I speak with companies often that have been faced with the reality that they need to evolve, but for a plethora of reasons are stuck standing still. In all fairness, I also talk with companies quite regularly that impress me with their abilities to steer, shift, and adapt in ways that are leading-edge, innovative, and – most importantly – meeting the needs of their customers in ways others simply haven’t thought of or acted fast enough on. And then there’s a wide range of companies that fall somewhere in between. Wherever you lie, and whether or not you’re ready to admit that truth to yourself, the reality is this – the service customers demand has changed, drastically. It’s still changing. And it will continue to change. Being a one-trick pony will no longer cut it, and for those that seek a solid future in service the path to that future is in diversifying your offerings and finding new and different ways to serve your customer base (or even serve a new customer base).
Based on my conversations with those leading the charge in finding ways to evolve and diversify service revenue streams, let me present to you four potential paths to consider:
We talk about servitization most commonly when referring to manufacturers of products that know due to commoditization they need to begin to differentiate and protect revenue by providing service alongside their core product offerings. Tom Paquin covered an example recently in his blog about automakers offering car subscription services that not only included the traditional aspects of a lease but also bundled in guaranteed pricing, insurance, vehicle maintenance, and annual upgrades. This concept illustrates well what is at the heart of the goal of servitization – thinking of any and all ways to make the lives of your customers easier, more seamless, and essentially invisible around the product you have traditionally provided.
However, I think another example of servitization is for service-based businesses to focus on expansion of their offerings to include adjacent and complimentary services. Again, looking at your historical or current business model and value proposition and thinking about where you may be able to branch out. Oftentimes, this begins by simply forcing the process of thinking outside-in versus inside-out – meaning, companies inadvertently get stuck in an inside-out viewpoint and focus on their internal operations, struggles, or improvements without taking the time or effort to look at the outside perspective of their customers. When you begin to look outside-in, you start to notice pain points your customers have that either aren’t currently being solved or are currently being solved in ways or by providers where it would make their lives easier to be able to attain that service alongside what you’re already providing. I reconnected recently with a service leader doing this really well and will have a great example on this coming soon.
#2: Service as a Service
With the talent-strapped struggle so many companies are facing today, we’ve come to recognize the value in contingent workers or the gig economy as a way to meet the needs of the demand we’re faced with. But if you are an organization that is fortunate to have a sizeable, skilled workforce and you’re looking for ways to diversify your revenue streams, have you thought about providing service as a service? Perhaps some of those companies in dire need of talent would be happy to pay you to leverage yours.
A great example of this is DISH’s introduction of OnTech Smart Services. DISH began its In-Home Services focus by partnering with some major brands to assist in installing and servicing their equipment. OnTech, the direct-to-consumer extension of this exists so that the company can “provide customers an unrivalled in-home experience with a full suite of convenient, start-to-finish solutions including professional installation of products from Google Nest, Ring, Linksys, Wemo, Roku®, Yale, Polk Audio and Klipsch Audio among others.” So, the company smartly and adeptly recognized the fact that there were additional ways to meet the needs of customers it is already serving and also that it could benefit from more extensive use of a very valuable resource it has – it’s field technician workforce.
#3: Outcomes-Based Service
We can all agree that the days of break-fix service being an acceptable business model are behind us. Customers who’ve become accustomed to Amazon Prime same-day deliveries, Uber’s real-time insights, and DoorDash convenience will no longer tolerate you saying you’ll come within a four-to-eight-hour window to fix something they need now. Consistency, convenience, peace of mind, and a constant flow of information are in demand and you can either find ways to deliver those things or you can slowly disappear. Cubic Transportation is an example of a company that has successfully adopted an outcomes-based service model. They recognized the need to evolve, did the work to transform their company processes and culture in an effort to be able to do so, and adopted the technology necessary in to deliver on the outcomes their customers wanted. They’ve been able to deliver on guaranteed uptime and as such have grown and expanded their business. While in an example like Cubic outcomes may be more of an extension of your business – the necessary next generation – it does set the stage for revenue diversification as you become comfortable with and capable of delivering outcomes.
Tetra Pak, however, is an example of a company that has turned to outcomes-based service as a net-new way to augment its traditional packaging business by recognizing the expertise the company had accumulated in the art of maximizing efficiency and then mapping this to a common pain point among its customer base. This enabled the company to take its hard-earned knowledge and expertise and offer it up to customers in the form of delivering them the outcome of helping them maximize efficiency and productivity. Sasha Ilyukhin, Vice President, Services and Industry 4.0 Solutions at Tetra Pak further explains by saying, “We listened to our customers. They are under continuous pressure from changing consumer demands and increased market competition and as such need relentlessly increase productivity and reduce operational costs. We knew that Tetra Pak is uniquely positioned to help our customers make their business more efficient and profitable. We have more than 65 years of accumulated knowledge and know-how in the food and beverage industry. We also have vast experience and commendable achievements in the area of Total Productive Maintenance, where our own packaging material factories have received highest recognition from Japan Institute of Plant Maintenance. In addition, we have unparalleled presence in the field, where our service engineers are based near our customers. Combined with our growing appetite for digitalization technologies and risk-reward business models, all of the above enabled us to grow outcome-based agreements as the future foundation of our services business.”
#4: Digital Services and Business Insights
The final area I’ll cover which I think holds mass potential for today’s service organizations looking to move beyond their traditional wheelhouse is to think long and hard about what data and insights you hold and who stands to benefit from making use of that information. There’s a whole world of data translated to business insights and digital services just waiting to be tapped. One example of a company well down the path of delivering on this promise is KONE. In this podcast, Jon Barr, Head of IT Americas, discusses how the company is embracing the world of digital services.
When I was with Field Technologies, I did an article with a leading beverage equipment manufacturer who was also diversifying its offerings by thinking outside the box about how data from its IoT-equipped products could be used by those interested in trends around peak use times, consumption of various flavors and formats, and equipment downtime. If you just allow yourself to think without constriction of “how you’ve always done it” or simply beyond how the data you have benefits you and you alone, you may quickly begin to see how you could further leverage today’s most powerful resource (data).
That’s really the key to all of this, as simple as it sounds but as hard as it is to do – get out of your own head. Look beyond the obvious. Think outside the box. Put yourself in the shoes of those you serve and think about what problems they have you can solve or what opportunities exist for you to deliver more value to them. Service businesses used to thrive or die on their ability to master the day-to-day, but in today’s landscape if all you’re doing is mastering the day-to-day you are sealing your fate.