In late October, I was extremely pleased to visit and serve as the chairman for Aftermarket 2015 in Noordwijk, the Netherlands. This is an annual conference for service leaders put together by the Copperberg group and my comrade Thomas Igou. The audience is primarily made up of senior-level service leaders of European organizations or the European units of global organizations.
The purpose of my visit was two fold:
- To learn about service business trends from a European perspective
- To raise awareness of our community and research to the Aftermarket attendees
Before I get to my findings, a few comments on the overall conference:
- The conference is extremely well done. The content is spot on and the attendees are extremely senior level. This is very important to me as its something that we work and focus on for our own Smarter Services Symposium. Anyone looking for a service-focused conference should consider the Aftermarket conference in 2016. (Connect with Thomas Igou to learn more)
- TSC partner and 2015 Symposium Chairman, Ron Kaufman, led a wonderful Service Mastery workshop that was extremely well received. I’d say that Ron tried to mute his American-ism for the European crowd, but didn't have to.
- I am terrible at running, but others aren’t. (See a post from Run Club leader Giacomo Squintani from PTC)
To set some context for my bullet points, the following are the top priorities as shared by European respondents to our 2015 preview survey (conducted at the beginning of the year).
- Customer-centric initiatives – VoC, Segmentation (45%)
- Enhancing service profitability (45%)
- Developing new service offerings (45%)
- Performance management (35%)
- People and Talent (30%)
It's a jam at the top, but the priorities are very similar to those returned by respondents across the globe. These also serve as a consistent base of discussions that were had at the Aftermarket Conference.
1- Lets Move Beyond Executive Buy In.
I moderated a panel on Executive Buy in featuring Robbert Kreber, Head of Aftersales at LiuGong Machinery, and Dr. Philipp Dreyer, Sr. Manager Aftersales Bus Strategy, EvoBus (Daimler). While both indicated that executive buy in is a must for service success, both agreed that we need to start talking about continued buy-in, investment, and innovation in service. A show of hands of the audience indicated that nearly one half of the organizations had secured executive buy in on service and were ready to evolve their service businesses.
2- We Need Cross-Functional Buy In
To build on the first bullet, most organizations agreed that the continued evolution and improvement of service revolved around cross-functional buy in. In particular, support and consideration was needed from sales and R&D. Another show of hands revealed that R&D was a major area where service leaders needed better collaboration and support. Typically, I expect to see sales sit at the top of the list. Better collaboration with R&D comes from:
- Getting service a seat at the R&D table to ensure that service needs are considered in new product development.
- Making R&D aware of the overall lifecycle cost of supporting equipment. This is something that Elekta does extremely well.
Organizations are also developing cross-functional support teams that focus on and consider the needs of various business functions. For instance, Getinge has developed a Getinge online team that looks at the technology and information needs of various business functions, specifically as it ties to remote data capture and the Internet of Things.
3- Satisfied Customers Serve as a Lifeline
In the quest for buy in, it is vital to understand, document, and reveal the impact of satisfied and loyal customers. BMW presented on pricing strategy, as it relates to the impact of service pricing on dealer profitability. Several important statistics from the BMW presentation:
- 70% of the profitability at BMW dealers comes from aftermarket sales (parts, service etc.)
- BMW has a near 80% repurchase probability for customers who are very or completely satisfied vs. a 46% repurchase probability for customers who are only ‘fairly’ satisfied.
Do most organizations have this type of data? My thought is that it does exist within the bounds of the service organization, but very few individuals outside of service are aware of this. This is an area of research for us at The Service Council as part of our From Customer Satisfaction to Success research series. Please participate if interested in telling us about the importance of satisfied customers to your business (Survey Link).
4- The Definition of Value
While the first three takeaways focus on the value placed on service internally, the next two focus on understanding how customers value service. Coen Jeukens, Service Contract Director for Bosch, closed the event with a session that defined value with the following equation:
Value = Reality – Expectations.
Positive value is created when reality exceeds expectations and vice versa. The thing about value is:
- Its definition changes with time (The Ron Kaufman escalator of expectations)
- Different buyers value different things (next bullet point)
5- The Changing Buyers of Service
This is very true of healthcare and medical devices but is also true of other equipment manufacturing industries. With consolidation and integration, the decision to purchase and value service is now ascending to the CSuite, typically the CFO or CIO. These buyers measure service value with different KPIs as compared to the traditional buyers of service. More so, these buyers aren’t impacted by the day-to-day activities of a service organization as much as a facilities managers or plant managers. Therefore it is imperative for service organizations to display excellence in supporting uptime, reliability, and speed, but it is also extremely important that these service organizations consistently communicate value and information to this new breed of buyers.
6- The Need for a Comprehensive Talent Strategy
Patrick Soler from Linde Material Handling led a session on 'Attracting Talent to Service' wherein he highlighted what Linde was doing to recruit, train, and retain field service talent. As Linde looks to the future it sees a growing service business, but a shrinking pool of talent to support this business. As a result, a comprehensive talent strategy is vital:
Of particular note:
- Linde’s focus on recruiting women in service
- The availability of multiple career paths for field engineers
- Performance-based and individualized training plans for field employees throughout their careers
- TSC will be partnering with Copperberg on a research initiative focused on the European market. This will be part of our initiative to publish Europe-specific content and research
- To that end, several of our research projects (1) Mobile field service applications - Link, and 2) The Importance of Customer Satisfaction - Link) are open for participation for service leaders across all geographies. If we generate a high level of response per a particular geography, we will publish region-specific results.
- We expect to be more visible at European events to share our research in 2016. In addition to the Aftermarket event in 2016, we hope to attend 2-3 other customer-held events in 2016.