Sometimes it feels like being a jack of all trades when managing a service business. On the one hand, you act like a firefighter, on the other hand, you know service is strategic to your business’s future earnings. That said, how do you elevate your job to proactively manage your service business? Establishing trigger points may be the key ingredient to manage your business on an 80/20 basis. Thus, giving you the focus on interventions that matter.
When do you know you are doing a great job? In speaking to many service executives, it is not always clear what the norm is. “We want to increase service revenue by 20%”. Why 20%? Why not more? Why not less? In my blog Mind the Gap, I tried to establish a norm for a maximum service revenue. In a blog by Shawn LaRocco, he defined a norm for Cost to Serve. Both blogs have in common that success is put in a perspective of a norm.
Manage by exception
A facilities management customer of ours processes 15,000 – 20,000 work orders per month. In the past, they had a team of 30+ people in the back office validating and correcting all debriefed work orders. Based on gut feeling and experience, there was a belief that 80% of the work orders did close within a bandwidth of ±5% of expectation. By formalizing that bandwidth through trigger points, they now have a tool to filter the volume and start managing by exception.
Intervene before a problem occurs
Apart from managing your workload on an 80/20 basis, trigger points serve as an early-warning system allowing for timely intervention. You don’t want to pay a penalty cost for a missed SLA. Instead, you want a service job to be flagged if its progress jeopardizes SLA attainment. E.g., a break-fix job needs to be completed within 4 hours. After 3 hours you could ping the technician to ask if completion is still on track. If not, you could provide the technician with support and/or contact the customer with a heads up.
A trigger point is thus a floor or ceiling boundary on a metric triggering an event. Using workflow, you can route the event to the mitigating personas in your organization.
Value = result minus expectation
Many years ago, the value of trigger points was eloquently explained to me by university professor Meindert Flikkema. He stated that every event has both an expectation and a result. If somebody gets more than expected, then that person is happy…and vice versa.
In the context of running my own service organization at Bosch, I tweaked Meindert’s equation and added the concept of a bandwidth around expectation. Similar to the above example of ±5%, I strived to manage my operations inside the bandwidth. Inside the bandwidth I let the business run on automation. If I managed well, that would account for 80% of my workload. The outliers I routed to my attention queue. Over time trigger points would help me focus on what really matters for both my customers and my CFO. I’ll use the business driver contract profitability to illustrate the value equation and its impact.
Suppose a customer wants to buy a full-service contract with a scope-of-work containing preventive maintenance, capped break-fix events, calibrations, software maintenance, and an included set of spare parts and consumables. Using a CPQ-like tool the scope-of-work totals to a calculated cost of $75,000, a calculated revenue of $100,000 and an expected margin of 25%.
Throughout the lifecycle of the contract, executed service activities will impact the cost you accrue. If those costs exceed the $75,000, you have either over-delivered or over-run on your calculated cost. Your CFO will see a less-than-expected margin contribution. If your margin is significantly more than the expected 25%, then either you are over-charging or under-delivering. Your customer may get a feeling they are not getting value for money.
Tipping the trigger level should make you curious. Challenge both expectation and result. Do you have a clear understanding of cost-to-serve? Are you taking the life cycle of the product into account? Did the product owner accept your mid-life-upgrade proposal?
Don’t wait till it’s too late for corrective intervention
As a service leader, you don’t want to be told about under or over-situations by your CFO when it is too late for corrective intervention. Similarly, you don’t want your customers to churn. Trigger levels act as an early warning system before you accrue irreversible costs or impact customer expectations negatively.
- It’s November. Show me all contracts at 80% of the calculated cost. Let’s see what service activities we can push out to ‘save’ this years’ margin contribution.
- It’s July. We anticipated six break-fix events for a full year. We’ve already had four. We want to flag future break-fix service requests to inform the customer service agent and technician to be stricter.
- It’s September. The year-to-date contract margin spikes at 35%. Upon investigation, you find that a contracted and scheduled calibration activity has been canceled by the customer. Instead of treating this as easy money, you engage with your customer to pre-empt contract renewal conversations.
It’s time to proactively manage your service business
As long as we have unplanned downtime, firefighting will remain an element of a service leaders’ job. Field service management tools are a great help to facilitate the transaction and collect service data. The true value manifests itself when you use transactional data in combination with trigger levels. Trigger levels give you that early warning to become proactive instead of reactive. Trigger levels add direction to your decision-making. And better decision-making makes you more intelligent and more strategic. Not only inside the service domain but across your organization. So are you ready to proactively manage your service business?