Steve Downton, Downton Service Management Consultants Ltd, Noventum Group
Recent research applying the results from a benchmark review has shown that the strategy adopted by the service operation impacts significantly upon the revenue and margin performance of the business as a whole.
In addition the research confirms that success comes from constructing a successful strategy and delivering it into an effective operation, creating loyal, satisfied customers, while strongly growing revenue and profit. However the benchmark aspect of the research also confirms that establishing an operation that best delivers the business strategy is a major challenge, but when successfully accomplished is shown to deliver a handsome financial reward. Finally, the research highlighted that in the current economic climate, there is a great need to optimise existing solutions and generate as much value as possible from what is already in place.
As part of this research, a number of Service Directors identified the type and level of information they required to manage their operations; they agreed that in many instances, prior to the use of a Benchmark review, they had struggled to capture the necessary level of detailed information to effectively manage their operation. It is important to recognise that information deemed necessary today is very different from only 5 years ago, and a large number of service operations seem to owe their success to individuals - managers and directors - who have worked their way up through the ranks, and are able to closely manage simpler operations in a hands-on mode, achieving success through close relationships with engineers and customers.
Front-line staff can be utilised to develop a people-driven operation affording success through long-term personal relationships that will provide the ability to understand and address specific customer needs and co-create solutions that will generate customer centricity and intimacy. In many companies this does not always exist at the more senior positions and at the service business information interface - in part due to a significant increase in the complexity of business operations, and the unrelenting increase of demands placed on the operation by the customer. Many more service managers and directors have come in from other parts of the business and expect to have the necessary information at their fingertips to run a business operation and are quite often taken aback at how little data is available for reference in the “typical” service operation of even quite large businesses.
A much more business-like approach to investment has been demanded, supported by Service Management Solutions more able to fulfil the promises they are sold upon. The research also confirms that the current crop of service solutions can allow businesses to gain a much greater level of visibility of their operation than ever before. This has been shown in further research undertaken earlier this year, which indicated that mobile solutions are now firmly a part of the service software solution scene, and the large number of suppliers offering mobile solutions certainly indicates that demand has created a supply. All the factors would seem to indicate that mobile solutions are now considered a most important component. 95% of participants would include a mobile solution, confirming that, as companies gain experience of the software, they begin to understand the value that it can bring, particularly the potential value from unexpected benefits from the solutions. There is now perceived to be a breadth of value being generated from these integrated solutions, and this explains why they are proving so popular. Importantly, the value gained by service operations only results when organisations are prepared to work differently. Accepting mobile solutions will reveal opportunities and benefits that old ways of working could not have achieved viz. improved remote fixing; instant invoice production at the close of the job on a customer’s site; visibility of the location of another engineer with a part that is required. The effective implementation and utilisation of Service Management Systems is enabling the once poorly-informed service director to utilise information automatically captured by the system, to quickly solve problems and deal with new challenges.
Existing measures within the business may adequately gauge efficiency, yet impose limitations on the service operation because they do not adequately measure the value of the customer to the supplier, or identify the customers’ opinion of the value of the supplier. The best course is to recognise that some existing (basic business efficiency) measures are required to provide an historical perspective but that there is a need to gradually modify a number of the other measures so that they accurately reflect the overall performance and effectiveness of the operation, while capturing the value that the customer receives, and the customer’s perception of the value. These insights will also indicate trends and changes in the service environment, and prove that measuring effectiveness is the only way to safely drive the business and sustain success.
The following table summarises the top ten measures of performance, as agreed amongst the participants of the benchmark. They are in no particular order of preference and represent the key measures that service operations need to efficiently and effectively drive the operation. The difference in performance is evident in companies successfully using an integrated Service Management Solution.
Summary of Results
No | Area of measurement | SMS Software Users | Non-Solution Users | Improvement on non-solution users |
1 | Service Quality Index (SQI)% of Problems Fixed Right First Time | 87% | 80% | 9% |
2 | (SQI) % Timeliness of Arrival | 99% | 78% | 27% |
3 | (SQI) % Timeliness of Job Completion | 98% | 75% | 31% |
4 | Average Return Shipment Time in Days of Spares from Field to Repair to Shelf | 5 days | 15 days | 67% |
5 | % of SLAs Satisfied Without an Error During a Year | 95% | 86% | 10% |
6 | Service Revenue as a % of Total Revenue | 40% | 30% | 33% |
7 | Average Annual Cost of Field Engineer | £70,000 | £80,000 | 13% |
8 | Average Annual Cost of Scheduler | £40,000 | £46,000 | 13% |
9 | Number of Field Visits per Field Engineer per Day | 2 | 1.5 | 25% |
10 | Spares Stock Value as a % of Total Service Revenues | 4% | 28% | 86% |
The first three measures use the concept of the Service Quality Index (SQI) which is fairly new, though a number of businesses using a Service Management Solution have applied this measure. It captures the nature and extent of a number of key requirements for their service operation. It is used deliberately instead of the term “customer satisfaction” in order to drive quality into the equation and has the advantage that a number of measures considered in combination provide a broader analysis, giving a better insight into the overall performance. Good results in all three areas in the list, were achieved through better utilisation of engineers: individual engineers becoming more efficient and effective, encouraged to perform optimally creating highly motivated individuals because they are fully supported by the operation.
Using a Service Management Solution allowed much greater flexibility in the utilisation of staff, making significant growth possible, without the need to recruit. This growth also facilitated the ability to provide a seamless service to customers and their service requests, with the additional benefit that the increased productivity of engineers allowed for slightly longer time spent with a customer, producing significant gains from building relationships and “fixing” customers, not just faults, and significantly increasing revenue opportunities from useful information about each customer and their needs.
One valid management mantra is “you can’t manage what you can’t measure” and companies using a Benchmark review found that it provided them with the ability to capture data, providing information on drivers of the business. Information that was once unavailable to the management team has proved critical in the developing environment of fixed priced contracts and SLAs, where the key measurement driver is the Mean Time Between Failure (MTBF). This KPI has become very important in a contractual scenario: reducing the MTBF saves money, whereas in the old scenario of “Time and Materials”, reducing the MTBF would reduce the number of visits and therefore reduce revenue. This shift results in many companies spending more time and effort on increasing the reliability of their equipment and looking to the service operation to improve the MTBF over the lifetime of the product, to increase the value derived by the customer. This ability to extend the product’s lifetime could prove particularly valuable in the current economic climate in which the purchase of new products may be delayed and service will be used to extend the life of a product.
Having information visible and measurable is all well and good, but controlling performance and managing customers through accurate information and feedback is the only successful stance for service and business management. Building relationships is proving to be the most powerful strategy and creates the fastest revenue and margin growth of any of the strategies, but it can be hard to achieve, but can prove to be rewarding for the business.
