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Nick Frank, Founding Partner with Si2 Partners explains why profitable long term growth comes from having the right people in the right place at the right time and why technology although important, usually plays a secondary role...

In todays fast moving world this might be an “off- message” statement, but the truth is that it is still people who deliver profits. As a result creating ‘High Performance Teams’ or what some call the ‘Self Learning’ organisation has become a priority in staying competitive within the new digital economy.

Sustainable improvement requires a commitment to learning.

In successful organisations, this is embedded in the DNA of its people which drives themselves forward to deliver results that makes the real difference.

How does your team measure up? Perhaps a good place to start is to review how your teams manage problems and the language they use. Most technically orientated organisations pride themselves on solving problems.

Ironically, too strong an emphasis on problem solving does not necessarily drive the customer-orientated behaviours we are looking for. Problems are in fact very static, with a focus on past events.

If organisations are not careful, problems become a blame game, concentrating on why things cannot be done. ‘Yes but……’ is a phrase that become endemic within the organisations way of doing things. However, problems are also the life-blood of innovation, in that they can create a focal point for organisations to rally around.

 

The resulting solutions are often focused on customers, are dynamic in nature and focused on the future. The language of solutions concentrates on ‘Yes and…’, seeking possibilities and opportunities. It is in fact solution thinking that really drives the organisation forward in creating competitive advantage.

A self learning organisation is one that has the rigour to identify and quantify problems, yet the discipline to shift to solution thinking, develop forward momentum and achieve results.

This problem-solution-problem-solution learning loop sounds fairly straight forward, but actually requires a level of management maturity that is often surprisingly missing from many organisations.

As Winston Churchill pointed out, learning is all about engagement: “Where my reason, imagination or interest were not engaged, I would not or could not learn”

So how do we go about creating a culture of ‘self learning’, which is deeply embedded in the corporate DNA. In most businesses, focussing on two important aspects of organisations can really make a difference. The first is a strong vision of what the company is all about, why it is there, what it is trying to achieve for its customers and how.

More important than the vision statement’s words, is the way that it is communicated.

Successful communication comes from:

1. Targeting your message: For example Field Service Techs have very different drivers from their Product Sales colleagues.
2. Augmenting logical reasoning with an emotional appeal that inspires employees to do things differently.

The second aspect is Values.

A company’s values are the core of its culture. While a vision articulates a company’s purpose, values offer a set of guidelines on the behaviours and mindsets needed to achieve that vision. While many companies find their values revolve around a few simple topics (employees, clients, professionalism), the originality of those values is less important than their authenticity.

Developing a culture that is aligned to values and vision is what provides people with a purpose, and this is the key to facilitating innovation.

Organisations that successfully create a self-learning environment typically start to see:

• Problem being solved systematically
• Experimentation with new approaches to work
• Learning from other companies and a focus on customers solutions
• Greater knowledge transfer through out the organisation
• An acceptance that change is normal and to be embraced

To get the ball rolling does not necessarily require large complex change projects. For example at Amazon, every person who wants to pitch a new idea to the management, is asked to describe it as a press release written on the day that the idea is launched. This press release, together with a list of ‘Frequently Asked Questions’ is what Amazon executives use to judge whether there is real value in the innovation.

This relatively simple idea forces everyone to focus on outcomes and solutions.

And if leaders ‘do what they say!’, then these practices and thinking, can become part of an organisations DNA.

 

So if you sense that your teams are struggling to execute on new opportunities that are arising in this digital age, or are becoming to focused on problems and falling into the blame game, then perhaps it is time to think about how you can evolve the dynamics of your organisation.

Using a 3rd party to help leaders gain new perspectives can be useful, because people listen more to a new voice. However, at the end of the day it is the Leadership at all levels in the organisation who by taking reasonably simple steps can set expectations, ‘Walk the Talk!’ and move the organisation on.

Nick can be contacted on nick.frank@Si2partners.com. Si2 ON-Demand is a unique advisory and support service that enables top performing leaders to solve problems and get things done, quickly, easily and cost effectively.

 

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The key to digital transformation for field service organisations lies in people and not technology writes Nick Frank of Si2 Partners...

“The rate of increase of industrial devices being connected to the internet is up 25% per year, but customers don’t really appreciate how the capabilities and benefits of the IoT are relevant to their business’

So says Dave Hammond, Product Manager at MAC Solutions. And he should know, as he sells and manages the market leading eWON router, which enables industrial equipment to be accessed securely and remotely, across the Internet. For business leaders, his ‘grass routes’ observations are far more insightful into the challenges of monetising data, then the many articles routinely churned out on the subject.

