Strategic Service Management

It’s that time of year again. MillwardBrownOptimor have published their Top 100 Brandz ranking, and corporate marketers are either celebrating or justifying in boardroom around the globe.

But should marketers alone take in these findings? Or does customer perception break down any barrier between Service and Marketing that may exist on Org Charts?

If you are in either Marketing or Service, I recommend you take in the “Trends” on page 10 of the report. What are its key SSM implications?

As people stay in during the recession, home shopping / home services are on the rise. Not only does that mean more deliveries, but also a greater need for repairs as users invest, for example, in coffee machines to cut down on trips to coffee houses. Do you deliver? Have you optimised your routing and scheduling? Is your parts planning reliable? Do you have the required visibility to exceed your customers’ expectations in your management of vans and technicians?

People buying equipment for home use, or putting off major new investments (which goes a long way to explaining the 22% hit suffered by the car segment), opens up an opportunity for service parts pricing. How are you positioned to take advantage of it?

Apple grew 14%; BlackBerry 100%. Where once we had phones, now we have… handheld life organisers. This trend is supported by growth in network brands: Vodafone is up by 46%, AT&T by 67%, O2 by 36%. We are increasingly connected, which (when managed…) benefits our efficiency (in and out of the office). But it also means our expectations rise. Why can’t a delivery be scheduled more accurately? Why can’t a tech turn up with the right part? We are all more aware of technology’s potential – and accept no excuses for failure to leverage it.

Such increased technical sophistication also means we are often happy to fix minor problems ourselves – a scenario that expedites repair time and dramatically reduces costs for all involved. Do you have the technology to remotely support your customers?

At Servigistics, we have long underlined product commoditisation. Branding is a critical path to differentiation. Is it achieved through good marketing? Is it achieved through good service?

Let’s look at it this way: I would challenge anybody to achieve differentiation in 2009 without good marketing or good service. Which is why SSM goes beyond managing your Service operation, and encompasses your entire business. And, in your quest to win and retain customers, you create fictitious barriers between Service and Marketing at your peril.

best,

g.o.s.

By Giacomo Squintani, Marketing Manager EMEA, Servigistics

For anybody who has just landed on Earth from a far-flung planet, here’s a very brief (and over-simplistic) overview of global economics:

• Once upon a time, people made things for people who would buy them. This was called the ‘Manufacturing Economy’;
• Then, as raw materials and labour, got expensive, people slowed down on making things, and spent more time selling things you could not actually touch or feel, such as financial products. This was called the ‘Service Economy’.
• Then a lot of people who had sold a lot of financial products suddenly realised there was a big hole in the economy, and thought that maybe making things was not that bad, after all. But people across the Service Economy had learned some valuable lessons about looking after customers once things had been made, too. So then…

Well, then is now. The next stage is the one we’re writing now. How is today’s history looking?

Our children, and our grandchildren, will be the ultimate of judges of that - if not in the classrooms, then certainly with their payslips, which will determine how many of our “financial programs” they find themselves funding. But some trends are already emerging - and could prove valuable for any Manager.

• Successful OEMs will need to master both Manufacturing and Service, providing both quality products and after-sales services. As Pierfrancesco Manenti at “Manufacturing Insights” predicts, “Manufacturers will enhance their capabilities as providers of services”. Excelling at either manufacturing or service may suffice in certain B2C industries, where replacement costs are ludicrously low; but they are the exception. And no strategy should be based upon exceptions;
• Successful OEMs must not forget what made them successful in the first place - and continue to leverage their core expertise while building new strengths around them. But that need not entail developing those new capabilities in-house - as we saw previously, collaboration is an effect of the downturn that has benefits to contribute in times of growth, too. And outsourcing / acquiring skills is nothing to be ashamed about if it allows companies to deliver excellence in the fields that made them leaders

Balancing the quest for in-house improvement with the ability to identify areas where procuring those capabilities externally is the wiser option will be a hallmark of any successful manager in the current downturn, during which ROI will be a key decision influencer. But this is a valuable skill that should not be thrown out with the doom and gloom when the economy starts to recover. Servigistics is a software solutions company, recognised as a leader in its field - a field that, while we may expand, we will generally stick to. Yet there are manufacturers who seek to maximise the value of their SSM operation by developing in-house solutions, when the cost of a Servigistics implementation could probably be covered by the savings realised in the additional development time of a bespoke product. I’ll leave you with that thought.

By Giacomo Squintani, Marketing Manager EMEA, Servigistics

Everybody’s talking about it… and most people are doing it, more or less overtly. Are you?

