Strategic Service Management - Leadership and Best Practices

Strategic Service Management Leadership and Best Practices Practical considerations and insights to leverage new profit opportunities Sponsored by Leadership and Best Practices in Strategic Service Management Table of Contents Executive Summary ........................................................................................ 4 Step 1: Maximising the Revenue-Generating Potential of Service ................... 7 Step 2: Gaining Visibility over the Entire Service Chain .................................12 Step 3: Keeping ahead of your Customers’ Expectations through Consistently High Performance and Creative Service Business Offerings ............................................................................................16 Step 4: Investing in Enabling Technologies and Systems...............................19 Step 5: Addressing the Various Levels of Service Challenges.........................21 Step 6: Pragmatically Evaluating Outsourcing to Deliver Business Flexibility ...........................................................................................23 Step 7: Bringing Together People, Processes and Technology .......................28 Trends and Opinions of the Study Participants ..............................................30 Conclusions Actions .................................................................................32 Appendix .......................................................................................................33 About the Respondents (and Survey Methodology) .......................................33 About the Author ...........................................................................................35 About the Sponsors .......................................................................................36 The companies selected to take part in this research were taken from those considered as leaders in their sector or as demonstrating success in one or more areas of their business. The findings are based on the output from questionnaires and interviews of their senior personnel focusing specifically on the drivers of success – specifically exploring any impact from the service, parts and logistics operation on their business as a whole. Downton Consulting © 2007 Page 2 Leadership and Best Practices in Strategic Service Management What is Strategic Service Management? “Strategic Service Management (SSM) is a new customer commitment centric business strategy that optimises a company’s service buisiness processes through a single, integrated view of post sale service operations, but taking into consideration the planning and forecasting of service resources, and the strategy and mangement of customer commitments, service partners, and service pricing.” Wikipedia (http://en.wikipedia.org/wiki/Strategic_Service_Management) “Strategic Service Management is the new business imperative for any company selling products and services to a global market. It is a fundamental shift in how companies conduct business in after-sales services. It provides an integrated view of your service resources as well as the key processes necessary to create and execute a customer-oriented service for a global market community. Strategic Service Management causes companies to completely reinvestigate how service business is executed based on efficient use of resources and partners in the value network. Technology is the glue that integrates these capabilities and holds the network together both vertically and horizontally. Within this network, it is essential to continuously search for creative ways to harvest more profits while efficiently and effectively delivering on service commitments made to your customers.” Frank Tennstedt, Accenture Downton Consulting © 2007 Page 3 Leadership and Best Practices in Strategic Service Management Executive Summary Historically, product sales have driven company profits. As a result, the aftermarket has suffered from chronic underinvestment in IT and process improvement. However, in today’s global economy, initial product sale margins have eroded to such a degree that it has become virtually impossible for companies to maintain or increase revenues without changing course. Consequently, the value of service is becoming widely recognised as essential in boardrooms. In fact, innovative service strategies, investment in IT and aggressive process improvement are now fundamental in the exploitation of new opportunities for further profit gains. “ Service is so great an opportunity for the company that our vision for the next century is that GE is a global service company that sells high-quality products Jack Welsh, former CEO, GE SSM at Work ” Industry leaders in the Strategic Service Management (SSM) trend can be swiftly identified because they are delivering service revenues of 90%, with margins of 65%. SSM is emerging as a major force for businesses concerned with the bottom line, as they embrace SSM as the natural successor in the line of profit- delivering and leadership-enabling technologies (Figure 1): Figure 1 SSM is the emerging wave. SSM = Strategic Service Management Downton Consulting © 2007 Page 4 Leadership and Best Practices in Strategic Service Management This report looks at several highly successful companies and highlights their major differentiator as an unremitting focus on delivering excellent value to their customers through investment in IT. The role of service in these companies