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Kris Oldland, Editor-in-Chief, Field Service News talks to Professor Tim Baines of the Aston Centre for Servitization Research and Practice, about the key themes at their 2017 Spring Servitization Conference held in Lucerne and how Servitization is becoming a mainstream topic of conversation amongst manufacturers.

 

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With Article 50 triggered and Brexit negotiations underway Spencer Earp, Senior Vice President EMEA & APAC for ServiceMax, a GE company asks just how important can field services be for UK PLC...

The last place you would expect to find a microcosm of Britain’s proposed industrial strategy is in a cereal bowl. As iconic breakfast brand Weetabix announced plans to invest £30m to expand its UK manufacturing facilities, its Chinese owner Bright Foods was considering a sale and there are plenty of suitors.

Weetabix is apparently bucking a breakfast trend, growing its market share and creating jobs but it is far from Brexit-proof. Price hikes it says are expected.

Just a week earlier UK Prime Minister Theresa May outlined her proposals for a new industrial strategy for Britain and Weetabix is exhibiting the sort of dynamism May hopes to re-create.

But while it may serve as a valuable example in developing the right conditions for growth, it may prove an exception to the rule.

While UK GDP figures put in a strong finish to a turbulent 2016, the outlook remains uncertain.

This year will be dominated by trading negotiations and a fluctuating pound and we are expected to feel the start of a pricing pinch. The UK, says Business and Energy Secretary Greg Clark at the launch of the Government’s green paper, “must close the gap between the most productive companies, industries, places and people and the rest; and ensure we are one of the most competitive places in the world to start and grow a business.”

 

Easier said than done. The focus will no doubt be on streamlining manufacturing processes, minimising costs, encouraging inward investment and using post-Brexit freedoms to use government subsidies to promote growth, such as targeted tax incentives and increased research and development grants. All good stuff but what can businesses do themselves?

How can the government proposals deliver ideas and strategies that touch all aspects of the supply chain, for example? How can a new business plan for Britain remove cost from the company and yet improve its attractiveness and productivity?

The analogies with the field service industry are startling. Field service has often suffered from under investment or derision. Businesses have regarded service as a cost to the business but this is changing.

New technology is turning everything on its head, with service increasingly seen as a critical business function. Business strategies are evolving along service lines, recognising that affordable sensors, automation and increased mobility are having a profound impact on how products are sold and of course supported. Brand reputations are rising or falling on the back of it and above all service led companies are increasingly profitable and efficient.

A recent report from Vanson Bourne revealed that 86% of execs surveyed said they expect field service to become a primary revenue driver in the next two years. Results from the Technology Services Industry Association (TSIA) Field Service benchmarking study also found that businesses “saw an improvement in renewal rates of up to seven points when field service engineers took the initiative to drive adoption versus engaging only in break/fix maintenance activities.”

In her speech to the World Economic Forum at Davos in January, Theresa May talked about facing up to change, redrawing the international image and making Britain truly internationalist.

The industrial strategy is part of this new thinking, but turning words into tangible actions will demand a cultural shift within organisations if the manufacturing sector is to be competitive and profitable.

 

It demands an automated, end-to-end field service management plan, one that empowers field service professionals in the business and recognises the value service can have to an industrial strategy.

Interestingly, GE drives more than 70 percent of its profits from the service business. It’s a strategy that works. Mobility and smart device technology are at the heart of this and something that will only accelerate rapidly with the advent of 5G networks.

In its Emerging Trends in Mobility report, the TSIA claimed that the rapid development of video conferencing, mobile knowledge management applications and wearables is rapidly creating an even greater positive impact on the service industry and business profitability.

It’s like a perfect storm and one that could and should carry UK manufacturing forward. It is this understanding of how the latest cloud-based technologies can underpin an industrial strategy that can help to drive differentiation and efficiency.

Not all manufacturers can do a Weetabix, but they can embrace ‘servitisation’. The industrialists and thinkers of Whitehall would do well to take note.

 

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With the topic of Servitization gaining more and more traction both in manufacturing circles and beyond a new industry book that provides a roadmap to making the shift towards advanced, outcome based services could well be of vital use for service executives across the globe. One such book Service Strategy in Action has just been published and Kris Oldland spoke exclusively to co-author Christian Kowalkowski...

I’ve met with Kowalkowski a number of times over the last few years.

More often than not it is at the Spring Servitization Conference, arranged by the Aston Centre for Servitization, (who themselves are part of Aston University,) which in itself is an interesting few days as it brings the universes of industry and academia together and there seem to be more and more people in attendance from both sides of the table each year.

Indeed, this should come as little surprise to anyone who has attended any field service oriented conference across the last few years. Servitization, arguably driven by the growing maturity of IoT, has become a mainstream topic within our industry and academics such as Aston’s own Professor Tim Baines, or Cambridge University’s Andy Neely - are both highly sought after for speaking engagements on the topic.