 Consolidation (or its precursor - collaboration) is on everybody’s lips. Let’s take a snapshot of the automotive sector, where FIAT and Chrysler are heading down a route that covers both consolidation and collaboration, with the US giant handing over 35% of its equity in exchange for access to greener technology. Separately from this deal, FIAT have been rumoured to be in merger talks with French group PSA - talks both parties have denied, nevertheless enjoying a healthy rise in share prices as a result.

 Is the landscape much different in other industries? Hardly. From airlines to financial services, from recruitment to IT (where it is viewed as the “CIOs’ Top Priority for 2009″), whether you’re making stuff or selling services, the world around us seems to be experiencing a reverse tectonic shift.

 Determining the extent to which the trend will benefit consumers would keep the conversation flowing at many academic dinner parties. For the time being, we are still a comfortable distance from danger; and the times demand the type of knowledge-sharing in which some corporations are proactively engaging, and to which others are being called by government, such as the UK automotive sector, whose financial aid is subject to investment in green technology.

 Consolidation is changing the rules. What are its implications for Strategic Service Management?

 As with most challenges, it offers opportunities. Manufacturers can share common service parts and manage both those and their bespoke parts through common tools. Even before the commoditization of product, while the end results that we deploy at home and at work may be unique, the individual components rarely are - the art lies in their combination (and marketing), but a bolt is a bolt just like a 60Gb hard drive is a 60Gb hard drive. And, regardless of the logo on the machine on which you are reading this, your brand of hard drive or processor may not be dissimilar to that of the guy two floors below you, checking the weather forecast on a totally different machine.

 Creativity is also expanding outside of R&D departments, and into the CFO’s office. Is owning your own inventory compulsory? No - providing you are still able to deliver first-class service. And if you can do that by pooling your inventory with other companies in your field… who loses out?

 There is nothing blasphemous about this. Times of crisis often bring sworn enemies together for the greater good. Over the coming months, this will often keep M&A lawyers busy - with the emphasis more on ‘acquisitions’ than ‘mergers’, regardless of the press releases. But, now that the technology enables it, keeping conflict at bay, there remains ample scope for cost-efficencies through collaboration.

By Giacomo Squintani, Marketing Manager EMEA, Servigistics

Long-term… How do you define long-term?

Whatever your answer, I have little doubt that it is a shorter timeframe than the one you’d have volunteered five years ago - and equally so that it is a greater timeframe than the one you might volunteer in five years’ time. On the most basic of graphs, we can imagine an inverse relationship between how we perceive “long-term” and the impact of uncertainty - in itself, rising:

Fig. 1: The Growing Burden of Perceived Uncertainty and Short-Termism

This, in itself, is nothing new -

jump in a time machine and you’ll find the graph holds true throughout history. That’s why I cautiously talk about a ‘perception’, rather than a reality - and show those two components plateau out, as beyond a certain level they cannot continue their respective paths. However, some argue that, whereas in the past periods of disruption were followed by stabilisation, as keeping up with the pace of progress set by revolutionary advancements was simply impossible, we have now entered “the age of constant disruption” - with technologies continuously evolving at a constant rate. Add into the mix the speed at which information can flow and people be mobilised, the interconnection of our financial markets, and you have to seriously question whether “long-term certainty”, as prior generations understood it, will ever return.

So - why bother with strategic planning? Why not live from one day to the next? After all, whether you’re an outgoing US President, an embattled UK Prime Minister or any other world leader, you’re probably blaming the state of the economy on factors beyond your control. And if the White House and Number Ten aren’t in control of their destiny, what chance have you or I got?

Do not be mistaken - the overwhelming strength of external forces is no justification to abandon ourselves to their pull. Quite the opposite: now more than ever, strategic planning is fundamental to success. Equally critical, however, is the ability to plan with flexibility - and review individual components on a daily basis without compromising on the bigger picture.

That is why Strategic Service Management (SSM) is critical during a downturn. SSM brings together the tools to measure progress towards goals for “old school long-term” and daily, indeed hourly, operational KPIs - the performance that matters to customers, more concerned with your ability to meet 4-hour SLAs than 3-year grand plans. Companies that lock those grand plans in a cupboard for a thousand days are unlikely to succeed not only in the current downturn, but also in subsequent periods of growth (hold on tight, they will come) - for they too will be uncertain, and require swift action. Where yesterday rapid reaction sufficed, today preemptive action is necessary - and that’s what Servigistics’ solutions enable, across all levels of management, delivering tangible results.

