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January 27, 2021 | 26 Mins Read

Lessons Learned in Global Service Transformation

January 27, 2021 | 26 Mins Read

Lessons Learned in Global Service Transformation

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Emilie Giraudet, formerly the Head Of Customer Service Business Support & Sales Steering at GEA Group, shares with Sarah her hard-won and valuable insights from more than a decade of work transforming global service at GEA. Insights include practical advice for how to influence and align key stakeholders, how to set a solid technological foundation, and three keys to successful change management.

Sarah Nicastro: Welcome to the Future of Field Service podcast. I'm your host Sarah Nicastro. Today we're going to be talking about some of the lessons learned on the journey to advanced services. I'm excited to welcome today Emilie Giraudet. Emilie is a global leader with 12 years’ experience in the manufacturing industry and an expertise specifically in customer service. She was most recently the Head of Customer Service Business Support and Sales Steering at GEA, one of the largest global technology suppliers for food processing. She has a wealth of knowledge and experience and has kindly agreed to join us today and share some of that. Emilie, thank you for being here and welcome to the Future of Field Service podcast.

Emilie Giraudet: Hello Sarah. Thanks a lot for welcoming me in your podcast today. Very pleased to be here today.

Sarah Nicastro: I am pleased to have you. Before we dig into talking through some of the lessons you've learned and some of the experiences that you've had in your various leadership roles, just tell us a little bit about yourself and your background and your most recent role with GEA.

Emilie Giraudet: Yeah, sure. I hold a Master Degree in Food Process Engineering and an executive MBA from INSEAD. As you mentioned, I spent most of my carrier within GEA, which is one of the largest global technology supplier for food processing. I dedicated most of my carrier to developing service strategies, businesses and teams, and to driving business and cultural shift towards the more customer centric and performance driven organization. In my last role, I led an ambitious digital transformation project, leveraging customer install-base data through data management and analytics in CRM and analytics cloud in order to steer service revenues and customer experience.

Sarah Nicastro: Good. You make it sound so simple, but we know that it's not. That's what's so interesting about talking through different people's journeys is there really are so many things that you learn along the way. At GEA, you made some significant progress on the journey to advanced services or Servitization and you're here to talk through some of the lessons you learned as you did this. The first area is alignment on vision. What perspective can you share on making the decision to move from spare parts to advanced services, CapEx to OPEX, some of these big, big shifts that manufacturing organizations are making. What perspective can you share on sort of seeing the opportunity to evolve but then creating that alignment around it as an organization?

Emilie Giraudet: Sure. It started with a great vision from top management, that's step by step we implemented in the organization. About 10 years ago, everything started with a visionary top managers at GEA who understood early enough that in order to increase sales and support customers, especially in mature markets, GEA should not only focus on new CapEx investments which were limited in these mature countries and also support existing clients with better services to help them optimizing their plans performance and OPEX management.

Emilie Giraudet: We really had this cultural shift coming from top management, especially looking at the evolving markets in mature organizations, mature countries. In order to achieve this vision, we define an ambitious service strategy with a head of a new after sales and service business unit, a consultant and myself so a very small team at the beginning, working on a strategy that we quickly had approved by the boards. Once the board approved it, we started to implement it in the organization.

Emilie Giraudet: To start and make it easy at the beginning, we built a core team with top service leaders that we picked from the best performing service entities around the world and after that, we worked on building a community around the world, training people, showing the vision, communicating about new service products and new proactive approach that we could bring to the market and at the same time, we started to implement new KPIs to track our performance, to be able really to integrate this culture in the organization and globally, if I look at the progress we made it in 10 years, GEA doubled its service contents from 15% of the revenue to now about 30% of the revenue. Globally service transformation as you know is a long journey. Some more steps are still needed to achieve the company full potential, especially I still believe GEA needs to break down some silos and to foster even more customer experience culture in the organization.

Sarah Nicastro: But I think it's a really good point that even before you start to implement real change or introduce real tech... Different technologies and systems and change processes and things like that, you started the communication and the training on the concept and the culture itself so before you were even saying, here's how you go do this new thing we're asking you to do it was here, understand how big of a role service can play in the organization and what that can look like and really training more on making it a part of the culture. Am I understanding that correctly?

Emilie Giraudet: Yeah, exactly. We had some good examples already. We had some countries where they already shifted their culture and who had a lot of revenues coming from services, would develop new concepts, new services, new approaches to clients so we could leverage this internal benchmarking to encourage other to change and to show the direction. So to make it real and possible achievable for countries who were a bit less mature, I would say. Everything started with the vision.

Sarah Nicastro: That's helpful, when you have examples within your own organization of where it is being successfully achieved because that's, it's a bit different than pointing outward and giving examples that way. I can see how that could resonate quite a bit. I want to throw a bonus question at you because I'm just curious your thoughts. One of the things that sometimes comes up in my conversations Emilie is, because you're saying that you had this vision, the vision started from the top down, the leadership saw the potential and the opportunity and then move forward from that point.

Sarah Nicastro: Do you think it is possible to transform in this way if it doesn't initiate at the top? The reason I'm asking that is because I do talk with folks sometimes who lead service functions and they see this potential, but it's like fighting an uphill battle internally. The company culture itself is more, let's keep doing things the way we've always done them, let's stay focused on our product success or what have you and it can obviously be very frustrating for the people that do see that potential when it isn't a shared vision. Is it a lost course? Is there a way to sort of infiltrate the upper level and share that? What are your thoughts?

Emilie Giraudet: Well, globally, I don't think its waste of time, so I believe there is a lot of potential in service and I'm sure that, I mean, when... I mean, people try to drive this initiative, they can be successful already at their level. Then if they want to really roll this out into the entire organization, I believe they will need to get support from top management to a certain extent or else it's very hard to move the organization. Getting buy-in from top management to me is needed to really roll out this big change and big transformation, but I think demonstrating that you can achieve things on your own at a local level or it gives you power to engage and motivate people. For me it's, we're starting but clearly if your ambition is to roll it out into the entire organization, top management support is needed to motivate the rest of the organization.

Sarah Nicastro: I just, I always feel for those folks because I can feel that frustration of seeing the opportunity, but it not being shared so I was just curious your thoughts. I mean, I agree you have to get it to have it really take hold, but it's a good point of find some ways to demonstrate success that you'd have better luck winning people over with that than just conceptually.

Emilie Giraudet: Mm-hmm (affirmative). If you have good feedback from customers it can really help, I guess, engaging top management.

Sarah Nicastro: Yes. Good point. Okay. Moving on to sort of the next topic which is the importance of organizational structure, when we look at expanding the service business. This is something where at GEA you made some changes to set yourself up for success. Tell us a little bit about that.

Emilie Giraudet: Yeah, indeed. In the last 10 years we tried three main different approaches. We learned on the way. We started, as I mentioned, in 2011 and especially in one of the division or where I was working a segment process, engineering segment, we created a new after sales and service business unit on top of the existing traditional application business unit. That was really a shift already implementing that. As I explained, we started small with a very small team and expanded a little bit but without having a real dedicated organization.

Emilie Giraudet: Only in 2015, GEA implemented a new organization. For the first time we created a global service organization with about 400 people out of about 4,000 service people globally in the organization. The global service organization was responsible for developing new products, business development, technical support with really experts from different domains. They were in charge also of improving processes and competence management so really a central function in charge of steering and making service organization more professional.

Emilie Giraudet: At the same time, we had this local organization that we try to empower and really to give them local responsibilities for them to steer sales and to serve clients as locally as possible so really trying to get closer to customers. That's our second organization. More recently in 2020, we implemented another organization where we remove this global service organization as such, we implemented five different division and what is new is that GEA appointed chief service officers at the board of each division. Then we have service teams in a metrics organization so reporting on one side to the chief service officer and on the other side to the more operational business units.

Emilie Giraudet: During these years, I have really saw top management focus on service continuously increasing and I believe it's also been supported and encouraged by a profitable sustainable growth. I believe GEA succeeded in defining an ambitious vision to start in appointing dedicated resources to implement the vision and they also managed to develop step by step service talents and mindset across the organization. Even if we try different things, I don't think it was failures. It was just new ways of doing things and taking time to structure and change this organization.

Sarah Nicastro: I'm not sure if this will make sense to you, but in my mind listening to the progression that you just talked through, it almost seems like just that not trying something and it not working, but more of an evolution. When you started this and it was a small team and it was focused, it was because it was new. I mean, it was a new focus for the company. You really were still working on making it a part of the culture and determining how you would have success and then it sort of evolved into the second phase where you made some progress. But to me, it seems the chief service officer point is really an illustration of the initial vision permeating the company culture to the point where it doesn't need to be its own separate entity or business unit. It is truly a part of the business. Does that make sense?

Emilie Giraudet: Yeah, it's a part of the business. It has still to be steered so somebody has the vision. Somebody is leading some initiatives and is having power to engage the organization on the change and I believe having this global service organization a bit separate was not sustainable anymore. Globally we are taking care of customers. We want to build customer experience so removing silos, I think it is part of our success and we had to. It's a good way I believe to break down some silos and incorporates better service organization within the different business units.

Sarah Nicastro: That makes sense to me. I think the customer experience is one aspect of it. Again, organizational structure is another topic that comes up a lot in these Servitization conversations because for a company that's really starting as a product manufacturer that's evolving to trying to be a service provider in a Servitized business. I've seen different structures similar to what you've mentioned, sort of a global entity or a separate business unit or a separate function or sometimes people even set it up as a separate business that kind of comes in at the point of after the point of sale and so it seems like it's something that takes some work to your point to try different things and not only sort out what works well and what doesn't, but to evolve as the service success of the business grows.

Sarah Nicastro: But to me, I agree with the point of having it more integrated into the business makes for a smoother customer experience. I also always question the true level of success you can achieve on Servitization if it just remains a separate thing. To me it's, you're really only then buying into the vision of Servitization to an extent rather than I guess doing the work it takes to integrate it fully into the business vision, culture, mission, process, et cetera. It's another very interesting part of the conversation. Okay.

Sarah Nicastro: Next let's talk a little bit about strategy. You have the vision, you've sort of structured yourself in a certain way since start and changed over time and then you have a strategy for how you're going to have success with service, but at GEA this began with needing to have a foundation from which to build and so you uncovered this need of really better defining what the install base looked like and that's where the CRM project that you mentioned earlier came from. Tell us how this tied into the strategy and why it was so important and what that project look like.

Emilie Giraudet: Yeah, sure. I'm very happy to talk about this. It's been one of my core focus in the last years and as you mentioned, it's really for GEA the foundation for developing service business. We truly need to know who are our customers, where are their plants located, what type of installation do they have, to be able to segment clients and be more successful in our proactive sales approach, in designing new solution services and developing services better fitting to client's needs. It's really a foundation to become more proactive and more specific in what we do.

Emilie Giraudet: Maybe let me tell you a little story to start and to show you where we started 10 years ago and explaining why we had to change at a certain time. 10 years ago when we built that business unit, we started to explain the concept of structuring an install base as a foundation for growing our service revenues and I really remember that some of the service heads were very successful, had difficulties in understanding this concept. Okay. I see two main reasons for that. The first one is that at that time service people were mainly reactive in our organization so they would not need to have a list of prospects to approach them more practically so that's one

Sarah Nicastro: Waited for the phone to ring.

Emilie Giraudet: Super reactive, no need to know our clients. The second reason is that at that time GEA had a very centralized approach and were servicing clients from the core technology centers that GEA has mainly in Europe and these technology centers, they somehow have information about customers in their local systems so no need for them to have a very well-structured install base to be able to answer to client needs.

Emilie Giraudet: But everything changed with the implementation of our new organization in 2015, where GEA decided to give more power to the local organization and we realized that this local organization had no access to their install base so it was very hard for them to achieve their budgets, their targets, without being able to proactively approach existing clients because they didn't know them. That's really what drove the change and it took us many steps to get there, I would say.

Emilie Giraudet: For a certain part of the organization, we had very limited... I mean, not limited, but we had siloed data. Data were, I mean, spread around different systems, et cetera, so we had a hard job collecting all the information, put it in a very simple global Excel file to start with. Then we had this project already at that time to launch a new CRM, but we had a freeze from the board so we decided to implement an in-between situation, building an SQL server, starting to structure things.

Emilie Giraudet: Finally, one year, two years ago, the cloud CRM was approved and we were able to clean and migrate data in CRM to build a global community of users globally to define governance model and really to progress there. It was really the foundation for us to start with. I believe GEA now has data good quality accessible in a CRM cloud for the entire organization and now GEA can leverage this information to develop sales steering analytics. Okay.

Emilie Giraudet: In terms of analytics, GEA has two main KPIs that they are looking at. One is the market potential. Market potential, we define them and GEA defines how much service business they can generate from each install base. Okay. The second KPI we are looking at is what GEA calls the capture rates. It's basically the ratio between what's the legal entities are achieving in terms of sales and their potential. Two main KPIs that GEA has been using for a while already, what needs to be improved and what we started to work on in the last months, I would say is to make these KPIs more operational.

Emilie Giraudet: The local teams really accepted it's not enough to say, this is your potential, here you go. They want to... They need to trust it and that's where having data of better quality, more accessible, allows us to utilize more advanced concept like machine learning, also engaging people using design thinking concepts to develop more advanced and more detailed market potential calculation. At the same time, we also develop some dashboards to allow people to visualize their data and to be able to really take better data driven decisions based on the reality in their market.

Sarah Nicastro: This had to be a really interesting experience for you and for the rest of GEA leadership because you already had the vision and you already understood the potential without the real data. I mean, it had to be so affirming to then have the data come together and to look at the potential in real numbers and the real scale of what was possible with the service focus. That's really interesting. I wanted to make one point of clarification because I know I got confused by this when we spoke the first time and I don't know if our listeners may be smarter than I am, but, so when you talk about local versus central, so when you started this project, you had the small group to start and then you had the business unit and now you have the chief service officers, but the strategy, the innovation, the technology, those things are centralized, but the execution is localized. Am I understanding that correctly?

Emilie Giraudet: Yeah, exactly. Sales and execution are localized. Exactly. To be able to visit clients so I remember two years ago, I visited Chile for instance and I was already responsible of this install base and we organized some workshops to understand how to structure things, what do they need and so on and what came out of this workshop is that, yes, they need the install base to be able to increase their revenues but they had information about the install base, it was very limited so they told me, Emily it's great to know that this plant is in Chile, but Chile is huge. I need to know exactly what type of plan do we have in which city. Okay. Then they had very limited access to our systems so the SQL server we had at that time was not approved by IT for instance so we could not allow global access to our information so having good quality data and being able to see it was really key for local people to visit clients, to improve their knowledge of clients and their performance in service.

Sarah Nicastro: That makes sense. I only point that out because it's another common conversation that comes up is around to what degree to standardize and to what degree to allow some level of regional or business unit or partner depending on the circumstance kind of individualization. That's why I was pointing out that the strategy, the innovation, the technology use are handled at the central level but the execution is at the local level.

Sarah Nicastro: I'm curious in terms of the CRM project and really bringing this data to existence and to life, to be usable by the entire organization. I'm curious what the reaction has been both from the company and what has it been like for folks to have access to this information and what type of feedback did you get there? But also from the customer perspective, this is really, if you're talking about moving from a reactive model entirely where it was, okay, something's wrong, we need to call for service to this level of being able to be far more proactive on providing service and looking for advanced service options and things like that. I'm curious the reaction and the feedback on both sides.

Emilie Giraudet: From the internal perspective, even if 10 years ago it was difficult to convince some people I think that the change of mindset progressed, so nobody was against or not able to understand the concept. I think everybody was in need. Also the fact that we implemented this global organization in 2015, GEA had to work with different divisions and some divisions were more advanced so already had the CRM on premise not on cloud, but had this higher maturity, I would say, in managing their install base. It was quite obvious that it was needed so nobody had to be convinced. Everybody saw the interest. We just had to do the hard work, cleansing the data, migrating the data, training people, so buy-in was already there. In terms of customer perspective, I see different... I receive different feedback. The first one is that GEA is a complex organization and GEA develops different technologies.

Emilie Giraudet: In the past GEA would have some experts in different technologies and would visit client for one specific technology and another expert would visit the same client for another technology. Finally, I think now local people have access to the entire information of the install base for GEA and it's a big advantage for them. So clients, instead of receiving visits from five different experts for their installation, they would receive visit from one person having the entire understanding and visibility on what is installed. That's one.

Emilie Giraudet: Secondly, I mean, with CRM came not only the installed base but a ticketing system. All correspondence with customer can be done in this system and it's transparent, accessible to everyone. It also increases the internal transparency and it's immediately perceived by customers so they don't have to repeat twice the same thing to two different people because we have hold historical information in our system. I think customers now get a feeling that we have a much better global understanding of their installation and not simply experts coming to solve specific problems that they have.

