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July 20, 2022 | 25 Mins Read

Scaling Innovation to Drive Business Impact

July 20, 2022 | 25 Mins Read

Scaling Innovation to Drive Business Impact

Author, Advisor and Top 10 Global Thought Leader Frank Mattes shares perspective on some of the most common reasons that innovation fails and sheds light on the why, when, and how of scaling innovation to drive business impact.

Sarah Nicastro: Welcome to the Future of Field Service podcast. I’m your host, Sarah Nicastro. Today, we’re going to be talking about how to scale innovation to drive business impact in service. I’m excited to welcome to the podcast author, advisor and top 10 global thought leader, as well as founder and CEO of Lean Scaleup, Frank Mattes.

Frank was a guest speaker at the 'Future of Field Service Live Tour' stop in Frankfurt. We had a wonderful conversation. It was one that the audience really enjoyed, because there’s so much importance to the points you made and the work you’re doing. It’s so really true when you think about some of the challenges that our audience is having.

Frank, what is your story?

Sarah Nicastro: Before we dig in, I gave your top level bio, but tell everyone a little bit more about yourself, and what you do.

Frank Mattes: Lean Scaleup, the term is the program. I mean, you want to scale up those big ambitions that companies have, thus creating and shaping their own future. Future-proofing their company, if you will. But, it turns out that this is not so easy to do. In my last five years, I partnered with leading companies and leading business schools, to come up with a solution to this 'Scaling-Up problem.'

It turns out, it’s quite easy to drum out ideas and do some small-scale experiments. But, when it comes to really make it big, this is where seven out of eight of big ambitions fail. The Lean Scaleup provides a solution to that. Co-created with leading companies, the London Business School, and UC Berkeley, to help companies solve that problem.

What is innovation?

Sarah Nicastro: We are going to dig into some of those specifics. Before we can talk about scaling, let’s talk a little bit first about how you define innovation. Many companies get a vision, they are excited to innovate, and then reality sets in. Or, they know innovation is an important buzz word and they want to innovate, but really they’re defaulting to more of just an incremental improvement. Let’s talk about the fact that we need to define innovation, and what it means. That there is some confusion around it.

Frank Mattes: Excellent point, Sarah. There’s so much noise about innovation, you called it a buzzword. So much activities going on, so many blog posts, and conferences, you name it, all around innovation. But, there isn’t a proper, commonly accepted definition on what innovation is. Isn’t that funny? I do have my own. Not saying that this is the only definition that you can use, but it combines a couple of very critical elements. It rings a bell with my clients. Just to give the audience an idea: my clients are the biggest German companies and on a selective basis, European or even global champions - companies like Philips, bp, Telefonica, et cetera.

The definition that rings a bell with these kind of companies, is to say innovation is capturing the value from meaningful insights via new offerings that change the order of things. Now there are a couple of things in here. Number one, it’s about capturing the value. It’s about value, and there is a customer who should appreciate the value. It’s not about 'new stuff' - it’s about value, and value is defined by the customer.

It’s also about simply just putting out some new stuff that has value, but it’s about capturing the value. Meaning, collecting the dollars and the cents of that value that resides within that new stuff that you did. We find this potential value via meaningful insights. There’s this old quote from Wayne Gretzky. When he was asked why he is so successful, he said, “Because I’m skating to where the puck is going to be, not where it is right now.”

If we look at it, Sarah, innovation is a game that you play with three to five years in advance. You need to think about who will be our customers in three to five years? What would be valuable to them then? What do I need to bring to the table to make myself attractive to these future customers?

The last point, new offerings that change the order of things, means new business models, new goto-market strategies, new strategies on working with the ecosystem to create the value, et cetera. we are talking about the big steps here. Changing the order of things, thinking outside of the box, if you will. If it’s in the box, if it doesn’t change the order of things, then we have incremental innovation. Hopefully that helps for the audience as well. Capturing the value from meaningful insights via new offerings that change the order of things.

Changing the order of things?

Sarah Nicastro: I think it is important to clarify that there isn’t anything wrong with incremental innovation necessarily. Right? But, the point is companies really need to define this for themselves and be clear on what it is they’re aiming for. What that means then in terms of what they need to change.

I wrote a blog a couple of weeks ago. Since late last year, I’ve been an avid Peloton user. We got the bike around Christmas. I have the tread, and it’s been great. It’s made my daily fitness routine far more consistent, and it’s been wonderful. A couple weeks ago, I was doing my morning workout, and one of the instructors said, “Everyone wants transformation. But no one wants to change.” I wrote a blog about that, because it’s really true here too. People see the examples of the companies that have done the hard work. Once they’ve achieved success, and they want that, but they’re not necessarily realistic with themselves about all of the hard work it takes to get that.

It was interesting to me, some of the parallels that are there. Now, with the vast conversations you’ve had with a variety of different businesses, different educational researchers, et cetera. What are the biggest drivers for innovation today?

Frank Mattes: Let me just reiterate before I come to the point, what you just said. I’m fully with you, and actually, if you look at the broad scale, companies are investing 70% in keeping their existing products and services relevant. Modernizing them, integrating speech interfaces and touch screens. Adding in one more functionality.

That’s perfectly fine, right? But, the point is that it still locks the company inside the box. If the box changes, then it becomes hard. This is why we need to think wisely about where and how to spend the 10% innovation budget. That’s the average for innovation that is aiming at changing the order of things.

Coming back to your question, what are the biggest drivers of today? I mean, let’s use an example that I guess we are all familiar with, cars and mobility, traveling from A to B, et cetera. What you notice is, number one, existing industry boundaries blur.

In the past you had your car makers, you had your insurance companies, you had the companies from the entertainment industry. These days you find big rumors saying that who once used to make iPods becomes a major player in the car industry. Now obviously there are many more industry boundaries blurring. There’s new competition out there. Companies that take an angle from area of expertise that your company does not have expertise in. Then there’s number two, future value pools.

There are enough surveys out there that say Gen Z or maybe even Gen Y, they’re not so much interested in owning cars any more. Probably like my generation or to some extent I think you’re quite young, so your generation is. They want to have the mobility, the service that they can book that takes them from A to B. This is a future value pool to get future revenue streams as in the car mobility industry. We’ll just stick to that one example. You need to be present there.

Number three is, existing business models lose their relevance. Let’s take an example: bp, one of my clients. They are currently still in the oil and gas business. They look for hydrocarbons, and take it out of the ground, refine it. Ship it to the gas stations where you’ll put it in your car. That’s the business model.

bp said that for various reasons, in ten years they will not base their business on fossil fuels any more. They said, we will sell electrons. We will go electric. We help our clients which would be big companies, regions, or even cities to decarbonize themselves and we want to be a major player in the mobility space. Because, in 10 years, the old business model has lost its value. Think about Nokia beaten by Apple's iPhone, et cetera. These kind of things.

Number four is the trend towards servitization. People don’t want to buy products. They want to have a solution to their problems, wants and needs - they want help in completing their job-to-be-done. If we stick to that, these services like Uber or Lyft, that you can simply call or rent a mobility vessel, as some of our clients call it. They do not call it cars anymore. They use the term mobility vessels to really stretch the imagination to the foundational function.

Last but not least, I see sustainability getting more and more importance. Innovation is not only about financial success anymore. It’s also about the ecological impact that it generates. There are also studies out there that show that investors value a companies that put out their part in decarbonizing the world.

Behind that, Sarah, you find in many instances, 80 or 90 percent or so, Digital. The potential’s of Artificial Intelligence, Big Data, remote monitoring of assets, predictive maintenance, et cetera. But it’s not exclusively tied to digital. Rather, I, in my view, in my discussions with my clients, I look at the changing order of things. Then work your way backwards. What does it mean to technology and the digital opportunities out there?

Sarah Nicastro: I think the changing order of things is a very good point. It’s where a lot of people get stuck. But, I think it’s also an important point to not start there. At least in my opinion. Because the same way you said they call them vessels instead of cars, because they don’t want to limit themselves to thinking in a singular or a mental image.

I think one of the things, at least the companies I talk with, struggle with is, they think about that changing order, and it makes them think small, because they start thinking about what it will take to get to that real disruptive innovation. That changing order seems so big that they back away from it. I think worry about that, not last, but I mean, don’t think about that initially, because then it will limit you from thinking about what the value is that you could potentially bring to market.

It takes courage

Frank Mattes: That’s an excellent point, Sarah, because it takes courage - apart from the right thinking tool and management systems, the right culture et cetera, and all the points that we might be touching later on. It takes courage to leave a little sheet of ice where the company lived comfortably over the last 30, 40, 50, maybe even 100 years, and venture out into the wild. Into the unknown, because some leaders recognize that the little sheet of ice is based is getting smaller and smaller by the year.

They are on a burning platform that’s also a terminology that’s used pretty frequently. If you don’t take your future into your own hands and future-proof the company, the forces of the market will determine your future. In many cases this will not be the better option.

Sarah Nicastro: Right. Also, just a side note, I never, never take notes during a podcast, but you probably saw me doing that, because I had some thoughts that I just could not … I was afraid I would lose them if I didn’t write them down. It’s a good sign. When we were at the event in Frankfurt, you said people aren’t short on ideas. They’re short on outcomes. Let’s talk about some of the roadblocks that get in the way of the ideas ultimately delivering the outcomes.

Frank Mattes: Your audience and my clients are companies, from SMEs up to very large enterprises. They have built their organization as a machine executing the same processes over and over again. Over the years, they have fine-tuned what they need to do, doing that flawlessly and most efficiently. There’s a lot of expertise in there, creating, delivering value at scale and earning the margins.

The problem is, when these companies set up their innovation ambitions, they found an innovation center or a digital lab, or an incubator, accelerator or a corporate venture builder - there are several concepts and terminologies out there. But, for the sake of simplicity, let’s say there's a little garden where smart people can think about the future.

You see that there are two systems. On the one side you have your day-to-day operations. Where customers log in their orders, which are then processed. The supply chain does its work, and the stuff is being shipped and serviced out in the field, et cetera. That’s a day-to-day business. And on the other side, you get those crazy ideas. There’s no problem in that.

The problem arises when you try to make those bold ideas that should change the order of things big. Why is it so? Because the management system that you have, that you need for that day-to-day business is about efficiency, productivity, short term views and no risk. Risk is not a good thing if you want to have those processes. Now the people who have been playing out in that innovation playground, come out and say, “Let’s make this big. Let’s build a factory. Let’s build processes. Let’s recruit new people to sell that new stuff.” This really conflicts with the management system that you have for the day-to-day business.

This is basically the point where it all stops if you do not have the right precautions, systems, probitions in place. It stops at the point where you demonstrate, still in that innovation “playground,” a Minimum Viable Product or a Proof Of Concept. When you want to go beyond that, when you want to achieve scale, you need to have a different thinking. This different thinking is heavily geared in basically all of the companies towards the running day-to-day businesses with a monthly, quarterly, annual horizon or so.

What is the fundamental issue?

Sarah Nicastro: Let’s talk a little bit more about this then. I understand the conflict. What needs to change? How do we … And we talked about this at the event, and we talked about, and I don’t want to make you give the same example. But, we talked about the red and the blue. I remember, and using that to illustrate.

No organization can just rush to solve that problem. There’s no way to just, “Okay, we get it. Hey, Frank. We understand what you said, and yeah. We got it. We’ll go fix it.” It’s far more layered than that. When you think about this incubator, garden, playground, it’s almost like then the machine’s over here, and it’s like running into a brick wall. It doesn’t fit. To scale, we have to figure something different out. Let’s talk about what is needed to bridge that gap to solve that problem.

Frank Mattes: Thanks for that reflection on what we discussed in Frankfurt, because I think also that my experience, Sarah, that this language helps a lot in understanding, framing, and then ultimately, obviously addressing the problem. The fundamental problem between the pressure of the NOW, while at the same time, the ambition - and in many cases the necessity - to create the NEW.

The language that I introduced that rings a lot of bell, is about the red shirts and the blue shirts. There’s a famous book out there. It’s called Blue Ocean Strategies that was written some 10, 15, 20 years ago. The two authors said, “Well, if you’re battling with the usual suspects, your known competitors for the same customers with the comparable value propositions using the same channels. Maybe even the same suppliers. A lot of similarity in here. Basically, that’s a shark’s tank.” There’s a lot of blood in the water in here, because it is a shark’s tank. These companies work in what the authors called red oceans.

On the other side, wouldn’t it be great if you could find a space out there where there’s little to none competition, where you have a superior, completely unique value proposition? Where you do not have to compete. Where the value proposition is so strong that the customers approach you, basically # lowering the Costs Of Customer Acquisition. This is what the authors called the blue ocean.

In order to discuss the issue that we just touched, Sarah, it’s helpful to say the day-to-day operations, these are the people working in the red oceans. I call them the red shirts. The guys in the “innovation playground,” try to find the new value pools - these are the blue shirts.

Now, the big point in understanding and trying to work out a solution product of the Scaling-Up problem is to say that this is not about good and bad. You need both. Actually, the red shirts, they sell the products, they provide after sales service, etc. to win and to secure the revenues that would fund that search and implementation for creating the NEW. If there are not no blue shirts out there, if it’s just red shirts, chances are that with a perspective of five, 10, 15 years or so, with all the big drivers of innovation that we discussed earlier, the red shirts will find themselves out of the business, because the customers have moved on.

We need both. That’s the conclusion, right? You need to own the business NOW and in the future in the NEW. You need to future-proof the company, if you will. This piece of awareness, Sarah, I found in many companies, this is what gets the juices flowing, the spirit flowing. My clients say, "Now I understand. It’s not about good and bad. It’s not about the blue shirts doing innovation theater. And it's not about the blue shirts saying, “the red shirts, they do not get innovation.”

They are living in different systems that were designed for different purposes. That run differently that need different people even, different culture in here. But yet you need both to future prove the company. Then we can come to that million dollar question in the truest sense of words. Okay, now that we understand there are blue shirts and red shirts, and we need both of them - How can we make them work together?

Does the whole company need to change?

Sarah Nicastro: I have two questions based on what you just said. One is, and maybe this will lead into how they work together. One is I feel like I remember talking at the event about percentages: how many red versus blue and what that should look like. That was one question. The second one is as a company, let’s say a company gains this understanding, appreciates the need to set this up and not think of them as competitive but collaborative. As the innovation needs to scale, so basically as the blue idea needs to come into the red machine, is the goal for the blue team to pass off the concept to the red to operationalize? Or is the goal for the blue team and the red team, eventually, at some point to become one?

Frank Mattes: These are good questions and obviously they are interrelated. The fundamental thing is and that’s also the trick, and then the philosopher's stone if you will of future-proofing the company. The trick is to say, “Well, we need to do this in the way that we monetize, that we leverage all of the good things that we build up in our last 30, 40, 100 years of our corporate history. If you look at it, there’s so much there of corporate assets and corporate capabilities that could be the foundation of that future. The NEW with new value pools and new revenue streams.

Let me give you some examples for this corporate assets and capabilities. Obviously, the company has customers, right? It’s got a reputation in the market. People trust the brand if you will. It’s got access to delivery and supply chain channels. It knows how to manufacture products and services. It’s working with the regulators, and it’s got tons of experts in the various functions. It’s got a lot of patents, IP, etc. It’s got transactional data that you can use to train artificial intelligence models. Et cetera, et cetera, et cetera.

In my book, I have two pages of potential sources of those unfair advantages, as I call them. That’s the kind of thinking you need to put out there. Also, Sarah, that’s where I see many companies struggle. They set up that innovation “playground”. They tell those typically smart, young people with the espresso machines and the beanie bags, et cetera, “come up with something really great. Really new.” But, typically that is not connected to the day-to-day operations where the company operates in today. It’s almost like, in that situation, Sarah, as if the company would try to create a startup out in the wild. It’s a greenfield - it’s not a brownfield. But actually we’re talking about a brownfield situation.

But then in that greenfield situation, the company will never win if it’s a smart idea, against venture capitalists. If the two of us get together, we’ve got this great idea about the super duper podcast, right? We would go outside and ask some venture capitalists if they would fund us, and then we take it from there. The company can never win that.

Now coming back to the point that you raised. Quite often you’ll hear the battle cry, the company needs to become more innovative. They’re putting out the posters, train those catalysts or coaches or whatever they’re calling. They run their annual great big idea programs, et cetera.

You know what I mean?

Well, I do have a different point of view, and that comes exactly from that thought that you … It’s really about leveraging what has been created in the past. Leveraging those corporate assets and capabilities for an unfair advantage. Three of my clients said, “Well, Frank, we don’t need 100% of our staff to be really innovative. It’s only 4%, 6%, and 12%.” That’s what those three companies said. 4 percent was an automotive company, 6 percent was a bank and 12 percent was a TelCo. You only need a fraction of people who understand what those blue shirts are creating, and how this could be translated into the machine of the day-to-day business.

Sarah Nicastro: You’re saying four, whatever the percentages was, that’s how many red shirts need to understand the mission of the blue shirts? Right? That’s not how many blue shirts you have, but it’s how many go betweens. People that could wear both shirts essentially.

Frank Mattes: Yes. Yes. Blue shirts, you have a couple of dozens maybe, or a couple of hundreds if you talk about real large companies. But those 4 percent, thanks for clarifying that, Sarah, is really the number of red shirts that need to be able to understand what the blue shirts are doing, and translate it into the process the logic, the machine of the red shirts.

Take an example. The car maker for instance. You’ve got the blue shirts thinking about mobility services and stuff that play out in those mobility vessels - they call them cars today. But at the end of the day, this car and the device that sits in the car that does the magic in here, needs to be constructed. This is heavy engineering, and you want to manufacture it with a six-sigma quality, right? This kind of translation work, this is 4 percent. Four percent only.

What is leadership's role?

Sarah Nicastro: How powerful are those four people, first of all? I mean, that’s just incredibly critical to the success of all of this. It also though, leads me to my next question, which is, none of this works without leadership that gets it and understands.

Often, I see individual, functional leaders, a VP of Service or what have you that really see this, and they really understand it. But, they are reporting to a top leader who is just clueless when it comes to what this all means. What it really takes, et cetera. I mean, what would you say about the role of top leadership in this? What to keep in mind, related to that?

Frank Mattes: One thing you need to have those red shirts that need to understand the blue stuff as we just discussed. But 20 great companies and two business schools are saying, Sarah. We need more. Number one is you need to have look at the end-to-end process. From the first thoughts about where should we innovate in, to the meaningful idea, to checking - validating as they say - this idea to making that decision 'Let’s make it big' - you need to look at this end-to-end process in the right way.

It touches, as I think we already eluded to, to different management systems. Different people, and if you dig deeper, different cultures, different KPIs, et cetera. Looking at the process is really an art. It’s not a straightforward thing that you do for many operational processes, be it in production or be in service in the end.

Now, to address the leadership, well, let’s come back to that in a second. Number three turns out that in order to solve that red, blue conflict, which is not a conflict about people. But, a conflict about systems. You need to establish a collaboration model. You need to define what is to be done in that transitional phase. It is a phase, when the blue shirt gradually hand over the responsibility for scaling up, and then actually running it at scale to the red shirts.

This is basically where the scope of the blue shirts ends, and it’s good because you’re getting into really detailed stuff, and on running the machines on the establishing of six-sigma quality. This is not what the blue people are about.

Sarah Nicastro: I mean, also the blue shirts need to keep looking for what’s next, right? I mean, they don’t go away necessarily. They’re continuing to look for those innovation … I mean, that’s another understanding of all of this is we’re in a time that this is all continual, right?

Frank Mattes: Yeah. But now, let’s come to leadership. Methodology, the process, the culture, the collaboration piece, and number three, the leadership. Obviously leadership plays an essential role in here. You can have the best process with all the jumps in between, all the validation, all the technology, you might even have a set up a collaboration model. But once leadership doesn’t support it, it all cracks. If you look on our website, leanscaleup.com, there’s a visual where we say out of the many cog wheels that run in the day-to-day business, leadership is that cog wheel that takes it out and creates that environment for the unfair advantage.

It’s a leadership task, and Sarah, in my view, it’s THE leadership task, to answer the question, how can we win today? How can we win the now? While at the same time, future-proofing the company, creating the NEW. Everything else delineates from there.

How can we win today and be safe and win in the future? It turns out that you basically need to have, as they say an ambidextrous view. You need to look at the red shirts and the red system and what’s going on in today’s markets. We also need to look at three to five years into the future. How are customers shifting? Let me give you an example. Let’s remain in that mobility example in here.

One of our customers is a big truck company. They are seeing that in three to five years, their customers will not be the logistics companies any more. Actually, it will be the customers of today’s customers. They will organize that fleet of autonomous vessels and run their operations. The truck morphs into an element of logistics-as-a-service.

, and you name it and that stuff, right?

You see that and you need to make the change while being confined to today’s requirements. Your shareholders expect that you safely deliver the revenues and the margins. Your current customers say, “Don’t you dare to speak to my customers. Because these are my customers, not your customers, and these kind of things.

What you need to do is to arrange an overarching system where you say, “Well, we have some red elements in here, but also the blue elements.” For instance, if you up your great idea, and you want to take it to scale, some of these milestones during Scaling-Up need to be in the red shirt manager’s systems. If they do not see the benefit of supporting the Scaling-Up, they will not do it.

If you do have to arrange that kind of working in blue KPIs into the red shirt system, you might end up with a C suite saying, “We want to be innovative. We take on the challenge. We want to create a future.” But it’s basically stuck in the middle management level, where the functional experts and the owners of those assets and capabilities that we spoke earlier are sitting. It’s about really that leadership taking that red shirt/blue shirt view, the ambidextrous view.