From having the right part to pricing it correctly, from having the right technician on the job to optimising the flow of information and enjoying a holistic view of your service business, even when it seems as if the world all around you is crumbling there are plenty of key components of the jigsaw you hold securely in your hand. Servigistics provides proven SSM tools to place them in the right place - and claw back some of the certainty for which you so rightly long.

By Shawn Lane, VP, Product Marketing, Servigistics

I recently had the pleasure of chairing a day of the European Strategic Service Management conference in Brussels.  And it was pleasurable, unusually.  I attend lots of tradeshows and events, but this one was genuinely interesting, partially due to the quality of the attendees.

Attendance wasn’t as high as expected, largely due to corporate cuts in travel expenses.  But those that were present tended to be more senior in stature and surprisingly candid in their conversations.  This show ended up being a true collaboration among leaders in their respective fields.

The second reason I enjoyed the show was the topic.  This is the first event that has been specifically labeled “Strategic Service Management,” and it truly was about the business STRATEGY.  Everyone was talking about how the service arms of their businesses were crucial in delivering profits, particularly in today’s economy when new product sales are down or flat.  Service has long been a strategic topic for businesses, but only now is the world beginning to recognize this fact.  Past conferences I have attended have focused on only one area, such as field workforce management, or parts management, or warranty management.  This is the first show that brings all these topics together as a holistic approach to the service business.  Kudos to WBR for arranging a conference that deals specifically with this topic.

People from a wide variety of industries attended this show, including healthcare, industrial equipment, consumer electronics, enterprise computing, oil & gas, construction equipment, and power generation.  Despite the diverse industries, there were several consistent themes not only in the presentations, but also in hallway discussions.   The buzz was in the following areas:

• Centralized vs. Decentralized Service Organizations
• Training & Knowledge Management
• Service versus the Sales team
• Compensation and Incentives for Customer Service
• Decision Support & Workflow Automation
• Customer Satisfaction Surveys
• Telematics & Remote Diagnostics

I don’t have the space or time to address all these topics today, so I’ll start with organizational theme.

Centralized vs. Decentralized Service Organizations

Ah, the classic management dilemma.  Should we centralize our resources and organizational structure to drive efficiency and standardization, or should we decentralize to achieve more customer focus?  And what about the 1980’s style Matrix organization that tries to do a bit of both?  Companies go round-and-round on this topic, generally switching back and forth as management changes occur.  Unfortunately, there is no ‘one-size-fits-all’ answer to this question, and I heard presentations from companies moving towards both.

As for Matrix organizations, it seems like everyone but the management consultants hate the idea.  But I did hear an interesting podcast about managing in a matrix organization on Manager’s Tools.  Their basic premise is that matrix orgs are inherently inefficient, but if you’re stuck there, you should know how to manage through influence and through clear operating principles.   (http://www.managers-tools.com)

Of all the presentations I heard, Ivin Smith, Vice President, Customer Service & Worldwide Technical Support, Pitney Bowes, had a good perspective on this topic that summed up the attendees’ opinions well.

First, identify the objectives of each function.  If these objectives are similar across product lines or geographies, then centralize it.  In his case, Ivin chose to centralize Pitney Bowes’ technical support and training structure.  Rather than treating technical knowledge and product skills as an after-thought to be managed by region, the centers were staffed by training professionals who developed certification processes world-wide.  By the same token, he decentralized areas where objectives may differ and more customer focus could be generated.  Pitney Bowes moved to a decentralized structure for major account focused regions and commercial focused regions.

Secondly, drive the P&L responsibility down as low in the organization as possible.  Ivin assigned P&L responsibility all the way down to the Service Manager level.  This discipline ensures focus on both revenue generation as well as profitable and efficient operations.

Finally, develop effective operating principles that are clearly communicated to the organization.  The catch-phrase is PRIDE, which stands for the components of their operating principles.  Ivin has issued a card to each service engineer that outlines Pitney Bowes’ service operating principles and holds his service department accountable for acting to these principles in their daily work.    OK, issuing a card does seem like a very AMERICAN management practice – but hey, sometimes those Americans get it right.

by Giacomo Squintani, Marketing Manager, EMEA, Servigistics

Last-minute shopping and trolley fights in the aisles. TV schedules crammed with repeats and specials. That sudden realisation you forgot to send someone a card as theirs hits your doormat. Yep, it’s that time of year again.