Sarah Nicastro: That makes sense. It's really interesting, you said how hard of a journey it was to cleanse that data, to consolidate that data, but as we talked about at the beginning it is the foundation for anything from that point forward and so you mentioned things like machine learning and it's taking the time and this is something that is always a lesson learned when I ask folks that have transformed service, what's one of the biggest lessons you learned? It's always the importance of good data and it's going to be harder than you think it's going to be, but there are no shortcuts, those types of things so it's interesting. Okay. You had said to me a comment you must show impact to continue progress and I think we alluded to this honestly a little bit earlier when we said if someone is finding themselves in a position where they see potential for the organization that may not be shared, look for an area to make impact, to gain the attention and the buy-in to continue progress but in your instance, tell me what you mean by that statement.

Emilie Giraudet: Yeah, sure. I fully agree to convince people to be able to get more resources, more budget in an organization. I believe it is crucial to be able to prove what you achieve so I'm going to share what I personally do usually. I usually do my best to use a combination of analytics and customer centric approaches when I drive my teams and my project. As a Six Sigma Black Belt, I systematically take time at the beginning of a project to define the scope clearly, to define objectives and KPIs that I want to measure and to achieve. Okay. That's to me really crucial and I know a lot of people don't necessarily do it, even if it looks very obvious. During the project, I really take time to monitor my KPIs and also very important to communicate it regularly to key stakeholders for them to see the progress, et cetera, and also for my team to be able to adjust approaches when needed.

Emilie Giraudet: Okay. That's the analytical approach. On the other side, before I start a project I always make sure as well that my teams, my projects are fulfilling our customer needs. Internal, external customers doesn't matter, but you really need to have a clear understanding of what customers really want and as I mentioned, I like to leverage tools such as design thinking, for instance, to really make sure that I have a true understanding of the needs. I believe that then it's easier to show impact when you're able to demonstrate and to measure the progress you've made on delivering customer results okay, to prove your success and to be able to continue progress in your organization.

Sarah Nicastro: Yes. That makes sense. That's really good advice for how you handle that. It always shocks me, but it shouldn't anymore because I hear it often enough but it still shocks me, the amount of people that say, I don't, we didn't measure that, when it comes to KPIs. I think that's a really smart approach, especially because when you look at this project in particular, the CRM project, it really is just the beginning of the potential. I mean, it was setting that foundation and so there will be so many opportunities to build upon that success, but part of that is because you did an excellent job doing it the right way and tracking that progress to make sure that when the next opportunity comes, there's belief in the ability to execute.

Sarah Nicastro: We had a gentleman on the podcast very early on and there was something he said that has always stuck with me and he referred to it as building a strong digital reputation. Meaning if you don't do a good job for whatever reason and we can talk about the many, many things that that could mean, but you ruin your reputation so the next time you try and implement a new tool or a new system, you're going to be met with so much resistance because of that last time so it's important to stay focused on building a positive digital reputation because when you look to build, you need to have a good track record. So that makes sense. Emilie, can you share one of or some of the hurdles that you are proudest for overcoming because we know that this journey is not an easy one. It's nice to be at a point where you can reflect back on some of the success, but there's a lot of really hard work getting there.

Emilie Giraudet: Yeah, sure. Probably the biggest hurdle I faced with that project was related to finding the right collaboration mode with IT department to drive such a global digital transformation projects from and for the business. That was really the toughest part. In 2019, I had to drive different projects around install-base management and sales steering analytics and clearly to work on this project, I needed support from it teams. The challenge was really for me to get support from this IT team because resources are limited and at GEA at least you really have to prove that your project is super top priority to be able to get resources and when I knocked on their door in 2019, it was kind of too late and I was probably missing buy-in from this, the organization to be able to prove how important it was.

Emilie Giraudet: Later in 2019, I started to prepare 2020 and I understood that I really had to drive into nearly a complete change management project starting from convincing top management, engaging business leaders around the world, also getting support from the CRM team to be able to demonstrate the strategic importance of my project to IT. It was not enough to knock on their door and say, "Hey, this is super important." But really showing them that I had commitment engagement from top management, from the business side of the organization, from the CRM team. Then finally after a few months, they approved to support my project and they did a great job at it and we were able to deliver our project on time with good quality. So all good.

Emilie Giraudet: What I learned out of this story is that mapping key stakeholders and really understanding their needs, their objectives, their working modes at the beginning of a project is a key dimension to succeed in driving such a broad cross functional and cross geographical transformation project. If you miss one key stakeholder, it can ruin your project so really important to map early enough key stakeholders, talk to them, understand how they work and how you can make it happen together.

Sarah Nicastro: That's really smart. I'm smiling because it's really smart. Also, there's a bit of tenacity thrown in. I mean, you deserve some credit for being resourceful and understanding, well, if it's not going to work this way, then let me kind of go about it in a different way. That's really good. Okay. What would you say outside of this project specifically or related, whatever you want to share, what do you... What would you say is the biggest lesson you as a leader have learned?

Emilie Giraudet: It's kind of related to this project, but not only so I would say it's about change management. When I was younger and especially when I joined this after sales and in service business unit I was really reporting to the managing director, head of the BU so I thought that people would follow what the MD would say naively which was not true. They would always argue and negotiate and not implement things. I really understood early enough that it's not enough to have very high position to ask your people to do things, you really have to engage them and to motivate them.

Emilie Giraudet: To me, there are three main dimensions to succeed in implementing change. The first one is about motivating people. We are human beings so we need a certain level of excitement, enthusiasm to get things done. I believe it's crucial really to find a way to motivate people around your project. The second one is about showing the direction, so being able to create a vision to make it compelling enough to be able to start the change and to motivate people to act. The third dimension to succeed in change management to me is to be able to slice the elephant into actionable and achievable steps so as to reduce the complexity and encourage continuous success. I really believe that being a leader is not about giving people instruction, but really about motivating people, understanding their needs, designing and communicating a compelling vision and executing plans with clear steps and milestones. All these dimensions are crucial.

Sarah Nicastro: That's really good advice. I think... What I was thinking about when you said you realize that they weren't going to just do what they were asked, they were going to push back. Even if they hadn't pushed back, I think one of the important things to think about with really making an effort in managing change the ways that you just outlined, which were fantastic is the goal should not be compliance because the level of success you're looking to have in this type of global transformation, you won't achieve from compliance. Even if they had said, sure, Emilie, we'll do whatever you're asking us to do, you need commitment, you need a real commitment to the mission, not just somebody that's going to do it simply because they're being told and you're not going to achieve that without making that a priority. That's really good advice as well. All right, any other comments or anything, any closing thoughts you want to share?

Emilie Giraudet: Yeah, maybe one last more so we started with explaining that moving an organization used to selling machines to a service organization is a cultural shift. That's also what I understood during this year is that, it's really crucial to drive organization cultural shifts and even if GEA can be very proud of its transformation to a more service oriented companies, I believe there are still better results that can be achieved especially by engaging a broader audience so we went through this different organization that we implemented so indeed we started engaging a part of the organization, the service organization, I believe now to reach more what we expect in terms of customer experience. We really need to engage a broader part of the organization and it takes time. It's not easy to break down silos and to change the culture but that would be for me the next step, I would say, for GEA to truly succeed and really leverage the potential that they have. This is hard to do.

Sarah Nicastro: What other parts of the organization or what piece would come next, I guess?

Emilie Giraudet: I would say people who are involved in selling new plants, new machines to customers, and really to tighten and to build a closer collaboration between pure service after salespeople and people selling new plants. I think we have a, I mean, in all organization interest into building this and a good way for me to do that would be really to map the customer journey so really to step out of internal processes and how things are done in an organization, but really looking at the customer journey and building a map to improve customer experience that would really facilitate collaboration within different parts of the organization.

Sarah Nicastro: Yeah. I always think too in this type of transformation, the opportunity, once you get into marketing. Like you said, it's every... It takes time. It's a huge undertaking to take a company from being a product business to a Servitized business. But once you start having success and being able to build upon it, it's quite interesting. I was also thinking when you were talking about the CRM project, you're really starting rightly so with a focus on how to wrap your arms around and better serve the install base but even once you're better serving them, then you have the opportunity to start brainstorming with them and thinking about adjacent services or new digital services or what have you. I mean, it really is the potential is limitless and it's exciting, but also overwhelming, particularly for people that are inclined to want to spearhead this type of transformation. It's a really interesting topic and you've had some wonderful points to share. Thank you so, so much for joining and talking with us on the podcast. I really appreciate it Emilie.

Emilie Giraudet: Thanks a lot Sarah. My pleasure.

Sarah Nicastro: You can learn more by visiting us at www.futureoffieldservice.com. You can also visit us on LinkedIn as well as Twitter @TheFutureOfFs. The Future of Field Service podcast is published in partnership with IFS. You can learn more about IFS service management by visiting www.ifs.com. As always, thank you for listening.

January 20, 2021 | 22 Mins Read

The Business Model Blueprint for Successful Servitization

January 20, 2021 | 22 Mins Read

The Business Model Blueprint for Successful Servitization

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Tim Baines, Professor of Operations Strategy at Aston Business School and Executive Director of the Advanced Services Group, makes his third appearance on the podcast sharing with Sarah insights into one of the most-discussed aspects of servitization: how to create revenue.

Sarah Nicastro: Welcome to The Future of Field Service Podcast. I'm your host, Sarah Nicastro. Today we're going to be talking about the business model blueprint for Servitization success. I am excited to welcome back to the podcast for a third time, Professor Tim Baines, who teaches operations strategy at Aston Business School and is the executive director of the Advanced Services Group. Tim, welcome back to The Future of Field Service Podcast.

Tim Baines: Thank you, Sarah. I'm pleased to be here.

Sarah Nicastro: We won't go into details but we had to work very, very hard to bring you this episode today. So, thanks to Tim for hanging in there with us, and I'm excited for today's conversation. I think the biggest question that comes up for me, when I'm talking with folks about the journey to Servitization is how do we monetize it? What are the revenue models? How do we use it to increase revenue? So that is a part of what we're going to be talking about with Tim today.

Sarah Nicastro: Tim was first on the podcast last year, talking about the forces behind Servitization and what that journey looks like for companies, so if you haven't listened to that episode, it's definitely worth revisiting. And in December we tackled some Servitization predictions for 2021 and some of the things that Tim expects to see this year. So today we are going to add on to our nice stretch of podcasts, by talking about business models and revenue models and how to make Servitization work for your business.

Sarah Nicastro: So Tim, to start, can we talk about how does Servitization represent a business model innovation?

Tim Baines: Thank you, Sarah. So the whole conversation about Servitization drags in this idea of the innovation of the business model of the firm. The innovation of the business model of the manufacturing firm. And as you know, this whole conversation is about moving from a world where the business model is largely about the design and the production of a product, and the transactional sale of that product, to a world where the business model is ultimately about ensuring the outcomes, the business outcomes for the customer. And for our business model, as a provider, as a manufacturer, to be based on receiving value, on the capture of value, as our customer consumes the service that we actually offer.

Tim Baines: So the conversation about Servitization naturally leads into conversation about business models. And when we look at business models, look at the business model framework. It's largely recognized as having four elements to it. One element is about the offering, what you put out there, what you give to the customer, the service, or the product, or the product and service. One element is about how you deliver that, so the systems, the technologies, the people. And the third element, and really the focus for our conversation upon revenue models, the third element is about this value capture.

Tim Baines: And I'll just mention for the moment, the fourth element is about the broader competitive landscape and our competencies to compete in that. Before, now I'm moving back to this third element and saying, okay, the processes of value capture, how we get value out of delivering the product or the products and service to our customer, is where we naturally go when we think about revenue models.

Tim Baines: And of course, if you think about an organization putting a service into a customer, they're going to receive value in a number of ways. Some of those ways are going to be very direct, ways in which we can monetize and other ways are going to be less direct. The learning that we get, for example, of working with a customer. That learning flowing back to us.

Tim Baines: But of course, when we talk about revenue models, we're talking really about that way in which we capture direct funding, how we get value, monetary value, out of our offering to the customer. And what becomes interesting, you can look at this area of revenue models and you can reflect upon it and think about the different revenue models which are actually out there. And there is, of course, the traditional revenue model that you associate with a product sale, that the manufacturer gets reimbursed directly and perhaps immediately, and perhaps in full for the sale of a product, right away across to these subscription type models, where we're paying for, on perhaps a monthly basis, for actually the provision of a product or a service.

Tim Baines: And ultimately when you get to the business, the revenue models that we're really interested in, which are associated with these more advanced services, these revenue models consist of a combination of different factors. They consist of a pay-per-use component but they also consist of a lower banding, where every month we will receive some revenue, no matter how much our customer uses our product or service and an upper banding, which is basically a point over which we're saying to the customer, you can't use our products and service any further because we need to have access to that to do some services with. So maintenance work.

Tim Baines: So I hope that's made sense, Sarah. There's an awful lot in this topic of revenue models and it starts with the business model and it starts with the fact that we are undergoing a move to different types of business models. And the revenue model innovation is a really important component of that move to these business models, which are based more around service, rather than the transactional sale of the product.

Tim Baines: So I'll stop there for the moment and just see whether my explanation resonates with what you were seeing, Sarah, what you're being asked when you speak to people.

Sarah Nicastro: Yeah. Tim, that explanation actually had me thinking about our first conversation and talking about some of the forces behind Servitization, Right? And so if you follow me for a moment, what I'm thinking about is the conversation is often led with revenue model, right?

Sarah Nicastro: So I don't have a lot of organizations leading the conversation with me and talking about the more holistic view of business model. They're pretty focused on the revenue model. And what it made me think about is that that's because ultimately that revenue model aspect of the business model is what's going to yield the payoff to them, right? So it's kind of, they're naturally focused there because they're most concerned with, if we're going to invest time and resources on this journey, what's the payoff to us? Does that make sense?

Tim Baines: It absolutely does. And I see that also.

Sarah Nicastro: Yeah. And it made me think about the conversation in the context of some of the external and internal forces around Servitization, right? So it's, to me, the focus on the revenue aspect only, is sort of an internal focus, where the business model focus is looking at it more holistically, with both, what's the ultimate pay-off to the company, in terms of revenue but also how are we going to deliver value to the customers, that they are in essence, willing to pay for? Does that make sense?

Tim Baines: It does Sarah. And I think there's three threads of conversation which intertwine. When we look at this area of Servitization, if we're not careful, we can just see them as one thing that's happening, revenue models. But of course, as you've just pointed out, you have A, the way in which the customer actually pays us, but B, how that rolls up to be the business case for the organization, the compelling financial argument for us to move forward with services. But also C, what that means in terms of our relationships with other financial organizations or the financial innovations, or the ways in which we might explore, to actually fund some of our own activities. And that third area is in itself, a whole area of conversation, which can take a deep dive into and can be fully immersive.

Tim Baines: But the first two points, I very much agree with it, when we speak to practitioners, we see the same thing. They are interested in, how is somebody going to pay me? How is that going to affect me? Am I going to receive a lump sum or am I going to receive monthly payments? What's it going to look like?

Tim Baines: And then secondly, how do I put together a compelling financial case to the business, which is an argument for us to either move into Servitization, to move forward with Servitization, to expand our Servitization activity. Those are those two levels.

Sarah Nicastro: Yeah. That makes sense. So you talked about one of the components of the revenue model being the value capture process. So can you talk a little bit about some of the different ways of capturing value?

Tim Baines: So, and this is where I understand this language here can seem a little bit, almost like conceptual and difficult to grasp for a practitioner. But this is the language that the scholars who are working on, on business model innovation, those scholars tend to use. And one of the challenges people like you and I have, Sarah, is to take this somewhat academic conceptual language and translate it into practical terms. And value capture is one of these academic terms.

Tim Baines: But when we bring it right the way down and say, "Well, what are we really talking about, the level of a manufacturing firm," we can simply say, the important bit for us is how do our customers pay us? How do customers pay us? Now, one of the challenges is that manufacturing firms, of course, are very familiar with the idea that our customers pay us when they buy a product. And of course, as we move into these services, which are more sophisticated, these more advanced, these outcome-based services, the way in which our customers pay us tends to change.

Tim Baines: So we're here as a manufacturing firm. We are made aware that when you look at the more sophisticated outcome-based contracts, customers tend to pay for that service as they consume it. And that can give a lot of concerns to the manufacturer because you take the example of a high value asset. Let's say it's a machine tool. Let's say it's a million dollar machine tool. The old world is that the manufacturer makes the machine tool, sells the machine tool, gets a million dollars for it and with that million dollars, has the funds then, to reinvest in the materials, pay for the workforce, et cetera, this sets about making the next machine tool.

Tim Baines: But of course, when we moved to these services and you hear people like myself, advocating it's going to be a pay-per-use, the manufacturer's sitting there and saying, "Right, I'm not going to get a million dollars. I might get more than a million dollars. I might get $2 million. But it's going to take me five years to get that $2 million."

Sarah Nicastro: Right.

Tim Baines: "Or three years or two years to get that $2 million." We're going to get more money back because ultimately I'm going to provide more services to go with the product. But I'm going to be getting back over a longer period of time and I'm not going to get it back as a lump sum. I'm going to get it back as a month by month payment. And that gives the manufacturer these alarm bells. And the manufacturer says, "I can't do this. How am I going to pay for all these raw materials that I've just consumed, in providing this machine tool. If all I'm going to get back as a monthly installment, which over two or three years, is going to build up towards this 2 million pounds, but from day one, I'm just going to get a small fraction of that back, how can I afford to do that?"

