By Neil Tumber, Relationship Manager, Advanced Services Group
Just like data, automation, Industry 4.0 and the Internet of Things (IoT), servitization has become something of a buzzword – and for good reason. Servitization and advanced services offer the potential for organizations to significantly transform their business models to deliver even greater value to customers while also increasing their own profitability. But what do we mean by servitization, and what exactly are advanced services?
In this post, we will explain everything you need to know.
What is servitization?
Servitization is a term used to describe a journey of transformation, specifically: the innovation of an organization’s capabilities and processes to better create mutual value through a shift from selling products to selling product-service systems that deliver a desirable outcome for the customer. So, for example, instead of manufacturing and selling a machine tool and ending the transactional customer relationship there, a business instead might produce and sell the machine tool as part of delivering a contracted support and maintenance service.
Servitization: a practical example
An example of servitization is Koolmill, a business in the UK that works with the Advanced Services Group at Aston Business School. Like several manufacturers, Koolmill was originally set up to produce and sell machines – in Koolmill’s case, rice-milling machines. However, much of its customer base is in low-income regions of countries such as China and India, where the price associated with milling-machine ownership is considered prohibitively expensive. To overcome this challenge, the business transitioned to a servitized approach, offering rice-milling-as-a-service.
What does cybersecurity have to do with you? If you’re selling digital solutions, the answer is: Everything. Steve Mustard, President and CEO of National Automation and President of the International Society of Automation, explains why SAMs should care.
By Saleh Al-Ben Saleh, Strategic Account Manager, Emerson
Expediting “inside” knowledge of your strategic account(s) is vital to realizing indisputable value for both you and your customer. Human interactions are invaluable to gaining this knowledge, but issues of location, time and logistics make accelerating these interactions a common challenge for SAMs.
Here I present a tactical approach that covers best practices showing human interactions success for one strategic account site, taking into consideration the following three key metrics likely to contribute to successfully accelerating human interactions (and, thus, inside knowledge) at a selected strategic account site:
Interaction time with individual strategic account client(s) during a single day visit
Relationships built/strengthened, quality of information gathered, initiatives/opportunities realized
The number of potential touches created for future visits
Before getting started, let’s look at four facts we need to accept in order to understand the value of the approach I call “Once you’re in…you’re in.”
Strategic accounts often have multiple scattered facilities, yet you only have eight hours per day to spend on a customer visit. So you should spend that time wisely, and by wisely I mean on valuable client touches.
While most clients claim to have open arms to meet and explore business-related issues, the reality is that priority takes precedence, and planning for meetings is a time-consuming task for all parties.
Even with a solid agenda, it will be difficult to facilitate several formal meetings on the same day at the same location.
Unplanned, stand-up meetings can be just as important as well-prepared meetings — if they are executed in the right way, with the right talking points and objectives in hand.
Putting all the above points into the context of expediting “inside” knowledge of the client, we can agree that SAMs would be wise to leverage any planned customer meeting to generate additional valuable but unplanned meetings during a single customer site visit. Picture yourself jumping from one purposeful interaction to the next, all day long in the same place. This is the main reason I have chosen to call this this approach “Once you’re in…you’re in.”
It’s not that hard. On a typical customer visit, we probably have at least one scheduled meeting of between 30 minutes and two hours, out of a total of seven hours (the typical daily window for meetings). The challenge is to see how much of these seven hours we can use to create human interactions. I propose that the answer is “all of them” – if you prepare well, remain alert and act quickly.
The following six-step methodology has worked for me in my career as a SAM.
#1. Start with the “T.” The “T” stands for “them” in the “TUFA” concept, a process for building on your existing target customer profile or creating one if none exists. The “U” stands for us, “F” for fit and “A” for action. Your customer profile should include all information on your history with the customer, including past performance, ongoing initiatives, an organizational chart and a social chart. Make sure to compile a list of all gaps in your customer profile. All this intelligence should be written and organized in a way that will help you drive fruitful conversations with the targeted account clients. Pro tip: Make sure to use open-ended questions to allow more talking space for your clients.
#2. One planned meeting to get in. If you are calling on an established customer, start from the end and follow up on a hot topic(s) with your assigned focal point. If it is a new customer, you may need several exploratory meetings to identify the right people with whom to interface. In either case, once you have secured your meeting, you should be able to develop others for mutual benefit.