It highlights the importance of mind-set above all else, which is all about getting back to management basics, a point that many commentators have lost sight of. What becomes clear from talking to people like Dave is that servitization, industrie 4.0 and Digital economy have little perceived relevance to SME businesses at the moment. Their focus is on better meeting the needs of their customers but mainly reducing costs. Many are enabling their equipment for remote connectivity with a business case solely based on savings and cost reduction.

 

They can easily imagine and so justify the investment based on a reduction in costly service visits through remote diagnosis, especially during the warranty period, where they bear 100% of the cost. With the number of devices being put on-line booming, everything sounds pretty good with the market. But Dave and his colleagues at MAC are concerned at the lack of ‘market understanding’ from the UK SME’s they talk to.

In their ‘Connectivity Roadmap’ most customers are stuck at level 2 - ‘Get Connected’, which is all about cost! They struggle to justify moving to the next phase of delivering proactive service revenues and ultimately transforming their business.

 

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So what are the underlying causes of this stagnation and an inability to step up to the challenge?

Part of the reason lies in the lack of maturity of the tool sets being developed by IoT providers such as GE, Microsoft and PTC. In the last 3 years, huge investments have brought these tools into the realms of reality, but they are still relatively cumbersome to integrate into the business processes.

Despite what you might read, it is only larger businesses that have the resources to invest in developing their own bespoke infrastructure; and even then, most of the tangible gains remain in the area of cost reduction.

For many in the industry, another challenge is around culture. Most quarters of industry have struggled to really imagine what the technology can do for their business. They have become trapped in product-centric thinking, rather than deeply analysing where the value is delivered within their customer and industry value chains.

The good news is that the business case to ‘Get Connected’ is so inequitably clear, that at least many engineers have been encouraged to pilot the technology and learn for themselves what it can do.

A second challenge is the conservative nature of many industrial businesses in adapting to fundamental change. Together these represent a significant mind-set issue.

The message for many businesses is that to maximise their return on technology investment, they would do well to challenge their current culture to become more outward orientated and service focused.

 

This means not only better understanding customers’ needs and their immediate problem.
But moving deeper into how to harness their inherent know-how and technology to help their customers make money. By moving emphasis away from technology towards outcomes and operational excellence, many businesses will be able to deliver more value and hence profitability.

The problem is that this is a ‘back-to-basics’ approach, based on common sense and, as we all know, common sense is one of the hardest elements of business upon which to act. Leaders can start by encouraging an ‘outside-in’ approach, taking a long hard look at the value they add to their customers and how they influence the industry value chain.

Then together with the experiences they gain in understanding the power of these digital technologies, they will develop the insight and confidence to turn data into profits.

So, if you sense your initiatives in developing these new capabilities are slowing down or not meeting your expectations, perhaps there are three basic challenges for you to review...

1. Do you have the right level of insight to use your know how to make your customer more profitable?
2. Do you know how to use information to make your operations more cost effective?
3. Are your people encouraged to explore new ideas and have an environment and process in which innovative ideas can be turned into reality?

 

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Nick can be contacted on nick.frank@Si2partners.com Si2 ON-Demand is a unique advisory and support service that enables top performing leaders to solve problems and get things done, quickly, easily and cost effectively.

 

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Nick Frank, founding partner at Si2 Partners outlines why the importance of people and culture cannot be overlooked when looking to instil a culture of continuous improvement and innovation...

The mistake many leaders in industry make, is to believe that defining a clear vision and strategy with ruthless follow up is the only recipe for success. This may indeed initiate change, but rarely do the results last. Often3-4 years later, the business will be addressing the very same issues, but under a new management team.

In todays increasingly digitized world this challenge is particularly relevant for leaders of service businesses, who feel they must react to new technology to avoid being left behind by their competitors. Maximizing the potential of these capabilities does not come from the technology or even adopting innovation processes, it must start with our own people.

The problem is that in their urgency to achieve results, many leaders breeze over the communication, incentives and cultural engagement necessary to achieve the required emotional buy-in from employees.

In their minds, treating change as a rational process makes it easier to determine key priorities, identify pitfalls and plot a roadmap with a beginning and end. But many initiatives fail, because employees and clients do not act as rationally as leaders assume. In fact people have been shown to be very unpredictable, making this part of change management more art than science.

 

Most managers will tell you, ensuring your people are engaged in what they are doing is the very lifeblood of a business. Some may use use fear, which gets things moving, but is only ever effective in the short term and does damage in the long term. Most agree that people have to be basically happy to sustain change over an extended time period. This ‘happiness’ is essentially influenced by the culture of the organisation, which evolves from the values displayed by leaders, their vision and the backing of stakeholders who own the business.