So given the rise in interest in Servitization, it is perhaps something of an anomaly that there are so few books dedicated to the topic. There is Baines’ own offering written with Cranfield’s Howard Lightfoot, 'Made to Serve' that is generally regarded as the go to book on the topic. Then there is Dr. Michael Provost’s excellent work ‘Everything Work’s Wonderfully’ but there is not a huge amount else.

At least until now.

Kowalkowski's new book Service Strategy in Action, co-written by Wolfgang Ulaga , is in many ways perhaps a natural sequel to Baines’ & Lightfoot’s Made to Serve, which although still superbly relevant to anyone wanting to understand the topic of servitization - is now approaching it’s fifth birthday.

And while the philosophy and concept remains the same, the conversation has evolved considerably within that period.

So how does Kowalkowski view the book?

“It is really written with executives in mind,” he explains “for business managers as well as service development consultants who are focussing on these issues. What we wanted to do was come up with a really simple road map for service strategy in action, divided into twelve distinct steps - so dependent on how mature the company is when they start, they can pick up the roadmap at the right point for their organisation.”

 

Indeed, the book certainly has the well ordered structure of a manual or how-to-guide. However, given the heavy weight nature of the content this not only makes absolute sense but is probably essential for it to be easily digested as a whole.

Kowalkowski himself, is a softly spoken and quietly intense academic with a clear passion and dedication to his topic and this also flows into his written work. Without, the roadmap structure, there could have been a danger that this book could’ve become a book for academics, that lay-folk like myself (and much of it’s intended audience) may have found hard to navigate through.

As it is however, it provides a perfect reference tool for companies making their way through the maze of moving from a traditional break-fix/SLA based business model to an outcome based services model, where uptime and CSAT are the new golden KPIS.

So how does the book plot out your path towards a truly servitized business?

Actually, the path laid out by Kowalkowski and Ulaga is a fairly straightforward one, based on their work with a number of differing organisations. As with all good ideas this journey starts at the beginning by establishing a clear understanding of why companies should be taking this path in the first place.

And of course not all companies are created equal, and very few scenarios are ever the same. So the opening section of the book deals with understanding your organisations position.

“First of all the service imperative, why at all move into service in the first place,” Kowalkowski comments.

“Is such a move a defensive stance to defend a product business? Or is it more offensive to gain additional revenue streams? What internal and external drivers towards advanced services exist within your organisation? Are you perhaps already on a burning platform - in which case maybe you better move a lot faster?”

“It [Understanding your position] also enables you to access the low hanging fruit, but then if you want to make more profound changes then you need to transform your business model more extensively and different elements of it.”

“What are B2B services – what are the key challenges? Products, are of course very heterogeneous but services are even more so - so, you really need to understand that it is a very different animal selling spare parts to promising up-gain sharing – it’s different worlds.”

 

The book also focuses on the cultural elements of such activities which typically are overlooked in a lot of the other academic literature on servitization which do not touch much upon the softer issues.

Yet the cultural aspect is really important and a key inclusion the book as Kowalkowski explains.

“We have a framework, key characteristics of what becomes important when building a service culture,” he begins.

“It’s all about the starting points – you often start in a service desert, a very myopic perspective where service is a necessary evil. Then the journey is through a dark tunnel before you the see the first glimpse of the promising light where service becomes a key growth engine - and that should be the aim.”

Then this framework can also be used for analysing and diagnosing the internal organisation – where are you today and what do you need to do to get to where you need to be.

Do we have some people who are really strong and supportive within the service business and if so are they in the right place?

“It’s not enough to have a service enthusiast in middle management level.” Kowalkowski asserts.

“You might need to have some service evangelist on the top level and you need the service promoters on the front office. Then you need to convince enough people who are fairly indifferent towards this, you can’t convince those that are the outright obstructers, but to form a guiding coalition large and powerful enough to make it stick – this is something that is important and we focus on this in the chapter on division and leadership.”

 

“We explore how can you do this using established change management framework and how to apply that to a servitization context – so forming a strong guiding and coalition and then empowering others to act upon that vision,” he adds.

In fact, the approach outlined in the book utilises the well established Kotter’s eight step framework which we then applied to this context.

“We said what are the service specific traits of change management here and provide some examples of that instead of re-inventing the wheel,” Kowalkowski comments.

“You have these proven frameworks already and this is very much a change management effort. It is not necessarily the hard things that fail, you might have the technology in place but maybe a company may focus to much on what is technically possible.”

“It becomes this double edge sword - do too much and you just rely on your technological features, investing in technology is of course OK, but ask what can the end customer do with it? You need someone who can analyse the data and suggest improvements for your client’s business, and provide them with insight that they don’t necessarily have the time and resources to do themselves perhaps?”

