On the surface, smart, connected products threaten to make the need for on-site service obsolete. Embedded technologies will phone home and signal either a firmware upgrade or generate an automated service request for a customer-replaceable unit as part of an advanced exchange program. Although this is happening more and more and will undoubtedly continue in the future, hardware companies will always need a field service engineer to go on-site at a customer’s location. The question is how to best to use this tremendous organizational resource in a way that helps the company during the B4B transformation? In this final installment of our 10-part blog series about how IoT is impacting Hardware and Industrial Equipment companies, we’ll be talking about how you can leverage your field service workforce in new and exciting ways.
Customers are pursuing new consumption models that don’t involve a large up-front product purchase, which is forcing technology companies to create new ways to offer their technology. One approach is to provide “outcome-based” service offers, where the customer pays as they consume and the supplier is responsible for helping them achieve their desired outcomes. For hardware companies, this takes the form of "Product-as-a-Service," where customers only pay for what they consume and are able to deliver. However, these new models and offers will put tremendous pressure on today’s field service organizations to adapt, be relevant, and continue to deliver a key revenue stream for their company.
One way that companies are responding to this challenge is by using field service engineers to help drive customer adoption and consumption of the supplier’s product and service offerings. (Tweet this!) So, what do adoption and consumption offers look like?
- Adoption: Adoption services are designed to help customers maximize their usage of technical capabilities. The supplier begins to take more responsibility for owning, operating, and improving the customers’ ability to achieve an outcome.
- Consumption: The supplier helps customers actually get the ROI that was promised when they purchased the hardware, as well as help them realize specific cost savings or revenue increases.
Why Adoption and Consumption Are Important
The practical implication of these new consumption models is that suppliers will need to create a business model where the majority of revenue comes after the initial sale, in a “Land and Expand” approach. Simply stated, suppliers need to develop adoption and consumption offers that are focused on helping customers achieve a higher ROI, better outcomes, and to ensure that customers extend the usage of your technology.
Effective adoption practices help suppliers predict and achieve the renewal of their product/service offers as well as help customers achieve their targeted business outcome. (Tweet this!) While many companies are addressing the need for these practices by hiring additional account executives, most companies cannot afford the additional SG&A expense. Is there a better way?
The Expanded Role of Field Services
Field service is in a perfect position to fill this role, and IoT has actually enabled them by creating additional capacity and providing proper information to conduct adoption practices. TSIA tracks the implementation of adoption practices that are in play today while a field service engineer is on-site, such as:
- Assess Utilization: Assess the customer's utilization of products and capture that information into a Knowledge Management System.
- New Features: Provide the customer with information regarding newly released features from a recent product update that could benefit them.
- Solicit Enhancements: Solicit information from the customer about desired enhancements and capture that information into a Knowledge Management System.
- Success Science: A formal "Success Science" process where field service engineers review the best practices of top revenue generating customers in order to replicate those success practices with other customers.
From our TSIA field service benchmark data, we have seen an up to 7-point improvement in renewal rates when field service engineers took the initiative to drive adoption vs. engaging only in break/fix maintenance activities. (Tweet this!) In addition, these practices increase revenue through the sale of new offers.
A Success Story
A TSIA member recently used their existing field service workforce to drive significant improvements in their business. As is often the case, this success story starts with a bleak outlook: services revenue was shrinking 5% each year, and field service engineer utilization was down to 62% as a result of lower customer density and more reliable equipment. They were faced with having to make one of two decisions:
1. Continue to reduce the size of the field service workforce
2. Cross organizational boundaries and leverage the existing workforce to play a new role
They ended up choosing the road less traveled and redefined what a field service engineer does. Adoption and consumption offers were developed and the field service workforce was trained and incented to look for on-site opportunities to help the customer improve their process efficiency, equipment utilization, environmental conditions, and operator effectiveness vs. best-in-class performance.
The results were phenomenal:
- 11 percentage point improvement in services revenue growth
- 1.3 point improvement in gross margin
- 18% improvement in first visit repair rate
- 4% increase in incidents resolved remotely
- 14% increase in transactional customer satisfaction survey
- 87% renewal rate
Thriving During the Transformation
With customers pursuing new purchase models and smart, connected products enabling improved service efficiency, there are new opportunities for field services to play a prominent role in driving adoption and smart, connected products can provide the data to enable field service organizations to execute on-site with a customer. (Tweet this!)
As suppliers find new ways to save customers money and improve their business outcomes, field service organizations are perfectly positioned to help their company gain incremental revenue delivering these types of adoption and outcome offers, leading to increased renewal.
Be Sure to Catch Up on Other Posts in this Blog Series
We hope you’ve enjoyed reading this blog series on the Intro to IoT. You can catch any posts you might have missed by clicking here or looking at the list below. As always, feel free to reach out to us with questions or comments below or by contacting us directly via email at firstname.lastname@example.org and email@example.com. Thanks for reading!
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
- How IoT Process Optimization Can Improve Customer Outcomes
- 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
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 firstname.lastname@example.org, 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 email@example.com.