Advanced services need advanced sales models to succeed, says moreMomentum's Jan van Veen.
AUTHOR ARCHIVES: Jan Van Veen
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Advanced services need advanced sales models to succeed, says moreMomentum's Jan van Veen.
moreMomentum's Jan van Veen suggests service professionals need to avoid the pitfalls around commodity as falling in could lead to missing out on big growth opportunities.
moreMomentum's Jan van Veen suggests service professionals need to avoid the pitfalls around commodity as falling in could lead to missing out on big growth opportunities.
MoreMomentum's Jan van Veen suggests once you embrace and accept cannibalism it might actually be good for your business.
MoreMomentum's Jan van Veen suggests once you embrace and accept cannibalism it might actually be good for your business.
With experiments you can test all critical assumptions and success factors of your service innovations, get better data and take better decisions before scaling up investment and implementation. As a result, you will only pursue the viable and...
With experiments you can test all critical assumptions and success factors of your service innovations, get better data and take better decisions before scaling up investment and implementation. As a result, you will only pursue the viable and valuable ideas, will not waist resources on unsuccessful ideas nor jeopardies today’s business, brand and confidence of any stakeholders or colleagues. Jan Van Veen discusses...
The benefits of servitization and digitalisation continues to fill content in podcasts, conferences and academic papers. Indeed, much of Field Service News’ pages is dedicated to these two phenonium and how the service industry should embrace both.
However, it takes a certain amount of courage for firms to break free from their traditional business-model, which might well have served them perfectly well over the years, in order to undertake a strategy which demands a long-period away from the comfort zone.
I hosted the Field Service Podcast where Jan Van Veen, Director and Co-Founder of Consulting and Training company moreMomentum was a guest. Jan continues to work closely with manufacturers, encouraging business innovation and change in their make-up and I began the podcast by suggesting to Jan that some manufacturers are reluctant to make changes in their set-up; reluctant to innovate. “I think it’s more about making sure that everybody is happy,” he responds. “That everybody has the same sense of direction of what needs to happen, and then also to make it happen. I think this is the biggest challenge.”
The comfort zone here is ‘business as usual’. Firms, Jan believes, can see the advantages of servitization and digitalization as a release from the pressure of performance but they are struggling to make the process happen, or the rate of change is too slow.
“In general, what we see is that change is not growing rapidly enough in business,” Jan says. “There is more and more of doing the same, of doing business as usual which does incrementally improve business offerings, products and services etc., which is all good but that doesn’t take them to the future; that doesn’t help them reap the benefits of digitalization and servitization.
Jan identifies the comfort zone as something that manufacturers have been doing – albeit successfully – for many years: improving reliability and preventing disruption through a focus on asset uptime and product-related services. It’s a rut that could potentially leave firms lagging behind competitors, competition that could even come from their own customers as they become more digital savvy.
“I think that’s the main concern here,” Jan warns. “Digitalization is becoming more and more ingrained into everything a business does. We are seeing clients of manufacturers becoming more digital in their operations and therefore start to think about other solutions that can improve their own operations. The questions become about the role of the manufacturer in all this.”
It’s an interesting point and one that challenges the traditional notion role of a manufacturer.
Should they stick to the traditional product-related services offering or attempt to get closer to the business processes of their clients and pursue a more operational-oriented approach achieved through committed servitization and digitalization adoption? Jan, of course, encourages the latter, but admits the difficulties it poses, particularly when it comes to altering a rigid business-model, which involves risk and requires cultural buy-in.
“There’s a bigger bet involved,” he says. “We have to seriously re-invest in new capabilities, digital capabilities, new competencies, new operations and processes. It becomes about political decision making. Reframing and changing the business logic is something which any kind of business finds very difficult.”
Reframing and changing business logic, as Jan says, can be extremely challenging. Firms are reluctant to alter a process that may not be flourishing but is working. Tinkering with a framework does indeed carry risk where the fallout could be extremely damaging. However, most firms are aware there needs to be some type of change and innovation in order to improve processes, services and products. There is a range of innovation, ranging from short term improvements to disruptive radical change and it’s the most forwardthinking companies that embrace this entire spectrum that ultimately succeed.
"Firms are reluctant to alter a process that may not be flourishing but is working..."
“They play the game on each type of innovation at the same time and are therefore working on performance for today, tomorrow and the day after,” Jan explains. “It means that every type of innovation and change has different challenges and pitfall and therefore requires different strategies and techniques. If we are not aware of that we will find ourselves applying the wrong approaches, which may work for one type of innovation, but not another. We then fail.”
The key in the process is business logic. But what exactly is it? How can we define it? Let’s strip back one of the basics of enterprise. Every industry or business has a prevailing set of thinking patterns or knowledge about their customer’s needs: yearly performance; information about competitors; world trends which we then, as a business, make appropriate strategic decisions from. It essentially defines how businesses act, decide, change and learn.
