Strategy & Leadership

John Carroll: Why Smarter Service Creates Paths to Profits

John Carroll knows better than most what’s on the minds of field service executives. As head of The Service Council, an advisory and research firm to the service community, he speaks regularly with service executives about the state of their businesses and biggest challenges. We spoke to Carroll in advance of The Service Council’s “Smarter Services Executive Symposium” (April 29 – May 1) about why it’s imperative to make customer service part of your company’s genes — or risk being left behind in a world where products are increasingly being commoditized.

Define “smarter services” — what is the concept and why does it matter?

Services have been emerging as a source for product manufacturers to derive significant profit and market differentiation as products have become increasingly commoditized. In layman’s terms, smarter services is an appreciation of the importance of service as a profit lever. It’s also a recognition that service is no longer relegated just to business service and customer service employees. It’s an enterprise-wide cultural issue. Service needs to be in the very DNA of an organization from top to bottom.

Smarter services is about putting a maniacal focus on customers regardless of where they are in their journeys — and, by that, I mean pre- or post-sale — and doing so cost-efficiently and profitably. Organizations that have embraced smarter services have shifted from being reactive to customer needs to being predictive of those needs, and in a real-time manner.

What’s driving companies to take such a broad view of the services they sell?

There’s a book, The Experience Economy, that talks about the evolution of commoditization in world economies — beginning with raw materials, then goods and now services. Smarter services is about avoiding commoditization in your service process and in the products and services you deliver. Organizations are overcoming the challenge of commoditization by being responsive to customers in real-time, leveraging customer data, and understanding how customers want to interact and through what channel (for example, in-person or through social media).

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The book draws an example from the coffee industry and how Starbucks, which is very customer-centric, is able to charge $3 or $4 per cup of coffee because of the experience it creates. It’s all about avoiding commoditization through the staging of experiences. Otherwise, organizations run the risk pricing their services solely based on what the market will bear.

How can companies benefit most from smarter services?

It depends on the industry, but we agree with the notion that uncommon industries share common pains. Some of the common pressures include greater demand from customers for faster response times and performance of whatever it is they’re buying. Smarter services enables quicker access to these services and greater product performance.

In product-centric industries, if a product malfunctions in the field, smarter services can help businesses predict and avoid the problem beforehand and/or fix the problem in real-time through remote support tools that can, for instance, trigger maintenance alarms ahead of a breakdown and collect data for future enhancements.  

Take McDonalds. Their soda fountain machines are a very profitable part of their business. The rest of their products, such as burgers and french fries, are commoditized. Burgers and fries don’t break down. The soda fountain is a piece of equipment that can fail and break down, and if it does, it significantly affects their profits and creates a bad customer experience that then impacts customer retention.

How receptive are companies to your “smarter services” approach?

A lot of people understand the importance of this process and have embraced the concept, but struggle with how to implement it. It can take several years and goes beyond technology to areas such as people, data, process, etc.

At our upcoming annual symposium, we’re going to talk a lot about smarter services, but the sub-theme will be about “connecting with your world.” There are many applications of this. There’s the connection with customers, your employees, strategic partners and then there’s the actual connection that gives technicians access to the data they need.

How can companies start to implement “smarter services” internally and externally?

There are a lot of things organizations can do. They can leverage a combination of research inputs, customer surveys and market assessment surveys. They can start understanding market data around what customers are looking for and what is the true level of customer satisfaction. If they map a customer’s journey they can understand at which points in the process customers are most likely to become customers for life.

I also think there’s an internal and external assessment of implementing smarter services that needs to take place. The internal assessment needs to be built around operations — field service, remote service, warranty management, sales and marketing, and spare parts management. An external assessment can compare and contrast a company’s performance versus its industry, segment and the general market.

But the important thing here is, executives need to be on board with this cultural shift. That’s one of the first steps. If executive management doesn’t understand and appreciate the importance of service, then it’s never going to reach the field and, most importantly, the customer.

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