01. Copperberg Podcast
Episode 11
Tackling Service Revenue Leakage in OEMs with Syncron’s Luke Huckerby
In this episode of Copperberg Conversations on Manufacturing Matters, Kris Oldland, Editor-in-Chief at Copperberg, speaks with Luke Huckerby, Director of Strategic Business Development at Syncron, to discuss how OEMs can close profit gaps, strengthen customer relationships, and move confidently toward more advanced service models.
02. CONTENT
Are inefficiencies quietly draining your service margins?
Key Topics Covered in This Episode
- Advanced Services: Opportunities & Threats
How service contracts help secure long-term loyalty, drive recurring revenue, and why OEMs that don’t evolve risk losing ground to third-party providers and shifting customer expectations. - Why Synergising Service Lifecycle Management Is Essential
Learn how linking operations across departments builds stronger service performance—and why service contracts are the natural point of alignment. - What Are the Threats Lurking in Your Service P&L?
From poor contract pricing to invisible revenue leaks, Kris and Luke reveal the traps hiding inside many OEM service organizations, and how to root them out. - The Impact of Syncron’s New Contract Pricing Solution
From predictive costing to scalable pricing models, see how this solution helps OEMs simplify complexity and make smarter decisions faster. - Does Critical Tech Offer a Competitive Edge—or Just Keep You in the Game?
Why adopting advanced technology may give OEMs a head start today, but could soon become a basic requirement to stay relevant in an increasingly servitized market.
For OEMs serious about driving service transformation, this conversation is a powerful starting point.
03. Speakers
Copperberg Conversations on Manufacturing Matters is your go-to podcast for candid discussions with the industry’s top thinkers and innovators.
04. Listen now
Tackling Service Revenue Leakage in OEMs with Syncron’s Luke Huckerby
05. Transcript
Luke Huckerby (00:00)
Fundamentally, the opportunity that you’re trying to secure with service contracts is how do you secure the long term relationship of your customer? How do you ensure that they come to you to provide their service, to provide their spare parts? But also how do you provide that kind of excellent customer service to keep their equipment up and running as much as possible? You know, the uptime of the equipment.
When we think about the size of opportunity that’s out there, every piece of equipment you sell as an OEM has a typical life cycle that’ll stay with your customers. That might be 10 years, it might be 20 years, 30 years, depends on the equipment you offer. But the more of that lifetime you can help support your customer on, the more business both you’re going to bring through the service organization, but also fundamentally what you’re doing is providing that customer with a great journey. So they’re gonna come back to you again to support with the next piece of equipment and the next project that they’re working on.
Nina Roper Yearwood (00:54)
Hello and welcome to a new episode of Copperberg Conversations on Manufacturing Matters. I’m Nina Roper Yearwood coming to you from Germany.
In this episode, we’re bringing you a thoughtful conversation between Kris Oldland, Copperberg’s Editor-in-Chief and Luke Huckerby, Director of Strategic Business Development at Syncron. Luke brings hands-on OEM experience, having led spare parts pricing and service contracts along with other key areas in the service business at one of the world’s largest construction and agricultural machinery manufacturers.
Their conversation starts with a familiar pain point for many service leaders – revenue leakage. Whether it’s parts, warranties, or missed upsell opportunities, these gaps often come down to siloed teams and a lack of visibility across the service chain. And that’s where service contracts come into focus in their conversation. Not just as a tool, but as a foundational piece of a smarter, more connected service model.
As Luke and Kris explore, service contracts are crucial stepping stones in the servitization journey and are important in driving OEM profitability and customer loyalty. Let’s get into it.
Kris Oldland (02:35)
Hello and welcome to this, the latest conversation in the Copperberg in-depth discussions that we host here across Copperberg.com and FieldServiceNews.com. This is where we go beyond the short one-liners and the piffy quotes that make great media copy, but actually dig a little bit deeper into some of the key conversations that driving change within the industry.
It’s also where I’m incredibly privileged to speak to people that are always can give me some guidance as the Editor-in-Chief here at Copperberg on what those key themes are across the industry.
And in that manner, I’m very, very delighted to welcome today’s guest – Luke Huckerby. Luke is Director of Strategic Business Development at Syncron, has a fantastic background as well, all sides of the industry, but as is the tradition on such interviews as this, I always think it’s better to ask my guests to introduce themselves because they will do a better job than I ever could.
So Luke, welcome to the discussion and give us that helicopter view with that background of yours. Obviously, like I say, very, very detailed experience, breakthrough. So let’s look at that first.
Luke Huckerby (03:55)
Yeah, thanks Kris and good to be with you today.
So, I’m Luke Huckerby as Kris mentioned, Director of the Strategic Business Development Team at Syncron, and that’s a part of our Solution Consulting Group. So fundamentally my team, we look after working with both current customers and new prospects in how to actually develop their business strategy along with our solutions and really take full advantage of the suite, the service suite that we offer.
