Transformation to a service company

Industrial companies are considering ambitions to re-position themselves towards service companies. We live in a service economy, thus the direction is evident. Consumers having great service experiences in e.g. retail, banking, and entertainment start having bigger expectations towards business interactions as well. A big consideration is profitability – how a service generates more value than a product, which may have attractive margins – but even bigger consideration may be how to maintain customer loyalty and remain competitive – since customer needs evolve.

An industrial transformation towards a service company will most likely not be a fast turnaround, but depending on the industry, customer base and scope of business a gradual change. From engineering towards technology provider, from integrated solutions towards services provider. There are a number of elements to be considered a part of this transformation.  

Ø  How do customer requirements change?

o   Customers understand increasing opportunities of online, data and analytics. Learning from consumer services, they expect a smooth customer service in various channels. Customer needs may shift from single transactions towards efficiency improvements, performance guarantees and consultancy. Some customers still want individual products, but delivery or installation requirements may change, and they may be willing to pay for them.

Ø  What is a positioning that provides a competitive edge?

o   Once the company understands its customers business requirements, it is time to decide what positioning to take. How to differentiate from competition? How to not just respond to customers basic requirements, but help them improve their operations, and even help them grow. Price, value, service, speed, sustainability, safety, peace of mind?

Ø  How to develop the footprint?

o   A company may own a number of locations ranging from offices, production or service facilities and research and development. Based on the positioning, what are the key factors? What are the operations that support company positioning and increase profitability in the long term and require more investments? Instead of own production, would joint ventures, partnerships, or leasing make sense?

Ø  What competence shift is needed?

o   A transformation towards a service company requires new kind of competences. These are wider set of various competences. Engineering and technology skills will be complemented by powerful supply management, partnerhsips, integration capabilities, business planning and advisory skills. Customer understanding is prerequisite for a successful service company.

Ø  What kind of offering sells?

o   What does the company sell? What is in the catalogue that transforms into money? What responds to customer needs and how can the portfolio be planned that it is modular and meaningful for volume and value selling? A company needs solutions that can be commercialized and promoted to its customers, not only tailor made upon request, which may become too expensive.

 

Ø  Importance of company culture and internal communications?

o   What are the employee processes, measures and rewarding systems that support the transformation? Is induction for newcomers still in own facilities or would it be time to get the employees closer to customers business? How to reward for value creation?

o   In cultural context, it is never too much to emphasise importance of internal communications. Employees need and deserve to know about the company´s vision and business, and be able to discuss and contribute to it. Next to customers, employees know best of the customer business.

Recommended article European Journal of Innovation Management Volume 7 · Number 3 · 2004 · pp. 218-228

 

Marketing as a service

I´ve never liked the concept of “content marketing”. Shouldn’t all marketing have some “content” that is relevant for the target group. The definitions I`ve seen have sounded like what integrated marketing has been about for decades. We need to find relevant message for our customers in a channel where they get most value of it.

In a meeting at Finnish Advertisers Association, we had a much more exciting discussion over “Marketing as a Service”. Since people spend increasingly time in various social media channels, it has become a hub for performing various tasks or activities. Finding information, making comparisons, finding inspiration, looking for services, performing transactions, or simply being entertained. This is where customer service, sales, marketing and communications get mixed. Someone may look for advertising for the sake of entertainment. Someone might be looking for online technical support to use a product, and ends up buying more.

Marketing, with the purpose of generating demand, can actually be used as – or generate - a service. Online channels provide great opportunity for various kinds of interactions – when wished by customers. Thus the customer journey logic works well. How can we serve the customer within their purchase process through various actions that help them make a decision – and be happy about it. Thus, the “Maalilinja” service by Tikkurila, who provides inspiration for interior design over selling paint, and “Traveller” service by Marriott, may be bigger reason to buy than a single offer. In fact, a short movie by Marriott, ended up with 80.000 bookings, with service being destination information.

