Service Transformation Consulting

Understanding Service Transformation

Video text: 24/7 service. No breakdowns. Immediate response. Preventive Service contracts. Digitalization. Finding Experienced engineers. Do you recognize these? These are the typical service business challenges of manufacturers that provide services every day. As a manufacturer providing services, you must develop your competencies to deal with the business environment. That day by day becomes more complex with price pressures going ever higher on traditional products. We all know that products can be copied, but a strong service culture and a strong brand cannot be copied and provide long lasting competitive advantage. Manufacturers that want to grow their service revenue need to change their culture from an inside out to an outside in culture. Therefore, manufacturers must transform and implement new service based business models that will allow them to grow and improve profit margins by building strong relationships with customers. 

Moving from reactive to proactive maturity

Video text: Every manufacturer follows a similar growth path from providing product related services towards providing customer business related services. It usually starts with warranty time and materials like spare parts as a reactive service, followed by preventive maintenance contracts, which are obviously more cost effective for the end customer. Next step after that is typically that you provide full service contracts like service level agreements as part of these preventive service contracts That also specifies the level of service like an uptime or response time. Now, as soon as products become connected through an Iot platform, that data can not only be used to be more predictive in, for example, maintenance, but can also be used to provide more remote services, a lot more cost effective remote services. The same data can often also be used to help customers addressing other, let's say, business challenges. Therefore, we call them customer business related services that are provided. And typically these are provided in a proactive way because customers may not know that you can help them with some of their challenges. So you have to make them aware. You have to kind of educate them that whatever they are doing, there is a better way of running their business with proactive customer business related services.

The growth path to service maturity

Video text: The service growth model has two big blocks. The first one is product related services and second one the customer business related services. Product related services are those services that start with manufacturers providing a warranty service for their products. Then they start selling spare parts and field service repair services, and that is usually in response to a customer request. So, it is reactive. And when customer demands more cost effective, maintenance manufacturers start offering preventive maintenance contracts. These contracts evolve into full-service contracts that reduce the risk of using the technology. They may also include defined service levels such as response times, uptime or other service levels for which the service provider becomes responsible. This is recorded in a service level agreement whereby service levels are measured and managed. Now predictive services are added when products become IoT enabled, and the service organization can predict service events. This further reduces the risk of using the technology for the customer. It improves service levels, and it can significantly reduce costs. At the same time, companies move from a field service centric model to a remote by default service delivery model using remote assistant technology such as augmented reality and knowledge management systems that improve their remote support centres. The second part of the block is customer business related services. That next growth phase starts when products are IoT enabled, and they relate to addressing customer business challenges rather than only the technical product related challenges. 

Service business and the customer experience

Video text: The relationship with customers will change once a manufacturer is providing proactive customer business related services. The customer no longer sees the manufacturers as a product vendor or preferred supplier. As now the positioning is that of a solution provider. So combining products and value adding services in a solution for a problem or even a trusted advisor. They will ask for advice for important decisions. Eventually, the more valuable the services are. The manufacturer is seen as a strategic business partner that is highly integrated in the customer's business operations and may also be a partner in a digital service ecosystem. At every step of the development of the relationship, the value of the relationship increases and becomes more long term oriented for the service provider. This also results in predictable and sustainable revenues and profits. 

Achieving service business success

Video text: To get to the next level in the service growth model, manufacturers follow a typical service business transformation journey. This is where the big challenge is. Let's look at the situation of a large multinational company. First, they must set the climate for change. This is usually done by benchmarking with service industry standards and best in class service business performance. This step requires making it very clear for all the stakeholders how the business can be improved. What customers really need and what the benefits of change are. Secondly, all stakeholders must become aligned on a vision for the future of that service business and the strategic roadmap that explains how and when to implement the vision. A third step is to design the details of how to manage the transformation, how to engage all the stakeholders, design the new organization, and design the new service portfolio. A consistent brand driven customer experience is very difficult to manage. Therefore, standardization or better standardized personalization of service sales and delivery is the key to success here. Therefore, a fourth step is to design how the services will be sold and delivered. We also call that the service operating model, which has several dimensions. The first dimension is customer experience design. That has to be according to the expectations that the customer has from the brand. They should perceive the values that they had expected from the brand. Then processes that are usually standardized at a global level to create efficiencies and economies of scale. 

These are the policies and business rules that serve as managers must agree on to make the global processes work. For example, defining service levels, defining a common severity scheme and escalation policies. Et cetera. Another one is performance metrics that should have a uniform service industry standard definition of how performance is measured and managed. And then lastly, roles and responsibilities. And that include the identification of the competence competencies required for each role. The fifth step is to identify the IT requirements and select a common service IT solution architecture. So we speak about architecture because it can involve several IT platforms and best of breed solutions that must be designed and built for the best possible customer experience. It's important to follow service industry standard applications that that have proven to work and to avoid custom build solutions. Then the sixth step would involve implementing the IT solutions and rolling it out on a global scale. So this involves a lot of organizational transformation because there are always different ways of working and different subcultures in a global company. So proactive engagement of all the stakeholders through communication, training and managing the required organizational and often personal transformations is the challenge here. The last and final step is scaling it up. So once the organization is ready for growth and the service factory is running smoothly, double digit growth of revenues should become possible without overloading the organization.