In terms of me personally, I joined Syncron a couple of years back now. Previously, I worked in industry and that’s a common characteristic for the people in my team. It’s all about industry background and bringing that to the fore. So I worked for one of the largest construction and agricultural machinery manufacturers and in that business, I was heading up the team that looked after spare parts pricing, service contracts and extended warranties, product growth strategy, as well as our dealer retail inventory program as well. So quite a broad role. Obviously that brought me a lot of good experience of both internal and outward facing service business.
So yeah, that’s me and great to join you today, Kris.
Kris Oldland (05:06)
Excellent, thanks Luke. And I think that’s one of the things that I always enjoy the conversations with you and your colleagues at Synchron because there is that focus on recruiting and putting people in key positions to help other organizations help your partners and prospects that have that industry knowledge. And I think it’s really important. I think especially as we look into today’s conversation.
Now obviously, one of the key drivers for us today is the launch of what I think is a very important missing piece actually in the software puzzle. And we’ll get into that in a little bit. But effectively the problem that I think you guys have done a very, very strong job in identifying and resolving is one that I hear an awful lot. It’s one that I, it’s a perennial problem. And it’s, the revenue leakage piece, both in terms of the parts, in terms of warranty.
I remember a friend of mine who’s a very senior service leader within the print copy sector, the one thing he wishes he could do is just take away the service catalog from any sales teams because it’s always over bundled in, services lost there. And also of course, don’t forget, from an engineer perspective, which is where a lot of us in the industry and certainly a lot of people who have been watching this will come from. We know that we’re all problem solvers, you know, and so when you’re on site with a customer, one of the biggest pieces of revenue leakage is of course the engineers wanting to fix stuff that’s out of warranty and all of these little pieces, for me, there’s the kind of the obvious stuff there.
Kris Oldland (06:55)
But I suppose as well, it’s opportunity cost as well, doesn’t it? Not being able to upsell, cross sell if you don’t have visibility into the service contract. Let’s just start with the magnitude of that problem. I say I come across this a lot and I always have done, even way back when I was a service manager.
Luke Huckerby (07:17)
Yeah, absolutely.
Kris Oldland (07:18)
From prospects, from customers, your experience, talk to me about it.
Luke Huckerby (07:22)
Yeah, so I mean, let’s let’s reflect back first on industry wise, what I used to see.
So, you know, fundamentally, the opportunity that you’re trying to secure with service contracts is how do you secure the long term relationship of your customer? How do you ensure that they come to you to provide their service, to provide their spare parts? But also how do you provide that kind of excellent customer service to keep their equipment up and running as much as possible? You know, the uptime of the equipment.
And I think, you know, when we think about the size of opportunity that’s out there, every piece of equipment you sell as an OEM has a typical life cycle that’ll stay with your customers. That might be 10 years, it might be 20 years, 30 years, depends on the equipment you offer. But the more of that lifetime you can help support your customer on, the more business both you’re going to bring through the service organization, but also fundamentally what you’re doing is providing that customer with a great journey. So they’re gonna come back to you again to support with the next piece of equipment and the next project that they’re working on. And that really is critical.
And I think if we think about the size of the opportunity, well, we know today in industry, there’s lots of competition, not just in the equipment market, in the spare parts market, in the service providers market. And I guess from an OEM perspective, if you’re not on your game and able to provide what your customer needs, there are plenty of options for them to go elsewhere. And I think a service contract fundamentally helps you as the OEM to plan. It helps your customer to feel secure and it helps you deliver a better level of service, I think, for the customer.
Kris Oldland (09:02)
Yeah, absolutely. And this for me, I’d say is something that I like to say it’s absolutely something that’s been fairly perennial, always been there. There’s always opportunity, better integration between that, what’s on the upside.
But I’d say it’s been quite largely magnified. I remember way back when I was the Editor of Service Management magazine, which is what Field Service News kind of evolved at the ashes front. Even back then, I was starting to report on the shift. So this is about 12-13 years ago. The shift from a cost center to a profit center. That was kind of when we were starting to see that move in the kind of, whether it be aftermarket or whether it be just pure field service from the OEM side, but there was the service P&L was becoming more more dominant.
And I’d say now, having done quite a lot of research into this across the multiple years and run a lot of studies actually around this topic. It’s almost a full shift, whereas previously it was rare for there to be a service P&L, now it’s very rare for a service operation not to have that, but to still operate as a cost center. Do you think that’s magnifying the importance of making sure we have that visibility in the service contracts and the revenue, service revenue?
Luke Huckerby (10:29)
Yeah, yeah, I think so. And I would echo your point completely that shift from cost center to profit center is, I would say in 95% of cases, perhaps even 99%, that’s made, that’s happened.
