Prioritizing service? Here’s why you need to go deep

Profile picture for user Michael Ouissi By Michael Ouissi March 16, 2021 Audio version
Summary:
It’s good that companies should worry about service, says Michael Ouissi of IFS. But bear in mind that complete service enablement requires changes to processes and core systems underpinning the business

Man providing fridge repair service with customer © Elnur - Shutterstock
(© Elnur - Shutterstock)

Ask any CEO about service and you’ll get a well-rehearsed discourse on how vital it is to put the customer first today more than ever. But is it that simple? The acknowledgement of the value of customer service as a competitive differentiator has accelerated as a result of the events of 2020. In soon-to-be-published research among 1,700 global executives, for example, we have found that a massive 74% of corporate respondents claim that guaranteeing a great customer experience has become more important because of the coronavirus pandemic.

That’s perhaps not surprising — COVID-19 has been the most disruptive event in a generation, upending the way we live and work. In times of upheaval, we look for suppliers we can trust — and we are quick to leave behind those that don’t measure up. Equally unsurprising is the fact that smart businesses are taking customer service more seriously than ever. After COVID, they can’t afford to lose more revenues. A common theme in service trend forecasts for 2021 is greater focus on customer support and omnichannel communications.

Similarly, expect businesses to pour money this year into researching customer behavior and influencing net promoter scores. Meanwhile, our research found almost 51% of companies have reengineered business processes to deliver better services and customer experiences already, and a further 41% are in the process of doing so. This is apparently all good news for customers and the companies that serve them.

However, our study also uncovered a worrying statistic — only 28% of respondents claimed to have business software that is good at measuring and supporting actions to improve customer outcomes. The implication is that many organizations may be investing in measures that address short-term customer service issues but do little to create a fully service-oriented enterprise. And that should be a cause for concern, even without Coronavirus as a complicating factor.

A seismic shift

To understand why, it’s important to first take stock of a seismic shift that is happening in many sectors. While companies such as Target have built their brands on customer experience, and have enviable net promoter scores as a result, manufacturers that sell through channels of distribution may feel far removed from the need to think about the moment of service.

If you manufacture refrigerators, for example, the key to success has always been make a product that works well, looks good and is priced right. Customer service was limited to having a decent warranty arrangement. But that’s changing. Manufacturers and other product-focused businesses are waking up to the fact that selling a product and walking away is an open invitation for a competitor to step in at renewal time.

A much smarter strategy is to use a product as a platform to deliver an ongoing service, thus keeping customer relationships live indefinitely. You don’t have to look far to find examples of this trend. Last month, for instance, Peugeot’s Iberian director Joao Mendes predicted 25% of the company’s revenues would be from services rather than vehicle sales within a decade.

The network equipment maker Cisco, meanwhile, got 51% of its revenue from software and services last year, so it is now effectively more of a service-based company than a hardware manufacturer. And in energy, wind turbine makers such as Siemens Gamesa today see services as a “money-minting model.”

Servitization cannot become a reality in a “technology as usual” set up

The challenge for companies looking to go down this route is there is a danger of believing that this ‘servitization’ can be achieved through a few process adjustments and technology add-ons. This can lead to companies focusing attention and money on shiny new customer experience toys such as apps or self-service platforms, without making deeper back-office adjustments to ensure service capabilities are properly embedded into the enterprise.

As a result, businesses risk not only having less-than-satisfactory service transformation projects, but also potentially in a loss of focus on the product characteristics that lead to customer experience excellence in the first place. Whatever your business, it’s important to keep in mind what constitutes your ‘moment of service,’ or the point at which your brand delivers the promise you made to your customers.

Take the example of a car rental company — as a customer, you may have multiple interactions with the business as you go through the reservations process. But the true moment of service is when you arrive at the car rental office and are handed the keys to the exact vehicle you wanted, in pristine condition, precisely when and where you needed it. Delivering this moment of service usually requires the orchestration of many systems and processes.

And it’s vital to get it right. If not, all customer service add-ons in the world won’t save your business from loss of revenue. Moments of service are all around us — it’s what you get from an airline when your flight lands on time at your chosen destination, or from your cellphone company when you call your family, without interruptions, from far away.

Focusing on core systems

The key to turning these moments into long-term service revenues is to make sure the core systems underpinning the business are natively designed to deliver servitization as well as operational excellence. How could this work in practice? Let’s go back to the refrigerator example. Fridge manufacturers rely on enterprise resource planning tools for the in-factory delivery of materials and components. The customer doesn’t benefit from this capability, though. And when their fridge stops working, they will likely throw it out and buy a new model. 

Now imagine the manufacturer not only contributes to the circular economy but sells a ‘refrigeration service’ with a lifetime guarantee. The product — a fridge — becomes a service delivery channel and the company’s component delivery system gets augmented to ensure rapid supply of spares to repair the asset in case of a breakdown. With this business model, the manufacturer (almost) never loses a customer and the customer (almost) never has to throw out a fridge. As an added bonus, the model is far more sustainable than current practices, which again plays into a trend that has evolved significantly over the last 12 months.

This isn’t the future. It’s feasible now. But it starts with a reevaluation of core systems, not some tinkering around the edges.