#3. Jump to the unplanned meeting. Through the profile you have developed in step one, and/or through your scheduled meeting(s) from step two, updates, initiatives and challenges will present themselves to you in one form or another. Whenever possible, seek to learn the champions of these items and ask to meet them while you are onsite. Most likely, you will be able to track them down for short, fruitful, stand-up meetings. Repeat this as many times as your schedule allows. After each interaction with a new champion, make sure always to exchange contact information, which you will need to schedule follow-up meetings.
#4. Think client and “walk the talk.” Eventually, a picture will emerge, and the potential for the next meeting will follow accordingly. Clients will frequently use three evaluation tools to decide whether or not they want to continue developing a relationship or not:
How much you understand the business from the client perspective
How well you can build mutually agreed-upon action plans for both sides
How fast you are able to “walk the talk,” deliver as promised and follow up on other commitments as well
#5. Enhance the “T.” Make sure the gathered information in steps two, three and four are reflected on the profile you created in step one. Having an updated profile will allow you to see the big picture clearly, plan your next visit and identify the people you want to interface with either through planned or “spontaneous” meetings.
#6. Do the loop. Now start again from step one and move through the process again.
Once you capture the value from undertaking this process, you can draw imaginary lines between the steps, create additional steps and add “sub-steps” as needed. I think of this as a best-practice template, which I encourage you to adapt to best fit your circumstances.
When trying to expedite constructive human interactions within your strategic account clients, you must endeavor to find the “sweet spot” between formality and informality. If your process is overly formal, you risk missing out on potential customer touch points and slowing progress. If your process is overly informal, you may get more customer touches, but your conversations will be less constructive and new relationships much less “sticky.”
The goal is to have as many meetings as possible in a single day, continually leveraging the information gained from past interactions to garner new ones. When executed to perfection, you will move from unplanned meeting to unplanned meeting. Success is never guaranteed, but based on my experience, this approach will give you the best chance of expanding your customer footprint over the long haul.
Boston Consulting Group recently released a three-part series on digital maturity in the manufacturing sector. SAMA reached out to series co-author Jonathan Van Wyck, a partner and managing director at BCG, to ask him what suppliers can do to make themselves indispensable to their strategic customers’ digital transformation journeys. This conversation has been lightly edited for length and clarity.
SAMA: I think people may have a narrow view of what we’re talking about when we talk about digitization. Can you lay out the full scope of what we mean by digitization?
JVW: When we think about digital transformation broadly, we think about a couple of different avenues. There’s one leg of it that’s saying, “How do you reengineer the customer experience, leveraging digital technologies, to support the projects and products you are offering?” The second is, “How do you actually leverage digitization as an opportunity to drive new growth and launch new solutions and new businesses?” And then there’s digitizing your internal operations, which is taking the internal lens and asking, “How do I take my manufacturing process, my supply chain, my customer service and support, and my sales processes, and leverage digital technologies to reengineer — either at a lower cost or to drive more effectiveness — those internal processes?” We have a framework off the shelf on that if that’s helpful to share.
SAMA : Can you talk about what you set out to study and what you learned?
JVW: What we’ve been seeing is that everybody’s talking about digital operations, and everyone feels a high degree of conviction that this is the future. But when you take that and contrast it with the progress that we see with our clients, there’s a disconnect. What we’ve found is that they’re taking almost a project-based approach to digitization, where they’re working with individual vendors who have a cool technology to pilot it in a specific location. Or they have an internal project around some component of digital — a plant scheduling tool or something like that — but they’re not able to drive it at scale and really capture the full benefit.
So we took a step back and started thinking about what we have learned from doing this with a bunch of companies to sort of bridge that gap between what we talk about as the opportunity versus the reality of where companies are — and then move from point solutions and individual projects or applications to actually driving value at scale.
SAMA: So what you’re saying is, there are a lot of pilot projects out there that can prove themselves out, but the companies, for any of a number of reasons, don’t manage to scale the solution and really capture the full value.
JVW: Exactly. When you look at past industrial revolutions, I’m sure it took the same stages in development. But the challenge here is that the way of working is so fundamentally different from traditional approaches. We’re talking about another revolution in terms of the types of talent, way of working from an agile standpoint — but also building the infrastructure to be able to support these use cases. I see our third paper as the most critical one. It’s about the organization and way of working to drive this at scale, which is ultimately what I think is the issue.
