Service Operational Strategy

Dear Friends, Colleagues, Partners and Associates,

We hope you have enjoyed a successful year. The economy in 2012 has for many companies proved a very positive catalyst; propelling businesses into transforming their strategies so that they can really satisfy customers’ needs and promote sustainable growth through services.

Owing to the financial crisis, many technology and product oriented companies have now come to realize that business is not only about selling great technology – but about understanding what your customers really want, what their challenges are and working out how best to help them. With businesses upping their efforts to add value and competition heating up, success requires a good service strategy.

Here at Noventum, we’ve enjoyed a fantastic year, in which many more Fortune 500 companies have opted for our expertise. Not only have we helped a range of businesses from SME’s to multinationals embark on strategic service transformations, what’s more we’ve entered into more long-term performance-based agreements; a reflection of our confidence to deliver what we preach. In the months to come, we will be communicating many of these case studies and success stories.

2012 has been busy. The year has witnessed expanded operations for Noventum. We’ve strengthened the team, hiring more talent; we’ve developed our Training Division to offer monthly courses on Service Leadership, Service Design, Support Centre Management and Field Service Management; and we’ve further expanded our Industry Standards and Best Practice Library to offer a full scope of management practices, KPI’s, Performance Metrics, Competency Profiles, Process Models and IT requirements.  We’ve also improved our Service Benchmarking further expanding its scope as more businesses join in. Our Best Practice Library and Service Benchmarking can now be utilized by almost any type of service business – a considerable achievement this year.

Our research activities have again been very successful this year. 2012 saw the inception of our collaboration with the Association For Services Management International (AFSMI) with whom we hosted several successful roundtables on current debates within the service world. We have also created permanent roundtable groups– bringing service people together to share their challenges and solutions.

Another major achievement has been the publication of our extensive research into Low Cost High Value Service Models. Thanks to your participation, our qualitative and quantitative survey, has gleaned important conclusions for our research community and is helping us to help businesses stride confidently into the future.

It has been a year of many achievements; looking forward, interesting challenges still lie ahead. We will be significantly strengthening our profile and increasing communications through a range of distribution new channels to include traditional and social media, and via the imminent launch of our new website. Look out also for our new mobile app which will make it easier to work and study with Noventum and to keep up to date with our research, events and training schedules.

In more evidence of our long-term commitment to getting businesses back to growth, we also aim to help businesses not only with our expertise but also via financing though our partnerships with Private Equity firms.

It has been a prosperous year for Noventum and we expect to take great strides into the next. Our success is proof in itself of our vision that services are the only way to abundant and sustainable growth, not just for your business, but for all high income countries looking for a competitive advantage. Our mission is to help create a profitable vision and strategy for your service business.

Thank you to all our community of clients, to everybody participating in our research, to employees, associates and partners and to the faithful readers of our newsletter.

We wish you good health, happy holidays and a fruitful year ahead.

Merry Christmas,

Hilbrand Rustema,
Managing Director

Achieving Operational Excellence In Your Service Business

(BIRMINGHAM, 19th September 2012) Following the conclusion of new research on Low Cost High Value Service Models, Noventum Service Management have hosted roundtable exploring their findings as part of the Service Management Expo 2012 at the NEC, Birmingham.

Service-oriented business strategies are more successful

INTRODUCTION
 

Following the 2008 crisis years, the commoditisation of products and product-related services is pressuring profit margins and growth across an increasing number of industries.
 

As customers mount increased pressure for reduced prices, statistics reveal that companies possessing long-term service contracts are particularly susceptible. As a result, a growing number of service businesses are now seeking new ways to fight the impact of commoditisation by increasing their profitability through the development of entirely new cost structures at lower cost levels.
 

In tandem, many businesses are currently exploring new ways to increase their value offerings by developing more advanced services and by improving how they communicate their value to their customers via the branded customer experience.

In the wake of the crisis years therefore, a key question for Noventum Service Management concerns how service-oriented businesses can overcome these challenges in two ways: 
 

i) By Lowering Costs and improving productivity - by significantly changing cost structures as opposed to making marginal reductions.

ii) By developing High Value offerings through advanced services, which aren’t necessarily related to product and consider the branded customer experience.
 