This is not new to experienced managers, yet so many focus on the well defined processes of moving from strategy to operational excellence. On reflection, profitable long-term profits are really generated by creating a culture that engages people to deliver excellent products or services that create customer value. This in turn drives customer loyalty, providing the opportunity to expand margins and increase profitability. This simple truth was re-confirmed to me in a recent workshop discussion, which included managers from Federal Express. They commented. ‘Our values drive us to start with our people and that the profits will come, never the other way round’

In todays world, where technology is rapidly changing the face of Field Service, many leaders would do well to focus more on the mind-set of their people that allows them to express themselves and have the confidence to try new ideas even if there is a risk of failure.

How can leaders inspire their teams to innovate and succeed?

We have seen successful leaders demonstrate five key attributes in creating a dynamic self learning organisation:

• Powerful story telling: One of the most powerful concepts leaders can use to turn dry strategy into an engaging vision is through story telling. Since the dawn of time, people have been captivated by stories. The role of leaders is to tell the story that inspires all the stakeholders in the ecosystem, not only employees, but also clients and shareholders.
• Walk the talk: Telling the story is not enough. Leaders have to live it and live to the values they espouse. Commitment is key to credibility!
• Common language: If story telling is the key to inspiration, creating a common language is the key to longevity. Language becomes a habit. It influences how people solve problems whether that be inside the organisation, or interacting with customers and partners. Creating a common language and view of the business is much more than words. It is creating a mind-set that influences how we articulate ourselves and conduct our everyday business.
• Relentless follow up: Changing culture is not an overnight process. It is often said that to integrate a new habit, one must repeat an activity 21 times. It is no different for developing culture within an organisation.
• Solution focused mindset: Discovering problems should be encouraged as they help bring clarity to our. However it is important not to dwell on the problem and who to blame. Solutions drive organisations forward!
• Think how many times something goes wrong in the business, which leads to significant shift in approach by senior management. To turn problems into opportunities, leaders need to be committed to creating self learning solution orientated organisations around them.

The message is not to wait until your CEO starts to talk about innovative self learning organisations. You can start ‘now’ developing a successful mind-set first for yourself and then your teams, that will allow you to take advantage of the amazing opportunities offered by the new technology’s around us.

Nick can be contacted on nick.frank@Si2partners.com. Si2 ON-Demand is a unique advisory and support service that enables top performing leaders to solve problems and get things done, quickly, easily and cost effectively.

 

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Nick Frank, Managing Partner with Si2 Partners, gives us a back of the envelope exercise that could yield dramatic improvements to our customer understanding...

For the vast majority of service managers and leaders, customer experience is something intuitive, as most effective professionals already have a good feel for what is important to their customers.

However, as the pace of technology commoditisation increases, so customer experience is becoming an important differentiator to creating loyalty and revenue growth. Perhaps its time to add framework to intuition, so that service leaders can communicate their experiences to their teams more effectively!

One very easy and often overlooked tool for gaining insight into how clients feel about our service is the Customer Journey Map.

It’s a very simple idea: a diagram that illustrates the steps your customers go through in engaging with your company, whether it be a product, an online experience, retail, or a service, or any combination.

It can be a back of an envelop exercise lasting 30 minutes, or a full working day working with a cross functional teams. Whichever approach you choose, it will undoubtedly provide you with insight into your customers feelings about the service they receive from you, and where opportunities may arise to drive customer loyalty or new sales.

In its simplest form the journey usually has a timeline. For example this might be lifecycle of a field service call: Request, Schedule & Dispatch, Service, Invoice.

For each part of the lifecycle examine these four key elements from the customers perspective:

1. Activities and actions of the customer in that step. This includes all the touch-point interactions between the customer and organisation
2. The motivations for the customer going to the next step in the process, what they are feeling and why do they care? These emotions are key to improving the journey.
3. The Questions the customer is asking themselves: This might be details about the work to be done, the jargon you are using or looking for recommendations on how to avoid further failure.
4. What are the Barriers that stop them from moving to the next stage of their journey.

At the end of this this thinking process, you can then validate your thoughts with clients within a structure that is easy to communicate and talk about.In general there are three reasons why managers and service designers use the journey mapping tool:

1. To improve Customer Experience across an end-to end set of interactions. The Field Service Call example would be typical of this type of use.
2. Understand the Sales journey, the critical point of interaction which influence how the customer feels about us, and what sales opportunities might arise.
3. Design the User Experience for a particular part of the journey. This has become particularly relevant as more business ‘shift to the left’ and incorporate more self service into their processes. A detailed analysis through each touch point of the software such as a FAQ page then becomes critical to ensuring that customers have a good experience.

Journey maps originated in the Service Design community, which has brought a much more user centric approach than traditionally existed in the industrial world. In addition to these basic mapping concepts, they have created tools to enable better empathy with customers and their emotions.

