Service & The CFO: Why Context Is Worth 80 IQ Points
By Rick Gustafson, Chief Financial Officer of ServiceMax
How the ability to measure field service is turning it from cost overhead to profit centre
Renowned MIT professor and serial inventor Alan Kay once said, “Context is worth 80 IQ points.”
These famous words are particularly relevant for CFOs today, especially if his or her organisation carries out any sort of service, repair or maintenance. That’s because the emergence of the Internet of Things, improvements in mobile internet and devices have meant that field service departments – traditionally an overhead cost to any business – are now being turned on their heads and actually generating significant revenue.
It’s shifting the goalposts and stirring up the very essence of how a business is run.
Service, it seems, is the new black.
Or let me put it another way: when was the last time a field service engineer helped your company make its revenue quota? It’s not as strange as it sounds. New research is predicting that the tail will soon wag the dog as field service is expected to become a primary revenue driver within the next two years.
Your field service reps are usually the only human touch point customers have with your company, coming into contact with them multiple times in the lifecycle of the product. They can discover patterns and timing of demand for replacement of products, drive consumable sales and add to your competitive knowledge database.
The key here is having the ability to deploy made-to-measure services, a bespoke approach that can ensure businesses not only meet the specific needs of customers but can also use those relationships to gather intelligence and act upon it.
Upselling and feeding product performance and recommendations to research and development are just two advantages of the new breed of service professional with increased visibility on the frontline. Throw in the ability to order parts on-site (therefore reducing order errors and support times) and anyone can start to see how technology is enabling more immediacy in services. Reducing waiting times and improving ordering accuracy and delivery means not just happy customers but reduced service times and administration.
The cost benefits will vary from business to business, of course, but imagine having an overall view, a sort of general’s map of the business that provides metrics for CFOs on the performance and profitability of service teams?
It’s the sort of command and control centre that would enable any CFO to see where money can be saved but also made. A field service dashboard gives CFOs visibility into what has previously been a blind cost centre. You can drill down to see service engineer utilisation, who is the most productive, who always orders parts on ‘overnight express’ even when it’s not urgent, which maintenance contracts are costing you money rather than generating it. You can also see context for stock parts, areas of revenue leakage and information on contract renewals.
Now imagine comparing your company’s service performance with the industry standard and identifying areas of under or over optimisation. It is this level of visibility and intelligence that is exciting both field service and IT decision makers alike.
A recent report revealed that improving customer service (45%) is a priority area for investment in all organisations. For IT decision makers, field services (24%), although it falls below the popular categories of security (68%), big data (44%) and analytics (35%) is still regarded highly. Nearly one-third (30%) of respondents to the survey said they risk losing customers if they do not place enough value on field services, and nearly half (46%) feel they risk falling behind competitors. .
And 86% surveyed said they expect field service to become a primary revenue driver by 2018. It’s a clear indication of how field service is valued and certainly how perceptions within the relevant departments have changed. There is a concern though with under investment and a lack of understanding of the shift in field service capability at board level. According to Callum Budd, Project Manager at Vanson Bourne, which conducted the study, many board level execs have yet to grasp the potential.
“Although service leaders and IT management understand the ability of field service management tools to positively impact profitability, supply chain, upselling, cross selling and warranty leakages, senior executives and board level management have yet to make the link,” he says. “It’s a classic case of having your cake and not eating it by failing to capitalise on the un-activated potential of your field service organisation.”
Of course boards have many priorities in making a business profitable and successful. And field service has probably never been in the mix until now. However, its clear shift to being a profit centre should elevate its status.
Of course, there is no one-size-fits-all approach to field service given the varying nature of businesses and product types. But what is evident is that across the board field service can benefit from a bespoke approach based on customer intelligence and performance and cost transparency.
For CFOs this is probably new territory but like a new tailored suit it won’t just make you and the balance sheet look good, it can feel immediately comfortable and leave you wondering why doesn’t everyone do it.