Magazine Article | May 20, 2008

Strategic Service Management: A Road Map To Best-In-Class Performance

Source: Field Technologies Magazine

Aberdeen Group research provides insight on how to best manage your field service organization to maximize revenue, profits, and customer retention.

Integrated Solutions, Industry Leaders in Field Service & Mobility

Globalization, cost pressures, and empowered customers are forcing businesses to distinguish themselves on the uniqueness of their products and the quality of their service operations. Increasingly, revenues, profits, and customer loyalty are being driven not by initial product sales, but by postsale service and support. As a result, many forward-thinking companies have moved away from managing service as a tactical cost center to managing it as a strategic profit center. This approach has been coined Strategic Service Management, and its success depends on effective collaboration across functions and an underlying integrated technology infrastructure to support service processes. Research by Aberdeen Group illustrates how service organizations that have embraced this approach have benefited and steps other companies can implement to achieve similar results.

Aberdeen used four KPIs (key performance indicators) to distinguish best-in-class service companies from industry average and laggard organizations. The KPIs were percent of total revenue and profits derived from postsale service, customer retention rate, and customers covered by service agreements. Best-in-class companies were defined as the top 20% of performers, industry average companies were defined as the middle 50%, and laggard companies were defined as the bottom 30%.

The results of this research clearly indicates that best-in-class companies that embrace Strategic Service Management realize 75% higher revenue and 111% higher profits from their service operations than other companies. They are also three times as likely to report a customer retention rate greater than 90% and twice as likely to achieve an SLA (service level agreement) rate greater than 90%. Table 1 provides a breakdown of the KPI results of best-in-class, industry average, and laggard companies.   

Now that you've seen the bottom-line benefits of adopting a strategic service management approach, you might be wondering how you can put your organization on a path to achieve similar results. Aberdeen applies a methodology to benchmark research that evaluates the pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. The PACE framework provides industry average and laggard companies with a structured way to understand how best-in-class companies achieved their superior performance. PACE terms are defined as follows:

Pressures: external forces that impact an organizations' market position, competitiveness, or business operations
Actions: the strategic approaches that an organization takes in response to industry pressures
Capabilities: the business process competencies required to execute corporate strategy
Enablers: the key functionality of technology solutions required to support the organization's enabling business practices

Whether your organization is trying to improve its service capabilities from laggard to industry average or industry average to best-in-class, the following actions will help spur necessary performance improvements.

Measure service profitability, customer retention, and service revenue regularly. Companies with a tactical approach to postsale service tend to measure performance with internally focused metrics like work orders completed per day per technician and service part fill rates. Internally focused metrics alone are insufficient in measuring the total customer experience. Today's senior service executives need visibility into customer-focused metrics like first-time resolution rate, on-time arrival compliance, continuity of care, and mean time to repair. In fact, 78% of best-in-class service companies systematically and frequently measure these metrics along with service profitability, customer retention, and service revenue, compared with 41% of other companies.

Appoint a senior level executive to manage postsale service. Seventy percent of best-in-class companies have a senior executive (VP level or higher) responsible for postsale service, while more than half of average companies do not. Executive ownership does not ensure best-in-class status on its own accord, but is a critical step in the journey. The one issue that clearly separates the best-in-class companies from the rest is this single point of accountability with access to the chief officer. It is imperative that the service operation function as a cohesive business unit in order to deliver top- and bottom-line results.

Gain a real-time view of service demand and resource capacity. An accurate and real-time view into near- and long-term service demand (e.g. maintenance, repair, or installation incidents) and resource capacity (e.g. people, parts, and vehicles) is a critical supporting element of Strategic Service Management. Service managers must stay on top of future technician availability, training time, spare parts availability, and vehicle availability. In order to do this, most companies need to shore up their data management processes. Companies hoping to drive growth from their service operations must ensure that critical customer, resource, work-order, contract, and asset information is up to date, accurate, universally accessible, secure, and relevant by role.

Implement field service technologies to optimize visibility and integration. In order to gain increased visibility into their service processes, many best-in-class companies have implemented technology to provide a holistic and integrated approach to managing resources, partners, contacts, and customers. Furthermore, 67% of best-in-class companies have either integrated their service-specific point solutions or deployed a strategic service management system that includes multiple functionalities in one place. Of the best-in-class companies that haven't already deployed a service management system, 14% plan on doing so within the next 18 months.