One such tool you might consider are personas. This is a fictitious character that illustrates the needs, goals, thoughts, feelings, opinions, expectations and pain points of the user.

By defining a typical character, we can explore the journey through the eyes of the persona and how they might interact with the different channels they come across such as websites, apps, call centres or field service organisations.

More sophisticated journey maps will also examine ‘moments of truth’.

These are the critical interactions that leave a lasting impression and often occur at touch-points known to generate anxiety or frustration.

How do you go about developing a Journey Map? Here are six simple steps you can follow for developing your own Customer Journey maps:

1. Define your goals for the journey map(s)
2. Gather research and customer insight
3. Analysis and discussion with a cross functional team
4. Sketch the journey
5. Refine and digitise, especially if you want to use the map to communicate with your people
6. Share and use: make the journey map live in your organisation

If you would like to read more about customer journey mapping, you can find more practical advice at the Service in Industry Briefing blog

 

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Service Executives across the world should see Brexit as an opportunity for increasing their influence on companies growth plans writes Nick Frank, Managing Partner, Si2 Partners...

We believe Service Executives across the world should see Brexit as an opportunity for increasing their influence on companies growth plans.

Most economic commentators believe that the medium term growth prospects for the UK and even the global economy have been severely dented, but these strengthening headwinds should also act as a wake up call for industry.

The more visionary businesses have redoubled their efforts to innovate and many are introducing Service Thinking into their growth plans. While digitization of products enables new ways of thinking and captured the imagination of many, there is nothing like the threat of hardship to accelerate change!

This is why the recent launch a UK National Strategy for Engineering Services by Chris White MP, Co-Chair of the All-Party Parliamentary Manufacturing group is both timely and needed.

Although a UK initiative, it is is very relevant to all globally developed economies.

Chris White recognizes that: “The developing trend of ‘servitised manufacturing’ is a specific example of UK innovation that has allowed early adopters to develop successful differentiated offerings in the global market.”

He goes on to describe a sense of urgency, which is very relevant to today’s situation!

“The opportunity is one that we must seize. We need to better integrate capability development and innovation between manufacturing, engineering and technology, between engineering and business model innovation, and across sectors”

 

Policy makers recognise that within the context of a countries industrial strategy, many of the world’s leading companies have developed new service orientated business models in order to prosper.

Dave Benbow, Global Head of Engineering at Rolls-Royce PLC explains: “We have consistently delivered shareholder value through being market leaders in engineering services: ensuring that our engines are designed, manufactured and supported in-service to deliver power for our customer whenever required throughout their lifetime.”

But sustaining this success requires a back to back business philosophy with their supply base.

The fact of the matter is that mind-set change is not happening fast enough and needs to be accelerated!

To address this, a central theme to the National Strategy is the creation of an Industry Council to inspire UK companies to innovate new ways of delivering value through services.

The goal is to add 1.9% or £31.6bn to the UK economy. To put this in context this is more value added than the UK’s globally recognised legal industry. Industry leading companies will challenge their supply chain to reduce costs by 20% and increase asset availability by 20%: A 20/20 vision which they know has to be delivered to remain competitive.

As Managing Director at the global industrial services group Babcock recognises: “In numerous engineering and technology domains, we have found that by taking responsibility for ‘outputs’ – asset performance – we have been able to give our customers more value than the simple delivery of discrete products or programmes.”

This requires a massive shift in thinking, almost a re-invention of how we look at manufacturing and engineering. The new council will work in partnership with academia to develop skills and capability, from both a technology and business perspective.

It will interact with government to not only influence cross-industry thinking, but to flex it’s economic muscle to drive mind-set change in how the massive infrastructure projects such as the HS2 rail link will be engineered and delivered. It was after all Margret Thatcher in the 80’s who drove the Ministry of Defence to start the procurement of Outcome based availability contracts that has led to the UK’s commercial and academic leadership in this particular industry niche.

The strength of this approach is that the core team which includes Si2 Partners, is industry led.

Over 106 organisations were consulted in its development. The strategy is supported by some of the UK’s leading universities as well as key government departments such as the Ministry of Defence and the Department of Business, Innovation and Skills.

 

Indeed as when driving fundamental transformation, the importance of Industry, Academia and Government working together to effect sustainable change cannot be underestimated.

The message for service organisations all round the world is that your role in value creation is being recognised.

Indeed the major global industrial players are beginning to push the service orientated, outcome based business models deeper into their supply chains. To accelerate change, executives can seize the opportunity of economic uncertainty to show how services are one of the strategies that organisation can deploy to sustain long-term business growth.

You can download the UK National Strategy for Engineering services and the supporting market data that underpins the strategy at http://si2partners.com/uk-national-strategy-engineeringservices-now-available-download/.

