Enterprise Service Management System Trends

 

enterprise-service-management2There has been a lot of attention given in recent years to the need to automate field service and related logistical processes through the implementation of Enterprise Service Management (ESM) systems.   Although the benefits from improved automation are well documented, there is still a segment of the market that is facing challenges to achieving measurable productivity and efficiency gains associated with key service performance metrics.  This shortcoming is due in part to lack of integration between Field Service and Reverse/Service Logistics functions.  The growing trend toward remote support combined with the increasing reliance on spare parts in the service resolution process places even greater demands on equipment service providers to ensure their field service and related logistical process are both integrated and optimized.   We conducted a survey among a cross representative sample of companies in the High Technology Service & Support Industry to validate these assumptions.  Over 250 respondents participated in the survey.  The survey results reveal a number of very interesting trends:

  • Greater reliance on Remote Support: The survey results support the fact that more and more service requests are being resolved remotely without the need to dispatch a field service engineer. More importantly, a large percentage of these remote activities are resolved by sending a replacement part to the customer site.
  • Best of Breed Solutions outperform Integrated Solutions: Despite the breadth of functionality found within integrated enterprise systems, our results indicated a higher level of satisfaction with Best of Breed solutions than with Integrated ESM platforms. We believe this is because best of breed solutions are more focused on the detailed processes and transactions involved in managing a field service and/or reverse logistics operation.
  • Perceived Gaps in Reverse Logistics functionality: Many companies perceive their ESM solutions have gaps in the ability to deal with Reverse/Service Logistics issues particularly when it comes to depot repair activities.
  • Integrated Automation is critical to success: The level of integrated automation between Field Service and Reverse/Service Logistics functionality has a direct impact on ESM effectiveness. More importantly companies with a high level of integrated automation perform better on key service performance metrics than those who do not.

 

In summary, our research findings reveal that companies who have been able to successfully integrate Field Service and Reverse/Service Logistics processes report a higher level of service performance than those who have not.  The most effective integrated solutions are those that incorporate best of breed functionality for both Field Service and Reverse/Service Logistics processes.  More importantly, the data reveals that these integrated solutions are not only highly effective in managing ongoing service requirements but essential to overcoming critical business challenges.

We’d like to thank IFS, a leading provider of Enterprise Service Management systems, for sponsoring our research study.  IFS has made available the results of our study in a 14 page whitepaper that can be downloaded at Whitepaper Download.   To better understand the implications of these findings to your organization or to define requirements for a best of breed, integrated solution, schedule a free strategy session with us today by clicking here.

The Five Most Important Trends Impacting the ITAD Market

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In my last blog post, I provided a high level summary of key findings from the recent market research study we conducted for Arrow Electronics on the topic of IT Asset Disposition Trends.   Now that I’ve piqued your interest, I thought I’d share five important data points from the survey results:

  1. 9 out of 10 companies in 2014 have a formal end-of-life ITAD strategy
  2. Nearly 2 out of 3 companies surveyed choose to have a 3rd party service provider manage their end-of-life assets
  3. The most important factors in selecting a 3rd party service provider are adoption of compliance standards, well documented chain of custody, and high quality reporting
  4. 95% of companies feel that R2 and/or e-Stewards are the most important environmental standards related to ITAD
  5. Nearly 9 out of 10 companies feel that R2 and e-Stewards should be combined into a single standard

 

These findings validate the fact the ITAD has gained increased attention among not only IT Managers but C-suite executives as well.  However, these findings reveal that most companies do not view ITAD as a core competency.  Instead they choose to outsource it to 3rd Party Service providers.  This explains the increased level of competition within the ITAD market as more and more companies enter this space.  It is not just start-up specialized ITAD vendors that are pursing this opportunity but well established IT Service providers and distributors like Arrow Electronics who view ITAD as a natural extension of their product and service offerings.