With this in mind and in order to helps businesses observe their own rationale for change, Jan has developed a Hybrid Innovation Matrix. Relatively small, incremental changes, shown in the bottom left of the matrix represent what most businesses are doing. These take place during the day which includes customer feedback, marketing and R&D. “I don’t think this is the real challenge here,” Jan tells me. “Most of the companies have that right. It becomes more challenging when we move up the left column to the bigger changes within the current business logic, such as applying new predictive technology in our maintenance and services. This includes political decision making and serious change management if you want to launch that new technology.”
More generally, in the top right, darker red quadrant is where new solutions and markets are being created. Usually through a cluster of companies focusing on one area, for example, digital becoming more common in healthcare or the emergence of renewable energy. Here, Jan predicts the incubation of further ideas and disruptions. “We will see different kinds of developments going on and we still don’t know which one is going to emerge or be dominant, but one thing is for sure, in the next five to ten years, something serious will happen and change here.”
But how can companies use the tool to establish their own potential for change, or more specifically, make sure they’re avoiding ‘business as usual’? The key is ensuring any large-scale changes (top left of the matrix) such as a new software system, does not come at the cost of new business innovation that is incubating in the right-hand side of the matrix. “If that happens,” Jan says, “then you will see that every initiative in the right column will be sacrificed for something which has a shorter-term result in the left column, and then you’re really stuck in business as usual.”
Jan is passionate about change management and innovation and it was obvious during the podcast how much of a difference this matrix and other tools can make to a manufacturer’s outlook. He’s the first to admit that it’s not an easy process but is adamant about the advantages it can bring, an attitude affirmed when I ask what inspires him to do what he does. “I believe that it’s all about empowering and enabling everybody in an organisation to be eager and passionate about performing, learning, developing and growing; as a person and therefore as a business.
“It is all about people making it happen, and I’m a firm believer that people do drive change and want to change, as long as there’s a good reason and not too many obstacles. Therefore, we have to give them good reasons and avoid all the obstacles, and then,” he says, “great things can happen.”
We see increasing attention for the way to manage and lead organisations and teams and to build confidence to innovate and change in a rapidly changing world. The widespread fear to fail has a paralysing effect which hinders sustainable change, innovation and improvements.
To reduce this fear to fail, the idea has emerged that it is okay to fail:
• We should ‘Fail fast, learn fast’;
• ‘Failure is an option’;
• We should organise ‘Failure celebration nights’.
However, in practice I see many people finding it difficult to really embrace these concepts wholeheartedly. In the end, failure is a failure, it doesn’t feel right and by nature is something you try to avoid. It will not feel okay fail really, whatever we say about failure and how much we celebrate failures.
In some cultures, this is stronger than others. Besides that, most industries and companies experience increasing pressure on performance. So, should we take it easy when performance is behind expectation?
I fully agree with the point that many companies suffer from the paralysing effect of the fear to fail. However, I am afraid we are missing the point and do not get the right balance between accountability on the one hand and confidence to perform, learn, explore and change on the other hand.
Learning From Young Ambitious Athletes
I have the pleasure of being involved in coaching young and ambitious judokas who have a dream of participating at the Olympics some time. My sons are pretty fanatic judokas as well. They train hard - five evenings per week - and play three tournaments per month. Losing a match often happens very intensively: you’re on your own, and within a few minutes or even seconds you are violently thrown on your back – game over! If you’re not the top of the league (yet), you lose most of the matches.
How to stay motivated? How to keep on learning and performing? How to feel proud of what you are doing and accomplishing?
I’d like to share three things around failure and success, which I have seen working very well for these youngsters as well as for the leading and dynamic manufacturers which are ahead of the game during today’s rapid transitions and change.
Focus On The Right Actions To Get Results, Not The Results Themselves
Instead of focussing on winning the match, the most talented athletes focus on their task, doing the right things to have the best chances to win the match. They evaluate how well they performed their task and how they could do better. The end-result (winning or losing the match) is hardly indicative. There are so many other factors which influence the end-result. Their best match could be the one they lost, not the one they won.
In practice, many businesses focus too much on the results alone when managing their teams. Everything is okay as long as the results are okay. However, when they miss a deal, lose a client, or when a new service-product does not sell well, there is a problem
which has to be fixed ‘yesterday’. It doesn’t matter how - only the results count!
On the other hand, successful teams and individuals focus on building strong capabilities and competencies. They feel accountable for execution and results. Whenever either results or execution are below expectations, they review, find the root causes, try other approaches and learn. This will bring the best, sustainable results.
This is success! Not doing this – on the other hand - is the failing. So, failure should not be an option!
"Many businesses focus too much on the results alone..."
Articulate The Expected Outcome Of Learning And Experiments
I have seen how much more pleasure, engagement, learning and the results judokas get when they are very targeted in their learning and experiments. The experience the effects on intermediate objectives which are leading indicators for the overall result – winning more matches. For example, they will focus an entire tournament on dominating their opponents, force them to move and then experience how much more they are in control and get more opportunities to make a throw.