If you would like to be involved in the next phase of this initiative, then you can sign up for more information from Cranfield’s Through-life Engineering Services Centre who have been a key player in facilitating this National approach.

 

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Nick Frank, Founding Partner at Si2, discusses the importance of understanding the metrics you are measuring to asses both internal performance and external perceptions of your service delivery in the eyes of your customers, and how the two are closely aligned...

Despite the bigger plan, do you find that the barrage of every day problems and deliverables makes it difficult to achieve your vision?

Most of us are driven by the everyday objectives of our boss, organisation and stakeholders.

The best performing leaders are not only able to deliver tactical results, they seem to be able to rise above the daily noise of business, see the bigger picture and figure out how those small wins can be turned from haphazard steps into a coordinated journey.

A key challenge is that ‘service’ is a business in its own right.

To be successful, all elements of a business have to be coordinated and managed from sales, to operations, finance to people as well as resources.

Put this in the context of a working business, where different levels of capability and maturity will exist in the organisation, and it can be pretty hard to figure out where your priorities lie. One way is for leaders to constantly see their challenges in relation to the whole business, so that they keep a perspective on how these elements fit together.

For example one could view a service business as requiring four essential elements to be successful:

[ordered_list style="decimal"]

1. Value: Do you deeply understand the experience and value outcomes you deliver to the customer within the industry value chain? Have you clearly defined your business model and how you will organise your business to deliver success?
2. Go To Market: Are you effective at creating and selling products, services and solutions that can access this value?
3. Service Delivery: Can your operations consistently and profitably deliver services to the expectations of the customer?
4. Plan / Leadership: Is there an explicit plan that is financially backed and supported by the organisations leadership?

[/ordered_list]

Although a pretty straightforward way of thinking, most managers can get caught up in the everyday activities and lose sight of the bigger picture. To illustrate this, lets look at one of today’s hot topics, ‘How to maximise the potential of the Internet of Things(IoT)?’

Many companies are still confused as to what the IoT means for them, especially as most commentators are also struggling to see how companies can move themselves forward in a practical pragmatic manner.

We see lots of ideas and case studies focused on what the potential could be, but few suggestions on how to achieve the goal.

Perhaps companies should first focus on the ‘Value’ that the IoT capability can bring to their customer’s value chain as well as their own bottom line.

This goes deeper than customer needs. It is important to understand what makes customers successful in terms of growth and profit within the industry value chain. Then it is possible to identify the expertise or data that can be generated to make a difference to the customer’s profitability.

As companies explore value, they will start to want to try ideas out, perhaps a few very low key pilot projects with customers, to open their minds up to new opportunities and potentially business models.

For a product company, this could really start to challenge their ‘Go-To’ market thinking. The fact that piloting propositions for services is an important part of their design process runs contrary to many product development processes.

The pilot process will also impact the ‘Service Delivery’ operations that must consistently and profitably deliver the value proposition.

In particular with digital technologies, having the software and analytical expertise in house to develop robust solutions is often a challenge to be overcome.

Increasingly it is necessary to work with partners or even as part of an inter-dependent ecosystem.

 

Lastly and most importantly, it is critical to have a ‘Plan’ that is backed by the leadership with a commitment to resources.

Probably the biggest frustration from managers driving change is that great ideas do not receive the resources they need due to short-term budgetary reasons.

What we see is that even in this relatively high level simplistic example, there are a complex interacting set of factors that leaders, as drivers of change, have to manage in parallel.

This complexity is a fact of life and will not go away.

This is why a factor that makes top performing managers successful, is having a perspective of how the daily grind fits into the big picture.

An even simpler way of cutting through the confusion of developing a services business can be summed up by a Steve Jobs quote:

‘You’ve got to start with Customer Experience and work back towards the technology, not the other way around'

 

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Want to know more? Nick can be contacted on nick.frank@Si2partners.com. Si2 On-Demand is a unique advisory and support service that enables top performing leaders to solve problems and get things done, as and when required

See our website at www.si2partners.com or gain insights on our blog ServiceInIndustry.com

 

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Nick Frank, Founding Partner at Si2 Partners, discusses the importance of understanding the metrics you are measuring to asses both internal performance and external perceptions of your service delivery in the eyes of your customers, and how the two are closely aligned...

As a Field Service manager, imagine having one Key Performance Indicator in your business that could predict how your customers will experience your equipment. One simple measure that your teams could use as a focus for their primary mission; to ensure customers remain satisfied, loyal and profitable. The limitations of most measures of customer satisfaction and loyalty are that they look in the rear view mirror, in that they ask questions after the fact. Far better to create a leading indicator, but how?

To get a better feel for customer satisfaction, many managers spend time in the field talking to customers and their teams.