Sarah Nicastro: It’s exciting stuff, but I can see why it feels daunting to some. I mean, it is a lot. It’s a tall task. But, to your point earlier, I mean it is really, really imperative that companies figure this out. That’s just the reality. All right, Frank. Go ahead.

Frank Mattes: And, and … Just one more point, Sarah. I mean, there’s stats out there. There’s stats that tell you how long is the average life span of a company that made it to the S&P 500. It’s not just Frank. You can look at the stats, and from those stats I would delineate my recommendation. You need to start about how to blend together the now and the new.

Words of wisdom

Sarah Nicastro: All right, Frank, so any other thoughts, advice, words of wisdom related to today’s topic that you want to share with folks before we wrap up?

Frank Mattes: Definitely. I mean, we started off with the Lean Scaleup, so I heavily would recommend to read into the book to absorb what those 20 companies and the business schools have worked out. I feel lucky to be part of that journey. Basically, get an inspiration on how to solve that system problem. But, I’ve got also, when I thought about this, Sarah, two or three minor but very powerful things to bring to the audience. Not to asking for changing the company from Tuesday to Wednesday. But, rather small steps, philosophies if you will. Changing the mindset.

Number two, is let’s look at one of the most successful business build ups. Companies that builds basically new businesses at scale and at pace, Amazon. Right? Jeff Bezos when he was still CEO said, “Our success correlates directly with a number of small experiments that we’re doing.” If you are very careful and you shop on amazon.com et cetera, you even see that the website changes by the day. They put a button up here, and they change the coloring there, et cetera. They want to continually look at how can we basically find clues of what might be really bad. Not just the optimization. The incremental stuff might really be better.

Also, a third piece of advice, Sarah, would be if you’re trying to tap into the unknown. If you want to really think outside the box, obviously that is territory that the C suite and the senior management of that company is not very much familiar with. Right? They know their home base if you will, all right? But they do not know the new.

There’s one concept that I recommend my clients to go with, which is a very, very powerful concept in tapping out into the wild. It’s called the skin-in-the-game concept. There’s so much studies that you can read in thinking about what the future would look like. You can speak to so many potential customers out there. What they need and what they might be willing to pay for.

At the end of the day, it’s about that they put something of value on the table. Skin of the game, right? They devote that time, and a team to co create a minimum viable product with you. They put their reputation on the line by conducting webinars to promote that new product or services. Always ask yourself, is this just theory or is someone putting real skin into the game?

Where to learn more

Sarah Nicastro: That’s a really good point. Okay. Frank, thank you so much. Wonderful conversation again. As Frank mentioned, it’s leanscaleup.com. Correct?

Frank Mattes: Yes.

Sarah Nicastro: Yeah. That’s the website. I know from the event in Germany, you had some great slides and illustrations. Obviously, Frank has written the book on this topic, so there’s some wonderful stuff. I would encourage all of you to go and check it out, because this was just the tip of the iceberg in terms of Frank’s insights.

Sarah Nicastro: So, Frank, thank you so much though for coming and spending some time with me. I appreciate it.

Frank Mattes: Thanks for having me.

Sarah Nicastro: Absolutely. You can find more by visiting us at futureoffieldserviceref.ifs.com. You can also find us on LinkedIn as well as Twitter, @thefutureoffs. The Future of Field Service podcast is published in partnership with IFS. You can learn more at ifs.com. As always, thank you for listening.

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Creating a Remote Service Strategy

In this session, from the Stockholm stop of the Future of Field Service Live Tour, Sarah talks with Roel Rentmeesters, VP of Services at Munters, about the considerations in creating a remote service strategy. Roel discusses how to navigate resistance to change, how remote service factors in to Servitization, and how delivering outcomes requires an evolution of service delivery.

Sarah Nicastro: All right. So Roel and I have had variations of this conversation many times, but it's always a pleasure.

Roel Rentmeesters: It is.

Sarah Nicastro: Yes. Okay. So, we're going to talk about the balance of working toward innovation, a bigger vision of change, while meeting the demands of the present day business. Okay.

Roel Rentmeesters: Yep.

Sarah Nicastro: So tell everyone a bit about yourself, what you do, what Munters does and then we'll get started.

Roel Rentmeesters: Good. So I work for Munters, it's a Swedish company. We do climate solutions for mission critical processes. So everything that's related to humidity control and temperature control in critical environments is what we do, and of course, we try to do this in a sustainable way, meaning that the way our energy consumption, et cetera, for our units is controlled and help the customer in their processes. And I'm leading the services organization. It's been five years that I work for Munters, my background is however in IT where I've done field service for the last 20 years, which is actually good, because the way IT has developed their service management from call centers and network operations centers and systems to control this, is very standardized using Itel, and I think there's a lot that we can apply from that IT industry in our manufacturing world. So, that's where I am in Munters, and it's really interesting.

Sarah Nicastro: Yes. Okay. All right. So, at Munters, there's this opportunity to servitize the business, as there is for many manufacturers, also probably a fair bit of resistance to that amount of change. So, when we talk about service transformation, I think, particularly for those who are in manufacturing, looking to servitize the business, you're really talking about fundamentally an identity change of the business, and that can be challenging, so how would you describe the opportunity for Munters to servitize and what are some of the things that are driving that opportunity?

Roel Rentmeesters: Yeah. I think servitisation is fairly new in Munters compared to in other industries. We started, I would say, seven, eight years ago, I heard a colleague say in 2000 already, so we are quite new and we are, well, we have been really a traditional manufacturing company, so we build big boxes in our factories, we sell them and sales and service was a support organization, and that changed a bit, I would say 2015, or just before that, the first thing we did was change the service organization, where before it was residing into the BU's and it was pure support, we moved it into a separate business area, and that really made a transformation happen, so separate sales from the service organization, so that they don't abuse each other and started that revenue generation in service, it was quite successful and we are still quite successful in it.

Roel Rentmeesters: So, we have 15% growth in the last years of service, but still mainly in our traditional services. So it is the commissioning, it is a break and fix, it is a preventive maintenance and particularly the upgrades, so how can you maintain your units? And that's where we still are a bit today. So we have not yet evolved into real connected devices and advanced services that need to be delivered, but that is something that we need to do in the next step, and that is what is part of our roadmap right now.

Sarah Nicastro: I was just going to say, Roel was at our Paris event, which was our first and we talked quite a bit there about the journey of servitisation and the continuum, and so the phase you're at, I think, is a phase where organizations tend to reach a level of complacency, because they understand the benefit of focusing more on service and really the opportunity of the end vision, which is to actually servitize, but then they achieve a certain level of success in really that incremental improvement type of thing, and then say, "oh, great. Well, we've succeeded, so let's move on to this next thing", and that goes back to the level of change we're really talking about. So, it presents an opportunity for Munters, what are some of the aspects from the customer perspective that are making service more important, or a bigger opportunity?

Roel Rentmeesters: Yeah. You can clearly see that today in the markets, customers want more than a product, they want product with the services around it, and packaged, and they want to go into moving CapEx to Opex, lease concept, where it embeds the whole service, and they also want to have more than just a box and you repair it when it's fixed, they would like to have a sustainable outcome that you guarantee 99 of X percent of the time, that thing is delivering what it needs. Customer wants to say, "these are my requirements, and you just make sure they are fulfilled", so less down times, more guarantees and even using technologies and softwares where you can certainly even influence their environments, if you have a view on their entire production process, and you have sensors that are beyond your own device, you can do a lot of analysis in the customer environment.

Roel Rentmeesters: And one of the areas that we have it's in the food industry, it's called food tech departments. They have sensors in the entire production from the egg, up to a filet of a chicken, and they can say, if you give more water or your air quality, or your airflow is like this, what is the influence on the filet that comes out in the end? Does it take longer? Is it becoming bigger, too big to produce, so they can pinpoint what is influencing your process, and we can do the same, if a door opens, and there's a lot of external air coming in, you can say to customers, "well, this is influencing your production, why don't you have your deliveries at night?" As an example, because we see the peaks in our unit saying, "oh, something is changing in the environment, making that I need to work harder, I use more energy or I even can't guarantee the outcome performance anymore."

Roel Rentmeesters: So that's why we need to go, it's more than a box, it is things around the box that we need to deliver and customers want it, and they want also fast response times, they want to avoid even technicians going on site, that's something that you specifically saw during COVID where people were afraid of having foreigners coming into their environment. So they want different ways to deliver service than you're doing traditionally today by sending out your technician with his parts and his screwdriver.

Sarah Nicastro: So, I don't create models. Okay. We'll leave that to Tim Baines at the Advanced Services Group, but if I were to just make the continuum quite generic, so you start as product manufacturer, service as a cost center, then you move to the phase of identifying more opportunity of service and its revenue contribution, and so putting more emphasis on it, which is really where you are today.

Roel Rentmeesters: Yeah.

Sarah Nicastro: Then you would move toward true servitisation, which is, you're not selling products and services, you are selling the outcome.

Roel Rentmeesters: Yeah.

Sarah Nicastro: Okay. And then the point you brought up is a very good one is that there really is a fourth phase of this journey for those who choose it, which is, if you connect devices in the way you would need to servitize, you also, in certain industries or applications, often have access to information that your customers find a lot of value in.

Sarah Nicastro: So this is where you can bring that insight, data, knowledge into the value proposition to achieve that trusted advisor business partner type relationship.

Roel Rentmeesters: Yep.

Sarah Nicastro: Okay. So let's talk about the point you made, which is maybe in the future of field service, we go into the field less.

Roel Rentmeesters: Yeah.

Sarah Nicastro: So during the very early points of COVID, Munters recognized the opportunity to deploy remote assistance, which is an augmented reality tool, because the realities were, you had technicians that could not travel, et cetera. Now this is something that had been on your future roadmap, so it had already been a consideration, but you recognize the opportunity to get right to that. So tell us a little bit about that journey and getting it deployed initially, and then we'll talk about how, now that travel is possible and things have normalized to a degree what that means for that solution.

Roel Rentmeesters: Yeah. It was an interesting time. So, like you say, I had been looking into remote management solution before and I wanted to use this mainly internally. So we have a third line support organization for our service technicians, and we thought, "how can we have a better interaction with them, guiding them, using mixed video, two signals being sent?" And I've been looking into different solutions, and then in the World Conference in Boston, from IFS, there was a third solution that I saw, but we would be rolling it out at some point, smaller scale, it was not so urgent, it would come and then COVID hit us. So I was in Italy when the first patient came on the cruise ship in Italy, and I was with my president and we said, "if this thing's hit it's Europe or Chinese technicians were already sitting at home, they could not travel anymore."

Roel Rentmeesters: We were like, "yeah, how are we going to guarantee service to our customers?" Because this preventive maintenance is really key in our units, otherwise they break down and you get problems in your production. So he said, "why don't we roll that thing out, you have been looking for, why don't you roll it out faster?" And so I contacted IFS and I said, "I saw this solution, I like it because it integrates with your field service management solution", meaning that if you have service calls and you would use this the time you spend it to whom you called, there would be a lot of registrations done from the video link that you put in, so I liked this for a future concept, and so IFS was responding very positively to this, we got 20 licenses for two weeks that we could test for free.

Roel Rentmeesters: We liked the solution. We gave it directly to our Italian engineers who were immediately stuck at home to start doing a service with our customers, then we bought the licenses, and I think within a couple of weeks we had rolled it out for 200 technicians worldwide. A very intuitive, easily to use solution, it is, it contains already training packages inside the application, you don't need an app to be installed on the customer environment, so you can just use his web browser that he has on his phone, and just a simple tablet, something with a camera, you can use it and you can interact with your customer. We asked our technicians to train, to use it before. So they started calling each other using the solution and playing a little bit with it, and then we organized seven training sessions where they could dial into, came in with concrete questions, because they had been playing with the system, and so within two weeks we had rolled it out for 200 technicians in 15 countries.

Sarah Nicastro: So, the need for change management is minimized when there is no option for business as usual.

Roel Rentmeesters: Yeah.

Sarah Nicastro: And it was impressive that you were able to recognize the need, move quickly, get it in place, and that helped you with business continuity during those lockdowns, but now that things have changed to be somewhat more normal, it gives you the opportunity and/or challenge of looking at how does the opportunity for remote service fit into the broader service delivery strategy.

Roel Rentmeesters: Yeah.

Sarah Nicastro: So what are your thoughts on that today?

Roel Rentmeesters: Yeah. First I need to say, we saw a significant reduction in the usage of the system, because our technicians and our customers still like you to go on site, often they have this relationship as well, so it's not just anybody who is picking up the phone and doing this remote session with your customer, and in the end, technicians will always have to go on site, will always have to do field interventions, commissionings, and trusted advisor, as you mentioned, customers still like this, but it doesn't mean that this is not a solution that you can use and still use for the future. You need to have a good business model behind it, is what we talked about earlier today. You can't sell, "we deliver remote managements", you need to sell a response commitment, you need to sell a fast response commitment, proper diagnose, faster potential resolution.

Roel Rentmeesters: So you need to have something behind it, an offering and a usage behind it. So we're building up our 24 by seven service towards customers, and that will be for me, twofold. It is connected units in the future where you can interact with the unit directly, it sends you an alarm or an alert, and you do something with the unit directly, or you use a customer that calls you at night and is standing in front of that device, and you do either your diagnose, help him maybe do certain things. So that is something that I see definitely as a business case and an offering for customers. Also, when you go into outcome based services and you want to reduce that downtime, you cannot permit yourself to send a technician who goes on site, maybe has to travel for two hours, does a diagnose, comes back, orders a part, goes for a second time to fix it, you don't have that luxury anymore at that time.

Roel Rentmeesters: So you really need to have solutions that can help you reduce the downtime, and don't forget, at the same time, that technician that maybe does this one visit during the day, if he's on duty to do remote management, he can maybe serve 20 customers that day, so from a value proposition for your customers, you have a different model.

Sarah Nicastro: Yeah.

Roel Rentmeesters: Look at it also for warranty claims. Warranty claims it's a pure costs. So again, if you need to send a technician, you spend the time, you spend the costs, we now impose actually that, when a customer comes with a claim, the first thing we will do is set up this remote session, so we will diagnose with him before we really say, "okay, this is a potential claim", and we continue further with our root cause analysis and all these things. And the last thing is internally we use it, our technicians still use it between each other. The third line support is still using it, they haven't stopped using it. So there is definitely use, but I can feel that my technicians, they still like the interaction with their customers on site rather than doing the remote sessions.

Sarah Nicastro: Yeah. And I think part of the resistance around remote service is that people think remote only instead of remote first, and so it's interesting if you go back to the outside in view and putting the customer first, having these capabilities and making sure that, if it's a quick and easy resolution, they're not waiting two hours or four hours for someone to arrive just to flip a switch or what have you, and/or when you do send someone on site, they know what they're going for, so they can make sure that they're achieving resolution the first time. So what's interesting is, when you're at the phase of this continuum that you're at, it is tricky, because there's a focus on service, you've achieved some good results in terms of improving service revenue, but you haven't yet servitize.

Roel Rentmeesters: No.

Sarah Nicastro: Okay. And so, from a customer perspective, a lot of times that service is still perceived as billable hours, face time, time in person. When you servitize, the potential for self-service and remote service increase exponentially, in the sense of, you're no longer having to justify the reduction of cost of service to your customers, because you're only responsible for the outcome, and so, the difference between that phase and the next and the role that remote service can play are pretty significant. Now that being said, the one other point that I do see a lot of people having success with is, using it for training of new technicians. So we haven't talked about this a lot today, but in most of the cities that we've been to, most of the conversations I have, there are real challenges in recruiting and hiring and retaining frontline workers.

Sarah Nicastro: And so using remote assistance, augmented reality, as a way to have, one, very experienced technician mentoring five or six, or whatever new technicians in the field allows you to speed their time to value when they come on board. So there are some really strong uses, it's just a matter of, like we talked about, the technologies here, the business model and everything else is here, and so when you have the capability, but that's not yet connected to your go to market strategy, that's where some of that friction comes into play.

Roel Rentmeesters: Yeah.

Sarah Nicastro: Okay. So we talked earlier about people process technology. So in your position, you are responsible for all three, right?

Roel Rentmeesters: Yeah.

Sarah Nicastro: Which do you find the most challenging?

Roel Rentmeesters: The people one is the most important one to start with. Today, we are running initiative inside Munters, where we look into the entire end to end process and the systems that need to support that end to end process. So it's not just in the services organization, it is throughout the entire organization. It's a huge project, but we define that, if we want to move into that next stage for servitisation, the basics needs to be in place, you need to have a steady field forest, you need to have really good processes and you need to have the systems and the technology to support your way of working and systems is not one, it's not one ERP that does it all, you need to integrate it all, so technology is amazing, but bringing it all together and having it support your entire end to end process is a challenge.

Roel Rentmeesters: We've been busy with this for two years now, there's 250 people working on that project. We're about to start a pilot in end of January. So all three are a challenge, but the people are the most important one, and we've discussed it already all day long, if you don't have the buy in, if you don't include the users in this process, get their business requirements, help them see the testing, the end user testing, change management to communication, if you don't do these things, then you can have the brilliant technology and the best process, if they don't understand why and what it brings for them, they will not use it, and you will fail in such a project.

Sarah Nicastro: Yeah.

Roel Rentmeesters: So for me, people are the most important ones.

Sarah Nicastro: Yeah. I agree. Okay. So what would you provide as your biggest lesson learned?

Roel Rentmeesters: I wanted to say that change management, and I think it's something that is very cumbersome today in Munters also, because the team is working so hard on trying to get this thing to work that I think they forget about the communication, they forget about the inclusion, another thing I want to say is, break it into pieces. If you have a long term vision like servitization and it's a lot of things together, it's your process, your system, how do you connect your devices, what is the customer value you want to bring for it? It's a lot of things, you need to chunk that down and work in sprints and clear agile way, like we said before, because if you want to do it all, you're bound to fail as well. So break it down and make sure you communicate properly and do your proper change management.

Sarah Nicastro: Sounds so easy when you say it. All right, any questions for Roel?

Audience question: What is your biggest challenge, do you think, going into servitization?

Roel Rentmeesters: We've been talking for five years to connect our units and none of them are connected. So, I think the problem is a little bit the silos that we were working in, we had, I analyzed 20 initiatives that started in local organizations to say, how do I connect our units? So what are the sensors? Where should we put them? And they're all really good, but they were local little things that were done.

Roel Rentmeesters: They form a good base for what we want to do now. So we are about to start the digitalization and connectivity, we call it digital services project, and this time we're going to try to do it right. A bit like the concept you've set up where you bring different departments together and stakeholders together, you don't use only internal resources that have been in the company for a long time, but you bring in new blood with new ideas, you have a longer term vision of what it could be, but you break it down into pieces to say, okay, this and this, and it doesn't need to be low hanging fruits, just, what is it we can really do? What could bring benefit and value? And then it's communication. So that for me is key to make it happen, so to go to this next stage, and that's where we are not today.

Sarah Nicastro: I was going to say too, the customer connectivity that's required, one of the challenges I see is, Berit, it goes back to your point of bringing in sales and marketing to the conversation, because what happens is, you're going to customers saying, "we need connectivity", and they're saying, "no, it's our data." So it's leading with the need, not the value to them. So it isn't about the value it brings you to reduce truck rolls, because they don't care.

Roel Rentmeesters: No.

Sarah Nicastro: But if you can ask the question framed in how it will help them, what capability it gives you to serve them better, I'm not saying it's an easy fix, but I think that's the starting point of getting to a different response.

Roel Rentmeesters: Absolutely. Yeah, absolutely.

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Why and How Service Should be Prioritizing Sustainability, Now

July 6, 2022 | 32 Mins Read

Why and How Service Should be Prioritizing Sustainability, Now

Rainer Karcher, Global Director of IT Sustainability at Siemens, joins Sarah to discuss why service-based business should be prioritizing sustainability, how to do so, and what the future holds related to regulatory pressures, customer expectations, and investment decisions.

Sarah Nicastro: Welcome to the Future of Field Service podcast. I'm your host, Sarah Nicastro. Today we're going to be talking about why and how service should be prioritizing sustainability. Now, I'm excited to welcome to the podcast Rainer Karcher, who is the Global Director of IT Sustainability at Siemens. Rainer, thank you for being with me on today's podcast.

Rainer Karcher: Thank you very much for having me, Sarah. Pleasure being with you.

Sarah Nicastro: Rainer was one of the speakers at the Future of Field Service live tour event in Frankfurt. We had a great conversation, so great that I asked him to come and join me here on the podcast to talk about some of the key points that our audience needs to be thinking about when we think about sustainability.

Rainer, I think at the event we talked about the fact that not everyone eats, sleeps, and breathes sustainability in the way you do, but we all need to be prioritizing, becoming more mindful and more proactive about it right now. It's a very urgent thing. We're going to talk about that a bit, some of the reasons for that; but more specifically, some of the things that are particularly relevant for service as it relates to prioritizing sustainability and making a positive impact on our environment. Before we dig into that, tell everyone a little bit more about yourself.

Rainer Karcher: Thanks very much. I'm based in Munich here in Germany, and as you already introduced, I am responsible for sustainability within IT in particular at Siemens. this is a global role which is focusing mainly on three different pillars in regard of sustainability, which is already describing a bit the definition of what I look at and how I look at it. First of all, it is the sustainability slash Green IT. Making ourselves, making all the services, what we provide to Siemens internally, which is around 300,000 employees worldwide, as more sustainable and as less environmental impactful as possible.