And I think, you know, if you think about the logic behind that, what you’re doing from a business perspective is you are starting to think about how do I not only capitalize on this, but how do I actually make this a positive thing in the organization? You inherently a cost center, the finance brain tells you negative point, it’s costing to my business. You don’t want to think of serving your customers as a negative point. You want to think of it as a positive point. And I think therefore moving it to the profit center, it helps that view in the business. And every month, every month without fail in my previous role, we were reviewing up to a CEO level, the accounts, the forecasts, the profitability of the service organization. That tells you how important it’s become.
Luke Huckerby (11:29)
And I think fundamentally, the margins you can actually realize in a service organization are much greater. And it’s, again, we talk about the life of the product. It doesn’t end at day one when you sell that equipment. It carries on for 10, 20, 30 years. That’s a lot of service that can be provided to your customers.
And if we then think about where service contracts come into that, again, just to re-echo that point I made previously, service contracts help you to secure that business. If you just leave it up to providing spare parts quotes and service quotes as and when they’re needed, ultimately your customers will shop around a bit more. They will look alternatives. From an OEM perspective, you want to be in a position where you’ve already secured that.
And I guess, Kris, when you think about how you do that, usually what you’re doing is you’re providing a contract for, you know, number of years and you are giving the customer a level of guarantee as to what that cost is going to be total on an annual basis. So it allows them to financially plan better, it allows them to almost de-risk that element of their business financially. And what you’re doing by doing that is you’re asking them for a level of commitment to you in order to provide them with that security. And usually, yes, you will give them a little bit of a better deal through the contract than you would if they just bought the time and material when they needed it.
Kris Oldland (13:01)
There’s a few points I want to pick on that if I may. I’d say I’ll do this in three, I’ll mention all three and then maybe we can go across each one.
Luke Huckerby (13:18)
Yeah, of course.
Kris Oldland (13:20)
I think one of the biggest problems is the lack of data flow when we start talking about this, and the contract being in the beginning, and then it being abandoned, and then it being, you only get in contact with the client or the customer when either A – they’ve got an issue and they need something fixed right away, or B – you want to sell them something and the contracts come from a renewal. So that lack of visibility across the silos of the business, that’s one issue, I think.
You mentioned about shopping elsewhere. And I think we have to acknowledge that, you know, for the OEMs in particular, you know, third party parts is a massive threat, especially when we look at parts being produced in India or China, et cetera. You just can’t compete, you know, the labor force is at that much cheaper. It’s, you know, it’s the scale of the economy there that they, there’s so many factors. Unless if that starts walking out of your remit and you don’t have control of that, that’s a massive, massive potential opportunity cost.
And then the third piece I’d say that’s worth exploring as we just kind of focus a little bit on this first part of this discussion, the challenge as it were. You mentioned risk, the transfer of, I’ve often said, servitization, which I spent a long time being very fortunate to speak to a lot of the kind of leading proponents in that movement, both from academia and industry. And having spent about a decade kind of paying attention I’ve come to the conclusion effectively is the exchange of risk for great profit in a servitized business what we’re doing is effectively we’re taking on more risk and we’re getting longer term contracts that tend to be more highly profitable. And I think that’s part of this conversation as well. But those are the three I’d like to kind of zone in on this first part whilst we assess this problem.
Let’s look at the data piece first. Is that something that you’re seeing now across the board when you’re speaking to multiple different types of organizations, OEMs from different sectors, that kind of data flow across the silos, is that still a big issue?
Luke Huckerby (15:43)
Yeah, absolutely. I think most businesses have now identified the need to synergize and harmonize the view of the service business. But there is a fundamental challenge and that fundamental challenge is that businesses still often operate from a human point of view in those silos. So you’ll have a warranty team, you’ll have a technical service team, you’ll have the technicians group, the parts pricing guys, the warehouse and supply chain guys, and they’re all in different areas.
And if you think about their fundamental objectives, they’ve got their localized objectives for their department, and then they’ve got their business objectives. And inherently, people default to their local objectives because that’s the thing that their area is truly measured on.
And as a result of that, I think that coupled with the fact that you’ve often got different systems running in these different areas means that data doesn’t often flow that well, both from a human aspect of not requiring the consumption, but also from one system talking to another. And as you know, Kris, that is Syncron’s big obsession, if you like, is how do we connect all of these bits of the service business together? That’s why we develop all these solutions that we’ve got, but that’s also why we’ve got so much focus on this central, how do we bring that together? How do we make those things all talk to each other? How do we make it for the heads of these different departments to actually flow all that data together and make better overall service decisions?
And I think when we put that in the context of service contracts specifically, let’s just think about who actually is influenced by service contracts. So first of all, the technicians are influenced by it. If there is a contract in place, they’re going to be carrying out work. That work becomes more predictable and easier to plan. Fantastic! So having a contract there actually crosses that area of the business.
From a part sales point of view it’s going to help to ensure you’re securing all those parts sales. So coming from that aspect of the business, very important. From a supply chain point of view, that again guarantees you, you know where the work’s going to go on. Roughly speaking, you’re going to know where that’s going to happen. So your supply chain can become more efficient. And even through then to the warranty department, typically, when your customer is making a claim or your service provider is making a claim, it comes through the warranty system. So again, those things all interlink and influence each other.
