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Field service in the medical industry is complex and challenging. Having recently attended the two key events -  Field Service Medical and Field Service Medical Europe - we look at some of the key challenges service directors working in this vertical face...

It is an often quoted maxim that when it comes to field service highly disparate companies from completely separate verticals can face many of the same pain points. Within the niche of the medical industry these challenges remain but there are also additional hurdles that can make service delivery even harder.

Fortunately for those working within medical field service, global conference producers WBR sit right at the heart of the industry hosting two key events, one each side of the Atlantic to help foster knowledge sharing within the community.

The first of these Field Service Medical was held in San Diego in February and in the Californian sunshine the debate was lively with a highly senior audience coming together and putting commercial rivalries aside to address some of the key challenges within the sector.

Of course as with the wider field service sector, technology has a huge role to play in enhancing the levels of service companies can provide, yet a number of additional challenges such as tighter regulation, greater security fears and fragmented purchasing structures can make the implementation of technology just that little bit harder within the medical sector.

 

Thus a number of conversations centred around integration, with FieldOne’s Ted Steffner’s presentation on the topic ‘Integrate, Don’t isolate’ being a particular highlight for a number of delegates.

Another specific focus of the medical sector is that the sale of consumables within the industry is perhaps disproportionally higher here than in other verticals such as manufacturing. Largely driven by the clean room environment, this leads to an even greater pressure to ensure good inventory management and as well as a number of presentations around this topic, Stacey Blakely, Service Sales Director, Hill-Rom led an excellent interactive round table that provided plenty of food for thought and helped drive the conversation.

Indeed, the sale of consumables is viewed very much as a key part of service revenue still within the medical sector and in some respects the thought processes of many within the vertical is still focused on the traditional break-fix approach to field service.

This was apparent when Professor Tim Baines, Aston University, gave a presentation on the topic of Servitization at Field Service Medical Europe in Berlin a month later.

 

Whilst in many other verticals the topic of servitization and phrases such as through-life-cycle service, advanced services and outcome based solutions are becoming familiar concepts, for many within the medical industry it remains a new concept which faces the dual barriers of both a relenting and strong traditional approach to revenue through consumables, as well as the additional challenges of fully implementing IoT solutions due to the aforementioned fears around security fuelled by the need to protect patient data.

However, whilst in some areas the medical industry maybe a touch behind the broader field service sector, it is also home to some truly innovative thinkers and service leaders.

One such person is Alec Pinto, Associate Director of Qiagen who gave a fantastic presentation on maximising utilisation. Pinto and his colleagues have done some exceptional work on developing mathematical modelling to truly define their available resources in terms of man hours, and then redistributing their workforce accordingly to improve customer satisfaction levels, efficiency levels and engineer engagement.

In summary, the field service industry within the medical sector has a number of unique challenges that are perhaps not felt within other verticals yet the market still continues to see innovation and development on both sides of the Atlantic.

 

“There is an overall theme of companies being more proactive and less reactive across the sector at the moment,” commented Greg Ashton, Conference Producer for WBR at the end of Field Service Medical Europe.

“People have been thinking about it for a long time but now the technology is at a place now where there is a fusion of people and technology all arriving together at a critical point.”

“It’s really the solution providers that are driving it forward, the solutions themselves have improved a lot over the last year,” he added.

 

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For manufacturers, parts supply and management has a major role in their aftermarket service operations. This event, led by aftermarket software experts Syncron, will show delegates how smarter inventory management can deliver greater customer experience.

Do you have all your inventory challenges under control? Great availability, no redundant or unnecessary stock? Shipping costs minimised, profits on part sales maximised? Happy clients, dealers and colleagues?

If you feel there is scope to improve your organisation's performance in any of the areas above, this Syncron Connect UK event is for you.  It takes place on 8th June, at the famous Belfry Hotel and Golf Resort, Sutton Coldfield, West Midlands.

Delegates will be able to hear about strategies to unlock profits through smarter inventory management, by more accurately estimating your spare parts requirements, better distributing them across your network and maximising profits on their sale

Mike Toms, Business Development Manager, JCB Service, will tell delegates about his company's journey, while Aston Business School will provide insight into how manufacturers can compete through Servitization and Advanced Services. Giacomo Squintani, Syncron, will explain the Best-of-Business v. ERP challenge for manufacturing service operations.

