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.

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.

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.

Key Performance Indicators and their impact on your business

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I gave a presentation a couple of years ago to a group of service managers and executives on the subject of key performance indicators (KPIs).  I was surprised by the fact that most of the audience could not give an accurate explanation of what a KPI is.  Most people thought it was a data point that was used to measure business performance.   However, this is not entirely accurate.

The true definition of a KPI is that it is a quantifiable measure of how successful an organization’s strategies are in meeting their goals.   To be effective, KPIs must be specific to your business needs, align with strategic goals, and bring overall benefit to your business.  Most importantly, it must inspire you to set new goals.

Unfortunately, many service managers confuse KPIs with industry performance benchmarks.  They are not the same thing.  In contrast to a KPI, a benchmark is a point of reference against which things may be compared or assessed. While a company might want to benchmark their KPIs against competitors in their industry, they shouldn’t assume that they must adopt the same KPIs as their competitors.  They might want to do this if their goal is to outperform competitors on every KPI they measure.  This may be neither practical nor feasible if their business needs and strategic goals differ from those of their competitors.

Let’s look at this from another perspective.  While there maybe dozens of different field service or reverse logistics activities that your company can measure, you’ll find that there are only a handful that ultimately drive the success of your company’s business strategy.  You’ll want to make these specific measurements your KPIs.   For example, your strategic goal may be to consistently meet your customers’ expectations for timely service.  There could be multiple factors to consider when measuring this outcome like response time, wait time, resolution time, call drive time, etc.  However, you may determine that SLA Compliance is the KPI that best measures your success or failure in meeting this strategic goal.  On the other hand, your strategic goal might be to deliver high quality service to your customers.  While this could be determined through factors like trunk stock fill rate or calls closed incomplete due to lack of parts, you determine that First Time Fix Rate is the best KPI measuring service quality.

When establishing KPIs, it is important that you answer these four questions:

  1. How will I know when my goals are reached?  This is a quantitative target that you want to establish for your KPI. It could be expressed as a raw number (i.e., 4 hour average response time), a progress measure (e.g. 98% SLA compliance), or incremental change (i.e., 10% improvement in Customer Satisfaction).
  2. What are the key success factors in reaching this goal?   A description of the core functions, activities, or business practices that must be performed in order to reach this goal.
  3. What critical actions do I want to take from the KPIs? It is important to anticipate how your company will react to the KPI measurement that it actually achieves. What steps do you take if you miss your target? What if you meet or exceed it? For example, hire more resources, retrain personnel, improve processes, implement new systems, etc.
  4. What results do I achieve through these actions?  Examine how these actions will impact your business.  In what timeframe will they impact your KPI and at what cost?  Are there other aspects of your business that will be impacted?

 

By answering these questions, you’ll have a strategic road map for achieving operational excellence in your business.  It’s all about getting clear about your goals, making sure you measure the right things, tracking results on a consistent basis, taking corrective action when needed and, of course, celebrating success. Do you want to learn more about how to achieve geometric results in your field service or reverse logistics business?  Schedule a free strategy session today.

For whom the bell tolls: examining the future of field service

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I remember attending a conference in the early days of my career, circa 1987, where service executives from leading computer manufacturers at that time (e.g., Digital, Control Data Corporation, Burroughs, Univac, etc.) were predicting that field service would become extinct by the beginning of the 21st century.  Their prognosis was based on an observable trend that the equipment was becoming more reliable and easier to support remotely. Thirty (30) years later Field Service is a booming industry.

Indeed, many of these predications have come true. Technology has become cheaper and more reliable. Product life cycles are shorter, making it more affordable to replace older systems.  M2M and remote support make it possible for many companies to resolve an issue remotely and avoid dispatching a field service engineer. Self-service options also make it possible for the consumer to manage the repair process themselves.  It has also become an accepted fact that field service is a low margin business and extremely competitive in selected markets (e.g., IT).

Do these trends support the argument that field service is going the way of the dinosaur?  Market data points to a different conclusion. According to the research firm Markets and Markets, the Global market for Field Service Management (FSM) software is expected to grow from $1.58 billion in 2014 to $3.52 billion by 2019, at a Compound Annual Growth Rate (CAGR) of 17.3%.  Certainly these figures do not suggest that field service is going to disappear anytime soon.