The main pillar of the second pillar is to drive the ambition targets of Siemens as a company with IT digitalization data analytics. So, this is the it for sustainability pillar. The third one then is the IT to society aspect. So wherever digitalization can support societal aspects like education and supporting with equipment donations. So, this is then the third aspect, which is part of my role. I'm doing that together with a small little team. To drive the company, this is, I said, already a governmental role so I'm the one defining the strategy for the company and trying to then involve all the operational units and the responsible respective service owners who is then adopting and just translating what I come up with then into actions and into measures.

Sarah Nicastro: Good. This is a topic that you are very, very passionate about, which means that you also spend a good amount of your time coming to events like you did in Frankfurt and speaking here on the podcast. Even when it's a bit outside of your day-to-day, you have taken it upon yourself to educate and evangelize the importance of the topic. What makes you so passionate about this topic? How did you initially get interested, involved, and ultimately to the point where you've made a career around this?

Rainer Karcher: Thank you very much for asking that question, Sarah. It is always, to think about, is that something where started at birth? Is it something which I had been green and sustainable from day one on? Without any doubt, I had not. It was in particular, my wife being pregnant with our first daughter, in the meantime she's 11 years old, and with a pregnancy, we started thinking about what is the future for our kids looking like, and what is clothings, and what is food, and what is the whole surrounding we are living at, and how can we make that more natural? How can we make that less impactful in regard of pollution and noise and all of that. That was the starting of it. It led me to then furthermore environmental aspects to support local NGOs, local charities, which are here based in the Munich area.

It brought me more and more into the whole area of understanding what sustainability is all about. The term itself, nowadays, if you look at it, is mostly understood with climate, with maybe decarbonization, and with carbon emissions in the atmosphere. But sustainability itself is so much more. You just already mentioned this, I'm in particular stepping out of my regular comfort zone, I would say, and getting to events and taking invitations like the ones I get from you and appreciate it to be able to speak to and get influenced by others and maybe inspire them as well. So everything I do in the meantime is based on the United Nation's Sustainable Development Goals, and one of that 17 goals, the last one, SDG 17 is on partnership for the good. Partnership means work together, collaborate with others, in particular, and you said that as well already, we have to join forces to act now.

We don't have the time to maybe delay and just invent the wheel, everybody by itself. We need to come up with a very quick and fast way of acting and making things happen. This only can be done if we do it together and join forces; meaning, to share knowledge, to share the experience, the good and the bad, just share what has happened good, and what was maybe not successful to just avoid everybody else making the same mistakes. And so, this is maybe how it turned more and more from at the beginning, a very little thing, into something which became my biggest passion. I mean, maybe this explains why I, as a typical IT guy, in IT since 24 years, then had the opportunity to turn two years back from a standard type of an IT person into a sustainability IT person. Nowadays I'm speaking both languages, translating between both worlds, and this became exactly, as I said, my biggest passion.

Sarah Nicastro: That's really cool. I think it's interesting how having kids changes you and your perspective. Just really gives you that broader and longer term awareness. I mean, even it's such an interesting dynamic. You think when you're young, you think you're invincible. The older you get, the more you realize how precious everything around us really is.

For this podcast, I mean, what I want to do is give people a sense of some of the areas of impact that ... We talk a lot on this podcast, Rainer about the fact that service leaders are already tasked with so much. They're supposed to keep up with the day-to-day business. They need to meet the current needs of customers, all the while innovating and thinking about how service delivery is evolving, et cetera. My goal is not to come in here and say, okay, and now also, this also needs to be your number one priority. But the reality to your point is it needs to be a priority for all of us. So I just want people to have it be a part of their consideration and decisions. Because as we're going to talk about, there are some things going on in service that can have a really positive impact on the environment, but also a positive impact on the business and some of the goals that these folks are working towards.

We're going to get into some of the service related points, but before we do that, I know you were at a few conferences this week talking about these topics, et cetera. Just to set the broader stage for those listening who might not be themselves involved in sustainability day in and day out, can you just talk a little bit about where is the most progress happening and what can we learn from that? And what are still the biggest gaps and obstacles we need to overcome?

Rainer Karcher: With pleasure. Thanks for that very important question. I mean, it all starts with transparency. To be sustainable, you first need to know where you currently. That is for nearly everything. If you don't know how much waste you are producing, if you don't know how much miles you covered with business trips, if you do not know how much gas you burned with being physically present with your customers or with anybody you're just trying to support, if you do not know what the carbon emissions are caused by, for example, data centers, which has been operated by yourself or where you host your services at, then you're not able to influence it in any way. Therefore, and this is the biggest progress which has been made from my perspective within the last 7, 8, 9 months, that where it was quite hard as I started my job two years back to get any kind of information in a reliable way without the big chance that there is a lot of marketing part in it as well, and this still happens from time to time.

So the typical term of greenwashing, some of most prominent things is carbon offsets at the moment. A lot of products are declared carbon free or carbon neutral. The reality is that there is mostly offset certificates behind. The product itself is still the whole same thing. Nothing has been changed, no optimization, no increased efficiency, so that the environmental impact of that product still is the same but there is now a sticker on it because it's a very nice prominent thing. It's just paying an offset price, which is way less than the environment impact itself would be. Therefore, what we need to have is a transparency, and we've got that. And the numbers and the reliability of those numbers is now helping to understand what can be done.

In particular, the aspect of energy efficiency, if it comes to understanding how can it further improve consumption of electricity, for example. This is something where we've already made good progress as well. If you take the example of hyperscalers on cloud service providers, they do tremendously good things now and have a good progress made, all of them in the last couple of month, in just optimizing the data center structure and the surrounding in that remark. But this is only one of the aspects, and there is plenty of others where we still not a clue of how to make things happen and whether is standards missing.

One of the aspects which we are currently looking at is a so-called product passport, which is describing the product footprint and the environmental impact of a certain product, which can be even a service. It doesn't have to be physical products. It could be a service provisioning in regards to software, for example, as well. The problem with this is there is no standards defined, which are globally available, and which are then valid to make it comparable. With that, we have hard times in, first of all, getting reliable numbers. Then secondly, we have hard times in calculating and finding algorithms, which are then helping to understand what then a certain type of a component or a product, meaning copper or iron or whatever it might be, what that means from an environmental impact, and how to then measure it. Again, back to what the starting is all about, it is the transparency which we need to have to make things happen and to change. This is something where we are still at the beginning.

In certain aspects, we do have an idea of how to drive things and in certain others, we don't. One thing which I'm always pointing towards is biodiversity. Species, which is maybe even a bigger crisis than we are already facing than climate, and nobody is really having a clue currently. Even the most famous scientists and biologists don't have even an understanding of what could be done and what would be the solution to drive things different. But we have to report that. Why I mention that in particular, now the audience could mention, well, that is an IT guy. Why is he talking about biodiversity? Well, there is directives coming across. Here in Europe, for example, just two days back from the European Commission agreed a so-called CSRD, that's the Corporate Sustainability Reporting Directive. This is hitting companies with a large than 250 employees from the year 2024 on, looking backwards to data from 2023.

This is nothing which is way above in the future. This is quite close to us. That's 107 KPIs from which there is a certain amount facing towards biodiversity. So we need to report what is the current influence on production sites in regard of species, bees or insects, and what is maybe lighting of those buildings having effects on. So, there is a lot of things where numbers are required, where measurement is required, where we don't even have an understanding how to get to the numbers and not even a clue then how to get influenced and maybe then further improve it. So, this is one of the biggest challenges which lies ahead of us.

Sarah Nicastro: I just thought of one other question I want to ask. So, yours is a global role. You're based in Germany, but yours is a global role. What, I guess, region of the world would you say is farthest along and is lagging behind in terms of overall focus and progress related to the topic?

Rainer Karcher: That's a very difficult question to answer politically correct, but I'll try my very best. I mean, in general, you have to always try to get the perspective of people who are affected and who do have a special situation and special challenge they have to face. It would be an easy one to point towards China, towards India, to say, well, as long as they are burning coal as hell, why should we change things what we do? But first of all, we need to understand why things are happening in China, which are happening, or in India. One of the aspects which I didn't had a clue about is that in India, there is still around 80% of households without electricity. Burning coal for them means just fulfilling basic needs. That is cooking, that is heating in winter times.

That is not, in a way, like we look at it. For us, it might be an easy thing to replace coal with more renewable energies and sustainable way of creating electricity. But for India in particular, it is a very much difficult situation. So therefore, it is not something you can just easily point towards and say, "Well, they are behind all of us and lagging behind of us." What I would look at it is a level of awareness. If you just now treat the European world and the American world in particular, I think we do have, at least from an awareness perspective, we are on top. We know way better than most of the Chinese, the Asian world, or the Southern American world, what the current consumption and current emissions look like, what we are responsible for, what the effect is of what we are responsible for with a day-to-day consumption, with whatever we do for business purposes.

From that point of view, I think we are ahead of us and we need to be, because this is the second thing and that's a message which I would like to point towards as well. The current change in temperature, the current climate crisis which we are already seeing, the first outcome of, is a outcome of what we had been responsible for. And that is for a particular reason. Carbon is nothing which reacts immediately. It's not the carbon, which now is being emitted which is reacting a day or two later. There is a time spanning between. This is around 30 to 35 years. The changes which are happening right now is caused by energy emissions by carbon which has been emitted 30 years back. So if you now look at India and China 30 years back, it wasn't them consuming and emitting the most. It was us.

And so, therefore there is a responsibility and we have therefore, at least a bit of a lighthouse function there as well. We need to be front runners. We need to show that we are able to do things different, and we can do things more in a sustainable way and in a different, in a more responsible way than what we've done in the past. Then I am just 100% sure that the Asian world, China, India, and the Southern American world will follow. I hope I answered that in a politically-correct way without pointing towards anyone.

Sarah Nicastro: I realize, and apologize, it may have been a bit of an unfair question. I think the reason I was asking that is because I see Europe being further ahead with this than even the US. I mean, I'm in the US. I think that there are pockets of greater awareness, pockets of greater focus, but there's also pockets of sort of a, I think sometimes you still have a mentality of, "Well, it's not my problem," or "I get it, but I only care about or am so tied to the pressure of this day-to-day stuff."

And so, one of the things I wanted to point out before we talk about some of these specific areas of focus is that while I absolutely appreciate and respect your personal passion for this, that it does not need to be shared to that degree by people to have a positive impact. What I mean is, the content that we're going to share here is not only applicable to people who altruistically want to prioritize this because they care as much as you do. The reality is there's a few other reasons that are very important to consider what we're about to share. Yes, it is the impact and the fact that we should care, but it is also the fact that a lot of the things we're going to talk through simultaneously can positively impact the business and the bottom line and the environment.

There's also the fact of, as you mentioned, particularly in Europe, there are regulations coming along pretty quickly that are going to force more focus on this. I think that will also be the case in the US. So, there's an argument for, don't wait until you're behind to try and catch up. Get ahead of it. Put some emphasis on it now, so that you're in a better position and you're not having to be reactive.

Finally, I think it's a growing reality that your customers, meaning the people I'm speaking to in our audience, care more and more; which means, they're going to be looking more and more closely at this and expecting more from their providers and partners. And so, those are all reasons outside of just genuinely caring that this demands focus from service organizations. So I just wanted to make sure folks understand that even if they're not as personally tied to this topic as you are, they don't need to necessarily get to that level to share the passion for the impact of it, which is also in those other areas. Does that make sense?

Rainer Karcher: If I may comment on that, it does totally makes sense. Thanks for bringing that up. I mean, this is something which I think the history just showed. I mean, science is pointing towards climate crisis this nearly 100 years. So there is scientists all over the world, independent on where they are, which are trying to understand and making us understand what the outcome is of what we do on a day-to-day basis. And so far, unfortunately, it had not been understood in a broader way. There is one term which I always try to come up with, which is, it doesn't require to have a handful of people doing everything perfect. It requires a majority of people doing a lot of things in the right way. This is then the bigger impact.

So exactly as to say, we need to come to an understanding that there is many different ways why it is a good thing and a good idea to take things different and make it a more sustainable product, a more sustainable service in the future than what had happened in the past. You mentioned already the legal requirements, which is indeed one of the major aspects. I mean, the European Green Deal which I've just pointed towards is only one out of currently seven green deals. There is one which is in the US, active and coming up as well. Same for Southern Europe, same for China, same for Asian world. So, that's one of them.

There is the customers. You said that as well. More and more customers are demanding to see what is the outcome of a product, in particular if it is within the supply chain. So pointing towards ourselves, Siemens is working with 65,000 tier one suppliers. To have a transparent view on what's going to happen, I just can't demand it. I need to work together with them. I need to just support them in getting the transparent view on that. Then are we able then to provide the environmental impact aspects to our customers only in a joint approach then as well.

One thing which is coming on top beside the public opinion, which is I think, worth mentioning as well. So it's not only a public opinion, but then employees or future employees. Talent attraction comes here into the game as well. Gen Z, who is coming from universities or used to be prior to pandemic standing on the street we defined as the future, they are the ones not working for a company who's not taking things serious. And so, to be able to proceed with our business, we have to be attractive for people who are interested in sustainability in a real way.

But one thing was, at least I do see in a very increasing way since now six months is investors. We at Siemens are very much faced from investors who are asking and demanding to see real action. They want to have it in a quarterly basis reported what is the KPIs, what Siemens is working towards in regard of sustainability measures. Not only carbon and decarbonized world, but there is female sharing management. There is learning hours of employees. There is diversity, equity, and gender equality aspects in addition. There is so many things which are now demanded from investors. I mean, in that remark, we are talking about money and about financial investment.

If the investors define a company who is somewhere listed and stuck, not as sustainable anymore, and they're pulling out their investments, then we know the outcome. So that's something which I think is hopefully convincing that there is more than just the environmental care aspect. There is more than just taking care on the future of our planet, which should be anyhow a basic for everybody. But without that, even if you're not convinced of things, there is a list of reasons now and requirements which are hopefully bringing you to convince yourself that this is worth thinking about it.

Sarah Nicastro: For sure. All right. At the event in Frankfurt, we touched on a couple of different things that are specific to field service and service that I want to run through. We don't need to get super detailed on each, but we'll just surface these as points for our audience to consider that both can benefit the business but also have a positive impact here.

The first is optimization of resources, particularly related to dynamic scheduling and routing and making sure that we don't have a lot of waste in travel. And so, are we making sure that we're paying attention to first time fix and getting resolution to where we're not doing repeat trips, and making sure that the person that we're sending has the right skills, has the right parts, so that we're not just wasting time on the business side, and then all of that travel on the environmental side. So, that's one. Anything you want to point out there? Or I can just run through these and then we can talk about any of the things that are interesting.

Rainer Karcher: Well, maybe I can give an example of exactly that concrete idea, what you just said to avoid maybe travel, to avoid then the energy consumption or burning gas, in that remark. One thing which my former colleagues from Siemens Energy who is now a separated owned legal entity, so therefore it's nothing which is in my influence, but I think a very good example worth mentioning. Maintenance on windmills or power plants is very specific and requires a lot of experience and a lot of knowledge and understanding. Therefore in the past, it had most been Siemens' employees, technicians from us, who had required to do the maintenance on site. So whenever there was even some little issues, it was always some Siemens technicians physically traveling to then the power plan, to the windmill, to make maintenance or repairing aspects.

What we've then achieved is the way to support customers who are on site and who are anyhow there which might not have the right understanding or experience based on their level of work with a remote way. So there is now a type of augmented reality combined type of maintenance way. There is a tablet which is combined with a helmet camera with inner devices, which is then leading a technician remotely. The Siemens employees, the experienced experts, are sitting somewhere in Siemens headquarters and guiding an onsite technician who's anyhow there through the whole process. There is the information about, I don't know, maintenance parts, part numbers, how to dismantle or mantle some components being displayed then in an augmented way into glasses, or then on the tablet, helping him and supporting him. This is avoiding a huge amount of physical travel and is therefore helping to protect the environment as well because of avoided emissions due to travel. That's just one of the examples exactly facing towards what you said.

Sarah Nicastro: I had that on the list as well. I guess the reason I'm considering those two different things is only because in the situations where it is actually essential to send someone, then let's make sure we're doing so in the most efficient way. So, there's two parts to that: make sure that we're eliminating the things that are not essential; and then make sure that when the visit is essential, that the person going is prepared and has what they need so that they don't have to go back and forth. The remote service and remote collaboration capabilities is another really good point. I think that comes in a few different ways. I mean, certainly there's the element of exactly what you said. Can we use remote assistance, augmented reality to help customers resolve issues that historically someone would go on site to do that are quite basic, that they're probably quite capable of. It gives them faster resolution and it avoids that travel.

We also see this though with things like, even internal to an organization. I'll give you an example. We did a podcast a while back with Munters who implemented remote assistance at the very, very beginning of the pandemic because their technicians could not travel. And so, this was their sort of business continuity plan. But what they ended up finding once they were using it is that when they used to open a new production facility, they would send all of these internal experts there to essentially do what was more of like a quality check. More of an assessment. Now they can do all of that remotely. So, they started to find all of these other ways where it was this technology that allows you to see what someone's seeing to annotate and to provide that type of guidance as if you were also there. There's a lot of situations where that can come into play and really alleviate the need to do as much in-person service and travel. So I think that is a really powerful, powerful thing.

The other thing is if you have technicians again who do need to be on site and they get stuck, They don't know how to complete the job. If you have that technology and they can get help from the back office again, you're avoiding a repeat visit. So, there's quite a bit there between the remote service and the remote collaboration tools, and then making sure that when travel is necessary, it's done in the most efficient manner. Those are things that have a positive impact.

The other one that came up at the event is a greener fleet. And so, what are you seeing in terms of trends of fleet selection and replacement and what opportunities there are there for people to make better choices?

Rainer Karcher: Maybe if I may, I could comment, first of all, to the first point which you came up with, which I 100% agree to avoidance and something to just be quite well aware of what is important, and if there is someone locally required, then to have it as much efficient as possible. One thing which is in my mind is prediction. What we do, in particular with IoT devices, our trains, for example, are producing a huge amount of data which has been used to predict when there is maintenance required.

What we are able to do with that is we can predict where at that moment a train is being physically located if we have to exchange certain parts, if there is a maintenance required. We are able to predict as well, what components might be required, what kind of replacement components might be required. So what we avoid is then that a service technician is in an urgency call somewhere, and then is required to, first of all, identify what type of components are required. Then as soon as he's there, and then he has to maybe order those replacement parts because they are physically located in the same area.

And so, this is first of all, a massive increase of timing. We are way less efficient if we don't have that opportunity. Secondly, it is having a great impact then in regard of maybe a second or a third type of travel back and forth to be able then to do that maintenance or replacement. If you can predict it with using data, with using IT and technology, this is helping in all various aspects. It is increasing the service quality. It is increasing the speed of maintenance. In particular, it is lowering cost. It is lowering efficiency ... not lowering efficiency, lowering emissions in regard of increasing the efficiency. So therefore, I think this is something which can help here as well, and is just a way which already exists. This is not artificial. This is not a future part. This is already something which is there.

Coming towards the question of fleet, indeed for us at Siemens, one of the biggest, biggest portions of greenhouse gas emissions is indeed fleet because we have service technicians and service cars running and for several reasons. Well, for sure, this is the typical type of diesel engines which are being used. One of the aspects is, for sure, electrification. Electrification of fleet and of fleet cars in particular is something which is definitely one of the ways to treat it, because as soon as I've electrified, I can make use of renewable energy as a source, and that is something which helps then to lower the emissions.

Is that the answer and the solution for everything? Well, I mean, that question is as much treated as the question is electrified cars the solution, or is it something which is even worse? Well, my perspective is electrification is the currently only way what we have as an alternative. We have to stop burning fossils in general. There is no alternative and there is no way in keeping what we have. The only way possible is then electrified. Well, this is quite harder, and this is maybe one of the big differences between the US and Germany. I mean, in Germany, the size of the country is just way, way lower and smaller. So with the current capacities of batteries, of electrified cars, we can cover most of our country.

I mean, in the US, some of the US states are the same size than what Germany is all about, so this is harder. Therefore, it requires, for sure, more solutions. Maybe there is some upcoming things with hydrogen, which might be worth looking into, but this is more a future thing. But in particular is I think worth looking into it from, again, the efficiency perspective, if you know which distances had been covered and for what reason you are able maybe to optimize it. Maybe you can just combine ways. Maybe you could just combine some of the trips back and forth and reduce the amount due to knowing what the whole situation is all about. And this is again requiring data.

Sarah Nicastro: It's a good point too, about predictive, and to your point, not only predicting issues and failures and getting ahead of that, because the more you can be proactive, the more you can plan intelligently and in a way that is beneficial. But also to your point, predicting parts needed and coordinating that into everything.

A couple more points to get through. The next one is related to servitization and the move toward as a service. This to me is super exciting because essentially what we're talking about is manufacturing things for lifespan and serviceability versus initial purchase price, which allows us to put more innovation into creating things in a more sustainable way. Then, if a company has shifted to as a service, any of the efforts they put into creating more efficiency, lowering the cost of service, et cetera, benefits them, benefits the environment, but the customer is essentially paying for the outcome.

Then the other part of this is around the circular economy where traditionally a customer purchases an asset, so let's take an HVAC unit. The manufacturer then provides service on that. But at the point that the customer moves to a different building or needs something else, the manufacturer has no visibility or control over what happens with that asset. So in and as a service model, they are able to swap assets in and out of different situations. They're able to put them back into use with another customer. They are able to remanufacture, et cetera. I think this to me is such a big area of potential of where service and sustainability can really come together.

