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.

How do you know if your price is right?

strategic service pricing

When was the last time you took a serious look at your company’s pricing strategy? I worked with a client last year who hadn’t made any significant changes to their pricing in almost 20 years.  While they made minor adjustments over the years to reflect competitive pressures, they never re-evaluated the basic assumptions and core calculations around their published price list.  They realized they might have a pricing problem when they noticed that they weren’t wining as many competitive bids. In addition, the bids they did win were not very profitable.

It might be time for your company to re-examine its pricing strategy if you find yourself in a similar situation.   Before you rush into a complete overhaul of your price book, it is important to have a clear objective of what you are trying to achieve with your pricing. Remember, pricing is a marketing function and marketing is all about perception so how you price your services will influence your outcomes in the market.  For example, your objective might be to take market share from a well-entrenched competitor.  Alternatively, it might be to avoid leaving money on the table. It might be to accelerate penetration into a new market or it might be to simply cover your costs and/or subsidize another part of your business.  It is very likely that the pricing will be different depending on which objective you choose. Once you have determined your objective you can start work on establishing your pricing strategy.   There are three (3) perspectives you need to consider when determining your optimal price.

  • Competitive Price: This is the price that your competitors charge. It is best if you can build or get access to a database on competitive pricing. This will help you understand what the highest, lowest, mean and median price points are within your market.
  • Market Perceptions: It is important that you have a good grasp of market price sensitivity.   You’ll want to understand at what point the price is perceived to be too cheap that quality is questionable, a bargain, getting expensive, or too expensive to afford. The answer will help you understand the optimal range at which you can price your services. One of the best ways to obtain this information is through survey research.
  • Your Price & Cost Structure: It is important that you consider your current cost when re-evaluating your price strategy. Obviously, you must know this if you are going to set prices high enough to cover your cost if that’s your objective. You’ll also have a better understanding of how much margin you can achieve under different price scenarios when you have this information at hand.

These perspectives provide the constraints you need to optimize your objective. For example, if your objective is to take market share from a competitor through a more aggressive price strategy, than you need to not only know where your current price is in relation to your competitor(s) but you’ll also need to know what price range the market (i.e., customers, prospects) perceives as optimal.  You may run the risk of pricing your service too low that the market perceives the price as too cheap to be of any value.  On the other hand, it may be difficult to win business by raising your price if the market already perceives your price as too expensive and your price point is already significantly higher than your closest competitor.  However, you can justify an increase if you are perceived as a bargain even if your price is higher than your closest competitor.

Hopefully, it is becoming clear to you why these perspectives are so important in establishing your pricing strategy.  Let’s get back to the client that I mentioned at the beginning of this post. I took them through a similar analysis and we were able to establish a new pricing strategy that has resulted in them winning more business at a higher margin. It was surprising to learn that they didn’t have to lower prices across the board to remain competitive. In fact, they could rationalize a price increase for some of their services and still remain competitive.

In summary, the key takeaways when it comes to  developing an optimal price strategy are 1) get clear about your desired outcome, 2) make sure you have the relevant data points you need to evaluate pricing alternatives, and 3) adopt an analytical approach. Think you might need to overhaul your pricing strategy?  Feel free to schedule a free consultation to discuss how we might be able to help.

Fundamental Concepts about Successful Service Marketing

Marketing business sales

Where would we be if not for marketing?  It plays such a critical role in generating sales.  Indeed, marketing is about finding a need and turning it into a want.  For example, you may need an automobile that can transport you family to and from their activities. However, you find that you want a BMW SUV because it’s a quality car, that drives well, is safe to drive, and has a great audio system. How do you know this? Marketing!!!

Unfortunately, marketing can be a daunting task for those of us in the services industry. That’s because most of what we are taught in business school about marketing is product oriented.  Let’s face it; products are easier to market because they have a form, fit, and function. They are tangible.  Services, on the other hand are intangible. So how can you effectively market them?  Using a product approach to market a service is like trying to hammer a square peg into a round whole. It just doesn’t work.