Too often, we see teams trying something new without being explicit about the expected effect and about how to ‘measure’ the impact. They tend to relate this impact to the end-result only. This reduces their ability to evaluate and validate their actions properly. They abandon good ideas too quickly because of the lack of performance improvement on the short term and move on to try something else. As a result, they learn slow and sometimes even follow unproductive paths.
However, successful teams articulate the learning objective, the expected impact and outcome of their initiatives and experiments very well. Whether it is about improving performance, finding new ways of working or developing a new service or business model, they have:
• A proper root-cause analysis;
• Clarity on critical assumptions which need to be valid for success;
• Formulated the critical questions;
• Designed their experiments to validate the critical assumptions and answer their key questions;
• Defined how to measure the results and validate their hypothesis.
Our Experiment-Learning-Card can help better articulate your experiments.
As a result, they can truly say that any answer or result is a good one and brings them further. A negative outcome is not a matter of failing at all. However, not following these kind practices is the failing. Failure should not be an option!
Like Edison said: “I did not fail, I only discovery 10.000 ways that don’t work.” Focus on learning from success and progress
Many young athletes with aspirations to get to the top – and ultimately will make it – are the winners at the moment. However, they have a mindset, attitude and practice to have a steep learning curve. That motivates and is the best predictor for good results.
Many of us often forget that we learn more successes and progress towards an aspiration than from failures themselves. Failures can increase a level of threat, stress and adrenaline, which can improve performance in a typical flight-or-fight situation. The effect is often short term and limits openness, creativity and collaboration. Which is not really a good situation for innovation and learning.
Our hormone-systems (dopamine, endorphin, oxytocin and more) are built around feeling rewarded and connected when achieving something (together), making progress and getting closer to the goals and feeling connected with
Every step we get closer to the desired result will motivate us more to be persistent and find ways to make the next step.
• Learning ≠ Failing and Failing ≠ Learning;
• Focus on actions and tasks for results;
• Focus on building capabilities for results;
• Celebrate progress and (small) successes;
• Specify objectives of learning, experiments and discovery as explicit as possible;
• Use our Experiment-Learning-Card to better articulate your experiments.
Jan van Veen is Founder and Managing Director at moreMomentum.
Quite often, when talking with business leaders and clients, I hear the problem that the organization and its people are not that open to innovate and change as they already have good performance and there is no clear threat visible yet. They experience it as a lack of “sense of urgency”: there is no “burning platform” for innovation and change.
A common approach is to either wait until the situation gets worse or construct a (mini)crisis to increase and maintain a sense of urgency.
However, the question is:
• Do we really need a burning platform to innovate and change? And;
• What are the downsides to building change and innovation around a burning platform?
In this article I will share five reasons why a Burning Platform is bad for sustainable innovation and change.
Why a burning platform is bad for innovation?
1.You are too late
Typically, the trends which create threats or opportunities develop a long while before becoming an obvious burning platform. First, there are the first weak signals for a trend. At this time, it is still hard to accurately predict what will happen and when. Maybe different way signals are contradictory.
So often, these weak signals are being ignored by the majority. After some time, we see the first competitors moving, but actually also struggling to successfully address the threats of opportunities. Their initiatives seem to be failing. As a result, the majority still waits. Once the leading competitors are having their first successes and the trends become emerging, the burning platform becomes visible.
But now, the leading competitors have learned and built capabilities and can scale. While the lagging majority is still trying to find the right questions, let alone the right answers. They are dropping behind the leading pack in their industry. They are too late.
2. You get a deeper performance dip
The urgent situation of a burning platform means there is a critical situation which requires a rapid response and rapid results.
The topic is becoming increasingly dominant in the daily activities of everyone in the organisations. All hands on deck!
It starts distracting attention from the daily work of running the business. The overall performance will suffer more and longer than if the urgent can critical situation would have been prevented by innovation and change at a much earlier stage.
3. You disengage your valuable people
In general, a necessity to change – the burning platform – will create higher stress levels which will impact altitude and behaviour towards change. The more critical and urgent the necessity, the bigger the chances are for stress levels which will trigger defensive reactions like fight, flight or freeze.
Too often, we see the stress levels resulting in internal fights, pointing fingers, pushing problems to other teams and the best talents moving to other companies.
These are negative sentiments, which can be transformed into a positive and bonding sentiment within teams for a while, but not for long.
4. You miss the best solutions
The defensive fight, flight or freeze behaviour mentioned above, also triggers short term reactive thinking and blocks constructive and creative thinking.
When solutions require deeper analysis, being open to new types of solutions and require collaboration between different teams or department, this reactive short-term thinking is counterproductive.
The high level of stress increases the risks of not seeing the real problems or opportunities, not finding the right solutions and not doing what it really takes to get the results.
"It starts distracting attention from the daily work of running the business..."
5. You increase the risk for failure
During the first attempt of implementing a new solution, we should expect hiccups. Instead of experiencing this as a failure, everyone should see this as learning.