 

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Click here to see the full agenda and to register for Syncron Connect UK

 

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The move towards servitization for many manufacturers offers a new way of thinking in business, with long term contracts and profitability the carrot on the stick. Kris Oldland, Editor-in-Chief of Field Service News talks to Harman Lanser of Air France-KLM, about making the move to an outcome based approach within the aviation sector following on from his key note speech at last year's Aston Spring Servitization Conference.

To find out more about servitization register to attend this years Aston Spring Servitization Conference here

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If you thought that servitization was still a concept or something only applicable for large manufacturers, it's time to think again, says Professor Tim Baines, Director of the Centre for Servitization Research and Practice, Aston University Business School, Birmingham.

There’s an excitement about servitization at the moment.  "People are asking questions such as: Is it relevant to my business? Will it work for my products?  Are my competitors adopting it? What does a Servitization model look like?" Servitization in general and Advanced Services in particular are attracting interest, says Baines, because they offer the prospect of new revenue streams through post-sale services and the greater financial sustainability that comes with it because manufacturers are no longer totally reliant on transactional sales of products for income.

However, as more services are being built around products, says Baines, so process are becoming more complex. "There are three levels of manufacturer-led product services: spare parts, proactive and reactive product condition maintenance, and Advanced Services such has outcome-based contracts. As companies realise the benefits and value servitization can deliver, both they and their customers are becoming more excited about the possibilities of the Advanced Services element." He points out the parallels with the lean manufacturing journey many manufacturers have already been to remove waste and cost from production processes.  “Just as Kanban inventory control and just-in-time logistics processes were advanced elements in lean manufacturing,  so Advanced Services are a sophisticated element in servitization."

The move towards a servitization model requires a greater focus on customer intimacy, and a change in process towards delivering capabilities and outcomes rather than products, which in turn requires business model innovation, organisational transformation and adoption of new technology, he explains.

 

All of this is challenging for manufacturers to take on board, he concedes.  "While there’s a lot of interest, there’s still a lot of uncertainty about whether the servitization model fits all manufacturers and whether it is relevant to all business sectors.  Part of that is because people often think servitization is difficult because of the process changes that need to happen. However, rather than look at servitization per se as being difficult, it’s more useful to focus on how receptive your organisation is to change. It’s as much about the culture and attitudes within the business."

Neither is company size is relevant to whether change will be embraced or resisted, says Baines. “Big companies have more resources to initiate change but also more inertia when it comes to changing existing processes. SMEs can be much more nimble having fewer constraints with, say, legacy processes." There is no doubt that SMEs are interested in servitization - in 2015, out of 100 companies that Aston consulted with on servitization, 77 were SMEs, reports Baines.

The intimate relationship with your customer and long-term partnership that the servitization model demands, beings other  challenges. "Who has the intimate relationship with the customer: you, the manufacturer of the product, or your distributor? How do you ensure your distributor has the same commitment to your customer needed to make the Advanced Services model work?”

Professor Baines will be hosting Aston Business School's  2016 Spring Servitization Conference on 16-17 May  2016.  For more information click here.

 

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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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The trend of servitization, i.e. businesses moving away from transactional approach to business to an outcome based model is gain traction. Kris Oldland, Editor-in-Chief of Field Service News talks to John Cullen whose organisation Metso has recently made the shift about why they had done so and the challenges they had faced in changing the whole ethos of the company from top to bottom.

To find out more about servitization register to attend this years Aston Spring Servitization Conference here

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UPDATE: LEADING UK SERVICE MANAGEMENT SOFTWARE PROVIDER TESSERACT JOIN LIST OF PROVIDERS TAKING PART IN THIS YEAR'S SUMMIT...

UK based software company Tesseract have become the latest specialist provider to join the select panel of session sponsors adding a further layer of insight into what promises to be an interesting two day session bringing together a mix of practitioners, solution providers and academia to discuss the key challenges in delivering service within an aftermarket environment.

Tesseract, pioneers respected within their field for delivering both the worlds first windows based field service management software as well as the worlds first browser based field service management software are joined by a well rounded group of solution providers including Kuehne & Nagel who will be providing insight on service logistics, Syncron who offer parts and inventory management solutions, and TrackUnit who offer telematics solutions.

 

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The 2nd World Chief Service Officer Summit takes place in London, UK, on March 14th and 15th, with a focus on Manufacturing Aftermarket. Field Service News is pleased to be a media partner for the event.

The manufacturing sector is changing rapidly.  As sales reach saturation point and competition increases pressure on prices, manufacturers are seeking other revenue streams.  Revenue from aftermarket sales will become increasingly important and customer service will have a higher profile. That presents both great challenges and great opportunities.