Given the large playing field of competitors, end-customers are becoming increasingly selective about who they choose to conduct business with.  Among the most important factors are compliance standards, documented chain of custody, and IT reporting and analytics.  It is interesting that while R2 and e-Stewards are perceived as the most important environmental standards, an overwhelming majority of end-customers believe that they should be combined into one, single standard. This suggests that these standards are used interchangeably by end-customers.  Possessing one or both of these industry standards is simply not enough for an ITAD service provider to differentiate itself in the marketplace. While many companies can lay claim to a well-documented chain of custody and superior reporting capabilities, we believe that its additional industry standards such as RIOS, ADISA, NIST, and knowledge of best practices to minimize risk, reduce waste, and maximize recovery values that set one ITAD vendor apart from one another.  If you haven’t read the Arrow IT Asset Disposition Trends Report, we suggest you obtain a copy, click here.    To discuss the implications of this report on your company or business, feel free to schedule a free 30-minute strategy session with us today.

A Strategic Analysis of ITAD Trends

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The data is now in from our large scale market survey conducted on behalf of Arrow Electronics on the subject of IT Asset Disposition (ITAD) trends.  The results validate a popularly held view among IT industry practitioners that ITAD considerations continue to be a top concern for all size companies.   In fact, knowledge of ITAD best practices continues to evolve and improve among C-suite and IT Executives.  However, as one might expect the issues and concerns between the two groups vary somewhat.

Our research also indicates that all companies, regardless of size, are more likely today than in the past to budget for the ITAD process.  In addition, corporations are becoming more aware of penalties arising from improper disposal of IT assets, which has led to an increased implementation of formal ITAD strategies.  While the most important factors for creating an ITAD strategy have remained the same over the last few years (data security concerns, commitment to “Green” business practices, and mitigating legal and financial risks), companies are far less likely to apply their ITAD strategy outside of North America.  It is also clear that companies who have developed a formal end-of-life ITAD strategy are far more likely to have an ITAD provider handle their IT assets when compared with companies who do not have a formal ITAD strategy.

Companies using a 3rd party service provider to manage their end-of-life IT assets are currently very satisfied with their providers.  When choosing these providers, ISO industry certifications are particularly important, with R2 and e-Stewards being the most important environmental standards.  Due to their equal level of importance and credibility, most companies feel that R2 and e-Stewards should be combined into one standard.

While most companies have a data security policy regarding their end-of-life assets, data security concerns are still prevalent.  Data security concerns are particularly high among companies with a formal ITAD strategy as well as companies who use 3rd party service providers.  Most companies use multiple tactics to alleviate data security concerns, which includes using 3rd party service providers.  However, with nearly 2 out of 3 companies selecting a method such as “Delete the file directory on the hard drive” which does not fully eliminate the potential for data security breaches, there remains some uncertainty as to which methods are truly effective.

With most companies adopting a BYOD policy that allows employees to bring at least one device to work, there has been a dramatic increase in the implementation of policies to ensure that company data on BYOD devices is secure during active use.  The vast majority of companies are also implementing policies to ensure that company data on BYOD devices is eradicated once those devices are no longer active on the company network.

Corporate social responsibility/sustainability has also become increasingly important, with approximately 93% of companies expected to have a program in place by the end of 2015.  Companies who currently have a corporate social responsibility/sustainability program in place typically report their program’s progress in their annual report and/or other forms of corporate communication, both public and private.

The cloud is having a significant impact on the purchase of IT assets, with a majority of companies purchasing more assets to support the cloud.  Some of these additional assets purchased likely include tablets, whose use continues to increase.  As a result, ITAD practices and policies will continue a critical topic among C-suite executives and ITAD Managers.

Details of our survey results can be found in the Arrow IT Asset Disposition Trends Report. To obtain a copy, click here.