So I think actually service contracts are quite an important synergized use case in a service organization. One of the true synergized use cases actually. And that’s really why, you know, for us at Syncron, that’s why we’re really focused on that area because, you know, historically we’ve helped all these different departments, we’ve helped start bringing these areas together.
But service contracts is so important to the growth of businesses moving forward. It’s so important to get it right as well because of the inherent commitment and financial risks. That’s why we focus there. I think that data flow then becomes even more critical and the value you can leverage from it becomes even more critical. And that starts to really start influencing both your customer performance but also your financial performance as well.
Kris Oldland (19:01)
Yeah. Yes, you know, I think this goes right back to what I was saying at the top, you know, it’s when we connect ourselves, worked alongside Syncron for many years. So when I saw the solution comes to, I was like, yes, this is something that I, you know, it is synergized, that’s a great word for it. And it is something that is a workfully neglected part of the industry.
You know, bringing these various, because there’s so many different moving parts in a serious operation, as you just outlined, and bringing visibility across those. And of course, every stakeholder has the wider business goals, as you say, but also it’s human nature that we’re going to focus on our own specific KPIs. So having something that’s bringing those together, it’s a hugely important tool.
Kris Oldland (19:59)
Before we kind of zone in on a little bit of how that works, let’s just spend a moment on the servitization piece as well, because I think that brings a lot of this together as well.
Because the reason I say that is, number one, we touched on the shift from cost center to profit center, and I think that’s part of the same evolution. I’ve been quite vocal about the fact that I think servitization is the end goal. I think it should be an adjacent goal. I’ve seen too many organizations throw all of their eggs into one basket of trying to move to this fully outcome-based model. What it actually doesn’t do, that approach, is you don’t remember that you have to take the customer review on the gym. If you’re trying to push into a pure, fully outcome-based, and I’ve seen it in multiple different industries, then you have to remember that different customers will move at different paces, and some may never want to exchange that risk.
But where I see something like this tool that we’re talking about today really coming in, is, you know, the contracted services part is a massive step towards being able to facilitate that shift, both internally for you, but also as an OEM and externally being able to communicate that to the customer so you can demonstrate what the value is, where you can show where this is.
This is one of those moments where I tend to kind of go out with the opinionated position that, you know, it’s my job to be hyperbolic as an industry chief. But this is where I have the humility to say, all right, have I got that wrong? How close am I to the thinking on that? What’s your thoughts on, you know, whether that contracted services piece is a step towards servitization and, you know, tools like what we’re discussing today, they give that they facilitate that shift across towards the option for servitization.
Luke Huckerby (21:56)
Yeah, yeah. So I think when I think about servitalization, I almost think about four steps on that journey. And the base step is where we’re coming from as an industry. That is the, you sell the product and then when it’s required, you sell the time, you sell the maintenance materials when it’s needed. That’s like the base level of business. And I think, I think as things are moved from profit, from cost center to profit center, that’s been a natural evolution out of that model because it’s not the best way to do it.
Step two is then service contracts. And when I talk about service contracts, in my mind, they are when you sell a contracted commitment from the OEM or the service provider to the customer. And effectively, what you’re saying to that customer is, over the next X number of years, I’m going to provide you with the materials and labor to maintain and keep your vehicle or your equipment working. And actually, for a customer, that’s a relatively straightforward shift, because all you’re doing is saying rather than pay when I need it, I’m going to pay upfront and get a better deal out of it and I’m going to feel secure. Great!
Third level that I think about on servitization is the outcome based model that you talked about there. And how I think about outcome based is like uptime. Okay, so now I’m going to sell you as the OEM, the ability to keep your vehicle or equipment working for 95% of the required time. That’s my commitment to you. Whatever it costs to do that, I’m going to provide it to you.
Now, as soon as you start getting into that territory, if you start to skip straight from step one to step three, that’s quite a big jump, both in the thinking for the customer, but also in the financial implication of that for the OEM. Because suddenly you’re moving away from providing parts of labor to providing a guaranteed outcome. Okay, and what happens if that equipment breaks down in the middle of the night in Malaysia, and you’ve got a service center based in, let’s say, I don’t know, the Middle East? How do you actually manage that? It becomes quite a complex thing. And if you’re asking yourself that question, the customer is ultimately asking that question as well. And you can guarantee if you don’t get that uptime, they’re gonna be on your case and you’re gonna be liable for the cost of it not being achieved.
And then the fourth level I think about is the kind of the Shangri-La scenario of equipment as a service. And I think a lot of industries, a lot of of consumer goods, we’ve moved gradually towards this fully servitized model where people pay on subscriptions to get what they want. But actually that is a huge, huge shift from where we started, a huge shift. And to echo your point about people going all in on that top level, fully servitized equipment as a service model, that’s fundamentally tearing up the business model. That’s fundamentally tearing up the whole customer journey. And I think that’s where we head towards, but it takes time to get there on that journey.
