In our post “Driving Service Efficiency in the Age of IoT”, we highlighted the most common application for smart, connected products: service efficiency. However, this narrow focus limited the return on investment for many suppliers, leaving many to wonder what the IoT (Internet of Things) buzz was all about. The next step on the Remote Services continuum, process optimization, places more emphasis on the customer, which leads to better results for everyone.
What is Process Optimization?
TSIA defines process optimization as:
Objective: Improve product utilization and enable value-added services.
Providing remote monitoring, predictive maintenance, and automated support before equipment fails. Combining technology, people, and process to provide services regardless of location. Also includes the collection and analysis of data to identify new features and value added services that help customers achieve and maintain a level of operation.
So, where service efficiency focuses on making the on-site incident quick and effective, process optimization looks to eliminate the unplanned, on-site incident altogether. (Tweet this!) By collecting data to monitor key components, get performance feedback, and identify actual usage patterns, suppliers are able to dramatically increase product utilization by:
- Repairing a product before it actually fails.
- Providing remote support and self-healing technology to minimize or eliminate on-site calls.
- Creating a knowledge base that enables technical assisted self-service.
A Process Optimization Success Story
A TSIA member from the enterprise hardware industry incorporated automated service, self-help, and assisted support technology as part of a new product launch with some impressive results:
- Cost of support reduced by 60% when compared to the previous generation of products.
- Field dispatch rates reduced from over 40% on previous products to less than 10%.
- 92% of issues are addressed using the diagnostics in the product by Level 1 and Level 2 customer support professionals.
- Exceeded revenue objectives, and product family growth rates are forecast to grow 2.5 times faster than originally projected.
This member success story is a logical extension of service efficiency, since it is focused on the supplier’s product. Although the improvement in product utilization was well received by customers, as illustrated by the phenomenal growth in product placements, this member has yet to achieve the other objective of process optimization, which is to use the collected data to enable value-added services. So, what happens when companies expand their focus beyond the performance of their own product to that of customer performance?
Going Up? How Data Can Be Used to Improve the Customer’s Process
A great example of improving product utilization and enabling value-added services is Schindler elevator and their PORT (Personal Occupant Requirement Terminal) Technology. For over 100 years, elevator manufacturers have sold, installed, and serviced elevators. They have improved the product to the point that an elevator attendant is no longer required, causing the end user to take for granted that they will get to the right floor safe and sound, simply by pushing a button. For many manufacturers, this is where the story ends.
However, Schindler looked at the process from the customer’s perspective. Building owners and facility managers have these highly advanced elevators in their buildings without any overarching method to improve the end user experience or to operate the elevators more efficiently.
Schindler filled this void with their PORT technology, and the data collected from the operation of the elevators helped building owners and facility managers:
- Reduce end user wait times by up to 50% using data analytics to anticipate traffic patterns and cluster passengers.
- Reduce end user time to destination by 50% by calculating optimum route and assigning best elevator to handle the call.
- Lower building energy costs by 30-40% with more organized trips that consume less energy and generate less heat.
- Increase leasable space for building owners by providing the same level of service with fewer elevators.
- Enable building owners to charge higher lease rates and offer premium service offers by utilizing radio frequency identification (RFID) technology to identify travelers and provide personalized service, i.e. disabilities access, express elevator, and concierge service.
Schindler is now on their 4th generation of destination dispatch technology and they continue to find new value-added services that go beyond the classic sell, install, and service of a product.
It’s All About the Outcome
Every sales manual in the world sings the praises of consultative selling and its focus on improving customer outcomes instead of reciting a list of product features. Beyond being a good way to sell more products, placing the improvement of customer outcomes at the center of an integrated strategy with the development of smart, connected products can reinvent technology companies. (Tweet this!) For example:
- In 2014, GE Jet Engines sold $3B in products to Etihad Airways, with an $8B managed service agreement to cover all engines in the order to enable a technologically advanced and fuel efficient fleet.
- In a recent case study presented at TSW 2015, remote monitoring and predictive maintenance helped an industrial equipment member not only reduce the total cost to serve, but led to the development of new adoption offers that increased revenue growth by 11 percentage points.
But Wait, There is (Even) More!
Where is this all heading? At the end of 2013, TSIA published a book titled B4B: How Technology and Big Data Are Reinventing the Customer-Supplier Relationship. TSIA has seen a growing list of product companies that historically only offered traditional product-attach services (Level 2 offers) that are now delivering services that help customers accelerate their adoption of technology (Level 3 offers), or commit to helping customers achieve specific business outcomes (Level 4 offers).
As customers continue to insist on suppliers moving towards a Level 3 and Level 4 supplier model, finding new ways to save customers money and improve their business outcomes will determine the long-term success of technology companies.
A bit of a warning to product companies that are focused on service efficiency and process optimization: someone will help customers achieve specific business outcomes, either current competitors or new entrants. These new entrants don’t play by the same rules, are unencumbered by legacy product definitions and entrenched ways of competing, have no historical profit pools to protect, and are open to seize full potential to capture value. These new entrants also see software that connects products as the core advantage, not the product itself.
Stay Tuned for Further Reading
The topic of our next post in this industrial equipment blog series will be how product companies can leverage IoT to integrate information, people, and processes to improve a customer’s business outcomes. Can’t wait? You can always go back and read previous posts in this series, or download the slides from our presentation, “How the ‘Internet of Things’ is Transforming the Industrial Equipment Industry” from the TSW site.
Read more posts in the “Intro to IoT” series:
- Smart Products Need Smart Services: How IoT Affects Industrial Equipment
- Driving Service Efficiency in the Age of IoT
- Focusing on Customer Outcomes for Their Benefit and Yours
- Surviving the IoT Revolution: A Tale of Two Companies
- Collecting the Low-Hanging Fruit in IoT
- Breaking News of How Analytics are Enabling Services Growth
- Your Strategy for Escaping the Complexity Avalanche
- Organizational Structure and Capabilities Along the Remote Services Continuum
- Leveraging Your Field Service Engineers to Drive Revenue
About the Authors
Vele Galovski is vice president of field services research and advisory for TSIA. During his career as a services executive, he has provided thought leadership and driven breakthrough performance in high-profile assignments in a diverse set of companies, including Xerox, Eastman Kodak, Bank of America, NVR, and several cloud services startups.
Throughout his nearly 30 years in industry, he has consistently driven double-digit top-line growth with a proven retain, gain, and grow strategy; and bottom-line profitability with a focused cost-down process. He may be reached at email@example.com, or connect with Vele on Twitter @.
Prof. Harald Kopp is TSIA's director of industrial services research, as well as a teacher in a MBA program for sales and service engineering at Furtwangen University, Germany. His focus is chiefly on services in industrial automation, equipment, instruments and technology companies. He has 20 years of experience in the areas of research, consulting and management in industrial services, supply chain management, and IT-Management in industrial equipment, automotive and enterprise IT industries. He may be reached at firstname.lastname@example.org.