 

In fact, the questions around how, when and why customers should be engaged within the process of moving to a servitized business model are also covered extensively within the book.

“We focus on the customer and the job to be done in really understanding and outlining how service innovation and development is different from product innovation. We look at strategy and how it is aligned to corporate thoughts?”

“Are you really prepared to cannibalise your business – is that even really necessary?” It may that it is not - depending on what your goal is for the service growth initiative is.”

Again the emphasis is very much about establishing a firm understanding of your own current position before proceeding further. “We offer a diagnostic  test that asks are you are you fit for services, do you have the right resource for what it takes? We look at this in a very straight forward manner but it can be a good starting point for many companies.”

“Then we also look at how to move from free to fee, that is how to capture more value from your existing services – which again is a good starting point for moving towards advanced services, but is also useful for maximising revenue from and getting the most mileage out of your existing services.”

Finally, there is then a focus on building a service factory, which is also about improving existing services.

“We include an example of service blueprinting and how it can be used to improve the efficiency and productivity of the service business," Kowalkowski states.

“It’s all about managing efficiency, effectiveness and capacity utilisation. Again depending on the type of service business, then what productivity aspects are important can be defined.”

Whilst the change management and cultural question are in the main handled by Kowalkowski, the discussion around the transition from selling items, to selling services is a complex one and this part of the equation is handled predominantly by Ulaga.

“Transforming sales is of course a big thing as well and Wolfgang has been working a lot with the sales management - so this part of the book is all based on his extensive work in that area,” explains Kowalkowski.

There is, of course, a very different mindset between a service sales team and a product sales team. But should companies who move to advance services be focussed on retraining their existing staff or replacing them with a specialist sales team that understands and gets service sales?

“Obviously with the magnitude of change, understanding how important it is to get this right is key,” replies Kowalkowski when I put this question to him.

“We dedicate time to looking at the key aspects; what is the difference between industrial sales and service sales? The differences in learning orientation? Customer service orientation?”

“Sometimes, they [service sales professionals] have to be more introverted - which is interesting as you generally look at sales professionals as extroverted people.”

 

‘But look at those who sell service, and who does so well and there is often a much more introverted personality amongst those who are successful.”

It is of course all about the organisation and how to fit service into your organisation.

You will never have a one size fits all solution as different companies work in different ways but Kowalkowski points out that they have noted some “different development patterns over time, such as breaking up the silo mentality, how to foster the collaboration of central and local units and so on,” insight into which would pay for the price of the book itself.

Similarly, understanding if Servitization is right for your business is just a first step on that journey, having a road-map like this book is useful in terms of knowing where you are heading and how to get there. However, it’s also good to know how fast you should be going on various elements of the journey as well.

And this has been embedded into Kowalkowski and Ulaga work also. “In terms of what comes first, strategy or structure - for us it is about having enough in place to be able to initiate the change and execute it,” Kowalkowski comments.

“Maybe you can quite easily identify things that are currently lacking – e.g ‘we are not strong in risk management’. Obviously if a company is about to offer output based services they need to improve that before they can move forward.”

“Yet, whilst that is quite concrete and you could still grab some further low hanging fruit by reviewing your current service pricing – can you start doing something about that?”

“Maybe you need to just start changing cultures and processes for certain things – or even leave some problem areas as they are - as in the long term it may encourages other service and product sales, having a delayed benefit that outweighs the problem it creates today.”

Indeed, the questions around servitization are often as complex as they are numerous, yet the long-term rewards are numerous and long lasting. For anyone going through the shift to servitization books like this are going to be of huge use.

 

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Kris Oldland deliver's his editorial leader in issue 17 of Field Service News where our theme was the ever changing nature of field service...

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Now any regular readers of this column will know that I’m a big fan of change.

Not that I think change needs to be wholesale and sweeping. No I subscribe much more to the journey of continuous improvement method of change. I like the concept of constant refinement, of being in constant Beta.

As a result of such an outlook I do tend to focus on innovation quite closely, which is a happy coincidence that there seems to be constant innovation within the field service sector too.

So I often talk about changes in our industry. Changes in business processes such as the shift towards servitization or the concept of crowd service

Changes in technology such as the emergence of Augmented Reality and IOT as two highly credible emerging technologies that the field service industry must embrace.

Even, the changing skill-profile of the field engineer as an incoming generation replaces an ageing outgoing one.

But the change referred to in this edition of Field Service News is actually a completely different type of change and for once I found myself wondering if such seismic change within our industry is good for us.

That change is amongst the solution providers, the pioneers and innovators that helped usher in so much of the revolution we are currently experiencing.

