Field service is a complex business. And what increases its complexity is the fact that it’s an abstract business—you can’t touch it and you can’t store man-hours the way you store spare parts. Field service is not like capital equipment, for example, where you have items in stock and deliver them on demand.
In field service, delivering one hour of service, invoicing it properly, and ensuring customer satisfaction involves a lot of planning and resources. It also involves multiple stakeholders, from supply chain and finance to field agents and technicians. Each of these stakeholders has a different agenda and cross-departmental alignment is not easy to achieve.
Everyone having different targets also creates a lack of clarity. Getting the right information at the right time to the right people is difficult. The abundance of data available in field service only makes information delivery even more difficult.
The data available in the field service sector doesn’t only come from connected devices. Before digital transformation and connectivity, field service companies gathered data from their transactions and work orders. And today, making use of all this information in an efficient way can be cumbersome. So, how can field service organizations monetize data promptly and efficiently?
In his Field Service Forum 2021 session, Aftermarket Director at Atlas Copco, Ahmed Gharbaoui, explained how focusing on the installed base can help make the most of available data while also improving clarity and alignment, and increasing and sustaining growth.
Challenges in the field service industry
On top of the organizational misalignment and lack of clarity, the field service industry is also challenged by the safety and health protocols that resulted from the 2020 pandemic. These protocols make it difficult to access machinery and deliver services, leaving many companies with a backlog of work orders.
And this is a big deal in an industry where instant gratification is the key to a profitable business. In field service, customers expect results the moment they request them, and in the effect of such protocols, delivering real-time services is next to impossible without advanced technology.
Despite all this, field service organizations provide great offerings on machine reliability, impacting the total cost of ownership, and they also have high aftermarket potential. But they are not really getting a decent market share. Oftentimes, the results they experience are not the results they expected. Yet, there are plenty of opportunities for growing aftermarket sales and revenue. According to an article published by McKinsey & Company in 2019:
Industrial companies that understand their customer base, adequately prioritize aftermarket sales, and relentlessly focus on execution can boost their services revenue by 30 to 60 percent within three to five years—without requiring large investments in CapEx, new-product development, or cost-reduction programs. Moreover, this growth directly feeds cash flow and tends to be stable through business cycles. And it can be quickly monetized, within just weeks in some cases.
So, how can field service organizations understand their customer base better to prioritize their aftermarket sales accordingly? As Mr. Ahmed Gharbaoui suggests, they can achieve this by keeping their installed base alive and thriving.
Keeping the installed base alive
The installed base consists of the customers that are using a company’s equipment or services for their business. As such, it’s important to keep that installed base alive by avoiding breakdowns. And to achieve this, field service organizations need to stay connected not only to the equipment they provided but also to their customers to understand their performance needs and accommodate them.
On one hand, it’s essential to invest in advanced strategies and capabilities that ensure equipment uptime and high availability for the end-user. For example, predictive maintenance is a great solution for optimal availability as it fixes issues before they even occur. Otherwise, the break-fix model is becoming highly inconvenient for customers. Although companies may offer repairs and maintenance for free, it still costs customers to experience a breakdown with the resulting downtime.
On the other hand, installed base management is the key to successful customer relationships and aftermarket profitability. The first step in optimal installed base management is defining what the installed base is and who owns it. Each organization might have a different definition for its proprietary installed base and decide what to include and remove from it.
From territories and distributors to units sold via traders and everything in between, each field service organization should have a clear definition of what and who their installed base consists of. For enhanced efficiency, the installed base should cut through the noise, include an aftermarket policy, have clearly defined ownership, and provide access to a unique database that consists of all necessary details.
The second step in optimal installed base management is segmentation. It’s important to create a comprehensive segmentation system that can be efficiently used by the designated teams. A key consideration in this regard is entitlement, which can be established based on average lifecycle, historical parts and service consumption, and high-end service agreements with yearly revenue as a baseline for yearly units entitlement.
The third and final step in optimal installed base management is monitoring, which requires field service organizations to set the simplest ratio to measure progress and investigate what drives growth. For example, measuring units covered by warranty, units under service agreements, or months of connectivity are simple ways to monitor progress. Once monitoring is implemented, updating and reporting become essential so field service organizations can remove obsolete units, update sold or commissioned ones, update the communication of units exiting the warranty period, track lost units, and measure retention and attrition.
Pitfalls to avoid
Keeping the installed base alive may sound straightforward in theory, but in practice, there are always risks that can get in the way of success. So, what are some of the pitfalls field service organizations should avoid to efficiently manage their installed base and boost their aftermarket sales?
Making assumptions based solely on historical transactions can be dangerous. That’s not nearly enough information for the designated teams to access the necessary details about the installed base. To avoid assumptions, field service organizations must ensure that their installed base is always up to date.
Believing that frontline teams and middle management can cover most of the work at hand can be detrimental in the long run. As per the Pareto principle, also known as the 80-20 rule, roughly 80% of the effect comes from 20% of the causes. As such, field service organizations should allocate as many resources as necessary to be fully covered.
Field service organizations should take ownership of the installed base seriously and not underestimate its importance. Even with a highly-performing installed base, the lack of an ownership matrix can lead to a lot of missed opportunities.
Keeping the installed base alive and monetizing it for increased aftermarket revenue is not a one-and-done, overnight event. It’s a process that needs to be constantly managed and optimized to ensure the best results.
As mentioned, when selling a piece of machinery or equipment, field service organizations forge a connection for life with their equipment and the people who bought it. They need to constantly nurture these relationships with both the machine and the humans leveraging it for utmost success in service operations.