The Impact of IoT on Enterprise Service Management – Part II

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As follow-up to last week’s blog post, I wanted to share some more answers to Frequently Asked Questions (FAQs) about the impact on IoT on Enterprise Service Management (ESM):

  1. What new skills sets are required to support an IoT environment?   IoT generates an extensive amount of real time data, some of which of is unstructured. In order to make use of this data in any meaningful way, a service provider will need to employ “data scientists”. These are individuals skilled at analyzing and interpreting data through predictive analytics.
  2. What impact will IoT have on Call Center personnel? The always on nature of IoT and its ability to send automatic alerts to the service organization will reduce the demand for personnel that handle basic call handling and dispatching procedures. However, there will be a greater need for remote support personnel with the ability to monitor service events in real-time, apply predictive analytics, and initiate corrective action.
  3. What will be the role for Field Service Engineers (FSE)? IoT has the ability to improve the percentage of service events that are resolved remotely without dispatching a FSE.   This does not necessarily equate to a diminished role for FSEs. In fact, the need for FSEs will increase. First, FSEs will be required to deploy IoT solutions. Second, FSEs will be needed to provide onsite diagnostics and troubleshooting when remote resolutions prove ineffective. Third, FSEs will function in the role of onsite consultant in helping the customer obtain maximum benefit from the technology operating at their site.
  4. How will IoT impact the Supply Chain?  Most people agree that IoT will enable Supply Chain personnel to proactively ship a replacement part or consumable to the end-customer before the customer is even aware of their need. The reverse logistics supply chain will also benefit from IoT in the sense that it will gain better visibility into events occurring at the field level that impact demand on return center and depot repair operations.

I know that these answers barely scratch the surface of the questions people have about the impact of IoT on Enterprise Service Management (ESM).  In the weeks and months ahead, I will continue to share my insights on IoT and ESM.  As always, I am interested in other people’s perspectives on this subject.  Please feel free to post any comments, thoughts, or fun facts that could help advance the body of knowledge around this subject.

The Impact of IoT on Enterprise Service Management – Part I

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Last week I attended the IFS World Conference 2015 in Boston, MA and participated in a panel on the subject of the Internet of Things (IoT) and its impact on Enterprise Service Management (ESM).   The other members of the panel included Adam Brody, Director of Enterprise Systems at Sysmex America, Inc. and Tom Bowe, Global Industry Director, IFS, Inc.   We were asked some great questions by our moderator Jon Briggs and members of the audience who were comprised of industry analysts, members of the press, and other influencers.

I am taking the liberty in this blog post of sharing some the key questions that were poised to us and the answers I provided.  Here they are:

  1. Which service industries will be affected by IoT?  It is hard to imagine any industry that will not be affected by IoT especially when it comes to the area of service and support.   As long as there is a way to connect a sensor to electronic or electromechanical equipment, there’s an opportunity for IoT.
  2. How will the end-customers benefit from IoT?  The conventional wisdom is that IoT enables proactive service management. If you can see what’s happening with the equipment in real-time, then you can predict and anticipate what may happen next. Pre-emptive actions could be taken to avoid downtime or prevent failure.
  3. What is the financial gain to manufacturers from IoT? Manufacturers can collect real-time data related to system reliability and maintainability issues which enable them to be more precise in managing service resources.   More importantly, IoT provides manufacturers with a vehicle for offering premium priced services like remote monitoring and diagnostics, automatic replenishment of consumables, and proactive service management.
  4. Will there be divergence in usage between B2B and B2C applications? It’s possible that some segments of the consumer market may be resistant to IoT because they believe that it intrudes on their personnel privacy.
  5. What are the challenges to IoT adoption? One of the biggest challenges to using IoT Technology to transform service management is that it requires updates to the existing technology infrastructure. Some technology out there is 10 years old. If you really want to adopt IoT throughout the enterprise, every piece of technology has to be IoT-enabled. That’s going to take some time. Another challenge is learning how to make use of all the data and information collected by IoT.

 

We covered a few other important topics in this panel discussion which I plan to share in next week’s blog post, so stay tuned.  You might also want to check out the article appearing in Tech Target from Laura Eberle titled “How is the IoT changing Enterprise Service Management?”   Laura did a great job covering the key salient points from this discussion.  Last but not least, I’d appreciate it if you could add to this conversation by sharing your perspective on IoT and what impact it will have on enterprise service management.