 

In the last 18 months we have seen most of the big names in field service  management solutions being acquired. Tesseract, IFS, ServiceMax, ClickSoftware, Telogis, and most recently ServicePower have all been bought up and that’s just a few from the top of my head.

There are many, many more.

The thing is that all of these companies had a common thread that allowed them to thrive in our industry. They were all independent companies who truly understood and cared about field service.

If I recall correctly the redesign of Solarvista a few years back took 3 MILLION lines of code, more than it takes to send a shuttle up to the space station, there are far easier sectors to enter, far easier places to make money as a software provider.

But it was the passion to help drive service forwards that was at the heart of many of these companies’ success.

Colin Brown former MD and founder at Tesseract for example came from an engineer background himself, so he got the challenges that companies were facing and was able to tailor that into a series of industry first solutions (i.e. first windows based solution, first browser based solution, first SaaS solution).

Similarly, Dave Yarnold, CEO at ServiceMax has spoken at great length about the importance of service - even going as far as to described ServiceMax once as a Field Service Enablement company who happen to use technology to do so.

And while Yarnold, remains on board in ServiceMax’s new guise as part of the GE Brand one just hopes that is infectious enthusiasm for great service delivery isn’t diluted by being in a bigger pond.

Indeed, the message from almost all camps is that it is business as usual just with bigger expectations, and quicker developments. On the surface it all sounds great and I must admit that it is fantastic to see the field service sector become such hot property globally - it’s just when so many great independent companies are bought within quick succession of each other it does make me a little nervous.

All Change maybe fine, just not at once, is all I’m asking.

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While for many the shift from traditional transactional product focussed business models to a more strategic service centric approach that focuses on longer term, outcome based contracts is a complex process to navigate. However, Jason Smith, General Manager, Aftersales, EMEA for Japanese food packaging and weighing manufacturer Ishida is a man that has not only been through the process, he has done it twice.

Kris Oldland, spoke exclusively with him about the importance of executive level buy-in to undertake such a move and why customer selection when rolling new service models out is vital….

KO: All too often I hear that despite the fact that service operations of a business brings in a significant proportion of revenue into a company, there is a general lack of support for the service team of many businesses at the top tier executive level.

This of course would be a fundamental barrier to moving to an advanced services model and is a challenge many senior service executives are confronted by even though they can see how both their business and their customers could benefit from a move away from the traditional break-fix maintenance to the type of proactive service operations that advanced services require.

So how can we get the voice of the service department heard at the executive level?

JS: I think the only way to do that is to have a fairly compelling argument and there is nothing like having a very compelling customer story to help give that leverage at board level. Traditionally, businesses are built upon delivering a product and they will have done that very successfully to have grown to a large size. It is the case really that they will have done so on tangible benefits.

Comparing one product to another is much easier than comparing one service against another. I think within most manufacturing organisations there is still probably a lack of understanding about the value services can deliver to a customer combined with a product.

 

Its still regarded as a separation – that’s why we have terms like aftersales – it’s after the sale, its not combined with the sale.

For your typical product salesman it’s hard to comprehend something as intangible as advanced services and how to explain it and describe the value when he hasn’t got any evidence or experience to back it up with.

KO: So does the adoption of servitization as a business model need to be driven from the top down?

JS: Absolutely, without that support from the top it is dead before it’s ever started.

KO: What about the customer point of view - it’s one thing pushing an advances services route and getting buy in internally, but what about externally?

Is it a case that some customers just don’t want to come down this route because they are so used to the transactional nature that they have always operated within?

JS: Very much, it is a cultural thing for a customer and customer selection is therefore very important.

A customer who is used to transactional relationships, that may have those pressures on them themselves from their own customer base, would be one who is very transactional and possibly looking to exploit the relationship.

They would probably not be the best ones to try and build this concept with because in order to mitigate, quantify or even deliver or offset the risk that you are going to assume in delivering an advanced service you are probably going to make it uneconomical and unviable compared to the traditional business models. You just won’t compete or you’ll be pulled a part and it just won’t be relevant anymore.

 

Therefore, I think customer selection is absolutely vital. The question is along the lines of technology push/customer pull – which is best?

I think it depends very much on the pace at which you want to work. Customer pull you lose control of the pace and velocity at which you want to work at in terms of the delivering the service. But if you push it out to your customers you have the challenge of convincing them to get on board.

KO: Ultimately will there always be two-tier customers, will there be those companies that you take on the servitization journey with you and those that remain doing business in the traditional sense or is the long term aim to eventually bring everyone on board with advance services? 

JS: I think there is really three types of customers and I would support the Caterpillar approach that there are those who want to do it themselves, those who want us to do it with them and those who want us to do it for them.

In terms of servitization probably you are always going to have an element in each of those three camps. The challenge that we face as service providers is moving them out of the ‘do it myself’ to ‘do it with me’ to ‘do it for me’.

