Party like a... Service Exec?

If it were left up to conference companies, you and I would find ourselves at a different one-of-a-kind exclusive symposium of senior grand poobah mucky-mucks every week of the year. But alas, we have day-jobs.

That said, allow me to implore you to consider joining us in Orlando next month - September 17th and 18th to be exact - at AFSMI's annual World Conference. It'll be the first in the long-running series since AFSMI joined forces with three other services associations (SSPA, TPSA, and ESCA). So this won't be your father's or grandfather's AFSMI.

One reason you might consider attending is I will be giving a presentation on the 17th called Leveraging “Smart Services” to Drive Product and Service Sales, which will feature best practices for packaging, selling, and marketing Smart Service-enabled product support capabilities.

Still not convinced? On Monday evening, September 17th, we will be hosting an exclusive dinner and rock-and-roll memorabilia tour in The John Lennon Room at The Hard Rock Café, Universal Studios. The room actually replicates John Lennon's Manhattan apartment. Plus, a guy with "Rock Dude" on his business card (seriously, I've met him) will be on hand to provide colorfully narrated tours of the Hard Rock's treasure trove of musical mementos.

Please don't mistake this for a shameless promotional pitch, but space is limited. We really can only accommodate 25 guests. Just picture John Lennon cramming that many people into his apartment! Even if you can't make it to the AFSMI event, come out for a truly one-of-a-kind exclusive experience at the Hard Rock. Reserve your spot on the guest list by replying to this evite. Hope to see you there!

Cubbies Edge Giants, Despite 2 Bonds Round-trippers

For the 16th year in a row, the nPhase Smart Services Summit culminated in a rooftop view of Wrigley Field (see inset), sans precipitation I might add. Barry 'roid-rage Bonds crushed two homers to inch within 2 of Hank Aaron's record, but Summit delegates were still treated to a 9-8 home team victory.

The Summit itself was attended by a record-high 120 people, representing such companies as ABB, John Deere, Siemens, Electrolux, Air Products, Diebold, Xerox, and Bausch & Lomb. Too many nuggets of wisdom to share in one blog post, but here are a couple highlights:

• Metric that Matters. Equipment uptime/availability -- the percent of scheduled production or calendar segment a machine is available for production -- tends to dominate discussions about the Smart Services value proposition for equipment owners/operators, but Reid Jaiko of ABB Robotics reminded us that availability is just one of the three building blocks of Overall Equipment Effectiveness (OEE), along with Performance and Quality.
  
  Performance is the quantity of output produced during the machine's running time, versus the potential quantity, given the designed speed of the equipment. And Quality is the amount of good products versus the total amount of products produced. So, for all you quant-jocks out there, here's how the OEE calculation breaks down:
  
  Availability Rate = Operating time - Downtime / Total Operating Time
  Performance Rate = Total Output / Potential Output at Rated Speed
  Quality Rate = Good Output / Total Output
  
  OEE = Availability Rate x Performance Rate x Quality Rate
  
  Why is OEE important? It has a direct and substantive impact on the operator's profits and ROCE (return on capital employed). So if OEMs can demonstrate Smart Services' impact on OEE to their customers, game is on!
  
  
• Smart Services on the chasm cusp. Some of you might be familiar with or even devoted followers of Geoffrey Moore's "crossing the chasm" concept, which he first popularized in his 1991 book. As Joan Waltman, president of QUALCOMM Wireless Business Solutions, shared at the Summit, the basic concept is that with any new disruptive technology, there exists a daunting market-penetration gap between early adopters and what Moore calls the early majority. While you might not realize it, if your company has already adopted Smart Services, you are perched advantageously on the near-side of this chasm. And if your company hasn't yet adopted Smart Services, you're somewhere between just-across-the-gorge and six-time-zones-away.
  
  If the latter describes your company, what can you do about it? Joan aptly quoted Moore in her presentation, saying, "When confronted with market disruption and technology revolution, your biggest challenge is letting go of comfortable old behaviors before they kill you."

If you missed this year's Summit, you can rest assured along with all the other Cubs fans, that there's always next year. In the meantime, you'll soon be able to check out more of the highlights on nPhase's Web site.

Smart Services Adopters are Bullish on Brand

If product support is going to fulfill its promise of providing an OEM with new competitive advantage, then the brand must embody the service message. To make certain that a new Smart Services offering is favorably received in target markets, most OEMs would be well-served to organize a cross-functional brand strategy team – comprised of representatives from marketing, service, and sales – tasked with determining the most effective packaging and positioning.