Tim Baines: Now there's an explanation of how you can do it, but I'll just pause for a second Sarah and say, does that resonate? Is that the type of conversation that people have come to you with?

Sarah Nicastro: Yes. That absolutely makes sense. And I think the implications of that level of change within a company are something that is just not simple, right? I mean, it's something that takes a lot of change management in thinking but also work to put into practice and sort out what that means and how to evolve into that type of model.

Tim Baines: And it's a topic which, when people first started looking at these more sophisticated services, these more sophisticated business model and there were outsiders to it. And they looked at these and said, "This is really concerning." And I always remember some of the very early research papers, that I read about Roll-Royce. And you would see the statement that says, Rolls-Royce no longer sell jet engines, they sell power by the hour. And of course, people took that literally and they said, "Oh, so they're not selling the gas turbine?"

Tim Baines: The answer is, they absolutely are selling the gas turbine, whether it's Rolls-Royce with a gas turbine, where there is a company like Alstom, or GE. Sorry, Alstom with a train system. Whether it's Caterpillar with a big quarry truck, the asset is being sold. So I think that's the first part of the message back to the manufacturer, exploring the Servitization space. They will still sell the asset.

Tim Baines: So back to our machine tool example. I will still sell the machine tool. And I will sell it and I will get that lump sum payment for the machine tool. It's just that the customer isn't necessarily buying the machine tool. And that's what people get confused with. With these more advanced services, I'm still selling the asset. I'm just not selling it to the customer.

Tim Baines: I'm selling it to a finance organization, which becomes an intermediary in this model. And remember, a couple moments ago, I spoke about the three strands. This is part of the third strand, which we could perhaps talk about in more detail at a separate time. But if you look at these organizations, whether it's Caterpillar or whether it's Rolls-Royce, whether it's GE, they all have a financial institution, a captive financial institution. So a financial function with inside their organization, which is taking on, when the product is made, when the machine tool is made, in effect, internally, they are buying that asset from the manufacturing part of the organization and putting it into the finance part of the organization.

Tim Baines: And now there's other businesses out there, which are much smaller than people, like Rolls or GE, who are using external banks to do the same thing. So it hasn't got to be a captive bank, but external bank. Well, that's what happens, is the asset is being sold.

Tim Baines: So the manufacturer actually, going back to our fictitious example of the machine tool manufacturer, what's actually happening, is here I am. I am selling my machine. I made my machine tool. I'm going to sell it. I'm going to sell it to the bank and it's going to go to the bank. So I'm getting a million dollars right away for the transactional sale. And then I've got a guaranteed income then, for the next two, three, four, five years, whatever the contract length is, of another million pounds, another million dollars for those services, which I'm going to provide for.

Tim Baines: And this is where this conversation then, about the revenue model and the compelling case for services get so intertwined because all of a sudden I've now got an income into my business of 2 million pounds, whereas previously, I would have only got a million pounds or two million dollars, where previously I'd only got a million dollars.

Tim Baines: Now that's a very compelling argument to move forward to Servitization. But the argument doesn't exist unless you get underneath the surface of it and start to tease out what the revenue model looks like in the way that you're doing. In the way that you're speaking to me about.

Sarah Nicastro: So Tim, can you walk us through, what are some of the established and emergent revenue models for advanced services?

Tim Baines: Okay. So understand the baseline. So the baseline is the traditional transactional sale of the product. I've made the product. I'm selling it to you, as the customer, and you're paying me directly one single installment for receiving that product.

Tim Baines: So moving away from that, what you tend to hear people talk about more and more is a subscription. A pay-per-use. And notionally, a subscription model is a model we're familiar with. It's the model that you might have on a mobile phone or with a gym membership, is each month, I will have a monthly payment.

Tim Baines: Now, based in the context of what we just spoke about a few moments ago, about the fact that I will still be having my transactional sale of the product to the finance house, which will give me a lump sum back inside my organization, to go and finance my manufacturing system, the customer just experiences their subscription charge. So as a provider, I am getting both a lump sum repaid and I'm also getting a subscription from the customer. The customer themselves is paying a subscription and that subscription comprises of two components. Part of it is going back to me, the manufacturer for my services and part of it is going back to the finance, as to pay for the loan, which they've taken on, in effect, has been taken on the machine. So the customer sees a subscription charge.

Tim Baines: Now, when you look at subscription charges, that is, a lot of people are looking at the moment in time at Servitization and seeing it as being a move to subscription charging for a combination of a product and a service. Now it's more sophisticated than that, of course, when you start to look at more complex machinery because the power by the hour model on a gas turbine isn't simply a subscription. It comprises of three components.

Tim Baines: It comprises of a baseline, which says that, look, even if the asset isn't being used, you will still pay me every month, a base fee. And by contrast, it comprises of an upper fee, that says, "Look, we don't expect you to ever pay more than this top level because we don't expect you to use the asset more than so many hours in a week, so many weeks in the year, type of thing because there's a maximum utilization we would expect this asset to actually have. And it might only be 85% because above that, we need to have access to the equipment to maintain the equipment.

Tim Baines: So you've got a lower band, a higher band and between the two, you've got a variable. And the variable will be based perhaps on the number of hours used or the outcome, the number of products produced, et cetera.

Tim Baines: So some practical examples. If you look at, we've talked about Rolls-Royce, in terms of power by the hour, the idea that the gas turbine thrust, that's an airline operating company buys from Rolls-Royce, is based upon the number of hours that that machine is running for them.

Tim Baines: If you go into food production, you go in the world of food production and you think about the idea of pay per pack. If you imagine a production line and the production line is producing potato crisps. And then you've got each item going through the machine, in effect it incurs a kind of a revenue flow back to the manufacturer of the machine. A pay per pack. And you have that happening with companies like Domino and companies like Ishida, and companies like Tetra Pak. Or people like that who are playing around with these ideas about pay per pack.

Tim Baines: And then you've got this idea of pay per good pack. And if you imagine in food production, you've got a difference between paying per item produced and paying per good item produced. And that's a different form of revenue model. And they're all bundle ups, Sarah. So you've got all these different revenue models, components of a revenue model.

Tim Baines: And one of the challenges when you're thinking about an advanced service offering, is to put together that construct of that revenue model so it works for the customer. So you've got these different components, as I've just talked through. So it's a revenue model, which comprises of those and works for the customer. And it's on the base of the revenue model that the justification, the business case, can then be put in place. And then we go from there.

Tim Baines: So I'm sorry, Sarah. There's an awful lot in the revenue model conversation and I'm mindful that I've spoken at length about it. But is it helping to clarify or am I just adding more fog to an already quite foggy topic?

Sarah Nicastro: No, I think it's definitely helpful. And I think, there are certainly areas where we could really dig in and that gives us an opportunity to have you back at some point and do that. But this is good.

Sarah Nicastro: I do want to ask a couple more questions. The next is around what do you think the future trends are for these revenue models for Servitization? How do you see this kind of evolving?

Tim Baines: Okay. So I see, what I feel I've witnessed over the past few years is people becoming much more aware of a subscription charging approach. So the customer paying a subscription. And you can think about it in terms of if you stream music, you pay a subscription.

Tim Baines: Now the subscription charge is simply a fee, which gives you an availability. And somebody like myself, who lives in a place where my mobile phone reception is poor, still pays the same, if you like, subscription fee that somebody who's living in the center of town would pay. I'm not paying a fee based upon me fully experiencing the outcome that I want. I'm paying a fee which is giving me access. I'm not paying a fee which is based upon the successful receipt of me receiving an outcome. Now, of course, there are, if I look at the contracts, there are terms and conditions about my mobile phone should work under these conditions, et cetera, et cetera, and I can get a refund if I don't get it.

Tim Baines: But without going into the depths of the contract, I think the trend will ultimately go towards charging for outcome. Charging for successful delivery of outcome. And go back to my point, a moment ago, imagine a piece of production machinery inside a food processing plant. And let's say that piece of production machinery is a bottling machine. And at the moment in time, we might talk about moving to a world where the manufacturer, the production machinery is being paid on the basis of the number of bottles which are being filled.

Tim Baines: Actually, the customer doesn't receive income based upon the number of the bottles. We receive income based upon the number of bottles which have been fully filled. Have been filled in a way that the contents remain sterile, let's say, et cetera. Paid per good fill. Okay.

Tim Baines: And that's part of that evolution. So that's where I think it'll go to, Sarah. I think most businesses are quite a way off that yet. They're really in the world of even this idea about moving to a subscription-based approach and partnering with a financial institution, to enable that subscription-based approach. That's where the bulk of business is, just to exploring that.

Sarah Nicastro: I agree. And I was going to point out, one of the things I see companies doing is almost tiptoeing toward subscription but not being fully comfortable with it yet. Meaning some companies I see are still trying to keep the two worlds separate, in the sense of selling the asset, but then trying to offer service on subscription after the fact. And I think that I see how you could feel as though you're kind of testing the waters in that approach but I think ultimately, what you've talked about today makes far more sense and is a truer representation of actual Servitization, If you understand what I mean. Does that make sense?

Tim Baines: I think Sarah... Go ahead. Sorry.

Sarah Nicastro: No go ahead.

Tim Baines: No, I was just going to add something in, which was, I think this move to subscription is a very valuable component of the Servitization journey but it isn't the Servitization journey in itself. And I think it's important to recognize that a customer can still buy a product on what feels like a subscription basis. I know Goodyear will sell a tire to a customer on the basis of a monthly payment of the number of miles or kilometers that tire has gone.

Sarah Nicastro: Right.

Tim Baines: Now that's still a traditional product sale. It's just really been paid for in installments. So the shift to subscription doesn't explain the whole Servitization journey. And it's important to recognize that because we have come across situations where, because the subscription model is difficult for the manufacturing organization to grasp, the whole Servitization initiative gets derailed. Of course, Servitization is fundamentally innovation in the customer value proposition.

Sarah Nicastro: Right.

Tim Baines: Doing more and more for our customers and of which a pay-per-use subscription model makes absolute sense. But the subscription model itself doesn't explain the Servitization. It's a component.

Sarah Nicastro: Right.

Tim Baines: It isn't the journey itself.

Sarah Nicastro: That makes perfect sense. So last question for you today, Tim. What you just said, I think is an important distinction. The Servitization journey is really one that is representative of evolving your customer value proposition. Determining how you monetize that and what the revenue model looks like is one component of that journey. It does seem to be one of the biggest struggles for a lot of people, or at least if not the biggest struggle, something on which they're putting the most emphasis. So for someone listening, that is struggling a bit with this conceptually, what's your best advice or synopsis for how to, as best they can, simplify and make progress in this area?

Tim Baines: I think I would suggest three steps, really. Sarah. I think the first step has to be, to be clear in your mind, exactly what this model actually looks like. And we've talked about it in the sense of this idea that what the customer receives is different than necessarily what the manufacturer offers. And that happens because in the loop now, where we've got this financial organization, whether it's incumbent in the manufacturer or it's independent to the manufacturer, being part of the equation. So being clear in your own mind about what is the structure of the financial flows, I think is my first step.

Tim Baines: And I'm not suggesting anybody goes into huge amounts of detail, but just sits down and sketches it out and says, "Yeah, okay. I understand what the customer's going to get and pay for. I understand what it is that I'm going to produce now. I'm going to receive funds. And I understand that if there is a financial organization in the loop, what they are going to get. What's their slice of the operation?

Tim Baines: I think my second piece of advice would be that I know that this is going... For an organization to invest in this, it's got to have this business case. But of course, the structure of that business case is both dependent upon this revenue model and also the stages of maturity of the Servitization journey. Because if we're at the stage earlier on and going back to our roadmap, where we're just exploring the ideas, then the business case is simply asking for permission to explore the idea further, whereas if we're much further down the road, the business case is about much more strategic investment.

Tim Baines: So I think my second point is really be clear about the basic business case that you need to form, on the basis of the revenue model. So understanding how detailed you need to go, in figuring out the revenue model, really is determined by what's the business case you have to create at this stage of the game? So if the business case is to just get permission to do some experimentation, then at this stage of the game, the revenue model only has to be fleshed out as what it might look like with one particular customer, whereas if we're looking for permission to make a big investment, then the revenue model has to be fleshed out in much more detail with multiple customers.

Tim Baines: So I think that's the second point is be clear about almost like the stage that you're actually at in your Servitization journey and particularly, therefore, what does the business case need to comprise of?

Tim Baines: And then the third piece of advice is, if at all possible, come up with just a prototype and just experiment with one very safe organization that you can use to mutually learn from the experience. Just pilot, to try it. And through that piloting and trying, then both organizations will develop their knowledge and their insights of what this can actually look like. And then that's the platform to move further forward.

Tim Baines: And so you've got these three components really, that are coming out of it. And the first one would be clear about what that structure could look like, think about where I am, in terms of a business case and the sophistication of a business case I need to produce. And thirdly, just think about a very basic pilot at this stage.

Sarah Nicastro: Excellent. Very good. Very good advice, Tim. And we're out of time for today but I could ask you so many more questions. So we'd love to have you back again soon and continue the conversation. As you said, there's plenty of areas here to dig into but thank you so much for joining us again and sharing your perspective. We really appreciate it.

Tim Baines: Now, Sarah, thank you. I've enjoyed the conversation today and yes. Thanks for your tenacity in ensuring I actually get to speak to you today. So thank you. Take care and I hope to speak to you again in the near future.

Sarah Nicastro: You can find more by visiting us at www.futureoffieldservice.com and 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 about IFS Service Management by visiting www.ifs.com. As always, thank you for listening.

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January 13, 2021 | 30 Mins Read

Sysmex’ Tips for Effective Onboarding, Training & Retention

January 13, 2021 | 30 Mins Read

Sysmex’ Tips for Effective Onboarding, Training & Retention

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Sarah welcomes Bobby Lincoln, Supervisor of Customer Care Onboarding at Sysmex America, to discuss how to make onboarding personal – particularly in our now virtual world, how to train without creating overwhelm, and how to retain field service talent by offering career progression paths.

Sarah Nicastro: Welcome to the Future of Field Service Podcast. I'm your host, Sarah Nicastro. Today we're going to be talking about tips for successful onboarding, training and retention. We know that with some of the challenges that exist in obtaining and training and retaining talent, these are topics that are very, very important to the vast majority of our listeners. I'm thrilled to be joined today by Bobby Lincoln, who is the supervisor of customer care onboarding at Sysmex America. Bobby, thank you so much for being here, and welcome to the Future of Field Service Podcast.

Bobby Lincoln: Well, thanks for having me, Sarah. It's a pleasure to be here.

Sarah Nicastro: Absolutely. So this is Bobby's area of expertise. And I'm excited to have him here with us today to give us some tactical advice on how to have effective onboarding and training. Onboarding is obviously the very first impression a new employee gets of your company. And with talent that today has many, many options on where they spend their time, it's a very important first impression. So Bobby, before we dig into some of the things we want to touch on today, just tell our listeners a bit about Sysmex, yourself and your role.

Bobby Lincoln: Well, thank you. Yes. My name is Bobby Lincoln, as Sarah said, I supervise customer care onboarding for Sysmex. I'm also responsible for managing a group of field service technicians, which we'll discuss those later on this conversation. In brief it's a national group of field service technicians that we hire to support districts as they get trained to do installations and eventually move into a permanent service engineer role. But I do supervise the onboarding process for everyone in the service organization, I've handled this responsibility for going on little over a year and a half. So pre-COVID and after COVID experience going on. I've been with Sysmex now in year 16, which I hear is unheard of in modern world, everybody switch jobs from every three or four years. But no, I'm a lifer as they say. Sysmex is a medical device company at its core. We're a Japanese based company.

Bobby Lincoln: We are the global leader in hematology diagnostics, we are now broadening our year analysis portfolio. And yeah, it's been a wild ride. When I started with Sysmex, we were... I don't know the exact market share number, but over the course of the last decade and a half, it feels really weird saying that by the way. We've become number one in the United States and the world.

Sarah Nicastro: Awesome. And I agree with you. I think after 2020 everyone should have survived and led through COVID on their resume. It's-

Bobby Lincoln: Absolutely.

Sarah Nicastro: It's a whole skill set in and of itself. All right, so we're going to talk today about onboarding, training and retention. And I kind of lumped them together in the introduction, but they are really three different and three very critical areas. So let's take them one by one. So we'll talk about onboarding first. So to start, just tell us a little bit about what your onboarding process looks like.

Bobby Lincoln: Well, I would like to discuss because it has morphed over the last year. Pre-COVID we would have... We'd spend interviewing. We spent a lot of time on the interview process, which I anticipate most other organizations do as well. We would come into the office, in our United States offices located... Well, there's a couple now actually. But we'd send everybody to Lincolnshire, Illinois, Northwest Chicago, and we'd come in and we'd spend day one just getting to know each other. And then throughout the course of the week, we'd have different presentations, discussions, we would do a tour of the building, we'd literally get to meet the CEO if he was in his office that week, which is pretty cool. A lot of people on day three don't get to meet the CEO of their organization. But really, the big thing about our onboarding process is, the goal is two things. We want to acclimate our new employees to our organizations or better yet our culture, ultras big from where we are.