Service marketing maybe difficult but it doesn’t have to be impossible.  To become successful at service marketing you need to understand three (3) basic strategic concepts about services:

  1. Value is based on perception: That’s right! The demand your customers have for your service and the amount of money they expect to pay is based on their perception of you. It’s your responsibility as service marketers to manage this perception through your brand and communications strategy. More importantly, their perception must be consistent with reality. Otherwise, you’ll lose your credibility. You can’t expect customers to pay a premium price for your services if the perception is that you are a low cost provider.
  2. Capability to serve versus actual service: It order to effectively market and sell services you have to give your prospective customers assurance that services will be there when needed. This means that you have to define your capability to serve before they buy and receive the service from you. Capability can be described in terms of service offerings (i.e. portfolio), processes, skills and infrastructure that make the actual service possible.
  3. Value-in-Use and Time:  Another factor that influences your customers’ willingness to purchase a specific type of service from you at a specific price is their value-in-use for that service. This is defined as the value of the service to the customer in the absence of its presence. In a service business, we often measure this in terms of time. For example, it may cost your customer hundreds of thousands of dollars if their data center hardware is down for more than 2 hours. The higher the value-in-use the more they’ll be willing to pay. Knowledge of your customers’ value-in-use provides leverage in how you price and market your services.

To summarize, it’s all about perception, time, and capability. How well do you incorporate these concepts into your portfolio design, your pricing, and your marketing communications program?  Just think about how effective you become if you do.   Let me know your thoughts.

These strategic concepts provide an underlying framework upon which all great service marketing programs are built. However, they are just the tip of the iceberg of what you need to know.  To help you succeed, I’ve created a new online course that will educate you on the fundamentals of successful service marketing. You can learn more through this link:

Successful Service Marketing ™

I encourage you to watch the brief video overview.  The course is perfect for anyone who wants to become more effective at marketing their service business.  You can also schedule a free consultation with me if you’d like to learn more.

Predictions for 2015 and their impact on Lifecycle Services – Part II

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In Part 1 – my last blog post on this subject, I discussed some of the trends that are creating uncertainty for companies who participate in the IT Service Supply Chain.  This uncertainty stems from conflicting data with respect to market drivers in the IT Industry in general and Lifecycle Services Market (e.g., hardware maintenance, asset recovery, depot repair, services logistics, etc.) specifically.

For example, more than three quarters (78%) of workloads will be processed by cloud data centers and almost a quarter (22%) by traditional data centers according to the Cisco Cloud Global Index.  In addition, public cloud and hybrid cloud will grow dramatically faster than traditional datacenters.  Most of this computing power will be housed in mega data centers.  However, IDC predicts that by 2017 industry consolidation will lead to a market comprised of only 6 to 8 mega global players.    The strategic implication is that there will be less IT assets distributed throughout the world resulting in less demand for onsite maintenance.

On the other hand, IDC predicts that IT spending on big data will grow 30% in 2015.  In addition data volumes will exceed 6 trillion terabytes.  Furthermore, data created by Internet of Things (IoT) will nearly quadruple by 2018 from 2013 creating twice the amount of data end users transmit to data centers and it will be 47 times greater than total data center traffic that exists today.  This means that there will be increased spend on data storage and network management.  As a result, services associated with the installation, management, and maintenance/ repair of storage devices and network equipment may increase.

Given these conflicting perspectives, what can companies involved in Lifecycle Services do to ensure profitable revenue growth in 2015 and beyond?   Here are six (6) things that service providers can do to achieve long term success:

