ENGAGE TOP MANAGEMENT

A division of a German engineering group, that had traditionally produced and sold large machines for the paper making industry, had built a modest service business totalling less than 5% of the division’s total revenue. Their current service offering consisted of providing spare parts, reactive and preventive maintenance service contracts.

The Challenge

Two senior managers were having difficulties in convincing the board

The company was facing several challenges:

Price pressure on new equipment sold was increasing due to increased competition from Chinese suppliers
Annual growth of the company had been below industry average for the past 5 years
Profitability of the overall business was going down

Two senior managers saw several opportunities to grow the service business but were having difficulties in convincing the board of directors to strategically invest in the service business in order to develop its potential.

What was done?

The service director used the knowledge and tools from the Service Transformation Centre to convince the CEO of the company to invest in growing their service business.

The following steps were taken:

A financial and operational benchmark was performed of the company’s performance against a comparable group of industry leaders. The report included the growth and profit potential for this company if they would strategically invest in the development of their service business.
A web-based survey was sent out to several hundreds of customers immediately after the most common interaction point of a customer service request by phone or email, a spare part order request, an on-site visit by a field engineer, and following a visit by a sales person.
Several customer interviews were conducted using video conferencing. The interviews were analysed, and a short video compilation was made to high light the key conclusions about what the customers’ service expectations were and what service they were actually receiving.
Growth potential and productivity improvement opportunities were prioritised, and the conclusions were discussed during a workshop with the board of directors of the company. The result was a commonly agreed and documented vision with the strategic and financial objectives defined and a service transformation roadmap for the coming years.
A short-term plan was made that secured the first real result within the first year. In addition, a multi-year roadmap was implemented by setting up the service transformation governance programme organisational structure, planning and funding.

Benefits

The financial results in the past 5 years have been a sustained double-digit growth with profit margins above the industry average.

The result was that the board of directors understood that customers were expecting more help from the company. They expected help addressing their business challenges such as improving their competitive position with smart outcome-based services, industry knowledge, data and information systems that would help customers to lower production cost by integrating several players in the value chain.

The company has started their service transformation journey by implementing the multi-year strategic roadmap. This contains several projects that required substantial investment, organisational change and the development of new capabilities in the company. The financial results in the past 5 years have been a sustained double-digit growth with profit margins above the industry average.

Get buy in from the top management to change the business model to service: Find the steps enabled by methodologies, tools and coaching available through our Service Transformation Centre.

Don't miss the chance to gain access to Noventum's service expertise and best practices, tools and methodologies, all gathered together in the STC!