Rainer Karcher: 100% agreed on that.

Sarah Nicastro: What are your thoughts?

Rainer Karcher: 100% agreed. I mean, to stick the example of cloudification and hyperscalers, hyperscalers are itself enforced to be as much economical optimized as possible because of cost efficiency. That's their main interest: to make a data center as much filled from a load perspective as possible to make it as much energy efficient as possible because of economic reasons. What we, as IT companies, are mostly consuming is then a service. So there is exactly the way from what you've described, a way from what we've done in the past with on demand, any kind of own operated data centers and servers to as a service models within the hyperscalers. What it created is a huge opportunity.

So this is theoretical values and very much the optimized way, but there is a number which is calculated from all of the hyperscalers. If you put systems from on-prem data centers into hyperscalers, there is a chance of reducing carbon emissions by 80%, eight-zero. I mean, this is just showing what the opportunity is all about. Exactly, as you said, there is so much more in it because of the responsibility, which is then shifted from the one who is consuming to the one who is providing the service. I think this is something, whether it's huge opportunities to take influence in so many different aspects.

As you just mentioned, that topic of circle economy, I would like to come up with another example. We are worldwide active as a company, 300,000 employees. That makes it 300,000 end user equipment devices. That means laptops, smartphones, any kind of equipment which is used on a day-to-day basis, which is exchanged after a series of time. At the current situation where we purchased the devices in most of the countries, we have to take care on refurbishment or recycling afterwards. If there is a as a service topic, which by the way is being worked on from our perspective at the moment for those equipment, I do have 100% secured that there is a partner which is reliable, which is documenting what he's doing in a societal and environmentally friendly way, what is happening with those devices after using them. And this is something which helps us backwards to the reporting aspect, which I've spoken about. So all the directives, they do have certain KPIs within which is focusing exactly on this. Refurbishment rates, recycling rates, which we have to document.

Secondly, I can't be ensured that there is not a partner, maybe treating things wrong and just making money out of. I do have, therefore, I think, a huge impact with as a service constructions exactly as you described that into various different aspects as well. It makes it a win-win for both sites, because I think this is something which is not only helping those who are consuming, but those who are providing the service the same way.

Sarah Nicastro: That's the thing. Going back to what I said a bit earlier, that's what I want to encourage people to do, at least initially, is look for those win-win scenarios. I mean, this doesn't have to be something that is just a cost. There are areas, if we're smart about this, that can impact both the business and the environment positively. Let's focus on those things at least, and the low hanging fruit, if you will. Then maybe as we make some progress, you can shift toward investing in a new fleet or what have you. Right?

The last thing on my list, and we've done a couple of podcasts on this. One was with bureau Veritas, one was with Tetra Pak, and it's around how those organizations are creating new service offerings for their customers around sustainability. Looking for ways to help their customers focus on their sustainability efforts. This obviously depends on what industry you're in and what types of customers you're servicing. But there is a potential opportunity to look at the option of increasing your portfolio of services by helping your customer base focus on these same things. So, go ahead. Were you going to say something?

Rainer Karcher: I was just going to, again, echo what you said and agree of what you said 100%. This is something I would like to particularly mention, but because there is so much more chances than challenges. I mean, the topic itself is currently on everybody's focus. It is a priority topic. Anyhow, it's quite prominently spoken about everywhere and there is huge, huge opportunities being created out of that aspect. It is something, if you treat that right, if you just be the one taking things serious, you can just separate from competitors, even in that remark as well, and show things which are then valuable. I am 100% then sure that this is a benefit, then not only for the environment, not only for the customers, but for the company providing that service then as well. This is something which is definitely more worth mentioning than just avoiding it and just bypassing and saying, "Well, I don't mind. This is not something I have to look into." I just wanted to agree with you.

Sarah Nicastro: For sure. Two more questions. Let's talk about why companies shouldn't wait until this is more of a mandate or a more urgent customer pressure to start prioritizing these things now.

Rainer Karcher: Well, first of all, there is, they already mentioned directives, which are quite quickly hitting us. If, and now, again back to Europe, look at the timeline, we have to start reporting by January 1st, 2024, which might seem to be far away. But we have to report numbers from 2023. If I do not start collecting those numbers in less than six months, I don't have anything to report at. This is the first. Secondly, the sooner I get into this, the more time I do have to be proactive and not just wait for someone to push me towards something and to enforce me to do something different. Third, I think it is quite of importance to show proactively that we are taking things serious in our enterprises, in our companies, in our surroundings, not only to show to competitors, but to show to the consumers, to our customers as well, that the current perspective is on priority aspects like the sustainability topic is, as I already mentioned.

And so, with that in mind, I think it is more than just one reason why it is of importance not to wait for it beside then the fact that this is once again my passion coming into this. If you take the latest IPCC World Climate Report, it says clearly and points to what the remaining carbon budget. So the emissions, which is able to be covered by the planet to still stick with one to five degree global warming. This is a timeframe of less than seven and a half years. That time window is closing dramatically and the longer we'll wait, the harder the cut has to be. The longer we wait with reducing carbon emissions and keep going what currently by the way is the case.

So after the pandemic, obviously, well, it seems to have stopped even if it probably still is there, but it has not been as prominent at the moment anymore. The emissions are going up at the moment and not going down. What we would have to do? And so, the longer we keep going, the harder the cut has to be. This is something which I think makes it worth looking into it already right now and not wait for it.

Sarah Nicastro: That makes sense. All right, so last question. Stepping away from the business conversation and tapping into more of your passion for this topic. For the folks that are listening who do share some of your passion and recognize the criticality of all of this, are there a couple of things you could point to that as individuals we could focus on to contribute and have a positive impact?

Rainer Karcher: Yeah, definitely with pleasure. Thanks for that question again, Sarah. First of all, don't feel alone. There is plenty of you and of us with the same passion, with the same awareness, and we're getting more. This is the first thing. And joint forces means get together. Even if you're at the starting, don't get disappointed, don't get overwhelmed with all the terms and all the specific areas to look into.

Secondly, don't get disappointed with the overwhelming amount of negative messages which are coming across. There is always a chance to be in a changing position. The change starts with ourselves, exactly as you said. There is sometimes just a little thing. So if you look into the electricity topic, I mean maybe unplugging devices instead of keeping them in standby is one of the first things. This is not influencing only carbon emissions, but your own wallet as well. Because, I mean, energy is getting more and more expensive. If you unplug, this is reducing. A number just to throw at, if you keep your laptop plugged in all the time, 365 days, 24 hours a day, this consumes, even if it's just in stand by $50 per year, just with a standby instead of plugging it off. $50 in my wallet or not makes a difference. This is one of the examples.

Same is with usage of devices. Is it required to exchange the smartphone every two years? Well, the vendors just want us to, and the marketing wants us to. Is it from an environmental perspective, the good thing? It's not. The longer we use it, the better it is for the environment. Then it goes just in the same way with making use of data. Nowadays data and taking the example of a smartphone, pictures are stored mostly in cloud, and it doesn't even cost you a thing so you just forget about it. You take plenty of pictures, you forget about it. They are stored somewhere. Well, the problem with that is we have billions of smartphones all over the world and everybody is using the same thing and doing that picture thing. Whatever is being stored, a single picture currently is with a resolution of modern smartphone, seven to eight megabytes.

If you just sum that up with that multimillion of pictures being taken day to day, there is storage systems behind. And one of the most increasing topic currently is data centers and the energy consumption of data centers therefore is increasing because of we are just not thinking about it. So get aware of what you do, get aware of what the current situation is, of what your behaviors look like, and change. As I've said, the change start with ourselves. If you change our behavior with the little things, all the little things combined make big things as well and make a big step. This is then getting, I think, the stone rolling and hopefully leading then to a bit more of awareness and for the next steps.

Sarah Nicastro: Okay, perfect. Thank you, Rainer. I really appreciate it. I have immense respect for your passion on this topic and your insights, and I'm so thankful for you to come and share with our audience and give them some food for thought.

Rainer Karcher: My pleasure, and always coming back if you want me to. Thank you very much, Sarah.

Sarah Nicastro: Excellent. Thank you. You can find more on this topic and many others by visiting us at futureoffieldserviceref.ifs.com. You can also find us on LinkedIn as well as Twitter, @thefutureoffs. The Future of Field Service podcast is published in partnership with IFS. You can learn more at ifs.com. As always, thank you for listening.

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On today’s podcast, we’re sharing a session from the Paris Live Tour with Jean Claude Jobard, Vice President EMEA, Marmon Link at Marmon Foodservice Technologies. Well-versed on today’s landscape, Jean Claude’s focus is on the reality that the pace of change is only increasing, and leaders need to become more adept at anticipating what comes next. He shares his thoughts on the four major trends that will shape what field service will look like in three to five years and discusses what it will take to be not only prepared but ahead of the competition.

Sarah Nicastro: So, Jean Claude, tell everyone a little bit about yourself, and your role and your journey, and then we'll get into our topic.

Jean Claude: Okay. So I'm background is mechanical engineering. I've been working in the packaging industry for 35 years, food packaging, cans initially. And then I moved to Tetra Pak and to Sidel. And over these 35 years, I spent more than 25 years developing service, service business, and organization. Different place of the world in France than Czech Republic or east Europe, South Africa, Italy, and then China and back to France. And I said, the first time we discussed, is service is what makes my heart beat. I'm really passionate about service and what we can do in term of development for our customers, but also for the company we are supporting.

Jean Claude: Now that was up to beginning of March and the beginning of March, I've moved to a different company, Marmon Food Service Technology that is not very well known. Well, actually, it's not known at all. It's part of Marmon group, which is a large corporation from, from US. And the Marmon Food Service Technology job is to manufacture premium commercial equipment for food and beverage. To be clear, if you go for lunch or dinner outside, most probably there will be an equipment for Marmon to prepare your food or your beverage, whether it is fast food, a canteen, or an institution or 3 star restaurant, we are providing equipment for these guys. And my job is to develop service for Europe, middle east, and Africa for, for Marmon Food Service Technology.

Sarah Nicastro: Okay, great. So we heard Roel's story, and we talked a little bit about, you know, managing the needs of today's business while also thinking a bit down the road, right? And we also talked a bit about how Munters was able to react adeptly to COVID with remote service and how that sets the stage going forward. When you and I first connected, Jean Claude, you said something that I really liked. So you said, "COVID has forced companies to change, but for some it's action reaction for others, it's become embedded." So explain what you mean by that.

Jean Claude: Yeah. So probably I will start with a story. In my previous company in 2017, there was a big show for the beverage industry in Munich, Drink Tech, maybe somewhere, you know, and we presented a remote video assistance with, glasses, I mean, the old technology that was fantastic picture that was 2017. Now between September 2017 and March 2020, what happened? Nothing. We used for the show, for the C suite, maybe to show to the customers how good we can be using these glasses or this remote video assistant. But we did nothing. Not a single dollar, or euro always, we sell in services supported by remote video assistance. And then COVID, guess what? From one day to another, every everybody wanted remote video assistance, we all need it right now. And all this kind of connection, by the way, the problem of cybersecurity was not an issue anymore.

Jean Claude: We just need remote video assistance. And that was COVID, a reality that in some countries where traveling was really impossible, and that was mainly Africa and Asia. We have been developing a lot of services for remote video assistance. Surprisingly enough was not too much about troubleshooting, but that was for other kind of services, supporting installation and commissioning, upgrades, supporting volume change. This is how we support our customer during that time. And that was mainly in this region. In some other region, as FSCs, our FSCs were still able to travel. Actually, we didn't use it so much. Now, we can travel again. And what's happening? The use of remote video assistance is going down. I want to see a technician. That's what some customers are telling us, but our cell force, our management, is not offering remote video assistance. And then we are back to normal.

Jean Claude: So what I meant with action reaction, this is what happened with many company. There is an issue, we react and then back to normal, we are back to normal. Why company have been implemented remote solutions far before, and some companies have really embedded this change in the way they're delivering service. Now there is a link with the previous interview, I believe is we are not selling technology. We are not selling digital. I mean, but we should not. But actually this is what we try to do. The way we work today is our digital team telling us, you know what, this is what we have developed. Now you go and sell it, but this is not service. So what we want to sell is services supported by digital technology. I used to say, digitally announced services. This is where we really bring value to customers, not selling RVR, such is nothing is just a tool to deliver better service to our customers.

Sarah Nicastro: Yeah. So, you know, going back to the storylines that I put up at the beginning resilience was the first. And I think that, you know, this idea of sure, you know, the circumstances of the last couple years were things that we had never imagined. So, just surviving it is one level of resistance or resilience. But I think the companies that have done the best have realized not only that they need to embed certain changes in their business, but embed change itself into their business. Right? So they're adopting a mindset that is different than before, which is we can't just think short term quarter to quarter. Yes, we need to meet the needs of today's business, but we need to be taking a longer view. We need to think about what the business of next year, 5 years will look like. And we need to be making change a part of the company culture. When you think about organizations that you know, are doing a good job of adapting, what sets them apart from those who struggle a bit more with that mindset?

Jean Claude: So I would say probably 2 key elements, and then I would add another one that is in a different category. But the first one for me is leadership. Leadership to set the vision. And I want to elaborate a bit on that one. And the second is courage, courage to implement the change because that is, it can be a bit working role and it's not continuous improvement. It's really a change. We will not work the same way than we did in the past. Setting the vision, we had a discussion with be actually quite some time ago about setting the vision. And I said, but you know what? Setting the vision. How can I imagine? I mean, you don't know what you don't know. So this is why I believe this kind of event are very interesting because some companies are far away in term of service development.

Jean Claude: And if in your company, you want to develop a service vision. You need to talk to other people that are far above of what you do. So leadership, this is about setting the vision and you need benchmarking. You need to talk to people to see what can be done. And then you do your own objective, your own vision for your company. Courage, because what we will do tomorrow is not what we do today. And they will be, there are a lot of resistances, the resistances of using digital tools, I'm going to lose my job. I mean, some FSCs are telling us I'm going to lose my job, or if they don't lose their job, but I will stop traveling. And traveling is 30% of my revenues, what will happen to me? So, and then there are people at management level who do not believe that these kind of changes of remote tools can bring additional value to the service.

Jean Claude: So this is really courage in making this change happen, selling it to the customers, by the way. And there is a third point that I thought about is product management. As an equipment manufacturer, we are fantastic as product in product management for equipment. I would say the digital teams are usually extremely good as well as packaging or the product, the development. From service perspective. What is it that we want to sell? What is it that our customer needs? We really need to be much, much stronger in term of product management to respond customer request today and tomorrow.

Sarah Nicastro: Mm-hmm (affirmative). Yeah, I think the leadership point is so important because oftentimes the top level leadership, not oftentimes, but sometimes they are the deepest rooted in the legacy. And that is where I see people struggle. You know, people that are in service leadership roles that see the potential for this change, but they're, you know, faced with leadership that doesn't share that vision. And that is a really difficult position to be in.

Jean Claude: Yeah. One comment on that one. In many companies that have recognized that service can bring a lot, not only revenues, but margin is coming from service and only from service. You do not make any money with any more money with, with equipment. Everybody's saying service first, service first, service first. Now over the last 2 years in a previous company, I mean on a quarterly basis, you have the presentation of results. And then a few presentation from other people. There was not one single presentation from service. We never listen to a field service engineers, not for sales guy selling services. So this is where management needs to walk the talk. I mean, if services first, services first, but at the end of the day, when you sell equipment where you talk about still about 10, less still about technology, not so much about service. So we really need to develop this. This part is despite really walking the talk.

Sarah Nicastro: Mm-hmm (affirmative).That's why I said earlier, it's a significant identity change, right? And so there has to be a willingness to change, but then there's all these layers of the business that that identity is a part of that you have to start reflecting upon and changing. Okay. So Jean Claude, we're going to talk about some of your sort of, I won't say predictions, but areas of focus for service organizations in the coming years. So we have 4, the first is speed of reaction.

Jean Claude: Yeah. Well actually all this thinking process, start with a discussion with one of my colleagues and saying, well, we know how we deliver field service today. It's what it is, it's not fantastic, but how will it look like in the coming years, what are the customer needs? And then the first one is speed of reaction. Years back, 25 years back. One of my FSC told me, you know, that was great. I could really learn on the job, the equipment, I got expert learning by myself, learning by failing at customer. Because at that time, if you took a bit more time sorting an issue at customer, that was okay. Now when it's summer season, when you have a beer production line that is stopped, I mean, you cannot wait one day. I mean, it does to start back now. So speed of action is in essence, absolutely.

Jean Claude: This is a clear need. And this is where we linked to remote support because in our business, there is no way you can have all the right resources, at the right place, at the right time. It's just not possible. We're covering the world, 500 technician. It doesn't work like that. I'm talking with that's my previous job, not the new one, it's coming with other challenges. So it's not possible, but mixing probably remote support and local resources that can be your resources or resource from an agent from another supplier, one not from another manufacturer. You can probably imagine irate solution that will bring a lot of value and will help you to support very, very quickly to have good time for reaction.

Sarah Nicastro: Yeah, so you're talking very specifically about speed of reaction in service. I think the other aspect of this though, is speed of reaction as an organization to demand, right? So if we are in these cycles of, you know, I don't want to say product development because we're talking more about service, but development of new offerings, new value propositions, you know, those can't take years, right? Because the needs of the customer evolve and we need to become more agile at meeting those needs and pivoting to meet different needs, etc. So speed of reaction is one. The second is cost pressures.

Jean Claude: Yeah.

Jean Claude: Well, cost pressure. Guess it's a surprise for no one. I mean, customers are looking for cheapest option. And when you charge 1000 Euro for one day of FSC, you better bring value otherwise, and they will never call you back. So for sure they will want to reduce cost as well as we, as a service supplier will want to reduce cost. Now, if you think about our business model, as it was a customer is requesting FSC.

Jean Claude: So time of reaction, I mean, it will not lift today, anyway, probably will live only on set on Monday. Monday will be traveling and then you will start working at customer Tuesday, Wednesday, Thursday, maybe, and Friday will be traveling again. So the customer is paying one day traveling, which is not bringing any value. So we have to find ways to do that. And again, we will still need people to work on machine with banners, with screwdrivers. There is no doubt about that, but maybe if we can, again, combine local resources, I mean, average skills with high skills on the back office using a remote solution. I really believe we can have a winning solution to serve customer better and quicker and cheaper.

Sarah Nicastro: Yeah, it's a good point. I mean, when we talked about Munters’ use of remote service, we talked a lot about the customer facing use of that technology. And, you know, there is a real value proposition to using remote assistance or remote tools to allow some of your experience talent to maybe they're tired of traveling and they don't want to be on the road anymore. You know, and maybe one of those, you know, older experienced technicians can work from home or work from an office and assist 5, you know, green, newer technicians that are in the field. So it is, I think, part of the solution to how we navigate the talent challenge. Now, Jean Claude, so cost pressures have always been an issue, what do you think will change between now and 2025?

Jean Claude: Well, for me, that’s two elements. One we touched on in the previous discussion that's field service, engineers availability. I mean, it's not very attracting as it is today. And if we start thinking about how will the future look like from field service perspective, the resource was a key element. And from resource perspective, we say, if you, if you hire a new FSC today, our experience is after 6 to 8 years, either will be FSC forever, or you will move to a different position. This is kind of trigger. But we need people that will stay, we need people with experience. And you know what, with all these digital tools for the guy that is out of university, I mean, working with computer, with screen, with smart glasses, that is life. So what if we could support customer remotely with all the tools we have today, I'm talking about this technology, but you can measure performance. You can monitor performance remotely, you can monitor energy consumption, you can monitor predictive or condition based alert. So there is a lot you can do with a screens and a guy in the office, that will drive intervention to customers. So we believe, if we really embed this technology in our way of working, that will be a way to attract new talent, different profile than in the past, but new talent, for sure.

Sarah Nicastro: Mm-hmm (affirmative). So that, yep. Go ahead.

Question from audience: Yes. You said also that frontline would be less used and our client and one distance remote would both things would be more attractiveness of our frontline people, which is again at stake. And it's what we, because yes, we play more with digital things that we at the end of the day, and coming back to what Jean said first that they are old. They will leave us with all their right. We need, keep them as much as compliant and more and more with offline and all the sophist complex things that we are great to get. Not it's great. Cause we down them.

Jean Claude: Yeah. I think one of the difficulty for FSCs is also traveling. I mean, if you have people traveling from Monday to Friday, every single week, you know, after 20 years, that more than 50% got divorced, they have difficult life, but they will never change the work. This is what they like to do. And yes, it's difficult to find people. Now, if you look at proximity at any kind of place in the world, if you look at all the industries, there are probably many different companies, many different businesses that need the same type of skills. So what if we share resources with organization? Exactly. Either through field service, engineers, suppliers, they're big company, supplying field service engineers, but why not sharing resources with other company? Because some basic stuff, mechanical stuff, guys can work on many, many equipment, electrical as well. Automation is another story. This is why we need the backend, but for basic maintenance, I'm pretty sure we can develop this model.

Sarah Nicastro: I think, you know, depending on the business too, there's almost a segmentation that needs to happen with the work, right? The customer facing work. Because we're talking about shared resources that can do the technical aspect of the job. But when you look at the other part that we've discussed, which is more of the trusted advisor role, that's almost a different path of how to leverage the talent you have and what the relationship with the customer looks like. Right? So the next generation of field service engineers, anything else to comment on there? So we're talking about potentially shared resources, what else?

