“Servitization”; A B2B Business Model That Will Be Embraced by the Machine Community in the Coming Decades

This blog post was written by Ron Giuntini, president of Giunitini & Company, a consulting firm focused primarily on the Configuration and Pricing of Quotes [CPQ] engaged in B2B Aftermarket agreements. Ron is also the founder of G35 Software, a prototype proprietary CPQ software tool.

Before venturing further, let us first define ”servitization”; it is a business model in which a machine (i.e. forklift, truck, order picking robot) is not sold, but is accessed by an end-user through a multi-year fixed-fee outcome-based service-contract. A servitization focused contract is primarily landed at the time of the delivery of a new or used machine. The service typically encompasses the following 15 elements:

  1. The equivalent of an operating lease is supplied; machine ownership is never transferred to the service recipient. Many of these machines in the future will be autonomous.
  2. The Intellectual Property [IP] of a machine’s embedded software configuration is not controlled by the service recipient, but by the owner of the machine.
  3. Solutions are supplied to maintain (i.e. break/fix) and improve (i.e. upgrade) a machine’s capability (i.e. lift 5,000 pounds), employability (i.e. 95% uptime in a 24 hour period) and deliverability (i.e. 8 hours of operation per day).
  4. An outcome-based fixed-fee is typically aligned with the customer’s revenue streams; in fact the fee becomes a variable cost. For example a public warehouse forklift user could be charged a fee of $3.75/ton for movements from storage to staging and loading of a vehicle; the fee would be directly aligned with their handling charge of $4.50/ton for the same movements to its customers.
  5. Solutions are delivered for a continuous period of time during the post-production life cycle of a machine; when over 1 year, revenue recognition financial reporting is required.
  6. The performance levels of solutions delivered are assured. For example technicians will arrive on-site for a break/fix event within 2 hours of being notified within any 24/7 period.
  7. Amendments are incorporated to the contract, such as up-selling or cross-selling; will often occur as a result of changes in the business environment of the customer during the multi-year contract duration.
  8. Contract renewal is aggressively pursued; it is a major end-game of the business model.
  9. A supplemental fee schedule is established; for solutions delivered that are not supported in the contract.
  10. Guidance for the price and configuration for quotes of the pre-landed contract is overseen by one entity.
  11. Higher profitability for seller; typically 25-150% higher than that of a product.
  12. “Stickiness” of buyer-seller relationships; continuous contact for years.
  13. Higher sales commissions for account managers; multi-year worth of booked sales.
  14. Optimized budgeting for buyer; converts CapEx to OpEx and reduces # of transactions.
  15. One “button to push” by buyer to address any performance issue with seller.

Currently, the decade-plus employment of the term of “servitization” has primarily been the focus of European Union [EU] based academia and EU OEM Board Of Directors [BOD] suites. In the last 2-3 years, EU-based OEMs have been touting the term in their US-based operations. Also a limited group of US-based academics and management consultants have been discussing the model as well. As of today, few US-based BOD, or investors are familiar with the term, but it is my belief that will be changing in the near term. Note that the terminology employed for the US-based business model may be different than that of the EU-based “servitization”; currently US-based firms employ terms such as “subscription” and “Product-as-a-Service [PaaS]” that encompass many of the elements of “servitization”.

In one perspective, the revenues generated from servitization simply shifts transactional-based revenues to that of the contract. For example, a Preventive Maintenance [PM] task is scheduled every 600 hours employing $1,000 of parts; this will be done either by the maintainer/owner purchasing $1,000 of parts in a transaction or having the parts bundled in the contract’s pricing of the fixed-fee per hour of operation. At this point there is little incentive for the seller to embrace servitization; it appears to be a zero-sum game.

The “magic sauce” of the seller of a servitization offering encompasses 4 major areas.

  1. Higher Profitability
    There is a powerful incentive to reduce costs incurred to deliver an outcome-based fixed-fee solution during the life of the contract
  2. Contracted Recurring Revenues
    The investor community is “excited” about such a recurring revenue business model; they reward the enterprise with highly favorable valuations that can exceed the Price/Earnings [P/E] ratios of their peers by 25%-50%.
  3. “Stickiness” of Relationships
    Engaged in a long-term relationship with buyer, providing opportunities for future renewal and up-selling/cross-selling revenue opportunities.
  4. Optimized Performance of Machine Models; Customer Success
    In order to meet outcome performance assurances, the seller will provide the buyer with continuous improvements in the capabilities, employability and deliverability of the machine.