It’s not like companies don’t have great ideas, and it’s not like companies don’t have an idea of what the right use cases are. It’s really about, “How do you actually build the organizational capability, the funding model and the talent to be able to do this?”
SAMA: I’m thinking about the manufacturing environment, in which great plants are typically run by very seasoned people who have been doing this forever. And to do a pilot project, you’ve got to bring in data scientists and a bunch of under-30 digital natives who can actually make it happen.
JVW: Also, company processes are oriented towards waterfall I.T. projects and are not set up to support this type of innovation. Because a traditional funding model is, “Submit a capital request with your full plan, the milestones all laid out, the exact financial investment that you’re looking for from the company, and then we’ll have a meeting with our senior leadership and debate it, probably cut your funding a little bit, and then approve it.” Whereas here, you don’t actually know the challenges, and actually laying out a full roadmap and waterfall set of milestones is actually counterproductive to what you actually need to do to experiment quickly, which is to assume that 25 percent of what you do is really going to work. So you do the 75 percent that will fail very cheaply, and then rapidly scale the 25 percent that does work. You just don’t know all that stuff in advance, and so it doesn’t fit with traditional processes.
So there’s a challenge from a talent standpoint, but I don’t think it’s just about hiring more people under 30. It’s about thinking about your internal processes and, in some cases, modifying your approach to how you drive digital operations. And this applies more broadly, not just within operations but to your traditional funding, project management and approval.
SAMA: So to a certain extent, you have to invest and pray and then say, “OK. How can we take this 25% percent [that’s actually working] and really put more effort into those and get more benefits faster?”
JVW: You just need to set it up to say, “We’re going to have an outside-in view of what the opportunity is. And we’ll have a long list of use cases, roughly mapped to that opportunity, and an idea of what that’s likely going to cost.” And then in your next meeting, a month later, you’re going to have a much more refined view. And then a month later, it will be even more refined.
So it’s a journey from more ambiguity to more specificity, but you just can’t shortcut that journey and have the specificity at the beginning.
That’s really challenging for companies that are used to having that specificity, which in reality is false specificity because projects overrun 80 percent of the time and take longer, et cetera. It’s a mindset shift.
SAMA: In my career, we had a hurdle rate that you had to exceed. If your project didn’t have better than a two-year ROI and proven, financially sound waterfall, you didn’t even submit the project because it was never going to get funded. Is that mentality bumping up against how you have to approach the digitization project?
JVW: There is a set of infrastructure that needs to be put in place to support use cases: You need to set up a cloud infrastructure. You need to build a data lake. You need to invest in a certain number of technologies, et cetera.
The challenge is where I’ve seen companies burdening those first set of use cases with the cost of all that infrastructure, even though that infrastructure could support 100 use cases.
This problem can be unlocked by doing it at scale and having conviction around the strategic relevance for your overall company and the total value on the table, versus taking it piecemeal and starting with three or four use cases in one factory.
SAMA: In a normal plant environment, there’s a plant manager, there’s a division leader, there’s probably some subject-matter experts, et cetera. But with this kind of thing, it sounds like you need to go above that traditional manufacturing decision-making process and get C-level buy-in?
JVW: Typically it’s at the C-level.
SAMA: From the supplier perspective, do you see them being a catalyst by bringing some of these ideas forward, or is it all internal to the customer itself?
JVW: I think the more stakeholders you can involve in the ideation process, the better. I’m a big proponent of involving suppliers, but I like to first recommend that companies internally align on what the pain points are and a high-level view of what a solution could look like before they go down that path.
SAMA: Are there any kind of best practices that you see good suppliers doing to really help this process work?
JVW: Recognizing that the process needs to start with the pain points and value levers. Don’t lead with your technologies, but facilitate a workshop around a specific process that’s relevant to them. That can be really powerful. It’s also about being open to collaboration and sharing of data. Because one of the other challenges I see is that it’s so hard to share data across companies.
SAMA: Are there any observations on who typically leads that so-called ecosystem to create a common data lake? Do you sometimes see a supplier that takes that on for the manufacturing company to help pull all these disparate entities together?
JVW: It’s typically a manufacturer, but wherever the supplier has the scale I don’t see why they couldn’t take the lead in their specific swim lane.