Jean Claude: I think one more point is sustainability actually didn't came to my mind actually, but then discussing with one of our field service engineers, external supplier, he said, you know what, customers start to talk about zero emission field service. What does that mean? The oil emission field service. And it means traveling. You forget it. I mean, because this is a key limit. We started a line in Japan, during the COVID period in a normal, it was a new technology for this country. So in a normal way, what we would have done, would've probably taken 10, 15 field service engineers from Europe flew them to Japan. Impossible. So what do we do? Remote support.

Jean Claude: Skills people, not with this technology, but we supported through remote tools during the installation, and it work well. So, I mean, from sustainability perspective, not even talking about cost perspective, the impact was a measure. So we need to think about all companies today have objective regarding sustainability. One day or another, field service will contribute. So we have to start thinking about it already.

So, and when you talk field service engineers, traveling is a big part. So if we can avoid flying, well, you contribute to a better world for sure. Then you will have resistance from FSC because I mean, going to some countries, it's quite nice. Actually. They love traveling for some of them.

Sarah Nicastro: Someone asked earlier about as a service and migration to that model. And I did a podcast not too long ago with Kaer from Singapore and they've transitioned entirely to cooling as a service. And it was a really interesting conversation talking about the ways that, as a service model helps sustainability. So all of the kind of intersections of how transitioning to that model helps sustainability initiatives for the company and for the customers. So it's a really interesting conversation. All right, so Jean Claude, you recently changed roles, as you mentioned, and it's different and you were in your last role for quite some time. So what has struck you so far in terms of the differences or the similarities in, you know, what you're going to be tasked with?

Jean Claude: Well, first of all, similarities, we talk about efficiency from customer perspective, efficiency, availability, and total cost of ownership. This is the same even so the players are completely different. What is very different is the level of maturity in term of service. I mean, in the past probably company, we're doing 40 to 45% of the turnover on service, here we are less than 10% probably. So the level of maturity is not the same. We are rather taking spare parts order rather than selling spare parts and not saying it's good to sell spare part by the way. But we are taking order rather than selling.

Jean Claude: And then the complexity is different because we move suddenly. Or I move suddenly from servicing multimillion euros packaging line to equipment that costs between 5 to 25,000 Euro. So you can imagine even a 10,000 Euro equipment, there is no way you will sell one hour of technician for 1000 Euro that doesn't exist. We are out of market. So you have to find other ways to do that. And then the install base is not the same. On one side, you have an install base that is pretty much monitored. Well, you know where your equipment, you know, your customers. On the other side, you have thousand, hundred of thousand of equipment in various places that you don't monitor very closely. So the challenge would be probably that one.

Sarah Nicastro: So despite the differences, what lesson did you learn in your time in your former role that you think will help you most in your new role?

Jean Claude: A few years back, one of the supply chain head of the company I worked for told us, during company meeting efficiency has no limit and externally believe this is applying to service as well. Service has no limit. And when you see the different level of maturity from one company to another, and even the one that are on top today, it's not the end. It's only the beginning. So it is so much we can do. And it's not only it's of course about making money. This is what we're paid for, but this is also about delivering service to our customers. So if you listen to your customer properly, you really embed in your development. What they need in there is no limit. There is no limit. Definitely.

Sarah Nicastro: I like that a lot.

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Live Tour Austin Highlights

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Live Tour Austin Highlights

That’s a wrap! Sarah shares an overview of the final Future of Field Service Live Tour event in Austin, Texas, and tells listeners what to expect next.

Sarah Nicastro: Welcome to the Future of Field Service podcast. I'm your host, Sarah Nicastro. Well, everyone, that is a wrap. Last week was the last of five future of field service live tour events for 2022. We ended the series in Austin, Texas and went out with the bang with another great event. So if you follow along the podcast regularly, you will know that this year is the first time we've taken the conversations we have here out into the real world to take this platform and turn it into a community. So we visited Paris, London, Frankfurt, Stockholm, and just ended in Austin.

Sarah Nicastro: So I just want to give you a little bit of a recap and talk about what you can expect next in terms of the content in the events and the future events. So we started the day with Max James. Max is an Air Force Academy graduate, pilot who was shot down twice in Vietnam, Fortune 500 entrepreneur, an author of book, The Harder I Fall, The Higher I Bounce. You might remember Max from an earlier podcast episode, 148, where he joined to talk about some of the lessons he shares in his book, and it was really fun to have Max join and hear some of those stories live.

Sarah Nicastro: He has a very interesting history and background and a lot of lessons that he's learned along the way that he's now not only put into his book, but came and talked with us about in person. So a lot of that was around resilience and talking about how resilience as an individual leader is necessary for resilience as a business. Talking about how leaders have to understand that failure is part of success. He talks about a cartoon that he shares in his book that is a knight who is very beat up, and the caption says, "Some days the dragon wins." And so we had a conversation with all the other folks in the room about how there have been plenty of days over the last few years that the dragon has won, but how we all have to keep on going and persevere to succeed.

Sarah Nicastro: So next we welcomed Sasha Ilyukhin, who is the SVP of customer service operations at Tetra Pak. And we had a conversation around Sasha's current focus on human centricity. We talked about the reasoning for that and the understanding that while customer experience is obviously incredibly important, that starts with the employee experience, employee engagement, employee satisfaction, and making sure that we understand that we're human, our employees are human, and we all need to relate to each other in a human way.

Sarah Nicastro: So Sasha talked through what that focus looks like for him now, some of the areas that he's working on, including engagement and recognition, mental health, how technology plays a role, how one-on-one communication and the impact that mid-level management has, all sorts of different things.

Sarah Nicastro: So I shared with the group that I think this is an area we'll see increasing focus on over the next few years, because I think that as we went off on our quest to provide the ultimate customer experience, sometimes we've overlooked the importance of the employee side. So that was a great conversation.

Sarah Nicastro: We then moved on to a panel discussion with Roy Dockery, who is the vice-president of field operations at Flock Safety, and Katy Chandler, who is the vice-president of learning and development at DuraServ. And we talked about everything related to tackling today's talent challenges. So again, if you follow along, you know that the talent gap is something that has come up in every city that we visited on the live tour. It comes up very regularly in podcast conversations. So we talked about the whole continuum of this, from how are we recruiting, starting with how are we clarifying exactly what we need for each role? Are we holding ourselves to outdated standards? How are we communicating what those roles look like in a way that is compelling for today's potential employees? How are we improving diversity of applicants and ultimately hires? All the way through to obviously learning and development, which is Katie's area of expertise, and talking about how, as we bring on people with more aptitude but less experience, how that evolves what we need to do in terms of training, learning, and development.

Sarah Nicastro: We talked about retention and everything that falls into that category and how sometimes when we talk about the talent gap, we focus a lot on the challenges around getting new people in, and again, can overlook the focus we need to put on keeping the good people that we do have. So it was a really interesting conversation as well.

Sarah Nicastro: Then we broke for a little bit of networking and lunch before we welcomed Sonya Roshek, who is the vice-president of field services at B+T Group. Sonya started her career in the military, then got into telecommunications, now running field services at the VP level, and has found herself often one of few if not the only woman in many male dominated spaces. So we talked a lot about the experiences she's had and what she's learned from them and what she would want folks who are focused on bringing more women into field service to think about from those experiences.

Sarah Nicastro: So I think it's a topic that is very layered and there's a lot of different things to address, but I always think that there is power in hearing an individual's story and thinking about what you can take from that and increase your perspective with.

Sarah Nicastro: We finished with Gyner Ozgul, who is the president and COO of Smart Care Equipment Solutions, talking about resilience, resurgence, and re-innovation. So we had a conversation with Gyner about his personal development as a leader over the past few years. His role has expanded significantly. Smart Care is growing very rapidly, and of course, that was all happening in the midst of the pandemic. So we talked with him from an individual leader perspective about how he navigated that. And then from a business perspective, we talked about some of the steps that Smart Care took during the pandemic to have business continuity. What the resurgence has looked like and some of the challenges that they face in that, including issues with supply chain and parts availability and how they're navigating that, and how they're resetting innovation. So how they are getting back to the longer term potential and view they have for the company that was set pre-COVID and a bit disrupted. So that was a great session as well.

Sarah Nicastro: After that, we had a group think where we came together and just talked about a variety of issues and allowed people to weigh in on one another's questions, and finished the day with some fun Texas style happy hour and networking. So it was a great day. All five were great. Someone asked me not too long ago which event was my favorite and I said, "That's a very unfair question." I do genuinely mean that. They were all different. Obviously that is the nature of having people share their individual stories. Each story is unique. So that was really a fun experience to hear so many different perspectives. And they all had different focus areas, different points of value.

Sarah Nicastro: I would say the common thread is really seeing firsthand it being reinforced how important community is. I think that service leaders tend to be very, very busy, often overworked, and sometimes overwhelmed, and taking just a day away from the day-to-day operations or the grind to sit down and engage with people that have the same challenges, that are working towards the same opportunities is not only comforting but inspiring. So it was an honor to be able to bring that to life in those five cities, and I'm very grateful for the opportunity to do so.

Sarah Nicastro: And what will happen next? So one thing is now that I am going to have at least a little break from travel, I can dig into some of the specifics of the content shared during the events and look for ways to share that with you all. So whether that's through articles or releasing some of the sessions as podcasts, I want to make sure that rather than a quick overview, you have an opportunity to get some of the detail as well. So stay tuned on the podcast and on futurefieldservice.com or on LinkedIn for that.

Sarah Nicastro: And we haven't completely briefed since Austin, since everything ended, but we have connected quickly as a team. And at least at this point, we do plan to do these events again in 2023. I don't know exactly what that will look like, but as soon as I do, I will certainly share with you. So if you weren't able to join us in 2022, hopefully you'll have the opportunity to do so in 2023.

Sarah Nicastro: So thank you again so much to the speakers that came to share their insights in each city, the attendees that came and engaged and connected, the team that helped me plan these events, Polly and Joanna, for the incredible work that they did on the logistics and execution. And of course, a huge thank you to IFS for sponsoring these events and allowing us to bring this type of community and thought leadership to these five cities without having to charge a fee for folks to attend.

Sarah Nicastro: So thank you all. Stay tuned for more to come at futureoffieldserviceref.ifs.com. Follow us on LinkedIn. You can also find us on Twitter, @thefutureoffs. And as always, the Future of Field Service podcast is published in partnership with IFS. You can learn more at ifs.com. Thank you for listening.

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Husky’s Move to Predictive Service

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Husky’s Move to Predictive Service

Sarah welcomes back Tony Black, President of Service at Husky Injection Molding Systems, who was this podcast’s very first guest when he was with Otis Elevator. In his new role, Tony shares with Sarah the catalysts for Husky’s move to predictive service, what’s enabled the company’s progress thus far, and what the future holds.

Sarah Nicastro: Welcome to the Future of Field Service podcast. I'm your host, Sarah Nicastro. Today we're going to be talking about Husky's move to predictive service. I'm excited to welcome back to the podcast, Tony Black, who is currently the president of service at Husky Injection Molding Systems. Tony, welcome back to the podcast.

Tony Black: Thanks, Sarah. It's great to be back. There's a lot to talk about. I'm really looking forward to a good discussion today.

Sarah Nicastro: Excellent. So, for those of you that haven't followed along since the beginning, I know we are quickly approaching 200 episodes of the podcast. But Tony was actually my very first podcast guest, so episode number one, which makes it very easy to remember. And at the time, Tony was with Otis Elevator, and has taken on a new role since, and I'm sure been up to a whole lot. So Tony, before we dig into the predictive service topic, tell us a little bit about what you've been up to the last couple of years.

Tony Black: Yeah, sure. So after a long career at the Otis Elevator Company and a successful transformation of their service business, that's what we talked about the first time, I decided to join another really great company, and also a leader in their industry, Husky Technologies. And like Otis, Husky has truly enabled the industry through technology and innovation. And it's really part of the DNA of the company.

And so, I joined here as the president of the service business. And what I found was, we're already a really good service business with talent founded on high responsiveness, really strong global infrastructure of technicians and service centers, probably the best in the industry, and really close to our global customer base. But the real opportunity was to transform our service business with more predictive and proactive solutions, and really all centered around delivering on our commitments to our customers. And not only delivering on those commitments, but then maintaining those commitments through the life cycle of our product. So, that's what I've been up to the last few years. I'm really enjoying it and looking forward to talking to you more about it.

Sarah Nicastro: Good, good. So, moving to a more predictive model. So we're going to talk a bit about that. Before we do though, can you talk a bit about the drivers for the move to predictive? So, what are the customer needs that you're witnessing? What are sort of the expectations on service that are prompting Husky to evolve into a more predictive approach?

Tony Black: Yeah, I think, let me just tell you a little bit about our customers and how they operate, some of the dynamics that are happening. Our customers operate their facilities 24/7 for the most part. And they're producing very high volumes, we're talking in the millions per day or billions per year. So any performance erosion or unplanned downtime is really unacceptable. Just can't have it. So you kind of couple that need with complex technology, there's material changes happening in our industry, there are new customers coming into the industry, and then there's a skilled talent shortage as well. So you put all that together, and our customers have really come to us and said, "We really need your help to help us maintain our performance with all these dynamics happening, but please do it in a proactive way. We can't afford to do it the old way."

Sarah Nicastro: So, the predictive service offering at Husky is called Advantage Plus Elite. So tell us some of the details about what the offering is, how it works and how this kind of changes the way that you interact with your customers and provide levels of service.

Tony Black: Sure. So, Advantage Plus Elite, but we also call it We Call You. So actually, a lot of our customers just call it, We Call You, because that's what we do. And I'll explain how we actually do that. But it's a connected solution. It's powered by the technology I described, we call that NSM. And NSM is the analytics and the tools inside and developed by a full-time team of SMEs here at Husky. And they've identified, through their experience, the key variables to monitor, the tools to use to detect trends, and the dashboards to monitor, and then proactively see the potential issues, but also do this at scale.

And so we launched this officially about a year ago, a little over a year ago now. Since then, we've stood up monitoring centers here in Bolton, Canada, in Luxembourg, in Shanghai, Mexico, Japan and Brazil. They're all staffed with monitoring center specialists. And when those specialists, using the dashboards and the tools, detect a trend or a problem, potential problem, they issue a We Call You to the plant and they issue it in local language. And this is all done 24/7. And that We Call You, it explains the issue, and then the solution is also explained. But the ultimate solution comes in the form of, either we give the customer enough information where they can resolve it themself. That would be one use case. The second is, we actually are connected and we resolve it remotely. And then the third is, we send in an informed technician and sometimes even send the part in advance as well. In all of these cases, we then monitor the solution and verify that we've really found the root cause.

So our customers really see the value in this. In just one year now, we have over 200 service contracts across 20 countries. We've issued well over 2,000 We Call Yous, and there's a lot of value in those We Call Yous. We estimate, directionally, for every We Call You, about $10,000 of cost avoidance or of lost production capacity. Now, we balance the technology with Husky people, people power. Each contract has a dedicated program manager, and that program manager facilitates a weekly and a monthly 30 minute standup meeting with the plant to go over the prior week’s We Call Yous. They use a standard weekly performance report showing the trend of unplanned downtime, OEE, energy usage, and so on. And again, these things are critical because of the nature of the way they operate.

So with that weekly meeting, it's actually a weekly and a monthly, combined with the technology, our customers, they're hardwired into the Husky knowledge base, if you will, hardwired into our SME base 24/7. And that, combined with the technology, has really proven to be powerful, and our customers see a lot of value in it.

Sarah Nicastro: Yeah. Okay. Just a couple points to clarify. What does NSM stand for?

Tony Black: It's new service model.

Sarah Nicastro: Okay. And then second question is, so it's called, We Call You, but is it just a call or is it a video interaction? Is it an augmented reality interaction? What is the format of communication in that initial outreach?

Tony Black: So the initial communication with the We Call You is in the form of an email, or it can be different media to get it out. But it's in that form. It's a kind of a standard format that we use that is pretty concise. But then the follow up work can be an augmented reality call. It can be a connection to their system where we're actually troubleshooting and solving the problem remotely. But the initial We Call You, it's really a one page communication explaining the problem, showing the problem actually with the trends that we see, and then the probable root causes of the problem.

Sarah Nicastro: Okay. And then you mentioned that for every We Call You, you've noticed, on average, a $10,000 cost reduction. So that's a $10,000 cost reduction for the customer or for Husky?

Tony Black: For the customer. It's really a cost avoidance. So, for example, if the system, for some reason, is using excessive energy, and then there's a problem and we detect that early, that's a cost avoidance of energy cost. Or if the system is using too much material to produce the solution, just the volume, it really adds up quick, so that's a significant cost avoidance. Or if we prevent a shutdown, an unplanned shutdown, again, with those volumes, and our customers, even more so today are really at capacity, they can't make their volume and they can't sell the product that they need to sell. So they've lost that revenue, if you will, that they would be getting. So it's really significantly beneficial for our customers.

Sarah Nicastro: Okay. And then I wanted to talk a little bit more about the program managers. I like your point around the balance between technology and people. I think this is something that we see people trying to land on, what's the right mix? So I was at a conference at the end of April, and there was someone on a panel there that was very honest in saying, we went way too far into automation and AI and saw our customer satisfaction scores decrease because they were missing that human connection. So we know that both are important. It's important to use the technology to work smarter and have these more sophisticated capabilities, but it's also important to customers to still have that human connection. So I think it's really fantastic that you are aware of that. And from the very beginning, Husky is working to align those things really well. So the program manager though, did they exist before this program, or is that something that is new and intended to sort of build that balance between people and technology?

Tony Black: Yeah. It's a new role, Sarah. Actually, I'm thinking about what you were saying. So there's really, I would say, three new roles in this solution. There's the program manager, there's the monitoring center specialist, and then we have connectivity specialists who are not centrally. Actually, we try to have the program managers able to speak the local language so they're around, located in different countries. Some are in the centralized, but can speak the local language. We do have the critical centers for the monitoring centers, with the monitoring center specialists. And then we have connectivity specialists who are also located closer to our customers who can help get our customers connected, that initial connection, and get the contracts up and running.

But the program manager isn't, back to your question, it's a new role. Actually, it's really nice to see because it's creating new opportunities for employees inside Husky. We have a really strong group of program managers, a complete cross section of people with different backgrounds, all have good program management skills, but a real high energy group, good with customers, but also understand how to work with the SMEs. They're really, if there's a problem, and through our initial monitoring center specialists we can't get to the root of it, then we tap into the Husky SME base. And they know how to get that done.

So again, that weekly meeting, it's part of the people factor. Our customers love that weekly meeting because it's efficient. It's 30 minutes max, because they don't have the time for meetings. So 30 minute max, but if they kind of see what's happened in the last week, we give them suggestions on ways to continue to improve. And if there's an issue or a question, they get it answered right in that meeting. So, I was concerned, could we scale that? But with the tools that our NSM technology team is building, and with the standardization, we're scaling it. That NSM is actually developing modules of technology. We're on module six now. So those modules include analytics, but also tools to help allow us to scale. And so, as we develop more, release more of these modules, we can even do it more efficiently.

Sarah Nicastro: Yeah. So I think it's really interesting. And I want to give you the context so you don't think I'm trying to get you to answer a question that gets layered. But the reason I think this is so interesting is because when we started talking about the technological capabilities that allow a lot of what you're doing, remote diagnosis, remote resolution, customer remote resolution, et cetera. You ultimately get to a point where you are talking about less onsite work. Now, I think this is all very positive, but there's a couple of topics here that start to make companies uncomfortable because it just requires change. One is the business model shift. So if you've always billed customers for onsite time, then how do you evolve towards something different? That's one. The second is, you start to get into technicians fearing that their jobs are going away. And I always say, there aren't enough technicians. No one can hire enough technicians right now. We don't need to worry about people being out of jobs. It just changes the way the work is done. It's not going away. It's just shifting.

And so, I just wrote an article, I think, a couple of weeks ago about one of the opinions I have is that we obviously need to let go of some of the, well, this is how we've always done it, because that's what keeps people held on these challenges. So we have to kind of let that go. I think there could be a lot of value in segmenting service and even technician work. And so, to me, it sounds somewhat like this is where you're going, which is, let's say over time as this solution scales, and you can correct me if I'm wrong. I'm not putting words in your mouth. I'm just thinking out loud. Let's say, over time, you do have significantly less onsite work. But you, at the same time, are increasing this program manager work.

These customers want to not only have the relationship but, as you mentioned that's very, very important, the knowledge. So it becomes less a transactional, we come to you, we fix X, and more a partnership of, yes, if something needs fixed on your site, we'll be there. But we're providing you all of this value in the form of information and uptime. And they want, to your point, a human being to have that relationship with. So you have program managers. And then technicians, hypothetically, if they didn't want to be that people person, some will, some won't, they could be the connectivity specialist or the remote specialist that you mentioned.

So, I just think it's such an important conversation to start looking at how companies are tackling those two big roadblocks everybody puts up, well, we can't do that because X. Well, you can, and ultimately you're going to have to. This is the future of service. The future of service is not field service, it's service. And we need to look at it more holistically in terms of what's the overall customer experience. So I just think this is a really fantastic and really important conversation to think about. If the onsite work decreases, that's fine, because these new roles are being created that allows you to take that same talent and give them different futures within the business. So that was a lot of words, but what are your thoughts?