It’s that time when we look out through the mist of our window and hazard some predictions for the New Year. If you’re in Finance and you got your predictions right last year, why are you reading this? You should be enjoying your retirement. As for the rest of us, here are five predictions for 2009:

1.      Vendors will have to show unprecedented flexibility on payment terms. In software, SAAS will garner further popularity, both for its technical and financial benefits, and vendors unable to provide “software as a service” solutions may not be around to read the 2010 predictions;

2.      The roles of Field Technician and Account Manager will continue to merge, as companies seek both to reduce costs and leverage the on-site contact enjoyed by their The roles of Field Technician and Account Manager will continue to merge, as companies seek both to reduce costs and leverage the on-site contact enjoyed by their mobile workforce. The success of the new role (already in some places called Technical Account Manager), for employees and employers alike, will be heavily dependent upon clarity of goals and training in the newer part of the role, and on the ability to measure those;

3.      The drive to regain control of technicians’ schedules will encompass preventive, predictive maintenance and self-fix solutions. In its April 2008 “The Maturity of Product Service” report, AberdeenGroup spoke about an “increased focus of service and manufacturing firms on preventive and often predictive maintenance processes”, highlighting “the drive for zero downtime [as] the primary reason for the 41% increase in the percentage of assets being monitored remotely over the last year” - a trend which the current climate can only strengthen. In 2008, 26% of Best-in-Class companies had a Knowledge Management solution in place, against a general backdrop of 19%. Will you join the elite?

4.      Optimising after-sales pricing will play a critical role in driving profitability from stagnating sales volumes, and in locking out grey market competitors;

5.  Mobile devices will continue to deliver on their promise, limited more by privacy concerns than technology. Expect to receive time-limited, segmented special offers by SMS when your favourite retailer tracks you within half a mile of one of its stores before long, as the High Street fights back against the recommendations systems of its online competitors… and expect to deploy your mobile device more and more frequently in a business context.

Whether you’re managing the grocery budget or a multi-million dollar corporate budget, at times like these there is a danger of underestimating the importance of the long-term and making unhealthy decisions. So reducing SLA levels as a means to cut inventory is not recommended. Companies that prove uncompromising in their investment in service, on the other hand, will be best placed to ride the bumpy ride that 2009 will prove, and to establish strong foundations for the new world order that will follow, maybe sometime in 2010. But those who forget the lessons that have been learnt in recent years… they are in serious danger of making some costly mistakes all over again.

Let’s not leave it twelve months to discuss these predictions - what are you expecting from the New Year? And, whatever your goals for 2009, here’s wishing you all the best in achieving them!

5.    Mobile devices will continue to deliver on their promise, limited more by privacy concerns than technology. Expect to receive time-limited, segmented special offers by SMS when your favourite retailer tracks you within half a mile of one of its stores before long, as the High Street fights back against the recommendations systems of its online competitors… and expect to deploy your mobile device more and more frequently in a business context.

Whether you’re managing the grocery budget or a multi-million dollar corporate budget, in times like these there is a danger of underestimating the importance of the long-term and making unhealthy decisions. So reducing SLA levels as a means to cut inventory is not recommended. Companies that prove uncompromising in their investment in service, on the other hand, will be best placed to endure the bumpy ride that 2009 will prove and to establish strong foundations for the new world order that will follow, maybe sometime in 2010. But those who forget the lessons that have been learnt in recent years… they are in serious danger of making some costly mistakes all over again.

Let’s not leave it twelve months to discuss these predictions - what are you expecting from the New Year? And, whatever your goals for 2009, here’s wishing you all the best in achieving them!

By Giacomo Squintani, Marketing Manager, EMEA, Servigistics

At Servigistics, we have been underlining the strategic value of service for manufacturers for several years now. But how has after-sales impacted other industries - industries where “after-sales service” does not always involve service parts, often embracing offerings which customers appreciate just as much? Let’s take a look at some of the vendors whose items you may be hoping to find in your stocking:

LiveNation

Remember record deals? An artist would submit a demo, and, if successful, sign for a record company. CBS, Atlantic, Motown… names that are entrenched in the minds of music lovers. But recording deals aren’t what it’s about anymore in a world where music downloads and cheap CDs have turned recorded music into little more than the opening gambit. Enter players like LiveNation, with deals covering both albums (the product) and tours (the service) for household names like Madonna, reportedly set to earn $120m over 10 years from the venture. CD prices may be falling, but concert tickets show no sign of doing so… How much is an album an artistic statement - and how much is it becoming a means to attract an audience?

