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By Ann Grackin
October 23, we participated in the Wharton/Stanford Service
Supply Chain in Philadelphia. This annual event attracts
some of the most senior professionals who care about the
Customer Service Chain.
Service has a broad based definition from traditional concept
of aftermarket installation and repair to a more philosophic
point of view expressed by the CEO panel—that possibly
there is no distinction between product P&L vs. Services
P&L—it’s about Customer Centricity. Ralph
Roberts, Chairman of Comcast, went so far as to declare that
if you serve the customer, you will be loved.
Having said that, many firms have declared that over the
years the revenue shift for them has moved from product design
and sales to ‘service’, though definitions of
that are squishy.
What we think of as not squishy, or in doubt at all, is
the stark reality that for many businesses the so-called
product is free (or pretty close to it)! It’s all about
the lifetime connections. Cell-phones, on-line auctions,
etc., have led the way. But many industries have suffered
extreme price erosions, appliances, etc., and we do not know
what else will be next. A clever inventor will create the
next disruptive technology and set an industry on a new journey.
Unless I am a disruptor, I would not like being in the consumer
electronics business. You’d better have price on your
side—Kodak’s 5 Megapixal for $398 or brand on
your side—Nikon’s 5 Megapixal for $1,200. But
even these strategies only last for so long. Unless you have
mastered the Armani factor, you’d better have other
things to compete on—and caring for the customer is
the eternal way.
OEMs like Unisys have about 70% of their revenue in service
and growing. We guess that is where equipment guys might
go (software as well). No one buys that much of your hardware,
but you still can have a customer for life. But not everyone
can do that. Unisys provides multi-vendor support on platforms
such as Cisco, Dell and HP, and this is a highly competitive
environment. You have to compete on price, availability and
responsiveness. Firms like Rockwell Automation and Northrop
Grumman now see the servicing ‘customer life cycle’ as
their business. Wherever it takes them—from design
to managing the IT systems. Reduce my risk-maximize my
returns is the role of today’s service provider for their customers.
This begs the question; how to master the service network.
Who owns it? Who can manage it? Who can create scale and
responsiveness[1]. From OEMs, to dealers, to retailers, to 3PLs,
the models here are diverse.
Figure 1
Clearly, users want and need service—and not just
the big companies. The so-called So-Ho- small office/home
office market is the fastest growing part of Cisco Systems
service offering. And with the proliferation of Wi Fi, you
have to be the master of the economics of this game, since
there is no longer a fixed location or a customer who represents
scale (large office complex) to service. You have to be really
adept at managing that supply chain of parts, and service
people to make money.
Another trend is that the service arena is to move away
from the concepts of break-fix and measure providers—both
the OEM who made the stuff as well as the service providers
(assuming that they might be different organizations) on
performance. Guarantee service, not get measured on parts
depot inventory supply.
This change in management philosophy will be very good for
customers. Not so good for equipment manufacturers, since
over buying and building go on today in order to maintain
planes in the air, utilities up and running, etc. If these
things never broke, we would just need the right amount. However, the really smart OEM will see there is actually
a value-adding shift here. They can manage the service—from
goods to information—proving what the customer really
wanted all along—continuous operation. And wouldn’t
it be nice to reduce the piles of recycled obsolete materials
in this world!
Fascinating New Spaces in Services
There are some great new ideas circulating in the Service
arena.
These topics deserve their own article—or rightly so—books,
to describe them. New technologies in production are changing
the face of the service chain. To keep performance high,
optimize the repair universe and avoid that most expensive
event—disasters—these technologies are now being
utilized in the top enterprises.
- Proactive fault detection
for avoidance, to maintain performance, uptime and continuous
operation. Predictive
technologies, by the way, are showing up in many supply
chain functions.
- Something called Autonomic Logistics-Engineer
in, from the product up, the ability to sense and communicate
its needs.
Lockheed built into the Joint Strike Fighter a concept called
Autonomic Logistics. The F-35 comes equipped with a new circulatory
system—like the autonomic systems in the human body.
And this body can communicate its needs to an advanced network
of services to proactively service it through the whole logistics
chain. Fascinating!
Conclusion
I will leave you with some words of wisdom from the CEO
panel.
“If you want to succeed in customer relationships,
get rid of the filters that keep you from hearing what the
customer thinks.”
“The only measures that count are in the eyes of the
customer.”
“Push decision making closers to the customer and
give your employees flexibility to make decisions that will
be good for the customer.”
I guess I am like Ralph Roberts; getting love is
probably the new methodology to customer satisfaction—and
shareholder value.
Figure 2
[1]
ChainLink has an upcoming report on Logistics that
address this issue.
©2003
ChainLink Research, Inc.
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