Service: The Essential Business
By Sumair Dutta, director of digital transformation at ServiceMax
During the pandemic, as product revenues have suffered, service has become the source of resilient revenue for many organizations. We saw the critical nature of service in uncharted times, especially as access to customers and assets was restricted. Service was seen as a lifeline to keep customers going, especially when these customers were relying on critical assets that could not be shut down during the pandemic. For those with business shutdowns, service was the bridge to prepare for eventual re-openings. Organizations need to ensure that unexpected interruptions don’t stand in the way of a production or performance ramp-up.
Will this increased emphasis on service continue, or will we slide back to the ‘old normal’? Chief Service Officers aren’t waiting around. Many have been afforded the opportunity to accelerate digital initiatives, particularly ones focused on operational efficiency, process control, and workforce safety. In conversations with service leaders over the past year, I’ve found that Prediction, Agility, and Resilience are critical for those looking to build sustainable service businesses. These three characteristics are common in the top five actions I believe service leaders must pursue to achieve success. These elements are also a critical part of the actions that service leaders must take to strengthen their business performance.
1. Use the Installed Base as Your Growth Foundation
Capturing and mining installed base data isn’t sexy and doesn’t capture the headlines, but it is critical. The truth is that companies can improve business predictability, develop and inform new service channels, and better target regional marketing and sales efforts when installed base (IB) data is more accurately captured and utilized. Installed base knowledge is essential to know how many assets are out there, what percentage of them are covered by contracts, and what condition they’re in. Knowing what’s covered and what’s not creates revenue opportunities, and cleaner IB data means a better platform on which to train algorithms and AI. It also means you can better understand the lifecycle and cost implications of new or aging products as their dependencies change. Lastly, it also enables better insight into skill requirements for your technicians.
2. Establish the New Definition of Service
Remote and self-service initiatives were accelerated out of necessity in 2020. Now service leaders must consider how these pieces fit together in the overall value proposition that they provide to their customers. Areas such as entitlement management and workforce scheduling, typically reserved for field service delivery, now need to be extended to remote support service models. Performance tracking metrics need to be revisited to ensure that things like remote resolution rates or self-service driven deflection rates are defined, measured, and tracked. More so than ever, the service experience extends beyond the field service interaction, and service leaders need to ensure that they have the right systems and measures in place. This is essential to monetarily capitalize on these trends while also providing a seamless and channel-agnostic experience to customers.
3. Don’t Forget the Customer
In 2020, most customers demanded more virtual support, either via self-service channels or through remote support. This came out of necessity given the impact of the pandemic. While service organizations have responded with great agility, they must ensure that their customers continue to see value in these channels. If the service provider plans to continue delivering virtual support, but customers expect to go back to field-based models, then the results will be less than ideal. Service leaders must continue to validate the value of alternate service models with their customers to ensure that there is no misalignment. More so, these new models of interaction might place additional requirements on the customers wherein they need to invest in technology or skillsets that they never had before. Service organizations must remain cognizant of these impacts and continue to focus on the effort that a customer needs to expend to attain necessary support.
4. Develop a Better Understanding of Contract/Account Profitability
With better digital tools to track and manage the service work being done, it becomes easier to track profitability and determine precisely where you are actually making money, and where you aren’t. It is necessary to identify and restrict any areas of leakage. These might occur due to poor visibility into entitlements, a desire to over-deliver, or limited tracking and validation of work done on an asset. Any leakage incurred is 100 percent lost margin. You’ve already captured and reported all of the costs. As you address leakage, it also becomes vital to develop a more granular level of service profitability, whether at the customer, asset, or contract level. This will help organizations understand which customers/contracts to prioritize or to determine where pricing adjustments need to be made for products and services.
5. Design for Outcomes and Bring in a Circular Mindset
Most organizations aren’t currently set up to deliver outcomes to their customers. This is because the objectives of the groups responsible for the design, sale, and support of the product are misaligned. Outcomes are seen as a responsibility of the service organization and this mindset has to change for outcome-based models to be successful. For instance, if the delivery of uptime is the outcome that a customer requires, then all the bells and whistles considered at the design stage might not be as relevant. What might be more relevant is the connectivity and serviceability of the asset that allows for a more predictive service approach or one that prioritizes time to issue resolution.
Similarly, the commercial relationship may look very different from one that is transactional to one that’s built on data transparency to ensure that there is agreement on the outcomes being delivered and paid for. And eventually, the service organization might have to rethink its model to ensure greater availability of parts or replaceable components so that there is less time spent fixing the asset in the field and more in replacing components to ensure uptime. This creates an added need to improve the return, recycling, and depot-based repair infrastructure, creating what some are calling the circular economy. There is a significant change required to profitably deliver outcome-based services, but organizations can begin by leveraging data to improve their internal collaboration.
On the surface, 2021 looks to be just as, if not more, uncertain as 2020. According to the World Economic Forum, it could take until 2023 for economies to fully recover – and that’s if nothing else changes. While service teams and leaders are more familiar with the ‘new normal’ of work, not all are prepared to be as agile as the environment requires. We strongly believe that the framework of success in these uncertain times can be built on three major characteristics: Prediction, Agility, and Resilience. These three areas will not only govern the investments made by service leaders but will also be the characteristics that define a successful CSO in this new era.