Fast-changing technology trends, the Internet of Things chief among them, are making it harder to distinguish between products and services. Behind it all is an increasing desire among business leaders to turn a profit from their service divisions. These days, service is a valuable asset that can be marketed and sold. Read on for more on why companies are rethinking the definitions of service, plus other news from the field this week:
When Service Itself Becomes A Product
No longer are products the commodities that companies can sell, writes Dan Woods, a consultant at CITO Research and a Forbes contributor. Now they must consider the services their field technicians provide as a product, a shift that’s causing companies to think about how they can make services a bigger — and more lucrative — part of their business.
“In the industrial sphere, companies that make devices have for decades made large amounts of revenue selling parts and servicing equipment after the sale,” Woods writes. “Selling parts and offering Break/Fix services are the most basic types of services offered by manufacturers. But now a much larger group of companies is finding that when they connect their devices to the Internet, they have a flow of data about how the product is working and who is using it.”
Woods cites research from Oxford Economics and PTC about the five stages of service. They are:
- Product Model: The main focus is on selling product.
- Service Parts: The company sells parts, but customers must maintain and fix the products.
- Field/Service: The company offers to fix problems when they arise.
- Service Contracts: A more advanced tier in which the company offers to maintain and fix products to meet negotiated service level agreements (SLAs).
- Outcomes-Based Services Model: The company offers SLAs that are based on specific performance goals.
According to the research, 70 percent of respondents are stuck in the first three phases, while 30 percent operate in the more advanced stages of service. More than 90 percent, however, want their service to reach performance-based levels within three years.
Read more at Forbes
Service Revenues Take Center Stage at UK Expo
The service-as-profit-driver discussion was a big topic during the recent Service Management Expo 2014, one of Europe’s largest field service events. In one panel, participants from Centrex Services, Noventum Service Management and ServiceMax explored the legacy of service as a profit drain and the key challenges to overcoming that mentality. Declining “break/fix” revenues and increased commoditization were among the challenges discussed.
Read more at the ServiceMax blog
Pep Talk for Underperforming Employees
Management would be easy if all employees performed perfectly. But they don’t, and it isn’t. Underperformers can drag the entire team down and alienate high-performing employees. It’s a difficult problem that managers must attack head on, often without a roadmap for success. Harvard Business Review editor Amy Gallo offers several tips, culled from management experts, about how leaders can turn around underperformers, including:
- Don’t cower: The problem won’t fix itself. Don’t ignore the issue or ship the employee to a different department to become someone else’s problem. It’s not helpful for anyone involved.
- Find the cause: Figure out what’s to blame for the poor performance, and fix it. It could be a lack of skills, unclear expectations or just a bad fit. Whatever the cause, managers must also recognize their culpability. “After all, it’s rare that it’s all the subordinate’s fault just as it’s rare that it’s all the boss’s,” says Jean-François Manzoni, a management professor.
- Communicate: Once you’ve identified the problem, talk to the underperformer — and make it collaborative. “Explain exactly what you’re observing, how the team’s work is affected, and make clear that you want to help,” Gallo says.
Read more at Harvard Business Review
Happiness Above Profits or Productivity
Ask any executive about the business’ most important asset, and he or she will undeniably say it’s the people. But too often executives give lip service to the importance of people and focus instead on business plans meant to increase productivity and profitability, according to Nick Frank, a service management consultant with Noventum Service Management. Frank discusses how Hutten, a Dutch kitchen service provider, focuses on a “happiness vision” to spur employee development and engagement. Hutton’s HR director explains how the company — with buy-in from the CEO — prioritizes happiness as its main business driver. For starters, the company realized that an employee happiness initiative couldn’t be dictated by management; employees at all levels needed to be involved in the planning process. The bet is that happier employees are more productive, more enjoyable to work with and, by extension, better customer pleasers.