Although the High-Tech Industry has experienced a number of trends which challenge the need for field service, there have been a number of trends which will allow field service to continue to survive and prosper:

  1. Increased use of advanced technologies:  Tools such as dynamic scheduling, mobility, knowledge management, and spare parts planning software enable Field Service Organizations (FSOs) to optimize the coordination of resources (e.g., parts, labor) required to support the field service delivery process resulting in more satisfied customers, increased revenue, reduced cost and higher profits. Furthermore, disruptive technologies like IoT and Big Data provide FSOs with the tools to expand their service offerings and be more proactive in managing service delivery. As a result, customers are more dependent on FSOs than ever before for continued support.
  2. The advent of on-demand platforms: On-demand and SaaS based applications enable FSOs to obtain critical service applications required to manage the field service dispatch on a subscription basis. This permits FSOs to quickly acquire and deploy state-of-the art Field Service Management Systems (FSMS), which at one time required a considerable capital outlay. This means that FSOs can expense the costs associated with the new system into their operating budgets and profits and avoid building elaborate ROI justification models. As result, the economics associated with maintaining a Field Service workforce have improved.
  3. Greater complexity and convergence of technology: Every major technology sector ranging from information technology, to telecommunications, to plant automation and building controls, has experienced a trend of equipment becoming increasingly more integrated with microprocessors, hardware and network operating system software, broadband communications, and network connectivity equipment. This complexity has led to new requirements for fast, reliable, and high quality field service in many segments.
  4. Acceptance of trade-off between remote support and field service: Manufacturers now accept the fact that there are trade-offs in cost and customer satisfaction in attempting to resolve all service requests through remote support tactics. Although remote support can be very effective in lowering operating costs, and eliminating the need for field service dispatch, there is a point in every service call, where it becomes more effective to dispatch a Field Engineer. The greater the complexity of the service problem, the longer it will take to resolve remotely resulting in longer downtime for the customer and higher support cost for the service provider. Field service dispatch can mitigate these costs and help to resolve the issue sooner.
  5. Growth in Servitization: Manufacturers continue to look for opportunities to generate income through the provision of value added services such as installation, integration, configuration management, training and process improvement. Field Service Engineers represent the most likely resource for delivering these services. Furthermore, many Servitization business models have their foundation in IoT and connected devices. Manufacturers are of course turning to their FSOs to roll-out and deploy these solutions.

Why were the service executives in the late 1980s so far off in their predictions? I think it was because they could not anticipate how innovations in software and technology could go on creating new revenue opportunities. Conventional wisdom at that time viewed innovation as a way of cutting costs, and of course, the biggest cost, was people (e.g.., Field Service Engineers). More importantly, most companies viewed Field Service as a cost center, not as a profit center. As a result, they were not thinking strategically about innovation. It is amazing how things have changed. To quote the old Virginia Slims commercial, “we’ve come a long way baby.”

Now it is your turn. Please share with me your ideas on the future of field service.   Let me know if you remember any predications from the past that are no longer true today. Tell me about your vision of the future. Will field service continue to thrive or will field service engineers become irrelevant? I’d love to get your thoughts on this important topic.

6 Things You Need to Know When Purchasing Service Lifecycle Management Software

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I’ve spoken with numerous service executives over the course of my career  about their experiences when purchasing enterprise software for service management (also known as Service Lifecycle Management (SLM) software).  I’ve distilled the knowledge I’ve gained into 6 tips to help you when you are in the market for enterprise service software.

 

  1. What to expect in the sales process?

You are likely doing research before you ever even engage a vendor, but when it’s time to start talking to software providers, what should you expect?  First of all, most vendors will give some sort of brief, high level demonstration of the software during your initial call. This typically is just meant to give you an idea of how the software works. More detailed, customized demos will follow and at this time more thorough vendors will ask you to fill out a demo prep form so they can tailor the demonstration to your needs. You may also be asked to sign a non-disclosure agreement so the vendor can freely share confidential information. Don’t expect more than a ballpark figure of the cost of the software on the first call; you’ll need to fully discuss your needs and expectations before getting more detailed pricing. This process also provides the opportunity for you and the software vendor to determine if you are the right fit for each other.