Some will create rafts of measures to monitor and improve their operations. Their logic being a great performing team is more likely to have loyal customers. However there is a temptation to measure everything, which can start to confuse teams.

To overcome this managers bring focus through introducing key performance indicator’s (KPI’s) and dashboards to make it easier to see the issues and take action. More sophisticated businesses look towards the Balanced Score Card methodology in which a more holistic view is taken of the operation. They not only examine financial and processes efficiency, but also consider organisational capacity and customers in relation to their strategic goals.

 

This balanced approach is pretty sensible, but a can be too ‘management speak’ for the people at the sharp end of the business.

The key challenge is to create measures that drive the right behaviours and culture, and not ones where people start to find ways of working around. So it is not quite as simple as many make out. From my own experiences of managing a european service operation, I always felt it would be extremely beneficial to develop a simple measure that was:

1. Easily understood by everyone.
2. That gave us a forward view that a particular piece of equipment was potentially going to lead to severe customer irritation and dissatisfaction.

Our business was injection molding systems, and we knew that something was going wrong in the customer when the spare parts spend of the machine increased, fault reporting was high and the same problem re-occurred over a 12 month period. We created a ratio of these 3 indicators and found that at a machine level, we could start to rank problem systems and identify those that were likely to turn into an irate customer.

Our thinking was that not only could this be used by the local teams to bring focus to a specific customer issue, it also gave an indications of how well teams were managing their installed base. Unfortunately for a number of reasons we were unable to operationalize this strategy and I often wondered how effective it would have been.

Recently I heard Mark Noble, Customer Support Director at Inca speak at a Service Community meeting in the UK. Inca design and manufacture digital printers and gave themselves the goal to improve the equipment productivity and hence satisfaction of their customer base. For their technology, it is the performance of the print head that controls up to 256 ink delivery nozzles, which is critical to uptime.

By combining 3 key performance parameters of the machine, alarms, nozzle deviations and productivity, Inca could rank their equipment in terms of the likelihood to cause customer dissatisfaction. They created simple dashboards that clearly identified the priority machines to be working on.

This allowed them to identify faults before they became critical therefore reducing costs, enabling their customer support centre to identify issues more effectively, maintaining better print quality and improving the planning of engineer visits around customers production runs.

 

A second example of this approach is at Peak-Service, part of the Qiagen corporation, a €1Bn technical services supplier for medical, analytical and industrial equipment. As part of their transformation journey, they created a customer experience indicator which aggregated measures of machine utilisation, revisits, call response time and call completion time.

They used this to help focus their teams and people on the drivers of customer experience as they moved through a transformation programme. This gave them one measure, which was easy to action and could be used to demonstrate results.

This thinking shows that by using operational data that already exists in most businesses, it is possible to create leading measures that drive action. The analytical techniques are in fact relatively simple, it is more having the right mind-set to try a different approach which is the challenge.

As products become connected through the IoT, so the opportunities to gain greater insight into customer experience and satisfaction will expand. Some might call this predictive and others a big data opportunity, but the name is not important. The critical insight we gain from these examples is that these companies are applying their deep know-how of their equipment and customers business, to identify problems before they happen.

Fore-armed is fore-warned!

If you would like to enter into a deeper discussion on this topic and others, why not join other industry professionals at the Service In Industry blog.

 

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The field service industry is changing rapidly, Nick Frank, Managing Partner, Frank Partners looks at how we can benefit most from the rapidly developing tools and strategies becoming available...

If 2015 was the year that IoT & Analytics became mainstream business terminology, then perhaps in 2016 leaders will focus more on how to use these capabilities to gain competitive advantage and growth.

Although some serious use cases are now emerging from industrial companies, most CEO’s and directors I meet are still asking the question:

‘How do we develop the opportunity?’

Perhaps one reason that most companies are struggling with this question is that despite what business leaders say about being ‘customer focused’, the sad fact is that often they only concentrate on ‘customer needs’.

This is generally what the customer tells them about their requirements at the interface between the product and the customer; in other words quite superficial.

 

Customer insight goes much deeper and explores how customers and potentially their customer make money.

By applying Service Thinking, companies can understand where the profit pools and opportunities lie within the ecosystem of stakeholders that make up the Industry Supply Chain.

With this insight, they can develop product, services and technologies that can drive growth.

So as you ponder how to move forward in what are unsettling times, you might consider these six strategies to maximise the value of your businesses knowhow:

1. Understand the Value Iceberg

If you look at the total cost of offering an industrial solution, you will find that the product element only directly makes up between 5% and 30%.

It is a bit like an iceberg.