Bobby Lincoln: Also, there is a few things that we have to hit, certain metrics that every employee needs to go through and all the corporate things, the human resources, presentations, all of those things that many, if not all corporations put their new employees through.

Sarah Nicastro: Mm-hmm (affirmative).

Bobby Lincoln: Yep.

Sarah Nicastro: Okay. So one of the big areas of emphasis for you is making the onboarding experience personal. So why is this something that's so heavily prioritized? And I guess, more importantly, what are some of the ways that you accomplish that?

Bobby Lincoln: As I was thinking about this, two quotes come to mind. I'm a big quote guy. It drives my wife crazy sometimes, but you think of the godfather quote, it's not personal, it's strictly business. Well, I like to subscribe to... He's a buffoon in many ways, but I'd like to subscribe to the Michael Scott version of business. And I wrote it down to make sure in case our listeners don't quote me saying it wrong. So I did write it down, where he says, "Business is always personal, it's the most personal thing in the world." And you fast forward a little bit in that episode and he goes, "People will never go out of business." And I really subscribe to that, we subscribe to that at Sysmex, we believe we are in the people business. Why wouldn't we make it personal?

Bobby Lincoln: We hire folks to come in as service engineers, we hire them to do a technical job, but at the end of the day, that's only part of it. Our customers are going to require some fixing as well. So we spend a lot of time on making it personal to welcome them to our family. Really a family. That's our view. That's how we approach it. And when you bring someone into your family, Sarah, you've probably had folks sit down at your dinner table before, and thought, "I don't know. I don't know." We spend a lot of time on the front end so that when we bring folks in, they fit into our family and we want to acclimate them to that culture.

Sarah Nicastro: Mm-hmm (affirmative). Okay. So when they start the onboarding process, do you have any examples of things that you guys do to make it feel personal to them? So that it's not just employee one, two, three in onboarding session number whatever? What are some tips around creating a more personalized experience for those folks?

Bobby Lincoln: So much of this conversation, I'm going to tailor it more to where we are right now virtually, because in the office when I would host this onboarding process, it's similar, but it's different. So for example, we log in on day one, everybody comes in and I intentionally start our meetings about 15, 20 minutes before all the production starts, if you will. We get to know each other. One of the fun things that we do during this process, is every single class we challenge them with icebreaker questions. And it's no fancy science behind it. I literally Sarah, go to Google and type in icebreaker questions. For example, one of them was what superhero would you want to be and why? My personal favorite is if you could upload one skill to yourself via the Matrix, if you could become Neo about anything what would it be? And we challenge them and talk to them.

Bobby Lincoln: It just naturally generates conversation. And to make it personal, this might sound crazy to some out there, but I want to create the environment of we're sitting around the dinner table where you feel virtually comfortable talking to anyone at that table. That's the atmosphere that we hope to create in our onboarding process.

Sarah Nicastro: Yeah. Now I have to assume being successful at that is more challenging in a virtual environment than it is in person.

Bobby Lincoln: It is especially challenging for people like myself that when I give presentations, I feed off the room. I love the energy in the room, you can look and see it's harder I think, especially using certain platforms where now our new hire classes range anywhere from four to eight individuals. Seeing them on a screen, reading their faces for how they're receiving the information is way more difficult this way. Whereas when you're in the room, you can see it and feel it. This way, you kind of have to... I don't want to say put on more of a show, but make it a little more entertaining, if you will. And that's how I have... I've seen it work very well thus far.

Sarah Nicastro: Mm-hmm (affirmative). Yeah. And I think that not everyone can control, I guess, size of onboarding class, but when you're doing it virtual, I think considering how many people you have in a group is important, because if it's still not as easy as reading the room in person, but if you have to keep an eye on four, or six, or even eight individuals, energies and reactions on screen is one thing if you were doing a class of 20 or 25, or any more than that, it would become very difficult to give anyone that individualized attention.

Bobby Lincoln: Yeah. We had... This was right before COVID hit last year. The November prior we had a class of 18 people in our room. There's no way we can do that in this format. In fact, we have made the decision based on occupancy levels of the buildings of local in Illinois, of what they allow, our new hire classes can only be a certain size, because of the restrictions that we have at our training center down the line. We have more frequent classes, but they're smaller.

Sarah Nicastro: Yeah. Which in the process you walked us through in terms of how you try and create more of that dinner table dialogue and really get people engaged, if you have four, six people, that type of interaction is feasible and easy to encourage. You don't want them to be able to hide behind the numbers, I guess. Okay.

Bobby Lincoln: Yeah. And I have folks that work with me. We have people throughout the organization that come in and help. And we always have one of the new hires, one of their direct managers is tasked to assist with the process. And a lot of times, depending upon the presentation, or I've got two or three screens going and they get tasked with monitoring faces. That's their job. They got to make sure the room's awake, nobody's falling asleep.

Sarah Nicastro: Right.

Bobby Lincoln: Yep.

Sarah Nicastro: It's important.

Bobby Lincoln: It is.

Sarah Nicastro: Okay. So you mentioned this a little bit, but you have these folks come in and you... How long is the onboarding program?

Bobby Lincoln: We have it broken down into three segments. It's onboarding week, which they spend day one that first week, that's onboarding, that's where we have human resources, we briefly get into anything technical in week one, it's a lot of application building, giving them the tools. "Hey, this is what you use this for, this is what you use this for." That sort of thing. Week two is our foundational class where we dive deeper into various processes and then they get put into our technical training curriculum.

Sarah Nicastro: Okay. I like the one thing you said though, about the goal is an onboarding for them to have a foundational understanding, but not an overwhelming amount of detail.

Bobby Lincoln: Right.

Sarah Nicastro: So you want to give them the critical overview that they need to be able to move into the training program, but you don't want to overwhelm them with too much at once. So talk about why you think that that concept is important when it comes to onboarding?

Bobby Lincoln: Absolutely. Are you a sports fan? Do you like football?

Sarah Nicastro: Yes, I have given up watching football since I had children so that my husband can do so because it's one or the other not both.

Bobby Lincoln: Very nice. I get the television, I've got three children, and daddy gets TV on Sundays. That's it. Four months of the year, daddy gets TV on Sunday. But I like in our training program to... All right. On day one of training camp, if you were to give your quarterback the entire playbook on day one, there is no way we could have the expectation that they could accurately and precisely execute that playbook in its entirety after that day. Impossible. If I could upload a skill like I mentioned, I would do that. But we can't, we're human beings. We have to absorb information, learn it and implement it. And so I like how we approach training to that. We have a certain progression. Once you can do A, let's do B. Once you can do B, let's challenge you with C. That's The goal.

Bobby Lincoln: Because if we overwhelm individuals on the front end, they're going to get burnt out. We're all human beings, when we get burnt out, we don't like what we do. I don't want that, I never want anybody to feel that overwhelming burnt out where they just want to quit. Any manager, or anybody in charge of any program should not want that for their folks. But it's step by step. And I liken it to the NFL playbook, you cannot expect them to do everything on day one, you have to work in steps.

Sarah Nicastro: Now have you seen a difference, Bobby, in terms of, I guess, bandwidth for consumption? Is that different in person versus virtual? So pre and post-COVID? And how has that changed?

Bobby Lincoln: I think in person I can connect and get more information through in a shorter amount of time. This platform allows, it's just too much distraction. I'm looking outside my house right now, I've got my kitchen there, I've got to say no to all the snacks that are there, or the phone might ring or... I've had folks where their kids are home, my kids have been home. It's challenging right now. It really is.

Sarah Nicastro: Yeah. And you get the Zoom burnout, right? So when you're doing onboarding in a physical location, you can say, "Okay, we're going to do the first two hours in this room, and then we're going to move to this room." And you can change scenery, you can work in activities, or breaks, or what have you when it's, "Hey, show up for your eight hour day and we're going to spend the whole thing on Zoom, and I'm just going to crush you with information." You'll start to get blank stares after so long. So I would think you've had to be strategic about how you pace things so that you can keep people engaged as well.

Bobby Lincoln: Absolutely. We've had a certain strategy for onboarding for the last six, seven years, and it's just day one, day two, day three, and so on. With this format, we've rearranged it because we don't want to overload their brain on information on one day, because by three o'clock in the afternoon, you can see it, they're done. We only really schedule out of the five days for week one, we're on Zoom half days on three of those days. And so we give them more autonomy to do some of the corporate training stuff that's online and the virtual training that we have everyone do. We give them the time to do that and do it at their own pace, because this is tough. This is tough.

Sarah Nicastro: Yeah. The last thing I wanted to talk about in terms of the onboarding experience is the emphasis that Sysmex puts on teaching the human side of the business in addition to the technical stuff. So tell us a little bit about that conceptually and then in practice, how you balance that within the coursework.

Bobby Lincoln: Sure. We understand that our customers are... We're in medical devices, that's what we do. Our instrumentation or analyzers, they are what our doctors and our healthcare workers use to save lives. The end of the day, that's who our customer is. It could be me, I don't want it to be me anytime soon, but I know that I will be a customer per se. We work really hard to understand that the end result of our instrumentation is a human being. And you can't do this job effectively if you don't have a passion for people. You just can't. You can fix things, you can do a great job fixing that analyzer, but if you're not good with your customer, that personal side of it, that human side of it, it's just not going to work. And there's a reason why we win so many awards year in and year out. Is because we focus on that. One of my favorite moments in this whole onboarding journey that I've been on camera, and if you ever listened to this, I'm calling you out.

Bobby Lincoln: We were in training and going through what our customer service model and how we approach it. And he raised his hand and he's like, "I thought you hired me to fix instruments, all we've done is talk about people all day." Right, that's what we do. That's what we believe. We firmly believe that if we take care of our customers and teach how to fix instruments, as well as down the road, making sure our employees are happy, it's just a natural circle of success.

Sarah Nicastro: Mm-hmm (affirmative). So what are some of the topics that you touch on in onboarding specifically when it comes to the human side? So obviously, you're touching on the technical side, but on this human element, what are some of the things that you start the conversation on in the onboarding process?

Bobby Lincoln: We employ a model and I don't want to give away too many secrets. But we work on human interaction, specifically how to defuse negative situations, there's everybody listening to this that deals in service, most calls from customers are not happy once, there's something that we need to fix. Something we need to resolve. Sometimes it's the instrument, sometimes it's the person, it depends. And so we spend a full day learning, teaching and every time I've given this presentation, I've thought of something new or how to interact with people. You can use it in your personal life. And it really centers around listening to others and having empathy for their situation. And we have been doing this for many years, and we just believe that if we focus on the people and we listen, and we acknowledge them and we hear them out, we can get to a successful resolution on both the technical side and the personal side of things.

Sarah Nicastro: Yeah. Yeah. And it's interesting, this is a topic that comes up more and more in terms of the emphasis on soft skills and the need to focus on that in training and talent development, because we're really beyond a world in field service, where mechanical or technical skills are all it takes to do the job. So to your point, whether you're talking about a break fix type service situation, where you might have a customer who's frustrated or upset or stressed out because they need resolution on that, or whether you're talking about even more advanced services and what it takes in terms of relationship building and being consultative and being viewed as a trusted adviser.

Sarah Nicastro: On any end of that spectrum, it becomes critical to have really good soft skills and people skills and communication skills and relationship building skills, in addition to being able to fix whatever you're there to fix, right?. And I think that that trend in my opinion is only going to continue as we look at the automation of certain tasks using technology and just the changing world of what service is demanding. I think that those skills are only going to become more important.

Bobby Lincoln: Yep. And one of the things that's really neat too, and it took me a while to learn this when I was new in field service, my background is in clinical laboratory science. I worked in a hospital lab for a little over four years and then moved into field service. But you as someone in field service, drive future sales more than you ever imagined. I didn't realize that, I just thought, "Oh, our salesperson came in and did a fantastically good job." And they're like, "We sell because of our team." And we've had customers that have been competitive takeaways, they're... Let's give some props words too. Some of their engineers, they had such good relationships that they worried about what was going to happen to them and vice versa. We don't want to... If you're my service engineer, what would happen to Sarah, if we jumped ship? That's why relationships are so important. It's so important all the way down the line. And that's why we start off with that, because at the end of the day, business is the most personal thing in the world.

Sarah Nicastro: Yeah. Okay. So let's talk then about training. So the onboarding process happens and they go through the two weeks of initiation and then they transition into the training program, right?

Bobby Lincoln: Yep.

Sarah Nicastro: Okay. So tell us what the training process is like at Sysmex.

Bobby Lincoln: We spend a week on onboarding, they come in and we acclimate them to culture and build them up and talk a lot about the customer service side. That's week one. Week two, is a foundational training, a lot of the tools that we set up week one, we learn how to use. We get involved in them. We do some introductions to the various analyzers in our portfolio. What's really neat about that particular thing is it's used to be an onsite demonstration, or an onsite thing. Now it's virtual, we're doing this virtual. And what's neat is we've used our various tools and we've got a world class center for learning that does a live stream. So they can live stream this class. It's really neat to see. Then we mix in, it becomes a mix of technical training on site in the classroom style teaching and on the job. And so our philosophy is let's get them in the field, let's start learning who their customers are. Let's hook them up with folks on their team that we trust to be a good mentor and then keep teaching.

Bobby Lincoln: And it's a good six to eight-month process to get through all of the various training that we have. And even at that point, we're very upfront. We expect, you're not going to feel comfortable until you're about 18 months to two years in this job. That's just normal. That's normal. Now everything is a bell curve. So there's some on the front end, some on the back end, but for the majority, 18 months to two years is a fully functioning service engineer.

Sarah Nicastro: Mm-hmm (affirmative). Okay. So I know you touched on this earlier when we talked about the football playbook analogy, but talk again about, within that six to eight month training program, how you phase in work. Because from what I'm understanding, you do that in an individualized way. So you expand on tasks as they become ready for more challenges. Am I understanding that correctly?

Bobby Lincoln: Yeah, that's correct. We don't want to take somebody two weeks into the job and say, "Here, go walk into the Mayo Clinic and fix their instrumentation." That's not fair. That's obviously not fair for our customer and it's not setting anyone up for success. It really is a... Now there's an unwritten number of time or a tenure with which we gauge. Like, okay, we have to take any job, we have to be able to check the boxes. Some people check them faster, some check them a little slower. But it's really a relationship. Training is absolutely a relationship between our center for learning that gives feedback on the individual. The individual has to take ownership and perform and then their direct manager has to navigate them through their journey of training to start saying, "Okay, you know what? Bob is ready to go out and do some preventative maintenance, let's give it a shot. Go ahead, you have all day to get that done." And we see how he does. Or an installation for example.

Bobby Lincoln: We know a certain analyzer takes a certain number of days on average to fix. Excuse me, to install. Let's see how they do. Get them out there in the real world. We can train, train, train, but eventually you've got to go out on the field and play the game. And so it's incremental for a reason because we want to build knowledge, we want to provide information and then start seeing how the performance is.

Sarah Nicastro: So you build from really simple tasks to harder tasks, both to build their knowledge and expertise, and also to protect the customer experience obviously. Like you said, not having someone brand new go into Mayo Clinic to do this job. And then you pair them with mentors. And how do you determine... Does everyone have a mentor? How does the mentor process work?

Bobby Lincoln: Oh, in a perfect world, we'd all have assigned mentors and that sort of thing. What's really neat about how our districts are structured is that we have entry level folks all the way up to high performing award winners. And each team within your own organization Sarah, you probably have somebody that doesn't have a mentor next to their job description, but you know that you would send someone to work with him. That's our mentality. We know if someone needs some technical training within our group, we know who to send them to. When I was in the field, I was what we call our lead service engineer, which was directly below our district service manager. And I focused a lot on customer skills, administration type things. Technically, I was never the best at it. I'm a solid B+, solid B+ technically. But I excelled where my... I was really high performing in the customer side of things.

Bobby Lincoln: So I would mentor our new folks in that regard. So it's more of a... In the world of unlimited budgets, we'd have this fancy mentoring program, I'm sure everyone listening would love to have that sort of thing. But the real world is we know who we can trust, we go to those people and just because of the type of culture we have, they want to see their teammates do well, because that makes their job easier, it makes the customers experience better. So it's a little bit of both.

Sarah Nicastro: Mm-hmm (affirmative). Okay. Now, how do you sort of monitor performance throughout training to determine, I guess, both when to add new duties to folks? And then also, when they're ready to graduate from training?

Bobby Lincoln: There are some official documents that we have that are designed to lead a manager to gauge their service engineer’s performance. So there are some boxes they have to check. But I can't look at a team in California and say, if I'm not working with them day to day. Like I focus on my team, I know what I should expect from people as they progress. I'm not dodging the question, that's just the honest answer, it's not something that's they have to do this, they have to do this. They have to obviously, but it's more of... You just know it. It's like watching your kid learn how to ride their bike. They go for a few feet, they go for a few feet, and all of a sudden, they're riding down the street and you're like, "Hey, where did you go?" They pick it up. You know. It's feeling.

Sarah Nicastro: Correct.

Bobby Lincoln: And that's the mentality that we have. We know when our service engineers are ready, you can just tell. And we introduced them based off of the maintenance tasks, to installations, to the full blown troubleshooting job that it is.