Treat salespeople like the valuable assets they are

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With so much merger and acquisition activity occurring within the High Tech Industry, I thought it would make sense to understand how sellers should deal with their most valuable assets, their salespeople.  I posed this question to my friend and business partner, Joe Vanore at Everingham & Kerr, who gave me permission to republish this article from the company’s June/July 2014 newsletter….

Knowledgeable, experienced salespeople with strong customer relationships are worth their weight in gold — or perhaps the premium paid to acquire their company. So the last thing you want to do as you integrate your acquisition is alienate this valuable group of employees. Instead, focus on convincing sales staff of your merger’s merits and involving them in the planning process.

Thwarting the competition

As soon as your deal is announced, competitors are likely to contact your target’s customers to persuade them to jump ship, claiming that your combined organization will be too big or bureaucratic to effectively serve them. Competitors will also attempt to recruit your best salespeople.

Act quickly to thwart competitors’ efforts and reap the benefits that attracted you to the transaction in the first place. Help salespeople communicate the deal to customers by preparing a script that explains expected changes and how customers will benefit. Include FAQs and provide the name of a person in the organization who can answer questions your sales staff can’t.

Face to face meetings

Also be sensitive to the morale in the sales department. It’s not enough to communicate upcoming events via e-mail. CEOs of both organizations need to meet face-to-face with their salespeople as soon as possible to address rumors, reassure employees of their job security and discuss potential opportunities within the merged organization. Keep these presentations short and spend time listening to employee concerns.

Salespeople will — above all — want to know how the deal will affect them. For example:

  1. Will the sales forces of the two companies be combined?
  2. Will salespeople now be expected to sell the other company’s products or services?
  3. Will compensation and benefits change?
  4. How will the new sales department be structured, and who will manage it?

 

If you don’t know the answer to a question off hand, promise that you’ll respond as soon as possible — then keep your word. Following these meetings, salespeople can return to their work and communicate a consistent message to existing and potential customers.

Financial Incentives

Even the most loyal employee will consider a competitor’s offer if the price is right. So consider financial incentives, if you hope to retain top sales producers (and their customers) and encourage staff to cooperate with new colleagues and share knowledge.  Offering retention bonuses and rewards for maintaining and increasing sales — in addition to existing compensation plans — can help. Make such incentives easy to understand and clearly achievable. While interim bonus programs may be expensive in the near term, they can prevent sales from dropping off during the merger process. And they will help you generate far more long-term revenue to offset the immediate cost.

Ask the real experts

Because they work in the trenches, salespeople may have cross-selling and other ideas. Create a temporary sales leadership team to evaluate possible downside risk and increased sales potential. The team should include two to four seasoned salespeople who focus their efforts on retaining customers and maintaining sales during the integration.

There are many ways the team can help accomplish these goals. It can serve as a clearinghouse for customer concerns and employee confusion over the future of product and service offerings. Team members also might have ideas for new product and service offerings or combinations. Sales leaders can be valuable in identifying and monitoring at-risk accounts.

A fragile link

Although all personnel affected by a merger deserve honest communications and an opportunity to voice their concerns, it’s particularly important to keep salespeople in the loop. Your sales staff is your direct link to customers, and this link can be broken if it’s not handled with care.

Seven Ways to Win at Service Marketing

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Revenue growth is probably the single most important objective for executives who are responsible for managing service as a profit center or strategic line of business.  “I want to double my service revenue in the next 3-5 years” is an incantation that I hear constantly from business owners and executives.  That equates to a 20% or more growth rate per year.  Sure, this type of growth is easily achievable if the market is growing at this rate or faster.  I’ve found that these high growth targets are often triggered by management’s desire to take back market share from competitors or increase the share of service revenue contribution to overall corporate revenue.