  1. Have a clear understanding of your planning horizon: Remember the impact from the trends described above will not be felt immediately. They are likely to occur over a 5-10 year horizon. You need to anticipate where the market will be in the future and create a road map to get you there.
  2.  Focus on micro economic business trends: While it’s always a good idea to review market data from industry analysts, this macro level data may not reflect the actual dynamics, buying behavior, or purchasing decisions within your target market. That’s why primary market research is so important to your planning process.
  3.  Decide on where you are going to play: This requires asking critical questions about the condition of your target market today and where it is headed in the future. Will you continue to sell into a down market? Do you expand into new markets that are synergistic with your existing capabilities? Do you develop new capabilities and diversify into higher growth markets? These decisions require that you take a structured and disciplined approach to market research and strategic planning. You can no longer rely on top of the mind pontification or gut level decision making to plan for your future.
  4. Have a clear exit strategy: Regardless of your decision about your future growth, it is important to plan with an exit strategy in mind.   As a business owner or executive, you probably have good idea of the financial objectives your company needs to achieve before it exits the business. If not, you need to establish these targets right now even if your service business is a division or subsidiary of a larger company and there are no immediate plans to sell in the next 5-7 years. Exit planning will force you to consider what your business needs to look like, how it needs to operate, how it needs to go to market, what type of growth rate it needs to achieve, and how much profit it needs to generate in order to exit. The actions you take to achieve these outcomes will benefit your company whether or not it actually exists.
  5. Maintain a highly efficient infrastructure: One thing is for certain, end-customers will continue to seek operational efficiency when managing and maintaining their IT assets and related operations. It is inevitable that they will continue to place downward price pressure on their service providers. A highly efficient infrastructure and service delivery processes is an imperative for winning and keeping customers as well as maintaining healthy profit margins.
  6.  Market on all cylinders:  Your customers face these same challenges that you do when it comes to planning for the future. They are likely to be confused by all the options available to them. The way to win their hearts and minds, and share of spend in a competitive market is by positioning yourself as an expert in their market. It requires that you implement an education based marketing strategy. This approach builds trust because you demonstrate that you understand your prospective customers’ needs. When implemented effectively, it defines the criteria that your customers should consider when choosing a service provider and establishes your company as the standard by which they should consider.

Your future can be bright as long as you are prepared to do a little work to prepare for it.  It is only a problem if you do nothing at all.   One way to ensure you and your team achieve optimal success is to seek guidance from an objective, independent advisor.  With over 25 years’ experience in completing similar assignments in the High Tech Industry and extensive capabilities in key practice areas (e.g., market research, strategic planning, service marketing, and productivity & efficiency improvement), we believe that Blumberg Advisory Group possess the skills to help you succeed.  To determine if we have a solution to meet your needs visit our website or schedule a free consultation today.

Predictions for 2015 and their impact on Lifecycle Services – Part I

tech-trends

I think everyone who reads this blog will agree that the IT Industry is undergoing a major transformation as end-users deploy a greater number of technologies like Cloud Computing, Mobility, Internet of Things (IoT), and Big Data solutions.  Prognostics from IT industry analysts point to an increased roll-out and deployment of these technologies in 2015.  Although these predictions bring good news for suppliers of these technologies, they bring with them some level of uncertainty for companies that provide Lifecycle Services such as onsite maintenance, depot repair, installation services, etc.

In essence, some trends suggest that there will be greater demand for IT Lifecycle Services in the future while others point to a reduced need for these types of offerings.  For example, trends which seem to have a positive impact include:

  • Internet of Things – Companies that design, build and operate networked eco-systems in industry sectors like transportation, agriculture, etc. will turn to Lifecycle Service providers for the provision of onsite and logistical services to support these platforms.
  • Big Data – The proliferation of these solutions will require additional storage which in turn will bring the need for installation and maintenance services.
  • Hybrid Cloud – Lifecycle Services are needed to support hardware refreshes and maintenance of on-premise technologies like networking equipment, storage, servers, etc.
  • Video – The use of video among consumers and enterprise is increasing and the roll-out of technologies which support this type of communication is increasing. As such, companies who deploy these solutions will continue to turn to Lifecycle Service providers for support.

The trends that could reduce the demand for Lifecycle Services include:

  • Data Center Consolidation & Virtualization – Although onsite service providers are needed to deploy these types of solutions, consolidation and virtualization means that there is less hardware to be supported in the field.
  • Pre-fabricated Data Centers – In their desire to operate efficiently, those companies that operate and maintain their own data centers will turn to pre-fabricated models which reduce the level of labor and material used in the design, build, and installation of new data center.
  • Software Defined Networks (SDN) – The transition to SDN means that network operators can build-out or enhance their networks without investing in new hardware. As a result, the need for Lifecycle Services may plateau.
  • Preference toward Public Cloud – According to the consulting firm 2nd Watch, private cloud computing is one of the least popular trends right now because it is very expensive to manage. As result, a large percentage of CIOs are opting for public cloud solutions. These will result in the reduction of end-user IT assets to be supported by Lifecycle Service providers.
  • Mobility – As enterprises continue to deploy mobile device in their workforce, we will see less and less demand for fixed IT assets like desktop computers and departmental servers along with the lifecycle services that are associated with them.