Below are some of the factors that may hinder the embracement of servitization by the Commercial Machine community.

  1. The difficulty in changing organizational cultures of actors.
  2. The potential risks of large multi-year losses for seller.
  3. Challenges of sellers in educating the investor community of the new business model on the income statement and balance sheet.

In conclusion, it is not if the “servitization” business model will be embraced by the Commercial Machine community, but when. It will be difficult journey, of 10-25 years, but when early adapters demonstrate the financial and relationship benefits, the rest of the community will follow suit.

Would you like to learn how to effectively implement a “Servitization” business model in your company?  Schedule a FREE Consultation TODAY!

7 Strategies To Build A Powerful Technical Support Team

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In this week’s blog post I am sharing an article written by Alice Methew. Alice is a professional writer and has written articles for many different sites. She is committed to the pursuit of excellence through writing and has a passion for technology.

What are the roles and responsibilities of a technical support team? First of all, you need to realize that the technical support team is the flag bearer of a business’ goodwill and reputation. Of course, this team has to play a big role in the process of client retention. Unfortunately, many business owners have not yet realized the true significance of a technical support team, because the benefits that this team offers are not tangible. On the other hand; smart business owners give utmost importance to technical support team and they continuously monitor the performance of this team to maintain the productivity of the business at an optimal level. Here are the 7 strategies to build a powerful technical support team based on lessons learned from Enterprise Systems, a leading IT Support Organization in Houston, TX.

1) Hire technicians who have the potential to maintain a harmonious balance between technology and humans

If you want to build a good technical service team, you have to appoint the right people. It is a well-known fact that there should always be smooth coordination between various departments within your organization to ensure optimal productivity. If you want to minimize the number of issues that the technicians have to tackle, your technical support team should have the potential to coordinate efforts with other company business departments. That is exactly why you need to hire support engineers with adequate technical knowledge and they should also have a proper customer support background. If a technically accomplished professional does not have the patience and ability to listen, he can never be a good member of a technical support team. In such a situation, you may have to deal with a lot of problems.

2) Proper documentation of problems and their solutions

Many tech support teams often get stuck on problems even if they had dealt with similar issues earlier. This situation occurs mainly because of the fact that the technical support team does not have a clear cut list of standard procedures to address frequent problems. Whenever the team gets a call, the members keep on re-inventing the wheel and this situation does not help you build a strong team. You have to make sure that the technicians are preparing notes on how they resolve each problem. These notes must also be handed over to other team members as cheat sheets. Then, a list can be compiled to form a quick reference guide. This approach can reduce the problem resolution period from hours to a few minutes.

3) Show the team members the correct career path

When it comes to highest turnover rates, technical support field stands tall. Many company owners complain that their technical support team members are leaving the company too often. Within the IT Industry, most members of the support team become developers or programmers after a short period. You must understand that there is no point in holding them back. You have to provide continuous training and flexible work hours so that they can learn faster and keep them updated. Business managers must meet them frequently to talk about the career path and goals. You have to give them opportunities to move up in your own organization. In such a situation, they are not going to leave your organization like many people do.

4) Ask the team to focus on satisfying the customer

All dynamic technical support teams strive hard to track measure and analyze the operations. In such a situation, the teams clearly understand what is working and what areas demand improvement. When a support team prepares these critical data points, they can easily improve the existing processes. If you want to build a good technical support team, you have to realize that all metrics should be geared towards achieving satisfied customers. The bottom line is that you must ask the support engineers to focus on one metric; customer satisfaction.

5) Get curious and passionate people

You can hire people who have a natural curiosity to find out how things work and progress. People, who come with this attitude, are excellent options for placing in the technical support team. Human resource managers must identify candidates who are passionate towards assembling things, tinkering with equipment and solving puzzles. These types of people possess the right frame of mind and they also have the patience to address ever emerging complex problems.

6) Do some simple calculations

When you do some simple calculations, you can come to know how your technical support team is performing. First of all, you need to check how many cases your support team is handling every week. Then, you also have to analyze how many cases are being handled by other departments and how many of them are being solved completely. This data can be used to analyze the existing performance of your technical support team in a realistic manner.

