Businesses succeed when they achieve tangible and sustainable results for customers–especially when those results improve their own bottom lines. Executives judge employee performance based on results they deliver for the company. Boards judge executive results based on how many deliverables and company goals set forth annually were achieved the previous year. Yes, the business world is fundamentally outcome-based, and in order to better compete, a company’s service organization should be measured on outcomes, too.
"A shift to outcome-based service enables providers to grow the vendor-customer relationship with a dramatically heightened awareness of customer needs."
Today, many companies still employ traditional field service models that support primarily reactionary maintenance when a machine or asset breaks. Technicians in these models typically respond to problems after they occur and often do so with the sole focus of reducing costs per incident/truck roll. As a result, companies view these service organizations solely as cost centers and therefore tend to allocate funds to more productive, proactive divisions.
Despite the industry’s historical inefficiencies, there’s good news. While many companies hosting service organizations make money from basic service delivery as well as the manufacturing and production side of their operations, there’s a new trend emerging that takes traditional service delivery and contribution methods to a new level. This trend is called outcome-based service, and it is designed to create long-term customer relationships by getting to the core of a customer’s wants and needs. It achieves results by providing solid and guaranteed business outcomes in support of those needs. This move to outcome-based service presents a new way of looking at service delivery, by providing service that goes beyond a traditional response and maintenance SLA, to a true business value proposition – a value proposition that is supported by emerging technologies unlocked by mobile, cloud and the Internet of Things.
So what is this outcome-based approach? There are a few business-to-consumer examples that might be familiar to you. I recently purchased a printer for my home office. Right on the heels of my first order of ink, I was able to sign up to receive ink on a subscription basis – no need for me to worry, and no hassle of purchasing future cartridges myself. My solar energy system was not a purchase of solar panels nor a lease, but rather a purchase of guaranteed energy production. If the level of energy production falls, I am compensated, and in the interim I don’t have to keep track of everything myself.
From a business perspective, the shift to outcome-based service is also becoming more mainstream. In the United Kingdom, Alstom keeps the London Underground Northern Line running with the promise of maximum train volume and minimal loss of passenger time due to delays. This goes beyond the traditional service response model and even preventive maintenance offerings by taking over a number of pieces of “people transportation” and guaranteeing a level of service (90+ trains active at all times) and a standard of service (to hotel standard) that keeps lost passenger hours to a minimum and throughput high. Other examples include Rolls Royce who provides guaranteed flight hours rather than just engines and discrete engine maintenance services. Manufacturing giant GE deploys its Predix software across business units to stream useful data to the service organization, allowing them to confidently provide outcome guarantees to their customers.
Here are a few specific business benefits of the outcome-based model for customers and service organizations. Many can be applied across departments and geographies.
Benefits of Outcome-Based Service to a Customer
• Risk reduction: Under the old model of waiting until there’s a problem before identifying a solution, the risk of faulty machines causing mission-critical system failures is laid squarely in the customer’s hands. The new service model dynamically and effectively crafts contracts around sustained performance and moves risk back to the vendors who provide and service machines.
• Closer vendor relationship: An immediate result of this fundamental change is differentiated service that builds end-to-end customer confidence in your organization and your ability to monitor asset performance. The move to a focus on outcomes boosts service value to customers by increasing the chances assets will be fixed or maintained before a problem or shut down.
• Value co-creation: Customers with properly working field assets will boost operational efficiency and profitability. Minimized asset downtime also allows customers to focus on building or rehabilitating other parts of their business.
• Predictability of cost: While the old model could allow spikes of service costs and fees (depending on contract provisions), the move towards providing outcome-based services delivers a more visible and predictable cost outlay. With fewer “surprises”, businesses can focus on the business of running their business, rather than worrying about contingency plans should a machine go down, maintenance schedules of the equipment across geographies, associated consumable fulfillment lead times, etc.
Benefits of Outcome-Based Service to a Service Organization
• Competitive advantage: Industry’s shift to outcome-based service is driven by a move away from product-centric service contracts to long-term agreements focused on the continued improvement of field assets and technician performance. Service technicians and engineers drive the shift to outcomes with a renewed focus on dedicated customer engagement.
• Tighter customer relationships: A shift to outcome-based service enables providers to grow the vendor-customer relationship with a dramatically heightened awareness of customer needs.
• Increased Margins: Service organizations implementing outcome-based contracts can optimize technician resources and use data from assets to diagnose potential operational problems across the fleet. Increased asset visibility and a promise of long-term service efficiency can expand profit margins. This is especially true as less money is spent to fix internal inefficiencies inherent with the reactionary service model.
• Service predictability and continuous improvement: Service organizations focused on outcomes and using IoT technology can apply knowledge gathered across field assets back into R&D to design for better (and cheaper!) service. These improvements are crucial to carrying out longer vendor-customer relationships with consistent asset performance.
In practice, it’s the customer who benefits from a renewed, long-term focus on customer success through outcomes. Global manufacturers and industrial companies around the world are taking stock of field assets, technicians and technology to build outcome-based strategies that work for their business models. The results can be increased customer loyalty, higher end-to-end revenue generation and a sustainable roadmap for superior service and brand loyalty. The field service industry is poised to fundamentally transform the way companies do business. An outcome-based approach opens the door for an enterprise-wide standard of the level of quality customers can expect from their equipment, manufacturing and service providers.