They should be able to have a constructive and forward-looking mindset to collectively understand why it is not working yet and what interventions are required to get it right. With a flight, fight or freeze attitude, the chances are bigger people will blame others or the conditions, find reasons to justify the disappointing results and give up.
For sure, we know about success stories where companies successfully pivoted their business during a crisis, like IBM. We also now the examples where companies miserably failed during a crisis and did not survive.
The better alternative: Purpose
The better alternative is what the leading and dynamic manufacturers do very well: the rally their employees, their clients and their partners with a strong and compelling purpose which makes continuous innovations and change the natural, logical and compelling thing to do.
Like everyone at Philips Healthcare is committed to transforming our healthcare by offering and developing integrated solutions (hardware, software, services) for people to live healthier, prevent deceases, be diagnosed quicker and more accurately, receive better and less intrusive treatment and receive the care they need at home.
Or like Tesla is accelerating the transition of sustainable energy and transportation with electric vehicles, better batteries and solar panels. This approach will be more rewarding for everyone, lead to sustainable success of the business and reduce the chances of entering periods of critical decline of performance. It will avoid you being on a burning platform.
The Essence: People Do change!
I believe that people do change and drive innovation, if there are compelling reasons and not too many obstacles. After all, that is the only reason the world is changing so rapidly.
Too many organisations do a bad job in providing compelling reasons and good job in creating obstacles. That is the reason organisations struggle in keeping up the high pace of changing world.
Leading, dynamic and innovative companies set themselves apart by maintaining a clear and compelling purpose, direction and strategic intent as well as e great environment for collaborative change and innovation.
Conclusion and recommendation
In this article, I described five reasons why the common practice burning platforms and sense of urgency are bad for innovation and change. I also briefly described the best practice alternative: build and maintain a compelling purpose for everyone to be proud of and to work on.
If you are on the same page and would like to take next steps, I would recommend you to:
• Assess what your personal view is on the reason your business or department should change and innovate differently or quicker.
• Assess to how compelling this is for the 1) shareholder, 2) boardroom, 3) employees and 4) clients.
• Evaluate and enrich (your view of) the purpose of your company or your department. What is your relevance for the industry, for your clients and for the society?
• Reach out to me for a discovery or sound-boarding session. I am happy to help and also curious to learn from your experience.
I am confident this will bring you actionable insights for your department - if not for the business as a whole. Good luck!
Jan van Veen is Founder and Managing Director at moreMoumentum.
For the next years, many manufacturers will focus more on “how to servitize”: How to make these innovations successful? How to accelerate these transitions and stay ahead of the pack? How to escape from “business as usual”? How to prepare the organisation for such journeys? In this article, I will share an overview of critical challenges and strategies for servitization.
Servitization is a different ball game
Many manufacturing businesses have made good progress in building a common understanding and commitment to business innovation including servitization, and they have allocated resources and funding for servitization.
Now, they are experiencing that servitization is a different ball game from usual innovations and face new challenges, such as:
• Political discussions when deciding on nitiatives and investment
• New risks from uncertainty and unpredictable trends
• Forces towards ‘business as usual, with signs like “not invented here”, “that does not work in our industry”, “our clients don’t want that” and/or “this is not our core business”
The central question: How to organise for servitization
We hear and read a lot about new (digital) technologies, new disruptive business models and servitization. However, the real challenges are about organisational and human aspects:
1. How to translate these general insights into concrete and relevant initiatives?
2. How to overcome the challenges and obstacles and increase momentum?
In essence, servitization is innovating your business model, particularly when you move beyond “condition of product” related services. We need to rethink our value proposition, our target market, our position in the value chain and in the competitive landscape. We will be facing new opportunities and new risks. This requires us to be open to new thinking, new mindsets and different strategies for innovation and change.
The problem: One innovation approach doesn’t fit all
Too often, we see successful strategies for one type of innovation being applied for other types of innovation also and therefore fail.
Before diving into best practices, let us first better understand the challenges in different phases of innovation: 1) discovery, including ideation, 2) decision-making, including resource allocation, and, 3) implementation, including development.
The “Hybrid Innovation Matrix” helps to recognise different types of innovation based on respective typical challenges so we can better choose the best strategy for each.
About the “Hybrid Innovation Matrix”
The “Hybrid Innovation Matrix” (see following page) differentiates four types of innovation with the respective challenges and strategies along two dimensions. Along the horizontal axis, we differentiate innovations within the existing business logic from those developing new business logic. In every industry and business we have prevailing business logic, which is a set of common patterns, knowledge, experience and frameworks of thinking. We use this logic to understand our environment and make decisions. This common business logic defines how we act, learn and change.
Our brains are hardwired to maintain a cognitive framework to rapidly assess their environment, filter information and make decisions. This results in a strong bias towards protecting the established business logic.
Along the vertical axis, we have the relative size of the innovation or change. In the left column, we differentiate incremental improvements from the more radical innovations that push the boundaries. In the right column, we differentiate reconfiguring and extending an existing business model from developing completely new solutions and markets with completely new business models.
