OEMs: Appeal to your customers' "green" side

Struggling to quantify the impact that Smart Services can have on the asset owner/operator's enterprise? You're not alone.

After three solid days at IQPC's Remote Device Monitoring & Management Summit here in steamy Boston, I came away with a few realizations. One of these pertains to the multi-faceted business case for Smart Services that OEMs are in various states of building and defending. Of the four "Value Blades" that I presented at the Summit (see illustration), customer value remains the most difficult component of the value proposition to quantify.

But with today's increasingly environmentally-conscious law-makers, the timing might be just right for OEMs to position their Smart Service offerings as critical tools for their customers to comply with emerging "green" regulations.

As we speak, U.S. Congress is considering a stack of proposed bills including the Global Warming Pollution Reduction Act, the Safe Climate Act, the Climate Stewardship Act, and other legislation aimed at reducing greenhouse gas emissions by as much as 83% by 2050.

In the U.S., carbon dioxide emissions represent about 84 percent of total greenhouse gas emissions, according to the Energy Information Administration. And 98% of carbon dioxide is emitted as a result of the combustion of fossil fuels. Therefore, carbon dioxide emissions are tied directly to energy use. Theoretically, by monitoring and limiting energy consumed by its machines via Smart Services, an industrial OEM could aid its customers in curbing CO2 emissions.

But an OEM's role in ensuring its customers' green-friendliness is not limited to the realm of airborne pollutants. In the case of one manufacturer's equipment, the cleanliness of hydraulic fluid directly impacts the machine's usable life. Contaminated fluid increases the frequency of filter changes and oil disposals. In this instance, a Smart Service-enabled OEM could monitor and potentially avert causal factors that elevate sediment levels in the machine fluid, and thereby help its customers to dramatically reduce their toxic waste discharge levels.

The Pacific Northwest Pollution Prevention Resource Center (PPRC) is one entity that offers end-users some tips on working with their equipment suppliers to minimize negative environmental impact.

Is going green a top priority for your customers? Have you talked to them about how Smart Services might help them reach their goals? Post a comment and share your experiences.

Are your machines co-dependent?

Early generations of remote product diagnostic solutions required the service-providing entity to proactively "call" a machine to find out if it was operating within acceptable limits. If there were multiple machines installed at a location, the pulse of each one would have to be checked individually.

But there's a fundamental flaw in this approach. A machine that appears to be healthy on its own might actually be hindering the performance of a related machine. Herein lies the value of taking a systemic enterprise-wide approach to Smart Services.

Take air compressors for example. They tend to hog energy if they are not operating at full load. The problem is, monitoring unit efficiency will give a skewed view of systemic efficiency. The performance of one air compressor impacts and is impacted by other co-located compressors. The metric that matters is dynamic efficiency.

John Donne was the first to say that no man is an island. You should determine if this applies to your serviceable machines as well.

Compensation Drives Behavior

I was in the windy city this week at the The Manufacturer: LIVE show and was reminded that one of the most fundamental truths about human nature - fallen as it is - could help to unlock the potential of Smart Services. Compensation drives behavior.

No matter how sophisticated, educated, or highly evolved we deem ourselves to be, our propensity to complete a task at hand is directional proportional to the personal reward at stake.

Think about your childhood. Why did you make a snack out of that unsuspecting earthworm? Or slingshot an acorn at your neighbor's attack dog? Because your comrades were willing to pay you up to $5 - depending on the degree of danger or humiliation - for your .. er.. bravery.

As I was reminded this week by Dave Gleditsch of DemandPoint, we can apply the same incentive-based philosophy to the challenge of integrating Smart Services into the culture of a manufacturing company. Gleditsch cited Steven Levitt's Freakonomics in making the point that incentives have extraordinary power in affecting change.

And when it comes to Smart Services, technology is actually NOT the biggest challenge. It's change management. It's motivating sales forces that have dealt products for decades to add service and support offerings to their bags.

So, why not try hard incentives? Deliver the message that it's not unrealistic to capture 50% of revenues and 60% of profits from service - according to the Harvard Business Review - and that a portion of these spoils are up for grabs. Leading companies like Toyota have aggressively pursued profit-sharing, President's Club contests, and bonus programs for years. If it's Smart Services sales you want, ratchet up the rub for service sales and see what happens after a quarter or two. Or change the mix of your existing bonus program to compensate sales representatives disproportionately for margin contribution, not just revenues.

As with any significant change, your sales team's behavior won't change overnight. But you can be certain that when their paychecks do, their behavior will be soon to follow.