Service gets its game face on for the IoT era

March 17, 2016

Posted by: George Malim

Dave Hart, ServiceMax

When you hear the word chief in anyone’s job title, several things come to mind: a senior management role overseeing an important business function associated with strategy and power, profitability and revenue growth. Someone who is leading a function that is critical to the success of a business, writes Dave Hart, the vice president of Global Customer Transformation for field service management specialist, ServiceMax.

These are not usually adjectives associated with a company’s service department. Historically, the service department has been the ugly stepsister to sales – the beige of all business units as it were. But there’s a quiet transformation happening in organisations all over the world – fuelled by IoT and the shift to outcome-based business models. So much so, that its impact is warranting a new leadership role: the chief service officer. Service is – finally – getting its game face on.

So what’s the big deal and why is it happening now? Two key reasons actually. First, smart companies are realising that their field service organisations can drive significant new revenue. Whilst, we are not in a recession any more, companies are still cautious and want to make everything they purchase last longer. That means fewer new product sales. Smart companies have realised they can grow revenue by putting together innovative services programmes that maintain installed products. It’s a recession-proof source of revenue growth.

Customers that are less willing to upgrade to the newest versions of a product, are open to a value-added service programme that helps them run their business more efficiently and cost effectively. In fact, average service margins are nearly 11% higher than new equipment margins. With new equipment sales struggling, savvy field service leaders are finding their departments can be the golden goose for their organisation, making them more vital to business success than ever before. This is one of the reasons – the servitisation of companies as a new revenue model – that contributes to creating the role of the chief service officer.

The second major driver is the emergence of new technology – specifically IoT, the cloud, mobile devices such as smart phones and tablets – as a way to empower field service technicians. IoT is moving service from reactive to proactive to predictive, enabling companies to remotely monitor the performance of their equipment and anticipate service requirements, making better use of service technician’s time, increasing customer service and reducing costs.

There are more than twenty million field technicians across the globe. Cloud-based field service management solutions are helping companies manage contracts, schedule jobs and parts, and bring together the right data at the right moment to delight customers and drive business results at the crucial point of service. A chief service officer is able to garner valuable intelligence from these transactions and feed them back into other parts of the business – such as R&D, sales or operations.

By equipping field service technicians with real time tools in the field they can do work-orders, request parts, schedule and be scheduled, look up manuals, take payments, renew maintenance agreements, use social channels to communicate problems swiftly and effectively and upsell and cross sell products and solutions where appropriate. All of this is done on a smart phone or a tablet. All the data is real-time. And customer relationship management systems pick up the information and ensure that the customer receives future communications, advice, updates and education. And of course all of that data is delivering valuable new insights about the businesses and customers.

Service businesses represent around seventy per cent of the world’s economy, yet to date, only about a third of the world’s large service businesses currently use field service management solutions. It’s a market poised for growth, and it’s applicable to all vertical service industries and businesses of any size, particularly given the handsome returns of servitisation. According to McKinsey, almost half of manufacturing companies are expecting service to account for a third of their total revenue by 2016, it’s an area benefitting from both innovation and investment.

When executed well, the commercial impact of getting the service department in order is significant. When you consider the returns – average productivity increases via mobile of twenty six per cent, twenty two per cent increase in service revenue, and a fourteen per cent cost reduction – then it’s easy to understand why the Chief Service Officer has arrived on the scene.

As service departments shake off their historical image as expensive cost overheads, and organisations embrace both servitisation strategies and the tools and technology to support it, the role of the chief service officer will only become more prevalent.