This survey was designed to compare performance levels in service businesses to reveal significant trends and patterns helping us to further develop Low Cost High Value Service Models.

Typical examples of low cost, high value delivery models include the following:

• Self-help  Whereby customers solve issues and conduct maintenance themselves without the support of their service provider, excluding the use of manuals, online FAQ’s and web videos
• Supported self-help  Whereby customers solve issues and conduct maintenance themselves with the support of the service provider, i.e.:  via a helpdesk (phone, email, chat) or ‘look-over-the-shoulder service’, possibly with help of a remote connection for diagnosis
• Remotely using a machine to machine (M2M)connection  In this instance a service provider will access a system via a remote connection and not only diagnose the issue but also execute the solution via the remote connection
• Product exchange  In this instance, rather than repairing equipment, a service provider will arrange its replacement whereby the customer will either receive a new or refurbished product
• Bench repair  Here, the product in need of repair will be shipped to the service provider’s repair shop, after which the product is shipped back to the customer. In the interim the customer may receive a temporary loan product
• Tech courier  Having determined which part or component needs replacement (via customer or service provider diagnosis), a low-cost courier with basic technical and product knowledge will deliver the component and conduct the swap. In this instance, products are designed for easy access and swapping.
• Field engineer In this instance a field engineer is dispatched to repair the customer’s product, potentially conducting the diagnosis himself.

Survey Characteristics

This survey was undertaken by Noventum Service Management between January 2012 to June 2012. It comprised an online quantitative questionnaire among 211 participants and qualitative in-depth interviews.

Research was conducted across both the B2B and B2C sectors and among multiple service-intensive industries such as; utilities, computer related, software, telecoms, electronics, medical, print, graphic, machine, construction, HVAC, manufacturing, retail, controls & instrumentation, facility management, government, safety & security and IT consulting.

Selected participants were highly experienced; nearly three quarters (72%) of survey respondents interviewed possess over 10 years of service expertise and 36% with over 20 years of expertise.

Respondents were motivated to undertake the survey for a range of reasons; the most significant group were seeking to design new services with the second largest seeking to improve processes and productivity.

OUTSTANDING CONCLUSIONS
 

Following the conclusion of our survey Noventum Service Management have identified a number of
important trends and findings related to business strategy, cost and value. The most significant and
unexpected among the findings are as follows:

Results show that among top performing companies, service-oriented business strategies drive
both growth and EBIT (Earnings Before Interest and Taxes) to levels above 20% per annum. Furthermore, successful business strategies were proven to be those which integrate both products and services and those which are both brand and people driven and less focused on cost.

Findings further indicate that businesses in industries offering more advanced value-adding services
are better performers based on operating costs, gross margins and net operating income. Service companies within the fields of IT, software and medical equipment sectors are leading the way in delivering value-adding services whilst companies in the fields of construction, telecoms,
process controls, instrumentation and safety & security remain stagnant.

According to the survey, more successful companies offer a broader portfolio of services while worst
performing businesses do not invest in services. In successful companies knowledge driven and
availability services are shown to supplement warranty and product support services. 

Remote services and knowledge management are key enablers among top performing businesses  offering a wider portfolio of services. Here, their services were best employed as enabling capabilities for their product-related services (such as warranty, product support and availability services) and not offered as a service in itself.

Top performing companies are masters in communicating value to their customers and at having customers experience value.  These companies appeared to communicate value less so through features or capabilities and more through customer centric offerings and via the branded customer experience.
 

FINDINGS BY TOPIC
 

Strategy Findings

More successful businesses are those exercising a business strategy integrating products and services. These businesses were motivated to invest in services on top of their core product offerings because they believe the combined service plus product proposition helps them differentiate themselves in the market place and enables them to offer more value to customers. By contrast, lower performing businesses were still product-oriented and cited unmet customer needs as their main driver revealing a lower level of maturity. Survey findings revealed that customers respond better to businesses that offer an integrated approach of both product and service solutions.

The top ten per cent of business performers implement strategies which are brand and people focused in equal measure with no proportion of their strategy driven by costs. By contrast the worst quartile performing companies focused over half their business strategy on cost and price with a very marginal focus on people.