While this analysis of market trends is by no-means exhaustive, it does suggest that the market for onsite and depot repair services will remain volatile over the next several years.  This is because end-customers are in various stages of their lifecycle when it comes to the implementation of disruptive technologies.  As such, some end-customers will require more support from their lifecycle service provider while others will require less.  No doubt, end-customers will continue to seek the most cost effective provider when it comes to supporting their lifecycle service requirements.

To win in this new market, service providers must possess good market intelligence on what stage of the IT lifecycle their customers are in.  At the same time, service providers must use this information to develop and implement service offerings, delivery processes, and infrastructures that are optimized towards the needs of their target market.

In my next blog post, I will reveal in more detail the steps that Lifecycle Service providers can take to thrive under the new market realities described above.  In the meantime, please feel free to schedule a free consultation with me if you would like to get a jump start on preparing your company for future growth.

Strategy: The difference between surviving and thriving

Survival

As many of you know, I have been very interested in how Disruptive Technology (i.e., Cloud, Mobility, Big Data, etc.) impacts businesses involved in service and support. Several months ago I conducted a survey on this topic.  The survey was designed to examine which technologies are causing the greatest disruption to service businesses and identify strategies and tactics that companies are using to overcome these challenges. The survey findings reveal that the two technologies that are having the most disruptive impact are Cloud Computing and Mobility.  Over one-half (52%) of respondents expressed this concern.   Big Data/BI and the Internet of Things (IoT) are having less of an impact as expressed by over one third (38%) and one-quarter (25%) of the respondents respectively.

 

On face value, this data makes sense. While not quite considered a mature market, a large percentage of businesses have implemented Cloud and Mobility platforms whereas Big Data and IoT are in an early stage of market development.   Chances are that you feel reasonably certain how your company will respond to these challenges and continue to grow, or you are struggling to find an answer and are concerned about your own survival. The survey results suggest that companies who feel confident about the future have implemented one or more of the following strategies:

 

  • New Service Development: A majority of companies surveyed are generating new sources of revenue through the provision of new services offered to current customers. They are achieving this result by developing new capabilities or exploiting existing ones. Examples include strategy consulting, asset disposal and remarketing, network management, and cloud based services.

 

  • Market Expansion: On the other hand, many on the respondents have a service delivery infrastructure that is optimized toward the delivery of break-fix services. As a result, these companies are pursuing opportunities in market segments that will continue to require break fix services such as ATMs, Kiosks, Retail Digital Signage, etc.

 

  • Operational Improvements: A number of respondents indicated that they are making investments in their service delivery infrastructure that will enable them to operate at a higher level of productivity and efficiency, thus improving the quality and becoming more competitive in the market.

 

  • Market Penetration: These respondents indicated that they will continue to pursue business within their current market with their existing service portfolio. Granted, some of these respondents are providers of solutions which incorporate disruptive technology. However, others are traditional break-fix vendors who believe that beefing up their sales and marketing efforts will result in new sales.

 

I’ve also found from direct interviews with service executives, that companies who pursue a strategy of new services development tend to have a higher growth rate than those who pursued other strategies. My research also suggests that companies who follow a well-defined strategy have experienced service revenue growth rates in excess of 10% over the last two years. However, those without a clear strategy have experienced stagnant or negative growth in services revenue over this same timeframe.   And that’s the difference between having a thriving business and merely surviving.  Companies in survival mode find it difficult to achieve any traction in the market and experience a lot of uncertainty about the future. This is not a great place to be.

 

Unfortunately, companies in survival mode can get stuck there unless management takes the necessary actions to transform the business. This requires a shift in thinking, from tactical to strategic. It is not an easy task because it requires management to set aside the time to analyze the current situation, conduct market research, and plan for the future. It might feel uncomfortable if you don’t do it very often. Furthermore, the desire for immediate results often prevents companies from investing the time and resources to plan effectively. However, if you don’t exercise your strategic planning muscles you’ll likely remain stuck where you are for a very long time and possibly risk business failure. On the other hand, you’ll be in much better shape 90 days from now if you take the time to today to plan your work and then work your plan.

 

Building your strategic planning muscles is a lot like weight training. The more systematic, precise, and diligent you are about it the more likely you are to achieve excellent results.   Unlike weight training, which is a lifestyle choice, strategic planning is an absolute must if you are going to build a thriving business. To help facilitate the right environment for achieving a positive outcome, I’ve created a new online coaching program. You can learn more about it through this link. Please also feel free to schedule a strategy session with me if you have questions or need a personal trainer to help you achieve better results.

