As a Brit, my instinctive reaction to hearing the word servitization was to raise a quizzical eyebrow and assume that it was a new American-ism that I hadn’t heard of before. Not so, says Dave Yarnold, CEO of field service specialist ServiceMax.
If you look up servitization on Google you get 38,000 replies. It’s the process of providing service as a product, of looking at service as a series of outcomes.
Never mind servitization, field service were two words that wouldn’t have been heard in common circulation at the Dreamforce conference a few years ago, but it’s currently one of the hotter topics in the industry. Yarnold argues:
Companies really are beginning to focus on service. Service used to be all about being a necessary evil. You had to provide it and you tried to minimuse the cost of it. It’s now seen as a source of additional revenue.
Certainly a recent study in Europe - the WBR 2014/15 European Services and Trends Report - suggests that there’s a fundamental shift in attitudes towards the field service technician and his or her role in the organisation.
More than 66% of European companies surveyed now view their field service departments as a profit centre, with 44% of senior executives see their field technicians as qualified lead generators. Building on that, 26% of companies incentivise field service technicians to sell while a further 28% plan to do so within the next two to five years. Yarnold says:
We’re not in a recession any more, but we are in ‘interesting’ financial times. Everyone needs to make everything last longer. That has two results. If you’re a product company, you’re not going to see huge upticks in product sales, but you can grow by putting together innovative services programs. It’s a recession-proof source of revenue growth. On the flipside, customers are not as willing to upgrade to the new versions of the stuff they have as quickly as they did before, but they are open to a value-add service program that helps them run more efficiently.
What ServiceMax sets out to do is to empower the breed of what Yarnold calls ‘heroes with clipboards’ with more sophisticated technologies to support their mission to
literally keep the world running.
In Europe, Coca Cola Enterprises has kitted out its field service team with iPhones and that’s taken away 50% of the admin by doing that. Their technicians now have all the data about their customers with them and they are even more respected as a result. They are upselling customers on servicing things other than coke machines so you end up with different sources of revenue.
One customer went live and just by eliminating manual processes, like writing up their notes, just by eliminating inefficiencies and inaccuracies, they recouped $30 million in revenue.
This is one of the emerging areas, the servitisation of companies. It’s coming on top of the cloud, mobile devices and the industrial internet with the focus on devices as sources of data.
Big Data and the Internet of Things come into play here:
The whole Big Data thing is overhyped in a lot of places. With the Internet of Things and the connected enterprise, machines are going to generate a lot of data. You want to be able to determine the unique insights that they can provide to their customers. Field service is one of the best places for Big Data to be applied to take what is currently a reactive kind of industry to a more predictive one.
You have a desire for companies to be better connected to the customers which is an immense goldmine of value for CMOs and for the product folks to understand everything that’s going on. That’s going to be an important system of record to be able to track everything you’ve every sold and know what’s happened to that products. I saw a keynote by GE’s Jeff Immelt and he was talking about outcomes, not about selling locomotives. He’s talking about outcomes like getting locomotives to move one mile per hour faster and that can only happen if you’re connected.
Perhaps a sign of the potential of the field service market at present can be seen in Oracle’s recent stake in the ground with its acquistion of TOA Technologies. Yarnold sees this a good thing:
It’s good from the standpoint of elevating the momentum of field services as something real in the enterprise space that has been neglected to date. There are nearly as many field service technicians as there are field service sales people. It’s a massive market. It’s great that more people are seeing field service.
In terms of that acquisition, it’s a pretty vertical play. The company was very focused on cable and telecoms, which is only 6% of the total addressable market in field service. So I think it was more of a vertical play than a strategic move. But any attention that this space gets makes more CEOs pay attention.
He concludes ruefully:
In some respects, I would have preferred to stay under the radar for a bit longer!
An area of the industry that's finally getting some well-deserved attention as a potentially powerful revenue generator.