Tony Black: No, no, I think you're spot on with that. I guess just a couple things that, for sure, I think it's a fallacy if you think you can just kind of have this magical AI and bots and automation, auto emails. Success there is going to be super limited. It's not going to work. It doesn't work. So the other thing I would say is, like you said, there is always going to be a requirement for a tech base close to our customers period. That is the reality. And so, the type of techs and the number of super techs you need, the mix is going to change, but that will always be needed. And again, what we're doing is we're creating more informed technicians. And techs like that, they like having that information. So that's one thing I would say, Sarah.

The other thing I would add again, and we're seeing it real time playing out, these new roles, they're being filled by technicians. Not just technicians, others as well, but there's a good mix of technicians who are really interested in doing this and they like it and they're enjoying it and they're growing. And this is really growing. So it's creating these nice jobs for our techs and others in Husky. But again, we still need technicians. So those that want to stay out in the field, we need them as well.

Sarah Nicastro: I just always want to put everyone at ease. It's like, okay. On the technician thing, there's ample opportunity. There's ample opportunity for onsite work, whether you call them program managers or customer success. And not just that, to your point, you mentioned three new roles that have come up as a part of this program. So I always just want to disarm everyone of, no one's taking jobs from anyone. In almost every conversation I have, there is more customer facing work to do than there are people to do it. So no one needs to be concerned that anyone's going to be out of a job. It's just a matter of being open minded about what it could look like in the future, instead of being tied to what it has looked like historically.

And then on the business model part of it, I always say that if you feel you can't sell a new business model to your customer base, you haven't defined what the value is to them. You're thinking about what the value is to your business, because if you can do it right, it benefits everyone. And I think knowledge is such an important word that you brought up, because it isn't just about delivering the service Husky's always delivered, but in a different way, it's about delivering more than what you've delivered based on the information you're gathering with analytics.

So it just seems like you really are onto the concept, which is, you're becoming a knowledge partner. You're not just having a weekly check in and saying, "Okay, well, we identified three issues. They were fixed before they became a problem, so happy days." You're also saying, "Oh, and we noticed this. Oh, and the data shows us this. And, oh, have you considered this?" That's where the big term everyone's working toward is trusted advisor. That's where that comes from. It's about thinking about not just what service can we provide, but what knowledge, what insights, what value can we share with our customers about their business?

Tony Black: Yeah. So it's truly a partnership when we kick off that first kickoff. The customer name's a champion that is a champion of this solution, they work in the factory. But those weekly meetings, a lot of times it's almost like a just in time training session, actually, very effective. More effective than any training I've ever seen, because it's really kind of point of need and very effective. And again, it's about the customer having access to the Husky genius, if you will, and the SME base. And that's why, again, as I say, it's a partnership. We do tailor the solution a little differently for a new customer versus an existing customer who's more experienced. As I said, we do have new customers in some new markets. And in those cases, we do provide more training. Even in addition to the analytics, we provide toolkits, spare part kits to get those new customers kind of end to end covered along with the commit and maintain portion.

Sarah Nicastro: Yeah. That makes sense. Now, Tony, how would you say that this and Husky's vision for the future aligns with industry 4.0?

Tony Black: So it's fully aligned. But what I like to explain is, it's really beyond in industry 4.0. A lot of what I've seen in 4.0 in a factory setting is about predictive around hardware, bearing life or a pump life or a motor life. The advantage plus elite solution does that. But the way I like to explain this is, we look at it like a pyramid. And if you think about the top of the pyramid, it's the product that we're making for the customer, our machine is making for the customer, and the master process on how that product is made. If you go down to the bottom of the pyramid, it's the hardware, those bearings and pumps and motors, it's the hardware that makes up our system. And then if you go up higher in the pyramid, then we have subsystems for our system. And then you go up higher, and you have controls and drives and tuning. And then eventually, at the top, is actually the product that we're making with the master process. That's the pyramid.

And then outside of the pyramid, there's a lot of external factors. There are things like shift changes that are happening, or temperature or elevation pressure, all these environmental factors that are happening. The NSM technology is built around really looking at the entire pyramid from the bottom to the top, as well as the environmental factors. So, I don't know how clear that explanation was, but that's why I think it really is unique, this solution, and really industry leading, because it's not just focused on the hardware, which is important, but there's a lot more that needs to be kind of monitored in a proactive way.

Sarah Nicastro: Yeah, that makes sense. I think there's a lot more discussion today around ecosystems, and not only thinking about, if you manufacture a certain thing. Like, not only thinking about that thing, but thinking about the world in which it operates. And sometimes, again, that can be scary because it can be more work to take into consideration anything outside of your own pyramid. But ultimately, that's where a lot of the increase in value comes from, because your customers have to think about everything outside of the pyramid. So if you are not thinking about those things and they are, you can only provide a certain level of value. If you share that thinking with them and can figure out how to help them with some of those external factors, or what have you, through insight, knowledge, et cetera, then you can significantly increase the potential of your own value proposition.

And it goes back to this holding tight to the legacy of the business. I mean, that's really what we all have to move beyond because the companies that are doing that intentionally or circumstantially are falling behind the companies that are willing to not stick to the way it's always been, or the good old days, or the past successes. So Tony, it's really interesting to hear the journey Husky's on. And I think there's a few points you have brought up that I think just hit the nail on the head in terms of what it takes to get this right. I'm curious if you had to share a piece of advice with listeners that have the goal of going down the predictive service path and doing it the right way, what would you tell them?

Tony Black: So I'll try to keep it really practical and pragmatic, that's usually the way I like to. I like to hear things that way. So we talked a lot about the technology and the people, I cannot emphasize that enough. That is just so important. And it is a change, so it's important to have those discussions with your organization and with your technicians to make sure that they understand that, actually, we're going to create job opportunities for them, career opportunities. We're going to give them new tools. Because our technicians, more than anything, they want to deliver on the promise to our customers. So if we can help them do that, they're happy and they're motivated and engaged. So, critical to balance that internally and externally.

The second thing is, I talked about the NSM. So my advice there to do that is to create an internal and fully dedicated advanced technology team to build those analytics and the tools that I talked about. Do it with your own SME knowledge. It'll be much more efficient. It'll move faster. It'll be much more impactful as well. Use Microsoft for your cloud, use companies who are experts in edge technology for your edge device. You don't need to go develop that. But my advice, again, is use your own. And it has to be a dedicated team of really strong SMEs. That's what we have. And really, it's instrumental. And it's been instrumental in, again, coming up with insights that really are impactful.

And then the third thing is really about just a lot of focus. As you kind of go down this path, it's really easy to start thinking about a lot of things that you want to do and can do. And what can happen is you just kind of get paralyzed and you don't really get anything done really well. So my advice here, very specifically, is just focus on several key insights. Just one good insight can provide enormous value for our customers. And it builds you. It builds a platform to expand on. So, don't worry about having 50 great insights. Have one and start. And customers will see value. It's a journey, right? It's a continuous journey. And you keep, as I talked about, we call it modules, but we keep innovating and adding insights as we go and as we learn. But we didn't wait. We started with that. Soon as we had a base, we started. So I would say, those are the three things I would recommend to someone.

Sarah Nicastro: Okay. All right. And last question for today is, when you think of the journey that Husky's on with this, I know part of the next steps are to continue to scale. What else do you think will come next? If you sort of envision what the future looks like, what comes to mind?

Tony Black: Well, when I look at our business, we have to apply this proactive and predictive kind of mentality and approach across the whole business. A big part of our business, and I think every service business, is spare parts. And spare parts are truly the lifeblood of service. So what we've also been working on is kind of applying this approach, we've developed analytics to help our customers understand what they need to stock. We developed online digital tools recommending value solutions to our customers when they search for a part. We've developed proactive maintenance kits. And we're working on really even enhancing our service centers to make sure we can have parts next day anywhere in the world. So spare parts, but applying the proactive and predictive mindset and tools around that, we're all over that right now as well.

We also have a very significant install base that ranges in age. And so, there's an obsolescence challenge with that. So we've built up a strong kind of modernization, upgrade, engineering organization to help our customers. Again, maintaining that commitment through modernization and upgrade packages. So those are a few of the things that we're working on in parallel with the advantage plus elite solution.

Sarah Nicastro: Okay. All right. Well, it'll be interesting to see how it progresses. I'm thankful that you came and shared your perspective and the journey thus far. There's some really important points that you've made that I'm glad that you have already taken into consideration. It'll make Husky's journey a bit better. And for those listening, hopefully it's some good food for thought. So thanks for coming back, Tony. It was a pleasure to have you again.

Tony Black: Yeah, it was great to be back. Thank you.

Sarah Nicastro: Yeah. You can find more by visiting us at futureoffieldserviceref.ifs.com. You can also find us on LinkedIn as well as Twitter, @TheFutureOfFS. The Future of Field Service Podcast is published in partnership with IFS. You can learn more at ifs.com. As always, thank you for listening.

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The Power of Relational Intelligence

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The Power of Relational Intelligence

Sarah welcomes back Founder & Managing Director, Bandelli & Associates and author, Dr. Adam Bandelli, to discuss his new book "Relational Intelligence: The Five Essential Skills You Need to Build Life-Changing Relationships."

Sarah Nicastro: Welcome to the Future of Field Service podcast. I'm your host, Sarah Nicastro. Today, we're going to be talking about a theme called relational intelligence. I'm welcoming back to the podcast today, Dr. Adam Bandelli, who joined us on episode 141. At that point, we were talking about Adam's last book and he just released a new book, Relational Intelligence: the Five Essential Skills You Need to Build Life Changing Relationships. So, we're going to talk a bit about that concept today and how it applies to you all in our audience. So Adam, welcome back to the Future of Field Service podcast.

Adam Bandelli: How are you, Sarah?

Sarah Nicastro: Good. Thanks for being back with me.

Adam Bandelli: No, it's my pleasure.

Sarah Nicastro: All right. So, what is relational intelligence? Let's start there.

Adam Bandelli: Yeah, it's a great place to start. So, relational intelligence is the ability to successfully connect with people and build strong, long lasting relationships. So, it's really about using five key skills that will enable you to strengthen the skills that you have with your people and teams, and really build great partnerships with your customers or your clients or the people that you work with.

Sarah Nicastro: Okay. Now the book, how did you come up with the idea for the book?

Adam Bandelli: Yeah, that's a fascinating question. So, I started my research back in my undergrad years since the mid-nineties. When Daniel Goleman came out with this book, Emotional Intelligence, Why it Matters More Than IQ. And it really started me on a journey at looking at different leadership skills and behaviors that make up for strong impact that companies have on their clients and their customers. And so, did my doctoral work really at looking at what are different aspects beyond emotional intelligence that contribute to how leaders build relationships with others. Found out in my research, that there were five key skills that connect to this and that these skills are behaviors that can be practiced and learned over time. And then I really spent the next 15 years of my career, focused on practicing and refining those skills, both with colleagues and with our clients, which ultimately, culminated in writing in the book last year.

Sarah Nicastro: Okay. So, the research that you did to support this idea or concept of relational intelligence, what did that research look like? Obviously, part of it is, your own experience and how you've used the concept yourself at your firm and with your clients. And again, for those that didn't catch the first episode, tell them a little bit about what your firm does and how you work with clients, so that they have an idea of how this would apply.

Adam Bandelli: Yeah, absolutely. So, our work is a leadership advisory boutique, and we focus really on three areas. One, is around senior executive selection. So, we help companies identify leaders for top roles and we'll do our leadership interviews and some psychometric tools to determine if they'll be a good fit for the culture. So, we do a third of our work there. Another third of our work is around leadership development. So, we do a lot around individual coaching, team coaching, high potential development. And then the third part of our firm, we focus on executive education and training. And so, we actually just built out our flagship program, which is called the Relational Intelligence Experience, which is a two-day immersive offsite where we bring leaders together. C-suite senior teams, and we focus on those five skills. They learn about the skills, they get to practice them real time. And then we give them tools to take it back into their organizations.

Sarah Nicastro: Okay. And so, going back to my first question, I'm notorious for asking two questions at once and it's such a bad habit, but going back to the first question that I had, what was the research that you did that sort of initiated this concept that you then on your own have proven out over time?

Adam Bandelli: Yeah. So, this is my doctoral dissertation back in 2006, where I initially researched, "What are the types of leadership behaviors that impact how people build relationships?" So, really how senior leaders build relationships with your people. And so, the five skills that we drew from the research, both in the academic circles and then practitioners, are establishing rapport, understanding others, embracing individual differences, developing trust, and cultivating influence. And of those five skills, we built an assessment to see what they actually measure and assess.

And then we went out and we found that those skills actually predict four real important things in organizations. One, is employee engagement. Two, is job satisfaction, so how happy are people at their job and doing their work. Three, is how committed they are to their organizations. And then four, most importantly, how can employers retain their talent? And so, we found that having good relational intelligence, or leaders who practice those five skills are able to drive those four outcomes for their business. So, that was the initial research around my dissertation. And then as I mentioned, I've put this into practice now with our clients over the last 15 or 20 years.

Sarah Nicastro: Okay. So, going back to the point you made about emotional intelligence, talk about how this is different, because I'm sure there are folks that would hear some of what you're saying and think, "Well, isn't that emotional intelligence?" Talk a little bit about what the differences are there.

Adam Bandelli: Yeah. So really, as I mentioned, relational intelligence, we define that as the ability to successfully connect with people and build strong, long lasting relationships. Emotional intelligence is really defined as the ability to understand your emotions, the emotions of others, and how to manage emotions effectively. So, the two concepts are really completely different. Now with EQ, the research that we've done, EQ can be used for the ability to connect with people, but it could also be used for self-serving and manipulative purposes.

So, we've all seen the type of leaders who are either narcissistic or machiavellian, who know how to use emotions to trigger other things in people, to get them to do what they want them to do or use folks as a means to an end. With relational intelligence, you cannot fake it, because it focuses on the long term sustainability of relationships with the outcome of developing the people around you. So, that's kind of the big difference between the two. Within our framework, the second skill, understanding others, you do need to understand your emotions to learn about people and be able to understand people. So, EQ has its place within relational intelligence, but the two constructs are completely different.

Sarah Nicastro: Okay. Another question I was thinking, as you were sort of explaining the concept is not necessarily how they compare, but I guess your take on the relationship or not, between relational intelligence and servant leadership.

Adam Bandelli: Yeah. That's a great question. So, servant leaders, I think, really focus on three things. They have a specific mindset that's around developing people. They have a focus on growing others capabilities, the method through which they do that is relational intelligence. So, servant leaders are intentional about how they build relationships with people. They're very skilled at initially connecting and establishing rapport with others. They're very good at being curious and inquisitive and learning about the people that they work with. They value and embrace diversity. That's a very important part of relational intelligence. Can you build inclusive cultures where people feel like their opinions and perspectives matter? And then developing trust. This is the most important skill in relational intelligence. Can you make yourself vulnerable and put yourself in a place where you can learn about others and grow with them? And then ultimately, and this is what ties it back to servant leadership. The last skill of relational intelligence is cultivating influence, Sarah. And that skill in and of itself is about unleashing the full capabilities of the potential of your people. And that's what servant leaders do.

Sarah Nicastro: Yeah. Okay. So, can you give us an example of a leader that you think has great relational intelligence?

Adam Bandelli: Yeah. That's a great question. So, I've worked with a leader now for two years in the technology industry and this leader, before we started using the concept of relational intelligence, a lot of folks will use, "Well, he or she is a great people person, or they're a master networker. They know how to connect with people." And so, this leader is someone who started his career as an individual contributor and really made relationships the focus of how he built out his business. Was a consistent performer year over year, but it was because the connections that he built with his customers. As he started to move into management, he started to take on different roles, responsibilities over people.

And so, he was very intentional about establishing rapport with his direct reports and really investing the time and being intentional about understanding and learning about those people. He's built a team over the years that is very inclusive. So, diversity is not just something he talks about, it's something that he practices, and it really shows up into this concept of diversity of thought. Is he bringing different people into the organization that have different points of view and are comfortable sharing it? And then as I mentioned, he's been phenomenal at developing trust. He has people that worked with him for 15, 20 years over his career. So, he takes care of his people. He operates as a servant leader and he makes development a priority for all the folks around him.

So, a number of people on his teams have been promoted over the years. They've taken on roles of increased scale, scope and responsibility. And so really, it was amazing when we started our coaching work together, he didn't know that he had this skill called relational intelligence. And so, as we talked through and unpacked it for him, it's something that I think he came to understand that he could put a language around it. And now, we're going to be doing an offsite in a couple months with his team. He wants to share with his team what these skills are and how they can bring it out in their leadership. And so, this is not only something that he does, but it's something that he wants to instill in his people as well.

Sarah Nicastro: Okay. So, on the flip side of that example, when you see someone who you feel is not good at relational intelligence, is that typically because of a lack of skill or a lack of effort? To me it seems like a big part of this, is intent. Emotional intelligence can exist, but not be put to good work.

Adam Bandelli: That's right.

Sarah Nicastro: Whereas relational intelligence to me seems like the intent, the decision to build these skills and put them to work for the greater good if you will. So, I'm wondering people that are not good at this, how much of it is them struggling with the skills themselves, versus not having the intent that it would take to want to do well at this?

Adam Bandelli: Yeah. It's a great question, Sarah. So, there is a skill versus a will thing. I can give you two perfect examples. I have a leader I've been coaching for the last year who lacked the skills. He had the interest in wanting to build relationships with his colleagues and his peers, but he didn't know how to establish rapport. He didn't know how to show up and be curious and understand people. And so, in our coaching engagement, we really focused on how to help him to identify ways and behaviors and things that he could do and practice immediately. So take this second skill of relational intelligence, understanding others. It's comprised of having good EQ. So, could he understand and have the self-awareness to process his own emotions, the emotions of others? It focuses on being a good, active listener. So, could he actually sit there and let people speak and give them a time to share their points of view?

It focuses on being curious and inquisitive and showing empathy. So, putting himself in other people's shoes and asking questions versus just telling people what he thinks they need to know. And so, again, with him, it was more just giving him the skills and the toolkit. He had a desire to strengthen the relationships with the people around him. I'll give you another example of a leader, I worked with two years ago. This was more of a will thing, where he felt that he was, "the smartest person in the room," quote, unquote. He was brought into the organization to help shift an analytic strategy for the company. And when he came in, he had sharp elbows. He would go into meetings with his colleagues and peers and tell them what he wanted to do and what his agenda was. He didn't ask questions. He didn't take time to establish rapport.

And so, I was brought in to start working with him when some of his managers and folks above him said that they were getting feedback, that he wasn't partnering well with his colleagues. And so, when we sat down and started talking through the skills of relational intelligence and embracing differences of other people and developing trust, he felt like he didn't have any issues or problems. That it was his peers who had the issues and he didn't want to make the changes and stuff. So unfortunately, he ended up getting fired from the company, but it really shows you this skill versus will thing. If someone's not willing to practice and put these things into place, it could lead to detrimental relationships with your colleagues [inaudible 00:12:33].

Sarah Nicastro: Yeah. That makes sense. That being said, though... so leave him aside, the gentleman that got fired, and if we go back to the first two examples, so you said there was this person you worked with that was naturally quite good at this and just didn't have the terminology around it. And then there was this other person who had some deficiencies, but had the will to want to improve. So, would you say there are people for whom this comes more naturally than others?

Adam Bandelli: Absolutely. Yeah. So, you look at certain things, certain factors. I think a desire to develop the people around you. So, natural servant leaders, I think, more than authoritative or top down leaders, they're going to be more skilled at using, developing, and honing relational intelligence without a doubt.

Sarah Nicastro: Okay. All right. So, we talked about the five... you mentioned the five skills. Is there one that you feel is most critical and/or is there one that you see people struggle with most often?

Adam Bandelli: Yeah, absolutely. So, I think the one that is most critical of the entire framework, is developing trust. And we define that as the ability to be vulnerable and take a risk to be exposed to the actions or behaviors of others. Most important skill, because it really comprises different pieces. First, to develop trust of other people, Sarah, you have to now understand, and we call it in the book, the mirror test. You have to understand your own wiring. What makes you tick? Before you can go out there and start building relationships. Then, it focuses on this idea of the bank account of trust. Are you continually making deposits to grow a relationship with someone else? A withdrawal will definitely damage a relationship. A large major withdrawal will destroy a relationship and end it very quickly.

So, there's that piece. But then there're the parts that make up trust things like how competent is someone, how committed are they? How consistent? What is their character? So, those factors all come into play. That's the most important skill I think to learn. The most powerful once it's put in place, is cultivating influence. And so, this is the ability to have a positive impact on the lives of others. It's the most powerful one, because this is how servant leadership is shown. This is what takes place when leaders put people in culture first, before driving results. And what we have found is this leads to higher levels of employee engagement, retention of talent, and job satisfaction. So again, those are the two skills. You have to be able to develop trust, to really use relational intelligence. And if you do it in the right way, the outcome will be that you'll develop and grow the people around you.

Sarah Nicastro: Now, is there one that tends to be the trickiest for folks or does it just depend on the individual?

Adam Bandelli: It depends on the individual, but I think the idea of diversity, embracing individual differences, this is the third skill of relational intelligence. A lot of people view diversity in different ways. So, I can think of the analogy... we do this with our clients. The idea of diversity is like being invited to the party, where equity is more about you're being allowed to dance at the party. Where inclusion is you're being able to help plan the party. And so, how leaders view inclusion, whether it's looking at different diversity types, race, gender, ethnicity, sexual orientation, culture, whether it's that piece or whether it's, "How do we bring people to the table and make it feel like it's inclusive?" And this idea of diversity of thought that that's in place. So, this is probably the one skill in the framework that can be the most tricky, depending on how people define diversity and inclusion.