I will describe the two quadrants of the “Hybrid Innovation Matrix” which are most relevant to servitization.
Adaptive and Incremental Improvements
“Adaptive and Incremental Improvements” is all about improving the performance of existing products, services and operations. Every industry has its common recipe of annual improvement of functionality, performance, speed, cost etc.
Examples include: improvement initiatives from departments like product development, marketing service based on customer feedback following, adding new features. And PDCA, Lean, Kaizen and similar approaches to improve the quality and efficiency of our operations.
How servitization fits in:
As this is not the quadrant in which servitization takes place, I will not elaborate on this quadrant.
Pushing the Frontiers
“Pushing Frontiers” is about bigger innovations within the common business logic. In every industry, we have common pathways of how the performance of products and services develop and how (latent) customer demands evolve. We can learn from the best practices and results from others in our own industry.
Typical examples are:
• How advanced technology continues to develop in the world of semiconductors.
• How there are hybrid and electric transmissions in cars.
• How we now have FaceID on our phones
• How we become more predictive in sales,supply chain, manufacturing and maintenance with digital capabilities.
How servitization fits in:
The early phases of the servitization journey fits in this quadrant. The service offering focuses on managing availability and condition of equipment in a more predictive manner.
Innovations in this quadrant often impact a large base of stakeholders in the organisation, advancing the knowledge in various disciplines, and involves bigger investments with bigger bets on the outcome.
A key challenge is to avoid obstacles at all levels in the organisation and a too narrow focus on, for example, only products or technology.
• Much higher levels of expertise, increasing the knowledge gaps between different stakeholders
• Finding strategic knowledge inside and outside the company
• Understanding a wider spectrum of (latent) customer needs beyond functional
• A too narrow focus, such as product technology or internal processes
• The commodity trap with innovations which hardly add customer value and are difficult to monetise.
• Mitigating risks from an uncertain outcome with higher upfront investments
• Lack of digital and service mindset
• Political battles or polarised discussions
- The more qualitative arguments
- Uncertainty of outcome
- Lack of new expertise, prepared by the experts.
• Limited capacity to implement change fluidly in the operating organisation
• Lack of required expertise and knowledge
• Lack of digital and service mindset.
Reconfiguring and Extending Business Model
“Reconfiguring and Extending the Business model” involves a combination of entering new markets, applying new technologies, encountering new competitors and facing new political actors. These are new aspects, different from common and dominant business logic in a business or industry.
Typical examples are:
• Low-cost airlines with a new value proposition and operating models
• Dell selling directly to the end-clients
• Storage solutions moving to cloud services
• Trucks manufacturers reducing fuel consumption by influencing truck drivers
• Fresenius (manufacturer of kidney dialysis equipment) operating entire dialysis centres in hospitals.
How servitization fits in:
As you can see from the examples, the more advanced phases of servitization extending the value offering beyond product availability perfectly fit in this quadrant.
The main challenge is to widen a peripheral vision escaping from the established dominant business logic.
• Being open to new knowledge, patterns, ideas and opportunities without being pulled back into ‘business- as usual’ by many forces
such as colleagues, clients, vendors, service suppliers and investors
• Recognising weak signals of potential trends, threats and opportunities, and when these become emergent
• Mitigating “conflict” with mainstream research activities
• Understanding and recognizing potential market disruption from immature and emerging alternatives (often at the low end of
• Limited knowledge and uncertainty about unpredictable developments
• Battles between stakeholders in operating organisation and innovation organisation
• Stopping initiatives because of lack of shortterm results, in favour of initiatives closer to ‘business as usual’ with quicker results
• Not considering weak signals for potential threats, like market disruption
• Fear of cannibalism.
• Embedding new knowledge throughout the organisation
• Building new mindsets and competencies
• Mitigating “conflict” with mainstream operations
• Existing clients may not like the new solutions (yet).
Coevolution of New Solutions and Markets
“Coevolution of new solutions and markets” is about the radically new emerging solutions. Here, we see many different solutions and ideas popping up while it is still unclear which of the competing alternatives will emerge and become the dominant solution.
Current examples of innovations in this quadrant are renewable energy, data-driven healthcare, mobility (including self-driving cars), Google Maps rapidly pushing away TomTom, and tachographs gradually being replaced by cloud-based applications. Other examples are PC’s displacing mini-computers and digital photography displacing analogue photography.
How servitization fits in:
I will not elaborate any further on this quadrant, as servitization in principle is not about developing these radical solutions. Even though for some industries there are actual opportunities and threats in this quadrant, in which servitization could play a role (like the Google Maps versus TomTom).
The solution: Differentiate innovation strategies with a focus on human aspects
The challenges I described concentrate on the human factors for successful discovery, decision making and implementation. They are quite different for each type of innovation in the “Hybrid Innovation Matrix”, which means we need different strategies to be successful.
I will now describe the best practices for the two types of innovation which are most relevant for servitization.