7) Set up different types of goals

When you have the existing performance data on hand, you can understand where you are heading and rebuilding process can be done by setting short, medium and long-term goals. The short term goals are for rebuilding your technical support team and they also allow you to choose the right tools that are being used to accomplish this rebuilding process. Short goals also allow you to put them in place to make the rebuilding process highly effective. Medium term goals can be set up to handle all calls within the team before the customers become really annoyed. Long term goals are primarily meant for reducing support costs. These goals can be materialized by lowering costs per product line, customer attribute, and product launch. This systematic three-step method of approach is going to deliver excellent results.

Many companies follow a wrong philosophy of maintaining cold vibes with customers. Quite often, they end up making a lot of mistakes. You cannot build a good technical support team by undermining the importance of customer requirements. You must try to develop a culture within the team that focuses on customer satisfaction and in such a situation, your customers will start noticing and appreciating it with immense satisfaction. The bottom line is that if you follow these 7 strategies, you can build a powerful technical support team in an uncomplicated manner.

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Field Service Staffing — The Variable Workforce and FMS

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The unemployment rate, outsourcing, part time employees, changes in the workforce; these are all topics that have been in the news for several years. Is it just that there are less jobs or fewer full time positions? Is the economy really in bad shape? Or is there a staffing trend that we need to examine.  Full time employment means a guarantee of wages, benefits, and paying the employee even when there is a lull in the business.  For companies in the Field Service Industry there may be peaks and valleys in workflow and need for field service personnel. And while so many functions can be performed on a remote basis, sometimes someone just has to be there.

Enter the Variable Workforce, offering highly skilled, well trained, specialized Field Service Engineers who are available on an as needed or project basis. These individuals are normally highly motivated as they essentially run their own small business and best of all; they work this way by choice.

Now we have people to hire.  How do we manage that? Freelance Management Systems (FMS) offer online cloud based systems allowing companies looking for qualified workers, including Field Service Engineers, to find them quickly and easily.  FMS provides companies with the opportunity to achieve significant cost savings over time and the ability to accelerate strategic or organic expansion resulting in new clients, new service offerings, and/or new sales territories.

So what is the actual experience of companies using a Variable Workforce and FMS platforms? Have they been able to achieve these benefits or is it just hype?

A survey seemed to me to be the best way to get answers. So we designed an online survey for the Field Service Industry to ask professionals who handle field service staffing or make decisions about field service staffing requirements, for companies with field service functions for technology equipment they sell and/or service.

We wanted to examine the benefits of Variable Workforce models, particularly FMS. In doing so, we could assess concerns regarding using FMS, the motivators for using FMS and the benefits that have been seen by using it.

Over 200 Third Party Maintainers (TPM)/ Independent Service Organizations (ISO), Original Equipment Manufacturers (OEM), Value Added Resellers, Systems Integrators, and Self-Maintainers participated.  The companies range in size from over $500 million in annual revenue to less than $50 million varying in size from those who manage less than 100 field service events per month up to more than 1000. These field service events included emergencies, installations, inspections, and preventative maintenance or calibration. And the types of technology supported included Information Technology, Network Connectivity, Printers, Point of Sale, Telecommunications, and more. The companies also varied on how a Field Service Business is run – as a cost center, profit center, strategic line of business, or revenue contribution center.

Over three-fourths (77%) were currently using some type of Variable Workforce Model.  The survey respondents were two-thirds TPM/ISOs or OEMs.

Most participants (81%) use the Variable Workforce for project based work.

We found that the top three reasons that companies made the move to a Variable Workforce were:

  • The ability to be agile and scale the workforce based on customer demands.
  • Over half agreed that “We didn’t have enough work in selected geographies to justify hiring a fulltime Field Service Engineer.”
  • Almost all said that controlling labor costs was a significant motivator.

One of the most important results was that the Variable Workforce users support more types of technology on average than non-users.  That is, those companies who use Variable Workforce are able to support 4 types of technology versus only 1.8 types of technology for non-users.

Nearly two-thirds of those utilizing the Variable Workforce use a Freelance Management System (FMS) to manage the staffing.  Of these FMS users, almost all have been using it for at least one year and 60% for three years or more — another sign that something must be working.

FMS users tend to support more types of technology as well. On average, companies who use FMS support 4.3 types of technology versus only 2.8 types for non-users.

Ultimately the most compelling reason to make the switch was that the FMS platform is agile, giving companies the ability to scale up quickly to meet seasonal, cyclical and short term demands. In fact, 71% of users found this to be the case.  FMS adopters have been able to gain more business and have been able to increase their field service work. They have experienced such success that 76% of them reported an increased demand for FMS just in this past year, most by at least 15%.

