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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.
Mar 27, 2019 • Features • Advanced Services Group • Aston Centre for Servitization Research and Practi • Data Capture • Future of FIeld Service • manufacturing • Monetizing Service • Professor Tim Baines • Servitization • tim baines
Digital technologies, IoT and digitalisation have been big topics in the manufacturing sector. Combined with services, digital seems to be the answer for a multitude of manufacturing questions, if you take the hype at face value.
But for many manufacturers, digital actually raises more questions than it answers, with one particular question at the centre: how to capture the value of digitally-enabled services?
The Advanced Services Group at Aston Business School has recently released a whitepaper on performance advisory services, which aims to cut through the hype and provide clear information and insight into how manufacturers can make the most of digitally-enabled services.
Real business insight
In this whitepaper, we wanted to reflect real business insight and real business challenges. We invited senior executives from a range of manufacturing companies - from multinationals such as GE Power and Siemens to local SMEs – for a structured debate on digitally-enabled services.
The discussion and its outcomes formed the basis of the research for the whitepaper and helped crystallise the three areas that are most important to manufacturers:
1. Performance intelligence and data as a service offering;
2. How to capture value from these services;
3. How to approach the design process to achieve success.
What are performance advisory services?
The process by which a manufacturer transforms it business model to focus on the provision of services, not just the product, is called servitization. Generally, we distinguish three types of services. Base services, such as warranties and spare parts, are standard for many manufacturers and focus on the provision of the product. Intermediate services, such as maintenance, repair and remanufacturing, focus on the condition of the product. Advanced services take a step further and focus on the capability that the product enables.
In this framework, performance advisory services are situated in between intermediate and advanced services. Typically, these are services that utilise digital technologies to monitor and capture data on the product whilst in use by the customer. These insights can include data on performance, condition, operating time and location – valuable intelligence that is offered back to the customer, in order to improve asset management and increase productivity.
Why are they attractive to manufacturers?
Performance advisory services are attractive to manufacturers because they allow the creation and capture of value from digital technologies that are likely in use already. Take the example of a photocopier - with the addition of sensors that monitor paper and toner stocks, it can send alerts when stocks are getting low. This kind of data is valuable to the customer, as it will help improve inventory management and avoid service disruptions or downtime, but it is also valuable to the manufacturer in helping them understand how the product is used, providing data that they can use to re-design products or to develop and offer new services.
Making money from performance advisory services.
Performance advisory services offer the manufacturer the potential to capture value either directly or indirectly and there is a strong business case for either. Whilst charging a fee directly for data or a service provided is compelling, the potential indirect value for the manufacturer should not be underestimated, as it can yield not only greater control and further sales, but also new and innovative offers, as well as improved efficiencies.
"Performance advisory services are situated in between intermediate and advanced services..."
In the photocopier scenario, the data generated could be sold to the customer as a service subscription, thus earning money directly.
Alternatively, the manufacturer could use the data generated for maintenance programmes or pre-emptive toner and paper sales, thus earning money indirectly. In reality, however, direct and indirect value capture are likely to go hand in hand. A prime example of this is equipment manufacturer JCB, whose machines are fitted with technology to alert the customer if the equipment leaves a predefined geographical area.
For the customer, knowing the exact location of the equipment is valuable – as it may have been stolen. But it also greatly improves efficiency for the manufacturer when field technicians are sent out for maintenance work and do not lose time locating the vehicle.
Performance advisory services - just one step on the journey to servitization
Performance advisory services present a compelling business case for manufacturers looking to innovate services through digital technologies, in order to improve growth and business resilience.
With the immediate opportunity to capture value, these digitally-enabled services are a first step for many manufacturers towards more service-led strategies and servitization.
But that is what they are – just one step on the journey to servitization. Manufacturers looking to compete through services should not stop with performance advisory services.
In the environment of a more and more outcome based economy, it is imperative to understand the potential of taking a step further to advanced services and to recognise performance advisory services as a step toward this.
The full whitepaper Performance Advisory Services: A pathway to creating value through digital technologies and servitization by The Advanced Services Group at Aston Business School is available for purchase online here.
Mar 20, 2018 • Augmented Reality • Commoditization • Data Driven • FSM • future of field service • Jan Van Veen • Machine Learning • manufacturing • Merged Reality • Michael Blumberg • Monetizing Service • moreMomentum • Bill Pollock • Blumberg Associates • cloud • digitalisation • field service management • Servitization • Strategies for Growth • Uncategorized
In the Big Discussion, we will take one topic, bring together three leading experts on that topic and put three key questions to them to help us better understand its potential impact on the field service sector...
In the Big Discussion, we will take one topic, bring together three leading experts on that topic and put three key questions to them to help us better understand its potential impact on the field service sector...
This issue our topic is the what to expect in 2018 and our experts are Michael Blumberg, Blumberg Advisory, Bill Pollock, Strategies for GrowthSM and Jan Van Veen, moreMomentum
The first question we tackled was What is the biggest challenge facing field service companies in the next 12 months?
Now let's turn to the second question in the discussion...
What is the biggest opportunity facing field service companies in the next 12 months?
Bill Pollock: The biggest opportunity facing field service companies today is the ability to compete head-to-head with any of their main competitors – however large or small – through the implementation and/or upgrade to a Cloud-based Field Service Management (FSM) solution. Over the past several years, Cloud technology has normalized the playing field for both FSM solution providers and their customers, who are no longer encumbered by the cost and complexity of their legacy premise-based solutions and applications.
Advances in technology are also giving a boost to those field service companies that have embraced these new technologies. For example, the greatest opportunities over the next 12 months will most likely be realised by those companies that will have already implemented Augmented Reality (AR) and/or Merged Reality (MR) into their field service operations. However, the most likely dominant field service organisations will be the ones that have also taken steps to explore the benefits of moving to an Artificial Intelligence- (AI) and Machine Learning- (ML) driven field service solution.
The technology is already there for every field service company; however, only those that embrace – and implement – these technologies will actually be able to reap the benefits.
Jan Van Veen: When talking about the biggest opportunities, I think we need to look beyond 12 months. It is mission critical to act now on future success.
Most industries are somewhere around the top of the life cycle and are facing (first signs of) commoditization.
The big opportunity for them is to go through the next life cycle where the added value is about enhancing the use of technology. The new value propositions will be heavily driven by data, algorithms and intelligence. The value will be far beyond predictive maintenance and uptime of technology.
This is a domain in which young, rapidly growing data-driven companies are in their comfort zone. So, the opportunity here is moving up the food chain and increase relevance for clients. By failing to pursue these opportunities, the threat is being forced down in the food chain and seeing other players deliver the high value, whilst seeing your role being limited to manufacturing equipment, spare parts and, to some extent, delivering low skilled hands-on machines for maintenance.
For those companies who are not ready to focus on these opportunities, I think your top priority should be to build the missing foundation and make sure you are ready to pursue the opportunities soon.
Michael Blumberg: The biggest opportunity facing field service companies in the next 12 months lies in pursuing strategies that will advance their journey along the path toward servitization.
The specific strategies vary from company to company based on where they are on their journey. For some companies, 2018 will be the year when they finally transition their field service operation from a cost centre to a profit centre. For others, the opportunity lies in monetizing service offerings and effectively marketing and selling service outcomes.
Still, others will have the opportunity to invest in digital technologies that enhance service quality, boost productivity, and create an uber-like experience for their customers.
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