A Baker's Dozen: Getting an extra month out of your year

Baker's Dozen of Donuts

I’ve always been fascinated with the concept of a “baker’s dozen”. Buy twelve (12) donuts and get the thirteenth one free. A great concept! Did you know that this business policy was created thousands of years ago to prevent bakers from cheating their customers? It was a way for bakers to ensure that they never undercounted their customers’ orders by adding one more. Wouldn’t it be great if we could apply this same concept to other aspects of our business? For example, having one extra month in the year? Just think about what you could accomplish.

Why cheat yourself out of the best year ever? You can have a 13th month year and it starts this month. That’s right the way to having an extra month in 2015 is to use this December to plan for next year.  Sure, you are probably thinking that you’ll just wait until December 31st to write your New Year’s resolutions. And you’ve kept these resolutions every year? According a study from the University of Bristol, almost 90% of people who set New Year’s resolutions fail to achieve them. The reason is because their goals are too general and lack focus. More importantly, they lack a plan for achieving their goals.

What’s that? You’ve already developed an annual business plan. That’s great you are doing better than 80% of businesses. However, writing a business plan does not guarantee success. Unfortunately, too many plans become static documents that sit on a shelf and collect dust. To excel, you’ve got to take action. So let me give you a framework for creating a dynamic business plan, one that will get a jump start on 2015 and give you the extra month you need to meet and even exceed your goals.

In order to develop a good plan that leads to measurable results you must ask good questions; ones that are relevant and produce rigorous answers. Here are some examples of the questions that I like to ask:

  • What was great about the last year?  I think it is important that you start off any planning session by celebrating your successes over the past year.   This allows us to build upon our strengths and move to our next level of success.  The best part of this past year for me was creating new online courses on the subject of service marketing and disruptive technology. I’ve also established a couple of partnerships which other industry consultants that will allow us to better serve the Aftermarket Service and Reverse Logistics community. What about you? Did you develop any new service offerings, implement any new improvements, or win any new clients?
  • What do you still need to complete next year from the previous year? To make 2015 a success, I still have to leverage my accomplishments from 2014. This means that I must implement a consistent marketing program as well as institute an effective customer service policy to respond to issues that emerge from my new offerings. What are the things that you need to follow-up on? Maybe you’ve built a case for acquiring a new software system but now you’ve got to develop a well thought-out implementation plan with a manageable timeline and budget.
  • What are the game changes in your industry that you need to focus on? While still an emerging technology, industry analysts are predicting an upsurge in connected devices. That’s right, over the next 2 years we are expecting to see a 40% increase in the number of sensors that are connected to products. Not just fixed electronic devices but wearables! This will likely place new demands on the Service Supply Chain. One of my objectives for 2015 is to help industry participants anticipate these requirements and implement new profitable business models. I expect to accomplish this outcome through my new online course, “Thriving Disruptive Tech”.
  • What are the small things that you must do consistently? In Orson Wells’ great radio show, “The War of the Worlds”, tanks and guns could not destroy the aliens. They died because they could not survive earth’s environment. The lesson… not paying attention to the small things can kill you every time! Contract renewals and new service sales are two of those areas. Renewals maintain your base and new sales enable growth. Without the two, your business is facing possible death. That’s why we are continuing to help our clients with customer satisfaction measurement and improvement. I will also be launching a new online course in a few weeks, “Successful Service Marketing”, which will provide you with the knowledge, strategies, and tools to achieve exponential growth in your service revenues.

 

Once you have these answers you can start working on your plans for 2015. I recommend you start with writing out your year-end goals, followed by a list of your 9 month achievements, 6 month milestones, and 90 day action plan. Continue to update you action plan every 90 days. Work backwards to plan forward! The first 90 days are crucial in this industry and will set the stage for future results, so make sure they are aligned.

I recommend that you and all the members of your team follow this process on an individual and collective level, even if you already have a formal business plan. It’s easy to become complacent this time of the year. Stay sharp during the holidays and keep your winning edge intact for the new year. If you feel you are lacking resources or need some extra guidance; contact me today for a strategy session.