Sarah Nicastro: So when they're ready to graduate, what happens next?

Bobby Lincoln: Oh, we throw them a big party, we send them out to dinner, and the CEO gives them gift cards. We have this really neat... Well, it's like I said, pre-COVID, we had a full graduation week which was really neat. So they would come in and there would be specific, but we would bug the analyzers in the training department and they had to fix it, they had to go in and pretend that our technical trainer was the customer, we'd have to go through the entire experience. And they had to do it unsupervised, using only their team, their tools, the resources that they had. And at the end of the week, it was, you get a little certificate and we do... I wasn't joking, we would have a very nice dinner and celebrate. Because it really is a journey. It's something that we should celebrate. I just recently finished a master's degree not that long ago. And-

Sarah Nicastro: Congratulations.

Bobby Lincoln: Thank you. Thank you. I went out for Baltimore's best crab cake and celebrated. It's fantastic. So you should celebrate your successes.

Sarah Nicastro: Mm-hmm (affirmative). Absolutely. Yeah. And that makes them feel acknowledged for their hard work and appreciated. Now when they graduate from training, this is going to kind of segue us into what happens next but what sort of the path from training on?

Bobby Lincoln: Then you get... So on onboarding, we're going to acclimate you into the company culture. From there on out, it's a slow acclamation into your specific territory, your customer base, that sort of thing. Once training is done, then you're going to be on your own more, you're going to slowly get your own territory. And as you perform and as your successes begin to mount and you prove that you can indeed do this job, then we're going to continue to expand it until we get to where we consider a fully... Not fully functional, that's not the right word. We have a certain number of designated instruments that each engineer is expected to service and carry and maintain that sort of thing. So full work load, if you will.

Sarah Nicastro: Mm-hmm (affirmative). Okay. So after training, they come into your team as a field technician. That's what you referenced earlier in terms of the team that you manage?

Bobby Lincoln: Yeah. So we've got the entry... We have two levels of entry into our service organization. One is entry level position. It's what we call our field service technician, and I'll use the acronym FST. The other way is the service engineer, which I'll call the SE. So the FST, the field service technician is an entry level position. These are folks when I'm hiring for them, I'm looking for fresh out of college graduate, folks that want to get into field service. Like right now in my team, I've hired people that had previous experience, I had somebody that had no experience in field service, they had an electronics degree, clinical lab folks, shout out to all the med techs in the room. I have someone that went to college for sales that's on our service teams. So we really have a broad scope of individuals that we look at for the FST position. The next transition to that is service engineer. So I like to describe it to use another sports analogy.

Bobby Lincoln: The FST is almost like the minor leagues. When a service engineer position arises anywhere in the country, that my team, my pole of FSTs will be the first place that we look at for, "Hey, we've got an opening in Baltimore," which is right down the street from where I live. We have an opening in Baltimore, are there any FSTs? Before we look at... We obviously open up a job wreck, but we have folks that are trained, that are ready to go, that can graduate, if you will, into that promotion of a service engineer. But we also hired directly into that role based on experience.

Sarah Nicastro: Mm-hmm (affirmative). So it's like your farm team.

Bobby Lincoln: Yeah. I like-

Sarah Nicastro: Just trying to keep the sports analogies.

Bobby Lincoln: It works.

Sarah Nicastro: I'm doing my best, Bobby.

Bobby Lincoln: That's good. That's good, I like it.

Sarah Nicastro: Okay. All right. So I can see how that benefits Sysmex. So now we're kind of talking about a few different things. I think that if you listen back to some of the podcasts that we've recorded on the topics of retention and talent and things like that, we've had a number of conversations about the fact that if your only strategy is to hire based on experience, and you think that you can continue to do that indefinitely, you're mistaken, because you're just going to run out of it. So this idea of... I like the examples you gave of all of the different backgrounds you have in your pool of folks right now, right? So they don't have to have that experience, but they have an interest, they have an aptitude, they have some abilities to develop in this role. And you bring them on at that level and you work with them to develop all of the experience they would ultimately need to do that as a role.

Sarah Nicastro: So I think that's a really smart approach from the Sysmex perspective, because you're giving yourself a source of talent by working a step or two back in the value chain, rather than just expecting to be able to hire people that have done the job for X amount of time. But the flip side of that is, it gives an opportunity to foray into field service for folks that wouldn't have the opportunity to join Sysmex that they didn't have that experience. So as you're bringing these people into the fold, talk a little bit about how an organization can structure and offer that career progression and why that's important when you're hiring younger people.

Bobby Lincoln: Oh, gosh! My immediate response would be who wouldn't want to go to work for an organization where they didn't have the opportunity to advance? I certainly wouldn't want to go into a role that had no opportunity for growth or advancement, or there are people that do. God bless them, there are people that are looking for the seven to 3:30 punch in, punch out and that's okay. I think the younger workforce that we have coming out of college, there's a few things. They want to make an impact. Everyone wants to make an impact, how does what I do today affects somebody tomorrow? What's really cool about this particular job in field service in healthcare in general, especially now, is I've taken instruments out of laboratories that had somewhere in the neighborhood of five million cycles through them. That's five million people that I helped indirectly, but I helped them. That's cool. I like that. That was neat. What I really enjoy about what we do is we not only hire people that are ambitious and fit into that culture, it is a culture, we look for folks that want to do that.

Bobby Lincoln: One of my favorite questions asked on an interview is, "Are you looking for a job, or are you looking for a career?" And it's okay. I want career people. And we have various levels of hierarchy within the service organization. So you start out as an FST, or an SE and then the natural progression is to the next level and up. And what's really fun about working at Sysmex, it's in our mission statement by the way, is we challenge each other. We challenge each other. So my boss will sit down with me and he'll say, "What do you want to do? Where do you want to go?" You'd be reasonable, you don't say, "I want to be CEO next week," that's not going to happen. But I want to go here and here and here. And so we go, "Okay, well, here's how I can help you get there. Here's been my experience that got me to where I am."

Bobby Lincoln: And so I like to do that with the folks that work for me is, I ask them, "Where do you want to go? What do you want to do?" And that opportunity, just having the opportunity to work for an organization that provides that, that pushes it, that in some ways incentivizes that, along with the impact of knowing that my job every day is going to effectively save lives, what's not to love about it?

Sarah Nicastro: Right. And those are good points. I think that in the conversations I've had with people about managing an older generation versus managing the younger generation, those are a couple of key points. One is I get your point, I'm built the same way like, who would not want to progress in their career? But if you think about a lot of tenured field technicians historically, we're happy to do the same job for 20, 25, 30 years. And they didn't have that same... I'm over generalizing. Some people do, some people don't. But if you look as a group, at the older generation of field technicians, I think you had a greater likelihood of people being happy to just do their job if it was a good job and not necessarily have that burning desire for continual evolution. And I think that's something that the younger generation looks for in an employer. And then your other point about playing to the impact and communicating the difference that your employees are making in lives, is something else that has some real appeal for folks.

Bobby Lincoln: Yes. What I like also too that we do, and it's not just... Even I had a conversation with someone who will just leave it as they're a seasoned service engineer, the PC way, right? We were having a conversation a couple weeks ago about him playing out the string, if you will. "What do I want to do?" But yet, he also called me to talk about how can I improve this specific process that my team manages? So even though we have people on the twilight side of their career, it's still a constant... There's no way to describe it, other than you got to live it and feel it. It's an innovative group that we are. And whether you're day one, or year 35, it's really the same goal. And I think we do a good job of hiring the right people, but also protecting our culture of who we are, that fosters that type of environment.

Sarah Nicastro: Mm-hmm (affirmative). That makes sense. Okay. So in terms of your evolution from the medical lab, to field service, to heading up onboarding and managing a team of field service technicians, what's the biggest lesson you would say that you as a leader have learned?

Bobby Lincoln: Oh, good grief. Don't expect me from you.

Sarah Nicastro: Okay.

Bobby Lincoln: That was a tough thing to learn moving into management, if you will. I have a certain way of doing things, I have a long track record of performance of processes that I've particularly employed, ways I handle customers, way I talk to customers. Not everybody does that. And so I learned very early on that I can't have my own expectations for my team. I can set them, I can put the bar, "Here's where I want to be. Guys, here's where we are, here's how we're going to get there." But everybody is going to do it a little differently. And so for me personally, that was one of the toughest lessons to learn. And to step back, when you're in field service, you measure success very differently than you do in managing field service. Every day you walk in, "I fixed that, I did that." When you're working with people, it's different, it's a longer game. So that's my biggest piece of advice for any new leader, is don't expect you from other people.

Sarah Nicastro: That makes sense. I like that. Any final thoughts or closing words of wisdom for our listeners on the stuff we've talked about today, onboarding, training, retention, anything related?

Bobby Lincoln: The virtual nature of everything we do now, I have found the greatest success thus far has been a couple of things. And this might sound a little crazy, because we're in corporate world, but when I say make this process entertaining, make it entertaining. However, that needs to happen. Some things that we like to do is ask silly questions or play videos during... I've restructured half of the week with entertainment in it, click on YouTube things, that sort of thing. Just because, gosh-

Sarah Nicastro: I will say Bobby and I were exchanging some messages real quick this morning on LinkedIn in preparation for our recording today. And at the end, you sent me a meme and it was just such a little thing, but it made me laugh out loud. And it's a small example. But to me after what we've been through as a world in the last year, there's no reason to not introduce a bit more levity and just personal connection to exchanges. So, yeah.

Bobby Lincoln: Make it fun. Gosh, we're doing this for eight, nine, 10, 12 hours a day, some of us. Gosh, have fun. Life's too short. Have some fun with it.

Sarah Nicastro: Yes. That's a very good point. All right. Well, Bobby, thank you so much for joining today and for sharing. I really, really appreciate it and hope you will come back and visit us again soon.

Bobby Lincoln: I would love to. This has been a blast. Let's do it again.

Sarah Nicastro: Absolutely. You can check out more of our content by visiting us at www.futureoffieldservice.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 about IFS service management by visiting www.ifs.com. As always, thank you for listening.

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January 6, 2021 | 1 Mins Read

Top 10 of 2020 Part 2

January 6, 2021 | 1 Mins Read

Top 10 of 2020 Part 2

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Here's the second half of our New Year's two-parter. To celebrate the end of a unique and challenging year, Sarah is joined by podcast producer and fellow website contributor, Tom Paquin, to discuss their favorite conversations and lessons from the past year.

Guests include:

  • Linda Tucci, Global Sr. Director of the Technical Solutions Center of Ortho Clinical
  • Reeve Bunn, President of DSL
  • Klaus Glatz, Chief Digital Officer of ANDRITZ
  • Sonya Lacore, VP of Infight Operations of Southwest Airlines
  • Mita Mallick, formerly the Head of Diversity and Inclusion and Cross-Cultural Marketing at Unilever and now the Head of Inclusion, Equity, and Impact at Carta

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December 30, 2020 | 1 Mins Read

Top 10 of 2020 Part 1

December 30, 2020 | 1 Mins Read

Top 10 of 2020 Part 1

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To celebrate the end of a unique and challenging year, Sarah is joined by podcast producer and fellow website contributor Tom Paquin to discuss their favorite conversations and lessons from the past year.

Guests include:

  • Jamie Beck, Sr. VP of Field Operations at Peloton
  • Roel Rentmeesters, Director of Global Customer Service at Munters
  • Sae Kwon, VP of Customer Experience at Cisco
  • Henrietta Haavisto, Head of Service Transformation Change Management at KONE
  • Tim Baines of Aston’s Advanced Services Group at Aston Business School

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December 16, 2020 | 28 Mins Read

Schneider Electric on The Move to Delivering Outcomes

December 16, 2020 | 28 Mins Read

Schneider Electric on The Move to Delivering Outcomes

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Jerome Soltani, Sr. VP of U.S. Services and Alex Gershman, Director of Strategy, Services and Solutions both at Schneider Electric join Sarah to discuss the inflection point service is at, the excitement that holds, and the challenges organizations face in bringing outcomes-based service potential to fruition.

Welcome to The Future of Field Service podcast. I'm your host, Sarah Nicastro. I'm excited to have today on the podcast a couple folks from Schneider Electric, talking about the company's move to delivering outcomes. If we look back over the podcast we've recorded this year, I think it's safe to say a majority of them have been about the path to outcomes based service and to organization. And there is some really good reason for that.

Sarah: I mean, first of all, I think it is the big evolution that companies are working on and toward. And hearing these stories I hope, for you, our listeners, gives you some light bulb moments that you're able to learn from and take back into your own businesses. I think these journeys are complex, as we're about to discuss, and I think sharing them with one another is fantastic because we all have something to learn from each other's stories.

Sarah: So, with that being said, I'm thrilled to welcome to the podcast today, Jerome Soltani, who is the senior vice president of US Services at Schneider Electric, as well as Alex Gershman, director of strategy, services and solutions at Schneider. Jerome and Alex, welcome to the podcast.

Jerome: Thank you. Thank you, Sarah.

Sarah: Thanks for being here. Before we dig in to the topic at hand, why don't you guys tell us a little bit more about yourselves? Jerome, can you start and do an introduction?

Jerome: Yeah. I'm Jerome Soltani. I'm the services leader for Schneider Electric in North America. I'm overseeing the field digital and consulting services for the biggest part of the Schneider Electric portfolio. Schneider, as we know, is the global specialist for NRG management and automation, and I oversee our entering services business, from building the strategy, develop the marketing plan, up to the execution and delivery. Alex, over to you.

Alex: Yeah, and I'm Alex Gershman, and I work on Jerome's team. And I've got the pleasure of working with him on the development of that strategy both over three-year period, as well as building our annual operational executional plans as well.

Sarah: Awesome. Well, thank you both, and excited to have you both here. We connected and I have a number of points I want to get to today, and I think we probably could've split this into three or four podcasts if we wanted to. But we'll do our best. With that being said, to sort of set the stage for the conversation today, I said at the beginning this path to outcomes based services is one that most companies are somewhere along today, right? And it's a journey. Can you share with me and the listeners for context, where would you describe Schneider being on this path, and how does that compare with what you have as the ultimate vision?

Jerome: Yeah, very good question, Sarah. Look, I think as you mentioned already, outcome based services is a journey. We are not yet there, but the good news is that we are strongly anchor the outcomes base value in our three-year strategy as mentioned by Alex. It's something that is completely in the core of our three-year strategy, and if you look back at what Schneider Electric has done, services and software and story and journey probably started probably five, six years ago in Schneider.

Jerome: If you look at this story, we have acquired different key players in the software domain in acquiring data, learning machine tools and so on and so forth, to really develop our capabilities and capacity in software. And services became very top priority for Schneider. If you look at that, this is really, for us, the prerequisite or the precondition to be able to move to outcome based services.

Jerome: So, with services and the digital piece, and now that we are able to have a much more unified approach in our services portfolio, we believe that we can accelerate very much our approach. And the good news as well is that we see the customer now. It was probably impossible a couple of months ago, a couple of years ago and now it's real. I mean, there were people who were asking for that, they are looking for that.

Jerome: To answer directly your question, I think we are at a inflection point where we are able, in some cases, some carrier, to redeliver the outcome based services, and be able to give this expectation or to provide this expectation to our end user.

Sarah: Excellent, excellent. So you're building momentum, which is really cool. So, I want to talk a little bit about we've set the stage for the fact that not only is Schneider on this journey, but a lot of companies are, right? Let's talk about why that is, and what I want to talk about really is what are you witnessing as a business from customers that is driving this demand, that's putting you on this path? So, happy to have you answer that question from a high level, and I know, Alex, you had made the comment that the conversations you have with customers today are far, far different than they were one or two years ago. Let's talk a little bit out what's changed. What's changed in terms of customer's needs, expectations, demands, and how is that really driving the need for Schneider to move this ball forward?

Alex: I think, Sarah, there are a couple of big, we call them mega trends, that we're seeing out in the marketplace that are driving the change in conversation. So first we see and certainly many of them accelerated through the last year, through COVID. Changes in investment shifts that our customers are making from big capital expenditures toward more operating annual kinds of expenditures. And again, through COVID we hear the needs to extend the life of assets, make sure that I don't have necessarily the capital to invest,

Alex: So that kind of CapEx to OpEx shift has certainly changed the nature of conversations that we're having. We're seeing from the customer perspective a couple things. One of my favorite terms of the last six months or so is the silver tsunami, hair color of the customers. We're seeing massive retirements on the part of the skilled labor inside of our customer organizations, meaning they're turning more and more to companies like ours to help them with the services needs that they had that they may have relied on internally previously.

Alex: We're also seeing a lot of pressure that our customers, especially a lot of our bigger strategic customers, that they're having to focus their efforts and attentions on their core business. Our candy makers want to make candy and they don't want to necessarily focus on their infrastructure. So, again, they're turning increasingly more and more to us to do that.

Alex: And then another one of the big ones, obviously the rise of data connected technology, the more that these things actually become real, the more customers are looking to us to help them with making sense of the data that they have, being able to get toward the outcomes that they're looking for with their customers.