The survey results certainly indicate that usage of Freelance Management Systems for the Variable Workforce in Field Service will continue to increase over the next year as well.

Stay tuned for future posts where I will discuss what our survey revealed about the Key Performance Indicators and how use of Variable Workforce and specifically FMS impacts the Field Service Industry.

Improving First-Time Fix Rates

A Field Service Manager’s Guide

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In my last blog, I discussed the importance and impact of high First-Time Fix rates for the field service industry. (If you have not already read it, catch up here.)  Knowing that a high First-Time Fix rate leads to greater customer satisfaction, higher renewal rates, and lower costs for your company encourages management teams to want to improve this Key Performance Indicator (KPI). And making those changes does not have to be difficult or costly. On the contrary, making this KPI a priority will increase profitability and can make your organization flow more smoothly.

Here are 5 keys to increasing your First-Time Fix Rate:

  • Triage
  • Training
  • Dynamic Scheduling
  • Parts Planning
  • Knowledge Tools

Call Triage:  This is where it all starts.  Your customer calls in with a problem. The team on the front line needs to have the right technology and systems in place so that when a call comes in they can screen the call, understand the issue, and understand what skills and which parts may be needed to resolve the issue. Some calls may be able to be resolved over the phone if you have given the Call Triage Center the technology and systems to evaluate the call properly then no dispatch is necessary, saving time and money for you and your customer. If this is not the case, knowing as much as possible up front will help in the decision making process for the next step – dispatching the correct Field Service Engineer (FSE) with the right skills and equipment to have the highest chance of fixing the problem the first time. Is there a FSE in the physical area? Does that technician have the skills and parts to repair the problem? If not how can the FSE get the needed parts? And how do you achieve this in the time frame you have promised to your customer?  Your call center needs to know who is available and what skill set and equipment they have to make the best decisions for both your customer and your field service organization.  By conducting upfront call triage, you can provide the FSEs with the information they need to know in order to resolve the issue right the first time. Having the right systems and technology will help facilitate this process.

Training:  While it may seem like an obvious thing, you must have highly trained and well qualified FSEs available for dispatch.  Make the investment in both hiring and training your existing team of FSEs.  The more skills they each possess, the greater chance that the one closest to your customer at the time needed will be able to make the First-Time Fix happen.   How do you make this happen? First, have consistent and periodic training. Second, training should take place both in the classroom and in the field. Third have continued skill assessment and evaluation, that is evaluate your technicians and see how well they perform, then go back and do more training in the areas needed. In summary train, let them do, evaluate, and train more.

Dynamic scheduling: This means using advanced technology to identify and assign the best technician who has the skills, is available, can get there in time frame promised to customer and has or can get the required parts. Again, it may seem obvious, but if the FSE does not have the right part to fix the problem then a second trip to the customer is a given.

Parts: Parts management must be a part of any profitable Field Service Strategy.  What are the most commonly needed parts for the most common issues your FSEs encounter? What are the parts that have the highest failure rate? How do you make decisions about what each FSE carries with them for every call? And what is the availability for the parts that are not included in those most common service requests?  All of these decisions impact your organization’s First-Time Fix rate.

The fifth aspect of creating a high First-Time Fix rate is enabling your technicians to be more efficient to troubleshoot while in the field. There are several ways to achieve this:

  1. Give FSEs access to mobility solutions to access knowledge bases while in the field.
  2. Provide access to a Telephone Technical Support center they can call while in the field.
  3. Implement collaboration tools that allows FSEs to use their mobile devices to query and collaborate with other technicians who may have faced the problem and know how to solve it.
  4. Rely on augmented reality technology so that your technician can learn in real time while in the field what they need to do to solve the problem.

Investing in people, technology and processes make a high First-Time Fix rate achievable. By utilizing time and resources to have a well-run Triage Center; Train and re-train technicians; use Dynamic Scheduling to make the process efficient; implement effective parts management; and giving your FSEs the tools to be successful while at your customer, your First-Time Fix Rate will enhance the profitability of your Field Service Organization.

Tell us what has worked for you?

Or if you are looking for answers call for a free consultation.

The New Field Service Workforce

Images Outreach article

There has been a dramatic shift over the past 5 to 10 years in the way work is performed in the U.S. and Europe as more and more workers join the gig economy.  By definition, a gig economy is an environment where temporary positions are common and organizations contract with independent workers for short-term engagements.  In other words, people are increasingly taking on freelance work.