We marketeers may spend our times on customer magazines and newsletters, which as such may be relevant and informative. The challenge for the future will be where and when to publish content to our target audiences. Someone suggested there should be a story bank. When there is a trigger, such as political or economic event, or cultural phenomena, we are ready to publish instantly. In addition to the annual or quarterly plans, we need to be prepared for instant feed. How does this change our planning or resourcing practices? Do online service personnel equal marketing as a service?

Characteristics of a solutions provider

Manufacturers globally are looking for ways of improving their profitability by transforming their offering towards services and solutions. What is crucial in this transformation is to clarify the definition of a solution. It does not equal products and services. Rather, a solution is an answer to a specified customer need. Example: improving energy efficiency. Improving availability of an installation for increased running hours. Reducing use of fuel in transportation.

A change towards an integrated solutions provider requires a wider scope of competences, such as customer business understanding, technology knowledge, auditing, consulting, communications and supply management or partnering. A study by Windahl, Andersson, Berggren and Nehler on “Manufacturing firms and integrated solutions: characteristics and implications” by European Journal of Innovation Management vol 7 iss 3 pp. 218-228 indicates that intelligent technology enables a continuous optimisation of customer operations. Developing services to complement the installed base requires fewer assets, is often counter cyclical and can provide higher margins.

Characteristic in a change process away from hardware or capital intense production is focusing more on customer process throughout the customer journey, including both business planning and operations. Some models may include even possibility for customers to operate equipment or installation without owning, maintaining or operating it.

Within the transformation, a key success factor is to plan how to build the capabilities supporting the customer performance. According to Windahl, Andersson, Berggren and Nehler, some key factors are: pricing models, generating new performance indicators against the traditional manufacturing set-up, increased risk taking and changing the relationship with customers and partners, including increased customer interaction and co-production. In their competence development model, they see a difference of “shaping the market” and a “interacting” as a strategic orientation. Listed key competences of an integrated solutions provider include technical and application competence, systems integration competence, partnering competence, as well as market / business and consulting competence.

It is no wonder companies are currently investing in advanced customer understanding models, CRM systems and continuous sales competence development. All gears towards collecting a flow of information from customers. Not only related to customer business and their needs, but increasingly into customer operational profiles, use data and related analytics. Providing integrated solutions is building a consistent business model with a customer, the solutions provider being an integral part of customers operations on a daily basis.

Not all customers are into ways of risk reduction and differentiating their services to their own customers. Thus a manufacturing company need to consider - and decide - the level of transformation they aim at, how much to build on existing manufacturing capabilities, how much to invest in building service and solutions capabilities – and to which customers to focus on. One way is to separate manufacturing altogether and build a new approach for customer focused solutions business with new metrics, culture and incentives.

Service opportunities for the “lifecycle” of Konmari?

There are various definitions for mindfulness, and the Finnish sanctuary, sauna, could act as a perfect example of an approach for focused thinking. However, sauna no longer acts as the only source for improving your self-awareness. We use life coaches, personal trainers, yoga and breathing exercises to find focus in life. To find joy of life. To find meaning of life. To find the next level. To find balance between personal and business life. To identify ourselves in the complexity of life.

The era of searching for balance and meaning has generated a number of approaches that fulfil our hunger for information and ideas - or simply generate joy and excitement.

In the interest of a best-seller, I read KonMari by Marie Kondo. What is it about the KonMari movement that has made more than 20.000 Finns join the Facebook group or more than 50.000 books sold in Finland?

The KonMari movement could be described as finding joy for life. Or at least getting your home organised. What Kondo does is link the search of joy with something simple – by cleaning and organizing our homes. Getting rid of unnecessary stuff concretises how one does not spend time on unnecessary things one doesn’t like or you doesn’t pleasure. Looking at the stories on KonMari movement, the method seems to work from shifting the logic from your home to your whole living. KonMari is about creating an environment where you see and use things that you appreciate. My friend is expressing excitement about getting rid of 30 year old clothes and old childrens toys.

But what when you have read the book and organized your home? What´s next? How can we fulfil the search of joy for the Konmaris for the long run? What is the “lifecycle” of these fans?

Marie Kondo does not really take stand into where to take all the 30 bags of unnecessary items from your home. Could this be a source for further ideas?