Alex: So, all of those big trends have definitely changed the conversation, and I would say it really is in this last year, certainly in the few years previous. Jerome said that the journey started many years ago, concepts like IoT, customers were aware and cognizing and talking and early adapters had started to make investments. But it's really in this last twelve-month period and even in the last few months in particular, that we're really starting to see greater adaption, intense greater adaption.

Alex: I pulled some stats. We just wrapped a voice of customer survey a couple weeks ago, but more than a third of our customers say that they have or will be investing in connected software for their critical facility operations in the next year. Two thirds of them are investing in connectable hardware. So these things are happening, and they're real and very much it changes the dynamic, it changes the conversation that we're having with customers, because now they're looking to take advantage of these, they're looking for the ROI on these kinds of investments.

Alex: And quite frankly we're as well positioned as anybody to help them be able to take advantage to generate the ROI from those connected technology investments.

Sarah: Yeah. What's really interesting to me about what you just said, Alex, and, Jerome, I'm interested to get your take on this, is I actually think not only are you well positioned, but you are the reason that they are ready to take advantage of those things. And what I mean by that is, customers don't buy buzzwords, okay? That's why three, four, five years go you could talk about IoT until you're blue in the face and in most applications nobody cared, and that's because why should they, right?

Sarah: I mean, the organization is trying to sell that solution or recognize that evolution had not yet built the ability to translate those buzzwords into a value proposition. That's the change we've seen within the industry over the last few years, is the capability is of businesses like Schneider to see how do we take these buzzwords, make sense of it all, turn it into a solution that meets pain points of our customers, then they're ready to adapt those things. Of course they want to, because you've done the hard work of making it all make sense and making it valuable to them. Jerome, what are your thoughts on that?

Jerome: I definitely agree with you. I think before COVID we had the feeling to be a little bit in advance. Not being arrogant, but you see when you're a little bit too ahead of the market, you feel a little bit alone to create demand and create this awareness. But, I mean, COVID and the pandemic and the situation, working from home, nobody in the campus, in the university and so on, we saw this awareness and this acknowledgement of coming from our user. It was a big relief for us, and it was great to see that finally the combination of our software portfolio connected product and services would make sense, and would bring a lot of value to our user.

Jerome: I mean, again, there are a lot of things to work on, but we see definitely this resonating much more with our end user now than the past. So definitely now it's become a reality, concrete, and the customer. As mentioned by Alex, we see this trend now completely part of the description with our end user, and really asking them, asking us how can we deliver much more value into our services, our digital services, how can we connect the asset, our service, our connected service of North America. We drive data remotely from the installation, and what is of value and insight that we can bring to them to be more efficient, be more sustainable and really at the end of the day help them to deliver their value to the end users.

Sarah: Right, right. I want to come back to that increased acceptance and that increased awareness in a moment. But before we do, let's go back to the Schneider perspective for just a minute. So this is a path you've been on for a few years, right? It's not brand new because of COVID. But you did mention, Jerome, when we spoke, that there has been an increased recognition even within the business this year, of how service serves as a form of business resilience. Talk a little bit about that.

Jerome: You know, again, services journey has started couple of years ago, but I think it was still at the operation level, at the country level, kind of second thought and not really a top priority. Now it's a good thing that our CEO and our board members were strong believers and have been really promoting the services business for years and have made very structural and transformational investment into this different teams at country level.

Jerome: What we saw this year is that COVID-19 has been really a catalyst to prove that services was highly resilient, and the models that allow us to continue to deliver our very strong ordering tech and profitability to our overall P&L. I mean, when I compare our traditional transactional equipment type of business versus services today, depending on the country, depending on the portfolio, you have a discrepancy between five to 10 points of growth between a services business and a traditional core CapEx driven business.

Jerome: Very outstanding performance and at the end of the day we’re delivering strong profitability, and then contrastingly good. We talk about pandemic, but even the economy. In some area we saw some business struggling because of the situation. But as well oil and gas business beyond COVID was already in trouble. But this business still need to operate. They need to deliver, they need to drill, they need to extract oil, gas. And to do that they still need to maintain the equipment, they still need to be safe and reliable. And this business I'm passionate about. I love this business.

Jerome: But it shows that this business is one of the most strong and reliable business, and resilient business in the economy, in the market.

Sarah: Mm-hmm (affirmative). Yeah, and I think going back to what you said before, Alex, the changing conversations with customers, there's kind of a snowball effect in play to a point, right? Because as businesses become better able to translate the buzzwords into value propositions and to start to articulate those in a way that customers resonate with, then there's kind of a point where customers realize, "Boy, maybe we can rely on this company for more than just X product or X service," right?

Sarah: And I had a the exact same conversation with someone a few weeks ago who's in a different industry but similar situation in the sense of companies that have employed these highly skilled workers to run this equipment for a very long time, these folks are aging out and they're finding it impossible to replace that talent. So how can they turn then to folks like you guys, to help them bare the weight of that burden? What type of automation can you provide or insights can you provide that eases that and helps them maintain their business, right?

Sarah: And then you see how it can build. You bring something to the table, they have this moment of realizing you're bringing more to the table and it can build, you know? We've had a lot of conversations this in particular about COVID being a catalyst for service companies, manufacturing organizations that I'm speaking with, how they're far closer relationships with their customers in terms of really more intimately understanding not just how their customers use their products or services, but how they operate on a bigger scale, and letting that influence the journey forward, right?

Sarah: So, it's pretty cool stuff. And, Jerome, I know when we talked the other day we talked about the openness to change and acknowledgement of this evolution on both sides. On the company side and on the customer side. And I think we shared a bit of a moment where we both realized how passionate we are about the inflection point, as you said, that we're at.

Sarah: So, I do think that while this year has been immensely challenging and certainly wish things were different, one of the very positive impacts is going to be how it drives this evolution forward. You know, what are your thoughts on... How would you describe the impact this year has had and how you think that'll influence what's to come?

Jerome: I believe that we talk about this outcome based services and the value prep that we want to create for our end user, but it's urging a lot of senior as well on our coverage model, on our sales model and on our execution model. There is lot of consequences, implications on the way we want to now connect with our end user, discuss with our end user, which is much more remote. It's not the past model where you need to face to face, facing your customer, have this relationship intimacy and so on and so forth has completely changed.

Jerome: We have a shift in our sales model that we need to manage. Not only the tool that we are using and the capabilities we are using, but as well the DNA, the culture is different. You have to shift that. So yeah. Some people would be able to manage this shift and accompany you on the shift. The rest we will need partly to recruit different people. You need to change that. It cannot work the same way that it was working before.

Jerome: I see as well very strong impact on the execution, and the way you crowdsource, the way you have a much more diffuse market, you need to be able to sell your customer everywhere at every moment of the day and night. Now the connectivity and the remote approach and the data that you have allow you to be much more predictive, but also give you the duty that you need to intervene before anything occur or before anything create trouble on the process of your end user.

Jerome: So, there is definitely a way for execution and the way you manage your population of technician that will oblige you to rethink your setup and to rethink how you drive and you organize your team. Big changes as well on the back end, behind the scene, to deliver that. And we were talking with Alex we are looking this inflection point on the sellers, you cannot do the same thing than you are doing previously. So, you need to cross examine and have this kind of already the adapter or champion that will allow you to embark this new approach and be much more constructive and really... Because for me I believe that the outcomes based is linked to the understanding of, the pinpoint and the expectation of the end user.

Jerome: You are not anymore just troubleshooting or maintaining something, you are anticipating and complying to needs for the customer to continue optimizing his operation or her operation, and the maintenance of his infrastructure or her infrastructure. So you're going to have different people that understand this need and this expectation to deliver the right outcome to our end user.

Sarah: Right.

Alex: I think we're going to look back on 2020 for lots of reasons. But if we think about what's happened in the years before, there have been incremental changes that have happened, connectivity customer demand, our own workforces. But given the intersection of external forces and acceleration of technology from the customer demand perspective from the sales perspective, as Jerome mentioned, from the delivery perspective, we're going to look back at 2020 as a massive inflection point across the industry in the in which services are consumed, delivered as a whole and the value that a services organization is going to bring to customers.

Alex: I fully believe we'll look back when the white papers are being written a few years from now, 2020 is going to be that inflection point.

Sarah: I agree. And so that's the exciting part. But, Jerome, you just did a great job of articulating some of the layers of complexity, right? So while I wholeheartedly agree and I'm equally excited about the fact that I think 2020 is and will be an inflection point, and it's kind of minimized some of the barriers and it's sped some of the understanding and awareness. The reality is the reason that these journeys are journeys is because there's so many layers of things that need to change to really be successful in involving from a provider of X to a facilitator of success really.

Sarah: So, Jerome, to your point, that's what I see the new role as, right? And it's a big difference, right? There's a lot of work that goes into getting from A to Z. So let's dig in to a couple of those things. The first... and I think you've eluded, Jerome, to most of these, so let's just talk in specific about a few.

Sarah: The first is the cultural and mindset shift, and to me this is one of the areas of biggest impact of this year. Because I think it's really forced people to get out of their comfort zone. I think it's really then the push that a lot of companies needed to realize, okay, it's time to do something different here. But it is a big change.

Sarah: I think the deeper, the richer the history. Often times the harder it is to really get everybody on board with this services mindset and all of these things. When we spoke the other day, Alex, you mentioned specifically that Schneider has done a very good job of creating a language around service. How? Because I think that this is an area where a lot of people struggle, right? Because there is pockets or recognition within the organization of why this journey is so important and how it can benefit the company. But to be able to persist that understanding all the way through a business and really change the culture is tough.

Jerome: Yeah.

Sarah: So, having that language and being able to get everyone speaking a common language is a really important step. So what are some of the aspects of that for you guys? How would you summarize the progress and success there?

Alex: I'll go first and let Jerome add. And it's hard, and again, like everything else, it's a journey and by no means what I declare victory. But I think, again, the position that we're in now is markedly better and different than it was 12 months ago. It starts for sure at the top down. Our CEO deserves a lot of credit. Jerome mentioned he's been using this kind of language for the past several years. There was a conversation, I don't know, maybe six months ago where we basically said there are six priorities for the company, services and software, services and software, services and software. That helps, right? When you get that message from the CEO, people start to listen.

Alex: But it's been a very deliberate push from Jerome, myself, our team, out to the rest of the organization, taking advantage of the door being opened for us and making sure that we're doing our best to kick it in. It is repetition on the language that we're using. It's reinforcing the concept that we're talking about. It's painting the vision about why we are where we are, and what, quite frankly, some of the implications are if we don't make some of these changes now.

Alex: I think that repetition and that storytelling about customer successes that we've been having about the kinds of conversations, the things customers are asking for us about what we're trying to do. That repetition, that language, that resonates as you're trying to make change.

Alex: But again, I'd say we're still in the early stages of making that happen.

Sarah: Mm-hmm (affirmative). And this is where it gets tough for me without having a five-hour podcast. This is where we get into there's probably 20 questions I could ask you just one this topic, because yes, you still have a ways to go, I get that part, right? And I think that companies that are really innovating well realize that there is no finish line to this journey, right? You're not all of a sudden going to put your feet up and say, "Ooh, we Servitized. We reached the outcomes based nirvana, right?"

Sarah: It's going to be a continual process, so as such the language will continue to evolve, the culture will continue to evolve, but I may ask to have you back just specifically to talk about what does creating services language within a manufacturing organization look like? Because I think that, that's a cool topic. But we'll leave it there for now, I guess. Jerome, anything you wanted to add to that or can I ask you the next point?

Jerome: Yeah, I like to respond on what Alex said... a little bit. Definitely it's one of the biggest challenge to change this culture and this language. I think as leader you need to drive adoption. And we were discussing that with Alex a couple of weeks ago. I mean, it's a must and not nice to have. And you need to at one point explain and message to our organization and the shift to outcome or the shift services or the shift to digital may not be super beneficial today, but if you don't start to shift your boat or your organization right now, in two or three years you will be completely out of the market.

Jerome: So, this is a difficulty to manage this situation where, I mean, you need to start before it's happening, proactive anticipation. And really I was telling you the story adopters or this champion. You need to have people that get it. You need to have change agents that will allow you in terms of services to show you that, I mean, it makes sense, and successes bring successes. We saw that in some of our customers. They realize that as soon as we provide them with the digital connectivity and the services, they were operating much better than before. And we have some testimony that has been shared across our organization and people realize from bottom to top that, "Wow, yeah." It makes sense and it can deliver a very different shade of added value or value prop to our end user.

Jerome: It’s kind of chicken and egg. You know at one point you see the benefit and so the thing that you have kept messaging, kept communicating, starts to resonate outside and internally and then it's a way you can cross examine in your business. But it's not overnight, and it's a complex shift in the culture of our organization.

Alex: Nothing does a better job... something that Jerome said is nothing does a better job in amplifying and making that message sticky. Again, the CEO can push it, but when customers share that and when we can share that success with all of our people, with our colleagues when our customers come on and do it directly, those are the things that ultimately make the difference in resonating in people's minds.

Sarah: Right, right. That makes sense. Okay, I want to talk next a little bit about some of the operational change that has to take place as well. And again, this is a whole separate topic that we could really dive into. But I want to talk quickly about two things. The first is how do you convince people to evolve when business as usual is working quite well?

Jerome: Again, it's one of biggest difficulty, biggest challenge. I think-

Sarah: I'm only tackling the big, hard ones. I'm not going to ask you any easy questions, Jerome.

Jerome: I see it as being one of my pet peeves, my things that keep me awake at night. I mean, especially... again, as I said earlier, the services business in US was doing well. Your core business is growing, and generating the right level of, the expected level of profitability. Now you need to say to your team you start to shift your focus from 100% of this highly profitable growing into something that takes more time, is more practice, more consultative business.

Jerome: And so you need to educate, you need to convince, and as I said it's becoming mandatory. And we need to, as we discussed with Alex and with our financial partner, with our HR partner, we need to experiment things to see what could work to shift this behavior and this focus.

Jerome: We've changed ourselves. You need change, something different, because it's different quarter, different financial investments. So you need to change about that, because people will not be paying out as it were and you don't see the same return investments. So you need to work on changing your incentive plan and the way people are paid out.

Jerome: You need to change your model. You need to give more time to your sellers that used to phase customer and you need to give them more time to create this pipeline of activity to create opportunities. You need to find a way to manage transactional services business elsewhere, because they cannot anymore spend their time on spare parts business. That's not what we want to drive.

Sarah: Right.

Jerome: So, you need to change your sales model to give to your top guns, highly competent sales guys that understand this approach more time and you need to be probably at the beginning less stringent, less demanding on the return on cost than before, because it's not the same value. It's a different value that you are selling to the end user, and even if the market has changed and the expectation are different, you still need to convince. You have some challenge in terms of we talk about connectivity but you should've talked about cyber security.

Jerome: And so there's some additional complexities that need to be taken into account, and you need to give the right support to this team to be successful. So lot of changes in terms of incentive plan, changing term of sales model and sale setup and rules of engagement to you can really make sure that you can give room for your people to be successful in this new ecosystem.

Sarah: Mm-hmm (affirmative). That makes sense, and it kind of ties in with the second part that I wanted to talk about, is eliminating silos, right? And having a more cohesive strategy and cohesive approach. So what are the thoughts there? How have you made progress on breaking down some of those silos and working more for the greater good of the customer outcome?

Jerome: Yeah. I mean, look, Schneider Electric is a great a company and, as we said, making the right move at the right time for software services, and I think the direction and strategies is very key and relevant. Now it's a complex organization. You have many functions, you have hardware functions, software functions and most of them are working silos still, okay?

Sarah: Mm-hmm (affirmative).

Jerome: And now what the company has done is really try to shift from this profound performance measurement by BU and being much more agnostic in terms of performance tracking and performance monitoring. If the possibility of opportunity for our seller, for our people to be recognized not only on the silo, but be recognized on the overall accountability or responsibility that they have on a larger, wider portfolio.

Jerome: So, you need to break this, you can't still have this BU because you need R&D very specific to each BU, and you need to have some marketing very specific to each BU. But at the country level, you need to have a performance management and performance tool that allow you to break this silo. This is from the hardware and software point of view. On the service side I think it had been clear from the get-go, and we see that with Alex we have expanding our portfolio and we have a national unified approach.

Jerome: I mean, for us, I mean, we talk about digitization, we talk about services. Again, to move to the outcome based services, you need to move from an asset and BU point of view, to a much more system and solution point of view.

Sarah: Right.

Jerome: And you don't bring an outcome-based services if you just monitor the obsolescence of your title. You need to cover a system and a multi BU approach with this decision and with services will allow you to provide this outcome based services. So problem for us, every discussion that I'm having with the different BU leaders is that I will own the outcome based services, and I will generate the outcome based services if the customer or the market is expecting that. But then I will need to provide them the right performance, and allocate the performance that they own and they deserve. But truly as a services team to be able to integrate and blend the different BU to make sure that it's completely transparent for our end user and you manage the complexity behind the scene.

Sarah: Right, right. Yeah, I mean, this is another very common conversation that I end up having, right? Because, as you said, it's another very complex part of the change. So as a product manufacturer you're structured operationally for internal efficiency usually, and if you're trying to be structured instead for customer centricity what you need to be to your point to tie all the pieces together and deliver outcomes, it's a big difference.