Apple

As Harvard Business Review correctly points out in its December 2008 lead article, when the iPod landed in 2003 it was not the first of its kind. The Rio had hit the stores in 1998, and the Cabo 64 in 2000. The products had been there for some time. What was missing was a reliable, legal after-sales infrastructure to enrich the initial offering. Enter the iTunes Store - and enter a market revolution. By providing a means of enriching the initial product, Apple saved digital music from piracy - and, quite possibly, saved itself.

Low Cost Carriers (LCCs)

In a downturn economy, how will LCCs (who have cut just about all the costs there are to cut) fare against rising fuel prices and increasingly low levels of disposable income? What will determine their survival?

To a large extent, it won’t be fares. Of course, they will help - not least in ensuring passenger load factors (the percentage of available seats sold) still outperform those of the traditional, more expensive carriers. But the bottom lines of players like EasyJet, Ryanair and Air Berlin are helped by far more than mere e-ticket sales. A recent poll of 12,000 airline professionals found that 56% of them believed that “the best way at this time for airlines to effectively battle rising costs is to charge fees for amenities that were once included in the price of a ticket”. When announcing Q3 2008 net profits of €35m, Ryanair CEO Michael O’Leary commented that “ancillary revenues [...] grew by 30% to €111m. Ancillary penetration continues to increase, and we are on target to achieve our ancillary sales objective of 20% of revenues over the next 3 years”.

The initial sale truly is “breaking down”… Sure, good ideas have backfired on some airlines - a lot of it is about communication (to customers, staff and press). You can read a lot more about Ancillary Revenue in the Airline Industry here. But what’s happening in your industry? As service offers scope for competitive differentiation, are customers expecting more for their initial buck - or are they getting used to offerings being broken down into individual components?

Happy Holidays!<-->

By Shannon Rentner, Senior Manager, Servigistics

Forrester Research just published two reports in December that demonstrate how critical customer experience is a company’s competitiveness.

While I can’t include the entire report here, if you have Forrester access, you should check them out:

• December 12, 2008. Customer Experience In A Down Economy, by Harley Manning and Moira Dorsey
• December 12, 2008. The Customer Experience Index, 2008 by Bruce D. Temkin

Some key points that we’ve been making have been verified in these reports. For example, in the “Customer Experience in a Down Economy” report, Forrester affirms that there is a direct connection between “a great customer experience and increased revenues.”

In the “Customer Experience Index, 2008,” Forrester reports that a good customer experience fosters customer loyalty. While that may sound banal, customer loyalty translates into additional purchases by the customer. In fact, according to the March 24, 2008, “The Business Impact of Customer Experience” report, “customer experience quality could cause a swing of $242 million for a large bank and $184 million for a large retailer.”

While banking doesn’t require service parts or service techs, a retailer just might. Consider once again, Best Buy, the nation’s largest electronics retailer, with $44 billion in annual revenue. While it, too, is getting pounded by the drop in consumer spending, Fitch Ratings, a leading global rating agency committed to providing the world’s credit markets with independent, timely and prospective credit opinions, says that Best Buy’s reputation for outstanding service that helped it become the number one electronics retailer will help it weather the storm.

[The day after this post, The New York Times reported that Best Buy will have to cut workers due to significant losses. The CEO Bradbury H. Anderson, said in a statement, "We believe that there has been a dramatic and potentially long-lasting change in consumer behavior as people adjust to the new realities of the marketplace."  One new reality, as we've blogged about in the past, is the  "repair vs. replace" attitude for consumers and industrial customers alike, putting a critical emphasis on getting service parts management in order. Companies that can perform well on after-sales service will have a clear advantage in this market, according to Walter Weart, Outsourced Logistics.]

In fact, Best Buy’s technical support business, aka Geek Squad, has been such a huge profit center for the company that other retailers are jumping on board. Target recently hired Zip Express, a company started by a former Best Buy employee, to compete with Best Buy on service.[1] Once again, this demonstrates that it’s not just about the price.

Finally, speaking of electronic gadgets and service, “The Business Impact of Customer Experience” report found that a cable television provider and a cell phone provider were most prone to customers taking their business to a competitor based on customer experience. Therefore, service delivery is extremely important in those asset-and-field-service intensive environments.

Like always, we welcome your feedback. Have any good/bad service experiences to report? We’d love to read about them!

[1] Zinn Fromm, Laura. “In Hard Times, Is Best Buy’s Best Good Enough?” The New York Times, Dec. 7, 2008.