As much as you like food, groceries and goods being delivered right to your door, wouldn’t be equally nice having things delivered out of your house, from your door?

In Finland recycling has been arranged extremely well. There is a system where to leave paper, glass, cardboard, metal and plastic. There are public recycling stations which accept items free of charge. There are logistics services that collect old used electronics. But are there turnkey solutions for recycling the full stack of unnecessary items you want to let go?

If we look at the lifecycle of an enthusiast who would like to maintain the life of cleanliness, what could be the opportunities?

-        Somebody to clean and organize. Including categorizing, providing packaging and storing solutions and getting the job done. There are professional organisers but is the market full? How could one differentiate from family homes to elderly homes or singles? People with different hobbies?

-        Turnkey solutions getting rid of things. Somebody to recycle, donate or sell. Take to rummage sales or sell at online store. Take things for charity or recycling stations.

-        Ensuring your home stays clean and organized throughout years to come. Making progress checks and helping out at agreed frequency. Providing clear service intervals or monitoring the condition of your home. Making health checks to your home and yourself. The intervals may include highlights like “children leaving home” or “moving out”.

-        Generating a memorable experience of things you may miss. Documenting, photographing things you feel you may yet want to see again. Generating digital versions of paper photos or old VCR videos. Making a summary of your favourite books or scrapbooks you no longer need.

-        Etc.

In the light of the movement and seeing all the existing options around us, could there even be a Finnish version of it? “Siivoa ja iloitse”? “Desinfioi ja nauti”?

Finnish export services – eternal source of hope or source of new economic growth?

In early 2015, Kauppalehti reported a recession of Finnish export services. After the financial crisis, the growth of Finnish export services stagnated - due to e.g. decrease in industrial services. The representatives of Finnish service employers, Palta, stated that Finnish service exports should see faster growth than that of other industries. Palta wished for initiatives boosting role of export services.

What are Finnish export services really?

Palta´s economic outlook 2016 reports following as service industries: logistics (e.g. air, land, sea, postal services), information and communications (e.g. media, audiovisual, publishing), expert services (e.g. consultancy, marketing, research, technical), administrative and support services (e.g. recruitment, travel, rental, leasing, security), entertainment (culture, sports, gambling/gaming/lottery), other services (e.g. real estate).

What role do export services play today in our overall foreign trade?

Statistics Finland reports Finnish export services having grown by Eur 2 bill in 2015. Export services grew in all segments with exception of postal services. Export services totalled Eur 16,9 bill. According to Palta private services within 2000´s have generated 200.000 new jobs. Talouselämä article on export services states more than 40% of Finnish export services come from IT, such as telecommunications and information services. With some markets, services already exceed the export of goods. More than half of export services go to EU countries, USA and China.

It is expected that private services are to have moderate growth within a wider number of industries. It is also predicted the number of employees will increase. However, Palta lists a number of global factors that may affect these trends, e.g. downturn of developing countries, impact of Brexit, and the overall restructuring of the Finnish economy.

Why should Finland boost export services?

Palta has a number of relevant suggestions. First, international trade brings growth potential. Since domestic growth potential is limited, we need to go abroad. Second, there is high level of innovation in Finland yet only one fourth of companies do export. Of those companies focusing on digital services, one half are doing export. This is low given digital services open immediate doors to global business. Third, we need to increase added value from Finland ie part of products and services generated in Finland. Finland is not the hub for mass production. Our strengths are in generating high value for customers.

And has Palta´s 2015 wish for a service export program to boost internationalization of services been heard? At least majority of Finpro´s Export Finland programs today focus on technology and service excellence. One recent example is establishment of Luovimo, a growth program tailored for creative companies focusing eg on digital services.

Export services are a source for future growth. Industries being transferred to service businesses, as well as internationalisation of services is a strategic contest where our skills may be of best use. Palta´s Matti Paavonen view in May 2016 report: increasing the national value of export is more important than the overall gross value. Ie we need to be able to produce bigger share of service in Finland. In service business, given our level of education and innovation opportunities, we can give and gain more. Signals are in the air - currently majority of export growth comes from service business.