 

  1. What to look for in a vendor?

There are a number of vendors offering Service Lifecycle Management software. Wading through the options can be overwhelming. The top three factors are software feature and functionality, technical competency of vendor, and vendor flexibility. Once you have vetted all vendors on these top 3 characteristics, you will likely have a short list of vendors that you want to explore further. At that point, you’ll need to evaluate the Total Cost of Ownership, implementation schedule, and vendors’ knowledge of your business. These factors can make or break the success of your SLM implementation.

 

  1. How important is price?

Price is far from the dominant factor when purchasing service software.  As it often happens, the lowest priced vendors are ruled out because they lack the functionality and/or are perceived as lacking the resources to support the implementation while the highest price vendors are often perceived as offering solutions that are too complex to implement. So while price is a consideration, making sure that the vendor can provide a solution that truly fits your needs is far more important than price.

 

  1. How important is the role of discounts in the buying decision?

Discounts are common when pricing software so there is often some room for negotiation. Truth be told, the discount doesn’t make or break the sale.  Highly competitive situations may result in larger discounts.  Be wary of a vendor who drops the price too much without asking for a concession. The lower price may come back to haunt you during the implementation or when you require post implementation support.

 

  1. CRM/ERP or best of breed service software?

For SLM software, there are often three choices: buy service software from your CRM vendor, buy from your ERP vendor, or select a best of breed service software provider. While you may think it’s easier to just use the company that you are already using for CRM or ERP, you need to consider the benefits of a best of breed solution. Best of breed vendors place their sole focus on the services side (e.g., field service, service parts, depot repair, etc.) of the business. Furthermore, best of breed software solutions are built to contain all the functional requirements to support the full service lifecycle management process in an organization. While you may not need all of the functionality now, you should be evaluating solutions with an eye toward the future.

 

  1. What happens after the sale?

Sometimes SLM deployments fall short of expectations. For example the implementation did not go as smoothly as planned or there were problems with the vendor’s level of support post implementation.  To avoid these situations,  it is important to understand exactly what the vendor’s expectation are of you during the implementation as well as understand the level of resources the vendor will commit over the lifecycle of your purchase.  Reference checks of companies similar to yours in terms of technology supported, size, and financial structure are a must.  You’ll also need to get a clear idea of the skill sets, experience, and capabilities of the individuals supporting the implementation. How much experience have they had in implementing the version of software that you are about to purchase?   A well-defined Service Level Agreement with penalties for non-compliance will also help to keep the vendor accountable during the support phase.

 

Purchasing any kind of software can be daunting, but when you are purchasing a mission critical solution, like Service Lifecycle Management, the stakes are especially high.  As they say, knowledge is king so the more you know about what to expect before, during, and after the sale, the more likely you are to succeed.  Need more information to ensure a successful outcome?  Schedule a free consultation to discuss your issues.

The Gift of Competition

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I received a very interesting email last week from a manufacturer of industrial automation equipment. It was a marketing piece promoting the use of their “original” spare parts over “generic” parts sold by third party providers.  I gather this manufacturer was losing market share in the Aftermarket and was taking steps to rectify.  I don’t know how I got on this mailing list because I don’t own any of their equipment.  Nevertheless, what I found so troubling about the email was that it attempted to discredit “generic” parts by claiming that they were cheaper in price because they were of inferior quality.

I find these types of claims troubling for three reasons.  First, they “trash the competition”.   Effective marketers and sales people know that going negative is not good for business.  Most manufacturers would not use this approach when it comes to selling their equipment in their primary market. Yet some believe anything is fair game in the Aftermarket.  The second reason why I oppose this type of advertising is because it’s just not accurate.  The truth is that generic spare parts can be more reliable than original parts. This is because third party manufacturers often spend many hours reverse engineering original parts in order to learn how to design and manufacture new ones.  In doing so, they can find ways to improve upon the design and reliability of the original part. This is particularly true of remanufactured parts.  Third, in some markets the parts used by OEMs and Third Parties are the exact same parts.   For example, a device assembled with commercially available off the shelf (COTS) parts.

