely asked the panel of the Field Service Summit 2017 in Warwick what successful transformation examples should encourage others to follow suit. Both Boeing and Philips demonstrate you can have best of both worlds.

They serve customers in a hybrid model.

 

Via one business unit customers can buy the product in a legacy CAPEX/ OPEX mode. Via another business unit customers can buy the output/ outcome of the product. Depending on his propensity, a customer can choose between a  jet engine and a “power by the hour” propulsion solution or a bulb and a “pay per Lux” illumination solution.

Why should you explore PAAS

It may scare corporate executives and sound very blunt but exploring PAAS is a “do or die” message.

If you don’t do it, somebody else will. At best it is your current competition and you can see it coming. For the worst, you will face competition from newcomers starting with a clean slate.

Record labels were so focussed on holding to their CD product revenue stream and deliberated so long on legal download options, they were decimated by services like Spotify.

How do you assess your organisation? Products are meant to deliver a solution.

Using a more positive approach: the more you understand how the outcome of your products generates value to your customer the more you establish yourself as long term partner in both a profitable and sustainable way.

Where to start

In the example of Philips Lighting, a small team beyond the radar of product based business model executives designed the “pay per Lux” solution.

Upon demonstrated success with a launching customer the new PAAS solution was put in the spotlight.

Setting up a sandbox environment with servitization minded people is essential, as you will be in for a paradigm shift:

[unordered_list style="bullet"]

• When you sell Outcome there is no title passage of the Product. This means the product remains on your balance sheet.
• As supplier you will be responsible for and remain in control of all CAPEX and OPEX cost components.
• You need to understand your customer to define a “pay per use” earnings model.[/unordered_list]

Understanding cost

In the Philips Lighting dialogue the customer asks for a Design, Build, Finance, Maintain and Operate solution.

This DBFMO framework (in the image above) can be used to understand total cost of ownership. Design and Build lead to the commissioning of a Product.

Maintaining the Product safeguards the Output of the Product. Operating the Output provides an Outcome. The Outcome generates Value. Maintain and Operate are stated in terms of OPEX. When adding Finance services to your portfolio, you can transpose Design and Build CAPEX into OPEX too.

Design-for-Operation

With PAAS the total cost of ownership shifts from customer to supplier. As a result the supplier is incentivised to throw in all his expertise to continuously optimise product, output and outcome.

In order to make pay per use profitable all cost elements of DBFMO need to be designed in unison. Call it design-for-operate. Where design-for-service supplements design-for-manufacturing, design-for-operate augments the former two.

 

Remember: business models based on breaking products should not be accepted.

Pay per use

Where design-for-operate drives towards minimising waste and cost, engineering the right pay per use model determines your revenue. This is where entrepreneurship and partnership kicks in.

Pay per use is a bi-directional handshake between supplier and customer that takes it to the next level compared to a typical sales-purchasing relationship.

Instead of a cost/ revenue conversation about products and output your dialogue will evolve into an outcome based profit/ value handshake.

Your customer will help you define the pay per use drivers. If you really understand his business and you are confident in the capabilities of your own organisation to generate outcome that makes your customer succeed, your customer will be inclined to enter into a partnership to make you succeed as well. As a result de pay per use drivers will be fair, sustainable and durable to both parties.

Don’t own, enjoy

Ownership comes with responsibilities. Why should a customer have to carry the risk whilst the supplier is the expert in both understanding and influencing risk. A PAAS model is the ultimate form of “back to core business”. The supplier managed DBFMO, the customer uses the outcome to generate value.

In return the customer pays for use.

Does pay per use really work for both parties or do words like partnership, fair and sustainable sound altruistic? The IT industry does give us insight into what is to come. Because SAAS solutions are available for consumers as well, first hand experience is changing our perceptions, attitude and decision-making regarding cost and value.

 

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“Philips Lighting – a PAAS dialogue – “pay per Lux”*

Customer: “I need light in my office.”
Supplier: “How many bulbs do you need?”
Customer: “I don’t know. You are the expert. What do you advise?”
Supplier: “Our proposal contains 100 bulbs of model abc. This is an investment of xyz.”
Customer: “I want the energy bill of the bulbs to be included in your proposal.”
Supplier: “Our renewed proposal contains 90 bulbs of our newest energy efficient model.”
Customer: “I want you to design, build, finance, maintain and operate the solution.”
Supplier: “We have developed a special lighting solution for you. Low on energy, sustainable in materials usage and easy to (de)install. We name it ‘pay per Lux’.”

 

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