Above the waterline it is possible to clearly identify the costs that are directly associated with the product itself. Below the waterline there will be hidden costs associated with the solution. Some can be allocated to the production process such as maintenance, people raw material, energy, assembly, down time, warranty etc.

Moving deeper into the iceberg there are costs that can be allocated as ‘production overhead’ such as purchasing, logistics, engineering, quality, implementation support, legal compliance and management overhead. Here are also found costs that are associated with the lifecycle of the solution such as field & technical service, parts, account management and financing. Then in the depths there are far more intangible costs of risk & uncertainty that significantly influence the decision making process of managers.

This Value Iceberg concept applies to nearly all product and technology based businesses, but its composition is very specific to the industry and customer context. Understanding it can help answer the question; ‘Where do my customers capture value and how can we use our know-how to help them grow revenue and profit?’ The most profitable companies in the world know what is below the waterline and target these areas of value for their products and services.

2. Where and what influence does a business have on the industry value chain

Understanding where value is created in the industry supply chain can help companies capture profitable growth. This can be illustrated through two examples:

Selling further up the value chain:

There are many companies who appear to be a supplier of a commodity product, but realise that if they sell further up the industry value chain to the OEM or even the end customer, that they can design themselves into the product such that even though they are on the end of the supply chain, they are specified as the supplier and avoid price erosion.

Frequently component suppliers will offer Application Engineering Services that engage with the OEM design engineers in order to be specified on the production drawing.

Consolidating elements of the supply chain into a service:

Frequently one sees suppliers of commodity products changing their position in the industry chain by offering services that consolidate and replace some key elements. A good example would be providing logistics services.

Some companies will provide their products on a just-in-time basis to line-side, taking cost off the balance sheet and simplifying their customers internal logistics processes. Others will not only support their own products, but supply spare parts or even maintenance services for their competitors. Both services affect the profit pools within the industry chain.

3. Access value through the product

Having understood the ‘Value Iceberg’ and the industry chain, companies can design their product to target specific elements of hidden value under the waterline. For example, niche fastener manufacturers who can generate an EBITDA over 30% by focusing on saving assembly costs with their ‘simple’ fastening solutions.

Or the tyre manufacturer who understands that 50% of the haulage industry costs is fuel, and that they can design products that can significantly impact their customers' profitability.

4. Access value through services and solutions

There is a growing awareness that adding services to products can help access even more of the value that lies below the water line. This has led to companies offering asset management type solutions that include remote, preventive and predictive maintenance as well as guaranteeing equipment availability in order to maximise raw material throughput. But this is just the tip of the iceberg so to speak.

Some industry leaders see so much hidden value under the waterline, they are creating new service based business models to tap into this growth opportunity. For example, in the fleet transportation market, Michelin no longer just focus on the tyre technology. They have developed a service business where tyres are charged by the kilometre, which given the importance of fuel economy and the tight margins have had a significant impact on reducing costs and making them more predictable.

 

These new ‘Servitization’ or outcome based business models require a much deeper understanding of the available profit pools that can be accessed by companies, if they are to be successful. Many of these services rely on data and analytics. By understanding where a company can make a real difference to their customer’s profitability, prioritisation of new technologies such as the IoT, big data analytics and mobility, becomes far more targeted than it is today.

5. Product Design / Service value Trade off

As outcome based services become more popular, it forces alignment between the customers' and suppliers' objectives. If a tyre is sold by the kilometre, then the design and service must deliver the lowest overall cost of performance over the life of the product. Even in more traditional business models, there is a realisation that the installed base represents a significant revenue opportunity versus new build.

There are many businesses who for every new machine sold, might have anywhere between 10 and 100 pieces of equipment already in the field. The installed base represents a large revenue opportunity!

In both these cases the trade-off in the product design between product cost and service value could have significant financial consequences. For example, with the manufacture selling tyres by the kilometre, a saving in the tyre cost which creates higher service costs will impact the profitability.

Designing services into the product such as remote connectivity, could enable a growth in service revenues that is far larger than the increase in the product cost.

This more holistic approach to value over the products life is a change in mind-set for most product-orientated companies.

This has significant implication on culture, KPIs and organisational design if a company is to maximise it profit over the assets life.

6. Managing Risk & Uncertainty

As companies take on more responsibility in their customers’ business processes, so their perspective on business risk must adjust.

While they have the opportunity to earn more margin, they also have to become better at managing risk and safeguard the value they have won.

Indeed, many companies will often unnecessarily shy away from profitable opportunities because of this lack of understanding.

It is a complex trade-off, but it is important to first be clear about the difference between uncertainty and risk.

Uncertainty is when there is variability in the outcome of an event caused by the environment, human error or lack of knowledge.

Uncertainty is a fact of life and so we must develop solutions/ processes to dynamically manage these unknowns.