And for me, the natural evolution is if you’re on time and material sales today, the next step is to get yourself to service contracts, committed business, providing the same thing, but for a set price over a set period of time. That’s the first step. And I think it’s really important to take steps on that journey, because sometimes evolution is better than revolution. It’s certainly more secure. And when you’re in big business and you’re trying to convince a massive amount of customers of that, it’s a more comfortable journey that people are willing to engage with. And I think that’s how I view this servitization journey.
Kris Oldland (25:32)
Yeah, yeah, I’m a big advocate of that, multiple iterations rather than trying to change the phrase that our American colleagues use, I always reference to – “Don’t try and boil the ocean.”
Luke Huckerby (25:48)
Yeah, exactly.
Kris Oldland (25:50)
Right, I’m going to see how I audition for your team here. I’m going to encapsulate in a couple of sentences what the new service contract solution does. And then you can tell me how far away I am and you can obviously expect. From my look at it, I mean we talked about the problem in terms of revenue leakage, in terms of understanding where these pieces are. I see it as it’s an opportunity to establish that business-wide visibility.
Luke Huckerby (26:25)
Yeah, absolutely.
Kris Oldland (26:30)
Yeah, and transparency in terms of the contract to reduce revenue leakage. And this is where I always doth my caps of the clever people, especially those that do the development of this stuff. But it’s using, if I’ve got this right, use an AI machine learning, the key technologies that driving evolution forwards in the industry.
Kris Oldland (26:59)
And you’re effectively managing, it’s going to allow the OEMs to better manage unplanned costs, better understand those costs, define customer-based pricing, I suppose, is how I would phrase it. How close am I? Have I paid enough attention to the materials that have been distributed? I know we’re still in kind of almost a soft launch. It’s already flourishing as a product. Go a little bit deeper into the actual product.
Luke Huckerby (27:26)
Yeah, sure. So yeah, Kris, you’ve picked up the fundamentals there, but I think we can expand on those a little bit. So when we think about the contract pricing solution, what we’re all about doing is helping OEMs to turn this very complex and difficult to manage scenario into something scalable and manageable. We’ve talked about the reasons for wanting to do that from a customer point of view, from a sales point of view. But fundamentally, let’s start with the challenges of that.
If I’m going to commit as an OEM to selling service contracts across my full customer base, what I’m actually committing to there is a guarantee that for this price that you pay, I am going to provide that service, that parts, all of that stuff for this period of time. But if we think about what could go wrong in there, so let’s take an extended warranty contract as an example. It’s a great, great scenario to really think about here. What I’m effectively saying there is that whatever happens, if it’s a warrantable thing, I am going to pay to repair that. That’s quite a big commitment. So we’re now thinking of the service business as a profit center. So the fundamental underlying thing that we all think about when we start to price these things is how do I make sure that’s going to have a positive effect or at least not a negative effect on my profitability as a business, okay? And so the first pillar I’m thinking about is how do I understand what I expect my costs to be?
And let’s just think about the influencing factors in there. So if it’s an extended warranty type service contract, the factors are, what’s the failure rate likely to be on this piece of equipment? Is a particular customer or a particular application going to drive a different level of failure rate? What’s the inflation that’s going to apply during that period? How’s that going to affect my parts? How’s that going to affect my labor? All of these things come into play, okay?
When you think about that, that’s a lot of variables straight away. Now, couple that up with the fact that that data probably exists in multiple different systems today, okay? And you might even have siloed sales units within your business where one country takes care of service contracts by themselves compared to another country. So it’s not even a centralized solution. So when you bring all these things into play, and then you think about the fact that a technician in the UK is going to get paid very differently to a technician in the northeast of the United States, you need to bring that into play as well. So there’s lots of complexity.
And when we think about that, what we’re trying to drive is the first pillar of the solution is making it very easy. And again, like you said, utilizing AI and ML, making it very easy for OEMs to establish unexpected costs for any given contract combination in any given territory that they want. And we’re doing that by basically utilizing all of the big data that exists in these OEM organizations.
So fundamentally, if you think about any big construction machinery or automotive business, they’ve got the service contract history, they’ve got the repair and failure rate history, they’ve got the patterns on what happened with warranty. So if you can bring all of that data together and you can use our system then to effectively combine all that data, look at what contract am I going to offer based on history, based on my expectations on inflation, based on the country where I’m going to sell it, what’s my cost base going to be?
And if you can get confident, utilizing the system, if you can get confident that you’ve got a good level of accuracy on that prediction, and it is still a prediction, but if your accuracy gets better and better, that gives you the confidence as a business to make the right pricing decisions. It gives you the ability to plan your financial accounts over the period of these contracts exist.
So fundamentally what you’re doing is you’re de-risking, you’re securing, and you’re using all of your business data to give you an informed position to make the right decision when it comes to selling that contract. And that’s the first pillar that we think about, okay?