While high revenue growth in a low growth market is difficult, it’s not impossible. A little hard work is usually required to achieve this type of performance.  To understand where the emphasis is needed, let’s look at where service market programs may fall short:

  1. Service Portfolio not meeting customer needs: Quite often service providers fail to meet their revenue objectives because their service portfolio is no longer meeting customer requirements. In other words, they have failed to offer services tailored to their customer needs. For example, offering only next day response when customers require same day.
  2. Pricing not optimal: If your revenue is flat or declining, you might want to look at how you price your services. Perhaps you service prices are no longer competitive. On the other hand, you may be underpricing your services in relation to the value you provide.
  3. Failure to understand competitive threats:   Many service providers, particularly those that are divisions of manufacturers, fail to understand the competitive threat of “mom & pop” third party maintenance (TPM) companies and/or in-house service providers.  For example, they often under estimate the value that TPMs provide to their customer and/or fail to develop an effective value proposition to compete against them.
  4. Failure to articulate value: How well have you articulated the value of your service offering to current and prospective customers? Do they understand the cost of downtime or the pain points that your services help solve? It is important that you not only articulate value to your customers but make sure that your sales people understand it and provide them with the appropriate sale aides and marketing collateral to support it. 
  5. Lack of communication & follow-up: One way to increase service revenue is by improving contract renewal rates. These rates often decline though lack of consistent communication and persistent follow-up about the value of services provided, when contracts are up for renewal, special incentives for renewing, and information on when they are about to expire. 
  6. Not asking for referrals: Referrals are the best and least expensive source of qualified prospects. The problem is most service providers forget to ask for them. Remember your customers speak to each other. They may be involved in the same networks and trade associations, or call on each other for advice and guidance. Why not enlist them in your business development efforts? 
  7. Lack of customer appreciation:    Your customers will remain loyal to you and purchase more from you when you let them know how much you value and appreciate them. It’s the simple things like a courtesy phone call/visit, thank you card, small gift (i.e., rewards program), or special offer that let them know you value their business.

 

These seven areas have one thing in common, they all benefit from market research.  Whether its information that will help you redesign your service portfolio or modify pricing, market research provides you with an unbiased and unfiltered perspective on what your customers are actually thinking and saying. You will learn things that you may not otherwise from a sale’s call or courtesy call made by a company executive.

Before you conduct research or make any changes, it is important that you have a baseline assessment of how well you service marketing program is working. You may want to consider an audit from an independent and objective industry consultant.     Schedule a free consultation today to learn more.

Strategic Value Drivers of High-Tech Service

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In order for a business to succeed it must have a clearly defined strategic value that it provides to shareholders, stakeholders (e.g., customers, suppliers, employees,) and the market place at large.  It is important to clearly define strategic value since it is the precursor to developing a value proposition and mission statement.  Furthermore, it forms the basis for the strategies, tactics, and programs that a business puts into place.

Nowhere is strategic value more important than in the High-Tech Service Industry.  All too often, service providers, especially those that are divisions of product companies (e.g., OEMs, VARs, Distributors) fail to clearly define their strategic value.  As a result, they fail to make any impact in reaching their business goals and objectives.   They are like a ship on an ocean without a sail, drifting aimlessly in whatever direction the winds blow.

We have found that there are at least three (3) common strategic values that High Tech  Service  & Support organization might chose to pursue/adopt. These include:

  1. Directly influencing the sale and adding value – A company who adopts this strategic value recognizes that service is very critical to the customer in their final selection to purchase a product.   In other words, it’s a value-added feature influencing the purchase decision. Dell is a great example of a company who uses service as a way of directly influencing the sale of products.
  2. Generating revenue and profits directly – This applies to any company that operates their service business as a profit center or strategic line of business. These companies recognize that customers are willing to pay for service independently from purchasing equipment. More importantly, their willingness to pay is based on the value-in-use of the service not it terms of the perceived cost. Much of IBM’s success in the 1990s was due to their ability to generate revenue and profits from directly selling services.
  3. Providing market control – Companies who embrace this value driver provide a broad array of services in order to gain account control. In essence, they engulf their customers with an extensive portfolio of basic and value added services in attempt to establish a trusted advisor position and influence future sales. GE is a prime example of a company that has achieved this result by offering its customers technology assessments, strategic planning, and other types of professional and value added services.