For large contracts this is a highly complex challenge, but there are three good pointers that can help all businesses:

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1. Identify areas of uncertainty
2. Develop processes that actively manage uncertainty in the product service delivery
3. Ensure transparency of data through the life cycle requirements to aid fast decision making

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Risk is a special uncertainty where negative consequences affect the overall performance.

This means ensuring your business can cover a worst case scenario, however unpleasant.

Managing uncertainty well, decreases but does not eliminate risk.

These six strategies can help all businesses create and safeguard value.

If incorporated into a company's thinking, they can help companies manage the value they already deliver more effectively.

More importantly it can help them to clearly identify the opportunities where they can grow their business through products service solutions.

 

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Nick Frank, Managing Partner, Frank Partners explores the importance of having a road map for harnessing the power that lies within a field service organisation...

As businesses begin to embrace the opportunities offered by the IoT, digitilisation and analytics, many are unsure what they are going to do with all that information.

Within Field Service most of the thinking is centred on driving out cost through remote diagnostics and services. But this is just the tip of the iceberg.

The digitalisation of products provides an even bigger revenue opportunity, often in ways not initially foreseen.

Many companies are turning to Service Thinking to identify the profit pools that they can exploit within their customer and industry value chains.

[quote float="left"]Many companies are turning to Service Thinking to identify the profit pools that they can exploit within their customer and industry value chains.[/quote]For example in the haulage industry, the truck itself only represents perhaps 8% of the running costs. 50% is the fuel bill and 25% the driver. Truck manufacturers such as MAN have developed servitized business models based on Telematics technologies that improve fuel consumption and turn the Truck into an operating expense.

This data driven business model has enabled early adopters such as MAN UK to grow their business by a factor 10 over the past 20 years against a declining market.

Although ‘Service Thinking’ will help identify the areas of priority, how do companies go on to figure out how to develop data driven solutions.

For example take SAVortex, a UK SME who have developed a SMART connected hand dryer with remote diagnostics.

The idea was to use connectivity to dramatically reduce maintenance costs for hand dryers in large office complexes. This they achieved, but in addition found that the data they had on the usage of the toilets was even more valuable to their customers.

Nearly everyone who goes uses a toilet also washes and dries their hands. By monitoring the usage of the hand dryers, large facility managers could infer the footfall in different areas of the building, so optimising heating, light and cleaning costs. These savings could in certain cases far outweigh those achieved within the original business model.

The question is how can we help companies make this type of leap in imagination.

A framework originally developed by IBM and reported in the Harvard Business review, can help companies explore the value of their digitalised assets. 5 patterns of innovation were identified that could be used to monetize data;

1. Add new value to existing Products:

This comes from understanding the data being produced by products and whether it is possible to generate insights from it. In particular whether these insights could add new value to us, our customers, our suppliers our competitors or players in another industry. The SAVortex hand dryer is a good example of this.

2. Combining Data within and across industries:

Is it possible to combine the product data with another data set to create new value? In the truck example the driving habits of the driver could be analysed by MAN through the telematics.

When combined with the drivers names held by the haulage company, training could be recommended to improve the capability of drivers to optimise fuel efficiency enabling profitability to be doubled!

3. Digitalising Assets:

Which assets are digital in nature and how can this feature be used to increase their value? Is it possible to turn physical assets into digital assets? An example from the field service world is that some spare parts will not be held as physical stock, but as a digital drawing. When the part is required, the drawing is down loaded to a 3D printer at the point of need for the part to be produced. This has significant implications on the business model for spare parts and where value is created.

4. Trading Data:

Can data be structured and  analysed to yield higher value information?

Again the Savortex example is a good example where the usage information of the dryer is can be sold to the facilities company due to the inherent value.

5. Codifying a Capability:

Does a company have a significant capability that can be digitalised and which others value? Many industrial companies have a huge amount of intellectual property which if put on a digital platform can yield immense value to various stakeholders. For example the bearing manufacturer SKF has many industrial apps which their customers and channel partners can download to help make their equipment more effective.

Key to success is to embark on this process with a cross functional team, adequate resources and senior management support.

With these in place, the next step is to know what data you have from your products and operations.

What data can you access but are not capturing? Do others have data that would be helpful to you and how might you collaborate with them. Then, by examining each of the five patterns, ideas begin to emerge and develop.

The creative process is greatly facilitated by two further actions;

 

1. Having a strong technology presence within the team who can understand how data can be extracted, exchanged and mashed up.
2. Having input from external parties who can bring an Out-Side in perspective to the technology and business challenges What is clear is that opportunities are growing for product companies to find new value from the data they generate.

 

With an open mind-set, some determination and a structured approach, this provides industrial companies with a significant opportunity to grow through embracing the digital economy.

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