Obviously moving them from a point where they are doing it themselves, to where you are doing everything for them is a big leap of faith. It’s not something you can do overnight, certainly not at a risk that you can sustain economically. So it’s a case of migrating that customer and building that trust over a period of time, to gain the confidence that you can deliver and that you can add value to their business.

KO: We touched on the fact that servitization needs to be driven from the top down, but do you need buy-in across the whole organisation as well?

For example with our field technicians - do we need their understanding of the concept and if so how do you achieve that?

JS: The easy answer to that is yes, you need buy in across the whole organisation because you are going to be relying on those inter-siloed relationships within the business to deliver within your promise. You’re going to have to rely on your supply chain and you’re going to have to rely on all your internal supporting departments to deliver that.

It is a fundamental change to the way you do business and the way you have done things traditionally, so yes the answer is yes you do need to have buy in from all levels and in particular your service engineers as it represents a fairly fundamental change or difference to the way they are used to operating. 

 

There will be a lot of knowledge in those teams, which is experiential and built up over time together with product training and in some ways you’re starting to both capitalise on their experience but also put it in a bottle so that you can use it in your supporting systems and algorithms for example. 

That represents a fairly big challenge and that’s also going to have it’s own implications for supporting systems such as knowledge management. 

KO: Finally, technology is the key enabler to allow us to move to advanced services, but how far along the journey do you think we are in terms of the development of the technology such as IoT and Cloud? Are we there already or is there more to come?

JS: In terms of being enabled to do the job and to support the decision-making within servitization I think we are actually there with the Internet of Things. OK, there will be enhancements, maybe faster connection times, you can store more data etc., but I think it is essentially there. 

We’ve got enough to be able to do it, maybe even too much.

The real challenge is what you are measuring, the volume of what you are measuring, how you analyse it and draw conclusions from it -to me that is the real challenge.

 

Also the prize is that the value of the analysis that you do is metamorphosed into the value that you can then create for your customer. How you do that, that methodology, is your future IP. That’s where your sales proposition will lie in the future.

So its not the fact that you can get the data, its what you measure, how you measure it and more importantly how you analyse it, what you do with it and being able to express that value in a manner which the customer can fully understand.

 

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Kieran Notter, Director, Global Customer Transformation, ServiceMax from GE Digital, takes a fresh look at some perennial problems...

Field service management hit the headlines in 2016 as automation, the Internet of Things and servitization reshaped the way we service and maintain capital assets.

These trends have now trickled down to the supply chain, providing a fresh approach to age old headaches. In this article, we look at five areas of friction in the supply chain and how combining field service management with assets is solving them.

The Inventory Tug of War

CFOs will always push for lower inventory levels to free up cash flow and reduce the risk of obsolescence. Yet Service Directors want higher inventory to increase First-Time Fix rates, reduce internal costs, improve productivity and raise customer satisfaction.

The supply chain is between a rock and a hard place trying to balance between two opposing arguments. So what’s the solution? In a word, knowledge.

Knowing the assets and installed base – from the basic location knowledge all the way to IoT (smart connected products) – gives the supply chain a much better chance to meet the demands of both sides. It caters for greater availability but with less inventory, thus freeing up cash. By using the data that’s attached to the asset, it’s location, it’s preventative maintenance plan, and its productivity provides an alert when a part is about to break.

 

Expensive, Unplanned Freight Costs

Knowing the frequency of parts that fail, and the correct intervals for preventative maintenance visits reduces freight costs with fewer ‘emergency’ shipments. However, the biggest saving here is actually in reducing the parcel count itself. If you know what parts you are going to need and when, you can consolidate shipments, sending them direct to the technician in advance.

At a basic level, just knowing where your assets are means you can position the inventory in more strategic locations to reduce costs and increase availability.

Product Lifecycle – The Delayed Curve

A supply chain is expected to cover the assets through their lifecycle. However, if you cannot see if the install base is growing or shrinking, you can’t align inventory accordingly.

That means it’s on a delayed curve which will either result in back orders for new product ranges as the planning tries to catch up or obsolete stock for products as they come to the end of their lifecycle, and usage slows down as planning has not reacted quickly enough.

Addressing this issue also means you get insight into the true profitability of a contract or product.

Likewise, knowing the top 20 required shipments rather than just focusing on the 200 makes a huge difference to how a supply chain can react and prioritise their efforts and resources. This also gives a much more focused supply to the field service organisation and the customers with the most need.

Back Orders After The Fault Is Fixed

When parts are ordered direct to the fault on the machine, a small change in process and practice can pay huge dividend – cancel back orders once the fault has been fixed. This may not work for all businesses but it will work for many.

