Managing Service Profitability in the Age of Digital Transformation

Oct 19, 2021 • FeaturesJoe KennyCoen JeukensDigital TransformationservicemaxGLOBALservice profitability

We know that the service department is probably the single largest contributor to the margin of your organization. But when I would ask you: when do you know you are doing a great job? What is your reference, your yard stick? We know the call for great, greater and greatest. CFO’s want even more margin contribution. CEO’s want to have more revenue and market share.

In this article, Coen Jeukens, VP of Global Customer Transformation at ServiceMax, and Joe Kenny, Vice President, Global Customer Transformation & Customer Success at ServiceMax, will show you some basic building blocks to manage your Service Profitability & Growth agenda.

It is an age-old dilemma for Operations Managers. Your CEO wants XX% revenue growth, your CFO wants XX% cost reduction, your CRO wants better references and higher NPS scores, and you are supposed to deliver all of this with zero additional investment, because – of course – you have been doing this for years with no additional cash, so why would you need it now?

To top all of this off, you had very little idea of where you stood, operationally or financially, at any given time. And this was due to the fast that access to real time data, a current view into work in process, and accurate financial information was all impossible to come by.

Historic Challenges

I often speak at conferences and participate in webinars, and I often relate this anecdote – in March I would lay out my operational plan, based on the most recent P&L statement I had received (January’s), intending to address performance weaknesses I had uncovered. My team would execute the plan and in May I would receive my March P&L to see if the response to January’s performance shortfalls were successful of not. It was madness.

Now, layer onto that, the fact that 30, 60, 90-day invoicing accruals were also Operation’s responsibility, even though we had an AP department. This process greatly impacted both revenue and cost, as the cost of service was consumed, but the associated revenue may not have arrived in 90 days.

Enter the Age of Digital Transformation

Fast forward to today, and service operations managers have been given a lifeline—digital transformation. Digital transformation can be like a light switch, illuminating what is happening in real time, allowing service operations leaders to adapt to circumstances immediately. They can reallocate precious resources instantly, validate payment status and credit status prior to service delivery, and see and understand the impact of operational plans in real time.

Digital asset and service management platforms can provide real time performance measurements, both foundational and top line. This includes data round first time fix rate, mean time to repair, mean time between failures, and equipment up time. With this data, operations managers can organize and drive for peak utilization of labor resources while ensuring that the training and quality of the work is optimal, thereby increasing the efficiency of their organization and lowering the cost to deliver excellent service.

With today’s platforms, functionality and tools, service operations are finally on par with our commercial partners and can see, and act, on upsell, cross sell, renewals, and service contract extensions instantaneously. In addition, we can support sales by identifying and helping them target competitors’ equipment for targeted replacement, becoming the eyes of the commercial team on the customer’s location.

Newfound Financial Control

Utilizing a digital solution allows for real time tracking of labor, parts consumed, travel, and any other costs associated with a service call, regardless of whether it is a T&M call or in support of a warranty/service contract entitlement. This is a key advantage that enables service operations leaders to not only manage labor and parts expenses far more granularly, but they can also evaluate the revenue associated with the service provided to validate if the pricing is correct based on their revenue and margin targets.

This ability to understand the Cost to Serve an asset or entitlement agreement in real time is a huge step forward for service operations. It gives them the data they need to truly align entitlement pricing, cost control, operational efficiency and productivity to accurately manage and forecast their performance and address fundamental issues that are obstacles to achieving their own performance objectives.

The evolution of equipment and asset service management platforms has greatly assisted service operations professionals in attaining the insight, visibility, and control that their commercial and financial counterparts have enjoyed for decades. As asset and equipment maintenance and service becomes a larger and larger part of most organizations’ revenue and margin contributions, it is important that they equip teams with the technology that enables them to better manage and control their operations.

ServiceMax will be exhibiting at the Field Service N Expo on October 27th and 28th and can be found on stand B6.

To sign up for the FSN Expo please click here.

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