Sarah Nicastro: Okay. That makes sense. You've alluded to this a little bit, but I want to dig into it a bit more, which is the impacts relational intelligence could have on some of the challenges we're facing with the great resignation. So, can we talk about how it could help when we think about the impact it has on employee engagement, employee satisfaction, retention, and why that is?

Adam Bandelli: Yeah. So, I just wrote an article for Chief Executive Magazine about a month ago, which focuses on this specific topic. So, why are people leaving organizations? They're leaving for pay, title, promotion, and the options that are available right now, but they're also leaving because of the relationships or lack thereof that they have with their leaders. I can think of a perfect example of two of our clients right now. They're losing people consistently because folks aren't being developed. You look at Gen Z and Millennials, their needs and their kind of desires are very different from Gen X and Baby Boomers.

And so, because people are not intentionally building those partnerships with their direct reports, giving them opportunities to scale and to grow and to take on new responsibilities, you're seeing a lot of folks leave the businesses that they're in. That's part of the big contributing factor. So, relational intelligence is a solution to the great resignation in the sense that if people, these leaders who'll come from different generations, if they're intentional about building relationships and intentionality and authenticity, Sarah, is really the under threading that goes through all relational intelligence. Can you show up for your people in a genuine and authentic way? And by doing that, invest in who they are, invest in developing them, and then ultimately help them to drive those things we talked about, like engagement or retention of talent.

Sarah Nicastro: I think authenticity is a really important point, because people smell bullshit a mile away. I mean, that's just true.

Adam Bandelli: That's right.

Sarah Nicastro: It's just like you mentioned the point about diversity, equity, and inclusion. You would be hard pressed, I think, to find a leader today that would go on record saying, "Who cares?" Because they know they can't do that, so it's at least something that from a PR perspective, everyone needs to seem-

Adam Bandelli: Check the box.

Sarah Nicastro: Interested in. Yes.

Adam Bandelli: Check the box, yeah.

Sarah Nicastro: But whether or not they really care about inclusion-

Adam Bandelli: That's right.

Sarah Nicastro: Is like you said, back to the through lines of intent and authenticity. Is it an issue they actually authentically care about? Which means that they either care so much about others that altruistically, they care, period. Or they really truly understand the value to the business they're running of actual inclusion. And not just as a surface level exercise, but in reality. But I think authenticity to me is sometimes it can be scarce. I feel like I'm someone that reads people really well. And so, I kind of have like a natural filter for people who are just spewing words versus people that actually believe what they're saying. And so, to some degree, then this is something you can't fake, right?

Adam Bandelli: No. Yeah, like I mentioned at the start, this is part of the difference between emotional intelligence and relational intelligence. You can't fake relational intelligence, because it focuses on this bucket around authenticity. So, if you're not authentic in how you show up for your people and you don't... again, going back to developing trust. If you don't show a degree of vulnerability... I'm working with a leader right now, who's phenomenal at doing this. She will share stories from her history and from her background and from her experiences, to really connect with her people. She has someone stepping into a new sales opportunity. "Well, here's a time where I failed in a sales opportunity. Here's a time where I succeeded and here's what I learned from it." So again, she's authentically showing up and being vulnerable for her people, and she's enabling them to have the trust and say, "Okay, I can make mistakes or I can learn from them. And if she's coming and giving this into the relationship, I'm going to give my best for her."

Sarah Nicastro: Okay. So, I'm going to go off on a little bit of a sidebar, and hopefully it's okay to say this, but Adam asked me to take an assessment of relational intelligence, which we haven't talked about yet. So, I have no idea how I did, but what I want to bring up here is the example you just shared, because I do think, this is where some of these concepts get a little bit tricky and nuanced. Because some of the questions in the assessment were asking like, "Here's the scenario, how would you react?" And so, the example you just shared about sharing a personal story, that can be powerful. It can also be off putting, because I think before you do that, you need to have mastered the art of active listening and building trust, because otherwise your personal anecdote reads as nothing more than ego.

Adam Bandelli: That's right.

Sarah Nicastro: You know what I mean? So, that's where I struggled with using that as a response. Because as default, I don't know that someone necessarily wants to hear that, unless you've kind of built some foundational elements, but again, just taking it back to the example and the story. It gets a little bit tricky because yes, leaders who can be vulnerable and share things about themselves openly, I think that's a very powerful tool. But then you risk crossing the line of like me, me, me and, "Well, when I walked to school uphill, both ways and I lost this deal..." So, it's tricky. Obviously, that's where emotional intelligence comes in and you have to be able to kind of know your audience and all of those things…

Adam Bandelli: But there's a reason why the skills kind of go in a certain order. So, we're talking about trust and vulnerability. That's the fourth skill in relational intelligence. So authentic leaders, established rapport. They have an ability to create an initial positive connection with other people. The first couple times they're with folks, the eye contact, they make body language, how much they're leaning in, how finding common ground and similarities. Then we talked about understanding others. This is being intentional about putting in time to get to know someone on a deep level. If I'm taking time to get to know you, Sarah, I'm not going to pull examples and things that may offend you, that may be off putting. And then this idea about inclusion. I'm not just talking at you all the time. I want to hear your opinion. I want to hear your point of view. So, when I share an example from my experience, you know it's coming from a good place, and I've invested enough in the relationship where you understand, and I understand you, and we can have those kind of genuine moments.

Sarah Nicastro: Yeah. It's just funny because in my mind, I'm thinking of like, Joe, the authoritative leader, who's picking up your book thinking like, "Oh, I should try this out," and starts with, "Well, listen to my story." Again, it's goes back to intent. Are you sharing that story because you want to talk about yourself or are you sharing that story, because you see how contextually it could help you connect and help that person in some way? All right. So, we talked about the great resignation. The other thing I want to touch on Adam, is I had shared with you that for our audience specifically, a lot of them are in sort of a transition or an evolution with their customer base, where they're moving from more of a transactional business model to something that is more relationship based, more ongoing, more outcome focused. And so, how would relational intelligence be something that organizations can also leverage with customer relationships?

Adam Bandelli: Yeah, that's a great question. So, I wrote the article for Future of Field Service a couple weeks ago. It really focuses and dives into this, so I would encourage your audience to read it. But again, these skills are not just about applying and connecting with your colleagues. It's with people that you work with or your customers as well. So, are you taking time to learn about your customers and not just learn about what they want to buy from you, but actually learn about what matters to them? What's important to them? I think of this saying, "We don't do business with companies. We do business with people and business is always human." So again, are you really investing to know what your customers want? Are you taking time to understand their needs, understand where they're coming from?

That takes a good amount of EQ. It takes a good ability to be an active listener. It takes empathy. Do you value customers who come from different places? You have customers who are men, women, customers who are different ethnicities. Do you value that? And then do your customers know that you have their best intentions? I think that's a really difficult thing. If you go to more of a transactional model, your customers can see through that very quickly. And the work that we do at my firm, we have clients for over a decade because the clients that we work with, the people that we coach, know that we generally and authentically want to see them grow and become the best versions of themselves.

So yes, their companies or their organizations are paying for these engagements, but the people that I coach that I meet with and see every other week, they know that I'm there for them. And so again, what I would recommend or what I would say to your audience, who does that and is involved with customers is, again, it goes back to this piece around intentionality. Are you being intentional in developing relationships? And can you be strategic about them? You may try to get the quick sale today, but could you rub someone the wrong way and not get the business six months from now? Or are you really learning about what they need today, try to address that need, but also build the relationship for long term longevity as well.

Sarah Nicastro: Yeah, that makes sense. Okay, so for leaders that want to get better at relational intelligence, what do they need to think about learning or practicing? Obviously we're going to tell them where to find the book, but besides that, what do they need to have in mind to focus on this?

Adam Bandelli: Yeah. So, I think there's a couple of different things that we offer now at our firm, and people can do these on their own as well, but taking a relational intelligence test. So, you took the one for us a couple weeks ago. We're building out a whole practice now, where people can go online, take the assessment. It'll give you a kind of baseline understanding of where you are today. You can also get an executive coach or work with someone to kind of give you some self insights into how you connect with people and how you build relationships. So, I think that's kind of... get a baseline of where you are today. And then I think a lot of the other things you can do besides read a book, is go through some training on it.

So, we're developing, as I mentioned, our Relational Intelligence Experience, which is a two-day immersive program that people can go through to learn about the different skills, like developing trust, cultivating influence, but people can do that on their own too. There are a lot of different training programs you can take, that talk about things like developing trust or managing conflicts. So, I think it's really three things. It's understanding what the idea is, is being able to get a baseline of where you are today and where you might want to go, and that could be taking a test. It could be working with an executive coach or a life coach. And then the third piece, is really deepening your understanding by doing some training and development around it.

Sarah Nicastro: Now, what about organizations who want to conceptually communicate this idea to their teams and help with developing some of the five skills?

Adam Bandelli: Yeah. I think again, the big piece I would encourage outside of getting the book itself, is really they can visit our website and see some of the content we have to talk through it. We've written a number of articles about it from different angles. So, customers dealing with direct reports, dealing with mentoring, and you can find that all on our website bandelliandassociates.com. But I think the awareness is a big piece. So, we're working with an organization right now, and they're trying to scale this down throughout the organization. And so, we're working at the top of the house to take their leaders through these behaviors, but then they're going back to their teams and they're practicing some of these skills. So, I would encourage your listeners who want to practice and learn this, to kind of get an understanding of them. They can pick up the book, they can go to our website, but then also start to model and practice these behaviors with their people.

Sarah Nicastro: Yeah. It's really interesting to me, this idea that even though the world we're living in, doing business in, continues to move at a more rapid pace. I think there's this philosophical almost not regression, because that's not the right word, but like we've become so transactional, that it's going out of vogue. I think individuals and businesses are recognizing that the loop we've been in that's just quarter by quarter, short term, deal by deal, higher by higher, it's not serving us. So, we need to take a longer term view. That doesn't mean sacrificing short term results. It doesn't mean not paying attention to today's business or whatever, but-

Adam Bandelli: You can do both.

Sarah Nicastro: This idea... and you have to. I don't think that we're going to get back at least in any short term, to that focus of just boom-boom-boom. I think that investing in relationships that we have with our people, with our customers, with those that we interact with, and thinking about that longer term nurturing of those relationships is super important.

Adam Bandelli: And what we've seen with the pandemic has really exacerbated this, is that people have not been able to have that human face to face connection. And so, we're coming out of time, where we're coming out of that finally, hopefully, and people haven't been connecting, they haven't had that. We're being much more transactional. We're doing things like this through Zoom. So, it can become very kind of quick and easy, get a sale, do this or that. It's a totally different experience being in the same room as people and being able to shake hands and eye contact and engage with each other. And so, we're at a time right now where things like relational intelligence are really important. People need to be intentional and they need to be authentic. They need to embrace inclusivity.

These are all really important things that they may have not been important four or five years ago. They definitely, probably weren't as much a decade ago, but as we go forward, if we want to engage and keep our workforce, whatever generation that is, but we have the newer, younger folks coming in, that's the way to do it. You talk about hybrid work models that most companies are doing now. At our firm, we firmly believe that people should go into the office two days a week at a minimum, just to have that face to face human connection with their colleagues. And then this is the idea where we look at kind of AI and automation and things that are changing. The idea of what a good leader looks like is changing. It's no longer just managing processes, it's managing and building and developing people.

Sarah Nicastro: Yeah, for sure. Awesome. Well thank you for coming and sharing. As Adam said, you can find information on the book and some of the content and tools that go with it at bandelliandassociates.com. And that is B-A-N-D-E-L-L-I A-N-D associates.com. So thank you for joining. Thanks for sharing this with us. And I hope to see you again soon.

Adam Bandelli: Sounds great. Thank you.

Sarah Nicastro: Yes, take care. You can find more by visiting us at futureoffieldserviceref.ifs.com. You can also find us on LinkedIn as well as Twitter at the future of FS. The Future of Field Service podcast is published in partnership with IFS. You can learn more at ifs.com. As always, thanks for listening.

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Live Tour Frankfurt & Stockholm Highlights

Sarah shares a synopsis of the topics discussed at Frankfurt Future of Field Service Live Tour stop on May 19th and the Stockholm stop on May 24th.

Sarah Nicastro: Welcome to The Future Of Field Service Podcast. I'm your host, Sarah Nicastro. Today, I'm going to be doing a bit of a recap of the last two of the European future of field service live tour events, which were Frankfurt and Stockholm, and happened over the last week or so. So for those of you who maybe haven't been following along, we have been doing a live tour of this podcast this spring. There's five cities that we have on our tour schedule. We started in Paris, London, Frankfurt, Stockholm, and our last event is June 14th in Austin, Texas.

Sarah Nicastro: So I just got home from a trip where I did both the Frankfurt and the Stockholm events and thought I would give a little bit of a summary of those here. Again, we have been recording the content of the live tour sessions as we've gone along. And once we have an opportunity to review all of that and get speaker approval on what we can and can't share, we'll certainly be releasing some of the content in its full form, but in the meantime, I will share with you some of the highlights. So first up was Frankfurt. That event was Thursday, May 19th.

Sarah Nicastro: And that day was in a really neat, but very, very hot venue. There was no air conditioning, and it happened to be a very warm day in Frankfurt. So it was toasty, but it was a great event. So we started the day off with top 10 global thought leader, Frank Mattes, talking about scaling innovation and some of the ways that in traditional businesses the operating structure and the way the business is set up really work against innovation.

Sarah Nicastro: Frank shared some really, really interesting insights on how companies are working past that, so that they don't sort of default to the tendency to do what they've always done because the business is set up to support that versus innovation. So it was a really interesting discussion to start the day. Next up, we had Christina from ANDRITZ join. She leads the companies smart services projects. And we talked about some of the things that come up when you're trying to take a manufacturing business with a lot of history and evolve into a service business.

Sarah Nicastro: And so, we talked about some of the vision she has for the type of smart services that ANDRITZ's customers could be interested in and how she's working on bringing those things to life but also some of the challenges that arise in doing so. We then had a session with Mark Ringwelski who's with REMA TIP TOP about their move to outcomes based service and how they're working toward delivering outcomes and uptime for their customers. And Mark talked a lot about the work they've been doing to put a foundational system using IFS in place to sort of build this future upon.

Sarah Nicastro: We talked a lot with Mark about the work that he's done in the business to spend a lot of time with frontline getting their input for not only the new technology, but the vision the company has and where it's headed and how helpful that has been for them with managing change. Next up, we had a session with Rainer Karcher of Siemens and Tiago Charréu of Atos and talked about the intersection of service, collaboration, and sustainability. So it was a really interesting conversation and one that I was thrilled that both gentlemen agreed to come and share because while field service specifically is a bit out of both of their direct wheelhouses, we chatted a bit after the event about the importance of bringing the sustainability message to pockets of folks that maybe aren't thinking primarily about that.

Sarah Nicastro: So we talked about how some of the technologies that are becoming more prevalent and enabling different ways of collaborating have a positive impact can have a positive impact on the environment. We talked about how servitization ties in with sustainability and the circular economy. And we talked about some of the overall trends in sustainability and the growing criticality of everyone paying more attention to the topic. Next up, we had Sonja Haavisto from Cimcorp and we had a session on communication and the role of the employee experience and employee engagement in meeting customer experience and customer satisfaction goals. And then we had a session with Dietmar Schmitz of Eickhoff talking about the organization's evolution and transformation of service, putting foundational technology in place to sort of evolve with what customers need and how their businesses are changing and what that means in terms of what Eickhoff needs to deliver in its service.

Sarah Nicastro: At the end of the day in Frankfurt, we actually did a really cool sort of think tank session. So we created a circle of chairs and people kind of spoke freely about their challenges and gave one another advice. And it was really, really neat to see that happen. So it was a great event. And then on Tuesday, May 24th was the event in Stockholm. And so we had a good amount of people join us there for that event. For me personally, this one was important because I've shared in a blog on future of field service that my very first day on the job at IFS, I flew to Stockholm for a user group, customer user group event, and having left a role that I was in for almost 12 years, I was a bit emotional about that.

Sarah Nicastro: I was a bit jet lagged. I was a bit overwhelmed and I felt not myself, if you will. And so for me, coming back to Stockholm these three and a half years later, and bringing the future of field service tour there was something that made me very happy to do. So the Stockholm event, we started with author Dan Toma. He has co-authored two books, the corporate startup and innovation accounting. And we had a conversation about the differences between digital transformation and innovation, some of the complexity with both, some of the things that organizations need to be thinking about as they work on either of those two things and both of those two things. And Dan shared some really great real world examples of the points that he was making. So that was excellent.

Sarah Nicastro: Then we moved on to Rafael and Kristoffer of Electrolux and had a conversation about the service transformation that is underway at Electrolux and how that affects the three points that we often talk about: people, process and technology. So we dove into each of those in some detail and talked a bit about how change in each of those three areas is coming together to evolve how Electrolux delivers service, what service means to its business, and what its customer experiences look like. After that, we had a session with Pekka Nurmi Cimcorp, who talked about modern IT, and sort of thought some of the traditional beliefs of IT that are maybe a bit outdated. So some of the things that were certainly true 10 or 15 years ago, but maybe companies are still holding onto those beliefs when in reality, the technology and the ecosystem has changed a lot. So that was a really interesting session.

Sarah Nicastro: After that I was joined by Berit Hallgren of Tetra Pak. Berit is leading a team who is working through Tetra Pak's service transformation project. And she is leading a cross-functional team that is responsible for sort of aligning various stakeholders and making sure that transformation goes smoothly, as smoothly as transformations do and delivers results for the business. Berit has been with Tetra Pak for 30 years and has had a variety of different roles. So it was a really interesting conversation to be able to ask her how she's grown within the company, how the company's perception of an approach to service has evolved, and based on a lot of experience, what her advice is for success with service transformation.

Sarah Nicastro: And then to close the day in Stockholm, we had Roel Rentmeesters of Munters join and talk about the company's servitization and remote service journeys. So that was a very interesting conversation as well. Both events were really, really great. I had someone ask me at the end of the Stockholm event if they had all been very different, and each event was different. Each event had a different feel. Obviously each event had different speakers, which meant that the topics all varied a bit, which was good for me because it kept things interesting. But there was also a lot of commonalities. I think if you are a follower of this platform, this podcast, our content, that's what we find a lot is that there are some universal challenges, some universal opportunities that are very shared, regardless of what particular industry you're in, what geography you're in.

Sarah Nicastro: And I think that was certainly reinforced through some of the common themes that came up during each of the events. I was also asked if I had a favorite, which is a very unfair question. And no, I didn't have a favorite. They were all my favorite because they were all fantastic in different ways. I think, I just feel very grateful. One to have had the opportunity to visit each of those great cities and meet some new people and see some that I've had relationships with for quite a while, and really just to see how this podcast and this platform can become the basis for a community.

Sarah Nicastro: I think that in each location, the people that joined were so very happy to be able to have these open discussions with one another and to be in person and talk about their businesses and their challenges openly with peers. So it was really, really great to see that happen. So not a favorite. They were all my favorite. And I'm looking forward to the last event, which is coming up in Austin on June 14th. And hopefully, we'll have the opportunity to do a live tour again in 2023. So if you're in the US or fancy traveling and you would like to join us in Austin, you can visit the website to find the agenda and the information for registration. Would love to see you there. Hopefully we're going to go out with a bang and have a wonderful last event.

Sarah Nicastro: So big thank you to each of the speakers that joined in Frankfurt and Stockholm and all of the people that came to be a part of the discussions and be a part of the audience. So thank you all for taking part in the future of field service live tour. If you want to find some more of our content and/or stay tuned for some additional content coming out of the events, please visit us at futureoffieldserviceref.ifs.com. The future of field service podcast is published in partnership with IFS. You can learn more at ifs.com and as always thank you for listening.

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Clarifying Digital Transformation vs. Innovation

Dan Toma, Innovation Thought Leader and award-winning author of the Corporate Startup and Innovation Accounting, as well as co-founder of Innovation Advisory Firm OUTCOME, talks with Sarah about the differences between Digital Transformation and Innovation and why/how the terms can be erroneously used interchangeably.

Sarah Nicastro: Welcome to the Future of Field Service podcast. I'm your host Sarah Nicastro. Today, we're going to be clarifying the difference between digital transformation and innovation. I'm excited to share today's conversation with you all, because this is something that I noticed myself maybe using these terms interchangeably a bit more than I should. Recently had a learning on that and excited to share that with you all today. Welcoming to the podcast, Dan Toma, who is an innovation thought leader, award-winning author of two books, The Corporate Startup and Innovation Accounting, as well as co-founder of Innovation Advisory Firm OUTCOME. Dan, welcome to the Future of Field Service podcast.

Dan Toma: Sarah, thank you very much for having me.

Sarah Nicastro: Yeah, thanks for being here. Okay. So before we dig into it, tell our listeners a little bit more about yourself and your journey.

Dan Toma: Sure. My background is actually in entrepreneurship. So when I was 19, I founded my first company, software development. And then I was obviously attracted by the idea of startups, building products, building digital products in particular. And I was just were working with other people's startups, with accelerator programs. My startups, first two startups really failed. Now I am probably at the fourth and now this one seems to be going somewhere. So I'm approaching everything with the entrepreneurial mindset, if you want. But at one point in my life more by chance than by design, to be honest with you, I was head hunted by a large organization and actually they were a company and telco business. They wanted to get more blood from the startup world into their ranks. So they head hunted me and I've spent about three years with them.