In most cases, back orders are left for the supply chain to fulfil, even though the technician has fixed the issue with a borrowed unit from a colleague or fixing the part rather than the assembly ordered. If the original back order is left, the other technician who lent the part is now second in line to get it returned, which has a knock-on effect with a ‘not required’ demand outweighing a potential ‘urgent’ order.

Also, if the original back order is shipped to the customer and the customer’s machine is up and running, then parts are often lost. One company who introduced this practice (less customer fit parts) reduced their back orders by 52%.

IoT (Internet of Things) – The Holy Grail of Condition-Based Service

Many companies are now firmly into the IoT realm and benefitting from the data that is being provided.

From smart sensors telling them what parts need replacement before an issue arises to optimum intervals between preventative maintenance.

Using this voice of the product alongside customer demand means you can plan your inventory to not only be available before a fault arises, but also plan the consumables and after sales items to a level that has not been seen before.

This moves you into the servitization market with confidence and a predictable profit margin.

Both the supply chain and field service benefit hugely from analytical information, real time data feeds, and expected, predictable outcomes supplied by IoT and its communications. You only need to look at industry verticals benefitting from this already, such as jet engines, fleet management, HVAC and medical devices to name a few.

 

Without asset knowledge, you are essentially working as a ‘demand’ chain and within the limitations of technicians’ ad hoc tasks to manage any intelligent levels of inventory at your locations.

You will always be behind the curve.

Some companies with high volume and low SKU’s can manage with this model, but all businesses will benefit from more real time data and the ability to not just pre-empt future requirements, but act on them.

 

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Ahead of this year’s Spring Servitization Conference, Dr Ali Ziaee Bigdeli explores three key reasons why companies should be considering a move towards servitization...

One of the questions that keeps coming up when I talk about servitization is “what are the key examples that really demonstrate the scope of this concept?” There are many examples in the B2B world, where the concept originally took hold, but increasingly examples are emerging in the B2C world, and I often find that these examples that touch people’s daily lives as consumers help to make the point.

Examples of servitization first emerged in the development and delivery of Business-to-Business (B2B) offerings. In this regard, debates almost invariably refer to Power by the Hour, the pioneering engine maintenance solution introduced by Rolls Royce in the early 1960s.

Necessitating extensive changes to processes, structures, technologies and personnel within Rolls Royce, this iconic service provides a perfect example of the experiences and ambitions of many manufacturers who embrace  a servitization-based business model. It also had a fundamental legacy in terms of altering the way that customers contract with the company, with a move away from the transactional purchase of equipment towards a 10-year contractual relationship.

More and more manufacturers are moving towards this initiative. Other B2B examples include Alstom’s TrainLife Services. In this, French group Alstom provides the train with a bundle of repair and maintenance services and charges the operators (such as VirginTrains) based on the miles travelled through 15-20 year contracts. Xerox’s Print Management system offers a services and copier bundle which charges customers based on the number of papers they have copied or printed, and MAN’s pay-per-kilometre programme does a similar thing based on the distance its trucks are driven.

Most of these are ‘classic’ and very well-known examples now, but just recently Goodyear announced the launch of Goodyear Proactive Solutions.

 

This will aim to use new technologies such as predictive analytics to help truck fleet managers better handle how their vehicles are used. The common thread is that the outcome is not the sale of a product, but capability delivered through the performance of the product.

The extension of servitization into a product like tyres, which on the face of it is a ‘simple’ and commoditised product, shows just how widely applicable the idea is.

As I mentioned in my introduction, the concept is also slowly-but-surely getting into the Business-to-Customer (B2C) level too, where it touches our everyday lives. You may have experienced something like it if you have ever gone for a new car on a Personal Contract Purchase (PCP) contract.

It is basically a leasing model, in which the car manufacturers charge their customers based on the estimated mileage for a fixed period, rather than just the price of the asset. Repair and maintenance are usually included in these  contracts, meaning that the customers would only need to fill the tank and enjoy the drive.

Other examples include Brompton, the British manufacturer of popular folding bikes, now rents the bikes via docks across the UK to provide a more hassle-free option; Daimler’s Mercedes Me platform which remotely notifies drivers if the car requires maintenance or repair work; and OTIS’s Remote Elevator Monitoring (REM), which provides safety and continence 24/7 through the data collected, recorded and analysed from the lift. In this, the manufacturer enables to detecting trapped passengers, collect  lift performance data, communicate lift performance data to Otisline, and establish a voice link from the lift car to the Otisline or another manned location.

These examples may lead to the question of why is it critical for manufacturing firms to move towards servitization? I can think of three principal reasons:

1. Growth and sustainability.

Through the development and delivery of advanced service offerings, the manufacturer enables its customers to achieve their key strategic aims. This focus on helping customers to achieve their own Key Performance Indicators (KPIs) is how these manufacturers are differentiated from competitors, and delivers business growth and sustainability for both themselves and their customers.