Lagging commitment towards investment in services by top management executives. Better performing companies appeared to invest in services through a drive from their middle management service directors who gradually convinced senior executives to commit to the investment. Providing analysis, Hilbrand Rustema, Noventum managing director said: ‘It’s interesting to see that this drive to invest in services doesn’t come from senior management or bottom-up from engineers but from middle management responsible for services. Here it is evident that service personnel have to put quite some effort and time into getting more recognition and budget.

'The key message here is not to wait until senior executives recognise the need for services because they are often divisional mid-management initiatives sold upwards to senior management. It’s therefore very important that a solid business case is presented for investment. In the top ten per cent of performers we see that service personnel in middle management are taking the leadership of building the service business step by step and soliciting the interest from top management.'

In poorer performing businesses directors are aware of the profit potential in services but do not take action. Worst performers are twice as indecisive on service opportunities as best performers whereas top performers have senior management that recognise the value of services and act upon the potential.

The top ten per cent of performers greater recognise the need for more services for which their customers are willing to pay.  Conversely, customers of companies lagging in performance believe their customers are not prepared to pay for additional costs or services

High Value Findings

Businesses which are better able to communicate value grow faster and are more profitable. The top ten percentile of performers focus on value to customers and are more successful in communicating this. These companies appeared to communicate value less so through features or capabilities and more through customer centric offerings answering specific customer needs and via the branded customer experience.

In more detail, better performing businesses focus on their customers’ needs asking themselves whether they need more services and whether they’re willing to pay for them. These companies did not offer additional services for free but rather communicated the value of their offerings. Here, successful companies present their services as highly valuable via their brand and their communications.

For example, the survey revealed that top performing companies regard remote services as an internal capability enabling them to offer more value. Here, remote services were embedded in more advanced service offerings enabling them to deliver high uptimes and business intelligence to customers making them highly valuable.

Ultimately, it pays how business present their services and how value is experienced by their customers, here lies the difference in customers willing to pay for services or not. In the best cases businesses recognise the importance of advanced services and put strategies in place.

When companies deep-dive into their customers’ implicit and explicit needs, they’ll discover their customers are often very interested in paying for more services which really answer their business problems. Top performers understand much better what customers really want and how they want it.

Top Performers possess a wider portfolio of services to include more knowledge driven services. More successful companies offer a broader portfolio of services while worst performing businesses do not invest in services. In successful companies knowledge driven and availability services are shown to supplement warranty and product support services.

The survey shows that as soon as industries start to add these services on top of existing warranty and product support services they start to add value and these companies are more likely to add to their earnings potential.

In terms of maintaining value in service delivery, top performers are more selective as to when to outsource in their drive to improve productivity. Top performers make a strategic choice to conduct value-adding activities themselves, they outsource less and never in knowledge intensive activities, which are regarded as an important generator of value. Here, support centres, which enable top performers to capture knowledge, are never outsourced.

In terms of industries, the survey revealed that the software, IT and medical industries are proving more successful in delivering value-adding services whilst companies in the fields of construction, telecoms, process controls, instrumentation and safety & security remain stagnant. In the IT, Medical Service and Software industries technological developments appear to be driving new services because products here are not stand alone but interconnected, making these industries the best service value generators. Conversely, low-tech industries don't drive services leaving their potential for value untapped.

Low Cost/ Productivity Findings

In terms of Service Delivery, top performers solve problems less via engineers and more via supported self-help.

The survey showed that top quartile performing companies use less field engineers to solve issues employing around half the field engineers of those in the last performing quartile (16 % and 29 % respectively). In more detail, results show the employment of field engineers dramatically drops with more successful companies moving towards less costly solutions such as remote solutions or supported self-help.

Advanced knowledge management and developing the competencies of in-house service specialists is key to problem solving in top performers; Self-help was not shown to be a driver in profitability but supported self-help is.

Top performers use a lot more supported self-help, which means these companies are investing significantly more in knowledge management and in the competencies of their service specialists and have the infrastructure in place to do so. Interestingly however, pure (web-based) self-help was revealed to be of negligible value in top performers.

Results showed no significant difference in performance as to how businesses use remote intervention for problem solving.