 

When establishing your strategic value it is important to select one and only one value driver.  Otherwise, it will lead to inconsistent performance and confusion in the market place. Strategic value cannot be defined in a vacuum, it must take into account the needs and requirements of your key stakeholders and align with your overall corporate strategy. For example, a company focused on generating services revenues and profits directly may find this goal at odds with its objective to increase market share in its product market.  Basically, the service division would be competing with the products line of business for resources and investments.   More importantly, your definition of strategic value will determine where you focus in terms of Key Performance Indicators (KPIs), such as investment considerations, business constraints you must optimize, and possible market outcomes.

Strategic value when set into motion is difficult to alter since your entire service program and corporate objectives are based on this.  It often takes a commitment from the C-suite and/or board of directors as well as persistent and consistent follow through from management to successfully redefine your strategic value in terms of measurable outcomes.   This change should not be pursued lightly.  Those who succeed at redefining their strategic value often do so after very serious consideration, typically involving strategic market analysis, risk assessment, and scenario planning.

Strategic value is the DNA of your service business. If defined poorly, your strategic value maybe a liability and bankrupt your company.  If designed optimally and implemented effectively it can lead to unlimited upside potential.

Strategic Market Analysis – The Foundation for Smarter Business Decisions

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Strategic market analysis is the solid foundation from which to build your business intelligence. Having careful, objective and professional analysis of the market place, competition, internal resources and capabilities and assessing future trends built on hard data and evidence is paramount.

All Companies have a critical need for strategic market analysis. Strategic market analysis provides an understanding of the market in which you are competing. Here are a few of the questions where you can achieve insights:

  1. What’s the total market opportunity?
  2. What is our current market share?
  3. Who are our main competitors?
  4. Is this a market we should be investing in or planning to exit?
  5. Should we consider merging, acquiring or selling?
  6. What market trends can we take advantage of, or do we need to address to grow?
  7. Does our business plan reflect market wants?
  8. Are there market niches we are missing, or should be growing?
  9. What are the market segments that are growing, or declining?
  10. Are we missing any important market segment opportunities?
  11. Do we have a deep understanding of our competitors which will allow us to exploit their weaknesses?

 

Planning and Allocating Market Analysis Resources
Planning and allocating resources for strategic market analysis is essential whether your needs are for proprietary or off-the-shelf research. The value proposition in making a sound purchase decision should come down to the strategic value of the information vs. the cost. When trying to make decisions, the place to start is with the most accurate and up-to-date information you can get . Outdated or bad information will result in a cascading effect of bad decisions. Because of this, allocating sufficient resources for strategic market analysis and business intelligence is absolutely necessary. These costs are insignificant compared to the capital, assets, and business failure you risk by making bad decisions based on flawed or obsolete data.

One note of caution, you should be of aware is that lower cost off-the-shelf research when not used for its intended purpose of broad view and general trend information will in the end cost more than proprietary research.

Proprietary Research or Off-the-Shelf Research
The important key to whether proprietary custom or off-the-shelf research is best for you depends. It depends upon answers to questions like these:

  1. Why do you need the data?
  2. Are you simply in need of broad trend data?
  3. Do you need it to plan and allocate operational resources?
  4. Do you need specific information on sub-segments of the market?
  5. Is having a deep dive on the competition required?
  6. Will you need data to enhance buying & decision making processes?
  7. Do you need strategic and market analysis?