is achieved through bringing the benefit of excellent products and unlocking the full potential of value for the customer. Ultimately service is the knowledge, experience, and products applied and used to the benefit of the customer. Markus Naegeli, European Services and Support Director for Canon Business Solutions, defines it as follows: "By offering our customers integrated services, Canon's hardware and software is transformed into complete solutions that lead to higher customer benefit and create a unique market positioning." However, the average state of service operations is not as good as their marketing hype might suggest, and any discussion of good practice in the service industry today really only refers to the top performing service companies, which represent no more than 15% to 20% of the total. These elite companies demonstrate success through: • high share value • high profit margins (typically over 50%) • and growing revenue streams (typically over 30%) These companies know how to deal with a complex service environment in which response times have fallen from days to hours to minutes, and return times from months to, in a few cases, hours. Most of these competencies are assumed, and should be as an entry level requirement. To really differentiate their businesses they are focused on understanding their customers and delivering added-value at the customer interface and have done so for many years. They have found that service works best when it resonates with the business and the business resonates with its customers. Investment in service has proven critical: • Companies today often under invest in service IT. This is in spite of the fact that, while service delivers 36% of Return of Investment (ROI) and 55% of profit, companies only invest 15% of their budgets in it. • ROI on IT investment in service far outweighs that of manufacturing functions, yet remains grossly under exploited. • In the last two years there has been a 20% increase in revenue return on service and an impressive 10% increase in margin. This document focuses on how these and other top performing successful companies have achieved their success, outlining the clear and demonstrable strategies for success that are common to all the leading performers. These are summarised below into seven key steps needed to achieve market leadership, with the rest of the report providing the detail and examples of how they have achieved their success. Downton Consulting © 2007 Page 5 Leadership and Best Practices in Strategic Service Management Seven Steps To Service Leadership To ensure that an organisation can head down the right SSM path, i.e.

Strategic Service Management - Leadership and Best Practices – Practical Considerations and Insights to leverage new profit opportunities – A Downton Consulting Report © 2007 Accenture. All rights reserved. Accenture has powered the latest Downton Report on “Leadership and Best Practices in Strategic Service Management” which identifies 7 steps for achieving service leadership. Maximize the revenue- 1. generating potential of service Gain visibility of the 2. entire service chain 7 Keep ahead of customer expectations 3. through consistently high performance, coupled with Key steps creative service business offerings leading the Invest in enabling technologies and systems 4. to ensure maximum value capture and provide a path to platform for ongoing process improvement service Address the various levels of service challenges 5. leadership Pragmatically consider outsourcing 6. to deliver business flexibility Bring together people and 7. parts organizations & technology © 2007 Accenture. All rights reserved. 2 1 To fully develop the revenue- . generating potential of service Leading businesses are now developing innovative 2 . 3 To gain visibility of the entire service chain To keep ahead of customer expectations through consistently high performance, service strategies to compensate for the irreversible . coupled with creative service business The report offerings identifies seven To pragmatically consider outsourcing 4 key steps to deliver business flexibility . erosion in margins from product sales in mature markets. To address the various levels of Service 5 Challenges . To invest in enabling technologies and 6 systems . to ensure maximum value capture and provide a platform together People and improvement To bring for ongoing process 7 . Parts organizations & technology In mature markets, product commoditisation has eroded margins © 2007 Accenture. All rights reserved. 3 1 To fully develop the revenue- . generating potential of service 2 To gain visibility of the . entire service chain To keep ahead of customer expectations 3 through consistently high performance, In a mature market, strategic service management is the . coupled with creative service business The report offerings identifies seven To pragmatically consider outsourcing 4 key steps to deliver business flexibility . key for long term differentiation . To address the various levels of Service 5 Challenges . To invest in enabling technologies and 6 systems . to ensure maximum value capture and provide a platform together People and improvement To bring for ongoing process 7 . Parts organizations & technology To backup those eroding margins, service can and must deliver differentiation and profits © 2007 Accenture. All rights reserved. 4 1 To fully develop the revenue- . generating potential of service Leading businesses are now developing innovative 2 .