Coen Jeukens, director global customer transformation for ServiceMax, asks if we are measuring productivity with the wrong criteria. Repurposed with permission from Connected Technology Solutions Magazine.
For decades the OECD has reported a global productivity decline, while at the same time we see a rise in GDP. This triggers the question: Should the productivity metric be augmented with more contemporary metrics in policy making and business decisions?
Today we see the disruption of anything-as-a-service business models, whose success are powered by underlying service metrics. Where productivity predominantly focuses on the efficiency of producing a product, service metrics focus on how that product is being utilized. Understanding and optimizing a product’s use creates new revenue streams, boosting our economy.
Responding to Volatility
Service metrics have been around for decades, but they have gained traction as other metrics fail to paint a complete picture for decision makers who face a volatile environment with rapidly changing customer behavior and new technologies. Now, it’s not enough to sell an excellent product. Companies must provide services that enable end users to drive value from that product. Instead of the product being the goal, the product is a means to an end, an outcome.
According to the OECD, “velocity and scale of adoption are coming faster, making service metrics (availability, uptime, reliability) strategic to growth and success.”
After-Sales: An Early Believer in Service Metrics’ Power
Research from Accenture shows that between 8 to 12 percent of the lifecycle cost are related to the purchase of a product. The rest of the costs are incurred during the operational phase of a product. It is typically the after-sales department that provides services during this phase. In doing so, after-sales has many touch points and a good idea about how the customer is using the product. In performing the services throughout the product lifecycle, after-sales generates many service metrics. The big opportunity is to use these metrics beyond the operational aspects of delivering the services.
“Velocity and scale of adoption are coming faster, making service metrics (availability, uptime, reliability) strategic to growth & success.” – 2017 OECD Compendium of Productivity Indicators
Service Metrics Maturity
The effectiveness of service metrics depends on the maturity of your service organization. If you only provide break-fix and spare part services in a reactive mode, the available metrics will have a lesser potential to influence your business strategy when selling output- or outcome-based services. For the latter, having a thorough understanding of all cost and revenue drivers is essential. Service metrics drive new insights, and those insights can be turned into new revenue opportunities. It illustrates how your services portfolio will change when maturing and shifting the focus from product to its use.
Let me illustrate how mature service metrics can impact your business model. Does your organization know where products go after they have been sold? Do you keep track of reactive and preventive maintenance activities per installed product? Do you keep track of modifications and retrofits to installed products?
When you invest in installed base understanding and connect the dots with all activities that relate to the installed product, with each iteration you generate more insights to do the job better, faster and cheaper. As a result, you build trust and satisfaction with your customer. In return, the customer will tell you more about his business and how you can create more value by means of offering more and upscale services. The more you are connected to the dynamics of your customer, the more reliable your economic barometer.
From Data Consumer to Data Supplier
In the installed base penetration example above, after-sales has transitioned from a data consumer to a data provider. To deliver basic services, after-sales builds on product-related info, such as warranty clauses.
In delivering services, after-sales collects data on the usage of the product creating a wealth of insights. The insights created from service metrics can feed both product development and market development, resulting in better products and relevant propositions driving sustainable economic growth.
On sustainable economic growth, the World Economic Forum describes the outcome economy as a phase where “companies will shift from competing through selling products and services, to competing on delivering measurable results important to the customer.” That, the World Economic Forum says, requires “a deeper understanding of customer needs and contexts in which products and services will be used.”
Service metrics cater to this deeper understanding of both product and customer behavior. It is technology, digitization and state-of- the-art field service management tooling that drives the maturing of service metrics in both scale and real-time. Having this data at your fingertips supports situational and holistic decision making. In other words, product-related services for commodity buyers and outcome-based services for value buyers.
Service Metrics as an Economic Barometer
Whether it is the maturing of the after-sales domain or the customer shift from owning a product to generating value of its use, service metrics are at the heart of both. The digital revolution has shown us that productivity does not have the same relevance in the automated, servitized industrial landscape. Today, we live in a data-driven economy. Those who master data have a competitive advantage. Service metrics play into that game.
“It’s about unlocking data to turn valuable insights into powerful business outcomes” — Coen Jeukens
After-Sales Paradigm Shift
After-sales traditionally has not been a business function with a voice in strategic decision making, despite contributing significantly to companies bottom lines. With the growing value of service metrics, after-sales has the potential to become a provider of valuable and strategic insights. This is a paradigm shift for the entire organization. Productivity has its place but pay attention to the service metrics as an economic barometer.
Read the original at Connected Technology Solutions Magazine.