The name of the game here is “Managing a wider portfolio, including higher risk projects”. The following practices will help accelerate the innovations that push the frontiers.
• Establish a clear and compelling direction in which the company is heading and how that relates to the developments in the industry and market
• Build a shared concern on developments in the industry and the importance of adapting to it
• Establish cross-functional and dedicated teams of experts for specific initiatives
• Establish dedicated project management.
• Use advanced techniques for finding (latent) opportunities, such as design-thinking and empathic design
• Involve external experts (consultants and new partners)
• Strategic level decision making
• Maintain a balanced portfolio of different types of innovations
• Apply a stage gate and review process, with clear criteria, such as;
- What initiatives should be higher risk initiatives pushing the frontiers
- In which domains to push frontiers (technology, products, services, customer experience etc.)
- Success criteria for go/no-go for the next phases
- Level of investment in different types of initiatives
• Educate stakeholders on the decision level
• Invest in further research first
• Develop solid business cases, supported by solid information
• Use advanced risk-assessment techniques
• Lean startup and agile development techniques
• Co-development with your best clients
• Early involvement of stakeholders from various functions
• Develop the digital and service mindsets
• Incremental improvement techniques such as PDCA and customer feedback programmes
• Not having dedicated innovation teams
Re-configuration and extending business models
The name of the game here is running “Entrepreneurial satellite teams”.
• Add a transformative direction of the company, which is fairly open
• Build a shared concern for developing business models for the next growth curves
• Being flexible in an unpredictable world
• Entrepreneurial and multi-disciplinary teams decoupled from the mainstream organisation
• Allow addressing different markets or segments for (first) success
• Less targeted search assignments
• Techniques to reframe and thinking in “new boxes”
• Build new and broad expertise networks outside your industry
• Experiment and learn
• External contracting or outsourcing
• Scouting for successful initiatives in the market
• Develop scenarios around weak signals
• Reframing of the opportunities and threats
• Decentralise decision-making
• Decision-making on vision and scenarios
• Rapid prototyping
• Acquisition of early successes in the market
• Allow competing initiatives to be pursued Implementation
• Keep the new business in entrepreneurial satellite teams
• Lean startup and agile development teams
• Co-creation with the most interesting (potential) clients
Pitfalls / what does not work:
• Decision-making and resource allocation by senior leadership in the operating organisation
• Input from customer feedback programmes
• Decision-making based on business cases and stage-gate reviews
• Early integration into the current operating organisation or business model
Conclusion and takeaways
We see an increasing number of manufacturing companies committing to business innovation and servitization and allocating resources for it. A hybrid innovation strategy, focusing on the human factors of the transition will make the difference between success and failure!
If you want to boost momentum for servitization;
• Share this with your colleagues
• Assess the ideas, initiatives, progress and obstacles with the “Hybrid Innovation Matrix”
• Build a shared concern for the need for ongoing innovations in each of the quadrants
• Put the organisational and human aspects on the strategic agenda
It is a great time to be in manufacturing. We are facing exciting opportunities to make manufacturing a stronger backbone of our service-oriented economies. We have a unique opportunity to make manufacturing a great place to work and to invest in.
Jan Van Veen is Managing Director at More Momentum.
Many manufacturers experience pressure on growth, revenue and margins. Their products and services are being commoditised. Competition from lower cost alternatives are arising. On the other hand, there are huge opportunities with new technologies, value propositions and business models.
One of the important trends is that value propositions and offerings become more data-driven and more service-oriented, which go hand in hand.
Besides predictive maintenance, most of the value from data is related to how clients use the equipment or products and to their operations and processes. Helping clients improve on this by nature is a service.
However, many manufacturers are product-driven businesses which do not fully appreciate the value that (advanced) services have for their customers and their own business.
So, one of the central questions is: How to Monetise Services and Data to Grow in a Disruptive World? The capability to monetising service and data is mission critical for sustainable performance and existence of manufacturers.
In a series of articles, we cover four critical steps that make the difference between success and failure in monetising services and data:
• Solve bigger customer problems;
• Articulate the value;
• Build momentum with clients to adopt;
• Build internal momentum.
Developing new data-driven solutions and services is all about extending the existing business model, which leads to different challenges than many other initiatives and programs in a business. Recognising this in advance will help understand the challenges and best strategies.
In the previous articles of this series, I have described critical success factors for monetising service and data, such as Solve Bigger Problems,Better Articulate Value and Remove Obstacles for Clients to Adopt. In the end, this all has to be done by people and teams in your organization.
In this article I will describe common mistakes that many companies make, which holds them back in having fluid and energising change, and to move beyond business-as-usual in their endeavours to monetise service and data.
Many companies, including manufacturers, do not have a clear picture of where the industry is heading and where their business is heading. It is unclear for their employees what needs to be developed and why.
More specific, for many employees it is not clear why the new service and data-driven solutions are that valuable to clients, how it would fit in the overall core business and why it should be paid for by clients. Often, the indicated direction even suggests the opposite and may give room to the logic that value added services and datadriven solutions are (free) features to support the product sales.