Sarah: Okay, I'm stressed out because we're running out of time and I want to make sure we get to two more questions, so bear with me. I want to make sure we talk, again, when we're talking about the different layers to this journey about digitization. So I know this, again, could be an entire topic on its own, but for the sake of giving the Schneider Electric overview today, talk a bit about how digital transformation, the need to be able to collect and deliver data, things like that plays a role into this evolution.

Jerome: I will start and, Alex, you can go on. For me you transform your assets and your products into a smart connectable product and equipment. So digitization for me is going from this dumb equipment and gear to this smart and connectable products that you can connect on the cloud, and then completely leverage all the algorithms, all the abilities to deliver insights and actually insights to our customer, again, to deliver this outcome.

Jerome: So, digitization is key for us, for riding this layer of connectivity to your equipment, to your software to really be able to deliver this apps and this advisor for our customers. So, digitization for me is key as well on the execution. We made a huge transformation on how to schedule and dispatch our technicians who have access to our partners, because they are technicians as well and we are leveraging now our technicians.

Jerome: We’re giving as well to our partner when we connect the end user we are providing insight to our partner as well to connect to their end user. So the digitization for me it's key on the offer and value prop, but it's key as well on the execution piece for crowdsourcing and for making sure that you send the right technician with the right competency, with the right component to deliver the right services. So it's for me forming digitization on both sides.

Sarah: Mm-hmm (affirmative). Alex, anything to add to that?

Alex: Yeah, the only thing I clearly get is the currency that enables the customer value to be driven to enable the efficiency, and it's also that maybe a third layer is the customer experience as well. The bridge between what you're being able to deliver, what your people are doing, the ability to seamlessly on their own get in touch with you, schedule the appointment, whatever it may be.

Alex: I mean, the reality is it's critical to all facets of the transformation. Data is the currency on which all of this is built.

Sarah: Right. I always say making the decision to deliver outcomes is taking on the responsibility of mastering a lot of complexity and making that invisible to your customers. And to do that, obviously, these tools are critically essential.

Sarah: Okay, one last question for each of you, and it can be a quick one. If I were to ask you each to share your biggest lesson learned or your biggest piece of advice for a peer that is listening to this episode, what would it be?

Alex: I'll let Jerome think. I've actually been keeping a bit of a running list of the lessons that we've been learning as we've been going through this, because there are many. So, Sarah, if you'll forgive I'll share. There's four or five of them.

Alex: So, one is look, becoming more outcome based is a process, it's not a switch, right? Don't have any misgivings that this is going be a year's long process that ultimately has no destination, right? And you have to orient yourself that way. The second is that customer selection, especially at the outset really matters. Finding customers or partners who want to work with you, who are willing to accept that things aren't going to be perfect right away, who are going to serve as case studies for you as you make the case internally and externally is hugely, hugely important.

Alex: It also means that segmentation and specialization within vertical segments also matters. You’ve got to be an expert. The way that you handle a healthcare system and the way that you handle an automotive facility, the outcomes they're looking to drive are going to be different and you have to be able to understand that.

Alex: Two others, one is that designing for services is key. So we work in an equipment, historical equipment manufacturing company that makes the best products, and one of the big keys to being able to drive this type of change is having the services team, having a seat at the R&D table, at the offer generation, creation table very, very early on, making sure that services isn't an afterthought. And we've pushed really, really hard for that seat. And I think that, that's been critical for us being able to build the momentum.

Alex: And then the last one is that I will say that internal selling is as important, maybe even or more as external selling. Again, your customers are pulling you along. Customers want this. I mean, this is where they're going this year. And that repetition, that setting the picture, that storytelling I think has been equally, if not more important, for the success we've had so far and enabling us to maintain that momentum. That's in so many was at the heart of sale.

Sarah: Mm-hmm (affirmative). Okay. Jerome?

Jerome: Alex covered that. But for me probably... I mean, I would say that for sure the outcome based services potential is exciting in the coming year. And we look at what is your current portfolio, and as mentioned by Alex, based on what is your market or what is your customer landscape. What is relevant for your customers in terms of services based on this portfolio? Do you need to partner to expand your value prop, because you cannot deliver an outcome by yourself if your portfolio is not enough or do not bring enough coverage.

Sarah: Right. So expanding the value chain?

Jerome: You need to change your value chain or adapt your value chain depending on the outcomes that you want to deliver versus what you have in your portfolio currently. So think about that before moving into this journey. I think it's important strategically. And then you can find the right alliances or partnerships to enrich your portfolio and deliver this outcome. But there's partly some work to do in terms of marketing intel to look at this portfolio versus the outcome based that you want to get.

Sarah: Okay. Good. Jerome, Alex, thank you both so much for being here. Plenty of areas that we could dig into further, so we'd love to have you back at some point if you would be willing. But thank you for coming and sharing your story today.

Jerome: Thank you.

Alex: Thanks for having us, Sarah.

Sarah: Yes. You can learn more about the journey to outcomes based service by visiting us at www.futureoffieldservice.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 about IFS service management by visiting www.IFS.com. As always, thank you for listening.

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December 9, 2020 | 28 Mins Read

Tim Baines of Aston Business School’s 2021 Servitization Predictions

December 9, 2020 | 28 Mins Read

Tim Baines of Aston Business School’s 2021 Servitization Predictions

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Sarah welcomes back Tim Baines, Professor of Operations Strategy at Aston Business School and Executive Director of the Advanced Services Group to share his insight on what businesses can expect as it relates to the Servitization journey in 2021.

Welcome to the Future of Field Service Podcast. I'm your host, Sarah Nicastro. Very excited to welcome back to the podcast today, Professor Tim Baines, who is the professor of operations strategy and the executive director of the Advanced Services Group at Aston Business School. Tim, welcome back to the Future of Field Service podcast.

Tim Baines: Thank you, Sarah.

Sarah Nicastro: We had Tim on episode 70 of our podcast. If you have not heard that episode, you may want to go back and check it out after today's discussion. Tim will tell us in a moment a bit about what he does with the Advanced Services Group at Aston, but today, we're going to be hearing Tim's predictions for what will take place in the world of Servitization in 2021. Tim, before we dig into the conversation, for those that may not have heard our first podcast together, can you give them a little bit of background on your role, the Advanced Services Group at Aston, and what it is that you all are doing?

Tim Baines: Okay. Thank you, Sarah, for that. I'm a professor of operations strategy, manufacturing operations. My background is that I've spent all my working career working either for or with manufacturing businesses, helping them with their strategic decisions with regards to their operations.

Tim Baines: I became involved with the Servitization conversation around about 2003, 2004, that type of period. And I did so because we were asked to... Within the U.K., we were asked by the U.K. government. A group of universities were asked to respond to the competitive priorities for manufacturing firms moving into the new millennium. Up until then, our attention had been looking within the factory, had been looking efficiency within the production process and how to be effective, how to exploit digital to make sure that products are made cut, made quickly, made of a good quality, and made cost-effectively.

Tim Baines: This project, this program of Servitization was really about, within manufacturing, within the research community in the U.K., looking beyond the factory gates, looking at the opportunities for manufacturers beyond the factory gates. And that really brought us to get interested in this topic of Servitization or advanced services.

Tim Baines: Since that time, my work has been entirely focused on Servitization. Servitization, very simply, in my mind, is all about helping manufacturing companies to compete through services rather than products alone. Since that time, my work has been entirely focused on this topic. A few years ago now, we titled the whole research center the Advanced Services Group, because we wanted to distinguish between those service-based business models which are truly disruptive and high-value and game-changers in the marketplaces, versus the more traditional view of services inside manufacturing firms, which is about selling spare parts and brake fix. We really wanted to position our work as being about the new business models, the new service-based business models for manufacturing organizations moving forward.

Tim Baines: That's where we are, and that's just a brief overview. The work that we do is a combination of research, which is very much trying to understand and frame what it means for a manufacturing company to compete in this space. We develop research frameworks, such as services staircase, which talk about the different customer value propositions an organization can offer. Transformation roadmap, which describes how organizations have moved into this space. The business model blueprint, which focuses on the core elements of a service business model.

Tim Baines: We do research which is very much about framing the innovation, helping to understand it. We work closely with businesses in the U.K. and around the world to apply the concept, and through the application of the concept of Servitization, advanced services, we learn, it fits back into our research, back into our teaching, back into our publications. And we just keep the virtuous cycle moving, of research, impact upon practice, research, impact upon practice, to move forward the whole knowledge in this area.

Tim Baines: The one thing which galvanizes all our work together is this open ambition to really change the world for the better through these advanced services. It's based upon a motivation that... The business that many manufacturing firms follow hasn't really shifted much since the ideas of Henry Ford in 1910, 1912. A lot of manufacturers are still very much committed to that business model of production, consumption, and dump. And the whole business model of advanced services maintains that route in the products and the IP of the products, but very much looks at gaining value through the services, and is a much more environmentally, economically sustainable business model. And we're very much committed to promoting that business model.

Tim Baines: Sarah, does that help as a form of introduction? Is there anything you think I ought to have covered there, which I've missed or skipped over?

Sarah Nicastro: I think it's perfect. I've said here before that the work you guys are doing is really, really good, well worth everyone checking out. We'll make sure that there's a link to the Advanced Services Group in the notes.

Sarah Nicastro: What struck me is that the research you all do and the work you do, it's very clear when you look at it, when you consume it, that it is very grounded in the voice of the industry. To your point, my passion is helping folks that are on this journey in any way I can through providing them insights and content and connections that can help them, because we know that this path to Servitization is not one that is very simple or happens overnight.

Sarah Nicastro: If you were to go back and listen to the episode Tim and I did, episode 70, we talked about the four forces behind Servitization. It's well worth a listen. But the reality, to set the stage for today's episode, is that I think the vast majority of our audience recognizes those four forces. They recognize the fact that this is the future, this is where we're heading, and they're at varying stages of readying themselves and progressing themselves through this continuum.

Sarah Nicastro: Today, what I want to talk about is what we expect to see next year. 2020 has been an immensely challenging year for all of us personally, professionally, and I have a deep respect for the service leaders that I talk with on a daily basis for the fortitude that they've had to show. Not only progressing forward-thinking goals like this, but dealing with a lot of very complex challenges on top of it. I certainly don't want to minimize that.

Sarah Nicastro: I think one of the things that I've taken heart in this year, one of the silver linings, if you will, of this situation is the impact that it's having on the Servitization journeys, in the sense of really spurring them forth, in my opinion. There's a number of factors that have come into play in this very challenging year that I think really have helped make some significant strides in Servitization efforts. What are your thoughts, Tim?

Tim Baines: It's really interesting to hear you speak, Sarah, because you touched on, when you were introducing the work that we do, about the contribution that an academic makes in this space. And it's very interesting, because my background's a little bit unusual within the context of a business school. I'm actually a professional engineer, I'm a chartered engineer. When we look at what research engineers do, it's very much around materials, products, functional things. Engineers are allowed to invent things, but when you look at a business school and research that's carried out inside the business school, the research inside a business school is very much based upon this world of observing the phenomena. You recognize innovation and you look at the innovation, you try and make sense of the innovation. And a lot of the research which is carried out in business schools is all about trying to make sense of the innovation.

Tim Baines: Now, the innovation that we're talking about here is this notion of Servitization. When you ask me to comment upon the innovation which is taking place inside industry, you're trying to make sense of this innovation. The academic community isn't inventing it, but they're trying to make sense of it, they're trying to clarify what is actually happening.

Tim Baines: One of the frameworks the academic community has come up with to help to understand these innovations is a change management framework, which basically says that change takes place as an interplay of the context within which the organization sits, the management process which take place inside an organization, and ultimately the outcome of the decisions that are played. The machine tool, the management processes, the business context to be all into play.

Tim Baines: What, of course, just happened massively for us over this past year is that the context has shifted. Now, the way in which we tend to think about making strategic decisions inside businesses hasn't necessarily moved. The cultural side of things hasn't shifted in terms of how we run businesses, but the context has shifted. And as a consequence there, the decisions we're making inside businesses, the actual outcome of the decisions has shifted also.

Tim Baines: When you ask me to comment, I'm sitting and I'm thinking about this context, and thinking, "What shifted about the context?" We are in this world when we're thinking about what's going around us at the moment in time. It's a bit like predicting the weather. Of course, we're sifting through the trends in the past and we're trying to reflect upon what we've seen and make predictions as to what the future might be, and of course, it's been a year of tremendous shift and change. But if you accept that a lot of the forces which are shaping industry were there anyway, what also COVID has actually done is to strip away almost the grayness of those forces. If you strip those away, I think COVID has shown us that forces which are shaping industry have almost accelerated the shift.

Tim Baines: This time last year, I wrote a blog, and I was talking about the shift, the forces. And I was saying, to me, in terms of Servitization, the forces which were shaping industry were this desire for productivity, greater outputs for the amount of inputs we're putting, this adoption of digital and accelerating the adoption of digital, and sustainability. And I was talking about environmental sustainability.

Tim Baines: Particularly if you're in Europe, the environmental sustainability agenda is really at the forefront of a lot of people's minds. Sitting where I am in the U.K., you were looking and you were saying, perhaps in the order of digital productivity and sustainability, these were the things which were coming on the agenda. These were the priorities. Now, we still have this bizarre situation where we've got this thing called Brexit, but let's not worry about that, because that'll take us in another direction together.

Tim Baines: And then you've had this year. Of course, we stripped away this grayness about what's shaping industry. And I would argue now, moving forward over this next year, of course, I think recovery and resilience are going to be the two fanfares, almost, at the forefront. But then coming right behind that is I do think the environmental sustainability agenda is going to be very high on people's list of priorities.

Tim Baines: Here's a great example of this. You very kindly helped us with the World Servitization Convention. You did a great job with that. It was excellent, thank you. But a few weeks before it, the BBC published a statement, and it was about Apple computing. The value of Apple was given to be higher than the whole of the FTSE 100. The FTSE 100 is the U.K.'s top 100 share index, and the U.K. share index was declared as having... It was full of dinosaur stocks, it was stocks like British Petroleum, Shell, all these different things. Fossil fuel-based stocks. And Apple was held up as being worth the equivalent of that.

Tim Baines: Coupled with that Apple statement, you had a statement about sustainability. And whereas in the U.K., we have this ambition of being carbon neutral by 2050. Apple was saying, "We're going to be carbon neutral by 2030, and we're going to be carbon negative by 2050." Carbon negative. And then when you look inside Apple and you look at... If you want a second example of Servitization and see how Apple have dematerialized their supply chain, and are really... The Apple iPhone, it's all based around services. The value's coming through services. And you look at that as an exemplar and you look at what's happened, you say, "Absolutely, these are going to be the trends." Industry is responding to public demand for this improvement in sustainability.

Tim Baines: When we look at it, and I take a step back, I say that my prediction, my reflections, is that the forces which will be shaping what we do over the next year will be, of course, responding, resilience, but I do believe that sustainability is going to be evermore at the forefront. And those leading businesses, those businesses which... There are really excellent examples of businesses which are leading the way there and are really making a lot of ground. Does that help, Sarah? Does that resonate with your own thoughts?

Sarah Nicastro: It does. There's a couple areas I want to dig into. You spoke about context and that the context is what has changed a lot this year, and I agree with that. I think that that shift in context... Really, if you break it down, I think that the biggest impact of that is... Like I said at the beginning, we talked on our last podcast about the four forces behind Servitization, and I think that there is a general acknowledgement of those forces and, again, I said this earlier, an awareness that this is the direction we're heading.

Sarah Nicastro: But I think that, for a variety of factors, if you were sitting in January of this year again, there's just still a lot of things that can lead to more of a resistance to really progress as quickly as is possible through that journey. There's some history and some operational things and some cultural things that were holding companies to their roots. And I think that what has happened is, particularly for anyone that was lagging a bit in getting on board this journey, the context of this year has given them a quick shove in the direction of progress.

Sarah Nicastro: And I would argue, though, that that shift in context is, I think, having a cultural impact in companies. I really do believe that... And it's probably what I'm most excited about. I think that there's been so many interviews I've done this year, where people have talked about just very quickly becoming more creative, more innovative, and more quickly adapting to, what do our customers need from us right now? And it's okay if that doesn't look like how we've historically delivered value. We need to shift, we need to pivot, we need to react quickly.

Sarah Nicastro: Companies have had to become accustomed to making far more rapid decisions than they ever have before with, arguably, more complex and quickly changing criteria than they've ever had to deal with before. The use of digital tools and technology. Again, even employees that were resistant to that have a change in thinking, because they see it as a way to persist in doing their work and having a job. I think that there's a lot of challenge to what's happened this year, but the outcome, I do think is on the company culture, and I think there's a lot of positive things that are going to come out of that.

Sarah Nicastro: I want to dig into a bit more of your specific points and some others and talk a little bit about more of those. When I think about the excitement that I have for moving forward, I think that, as we focus on that resilience and move toward recovery, these companies are doing so from such a stronger place because of the experience of this year and how both the context and the culture have changed in a way that can really move them forward in a positive way. Does that make sense?

