Much has been made of the potential benefits of adopting at least some Servitization strategies within a service portfolio. However, the processes that need to be put in place are complex and a delicate balance between increasing profitability and overcommitting on contractual obligations needs to be struck. Here, Michael Blumberg, CMO of Mize, offers his guidance as to what systems of support are required to achieve a successful path towards Servitization...
It is important that any company, regardless of where they are on their Servitization Journey, has the right systems in place to support this journey.
These systems must not only manage service delivery but also enable the service provider to scale their business.
Essentially, there are three (3) types of systems or applications that need to be implemented. These are:
- Systems that manage contractual obligations
- Systems that manage service delivery
- Systems that manage recurring revenue growth
Let’s examine these systems in more detail.
Systems that manage contractual obligations
Companies on their Servitization journey must implement system functionality that tracks and manages service contracts and obligations to customers. Without this type of functionality, service providers may find that they are either giving too much service away for free and losing money or not providing enough service and jeopardizing customer satisfaction.
Ideally, this functionality will provide information about what level of service this customer is entitled too. More specifically, it will provide specific business intelligence about the type of processes covered, the types of resources available/utilized, and the level of performance provided.
For example, a Durable product manufacturer or service provider will need to know if the customer is entitled to field service or only remote support. If field service, then are spare parts included in the contract. Does the contract include a response time or uptime commitment guarantee?
This information can be tracked and maintained through Service Contract and Warranty Management software functionality. This type of functionality is critical regardless of whether the service provider or Durable Products Manufacturer is providing basic services such as break-fix/field service, or more advanced outcome-based services such a “pay-for-use”. Managing customer expectations and meeting commitments and obligations is required no matter what offer the customer purchased.
Systems that manage service delivery
Don’t overlook the importance of your service delivery infrastructure in the Servitization journey. It is the engine that delivers on the promise of Servitization. The infrastructure must be aligned with current and future needs of your customer base Some companies are in the very early stages of their Servitization journey, providing only basic support services, and require service management functions such as field service, remote support, and service parts. Others may offer more advanced, outcome-based services such a “pay for use” or “cost down” commitment. These companies are likely to benefit from IoT and AI-enabled solutions that help anticipate and avoid downtime.
It is important to implement systems that are agile enough to support your long-term Servitization Journey. An advanced service offering, such as “pay for use” may not be practical or feasible today. However, your service system of record must be able to support these requirements in the future through add-on functionality or the ability to connect with third-party solutions.
Likewise, advanced service offerings often build upon basic offerings.
Even though your company may be ready for IoT enabled solutions, a robust service parts logistics or field service management functionality will still be needed to deliver outcome-based services.
Systems that manage recurring revenue growth
Building a profitable, recurring revenue stream is the name of the game when it comes to achieving the ultimate outcome of Servitization. As such it is important that service providers implement systems that support the marketing and sale of services. One of the ways they can do this is by implementing functionality that facilitates the ability to configure, price, and quote service offerings.
To ensure high attachment, service providers need access to functionality that facilitates their ability to modify or customize contract coverage, entitlements, pricing, billing cycles, terms, and conditions, etc. Since many companies enlist service technicians in the business development process, the systems must also be designed to make it easy for technicians to sell service plans, parts, and accessories.
Customer retention is also critical to building a sustainable recurring revenue stream. Staying in touch with customers on a periodic basis keeps your company top of mind. This is where marketing automation can be effective.
For example, automated email notification to a customer that an outcome was met or that a contract is up for renewal all help to ensure high renewal rates.
In summary, systems of support are required when embarking on any journey. This is no different for the Servitization Journey. Without these systems, companies will never get to their destination. Ultimately, the Servitization journey will result in building a profitable recurring revenue through the provision of a broad portfolio of basic and advanced services.
That’s why it’s critical that service providers implement a triad of systems that manage service obligations, service delivery, and service revenue growth.