According to the US Bureau of Labor Statistics, 53 million Americans are currently working as freelancers.  By 2020, 50% of the American workforce will be engaged in freelance activity. Furthermore, a study published by the Freelancers Union and Elance O-Desk indicates that freelance work contributes $750 billion annually to the US economy.

The gig economy has played a significant role within the Field Service Industry.  It is driven by the trend of many companies to implement variable workforce (VWF) models. This is a business model in which a field service organization (FSO) relies on a contingent workforce to manage peaks and valleys in labor demand.  Earlier this year, Blumberg Advisory conducted an extensive research study to examine the impact of VWF models on the Field Service Industry. The study, sponsored by Field Nation, revealed  that 8 out of 10 FSOs have implemented VWF models to manage over one-half (53%) of their workforces.

One of the ways that FSOs implement the VWF model is through a Freelancer Management System (FMS).  This is an integrated software platform that includes functionality for Vendor Management System (VMS), Human Capital Management System (HCMS), Service Ticketing System, on-line recruitment tools, and reporting & analytics. Approximately two-thirds of survey respondents use this type of solution to manage their contingent labor pool of field technicians.

The single biggest benefit of using an FMS, as reported by 70% of survey respondents, is scalability.  In other words, the ability to scale the workforce up or down based on service demands.   A majority of respondents also perceive access to a vibrant marketplace of freelance technicians (61%), the flexibility that an FMS has in managing W2 and 1099 employees (56%), and lower cost of overhead (54%) that results from using an FMS, among the top benefits.  Just under half of the respondents (46%) viewed lower direct labor cost as a benefit of using an FMS platform.

In addition to these benefits, FMS platforms have a measurable impact on field service financial and operating performance.  Indeed, companies that use FMS platforms report having observed a 6% or more improvement in field service key performance indicators (KPIs) such as field service productivity (i.e., # of visits per day), labor utilization rates, SLA compliance, recurring revenue, and gross margins.

Obviously, the gig economy has had a positive impact on FSOs who rely on the VWF model and FMS platforms.  However, many opponents of the gig economy believe that freelancing models take advantage of workers and therefore are bad for individuals.  The facts point to the contrary. In 2015, Field Nation, a leading FMS platform provider to the field service industry, conducted a survey among freelance workers to understand their attitudes and perceptions of freelance work.  An overwhelming majority indicated that the freelance lifestyle is both a personnel choice (88%) and their primary source of income (73%).  Almost all the respondents were satisfied with the work they do (97%) and the career choice they had made (95%).

These findings suggest that the nature of work within the Field Service Industry has changed for good. The days of individual commitment to a single employer and vice versa are long gone.  Freelancing is not a passing fad within Field Service .  Furthermore, Freelancer Management System (FMS) platforms make it possible for FSOs to achieve positive, measurable results from implementing a Variable Workforce Model. Clearly, the gig economy is here to stay.

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Keys to Successful Service Marketing

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Service Marketing was a relatively new concept when I began my consulting career back in the 1980s.   High-tech service companies were just starting to run as profit centers and focus on marketing their services.  As a result, there was very little attention placed on service marketing in business schools at that time. The emphasis was on product marketing.  All the marketing literature and textbooks, all the courses, and all the conventional wisdom on the topic of marketing were centered on products.  I learned very early in my career that it is extremely difficult to market services using product-marketing ideas.  It was like trying to hammer a square peg into a round hole!

I really wanted to help my clients solve their service-marketing challenges so I began an amazing journey of helping these clients discover, develop, and implement best practices for successful service marketing.  First, I learned as much as I could about product marketing and then looked at which aspects applied to service marketing and which didn’t.  Basically, I reverse engineered product marketing to determine lessons I could learn when it came to a different kind of marketing altogether.

Second, I identified companies who already were doing a good job at service marketing. In other words, they had already gone a long way to crack the code of service marketing.  I researched what they were doing well and advised clients to model their success on these early exemplars.  In essence, I bench-marked the best practices in service marketing and then showed my clients how to implement them.

Third, I found in one individual a great teacher, mentor, and coach who helped me excel at service marketing.  That person was my late father, Donald Blumberg.  A prolific author and speaker on the subject of service strategy, he taught me what it takes to build a profitable service business and guided me in establishing my own perspectives on service marketing.

