Operating
in fast changing global business environments, presents real challenges even
for the most successful corporate enterprises and as former market leaders like
BlackBerry have learnt to their cost, competitors are always ready and waiting
to step-in and take over your market share. What should “Corporates” do to
maintain their competitive advantage, and plan for the future? Here Professor
Andy Neely, Director of the Cambridge Service Alliance, discusses a concept that is helping to make sense of these many
challenges and bear traps – it’s called “the shift to service solutions”.
Listen to a Podcast with Andy Neely on the topic of this blog
This October like others, the Cambridge Service Alliance
held its annual
Cambridge Service Week Conference bringing together speakers
representing the market leaders in their field, Caterpillar, Finning, IBM,
Pearson, and even the Northern Arizona University - which is teaching
completely online.
We wanted to look at what we term “the big shifts” that are
going on around the World as organisations look at selling solutions and
services rather than products. As firms have sharpened up their business operations
to become more competitive they are increasingly looking at selling the outcome
that their clients want rather than merely the ownership of the product.
All these business
changes are taking place in a World where climate change, water shortages,
demographic changes, and a scarcity of resources are putting huge pressures on
decision makers in both the public and private sector.
One of our Cambridge Service Alliance members with an
interest in this shift to services is Caterpillar. Caterpillar machines and products
might typically last for thirty years but if you sell a machine tool for one
million dollars, it is probably worth about four times that if you include over
the course of that products life time, the spares and support services that can
be sold around it. The big challenge for Caterpillar in today’s fast changing
business environment is not just how do they sell their machines and products,
but how do they capture the relationship and then the support that they can
then offer on the back of the sale of that product to make sure their customers
get what they want, which is the ability
to move earth, or extract coal from the earth. The customer doesn’t necessarily
want the machine itself, it wants the outcome the machine delivers!
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| Cameron Ferguson, Caterpillar |
Cameron Ferguson, Manager of Global Dealer Capability in the
Customer Services Support Division, Caterpillar, told me: “Our customers make
lots of choices about where they are going to get their services done, by
themselves, by Caterpillar or by another party so we want to make sure that
Caterpillar is at least being considered to being the preferred and primary
service supplier. We can do that through solutions rather than just the
traditional linear service, but a solution that says, “We can guarantee up
time, we can guarantee costs per hour we can guarantee parts availability”,
whatever it maybe that is tailored to that particular customers’ needs.”
Surprisingly as the Caterpillar example shows, what we call
“the vision” planning is relatively easy. You can understand the role that
technology or data might play in enabling you to remotely monitor your
equipment or in the education world to remotely monitor whether students are
completing their course assignments and are therefore likely to graduate from
the programmes they are taking. However the
planning process gets tougher when you want to put the right technological
structure in place. You will need to get the right behaviour in your
organisation and you will need to get your customers to accept these solutions
and services! As you can imagine, that will involve a significant change
process in any organisation – what we term “the shift to solutions”.
We have learnt that rarely does a single organisation have
all of the capability to deliver the service solution or the outcome.
Increasingly this shift requires networks of organisations to come together, to
pool their resources and capabilities to create solutions for their customers. So who are the players in these new networks
and how do they emerge?
Increasingly, we are finding that these new networks involve
firms who are traditionally competitors, who come together for the purpose of
providing a better service for their customers. We find this work fascinating
and revealing. There are some really interesting dynamics around the way firms
collaborate, when they compete and how the ecosystems they are working in take shape.
Hold onto your seats, working towards these service
solutions requires your business to be quick off the mark and ready for a white
knuckle ride. It is clear that as your customers’ business model changes, and
what they do changes, you will also need to evolve your business, but here
comes the scary part, as you evolve your business, that in turn will allow further
evolution in the customer’s business model too, which in turn demands further
evolution in your own business plans! Responding to the challenges of business
today will require a continuous process of evolving your capability.
We know that firms have thought about competition between
firm A and firm B, but now people are worrying about competition between the ecosystems
they have traditionally worked in together, and the roles each play in that
system. You will need to think very carefully about where you want competition,
and who you want to collaborate with! Maybe you should ask yourself if you want
to encourage competition between some of your suppliers, and if perhaps you use
multiple suppliers for different technologies or sub- assemblies, or data, which
ones you might want to encourage competition in, and which part of the ecosystem
that would impact on. At the same time you may want to plan for change
simultaneously in another part of the ecosystem as well. This means that your
boardroom strategic discussion is much more about the way the ecosystem works
and your role within it, rather than the traditional model of: “we want to compete
with firm A or firm B”.
