Steve Downton, Downton Service Management Consultants Ltd, Noventum Group
Our research, initiated last year and extended this year, has reinforced the conclusion that certain strategies are proving to be most effective in creating increased revenue by providing the customer with what they require. However, translating a strategy into a realisable goal is not always achievable, top down, because there is not a clear understanding of the drivers or customer environment at senior level within the supplier and sometimes too much emphasis is placed upon dealing with symptoms, rather than tackling actual causes. Converting a strategy into an achievable goal is not achievable bottom-up, unless there is top-down commitment! Successful companies focus on the customer’s developing needs to anticipate the need for change and not wait till the customers leave. They have effectively learned to combine top-down commitment with bottom-up understanding through close attention to the experience of their customers and their customer interface staff.
When dealing with a service organisation, working from the “bottom-up” means working from the customer interface, and therefore the approach must recognise the customer will be responsible for significant input and reaction to change. A major change in operation might require moving customer interface staff from one area to another; this will obviously have an impact on the customer interface staff, but also their customers, which could jeopardise any relationship that the customer interface staff have managed to develop with individual customers, using the processes in place. The processes can pose the biggest problem to both customers and customer interface staff, and a new support person might not be able to provide the protection afforded the customer: the original support person able to manoeuvre against the worse excesses of the processes, while they may not be clearly visible to the new support person. Making changes without considering the need to examine the process or the way it has been modified is inadvisable, and result in a symptom being addressed, but the cause remaining unresolved, usually with a consequent loss of customer loyalty. Poor processes can have a significantly negative impact on customer loyalty, when the customer has very different opinions about what they value as opposed to what is delivered.
Understanding these nuances only comes with experience of the way service operations work at the customer interface and how they are developing in response to the changing environment. It must seem like a cry-wolf situation (or even the service mantra) to the rest of the company when service says the customer requirements are changing rapidly and becoming more and more demanding; others may not be aware of change because the business is making the same products, and customers still appear happy to buy them. The problem is that feedback into the rest of the business tends to lag reality when it is based around sampling during product development and product introduction, and does not refer to continual sampling of the current usage of the product or services by the customer.
Service can provide continual customer views through liaison with customers and service interface personnel, but very few companies realise the value of continual sampling or that they can use their service personnel to provide such feedback, preferring to see the role of service only as a means of looking after the customer so that they are satisfied. This misses the point that the customer can be very satisfied with the product and service but still provide valuable information as to the quality, versatility, and usability etc of the product, to enable upgrades and development to enhance the potential of the product to remain ahead of the competition. This is demonstrated graphically in Figure 1 below.
The service operation has to become the voice on the Board, supporting its primary role to feed responses back from the customer to the business. This close alliance with the customer is often referred to as customer intimacy, and is an effective mechanism of understanding the customer experience, and recognises the role of the customers in helping the supplier to continually improve product quality performance, and how to increase the relevance and usability of the products for the customers.
The best way of achieving customer intimacy is to gain recognition from the Board that the service operation is not simply a provider of good service and satisfied customers but can generate and contribute to the profit of the business by working closely with product development, sales and marketing, and of course, the customers.
Product quality will have a profound effect upon the cost of service and the overall level of customer loyalty and satisfaction, but the service operation can still add value, as a conduit for the customer to comment on improvement opportunities and place the focus on how the products and services suitability for the customer can be developed, improved and made more cost effective so that they generate increased value for both customer and supplier.
One key area where customer relationship is changing is in the way most people now obtain service. Establishing the most effective mode is a key strategic imperative, and the switch from time and materials to contract-based support has heralded this change in how customers receive service. Product quality is improving the lifespan of products, and as the requirement for equipment to be working at all times becomes more pressing, contracts on equipment that is “mission critical” (equipment without which a business cannot function) as opposed to “mission sensitive” (equipment which the business can function without for a while) are now a regular offering which more and more customers are taking up, demanding excellent performance to ensure continuity of operation.
Service contracts come in a number of types, from complex penalty-driven service level agreements to basic extended warranties. Many of these contracts were originally set up around performance targets – first time fix, response time and restore - driving the wrong kind of behaviour, and not allowing a real consideration of customer need. Many of the contracts currently being drawn up focus on what is valuable to a specific client and on the availability of equipment – such considerations will vary by type of asset and quantity, providing a much more effective value-pricing policy through which the customer and supplier can work together to the benefit of both. Recognising this change in relationship as a change in strategic positioning, will help the business to consider any important changes in the operation that need to be put in place. There must be a switch in emphasis from simply reactive repair towards proactive prevention of failure of the product, with follow-through once the equipment is up and running: this requires a whole new way of working for both supplier and customer. A straightforward example could be a scanner in a hospital, where remote monitoring can identify early symptoms of equipment problems, and reduce the unplanned downtime; if a failure does occur during a clinic and it is necessary to rearrange patient appointments and re-schedule doctors, physicists and clinicians, a pre-planned contingency process can be quickly implemented to reduce the effect of the machine not working.
Most service operations have become very good at reactive repair but are still coming to grips with prevention, as some are not quite sure that the concept is truly valid (is it possible to really predict random failure)? However preventative support can be delivered through a number of activities, including preventive maintenance, remote monitoring, machine to machine downloads etc. and is becoming a premium marketable solution. Many companies have never considered providing service beyond fixing the failure as they do not consider the consequent disruption caused by the failure as their responsibility. It is generally the disruption that causes the most stress for the customer, and minimising such a problem positions the supplier as a value-adding partner, not just a cost-effective repair agent. Most customers see such follow-on activity as true value-add, and increased revenues accruing from dealing with the ramifications of any failure has reportedly increased being valued at over 50%, and can cement and strengthen the relationship with the customer by being the provider capable of providing total support, (one-stop-shop) and of course generate more revenue for the supplier and the customer through improved recovery time. A visible service operation performing constructively can come to be viewed very favourably and follow-on up-selling by the sales team becomes much easier as they gain endorsements from a wide range of staff.
Positioning the service operation in this way is a significant strategic move and transforms the image of the service operation from a group of great fire-fighters into much more – a professional support team able to avoid a problem in the first place, but if a problem arises, able to fix it quickly and make provision to deal with the consequences of any failure in a planned and efficient manner. The customer support interface can strengthen the bond and increase the loyalty between customer and supplier, positioning the supplier company and the support team as providers of a service solution, not just a service repair.