Now, if I then take that to the next step, once I’ve understood what my cost expectation is, now I’m in an informed position to make the right pricing decision when I sell that contract. As we know, when you come to selling to a customer, just adding a standard 30%, 40%, 50% markup to your cost doesn’t give you a customer centric price, it just gives you a price. And in some markets, maybe they’re going to accept that, but actually what customers typically are looking for is value. How does that value stack up to me? Does it make sense to me that that price adds up?
And I think depending on the market you’re in, depending on the experience of your customers, it might be that you want to apply a competition-based price where you’re benchmarking against the local service provider. It might be that actually in this particular market, your customers look at the retail price of the machine and say, well, over a five-year period, 10% of the cost of the machine is a reasonable thing to me. That represents value to me. But if you go to 15%, that doesn’t make sense. So maybe you’re going to use a retail price based service contract price. Maybe it’s cost per hour, it’s whatever it might be, but there’s lots of different approaches for different markets and different customer types that you would take.
And again, what we’re trying to do and what we do in that system is we facilitate the ability to set up different strategies for different segments of your market, for different bits of the business at a mass scale. So no longer you can be constrained by some huge Excel sheet that takes three months to process, it’s all in the system. The system knows what you want to do. It now knows what the cost base is and therefore it knows what your pricing strategy is going to deliver financially. Happy days! You can make the right decision and also more importantly, you can perform at scale.
And I’ll reflect back to my own experience in industry as well, when processes are still highly manual, they work great when you’re working on this level of business, but as soon as you want to grow and expand that across a global business, across a very advanced business, suddenly that task just becomes exponentially large and it becomes unmanageable to actually scale out at the level you want with the confidence you want.
And so if you think about exactly what you said before, starting with the cost, making that more robust, then moving to the price, how do you make that customer centric? Because that’s going to drive better sales, better profit performance.
And then, final bit, Kris, really, and I won’t go into lots of detail in this first description, but we then have our analytics platform that sits over the top of all of our service solutions. And that’s where your teams are then able to actually track what’s happening in reality. I’ve sold the contract, what’s actually happening? You know, how good is my sales performance? How good was my cost prediction? Do I have any risks I need to address? Have I got any white spots in the market that I can go after because I’m not selling that money? And that’s fundamentally then helping you to manage the business as a going concern.
Kris Oldland (34:49)
Well, that as well, that synergized viewpoint as well as we talked about, being able to see where those white spots are, see where that risk is.
One thing that’s come into my mind a little bit there, and this is slightly adjacent thought, but I think it’s very much valid within this discussion. Threat. The threat of, let’s continue, we touched on servitization earlier. As we move, we touched on the shift to profit centers, that brings with it a fairly sizable threat. If the OEM will get this right, and especially those who are in the manufacturing, the OEM audience that I have here probably will see this. The intention is to ward off the threat of third party service and parts providers. It’s to effectively squeeze them out of the game. They’ve got a different game that they’re playing to come into it. And that is the big kind of battleground in one sense when it comes to serious revenue and parts revenue.
But I’d also say that as we extrapolate these thoughts out a little bit, ultimately, that’s the first part of this discussion. You know, where the OEM takes ownership, complete ownership, they’re not losing out to the third party service providers. But then it becomes, okay, they’re growing against the other OEMs as well. And that for me is always kind of a natural output of the servitized advanced services models. Being able to effectively absorb that risk on behalf of the client, that’s going to allow for those longer service contracts to be touched on, that is for me the essence of servitization.
That’s then going to allow the OEMs that are successful at this to steal, you know, share of wallet from their peers and their competitors. Tools like you’ve just outlined there are pretty much essential to achieve that, aren’t they? You know, being able to see the opportunities and to see the risks and to make sure that they’re like… I know I’m taking maybe two or three steps ahead in terms of where the industry is, but that’s important to always have that for a slightly future view. Yeah, can we enforce around that at the moment?
Luke Huckerby (37:19)
Yeah, I mean, if I may, Kris, and just start on the third party threat. So one thing I would challenge any of your listeners, any of your viewers, you every single one of them, I challenge them to say that they’re not tired of having the conversation with either the customer or their dealer where, this filter is cheaper online than what you’ve got, this oil is cheaper online. It becomes a burden. And to be quite frank, a frustrating burden as well. And not because it’s not a valid point, it absolutely is. But what you end up talking about is the minutiae of cost and the minutiae of price. It’s small things.
And then, you know, if you really want to do your due diligence, you’ll dig into the detail of, who’s the competitor? You’ll be sent a spurious supplier from God knows where, you know, it could be anywhere in the world. And fundamentally as an OEM, you know, do you really want to compete with every single third party trader on the marketplace? Well, of course not. You can’t. You’re operating from a different business model base, you’re operating from a different manufacturing standards base. And you simply can’t do it. And unfortunately, when that information is so readily available as it is on the internet, through web shops, et cetera, that conversation is always going to happen when you’re selling part versus part. And the whole point with service contracts is, you take that conversation away because you’re going to provide a contract that guarantees, you know, I’m going to maintain and provide extended warranty on your equipment for the next three years, for example.