 

Bottom line proprietary market research is the choice for comprehensive and specific information that allows you to make informed operational and tactical decisions. Also when you need more data points like:

  1. Market size and forecasts by product or region
  2. Deep dive competitive information
  3. Understanding market behavior, needs and wants
  4. Analyzing your capabilities to deliver against market needs
  5. The help of a market expert to leverage industry data from a proprietary databases

 

Off-the-Shelf market research is best for a broad view of the market without a lot of specifics. This type of market research attempts to satisfy the needs of most people wanting to gain a high level view of a market or industry.

When off-the-shelf or Internet research is used as the method for obtaining market data it is often referred to as a “Swiss cheese” approach. However, the problem, as we know with Swiss cheese, is that it has holes in it. This method is fraught with issues like:

  1. quality of the data
  2. old data, freshness of the data
  3. not getting the whole picture
  4. comparing apples to oranges

 

This approach is like trying to build a jig saw puzzle with pieces from different puzzles. Is this what you want as the foundation for your decision making?

Take Away

No matter the type of market research, the important point to remember is that no successful business goes to market without all the market research it can obtain and continues to utilize market research on a consistent basis to remain successful.

The building blocks to Servitization

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The “Servitization” of Manufacturing is taking the High-Tech Industry by storm!  By definition, Servitization is a transformation from selling products to delivering services.  It typically involves two components:

  1. The idea of a product-service system – an integrated product and service offering that delivers value in use.
  2. A “Servitized” organization which designs, builds and delivers an integrated product and service offering that delivers value in use

In more practical terms Servitization turns the product–service offering into a “utility” that the customer pays for on a subscription basis.   Under this model, the customer pays a monthly or annual fee equal to the amortized cost of the equipment plus the value of services provided for a specified period of time.

The concept of Servitization is nothing new. As early as the 1950’s, manufacturers provided their customers with the option to lease equipment with services attached to the lease agreement.  In the late 1990s and early 2000s, companies like ABB and GE begin to offer tperformance based service contracts to their customers.

Servitization is more than just a pricing strategy.  It is an overall business model that attempts to maximize and monetize value in use to the end-customer. This requires a manufacturer to proactively identify all the services that an end-customer may require over the lifecycle of equipment operation, understand the value that the customer assigns to these services, build this value into the subscription pricing model, and then deliver on that promise.

The trend toward Servitization has picked up steam in recent years for a number of reasons. First, market participants (i.e., OEMs and End-customers) have a greater appreciation of the strategic value of service to their overall business models.  Second, manufacturers recognize that service can generate more revenue over the lifecycle of the equipment than the actual purchase price of the equipment itself.  Third, the Great Recession forced many manufacturers to rethink the economics associated with how their customers justify the acquisition of new equipment.  Fourth, service tools and technology are now available that facilitates the design and operation of an integrated product-service system in a cost effective and real-time basis.

Ultimately, it’s the technology that is having the greatest impact on advancing Servitization business models.  There are some basic building blocks that any company will need to implement in order to deliver on the promise of Servitization. First, they’ll need a state-of-the-art service management system. It needs to perform the basic activities involved in managing a service organization (e.g., dispatch, scheduling, parts management, etc.). Second, they’ll need to have a way to connect with and monitor the condition of equipment within their serviceable installed base.  They will also need to integrate this information into to their back-end service management system. The third step is a mobility solution to communicate with people in the field. Finally, analytics are needed to evaluate what’s happening. Most companies will probably benefit by using a big data solution, as well, so they can look at unstructured data from their installed base and the customer’s environment at large, and start to analyze, predict and forecast.

In summary, Servitization is a transformational process that requires manufacturers to rethink all aspects of their business from marketing and sales, to pricing and financial management, to service delivery infrastructure.  The benefits of Servitization are great including the ability to build a multiyear annuity stream, gain account control, and create deeper and longer lasting relationships with customers.

I’d love to get your thoughts on Servitization.  Let me know if your company is pursuing Servitization.  What benefits do you expect to achieve? What obstacles remain in the way to realizing these benefits?   Last but not least, if feel free to schedule a strategy session with me if you want to discuss how Servitization could impact your business.