Just imagine how a hypothetical mission statement “… being the world’s leading manufacturer of construction equipment and engines” would help develop and monetise advanced services and data-driven solutions.
People in manufacturing are often biased towards products, equipment and technology. They have a narrow view on:
• Customer problems beyond the requirements for the products and equipment;
• How other actors in the industry are developing with advanced data capabilities, which could become competition to the current position of a manufacturer;
• How new technology can be applied to develop new value propositions, solutions and operating models.
This will affect how product managers, marketing and innovation will develop new services and data-driven solutions. Too often, we see that the services and solutions do not always solve a customer problem and hardly differentiate from services and solutions competitors are offering as well.
It will also affect how their colleagues in the operations (sales and delivery) understand and engage, as there is no compelling context to understand the importance of the new services and solutions, let alone be engaged.
Top-down P&L thinking
Too often, we see that developing and launching innovations, such as new advanced services and data-driven solutions, stagnate because of the decision-making habits in an organisation. Typically, we see one or more of the following:
The strategic intent from senior leadership is unclear, hardly based on a well-developed shared concern, not giving a clear path on what services and solutions to develop, nor on what the strategic priorities and objectives are, to be successful. So, employees are not really enticed to take action and therefore no change.
The strategies and plans are more short-term which emphasise short term financial objectives, leading to two different scenarios:
Financial objectives are not articulating the need for services and data-driven solutions, nor specifying which portion of these objectives should come from services and data-driven solutions. Often, employees are actually motivated to stay away from developing and launching the new services and data-driven solutions.
Or, in case the financial objectives also assign financial objectives coming from services and data-driven solutions, there is a lack of description of qualitative objectives and strategic priorities on how to arrive at those financial goals. The result is often a lack of initiatives and progress, or lack of alignment and results.
Top-down strategies from senior leadership are so specific and instructive that these actually dismiss other employees taking ownership of the plans, and/or adjusting plans and local strategies where needed.
Paralysis by control
Top-down control mechanisms from the last few decades are a huge obstacle for fluid and energising change in an organisation and therefore hinder the initiatives like monetising services and data. More specifically, we often see the following patterns;
Internal conflict of interest in the product sales teams, because they are often incentivised on sales volume.
It does not make sense for them to sell complicated service contracts. It hardly affects their commission, consumes a lot of time and may even put their product sales deals at risk. Instead, it is more beneficial to please their clients by offering discounted services.
In case there is a separate service sales team, for the same reason, there are often internal arguments on who owns the client and what is the best plan forward with each client. In the worst case, this even leads to having different faces towards the clients, leaving them confused and with a bad customer experience.
Control mechanisms that are too strict create an unsafe environment in which employees show defensive and risk-avoiding behaviour. Instead of trying, learning and being successful in monetising new services and data-driven solutions, they instead become complacent and resistant.
Typical signs are pointing fingers to other teams to take action, declaring that the new services and solutions are not the core business, that customers don’t want to pay and referring to other companies who have tried and failed.
Many things come into play when increasing momentum for monetizing (new) services and data, and preventing existence of too many obstacles and resistance. In general, the more adaptive and fluid change in a business, the easier a specific innovation on service and data.
We have seen that leading manufacturers have adopted 4 winning habits which sets them apart. These winning habits define how both operation and innovation is lead. In the next paragraphs I will describe the 4 winning habits in relation to monetising services and data.
"People in manufacturing are often biased towards products, equipment and technology..."
Leading companies have a transformative vision and mission on where the business is heading, what needs to change and develop, and why this is important considering the changes in the industry. This is a quite a holistic picture in which all stakeholders and entities in the business can relate and get direction on how to develop themselves, their teams, their department and their business unit.
It provides an outside-in picture on how the business is and will be relevant to a certain industry and customers. It explicitly points out how the business will add value to clients and that this requires certain technology, (data-driven) solutions and services.
Now imagine how the following mission statement will drive the development and implementation of new services and data-driven solutions: “Our purpose is to enable healthcare providers to increase value by empowering them on their journey towards expanding precision medicine, transforming care delivery and improving patient experience, all enabled by digitalizing healthcare.”
Here I want to focus on two phases on innovating your services and datadriven solutions: the development phase (including ideation, selection and design) and the implementation phase
For design purpose
In general, the envisioned services and data-driven solutions differ significantly from current business logic, mindset and operations in your business. Even though anyone in the organisation could raise great ideas, it is crucial that the development of the new services and solutions are done by dedicated teams with the right expertise and focus.
They need to ensure they are open-minded and unbounded by current (and old) business logic and pathways. In terms of discovery, this means they should:
Talk with other stakeholders in client organisations (rather than the ones your organisation normally speaks with) - for example, the CFO, CEO, VP, Innovation, commercial leaders, etc. Build a new expert-network outside the organisation - which is outside the current network of partners, suppliers and clients - including the academic experts and consultants in areas you usually have no relationships with and talk about topics other than current technology, products and service, and more about major trends, visions of the future industry,key challenges and strategies of different actors in your and adjacent industries.