Certainly a business model that can react with speed and the
ability to evolve your business model over time is very important for some
industries. You will need to think about the clock speed of the industry you
are in, so in some industries the pace of change will be incredibly fast while
in some industries it will still be more measured, so therefore you can afford
to be slightly slower in evolving the business model.
One of the things we have learnt in the Cambridge Service
Alliance is that there are ten basic lessons that you need to get right if you
are going to make a successful shift to solutions management. Let me give you
three of these.; You will need to understand risk and the transfer of risk
and if you offer solutions to your customers find out what risks you are being
asked to take on and how that plays out over the longer term? The context
really matters too, so you have to ask yourself – “Are we ready to make this
transformation as an organisation, can we break away if we are a product or
technology business from our technology heritage and worry more about service?”
In terms of context, you are really asking- “Is the customer ready for our
service?”
The third question to think about is: how do we design the
customer service experience to create the right emotional response as well as
delivering the pure technical service. Our Alliance partner, Finning have
thought carefully about what their customers’ want and if they can support
their customers. Finning know that their customers want equipment that works,
they want no down time so they have put
processes and products in place that meet those needs, but they have also built a centre that
creates a great customer experience too. Customers walk in and have been known
to say: ““Wow” are you really monitoring three-thousand pieces of equipment
remotely, are you really watching what is happening, and looking after our
equipment, you are like a safety blanket for us?” This is a valuable service so
that emotional response from the customer is partly created from the design of
the control centre in Finning’s case as well as the products and services it is
selling.
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| Lucy Courturier, Finning |
Lucy Couturier, Finsight Manager, Finning, told me: “We have really become involved with
the concept of Ecosystems since working with the Cambridge Service Alliance and
we now ask ourselves: “who are all the players”? We take into account
everybody that has an impact or that we impact in our day to day operations. We
have customers, competitors, suppliers, and we need to understand how each of
those interact to be able to provide the solutions that customers want. We
can’t just look at one part of that puzzle, we need to understand that complex
web of relationships to manage it effectively. The customer experience is as
important to us now as the business side is. The customer experience and the
relationships they have with us, is as critical in moving us forward.”
Mark Anderson, President, Schools & Higher Education
Strategy & Business Development, Pearson, says the growth in those needing
higher education in the World and the technology changes that are taking place,
means the sector will need to adapt to change on both fronts on a huge scale in
the future. He told me:
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| Mark Anderson, Pearson |
“There is an enormous growth in demand for higher
education, at the moment there are about 180 million people in tertiary education,
and in about thirty to forty years’ time that will rise to about 500 million people. Countries like China,
Brazil, India and South Africa will expand their education systems and at the
same time the development of technologies is pluralising access to and availability
of education, so we will we have to bring these two changes together.
“The ecosystem concept is one we have worked closely with
through the Cambridge Service Alliance, we probably didn’t use it previously
but if you are a company like Pearson where for hundreds of years you have
essentially been selling books, you had a relatively simple ecosystem
consisting of book producer, distributor or intermediary, book seller, and student,
there was a linear progression. Now there is a far more complex diverse
international mix of organisations who have a stake in education. Governments
are now more activist in education too, so we need to track a world which is
more complicated with a lot of new entrants who are having a rapid and an
immediate impact. Our business environment is changing very quickly and an
ecosystem model is a very good way of tracking that.”
As these stories from Finning’s and Pearson show the experiences
of others are really an important part of the business journey. Ecosystems are
a really good way of thinking how you might innovate your business, how you
might come up with services and solutions but remember just because you have
come up with them, doesn’t mean to say that you can implement them. There is a
lot of hard work to do to bring those visions, those ideas, those innovations,
to reality.
I hope we can help our partners come up with the innovations
and then help them execute them too, this is what we mean by the shift to
service solutions. Hold tight, it could be a roller coaster ride, but we
guarantee it will be full of excitement.
