Part 1 of this series analyzed the phenomenon of the rise of the service economy: the increasing importance of the service sector in industrialized economies. Especially in a sluggish market, service delivered after the initial sale of a product is what can truly differentiate competitors.
In fact, after-sale service is quite difficult to replicate. Thus, while durable (hard) goods orders decline and product-based margins diminish in maturing and commoditized industries, service margins remain healthy. When consumers or businesses focus more on maintaining what they have vs. purchasing a new product, after-sale service (or aftermarket) can have a substantial impact on any company’s revenue, profitability, and customer loyalty levels.
Therefore, the article asserted that one saving grace for the economies of these developed countries (the Group of Eight [G8] and beyond) could be the post-sale service, or aftermarket business model, in which services to repair, maintain, and optimize products are sold to installed bases. The concept of servicing an installed base is vast, spanning multiple technologies and business processes, including customer relationship management (CRM), product lifecycle management (PLM), and supply chain management (SCM), among others.
In practice, the competency can range from break-and-repair models in the most basic form via preventive and reliability centered maintenance (RCM), to performance-based contracts. In the latter case, long life assets’ performance and outcomes, such as aircraft flight hours or compressed air, are offered as services.
Enter Service Lifecycle Management (SLM)
A related software category term was coined several years ago, when AMR Research (a Gartner company) introduced service lifecycle management (SLM) to cover applications that aim to achieve this vast after-sale service functionality. In TEC’s 2003 article “Service Lifecycle Management – Tapping into the Value of the Product Aftermarket,” SLM is defined as a business initiative focused on servicing a company’s products, and the customers that bought them, after the product has been sold.
Simply put, SLM focuses on making more money from the product after the initial sale. But it is more than that: it is also a way to become a strategic part of the customer’s business after the sale is completed. Following are some of the major areas of SLM that AMR Research outlined in its book entitled “The Future of Enterprise Applications”:
Service discovery. The way companies manage service requests is changing. While some companies can claim that they proactively assess needs, most are simply reactive and ignore the opportunities. Many only address the identification of service needs when a product breaks and customers call for support (after the fact).
Rather than responding to problems, service should be proactive, anticipating the needs of customers. The use of condition monitoring equipment placed in manufacturing sites is an example. By taking constant readings on heat, vibration, noise, and other critical process variables, companies can understand if there is a problem before equipment fails. For more information on the topic, see TEC’s previous article entitled “Reliability Driven Maintenance–Closing the CMMS “Value Gap”?”
Service fulfillment. Good service is crucial to the brand, as it is the place where consistent opportunity arises to define further sales opportunities, understand customer needs, and exceed customer expectations. Well-integrated systems allow companies to manage scheduling, dispatch people, manage parts availability, and equip technicians with the accurate and timely information that is stored in the knowledge repository. For an in-depth analysis of one such vendor’s offering, UNIT4’s Agresso Field Service, see TEC’s previous article entitled “The Convergence of ERP and Field Services—One Vendor’s Leadership.”
Service knowledge. Vital to meeting and exceeding customer expectations is access to installed base and product information. This knowledge repository should capture and provide all information to respond to questions quickly and intelligently, while also assessing needs proactively. Often this information is stored within an existing CRM system, but knowledge management (KM) is far more than a customer contact management and sales portal application.
This knowledge repository also needs to capture and supply repair information, warranty and service contract entitlements, and compliance information, as well as track service histories. For more information on the topic, see my previous blog series entitled “The Power of Knowledge — Knowledge is Power” and the recent exhaustive analysis of Consona’s Knowledge Driven System (KDS) offering in the article entitled “(Forgotten) CRM and ERP Kingdoms in the Making?”
The Service Sector Segmentation
Based on the discussion thus far, different environments require different service approaches and capabilities. The major factors are whether the service must be performed on premises (in-house) or in the field, and whether it is appointment-based or happens ad hoc. Examples of providing services in-house with appointments (where customers come by randomly) would be medical clinics, dentist offices, and very important person (VIP) financial services, whereas airport security, retail stores, emergency rooms (ERs), call centers, and bank tellers would exemplify in-house services with no appointments.
Telecommunication and utilities services, office equipment maintenance and repairs, insurance claims validations, and health-care home visits would be appointment-based examples of field services. Conversely, field service with no appointments takes place during repair work at telecommunications and utilities construction and infrastructure sites.
Accordingly, a field service person or a crew is assigned to a job that needs to be delivered within a certain time window within a day, e.g., from 10 to 11:30 in the morning (and the customer needs to be home then). On the other hand, an in-house service person is assigned to a daily shift, e.g. from 8 am to 4 pm, and needs to deliver jobs as they arrive at his/her desk/station during the shift (although some intra-day scheduling may also take place).
Finally, professional services jobs are assigned to a person/team and need to be delivered during a certain period at the person’s choice as long as they are completed by a certain date (perhaps with some scheduling rules). Needless to say, typically different point (niche) SLM solutions handle different aspects and capabilities of these diverse service environments.
The Mobile Technology Factor
It is almost impossible to imagine modern field service without modern mobile computing tools, making us wonder how we were even able to live without these wireless gadgets only a decade ago. In the past several years, service organizations have evolved from having little or no contact with technicians in the field, to frequently communicating with them using cell phones and other mobile devices.
The population of mobile workers and the number of personally owned devices entering the enterprise is growing exponentially. According to industry analyst group IDC, the worldwide mobile worker population is set to increase from 919.4 million in 2008, accounting for 29 percent of the worldwide workforce, to 1.19 billion in 2013, accounting for 34.9 percent of the workforce.