So no longer are we talking about the individual filter price, the individual oil price. We’re talking about, am I providing you confidence? Am I providing you value in that guarantee of that contract? You know, so I think it’s a real strong tool in a really, really good way to not only satisfy the customer, but also to just get rid of all these very small level conversations about individual parts prices. It helps you ward off that threat. So that’s the place that I would start with that.
Now your second point about performance and risk, by servitizing your business and the journey we talked about earlier, the four steps, it is a progression that’s going to happen. I think everybody realizes that. The question is how quickly, okay? And as an OEM, what’s the key thing here? You don’t necessarily need to be first, okay? But you definitely don’t want to be last. Because as the customer expectation shifts, you can’t be the only people left just selling parts and labor at ad hoc. You’re just gonna end up losing your equipment sales, not just your service sales. Fundamentally, you’re leaving yourself behind your OEM equipment selling competition.
And fundamentally, okay, we think about a few things in business, revenue and market share is the number one measure that will always come into play for equipment manufacturers. That is what they’re trying to drive, okay? And if you’re going to lose that, then you lose all of the downstream benefits of being able to service that equipment, you basically lose the whole game, effectively.
So what that tells us is, servitization is an essential thing to have a plan for, to have an understanding on, to start working towards, okay? But if you’re to start working towards it, you need a robust approach. It is a profit center after all the service organization, not a cost center as we’ve mentioned before. And so quantifying both your risks and your opportunities, ensuring you’ve got a robust process in place, ensuring it’s scalable without adding tens upon tens of people to your organization, you’ve got to have a tool to manage this. It’s not realistic to expect to manage it through manual processes, it’s not realistic to expect to manage it fully through Excel.
And so, you know, where I come out from this, from the Syncron position is having a purpose-built, continuously developed platform, software platform, that let’s not forget is on a subscription basis itself, we understand this subscription market pretty well. Having that integrated into your business platform is gonna indefinitely be essential to be able to move on this servitization journey. And one thing I always say to customers actually when we speak with them is just because you’re not at your end game yet doesn’t mean you don’t start thinking about your software solution now. It doesn’t mean you start working with our software solution because if you fundamentally say, okay, I’m going to gradually move over the next 10 years to an equipment as a service model. And you wait until you’re at that finish line to realize all the pitfalls of doing it, the system that you need. Suddenly, you’ve got a system integration to go through, you’ve got a business transformation to go through, and you’ve got a customer selling journey to go through. Do you really want to do all those things at once? Not unless you’re very masochistic. So you need to think about that. You need to think about our journey from the outset.
So the first step we talked about is growing your service contracts business, offering better deals to the customer, offering robust processes to your finance teams, your sales teams, and bringing the system in at that stage when you’re growing is the place to do it because it’s the opportunity you’ve got to learn before it becomes too much of a monster to try and transform. And yeah, I think fundamentally, you’ve got a financial responsibility to deal with here. This is the balance of sales versus risk. So to go into it without a clear view, without clear controls is fundamentally not a good idea.
Kris Oldland (43:18)
So, one final piece, because you’ve been very gracious with your time. I’ve thoroughly enjoyed the conversation. And I think there’s been a lot, a lot of idling and a lot of insight gleaned from those watching at home or listening at home or in the car or wherever you are. I know people tend to take these conversations with them on the road quite a lot, it’s the feedback.
But I’m tie this into a conversation I’ve had a few times actually around the application of technology within the aftermarket, within the service operation, within manufacturing in general as well, looking at things like pricing and the whole supply chain. Certain technologies now, certain solutions, for my mind, have reached a point where we’re no longer able to say that by adopting this technology you will be gaining a competitive advantage, which was always kind of the mantra of the technology salespeople.
I would say, and I think this product in particular falls into this bucket. For those organizations that don’t adopt solutions like this, and this echoes a little bit what you were saying about ago, they’re going to be a very, very clear competitive disadvantage. And as you said, that you don’t want to be the last OEM standing that hasn’t shifted your business model to where the wind is taking the industry. And you can’t really kind of start to tackle these solutions like say at the end of the cycle you should be putting the solutions in place as we build.
So I’ll crystallize that because that’s more of a statement than a question. I’ll crystallize it into a question. Competitive advantage or competitive disadvantage? Which of those is the critical piece now when it comes to adopting technology like the contract solution?