This will not only help to obtain more ideas for future success, it will also help to change perspectives and business logic within the innovation teams and the rest of the organisation, by sharing these insights.
For implementation purpose
Once the new solutions and services have been designed and developed to a scalable offering, it probably needs to be embedded in the existing organisation. Now, the risks of resistance or complacency may come into play.
The more developed the mindsets and habits are on “digital” and change, the more fluid the implementation and change will be. This can be promoted massively by strong Discovery habits: Involving key players in the operating organisation, well in advance of the implementation, into the initiatives for launching new services and datadriven solutions - for example, by having a frequent dialogue on shared concern and discussing the alternatives to solve these concerns. This can be done by frequent conversations or including them in the extended innovation team.
Having everyone involved in discovery activities that do not require too much expertise and dedication, for example, by having colleagues; Have broader conversations in their day-to-day conversations with clients, suppliers and partners. You can provide them with topics and questions to help open the conversations
Joining events with customers where you discuss trends, visions, needs and how they see your added value. Join conferences within your own industry and even other industries and sharing new insights and learning points from the expert teams, painting a picture of what is going on in the outside world, how this may impact your business and how this will/could be addressed.
In line with the mission, vision and direction leadership of leading manufacturers, have a clear strategic intent on:
Result objectives - for example, overall growth aspirations that new services and data-driven solutions are crucial and how much business is expected to come from these new services and solutions. Strategic objectives on which offerings and capabilities need to be developed.
Next, they have a clear (top-down) strategy which articulates crucial choices on how to achieve these objectives in a few phases. This should provide a common roadmap on which offerings to develop, how to sell them, to whom and by whom, how to organise marketing, sales and delivery, and which obstacles to overcome.
This strategy should address all stakeholders (including R&D, marketing, product-sales, service sales and service delivery) who have direct influence on implementation and success.
With this top-down strategy, still, a lot is left open on how to achieve the objectives. Local teams are empowered to develop their local roadmap and strategy, and to take full ownership of the local development, learning, capability development and execution. This will allow them to mitigate local strengths, weaknesses, opportunities, threats and market circumstances.
With a constructive and forward dialogue between individuals, teams and departments, issues are solved in a fundamental and sustainable manner, hence building capabilities to perform.
For monetising service and data, this means that: Ideally, services and data-driven solutions are being sold at point of sale (when equipment is sold) - maybe not the full package, but the entry level offering which will be the first step to the next level mature offerings. Commission structure of sales people needs to be designed in such a way that it promotes the right focus and behaviour.
I have seen quite a few examples where equipment sales people were quite successful in selling service contracts once the commission they would receive was tied to the sale of a service contract.
Sales people who sell advanced services and data-driven solutions need to have specific skills and background, which are not necessarily the same as skills required for selling the products and maintenance services. Most stateof-the art sales techniques such as Solution Selling, Challenger Selling or Value Selling, assume a fluid and educated dialogue on related business domains.
Often, these conversations should happen with other stakeholders at the client organisation, maybe at higher seniority levels. The different teams need to have the confidence and safe environment to learn and develop these skills and knowledge, and become fluent in these conversations and sales approaches.
Different teams in your organisation need to be “in the same boat” without conflicts of interest. We currently see more and more companies aligning targets and incentive schemes, in which common and shared objectives prevail above individual targets.
Full transparency in key performance indicators on progress and results is required, to have all stakeholders have the necessary insights to be able to take ownership and accountability and intervene when/where needed.
The leading manufacturers, ahead of the game, have built momentum for continuous and easy change from the inside, moving beyond “business-asusual”. Their teams are passionate and eager to perform, learn and pursue opportunities. Instead of resisting new ways of thinking about customer challenges, customer value and their business, they focus on customers and pursue opportunities to increase value.
Monetising services and data has become a logical part of their overall vision and strategy. They are better in solving bigger customer problems, better at articulating the value for customers and in removing obstacles for their clients to adopt the new solutions. As a result, they better differentiate themselves – in the eyes of their customers - from their competitors. They perform better and have more resources to keep innovating their business and hence grow in our disruptive world.
Boost your monetisation If you want to accelerate the monetisation of your (new) services and datadriven solutions, I would like to recommend:
• Review your business alongside common mistakes and suggested solutions, and add the discrepancies to your strategy;
• Download the scorecard How to Monetise Services and Data here;
• Book a Discovery Call with Jan van Veen;
• Join our upcoming Impulse Sessions on How to Monetise Service and Data. These are full day interactive meetings with like-minded peers during which we will exchange experience, insights and challenges.
Essence It’s not about making money from new services and data-driven solutions; it’s about being highly relevant and valuable to clients in a sustainable manner and empowering your people to do the same.
It goes without saying that if you deliver value for money, you also get money for value.
Jan Van Veen is Managing Director at MoreMomentum.