Dan Toma: And that's actually where the first book, the Corporate Startup, was born because I was essentially seeing a big need and I was actually trying to solve my first problem to begin with and then probably create something for other people to follow. The idea was that large organizations were, and in particular, the one I was working for, terrible at building digital products. They were essentially building it backwards from what we were used to doing in the outside world, in the startup scene.

Dan Toma: Essentially they were starting from a business plan. Financing the whole thing they want and then probably after six months, they would put a prototype in the hands of a customer only to learn that doesn't work. Which was the exact opposite of what we were doing in the startup, where we were starting with a prototype, asking some people if they like it. And then maybe go to ask for some financing from some investors. So you saw where I was living in and I said to myself, I need to do something about it. I started blogging. I started speaking at conferences and that's how the Corporate Startup was born.

Sarah Nicastro: Okay. All right. So the Corporate Startup is the first book. Now I met Dan through the second book, Innovation Accounting, and that book is new. And so I have a copy of it. And Dan, I shared this with you. I'll be honest. Accounting is not my jam. So I got the book and I thought, "Whew, this is going to be a little heavy for me." It's such a good book. The content is great, but also the layout and the design and the way the whole thing's done is really good. But it actually urged me to buy the first book because there was reference to a lot of points that I just thought were super, super important for our audience. And so, as I was, as I was reading Innovation Accounting, the one point that really stuck out to me is this point about distinguishing digital transformation and innovation. This is where I said, I realized that there have been times where I've used those terms interchangeably and while they can maybe in some ways be connected, they're not synonymous. Okay, so can you define for folks each? So digital transformation and innovation?

Dan Toma: Sure. I can give you my working definition if you want. This is probably not going to make it in any dictionary anytime soon, this is just my working definition. The idea is the following: on digital transformation, what your company's essentially doing is putting the digital skin and digital interface to a legacy product. If that legacy product is called risk management for loan applications or something that has to do with a pen and paper process that now can be run more effectively and more efficiently through a digital channel, that's essentially digital transformation. However, in digital transformation, you are not necessarily creating any top line growth to your organization. You're still going to sell the mortgages. Now you're just selling them via an app that does the risk assessment in 15 minutes versus is three days, whatever. I'm just giving a random example here. So we are just becoming more efficient in our core business through digital transformation.

Dan Toma: That will be my, my definition. Now, if we want to build top line growth, if we want to expand beyond our current court day, if we want to look into, let's say banking for, I don't know, inhabitants of Mars. Again, totally random example. That will be probably more towards the innovation side. So innovation is creating top-line growth, is helping you explore areas that fall outside of your today's core and digital transformation is essentially making your core today more efficient, and it's helping you survive with today's core longer into the future. So your core won't die tomorrow or next year, but probably in five years, 10 years, or longer. Organizations need both, unfortunately.

Sarah Nicastro: Yeah., no, I agree. And so in the book, I just thought this was so well said. So innovation is the crew of new value. Digital transformation is around keeping existing business models and processes valuable in the digital age, which improves customer satisfaction and lowers operational costs. Now I think where it can get confusing for folks is the improving customer satisfaction part. But this is where the distinction gets important, because are sort of incrementally improving on what you've always done or are you creating something net new? And I think that it isn't uncommon for people to think of or refer to the two terms interchangeably. So to your point, companies need both, but what are the reasons you think people can sometimes confuse the two or consider the synonymous when in reality they're different?

Dan Toma: Right, well, it's common for people to use the terms interchangeably or use them as a synonym, to some extent, because in all fairness, digital transformation is to some extent incremental innovation. We're just taking something that we've been doing and making it slightly better. That's the nature of companies today. That's the nature of what they do. Continuous improvement, seeking continuous improvement and doing continuous improvement on their for business. This is what they are known for. Look at the look at the automotive industry. They're building every year on the experience and on the success of the previous year. They're just making the new model a bit more fuel efficient, and giving it a bit more flavor in terms of high tech features and so on and so forth. But essentially it's the same car as the year before.

Dan Toma: Especially if you look at it from a business model perspective. It's just like, I'm going to the Toyota dealership and I'm buying a Toyota, that's it. It doesn't different any way from the Toyota that bought five years ago or a year ago, or the one I'm going to buy next year. Now this is why the confusion, because some people believe that innovation is a one size fits all type of word. And you can just use it for everything. I think that one of the big lessons learned for us, and I think it's actually in chapter one of the book, whenever you want to start doing innovation, the first thing you want to do and you need to do is to define what innovation means for your organization. Because different people can mean different things whenever they say innovation. Some people might refer to innovation as being digital transformation, and they will not be necessarily wrong in thinking that, but some people might be, let's say thinking more about the disruptive side of innovation. Flying cars. Again, let's take the automotive company example.

Dan Toma: Some people might think that yes, pay per use or pay per minute for a car might be innovation. Or a flying taxi, or an autonomous vehicle might be innovation. Whether some believe that if you just take the, I don't know, hybrid engine and make it a bit more fuel efficient for next year is innovation. And actually everybody's right. This is why it's very important in your organization to have very clear definitions and very clear boundaries between various types of innovation, digital transformation and innovation, or different parts of the spectrum of innovation. Because essentially the way you are defining these, is going to inform how you approach them, the tools you use, the processes you use, the indicators you put in place. Speaking about innovation, accounting. We can't hope to measure in incremental innovation or digital transformation with the indicators that we propose in the book for breakthrough transformation and vice versa. This will not work. This is why it's very important to define because from the finishing, you can draw actions and you can draw all the other things.

Sarah Nicastro: So as I think about how your content to our audience specifically, I think that where some of the, I wouldn't even necessarily say confusion, but some of the interchangeability of the terms comes in is because for a lot of folks within our audience, the reason that they are digitally transforming is to enable new business models, i.e. innovation. And so that's where I think the intersection is. But I think the definitions you lay out, I think could be very helpful for people to think through that lens. Because I also think that sometimes companies think if we digitally transform, we can just innovate. Like it's just a cause and effect type of situation. When in reality, it takes a lot more strategy and concerted effort, so...

Dan Toma: And capability and skill.

Sarah Nicastro: Right.

Dan Toma: The skill that you need for digital transformation, the capabilities you need for digital transformation are not going to be sufficient once you're trying to innovate. Let alone talent. If you are trying to hire somebody and that particular person has an amazing track record of helping organizations digitally transform, it doesn't mean that that's the right person for you to build, let's say, flying cars again. It's not going to be the right person for disruptive innovation. You need different skillset, different personalities, if you want. So this is why I always say guys, make the distinction before you start investing.
Sarah Nicastro: Yeah. So, all right. So we talked about the working definition of each and some of the areas where they intersect. Now, you said companies need both. Okay.
Dan Toma: Yes.

Sarah Nicastro: So that makes sense. But what are your thoughts on how a company should determine which to focus on at any given moment or how to prioritize or do organizations just have to become comfortable doing both in parallel?

Dan Toma: Well, to some extent, utopia would be if an organization can do both at the same time. We're talking about ambidexterity. You're able to operate the core business while at the same time inventing the core business of the future. But that's utopia. I'm not saying that it doesn't exist. I'm not saying that organizations that do this don't exist. On the contrary, there's a lot of examples. I'm a big fan, for example, of New Pond. They are an organization that's always searching for new while at the same time operating the core business and digitizing the core business. And there's so many the other names I can think of. Now to your question. How do we decide which one do we put first? And how do we decide which one do we focus on?

Dan Toma: Well, it really depends on your organization. It depends on your industry. Obviously you have to build a roof in the summer, not in the winter. So if the seas are still calm, I think you should definitely start investing in innovation. If you believe that you have a strong market position today, if you are profitable, by all means start investing innovation because innovation will definitely cost money. It will go from failure to failure initially, before you will see any form of success. If on the other hand, you are under pressure from competitors, from the industry landscape changing, from any other things that might cause the ship to rattle if you want. Then probably digital transformation should be prioritized. Prioritize what's happening today, what's happening in front of you in the next, I don't know, 12 months, 18 months, five years max. You don't have the luxury at that time to start thinking about flying cars and going to Mars and all this innovation stuff.

Dan Toma: However, if you are, as I said, when you have a market position that allows you to start thinking about the future, you are the leader in your market, the market is pretty stable. You've been winning in that market with that particular competitive advantage or particular competitive advantages that you have, then by all means start to investigate innovation today. It's better to invest sooner than later. Don't get yourself to a point where you really, really needed innovation. And there was nothing in the pipeline. Take, for example, the cases of companies that we've seen struggling at the beginning of the pandemic. Most of them weren't digital. Most of them, they didn't have any other revenue stream besides walk-in stores. And the walk-in stores were like literally overnight closed. And think about airline agencies, airline companies.

Dan Toma: They were so used to operating aircraft and they had absolutely no revenue coming from any other source, besides I'm taking this plane and moving it from airport a to air point B and I'm making a profit because there is people there. Well, all of a sudden there weren't any people. So I'm just wondering why haven't they invested earlier or sooner into teleconferencing solutions or something that would essentially mitigate against the potential scenario where the core business no longer exists or is being slowed. There was a very interesting infographic. I actually encourage the listeners to go look it up. When at one point in 2020, Zoom's valuation was bigger or equal than the valuation of all the U.S. based airline companies combined. So I was like, okay. So I'm just wondering how many CEOs of those airlines were pitched by a junior staffer, a conferencing tool at one point, or at least the idea of let's invest in Zoom.

Sarah Nicastro: Right.

Dan Toma: That was a really funny seeing that infographic.

Sarah Nicastro: Yeah, yeah. And I think you mentioned the utopia is to be able to do both of these things in parallel. And while that might not be realistic for everyone, I do think that we need to be challenging ourselves more to think about innovation and how that fits into the business. And because you see a lot of those thoughts and ideas and practices just getting pushed, because it isn't the thing right now, but that's the whole point. So, I think it's something that companies that aren't doing both simultaneously need to be the thinking about how they can make more room for innovation without sacrificing the current business. I think honestly, segueing to the next point.

Sarah Nicastro: One of the things that prevents companies from maybe integrating this, this being innovation, integrating innovation better into the business is that it's difficult to measure the success of. So that's what the whole second book innovation accounting is about. Talking about how some of the standard ways that we measure success do don't fit innovation. So obviously we don't have time to get into all of the details of that book, but can you sort of give an overview of why those standard practices don't work for innovation?

Dan Toma: Sure. Again, Innovation Accounting is the book that, to be honest with you, I always wanted to write, but I had to write the Corporate Startup before writing Innovation Accounting. First of all, I was not mature enough. I didn't understand innovation as well back then, as I understand it now. This is why it took probably five years to start thinking about Innovation Accounting against for writing that. One of the interesting things about the world that we live in is that the value of tangible assets, if you want, the value, not in terms of their monetary value, but their value in terms of your business is going down. They are becoming the commodity. If we want, Dan and Sarah can start an airline tomorrow. It's not a big competitive advantage to buy an aircraft or to buy a parking spot at Heathrow or something like that.

Dan Toma: That's becoming a commodity. Why we will never win against British air or Southwestern or Lufthansa is on operating the airline, operating that asset. And obviously with digital companies, this is getting even more interesting. Think about Twitter. Think about Spotify. Think about Netflix. What is the value of their physical assets? Well, the servers, the desks, the computers, that's fine. I mean, everybody can buy that. What people can't buy is the culture within, within Spotify. What, who can't buy and replicate is the algorithm that Netflix is using to suggest all those videos for you to watch. What we can't buy is the customer centricity of Zappos. We can buy the desk that Zappos is using. We can buy the computers people are using whenever they upload products online on the platform, but we can't buy that culture. We can't buy their approach, their process.

Dan Toma: And as I said, with digital companies, this is even more interesting because the amount of physical assets that they have is sometimes very low, but their evaluations is probably higher than a company that has a lot of physical assets on their books. Why? Because us as society, we value them differently because we look at them through the problems that they solve, through how much they are being used, to the network effects that they have baked into their business models. And this is why innovation and standard accounting don't go well together. Because in innovation, we are essentially trying to build things that are not that heavy on assets and financial accounting, in particular is looking at the value of a company or value of an idea through the number of assets it employs. And actually with innovation, we're doing the exact opposite.

Dan Toma: We want the employee as little, assets as we can. Take, for example, Airbnb or Uber. How many cars does Uber have? Well, zero because they don't own anything. And the same goes for Airbnb. How many rooms do they own? Unlike Hilton, which they only have millions of rooms around the world, Airbnb doesn't. And this is why the two systems, if you want, innovation system and the financial accounting system were not meant to go hand in hand, this is why we struggled. As I said, for quite some time to build a complimentary system to financial accounting, that's able to account for digital innovation. That's able to account for early stage innovation, even more interesting to account for early stage innovation when you have an acute absence of financial data. If we started a startup tomorrow, we are probably not going to be profitable for the next quarter or for the next two years.

Dan Toma: And in some companies, take Tesla, for example, or FedEx or Amazon, they weren't profitable for the first five years. We need to have a system that allows us to say, "Yes, this idea is going to be successful, but in the future, not now, let's not discontinue it." Otherwise, we might fall into the classical corporate trap where we value everything through the lens of financial accounting, and guess what we're going to do? We're always going to prioritize the core business and investment in the core business. And we are going to do that by always putting on the back burner innovation and innovation ideas until we actually need them. And when we need them, we're going to be sitting there and looking at our ourselves and say, "Okay, so where's our innovation that should have saved us now?"

Dan Toma: Well, it's nowhere to be found. Why? Because we just used the wrong metrics whenever we had to take investment decisions. I always give this simple example. I try to dumb everything down. Whenever I'm explaining this, I always say, well, if we take our kids and take them to a swimming competition, they have their own benchmarks for their age bracket. We are never going to evaluate a 10 year old swimmer or a 15 year old swimmer for the performance of somebody that just won't medal of the Olympics, because it's just impossible for a 10 year old to compete with a 20 year old and be able to hit the same benchmark.

Dan Toma: This is why for every age group, we have different benchmarks. So if we do that in sports, if we do that with athletics teams, why don't do this with business? Why not do this with innovation? Why do we compare an idea that was essentially founded three months ago or three weeks ago, or three days ago with a core business that we've been having for about a hundred years? We should never do that because we're going to be super disappointed by what we have in front of us, what we've learned. And as a result of that, we're just going to invest in the core business.

Sarah Nicastro: Yeah. And to your point, failure is a natural part of innovation. So then what happens is these companies reach that first failure point panic and jump ship. And so the book is it gives some really good perspective on why we need to be thinking about this differently and what those more reasonable and worthwhile metrics are. So I'm going to ask you a couple of pretty unfair questions, because I'm really asking you to sort of scan the memory banks and give us a nugget out of a whole lot of knowledge. But so thinking about digital transformation specifically, what would you say is the biggest myth or misstep that you would caution folks against with digital transformation?

Dan Toma: I would say that probably the biggest mistake organizations make when they want to do digital transformation is thinking that they only need digital transformation. That after they do digital transformation, everything will be fine. There will be no more competitors. There will be no more fires to fight. Everything will be sunshine and rainbows. And another mistake that they make very much connected to this one, is that they think that digital transformation is a destination and it's not a journey. I've been seeing that. Once we're going to become a digitally transformed, like really? What does that make? What does it mean? It's a journey. It's not a destination. And again, stop thinking that you only need that.

Sarah Nicastro: Yeah. I wrote an article not too, too long ago about the term itself. Should we just start calling it something different. Like the digital continuum or the digital journey, or I don't know what else. I think I threw some other options out, but yeah, the word transformation, I think gives companies the connotation that it's step, step, step, complete, and it's just a false reality. Okay, so same question, but for innovation. What is the biggest myth or misstep you see related to innovation?

Dan Toma: I think, again, from my experience, one of the biggest mistakes I've seen organizations make is that they focus too much on the technology side. They believe innovation equals technology, and they only focus on technology. They ignore customer experience innovation, they ignore channel innovation, they ignore business model innovation. They just believe that if they're just going to invest in blockchain or invest in AI, that will be enough. My question to them would be okay, you invested in this amazing AI technology, what do you do with it? What is the product that you were building? What is the value that you were creating for an end user with that AI?

Dan Toma: Just saying that we acquired and we're going to sell it to our customers is not enough. And that's not innovation. That's at the very best some low key entrepreneurial mindset, but that's definitely not innovation. I think too many organizations focused too much on the next shiny technology without actually remembering the fact that the technology needs to work in an ecosystem. It needs to be built within a product that people would like, and people will benefit by using that particular product, so on and so forth. So stop thinking technology, think wider than technology, think business modeling, think customer experience, think customer engagement. Think channel.

Sarah Nicastro: Yeah. Good. So I thought of one other question, Dan, which is you mentioned that you were, you were head hunted and you went to work for this telecom and they wanted you specifically because of your entrepreneurial background. And so I think kudos to them for understanding that they needed more of that to innovate, but obviously you got in there and were like, "Whoa, whoa, whoa, what did I sign up for?" So I think the idea is a good idea. I think the idea of recognizing that if you are relying solely on your legacy to innovate, that could be significantly more challenging. It's sometimes very helpful to have outside perspective, outside ideas, outside talent. What though is the key to companies creating a better culture for innovation to exist? And I realize that's not an easy question to answer, but if you had to give some initial advice for people on, okay, if you recognize you want to create more innovation and you want to bring people into the business to do that, then you know, start doing x or not doing y.

Dan Toma: Right. It's definitely a difficult question and I'm not hoping to have the right answer here. I mean, it's probably one of the questions that's been puzzling thinkers for years now, decades. I would venture definitely venture here, a suggestion. First of all, you should really make a point out of the fact that you really want to grow for innovation, meaning that you are heavily investing in innovation and not just investing dollars, but investing time. Make sure that your leadership speaks about innovation on an ongoing basis. That they champion innovation with every opportunity that they have. And that innovation really sits on their agenda. Literally sits on their agenda. Like they have time booked in every week, every day, every quarter to just focus on innovation. And then the other point would be start improving your innovation process, because process will drive culture.

Dan Toma: And if you want to have a new culture, if you want to attract people with a different mindset, build a system that will force some old people to realize that probably innovation is not for them and will force HR to start recruiting for innovation. It's a very good point. You brought up and this reminding to me of some work I've done with an insurance company out of Germany, I'm not going to name names here, but the idea was the following: the head of the innovation lab, this was the lab passed with building beyond core experiences, beyond core solutions. Bear in mind, this company was 150 years old. So something like that. And some people actually, I think were 150 years old as well. And this guy was tasked with running the lab building, building the insurance of the future, think beyond core.

Dan Toma: So on and so forth. The problem for him was that in spite of the new lab that he had, the new processes that he used, all the thought leadership that he brought in, the problem was that HR was only hiring people that had insurance written on their CVS. People that worked with other insurers in the region, sometimes even brought them from abroad. And he said like, "I can't innovate with these people because these people can only think insurance in the way that insurance has been fought about for the past 100. And I don't know, 50 years, I need to have people that come from automotive. I need to have that come from the music industry from entertainment, from travel, people that think differently about insurance, because they don't have that legacy."

Dan Toma: Obviously it was very difficult for him to do that. And obviously he was fighting an uphill battle with HR. But the point I'm trying to make here is that if you want to really become an innovative organization, make sure that you have a strategy, make sure that you speak about innovation, make sure you champion. And by all means, make sure that HR is on board with you. Because if HR is not on board with you, if HR is not helping you recruit the right talent, it's not helping train the people that you already have. You won't be getting very far.

Sarah Nicastro: Yeah, no, that's really good advice. And I was thinking about that because like I said, I think the idea is good, but you have to understand that you can't bring one or two great people on and expect them to transform the whole business. There has to be a structure behind it. And I think the HR point is a really good one. And I think it also ties back to Innovation Accounting, because the other challenge is are your expectations realistic for what that journey is going to look like? They could have brought you on to innovate. And then, like I said earlier, you hit the first failure and they panic and send you on your way. Because they don't have the understanding of what that's going to take. So all very much tied together, all really interesting. And I really appreciate you coming and sharing, tell folks where they can find the books, where they can learn more about you and how to stay in touch

Dan Toma: The books, you can find them on Amazon. We're just starting delivering in the U.S., I think as of last week or two weeks ago. So amazon.com is a great source for the book. Just type the Corporate Startup or Innovation Accounting.

Sarah Nicastro: Have them here.

Dan Toma: Ah, here we go.

Sarah Nicastro: And it's, like I said, they're really, really well designed. I don't know. I thought that the layout of them was really cool. There's some workbook type stuff, there's different exercises to do. And it's something that, like I said, just knowing myself, I wasn't expecting it to be as engaging. And so yeah, they're definitely worth ordering.

Dan Toma: Yeah. Thank you very much for that. And if you want to stay in the much with me, LinkedIn or Twitter are the best places you can find me. So on Twitter, you can find me with the tag danto_ma and on LinkedIn, just type in my name, Dan Toma and I'm going to pop there with the books as the cover.

Sarah Nicastro: That's cool then. All right, Dan. Well, thank you so much. I appreciate you being here and really enjoyed the conversation and your content and hope to have you back again sometime soon.
Thank you very much.

Sarah Nicastro: You can find more by visiting us @futureoffieldserviceref.ifs.com. You can also find us on LinkedIn as well as Twitter @thefutureoffs The future of field service podcast is published in partnership with ifs. You can learn more @ifs.com As always, thanks for listening.

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