We published a podcast last week with Jerome Soltani, Sr. VP of U.S. Services and Alex Gershman, Director of Strategy, Services and Solutions both of Schneider Electric during which we discussed the company’s journey to outcomes-based service. Like many other organizations making their way to delivering outcomes, there are challenges to overcome as progress takes place. However, during our conversation, it was evident how some of the challenges particular to 2020 are really paving the way for accelerated success. Jerome and Alex are quite excited about what will happen next as it relates to service, and I think their reasons are points many others share excitement around too.
#1: Customer Conversations are Changing
Jerome and Alex discussed the fact that Schneider Electric has been on the journey to delivering outcomes for a few years and has been making progress all along. But COVID has accelerated progress in some key areas, one of which is in what customers are asking for. “There are a couple of big mega trends that we’re seeing out in the marketplace driving the change in conversation,” says Alex. “Many of them have accelerated through the last year, through COVID. First is changes in investment shifts that our customers are making from big capital expenditures toward more operating, annual kinds of expenditures. And again, through COVID we hear the need to extend the life of assets.”
This point has been echoed by other manufacturing companies I’ve spoken with in the past few months that have seen significant increase in service and maintenance revenues. “That CapEx to OpEx shift has certainly changed the nature of conversations that we’re having,” says Alex. “We’re also seeing massive retirements on the part of the skilled labor inside of our customer organizations, meaning they’re turning more and more to companies like ours to help them with the services needs that they had that they may have relied on internally previously. Customers are feeling pressure to focus their efforts and attentions on their core business. Our candy makers want to make candy and they don’t want to necessarily focus on their infrastructure. So, again, they’re turning increasingly more and more to us to do that. Finally, with the rise of data connected technology, customers are looking to us to help them with making sense of the data that they have, being able to get toward the outcomes that they’re looking for with their customers.”
It almost feels to leaders like Jerome and Alex, who have been working hard to make progress on this journey for years, that customers have finally caught up with the vision of how outcomes-based service can deliver. This is exciting, because the conversation becomes mutually driven. “I think before COVID we had the feeling of being a little bit in advance. Not being arrogant, but you see when you’re a little bit too ahead of the market, you feel a little bit alone to create demand and create this awareness,” says Jerome. “But, I mean, COVID and the pandemic and the situation, working from home, nobody in the campus, in the university and so on, we saw this awareness and this acknowledgement coming from our user. It was a big relief for us, and it was great to see that finally the combination of our software portfolio connected product and services would make sense and would bring a lot of value to our user.”
#2: The Service Language is Catching On
Not only are customers now driving outcomes-based service conversations, the language has caught on internally as well. We’ve written a number of articles about the challenges in evolving from a product provider to service-based company. The cultural shift that must happen is immense and employing a service vernacular is a critical step. This is an area Jerome and Alex have focused a lot on and, again, have seen major strides in this year due in part to the real-world illustration of just how much service matters to the business. “The services journey started couple of years ago, but I think it was still at the operation level, at the country level, kind of second thought and not really a top priority. Now it’s a good thing that our CEO and our board members were strong believers and have been really promoting the services business for years and have made very structural and transformational investment into this different teams at country level,” says Jerome. “But what we saw this year is that COVID-19 has been a catalyst to prove that services is highly resilient, and the model that allows us to continue to deliver very strong profitability to our overall P&L. I mean, when I compare our traditional transactional equipment type of business versus services today, depending on the country, depending on the portfolio, you have a discrepancy between five to 10 points of growth between a services business and a traditional core CapEx driven business. It shows that this business is one of the most strong and reliable businesses, and resilient businesses in the economy.”
Witnessing that in real-time helped expand the understanding, acceptance, and language of service within the company. “Like everything else, it’s a journey and by no means what I declare victory. But I think, again, the position that we’re in now is markedly better and different than it was 12 months ago,” says Alex. “It starts for sure at the top down. There was a conversation maybe six months ago where it was basically said there are six priorities for the company: services and software, services and software, services and software. That helps, right? When you get that message from the CEO, people start to listen. Storytelling about customer successes are also impactful and resonate as you’re trying to make change.”
#3: We’re at an Inflection Point
While fraught with hard moments and complex challenges, for services COVID and the experiences of 2020 have left us at an inflection point. Companies have an opportunity here to build upon the increased awareness and acceptance, both internally and externally, to see significant progress in service success. “I think we’re going to look back on 2020 for a lot of reasons,” says Alex. “But if we think about what’s happened in the years before around service, there have been incremental changes that have happened – connectivity, customer demand, our own workforces. But given the intersection of external forces, acceleration of technology, from the customer demand perspective, from the sales perspective, from the delivery perspective, we’re going to look back at 2020 as a massive inflection point across the industry in how services are consumed and delivered as a whole and the value that a services organization is going to bring to customers.”
2020 has brought many changes that can be built upon in 2021 and I agree with Jerome that the opportunity is exciting. “I would say that for sure the outcomes-based services potential is exciting in the coming year,” Jerome says. “And we look at what is your current portfolio, based on what is your market or what is your customer landscape. What is relevant for your customers in terms of services based on this portfolio?” The possibilities are almost endless for those ready to make the most of this inflection point.