According to Oracle, by 2011, the global cell phone user base is expected to reach 150 million, with nearly 75 percent of the United States (US) workforce being mobile by the end of that year. Some laggard service organizations still deliver schedules to workers every morning solely by phone, fax, or in-person pickup at the office. But more and more service companies deliver schedules electronically to technicians’ hand-held devices and, as the day progresses, the back-offices receive near real-time reports of the technicians’ jobs statuses.
As said in Part 1, many companies have deployed global positioning systems (GPS) to create large visual maps of where their workers are throughout the day. Some are also using street-level routing (SLR) to advise drivers about the shortest route from job to job.
Aberdeen defines mobile field service as the applications and tools available to field workers to accept, monitor and complete service work orders. In addition to work order management, capabilities afforded by mobile field service tools include navigation, parts management, schedule monitoring, and time and expense (T&E) reporting among others.
These mobile applications essentially link service technicians to back-office service and enterprise systems. In turn, these connections also enable dispatchers and other parties on the back-end to be constantly updated as to technician status and performance. As for the market penetration, by 2010 the percentage of technicians with wireless access to a formal packaged field service management solution will increase to 18 percent (from 5 percent in 2008).
In his 2007 guest article in Field Technologies Online entitled “The Age of Real-Time Service Enterprise” Dr. Moshe BenBassat, ClickSoftware Technologies founder, current chairman, and CEO, says that as customer expectations for faster service delivery grow, utilities, telecommunications, home and office computer and equipment suppliers, etc. encounter more challenges in building and maintaining daily work schedules to ensure that technicians arrive at their jobs on time and work productively. The maturity of mobile devices, GPS and other technologies offer unique opportunities to address these challenges in a cost-effective manner.
In a recent webcast, the VDC Research Group concurred with earlier predictions within its own survey’s findings. Namely, the proportion of mobile enterprise workforce is increasing, whereby the number of global mobile knowledge workers is expected to reach 200 million by 2012.
The Rise of the Mobile Workforce
Moreover, enterprises are increasingly feeling the need to provide connectivity to their mobile workforce. To that end, over 70 percent of surveyed organizations said that they would invest in notebook computers, smartphones, and personal digital assistants (PDAs) to equip mobile workers to connect to business applications remotely.
As for the rising importance of mobility investments, 70 percent of surveyed enterprises said that their mobility investments are transitioning from tactical to strategic. What performance gains did these organizations experience as a result of their enterprise mobility investment?
From frontline worker productivity, to reduction in customer churn rates and operating costs, enterprise mobility benefits have been far reaching. The major benefits being reported are as follows:
Certainly, there are the following challenges of deploying mobile technologies:
Still, the benefits outweigh the challenges, and the key deployment areas that are driving mobile applications “beyond the fence (four walls of the enterprise)” have been the following: field service, field sales, enterprise asset management (EAM), mobile inspection, spare parts logistics, pickup/delivery, healthcare at the point of contact (POC), long-term care (LTC) homecare, etc. Mobile applications have also found their use within four walls of an enterprise, i.e., in warehouse management systems (WMS), store operations, picking/put-away operations, and so on.
Thinking “Green” While Saving Some “Green Bucks”
Without trying to be accused of being a “tree-hugger,” I should point out here that one less apparent benefit of service chain optimization is that it is also kind to the environment. Reducing overly expensive excess service parts that take up a lot of room and mess up our environment is a major benefit.
In addition, if field resources travel less (in an optimized network) and spend less time idling in traffic, the company can reduce its service business’s carbon footprint and energy costs. How serious is this problem really? Each truck roll costs US$263 according to Aberdeen’s findings in mid 2008, and you can all make your own conclusions.
Less fuel burned, fewer spare parts unnecessarily replaced, assets maintained at top efficiency (and therefore minimum emissions and pollution), and so on, are just come compelling eco-friendly (”green”) aspects of a high-performance service business. Thus, I think it behooves companies who are service providers to think the “green and lean” way, in order to increase their margins and make their customers happier by doing so (and it cannot hurt to save the planet a bit).
A Big-box Retailer Example
Part 1 established that aftermarket services are becoming a major profit center for many companies, and big-box retailers (megastores) are also investing in their service groups. After years of successfully selling service contracts, retailers are now investing in field service teams equipped with mobile devices to build customer intimacy and create incremental profits.
During the recent Webcast by ClickSoftware and its marquee customer Best Buy, I learned that the Geek Squad service division is important to Best Buy for the following reasons:
In 2009, the service business was reportedly 6 percent of Best Buy’s revenue with 13 percent profit margins. Customers with a superior service experience reportedly spend 23 percent more on future purchases. Best Buy believes that with its services, a tangible or tactile product is not being purchased. Instead, the customer is purchasing technical know-how.
Geek Squad differentiates itself by delivering more than technical know-how by focusing on the customer’s end-to-end experience. Geek Squad has over 23,000 people enabling, protecting, and fixing over 63.2million service events/year in its contact centers, designated service centers, in stores, etc. ClickSoftware’s field service management (FSM) product is used by 5,200 agents/technicians visiting 1.9 million homes per year to perform deliveries, installations, and repairs to computers and appliances.
The mind-boggling task of scheduling that many field resources hints at the complexity of service provision. The final part of this blog series will go beyond the service economy opportunity to analyze why achieving consistently high customer service is not an easy feat, (and thus the Scylla and Charybdis reference in the series’ title).
In the meantime, please send us your comments, opinions, etc. We would certainly be interested in your experiences with this software category (if you are an existing user) or in your general interest to evaluate these solutions as prospective customers.