The bigger issue is not about false advertising but about what role Third Party Maintainers (TPMs) also known as Independent Service Organizations (ISOs) and Generic Parts Manufacturers play in the Aftermarket.  Obviously, these providers create competition for OEMs.  However, this type of competition is really not a bad thing for a number of reasons:

  • It legitimizes the market – – Markets are defined by the presence of competition. In order to win business, competitors must actively market their products and services. As a result, customers become more aware of the options available to them and purchase more quantities and more frequently.
  • It creates choice – Competition offers customers the freedom of choice. The theories of capitalism and free trade are built on this basic premise.
  • It improves quality & efficiency – Competition in the Aftermarket forces third parties and OEMs to continue find ways to improve the quality of products and services offered while at the same time finding ways to cut costs and improve efficiency.   In other words, competition raises the bar and results in better prices for customers.
  • It leads to innovation – In addition to raising quality and improving costs, competition drives service providers to become more innovative. Without competition, it is hard to know whether or not service providers would focus on finding ways to add value. Would service providers be just as compelled to invest in new systems and technology like SaaS, Mobility, and IoT if not for the impact that competition has on innovation?
  • It leads to greater cooperation – OEMs also have the choice to subcontract service to TPMs/ISOs. This can help them improve their own cost structure, fill in white space in service delivery, and obtain access to capabilities that they may not otherwise be able to build themselves. Under this scenario, OEMs and ISOs can learn from each other and use this knowledge to drive innovation, reduce costs, and improve quality

In summary, competition in the Aftermarket is good for all parties concerned.  Everyone benefits; from the customers to the OEMs and third party providers. Even the technology vendors benefit from competition in the Aftermarket.  Quite frankly, any company that feels that is has to trash their competition is probably troubled in some way.  Rather than resort to this tactic, a company that is very concerned about their competition is advised to look within their own organization to find ways to leverage competitive forces to their strategic advantage.

Please share your thoughts and reactions to this post.

5 New opportunities created by IoT and the challenges they present

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There has been some excitement in the media these days about the Internet of Things (IoT) and the promise it creates for businesses, consumers, and governments.  John Chambers, the CEO of Cisco, said on CNN’s GPS with Fareed Zakaria that IoT will create approximately $19 Trillion in economic value over the next 5 years.  As an example of the opportunities that are possible, Chambers points to the fact that the city of Barcelona created 40,000 new jobs through its connected city initiative.

While the upside potential is great, there are still many who believe that the disruptive force of IoT will have a negative impact on certain industries; eliminating jobs and destroying businesses instead of creating them. The proponents of IoT remind us that similar claims were made about the internet in its early days. However, according to a 2014 study by McKinsey and Company, 2.6 new jobs were created by the internet for every 1 job it eliminated. Will the same be true for IoT?

To answer this question, I think we have to look at how IoT will impact specific industries.  For example, let’s look at five (5) new opportunities that IoT creates for the High-Technology Service & Support Industry and the challenges they present.

  1. Facilitation of Remote Monitoring & Diagnostics: IoT makes it possible for manufacturers to implement remote monitoring and diagnostics solutions on a low cost and rapid basis. Of course, these solutions are as effective as the knowledge management tools behind them. Nevertheless, remote diagnostics can eliminate the number of emergency dispatches which in turn could have an impact on Field Service Engineer staffing levels. On the other hand, it is likely that new jobs will be created to monitor and analyze the data collected by these solutions as well as respond to the actions that are generated by this analysis.
  2. Greater integration with the supply chain: One the largest beneficiaries of IoT will be the service supply chain. By monitoring service related events, the service supply chain can have more visibility into the demand for spare parts and be more effective in planning and forecasting inventory stock levels. In addition, supply chain mangers can be more proactive in anticipating demands on forward stocking locations and depot repair & refurbishment centers. The net impact of IoT on the supply chain is an enhanced level of productivity and efficiency which is great for profits and job creation.
  3. Creation of barriers to entry: It is very possible that IoT will create new barriers to entry for service competitors. That is because once you control access to a device, you control the device itself. Manufacturers will need to think through how their channel partners participate in IoT solutions. Will channel partners participate in the revenue stream that comes from managing connected networks or will they simply resell the solution on behalf of the OEM? What options will be available when it comes to service & support? Will manufacturers implement open systems which make it possible for anyone to service the network or will be a closed solution keeping out competition?
  4. Collaboration between business partners: It is also likely that IoT solutions will be comprised of products and components from multiple suppliers. This will require greater collaboration between business partners. Manufacturers will need to establish new business protocols and rules of engagement when it comes to supporting IoT solutions involving third party products. This is likely to result in new job creation.
  5. Need for new business models:  IoT makes it possible for manufacturers to offer new added value services to their customers. At issue, these services are most likely to be monetized through subscription based models. New financial KPIs will be needed to manage these models. Instead of focusing on attach rates and gross margins, manufacturers will need to pay attention to monthly recurring revenue (MRR) and customer churn rates.   Revenue ramps up slowly under these scenarios and customer attrition rates are high so manufacturers will need to create marketing and onboarding programs to facilitate growth of MRR and reduce churn.