Interestingly we do not see top performers applying significantly more remote resolutions via machine to machine (M2M) links yet. However, these top performers are more successful in conducting the diagnosis remotely via M2M connections and do invest more in remote capabilities. This would justify the expectation that soon we will see top performers utilising remote resolutions via M2M and further increase their profitability.

Top performers capture more service requests via the Internet and remote monitoring and less so via engineers or 3rd party providers.

Top performing companies on profitability exhibited a higher level capturing service requests via either the Internet (email, social media, web site) or via remote monitoring.

RELATED OFFERINGS
 

This executive summary represents a first analysis of the survey and initial conclusions. Survey respondents will receive the full survey report with numerical analysis in October 2012. Respondents will also receive Noventum’s unique benchmarking service free of charge.

This survey’s conclusions are presented in a webinar. Click here to view online.

ABOUT NOVENTUM

Our vision is for a prosperous society in which sustainability and growth are symbiotic, are abundant
and available for all. 

We promise to unlock the unlimited service potential in organisations by offering a proven Service Transformation Roadmap comprising strategy, design, service processes, people organisation and implementation.

We can promise this because we are experienced service experts who are connected, pragmatic and innovative. We know what's possible and we can help you get there.
To learn more about Noventum visit: www.noventum.eu

Noventum Service Management have launched the new Service Process Roundtable, representing service managers and process specialists across the IT, mechanical engineering, medical technology, electrical and electronics industries.

Chaired by Noventum senior consultant Wilhelm Taurel and managing director Hilbrand Rustema, participating companies included ABB Automation, Abbott Diagnostics, Bobst Group, Jungheinrich, Sick, Siemens, Wincor Nixdorf International and Carl Zeiss International.

The roundtable comprises part of Noventum's Service Innovation Programme —a research initiative aimed at advancing innovation in the service business through experience exchange and research. The event further marked the launch of a series of bi-annual sessions designed to explore best practices in process management for technical service organisations, how best to align process optimisation objectives with overall company objectives and how process improvements can better be implemented to effect real organisational change.

'Change before you have to', famously advised General Electric's champion chairman Jack Welsh. In today’s stressed economy, service organisations wanting a chance at survival know they need to embrace change to stay relevant and contemporary. With the increased commoditisation of products and product-related services, pressure on growth and margins are forcing companies to think outside of the box when it comes to delivering their services.

Service businesses need savvy new programmes, which allow them to evolve quickly and nimbly.  Today there's more pressure than ever to create new customer-oriented offerings, which can adapt quickly to changing markets. However, navigating the right path to service transformation isn’t always straight-forward, particularly because the most common approaches (Big Bang and Incremental), carry a multitude of risks and yield surprisingly low success rates.

There exists an alternate path however, and it’s the one increasingly being adopted by today’s more successful and forward-looking service organisations. The Service Factory is an emerging and agile approach to change —it’s a stepped approach but offers quantum leaps forward in service transformation and at limited risk.

Noventum has worked with many service companies to achieve operational excellence, enabling profitable growth whilst meeting customer expectations.

We can help you to identify improvement opportunities within your service delivery. Noventum can design a service factory in line with your service and brand, standardising your service delivery, processes and systems; enabling you to achieve effective service transformation to deliver profitable growth and reduce costs.

•     Operational Assessment

Customers are moving away from traditional price and feature driven service strategies and recognising that the winning strategies are brand driven strategies that create a long term emotional bond with customers through shared values.  

We assist our clients to develop and implement successful service strategies with a number of service management consulting services:

With our consulting activities we assist our clients to develop successful service strategies and help them to transform their organisations into high growth, highly profitable and sustainable service-led businesses; that add value for customers, and are an inspiring place to work in. Our consulting approach is results oriented, collaborative and driven by transfer of knowledge, methodologies and tools. 

LOW COST HIGH VALUE SERVICE MODELS: Should you change your service delivery model?

With competition on services heating up and more players entering the market, the service industry is becoming increasingly commoditised. How you differentiate your offering and strengthen profit margins is by providing advanced services for that are highly valuable to your customers. For original equipment manufacturers (OEM’s) however, this presents a particular challenge owing to higher cost structures. The solution is to employ a Low Cost High Value Delivery Model.