Here are a couple of tactics this brand team should consider:

1. Tap R&D budget: Some level of investment will be required to define and execute a Smart Services branding strategy. Marketing dollars are the obvious source of funding, but increasingly, leading OEMs are claiming research and development funds that historically have been reserved for product-related initiatives.
   
   How can this approach be justified to a CFO? In essence, Smart Services can be “productized” and heavily leveraged to drive additional product sales. And in product categories approaching commodity status, investments in new product features and capabilities will yield far less returns than investments in new higher-margin, faster-to-market, and more competitively differentiable service offerings.
   
   
2. Create unique Smart Services brand: Most OEMs have been selling numerous flavors of service agreements for years, from extended warranties, to preventative maintenance, to dedicated call center and field service support. Among these legacy service approaches, Smart Services stand apart, able to deliver unprecedented improvements in asset uptime, business continuity, and overall performance within the asset operator’s enterprise.
   
   But one of the obstacles is that over the years, product-driven sales representatives have conditioned the market to under-value post-sales service by gifting service offerings to prospects during late-stage negotiations in order to ink a product sale.
   
   To differentiate Smart Services from vanilla service agreements and to begin to undo end-users’ misperception of the value of service, OEMs must create a new premium brand for their Smart Services offerings. Many leading OEMs have created clever acronyms, logos, and department names for their Smart Services programs.
   
   ABB Robotics uses "ARM," which stands for ABB Remote Monitoring. Respironics chose "Respi-Link" for its smart service solution. And Gardner Denver is positioning its "ESP 20/20" offering as perfect machine visibility.
   
   Let’s face it. Smart Services are not your grandfather’s maintenance agreements. Build a bold brand and stand by it.

Where's your company at in the Smart Services branding process? Post a comment and share your marketing lessons learned.

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.

The Evolution of a Revolution

You’ve heard of manifest destiny. Well, I think this is it. It is time to move up to the next level and M2M (Machine to Machine) just doesn’t cut it anymore. I mean, it’s great as a technical description of what we do – we connect machines to other machines - but it just doesn’t mean anything to most people in business. For the past three years I’ve been wrestling with the issue that M2M doesn’t resonate with the majority of people who would most benefit from it – business people.

Now for engineering types and some visionaries, the simple fact that we could connect to an asset or device or machine wirelessly is enough for them to grasp that there is an opportunity waiting to be exploited. Hence the “internet of things” as described in the very recent issue of the Economist . The problem is, it describes how it works, not what it does.
So, you may ask, what do Smart Services do?

As I said in an interview with StartIT, “The premise behind Smart Services is that companies can provide innovative and differentiated offerings as part of a service offering by connecting to your products in the field and extracting insight remotely. In other words, companies can provide better service more cost effectively when you have visibility into how your products are being used in real time or near real time.

I feel that Smart Services today is very close to where the Internet was in the early 90’s. Knowledge of the Internet was growing, but very few people really had a clear idea of how Internet-enabling their business would change it. In just twelve years, not only were companies like Google and eBay created, but many existing businesses have fundamentally changed the way they do business and interact with their customer.”

And the thing is, most business folks get it. They understand services businesses, so why not make them smart? If M2M was the revolution, then Smart Services are the evolution.

To put it another way, Smart Services will be the business language that opens the door for the revolutionary capabilities of M2M technology to become a standard operating practice in mainstream markets.

Taking up the Smart Services flag was not something that was done
capriciously, but was a decision that I came to after innumerable conversations with many people, some of those most influential being John Tillotson, Steve Lundin, Michael Jarosik, Glen Allmendinger and PeggySmedley.

Ergo, SmartServicesBlog.com (the business side), M2MBlog.com (the technology side). Joining me on Smart Services Blog is Mark Vigoroso, formerly Chief Research Officer of Aberdeen, and now chief services strategist of nPhase and who will be responsible for much of the content. On M2Mblog.com David Geltner (also of nPhase) will be back in blogging mode to talking about how this stuff actually works.

As for me, I plan to bounce between SmartServicesBlog and M2MBlog while letting these two guys do the heavy lifting. However my comments will be as insightful (or not) as always.

Services of the world, unite!

- Steve Pazol