 

In summary, IoT will have a positive impact on the High Tech Service & Support Industry in terms of job creation and financial returns.  Indeed, IoT is likely to create multiple new jobs and businesses for everyone that it replaces.  While some companies and individuals may be at risk, they can mitigate the downside by taking a proactive approach to strategic planning.  Furthermore, companies who stand to benefit from IoT the most can ensure maximum returns, and thus double down on their investment, by incorporating fundamental strategic design principles into the development of IoT solutions.  To learn more, schedule a free consultation.

Strategic forces shaping the deployment of IoT & M2M

The Internet of Things

News about the Internet of Things (IoT) is everywhere. Indeed, IoT is one of the largest and fastest growing segments of the Information Technology industry.  The number of deployments of connected devices is forecasted to increase by 30% in 2015 from last year, according to The Gartner Group, with the total number of connected devices to reach 25 billion in 2020.

Those of us who have been involved with the High-Tech Service & Support Industry for some time will tell you that the concept of IoT and its cousin Machine to Machine (M2M) are nothing new. Remote Monitoring & Diagnostic tools have been around for decades.  As early as the mid-1980s, capital equipment manufacturers like Honeywell, Texas Instruments, and AT&T had deployed these solutions to improve the troubleshooting and maintenance of their systems.

At issue, it is only within the last couple of years that the number of IoT and M2M deployments has begun to sky-rocket.  Let’s look at some of the forces that are making this possible:

  • Social Forces: One of the reasons why I believe we are seeing a surge in connected devices within the High-Tech Service Industry is the recognition that data drives business. For service providers, it is no longer just about finding ways to reduce the time and cost associated with troubleshooting and maintenance. In order to optimize productivity and efficiency, and to facilitate innovation in a service business, you need data. While service executives have understood this for some time, end-customers now understand and appreciate that they also need access to this same data in order to optimize the operations and processes that comprise their enterprise. In essence, data about the condition of assets and machine performance is part of a larger system of systems which need to work in tandem to ensure that that the entire system works smoothly and efficiently.
  • Economic Forces: The cost of implementing IoT and M2M solutions has reduced significantly over the last decade. In the past, remote monitoring was achieved through dedicated land line data communications which were very costly to implement and maintain. Today communication is much more accessible and affordable through technologies like Internet Protocol, ZigBee, and Wireless. Furthermore, the cost of collecting data has improved significantly. Earlier solutions required expensive and clunky Programmable Logic Control (PLC) platforms. Now data collection is possible through low-cost, disposable sensors. Furthermore, the financial justification for IoT has improved. Not only is access to investment capital cheaper than ever but manufacturers are now finding ways to monetize IoT solutions resulting in a profitable revenue stream, higher ROI, and faster payback period. More importantly, the financial model associated with IoT deployments is changing. In the past, manufacturers would first attempt to sell individual customers on the benefit of adding remote monitoring to their capital equipment purchase. In turn, the customer needed to incorporate the cost of a Remote Monitoring solution into their capital expenditure and cash flow projections. The economics of IoT have now made it possible for service providers to make IoT solutions available as a subscription model, thus enabling end-customers to turn a high fixed cost investment into a variable expense.
  • Technology Forces: As noted above, the technology (e.g., data communications, sensors, etc.) associated with IoT and M2M is becoming cheaper, easier to implement, more secure, and flexible. In addition, we now have access to much more robust, cheaper, and flexible data repositories. Not only has the cost of storage improved but the advent of Big Data solutions enables us to leverage information collected by IoT in ways we have never known before.

 

For service executives who are dissatisfied with service being an afterthought in their organization, now is the time to look toward M2M and IoT as platforms for innovation and new sources of profitable revenue.    To achieve this outcome, service providers need to develop an overall service business strategy around IoT as opposed to merely a technology plan for connecting devices with back-end systems.   While addressing concerns with respect to security and risk are critical to any IoT deployment, the optimal strategy must incorporate a service centric philosophy, receive full endorsement by C-suite executives, and be formulated with active participation of the service leadership team.  Strategic design is critical to IoT success. For more information, schedule a free consultation.

