In most industrial companies Service is like a business within a business -in fact a different business. And companies don’t support their Service Leaders very well. Not because they don’t want to, but because they don’t know how. For them it can be frustrating. The Service Leaders Network is here to change that.
Service is the one area in industrial and manufacturing companies that is (and feels) rather different from others. Organizationally, on the one hand, you can have functions like engineering, production, marketing, and human resources. They’re all geared towards creating and selling the products that the company is all about. So, is Service a function like production -though geared to supporting the product after it has been sold? On the other, you can have business units around products or market segments. Service might be a business unit too, after all, it generates its own distinct revenue streams, costs, and profits. But it cuts across all other business units.
Any way you look at it, Service occupies a pretty unique place. Traditionally:
- Service deals mainly with legacy (i.e. the past = installed base) rather than the future
- Products are about customer expectations. Service is about customer reality
- At least one (large?) part of service demand is derived from product failure. It will always be there (money in the bank, low sales cost), but is unwanted by customers
- In many cases, Service has far higher pricing power than Products
- Service people mostly work outside of company facilities or sites and are generally on the road or at customer sites -usually on their own
- Hence Service people spend almost all their time facing customers advocating for their companies, but often also advocating for the customer inside their companies
- Product R&D and innovation are about hard tangible features, engineering, and new technology. Service R&D and innovation are about soft intangible processes and offerings
- Service has few tangible fixed assets. Its main assets are its operational processes and its knowhow
- Service generates steady revenue through (relatively) small single orders or jobs. Products mostly do the opposite
- Service is anti-cyclical (customers buy service, usually more of it, even in recessions). Products are pro-cyclical
This list could go on indefinitely. What is shows is that it’s not just that service doesn’t fit easily into conventional organizational norms. It is, in fact, a business with different characteristics and has therefore different management requirements than the “main” product business and that applies to everything: From how to set service strategy to how to invest in growth; From how to create service “product” (offerings) to how to sell: And from how to organize and manage (often far-flung) resources and people operating on their own to how to design processes to how to invest in growth. In reality, Service is a kind of parallel business running somewhere unrecognized for what it is in most industrial companies.
Now most (top) managements in industrial companies know how to run a product business. Some even know how to run a “systems” (or solutions) business. Business schools teach this and most top managers’ careers have been made on it, whether through operations, marketing/sales or finance. But few know much about Service. In fact, most top managements don’t even recognize explicitly that it is a different business -and don’t think much about it. Which is why Service managers often have difficulty communicating or getting messages across, whether it is about the need for investment, customers or budgets.
So people making their career path through Service have limited potential to develop service-specific management and business skills through internal and external training. They are offered few service-specific tools or methodologies to help them with their business. But most of all they don’t have many people in their organization who speak their “language”, appreciate their problems or can provide guidance and insights -outside of their own space. And top Service leaders have even fewer options. Because in most companies or major business units there is usually only one service unit or department respectively though there may be many Product units. For companies, therefore, the path of least resistance is to place management focus on their “main” Product business.
Note: This is not a criticism, just an observation. Companies may have very valid reasons for behaving the way they do. It doesn’t help Service managers though.
Of course, over the past 20 years or so as installed bases have grown and product sales growth rates have declined due to saturation in many industries (though of course new ones always appear) the importance of Service has naturally increased. And with new technology and the advent of the Internet of Things and AI-based analytics, products and services are blurring into “servitized” offerings, essentially Service packages on the basis of products. As Theodore Levitt foreshadowed, companies are increasingly trying to sell holes in the wall rather than drills -Rolls Royce’s “power-by-the-hour”, i.e. selling thrust rather than jet engines being the classic example-.
Yet where does that leave Service managers? How are they or indeed entire conventional Service units -not to mention the companies themselves- prepared for such transformation? How do they master the challenge and the intricacies of making the leap from a being a different secondary business to the key integral part of their company’s core futuristic offering?
To who can Service leaders or top managers responsible for service and servitization oriented transformations turn to for ideas, validation, guidance, know-how or support and everything else that is needed when nobody in the organization has done this before? Consultants are of course a possibility. But few consultants have any real experience of the nitty-gritty of such transformations simply because few companies have gone through them. And consultants are expensive. At present both know-how and experience are long in demand but short in supply.
What then would help Service leaders succeed, both in finding ways to improve their conventional service business performance or to create new servitized businesses -without breaking the bank? The answer is their peers. Those who are mastering similar challenges, going through similar processes and solving similar problems. But these peers have to be from other companies. What if there was a platform where they could draw on each other’s experiences, insights, and ideas? What if that platform provided them with the opportunity to actively collaborate to improve their performance and to achieve better outcomes at lower cost?
And precisely for these reasons, we created such a platform: The Service Leaders Network is a facilitated network which allows Service leaders to meet, collaborate to master challenges or solve problems and exchange ideas and insights. Ably supported by selected expert-practitioners and facilitated by Si2 Partners, the Service Leaders Network is a platform where Service-specific tools and methodologies can be acquired, and best practices developed. We think that collaboration between Service leader peers is the most powerful tool of all. After all, it’s common sense that collaboration enhances performance. But it is also corroborated by academic studies: For example, a study from Stanford University found that when collaborating:
- Participants persisted 64% longer on a challenging task
- Expressed greater interest and enjoyment in the task
- Required less self-regulatory effort to persist on the task
- Became more engrossed and performed better on the task
- When encouraged to link this motivation to their values and self-concept, chose to do more related tasks in an unconnected setting -i.e. the impact persisted even after the collaboration ended
So if you are a Service leader in the industrial space, whether from a manufacturing or engineering company, but also a pure-play technical services provider, consider joining the Service Leaders Network. For more information visit the Service Leaders Network page or email us at firstname.lastname@example.org
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