If you are in manufacturing, repair and operations, this is the summit for you. Come and hear about the latest developments in spare parts supply, 3D printing, CRM, leasing and service support  for products such as autos, heavy equipment, medical device, yachting, aircraft and consumer electronics.

Over two days, in four themed sessions, delegates at the summit will hear from over 20 speakers, learn what the key trends are in service development, hear what competitors are doing and how to deliver service in a customer-driven environment.

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•   The Global Market Outlook and Internet+ Market
•   Supply Chain Management & Innovative Service Design
•   Technology Innovation and Profitability
•   Field Service & Mobile Workforce Management

Among the confirmed speakers are: Peter Rudzio, CLAAS Service and Parts; Wim Vercauteren, Manitou Group Alvaro Lizarraga, SANY Europe; Waldir Gomes Goncalves, Embraer Executive Jets; Robbert Kerber, LuiGong Machinery Europe; Per Stjernqvist, Volvo Construction Equipment Denmark; Alexandre Marrot , Xerox;  and Professor Tim Baines, Director of the Aston Centre for Servitization Research and Practice.

For more details and to register to attend click here:

 

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An executive summary of Noventum’s new publication, co-created with the participants of Noventum’s Service Innovation Programme and the Aston Centre for Servitization Research and Practice...

Looking at the industry trends, it appears that IoT, Industry 4.0 and product digitalisation will substantially affect competition, profitability, and the structure in many industries - as did the previous wave of Internet-enabled IT.

To be prepared and to define their strategy, companies must understand how smart, connected products impact industry and their service organisations, as well as the way companies do business. Service business is an essential part of most new business models that companies are implementing. Within the service business, it appears that Customer Business Related Services are driving the growth, while Product Related Services will shrink, if not managed very differently than today.

The major trends that appear to drive the development of advanced services are the;

1. Growing demand for Customer Business Related Services
2. Customers wanting to ‘’consume’’ technology, instead of ‘’owning’’ it
3. Increasing importance of Brands
4. Growing need for Customer Experience Design
5. Increasing globalisation
6. Implications of the Internet of Things (IoT)
7. Companies recognizing the need to capitalize on Industry 4.0; and
8. Companies requiring to develop Big Data Analytics capabilities

These industry trends are affecting the way manufacturers have to compete, it will impact their profitability, and it will change the structure in many industries.

In order to increase revenue from advanced services, companies face (amongst many) four top challenges:

1. How to manage the consistency of service delivery across regions and geographies in order to deliver a consistent customer experience, increase productivity and optimise the service delivery.
2. How to adapt sales skills, methodologies, systems, measurements and incentives to move from a product selling to a consultative sales approach and so support the sales of advanced services.
3. How to manage the development of a new services offering so that the value proposition to customers is improved and new services are brought to market faster than the competition can do it.
4. A model was developed that shows how most companies follow a similar path of evolutionary steps to reach a state in which the most valuable, fast growing and most profitable services are being sold and delivered. It is very difficult for companies to skip a step, as the capabilities of any of the previous steps are needed to be successful in the next. 

Noventum’s new book elaborates in detail on the required changes and the capabilities that a service business must develop in order to go from a reactive to a pro-active service business. As the maturity of your service organisation develops, the type of services you offer evolves.

And by differentiating yourself based on your brand, you can provide more value to your customers, while allowing for bigger margins.

The main areas to address for running a successful business are:

• Customer Journey
• Customer Value Perception
• Business model
• Company Value Management
• Service Propositions
• Marketing & Sales Model
• Delivery Model
• Knowledge Management
• Technology Management
• People Management
• Customer experience management

Generally, the participating companies felt they had a reasonable understanding about the mega-trend of manufacturing digitalisation and the service opportunities it represents, but had not yet transformed this into a sound strategy, roadmap and execution. If they had, they had actually just started.

At the end of one of Noventum’s Service Innovation Projects, titled “From a Reactive to a Proactive Service Business”, a workshop was facilitated, titled ‘Challenges and barriers of implementing advanced services’.

All participants were asked to indicate their main challenges in moving forward to a more service centric (or even customer centric) company value proposition.

Then challenges were categorised by themes. The three biggest themes were:

• Skills, in particular sales skills
• Company culture and
• Organisational buy in, in particular winning the support of the corporate executive board

Participants felt that the market and customers are (or seem to be) able to accept the service transformation. Most of the challenges to overcome are internal. Many companies have begun to make real progress, accelerating their pace of change, while slow-moving competitors fall further behind.

 

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