Wolfgang Ulaga (AT&T professor of Services Leadership at Arizona State University’s W.P. Carey School of Business) and Christian Kowalkowski (associate professor of industrial marketing at Sweden’s Linköping University and Finland’s Hanken School of Economics) have a message for you: Every company is a service company.
“The question,” Ulaga says, “is whether there are opportunities to grow beyond fundamental services.”
Field Service Digital sat down with the duo, fresh off the release of their book (“Service Strategies in Action“) about how industrial companies grow their businesses through service, to hear what separates the service contenders from the pretenders.
Field Service Digital: Have we reached an inflection point where industrial companies generally understand the value of service, even if they’re not yet offering them?
Ulaga: Yes and No. One company we’re researching manufacturers complex devices. The company continues to grow its service offerings, yet internally there’s still a push to grow the product side of the business and shelve services for a later stage. Even today, many companies look to the product space to grow their business and push services to the back burner. It’s true that there’s been a lot of discussion within firms about the fundamental benefits of service, but many companies just aren’t ready for that journey.
How can a company determine whether they’re ready to begin that journey — or whether providing services is right for their business?
Ulaga: It’s important to note that every company is a service company. Some companies are only involved in basic services to enable product sales, often called lifecycle services or after-sales services. In our opinion, “after-sales services,” is a dangerous term. If you define the activity you do as after sales, you immediately limit the service activity and convey the wrong message to your own employees.
The question is whether there are opportunities to grow beyond those fundamental services. Some companies never move beyond basic services. Others make inroads into adjacent areas, such as asset efficiency services or consulting and training services. With the growing interest in IoT, we also see some firms grow in services based on data and analytics. Only a few companies reach beyond those services into complex customer solutions.
Let’s talk about change management. How can companies change their culture to accept — and even emphasize — services?
Kowalkowski: The most important factor is having service champions with top management support to spearhead these initiatives. You can’t change a company’s DNA overnight, so start with a small group that has a vision and the power to drive service initiatives. It’s also critical that companies truly understand their customers’ businesses. Too often, companies focus on the technical possibilities rather than how services can support and improve the customer’s competitiveness.
You can’t change a company’s DNA overnight, so start with a small group that has a vision and the power to drive service initiatives.
Ulaga: This shift is a major strategic initiative for most companies. A lot of companies underestimate that, which leads to frustrations. This isn’t just a minor marketing gimmick where companies dream up a few service offers and then send salespeople out to sell them. It might be technically feasible to offer remote monitoring, for example, but is that what customers need in a given market or segment?
Are there quick wins service champions can seize to build momentum?
Ulaga: One strategy is to think about turning free services into fee services. There are many services activities, including inventory holding, prototyping, monitoring or training that provide value to customers but which are never invoiced. Think about using these low-hanging fruit opportunities to demonstrate how the company can improve profitability now by charging for these services, instead of just giving them away.
There’s clearly a lot of inertia companies must overcome internally. But how do companies convince customers to buy unfamiliar services?
Ulaga: Customers often aren’t the biggest resisters to such initiatives. The biggest resistance usually comes from within the company, especially the sales organization. Service is one area where sales teams need to practice value-based selling — and that requires intimate knowledge of your customers. How well do they understand customers’ businesses? Do they really understand how they make money? Can the company add value, whether cost efficiencies or productivity gains, through services? Companies that struggle tend to not have that intimate knowledge.