As a result of our collaboration, I developed my own understandings about successful service marketing.  I started to write articles and give speeches on service marketing, which led to more consulting work, which in turn led to greater learning on my part.  Over time, I became an expert at service marketing as I helped my clients increase revenues, boost profit margins, and improve market share.

I’m sharing this information because I want you to know that you can achieve these results, too.  More importantly, you can accomplish them in a fraction of the time it took me.  You don’t need to spend years reverse engineering product marketing or bench-marking best practices.  Instead, I’ve created a new online training course that will provide you with strategies, tactics, and insights for Successful Service Marketing. ™ As a starter, I’ve put together a brief video that describes the course content. You can access it here.  I am also providing a $100 discount on the purchase of this course during the month of May.  To take advantage of this discount, enter code SMK100 when you register.

Please let me know what you liked about this blog and your key takeaways.  If you’ve found this blog of value and think your colleagues or business associates could benefit from it, then kindly share it with them.

 

Enterprise Service Management System Trends

 

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

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

 

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

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

The Five Most Important Trends Impacting the ITAD Market

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

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

 

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

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

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.

Six Keys to Effective Benchmarking

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It is part of our human nature to compare ourselves to others.  In business this practice is known as benchmarking.   A good criterion of an effective benchmark project is that it provides objective data to answer specific questions about a company’s performance relative to others in their industry.  It is important to have a clear outcome and purpose in order to get good data.  Here are some guidelines to help you achieve the best results:

  1. Benchmarking is a means to an end – it is not an end to itself. Quite often, managers and executives want to use the data to prove a point. Benchmarks are nothing more than a measurement. Like most measurements we need to do something with the information. Often times the benchmark results raise new questions, usually about strategy or operations that must be answered and acted upon. Have a clear objective of what you are measuring and even clearer about what you are prepared to do once you review the results.
  2. Improvement not validation – Don’t go into benchmarking with false expectations. The results will do far more than validate how you are doing; it will provide insight on where you can improve.   Rarely does a company engage in a benchmark study only to learn that everything is fine and dandy with the current status quo. Don’t for a moment think that there is nothing new to learn either. I’ve worked with many companies who commissioned benchmark studies to validate the need to make a change in one area only to learn that the perceived issue was only a symptom associated with a different problem.
  3. Scratch below the surface – Thoroughness is the name of the game when it comes to benchmarking.   Often times the answers are hidden well below the surface.   It is the job of the benchmark analyst to be an agent of change. This requires that they dig deep and go wide. Performance in one area may be directly related to a performance in another. There are a number of factors that impact performance.   Quite often these factors are the root cause of the problem and/or a function of the underlying systems and processes being measured.
  4. Look for relationships – You must understand relationships in the data if you are going to interpret it correctly. You also need to be good at spotting patterns. The goal of benchmarking is to get to the root cause of the problem and identify where improvements need to be made. Quite often only one or two corrective actions are needed to make significant performance improvements in multiple areas. This is only possible if you can effectively observe patterns and relationships in data.
  5. Seek advice of an expert – Let’s face it benchmarking can be a complex task. Work with someone who has been there before. Find someone who understands your business and the industry you are in.   More importantly, make sure you find someone who understands what’s possible within the realm of reason so that you can innovate. Ideally, you’ll want to compare you company not only to direct competitors in your market but to best practice companies in any industry or market place with similar characteristics.   After all, your customers will do this. Why shouldn’t you? It is likely you will want to hire or retain an experienced industry expert to help you with this analysis.
  6. The answers are within you – There are times when there will be anomalies in your data and sometimes these anomalies contain tons of answers to why things are the way they are. The only person who can explain this is you. Also, one thing for certain is that even the greatest expert in the world can’t make decisions for you. Only you can do this.   You’ve completed your benchmarking efforts now it is time to make real change.   Whether you use a consultant to help you make this change is up to you.   It is all about being resourceful and we all have this capacity within us.

Takeaways – Benchmarking is a strategic endeavor that must be part of every executive’s tool kit.   As the old adage goes, that which gets measured gets improved. This is the primary objective of any benchmarking effort.   The ability to effectively analyze patters and relationships in data is critical since root cause of performance is often systemic or procedural in nature. The experience and perspective of an objective third party advisor can ensure quality results and an efficient process.   While experts can’t make decisions for your company, they can serve as a valuable guide in helping you find answers.