For manufacturers it generates long term contracts, closer relationships with customers, new business opportunities and revenue streams, and an enhanced image and market differentiation. The customer is able to realise greater value from its operations, better understand and predict its costs and financial profile, and potentially have the opportunity to scale-up operations.

2. Locking-out competitors.

Today, more and more technology-focused intermediaries are moving into the product manufacturing space and disrupting their value networks.

Indeed, significant disruptions are already happening in some sectors. For instance, the technology giant Uber is moving into the long-haul transport business with a new division called Uber Freight, in which the shipper directly connects with the truck, challenging the traditional business models of all stakeholders in this network from manufacturer through to user. Servitization strategies push manufacturers to move towards collaboration with other members of the network (e.g. distributors, suppliers, supplier of suppliers, technology vendors, and customers) and this will create a resilient barrier that inhibits the entry of new players.

3. Sharing risks of new technological innovation.

Manufacturing firms generally perceive implementation and adoption of advanced services as a high-risk strategy, perhaps due partly to a traditional product-based mind-set. The perceived risks are operational (e.g. capacity constraints, human resourcing and leadership issues), strategic (e.g. decline in competitiveness, reputational issues) and financial (e.g. direct negative impacts on profit, revenue and market share).

As with any new initiative, manufacturing firms that start to compete through services must internalise new risks. In this respect, the alignment of the incentive with other stakeholders in the value network enables risk sharing and mitigates unnecessary costs.

There are so many aspects to servitization; the benefits are quite well documented, but the challenges of adopting it are numerous, and our understanding- both as researchers and practitioners in industry trying to make an influence change- of how to overcome these is still developing.

This month I’ll be heading to Lucerne for the annual Spring Servitization Conference.

Over the past few years it’s become a key event in the calendar for researchers and thought leaders who want to share and progress their knowledge and understanding of how the theory of servitization can be applied in practice to manufacturing businesses around the world.

This year, I’m looking forward to the discussion on research topics such as: The impact of top management team composition and past performance on servitization; changing the revenue model for individual services; assessing your readiness for servitization with a diagnostic tool to measure service capacity, as well as industry keynotes from representatives of Sulzer Rotating Equipment Services, Testo Industrial Services, ABB Turbo Systems and Ali Group.

You can join the conversation by coming along to the conference, it’s running from 15th-17th May, and more details and registration are on the website https://www.advancedservicesgroup.co.uk/ssc2017w

 

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Mark Brewer, Global Industry Director - Service Management, IFS explains how the field service sector is being undeniably changed by the growing shift of companies towards servitization...

When I first started working in the field service management (FSM) space more than a decade ago, the industry landscape looked much different than it does today.

Ten years ago, organisations were looking to automate their field service processes in an attempt to decrease unpredictable costs and inefficiencies while gaining a little more control and visibility over an otherwise unpredictable industry. The core focus was scheduling and dispatch. Today, the focus has shifted, moving from core functionality towards a new, more holistic emphasis on the end customer.

The potential is limitless and the changing market cannot be overlooked. In a 2016 research report by Markets and Markets, it is estimated that the field service management market will grow from $1.97 billion in 2015 to $5.11 billion by 2020.

 

Low profit margins, increased competition and growing consumer demand fuelled by technological revolution have contributed to a major shift in the field service management market, both in demand and vendor response.

As field service organisations look to find new innovative ways to maximise operational efficiency and reduce operational costs, enterprise software vendors have established a sweet spot, spurring a flurry of field service management vendor acquisitions.

This change has created a fundamental shift in field service management, from expectations through to functionality and approach. As product-based organisations transition towards servitization and as traditional field service organisations look to adapt and grow, the following trends have emerged in order to enable the transformation.

1. END-TO-END. A NEW APPROACH MOVING AWAY FROM BEST OF BREED

Ten years ago, service organisations were simply looking to automate their existing processes.

In the majority of cases, schedules were generated on whiteboards or spreadsheets, paper work orders were manually distributed and communication between the field and back office was limited or non-existent. Best of breed solutions provided badly needed automation enabling organisations to increase efficiencies and reduce costs. Automation is now a given.

Today it is all about the data. As technology has advanced, organisations are now able to capture the data required to drive key business decisions at the highest level.

Where an automated solution provided process efficiency, an end-to-end intelligent service solution provides the seamless data flow required to optimally drive and scale the business while delighting customers. With end-to-end field service management, an organisation has access to real-time data, empowering fact based decisions and future plans.

2. CONSUMER-DRIVEN PRODUCT AND SERVICE DIRECTION

Now more than ever, today’s consumer is empowered and knows what they want. The world has become smaller thanks to globalisation, social media and connectivity in general.