Luke Huckerby (45:14)
I think if we think about, you know, it’s always both sides, Kris. But I think when we brought this product to marketplace, you know, we’re at Syncron the first people to bring this experience to the marketplace. There’s nobody else doing that full scope management that we’re doing today. And so right now, I think actually what this provides is competitive advantage because I think there’s a lot of businesses selling service contracts. But are they really selling customer centric service contracts? That’s a question. Are they really offering what their customers truly want? Are they really offering that at the right price and value to that customer? I would challenge that probably not. And I think the way to really think about that is what are the attach rates you have? For each piece of equipment, is it under contract? Is it not? What percentage of equipment is under contract from a service perspective?
And if you’re down at a very low value still, well, actually, you’re missing the bulk of your customer base, and therefore, you’ve still got a way to go. And that’s going to provide you with that competitive advantage by securing that, both against the party sellers, but also against other OEMs.
I think if we just touch briefly on the disadvantage, I would say competitive disadvantage, not heavy, yes. But I would say there’s also financial disadvantage to not having a robust solution. So that’s born out of, first of all, the market understanding we had. So we carry out various customer studies. I think the latest one we did with a hundred service leaders showed that, I think it was just over 50% recognized the need to improve their processes around service contracts. And when we actually get in with those customers and start looking at their business data, we’ve had reactions of, I’ve got this under control, the business is quite healthy. And then as soon as we scratched below the surface, we said, okay, at an aggregate level, yes, you are, you are healthy, you are achieving 40% margin on these contracts. But actually, if we break that down into the individual contracts themselves, 10-20% of them are actually loss makers. So if you just pull that into context, what could you have had if you’d had a more robust system in place? And your tax rates aren’t as high as you want them to be with your customers. So what more could you have if you had a good system in place? So that’s the journey you’ve got to think about with this technology.
I think if we kind of look forward into the future, of course, as we mentioned earlier, the OEMs offering robust customer centric servitized business models will win out above those that don’t. So I think it’s plain that it’s going to be a competitive advantage in the short term, in the long term or in the medium term it becomes a competitive disadvantage not to have a robust process in place.
Kris Oldland (48:13)
Yes, yes, I agree. I think it’s still almost baffles me how solutions like this, like I said, as soon as I saw the solution, as soon as I kind of got my head around, right, this is what it is. Not even without having prior to having dived into it and understanding the clever bits, the AI and the ML and all of the various data sets is bringing together and et cetera.
So yes, as you touched on earlier, it’s the visibility across the various stakeholders within that service supply chain and the service lifecycle. And that’s been a massive, massive kind of drum that I’ve been beating for a long time now is to break down the silos from a data perspective, from an application perspective, and from the very simple human process perspective as well and then to get people talking. I think it’s a huge important tool.
Luke, it’s been an absolute pleasure! My always, my final question is there anything else that you think we need to pay attention to in this conversation in this area? What’s your predictions for the key pain points that we should be looking at in terms of understanding that visibility across the organisation? Final thoughts. In fact, you can take that thread. I always say this as well. You can take that thread or any other final thought.
Luke Huckerby (49:43)
Yeah, so I’m going to offer a few final thoughts here. So my first one when we think about the service contract business, okay? Talk to your team and challenge your team to understand how robust the process really is because we’ve seen time and time again the advocacy that yes, my team’s process is great, it all works fine. As soon as you start poking below the surface, as we have with a few customers now. Actually, okay, maybe it’s not as robust as I thought it was. Maybe it’s more siloed than I thought it was. Maybe we’re not in as much control as I thought we were. So I would encourage people to really just probe that assumption. You know, make sure that what you assume is actually fact. And I wouldn’t be surprised to find that it is not as factual as you perhaps thought it was. So that’s the service contract space.
When I think about the service evolution, you know, my challenge or my thought to all OEMs is, are you really doing everything you can from a holistic point of view in the service organization? Have you really managed to connect all the data streams that you have, all the competitive advantage you could build by bringing all of these teams together, by bringing all of the data together, by having a consolidated strategy as to how you deliver the best possible customer service, the best possible value to your own customer, which is ultimately what’s going to drive your business. That’s fundamentally what wins out. If your customer is happy, well-serviced, and you’re in a good position from your financial stakeholders point of view, that’s the perfect position to get into.
And I think Syncron has been fully focused on that journey. That is our obsession. That is what we work on. It’s what we call service life cycle management. How do we bring all these different areas together, how do we bring the systems together? And most importantly, how do we actually bring all the data together and actually start to make better, more informed decisions? And of course, bring the latest AI technologies, the latest machine learning technologies to really turbocharge our team’s ability to deliver on that. And I think you’ve really got to planning, not only planning, but really challenging yourself to how are you going to move that forward? How are you going to stay ahead? How are you going to avoid falling behind? Because it’s going to be critical for the future.
Kris Oldland (52:07)
Yeah, fantastic! Fantastic! Excellent final thoughts, excellent conversation. Luke Huckerby, Director of Strategic Business Development at Syncron. Good to speak to you. I really, really enjoyed it. We’ll do it again at some point very soon. Thank you!
Luke Huckerby (52:25)
Thank you very much Kris, it’s been great!
06. Related Resources