Tim Baines: It does, Sarah. If I was to reflect upon the situation, I think businesses are at a crossroads, a t-junction crossroads. And we have this, certainly inside the U.K., where there is this... Some businesses will look at what we have been through over this last year, they will look back at what has happened in the past. And you might take this, for example, as the automotive industry. Look in the past, and then they're saying to themselves, "Okay, as soon as we can get back to the old way of doing things, as soon as we can get back to the past, then that's great. We've got to try and move back towards there, we've got to get people back into their offices, we've got to focus on production, get the product out there, get the shops open, et cetera." That's the whole business model Henry Ford made so successful, and was absolutely right for that context. It's not a critique of the business model; it's a critique of the fit of the business model with the context.

Tim Baines: And then you've got the second one that says, "Okay, well, we've come from here, but we're in a situation where we found our people were actually quite ready to change. We're finding that the people are becoming more sensitive. What we have been through over the past year has forced us to make redundancies. We've stripped away people inside the organization." Invariably, these perhaps are people who have been with the organization longer term, or perhaps were custodians of the old business model. Some organizations say, "Well, let's see and move forward with this."

Tim Baines: I'll be honest. The reality is, I am sure that the future direction will be a compromise of both, and that's fine. But there are so many exciting opportunities, to my mind, of embracing what these forces which COVID has made so apparent to us, embracing those through Servitization and advanced services, really capitalizing upon it. So many exciting opportunities.

Tim Baines: To your point initially, Sarah, I am mindful that there's a lot of people who are senior positions inside services businesses who've had a terrible time dealing with what we've been through and having to make the best of it. You and I today, we're talking and we have this very privileged position to be allowed to talk freely about these things without this legacy of having to bring the whole organization with us. That's our responsibility, is to talk a little bit about some of what the future might hold.

Tim Baines: The opportunities, to my mind, are absolutely phenomenal. Let's take some examples. If we take what's happened in terms of these forces which are shaping industry, and we talk about the market pull and the technology push, the market pull has shifted. Go back to the environmental one. If you look at the environmental context, which COVID has made a more apparent to people... In the U.K. particularly, people are spending more time at home, they're spending more time at the gardens, they're looking around them and they're seeing what's happening. They're more aware of their environment, and they're saying, "Hey, we like this. We want to spend more time with this environment, we want to care with it more."

Tim Baines: The environmental pull is becoming more apparent, so how can industry respond to it? Well, you've got all the technology which is required to be put in place and got out there, that manufacturing can provide and get into the marketplace. There are services upon services, whether it's heat pump technology, whether it's hydrogen for house heating, whether it's shift in mobility, all these different technologies which can be got out there through advanced services.

Tim Baines: And then we look at another area. Food has become more of an issue. We live on an island. The food supply, et cetera. Again, advanced services, looking at food, looking at this whole sector, how it can provide a more resilient supply chain, how we can get new technologies, how we can get robots out there. Again, through advanced services. That's another exciting opportunity. And we see the same service here in what I might call assisted living. People living independently and promoting that, without the need to jump in the car and go somewhere. All these different sectors, the opportunities are becoming so exciting for these innovations that we're talking about.

Tim Baines: Really, the biggest challenge, I would say, to a lot of people for this next year, the one challenge is, have you got the vision to actually exploit those things? Can you get the vision there? Or are you going to push this away? Are we going to try and regress? Or have you got the vision for imaging, for thinking about it in manufacturing industry, beyond the idea of producing, consuming, and just dumping it? That's the challenge to my mind.

Sarah Nicastro: Mm-hmm (affirmative). Maybe the conversations I'm having are just a really good sample, but I think that the vast majority of service leaders are really focused on harnessing this momentum and caring forward. I'm not talking to a lot of people that are intent to go back to the way it was.

Sarah Nicastro: I want to dig into a couple specific areas and talk about how the challenges of this year are really going to have a positive impact once we've progressed through them. The one is, we've seen an increased uptake of an openness to technology this year. Obviously, companies have, in parallel, been on their digital transformation journeys. There're still laggards and leaders. I think anything related to innovation, when things are going well, it's easy to deprioritize the need to evolve if you're in a good spot. This year, we've seen companies that have either rapidly expanded their use of technology to persist with business, or have quickly looked to get up to speed in that area. When we think about an increased use of an openness to how technology can play a role in these operations, how do you think that will impact Servitization progress in 2021 and moving forward?

Tim Baines: Okay. If I may, Sarah, I'll just comment very briefly upon what you just said about the service leaders you've interviewed. I would say the same. I very much endorse that, that these service leaders... And maybe it's because people inside of services are naturally more intimate with customers, so they are seeing these trends.

Tim Baines: However, when we think about Servitization inside the context of a broader firm, one of the big inhibitors of progress has always been almost the cultural change, the legacy of the production that's sitting behind. Of course, for the organization to shift, it requires that production environment. When I talk about people who perhaps not embracing the new business models with perhaps as much enthusiasm as you and I are, it's because I am reflecting also upon this traditional legacy lots of organizations have had. But it's really reassuring to hear that the people you've been interviewing are being consistent with ourselves. We're not just a bunch of crazy academics talking about what the future might like.

Tim Baines: Let's talk about digital. If you ask me about the innovations which are likely to have the biggest impact upon manufacturing businesses moving into services, I wouldn't put digital in the top two. I would put the two innovations which I think are most exciting at the moment in time. One is what we've already spoke about, which is the cultural change. I think there's an awful lot to be done there about vision and empowerment and really grasping the opportunity. I think the second opportunity innovation is financial innovations.

Tim Baines: That is not to say that I don't believe that digital has got tremendous opportunity to accelerate. I think that what we're talking about is the confluence of digital, financial, cultural. We're sitting at the center of these three, and we're enabling an acceleration into a new way of doing business which wasn't there previously. Whether it's artificial intelligence, whether it's remote monitoring, whether it's big data, whether it's blockchain. Those are fantastic innovations and they're really enabling what's going on, but the thing which has really come to my attention recently is the financial innovations, because it's the financial innovations which, I think, we need also.

Sarah Nicastro: Tell us more about that.

Tim Baines: Okay. The background to this is, 18 months ago, I went to a conference which was an asset financing conference. It was a big event, it was held in London, and I spoke about Servitization. And I was really surprised to hear about all these financial institutions who were talking about Servitization. We'd never come across this community before. What they're talking about is things that you would be familiar with, Sarah. It starts with subscription charging, which we're familiar with. But then it moves into conversations about asset financing, partnering with a manufacturer. It moves into conversations about ownership, moves into conversations about contracting.

Tim Baines: It's complicated, and I'll be honest. If anybody's listening to this podcast who is from the financial community, please forgive me when I say this. But their understanding of the concept of Servitization is inconsistent with the popular understanding of the concept of Servitization, as is held by the broader scholarly community that looks at it. They're looking at Servitization from an innovation... It's almost what I would call the mechanism for revenue capture. When we talk about Servitization, we're talking about how you're bundling the service offerings together to build a bigger customer value proposition. Basically, this is all about, to me, the shift to an outcome-based society. The subscription charging can go hand-in-hand with that, but it's slightly different things.

Tim Baines: Let's take a practical example. A couple of examples, if I may. I think I spoke about this last time. In the U.K., fossil fuel heating on new-build properties, 2025, you're not going to be allowed to have it. Even retrofitting, fossil fuel heating has been challenged at the moment in time. The alternative technology is technology like heat pump technology. It's expensive, so how do you get that new technology into it? How do you actually get somebody like you and I... If we went out and bought a fossil fuel heating system, it might cost us $2,000. The heat pump system for a house or equivalent property might cost us $20,000. How do we do it? Well, we obviously need financing. And if that financing can be bundled together in terms of a subscription charging, where we don't feel the pain as a big lump investment, but rather, the pain is spread out over multiple, maybe five-year contract. Then, we're going to feel more ready acceptance of the technology.

Tim Baines: We shift and take something alternative. You take food production. In the U.K., aging population, you got food production. A lot of the farmland in the U.K. is held over to dairy. And then as you start to move over from dairy, as people's... We're having a growth in people moving to being vegetarians, being vegan, et cetera. Concerns about climate change. There's pressure on dairy farming, and there's a request to actually exploit the land in different ways, but exploiting the land in different ways requires new technologies to get in there. You start to talk about autonomous vehicles and robots and such like. How are you going to make that happen? Again, you want to shift to an outcome-based contract, and financing can enable that. It's on subscription-based charging with really intelligent ways in which you're financing the asset.

Tim Baines: It's our service world, and it's our move to these advanced services, this outcome-based world, where we're buying the outcomes. But it's the bundling between the cultural organization to offer the services that the product enables, coupled with the technologies which help us to monitor how the product is used and build up intelligence, coupled with the financing which gets those innovations into the marketplace as quickly as we can.

Sarah Nicastro: Yeah. That makes sense.

Tim Baines: Sorry, Sarah. I've gone off into complete tangent there, but hopefully it's relevant.

Sarah Nicastro: No, that makes sense. This is in line with... Historically, one of the challenges that I hear a lot from people, and this is a combination of different factors, but people saying, "How do we bring our customers on board this journey?" While there is a market pull, there's also the real shift in terms of... Now, we're moving from delivering products to delivering service. What does that look like? How does all of that work?

Sarah Nicastro: One of the things I've heard a lot this year echoes what you just said. If you think about a manufacturer of really large equipment, obviously if people are looking to avoid CapEx expenditures and move toward more OpEx options, then they're looking for more of that financial innovation. How do we do this differently? How do we bundle these things together? How do we achieve the outcome we need in a way that looks different than that purchase or revenue model did in the past? That makes sense.

Sarah Nicastro: Generally, again, going back to the positive implications here, I think that the need to get creative this year is breaking down some of the barriers in communication between companies and customers to have discussions around what different models might work. What does this look like in reality? And I think that, again, that's something that will propel companies forth, because rather than avoiding those conversations or struggling through those conversations, they're coming together in a time of need to find outcomes that are mutually beneficial to both parties in a way that hopefully makes progress these folks can build upon. Does that make sense?

Tim Baines: It absolutely does. And this is tough, isn't it? We're asking of ourselves to envision a future which is different to the past. And just like when you started this conversation, you were saying what's our predictions for next year, we're making those predictions by looking at the past and teasing out which we can conclude factors, and we're being effective by our own assumption and prejudices.

Tim Baines: If you can, when you move to our world of these advanced services and you start to think about the opportunities which have been opened up and are opened up by this combination of this digital, this cultural shift to these outcome-based contracts, digital, shift to outcome-based contracts then the financing, they take you home. I'm fortunate enough to have a sensible office in my own home, et cetera, but an awful lot of people were shifted from being based inside the factory or inside the office block, and they now work from home.

Tim Baines: And then you look at it and you're saying, "Okay, well, what do you need to work from home?" And you think about the computers, you think about the printing technologies, you think about your desk, et cetera. How are we expecting people to go out and buy this? Actually, the old model is, go and buy it. The model that we really want is, the outcome I want is a work environment that I can be productive within, that's got all my technologies. It's safe, it's ergonomically sound, et cetera. What a fantastic opportunity for an outcome-based contract.

Tim Baines: It's not about a big asset. It's about that shift, enabling this outcome where I can be productive in my own workspace. And for that to happen, of course, requires the technology, but it requires the digital. I've got a printer over there. If my printer doesn't work, I need somebody to ring me up and tell me how to fix it. I don't want to go into YouTube and have to sift through all the various presentations how to fix my HP printer. I want it fixed, and I want financing in a way which I can afford it. I just want these outcomes.

Tim Baines: This goes back to your initial point about, what does the future look like? Look at this fantastic opportunity for the home working environment. Physical fitness, everybody's saying... In the U.K., we had a big run on people buying bikes and fitness equipment, et cetera. You want this gym at home, you want the outcome of being able to exercise at home. All these different things, all these opportunities.

Tim Baines: The big challenge for us, in my mind, is, is it envisaged that this is forthcoming, or this forthcoming? This is how the future could really look if we really exploited what is happening. The digital, finance, and the shift towards an outcome-based economy.

Sarah Nicastro: Mm-hmm (affirmative). Yeah. We had Peloton on the podcast earlier this year, and boy, are they one that has... The challenges they have are opposite of many of the companies we're speaking with, because their demand has just been through the roof, and it's been immense growth.

Sarah Nicastro: It is a good point. The opportunity here to innovate is not limited to manufacturers of huge equipment. We've talked with service companies that... Again, it's about listening to the needs of the customer and adapting quickly. We've had a lot of different examples of organizations that have just paid very close attention to the outcome desired in January and how that differed to the outcome desired in March of April, and they just moved quickly to be able to meet those needs.

Sarah Nicastro: I think, again, the thing I love about this is it's forcing these companies to flex these muscles of openness and creativity and innovation. As they're doing that by force, they're learning that they're capable, and that the opportunity to continue doing that is immense. That, I guess, is what really excites me about the way that the challenges of this year, I think, are going to pay off immensely in 2021 and beyond. It's really interesting to think about some of the ways that we'll see this come to fruition as we move along.

Tim Baines: Sarah, I... Sorry.

Sarah Nicastro: Yeah, go ahead, Tim.

Tim Baines: No, I was just going to... And your point about the threat side of things is interesting. One of the businesses we work with looks at assisted living inside your home, particularly for disabled or elderly people. They're very conscious of how the technology providers... We saw it this week with Amazon declaring that they're offering the capability to monitor machine tools and report on machine tools' performance. How do you compete against somebody like that? Well, you don't take them head-on in terms of the product. You do something that they can't do. And what they can't do is that services package. We're not talking about just good delivery. We're talking about that services package of assuring somebody can live safely inside their own home.

Tim Baines: Even if you're traditionally rooted in production and products, and you're looking at the future from... Not just the threats of COVID, but what else? For example, what technology vendors are doing, how they might move into your space. Customer intimacy that's demanded to be successful with services, particularly advanced services, is such that it builds that resilience. And it's resilience not just to pandemic, but it's resilience against the technology vendors. And that's good for us. None of us want to live in a world where everything's dominated by one particular business. It's healthy for people to have choice, and that's what services enables. It's a much more resilient business model.

Tim Baines: I should just say, we're certainly fine in the U.K., you have to be careful. Organizations such as Rolls-Royce have been hit very badly. When you look at something like Rolls-Royce, there has been an ambassador for the more advanced services, certainly over the past 10 years. It's very easy to look at them and say, "Oh, is that a reflection upon the service-based business model?" If that is a reflection on the sector... The whole sector of air travel has been so badly hit. Sectoral factors will always play into this, but nevertheless, the level of the individual business, services give resilience. Services provide the platform to respond, to recover, to get innovation out there, and sustainability.

Tim Baines: Big challenge to me, though, is whether organizations and politicians can actually envisage that, can buy into the vision, can see the vision, can understand that this is not about... So many opportunities have been opened up by this pandemic, and let's embrace them.

Sarah Nicastro: Mm-hmm (affirmative). Absolutely. All right, Tim. We've talked about the context and how that's shifted. We've talked about culture, we've talked about financial models, we've talked about sustainability. Any other thoughts? Any other thoughts or words of wisdom to folks as we wrap up 2020 and move into the new year?

Tim Baines: I think one of the challenges, Sarah, is for anybody that is spectating and looking to what's happened, there's a myriad of spectators, et cetera. The only thing I would say is look at the evidence. When we go back and you look at the Apple example that I spoke about shortly, there was evidence of a response and a potential trajectory. And then look at the evidence of other organizations, look at the evidence of data coming out of the World Bank in terms of where gross domestic product is generated, and the fact that services supersedes products and production.

Tim Baines: Look at the evidence, and the classic ways you know to look at the evidence is to find it, recognize what you believe in, form what we call the null hypothesis, which is the opposite view, and go out to prove the opposite view. And when you can't prove the opposite view, then there may well be some truth in the view that you want to believe. And I think if you go out there and you look at the evidence, then you can make your own mind up. I think it's extremely difficult to argue against the adoption of Servitization. That will be my finishing... I can't find the arguments against it.

Sarah Nicastro: I agree 100%. Again, in a year fraught with difficulty, I think we, as individuals and as a community, need to look for, what are the positives? And again, to me, the conversations I've had around... From company to company and individual to individual, how this has opened eyes and created more open-mindedness and spurred more innovation and creativity and agility, it's really heartening to see. And I think that, while we probably all would wish this situation away if we could, it's something that I think is really going to create a lasting positive impact for a lot of these organizations in terms of their ability to be resilient and to persevere and to think differently than they have historically.

Sarah Nicastro: I'm personally really excited to see what 2021 will bring, and certainly hoping it's an easier year for everyone than 2020 has been. But I appreciate you coming and sharing your thoughts and insights, and I know that we'll look forward to having you back next year to discuss how things are going and what we're seeing in terms of these predictions becoming reality.

Tim Baines: Thank you, Sarah. I very much enjoyed today's conversation, and I look forward to speaking to you again on this.

Sarah Nicastro: Me too, Tim. Thank you.

Sarah Nicastro: For those of you that haven't listened to episode 70, go back to futureoffieldservice.com and take a look for that. It's a great discussion. 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 about IFS Service Management by visiting www.ifs.com. As always, thank you for listening.

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