Experiences are more important than ever as today’s customer has a multitude of platforms available to make their voice heard. Customer engagement is now imperative.

In the traditional make and sell model, you design a product, engineer it, procure materials, manufacture the end product, market and sell it to customers and then optionally provide aftersales support.

 

The shift now is moving away from selling products towards delivering ‘product-as-a-service’. Where price has traditionally been based on product output and performance, now ‘contract value’ is based on a defined outcome, thus moving away from a transaction based model to a value based partner relationship. A field service organisation needs the right platform to facilitate this change in order to drive value from the product throughout its entire lifecycle.

3. REINVENTING OPTIMISATION

Whilst Servitization can be a strategy to drive enhanced revenue, this should not be to the detriment of service execution. Service will always be measured by how well you perform, and that means optimising the entire service chain from human capital to parts and logistics.

It also encompasses real-time measuring and monitoring of service execution enabling the transition to a proactive ‘manage by exception’ model, rather than providing a reactive response.

Optimisation is no longer viewed in isolation, optimising intraday schedules and inventory. Rather it should be considered holistically in an effort to deliver flawless end-to-end service.

How do field service organisations prepare for what’s next in the industry while ensuring continued success?

 

The first step is to ensure they have a strong foundation or platform to start from. Core processes and systems should be running optimally to allow an organisation the ability to effectively scale and adopt new technology.

Organisations must embrace change with an enterprise-wide change management strategy.

Lastly, the most successful field service organisations have a clear understanding of the end consumer’s expectations for today and tomorrow to ensure these can be met or exceeded today as well as anticipated for the future. Value added service is no longer optional, it is the very future of service.

 

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Who are the most influential people in the global field service sector that you need to pay attention to in 2017?

The Field Service News #FSN20 is our list of the individuals we believe will be key influencers in our industry across the next twelve months. Those included in the list have been selected by our own panel of industry insiders, who were given the simple criteria of identifying people who will have a significant impact on field service thinking.

However, more than just an annual list of 20 individuals the #FSN20 has grown since it’s launch to become a true celebration of excellence and innovation within our industry.

There are some familiar names and some new faces on this years list and as always we don’t expect everyone to agree with our selection – at it’s heart the #FSN20 was conceived as a tool to get everyone in our industry thinking about who it is that they have come across in the global field service sector that has made them think, who has made them question the accepted paradigms, who has inspired them to do just one little thing more in their own day to day role.

The #FSN20 is not just about the list our panel has put together. It is about fostering discussion that celebrates the unsung heroes of the field service sector. So look out for the online version of this list as well to take part in the debate.

But for now, ladies and gentleman and without further a do, in no particular order, we are pleased to introduce the #FSN20 of 2017…

 

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Click here to see page one of the 2017 #FSN20

 

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Click here to see page two of the 2017 #FSN20 

 

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Chris Proctor, CEO, Oneserve

With their relatively niche operating background primarily serving the UK local government and housing sector Oneserve may not be a company that are as well known as some of their competitors within the FSM solution space, however, there is no denying that in Proctor they have a CEO who isn’t afraid to ruffle feathers.

He has called for the Field Service Management software industry to stop “holding innovation hostage” and under his leadership the organisation have won some significant contracts away from their ‘home turf’ of the housing sector including Pay TV leaders Sky and construction giants Kier.

Having been promoted to CEO from Marketing and Sales Director in just 8 months with the company Proctor is a young, dynamic leader who is not afraid of controversy if it means raising awareness of issues within the industry.

 

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Professor Andy Neely, Head of the Institute for Manufacturing, Cambridge University

Professor Andy Neely is Pro-Vice-Chancellor: Enterprise and Business Relations at the University of Cambridge and also Head of the Institute for Manufacturing (IfM) and Head of the Manufacturing and Management Division of Cambridge University Engineering Department.

In his role as a Founding Director of the Cambridge Service Alliance he is widely recognised for his work on the servitization of manufacturing, as well as his work on performance measurement and management and as such is often seen chairing sessions in the field service sector.

 

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Hilbrand Rustema, Managing Director, Noventum Service Management

As service management consultancy spanning three continents. With over 200 successful projects and a proven track record of improving growth and profitability Noventum are a tour de force and are firmly established as the leading consultancy within the field service industry.

Hilbrand Rustema has been a driving force in that development and continues to lead the business having been at the heart of evolving service thinking for many, many years.

 

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Jan Van Veen, Managing Director, Van Veen Business Innovation

One of the founding partners of Noventum, Van Veen is now working under his own brand and is currently developing a framework for companies to be able to develop continuous momentum based on a series of detailed benchmarking and researching projects.

A broad and ambitious project, but Van Veen has the background and insight to be able to deliver what should be highly powerful business tool.

 

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