How do you meet customer expectations all the time, every time?

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Time is one of the most important drivers of value within a service business. Here’s an example of why that is the case…let’s say that you decided to go out for lunch with colleagues from work and you only have 45 minutes to eat.  In this example, you have three (3) choices. You can go to restaurant A where you have a long line.  You can go to Restaurant B were you have a short line. Or you could go to Restaurant C where you have no line at all.  Which Restaurant would you go to?  I’ve asked this many times in live workshops and the participants usually say Restaurant B. Why?  More people tend to choose Restaurant B because the line is not too long or too short. The tables are turning over at a good rate and people are being seated quickly. To quote Goldie Locks, “it’s just right”.

Why not Restaurant A? The line looks like it is too long and people are not leaving very quickly.  You’ll never be able to eat lunch and get back to work on time.   Why not Restaurant C? No one is there. It looks deserted. Very suspicious! Maybe people are getting ill from the food?  Don’t know if I want to go there Restaurant B seems like the safe bet.   It’s an optimal length of time.

Customers not only notice the speed of service completion time, but the amount they pay will be in direct proportion to how long they have to wait.  The challenge is that not every customer has the same requirement for service delivery. Some require shorter length while others are willing to wait a little longer for service.  There is also is a direct correlation between service completion time and customer satisfaction. Too much service can be just as negative as too little.   Let’s say that as soon as you stepped foot into the restaurant, your server came by to take your order but you hadn’t had time to look at the menu. That’s too much service. You’d probably get annoyed and if the server continued to hover over you, chances are you’d become very dissatisfied.  Let’s look at the opposite.  You go into a restaurant, you know exactly what you want to order and need to get back to work right away but there is no server to take your order. That would lead to dissatisfaction too. Wouldn’t it?

This principle also exists for services like onsite maintenance, depot repair, and service parts logistics. If your service level agreements (SLA) specify a 4 hour response time and your Field Service Engineer arrives in 4.5 hours, you’ll have an unhappy customer on your hands.  However, if they are arrive in two (2) hours, your customer’s satisfaction level maybe no higher than if they arrived in the 4 hour timeframe guaranteed by your SLA. In fact, they might be less satisfied if the FSE arrived sooner especially if no one is available to speak to the FSE because the customer implemented a work around, and the result was the FSE had to come back another time.

As a service marketer you really have to pay close attention to the perceived value of time versus actual time and make sure you’ve defined the service level to the customer, and have the capability to deliver it. The truth is that once you understand the value of time you can weave this into your value proposition and pricing strategy.  By doing your market research, you will be able to determine if there is a segment of your market that is willing to pay a premium for faster service. However, in order to deliver faster service you most have the technology, processes, and people in place to ensure faster deliver.

As service executives, we have to continually ensure that our service delivery infrastructure is aligned with the needs of the market and vice versa. This must be done at both a tactical and strategic level.  Tactical efforts involve activities like transactional based customer satisfaction tracking studies and daily monitoring of KPIs.  Comparison of these metrics help you anticipate and resolve issues before they get out of hand.  By contrast, strategic initiatives have a longer time horizon, usually involve a capital investment, and will typically lead to a step-wise improvement in financial performance.  To achieve this outcome, a service executive will want to get a clear picture of customer requirements by commissioning a “market wants and needs” study.  He/she will probably look toward carrying out a benchmark evaluation of internal operations to ensure that the service delivery infrastructure is capable of meeting these needs. These types of analysis will also pin-point where service executives need to invest the most to achieve gains.

Just like the restaurant example given above, service executives who miss the opportunity to align internal capabilities with the needs of the market, both tactically and strategically, are likely to find customers leaving because the wait time is too long or the quality of service is questionable.  Don’t make the same mistake.  Make sure you’ve got a tactical and strategic framework in place to ensure that your service is just right.   To learn more about the concepts described in this blog post, check out my new online training course titled “Successful Service Marketing”.   Struggling to implement a tactical and strategic framework?  Feel free to schedule a free consultation to discuss how we might be able to help.