SAMA: We teach our customers to say, “It takes a village to solve the problem, and if you can become the leader of that village, there’s a lot of value.“
JVW: I think that’s the next frontier: How do you digitize the value chain and start working with your suppliers and working with your customers to take waste out of the system looking holistically? Whoever can lead that ecosystem is in a pretty interesting position.
SAMA: Say I’m the strategic account manager for 3M going into a factory and trying to bring value to them. Any advice you’d give?
JVW: First, I think it’s so much easier to do that if you have a business model or an offering where you’re a solution provider versus an individual product provider. That’s one piece. And then the other piece is, map out the customer journey associated with your product or solution, and what that looks like — where the frictions or pain points are along that journey. If you don’t have that, then you’re not going to be able to add value to your customer. Having that approach embedded into the strategic account playbook becomes really valuable because it allows you to have a different level of discourse with your customers.
SAMA: Say you’re a SAM who just got assigned to a new customer. Is there a typical spot that you might want to start inside your customer, or is that really company by company, organization by organization?
JVW: It is very case by case. Some organizations will have a manufacturing strategist. Some may have a digital organization already set up. Some may be decentralized, with the plant manager driving the decision making. Some may be more centralized. That’s why you need to be able to map the organization of your customer and understand where the decision makers are.
SAMA: Typically, when this first meeting happens, is the customer expecting the supplier to bring people that have subject-matter expertise?
JVW: Yes, you can also look horizontally — because you may not have the whole scope of technology required to solve this pain point.
You need to be humble in recognizing that you may not have the capabilities to solve the entire pain point, and so you may need to work with your peers to build a solution that you can then bring to your customer.
And if you’re the one actually orchestrating that, it can be really value-additive, versus just bringing your customer a specific technology.
Say for example that you have the best programmable logical controllers, and then maybe you partner with the analytics provider who does the analysis on top of that, and then — oh by the way — you partner with a robotics company. I haven’t seen many suppliers do this effectively, but that could be very differentiating to be able to offer as the supplier. And then, by the way, you’re the one with the overall solution, versus [just being] one piece of it. That’s a much more powerful position to be in from a margin standpoint.
You can find BCG’s how-to guide to digitization here. Parts two and three can be found here and here.
By Lorenzo Castrogiovanni, Strategic Accounts Director, Air Liquide, and Mustapha Bouraoui, Vice President for Strategic Marketing, STMicroelectronics
In March 2019 SAMA honored Air Liquide and STMicroelectronics as co-winners of the 2019 SAMA Excellence Award for “Implementation of specific customer engagement strategies enabling, and successfully impacting, the value co-creation process.”What follows is the case study that led to the award.
This is the story of Air Liquide’s successful cooperation with one of its strategic customers, STMicroelectronics, a leading semiconductor manufacturer delivering solutions that are key to Smart Driving, Smart Industry, Smart Home & City and Smart Things. By establishing a structured framework aimed at innovating together in the sphere of Industrial IoT and Industry 4.0, ST now sees Air Liquide not just as a strategic supplier but also as a true partner and a potential customer.
Before the implementation of this customer engagement initiative, Air Liquide enjoyed an excellent business relationship with its strategic customer ST. And yet, their exchanges were focused on the ST’s manufacturing and purchasing organizations, leaving Air Liquide with only limited access to the product- and application-development groups of ST.
The co-creation venture began when Air Liquide proposed to share its technological “pain points” and “constraints” associated with its own digital transformation to ST’s marketing managers and product developers — an overture ST welcomed for the reasons visible in the following chart.
Ultimately, this mutual engagement allowed ST to support Air Liquide in its digital transformation, providing guidance, ideas and solutions in order to speed up prototyping of use cases while at the same time allowing Air Liquide to share its vision and requirements with ST to help them to develop technologies and solutions for the broader industry.
For Air Liquide, the engagement offered an opportunity to receive support for its digital transformation directly from a global industrial semiconductor leader while enhancing customer intimacy and positioning Air Liquide as a potential customer for ST. It also established valuable relationship capital beyond manufacturing and purchasing through a significant number of initiatives that are currently under development.
This initiative sits at the intersection of account management, customer experience, digital transformation and cooperative innovation.
Air Liquide and ST rolled out this engagement in several steps, over the course of approximately 18 months. Below is a brief outline, which can be utilized by any customer and supplier with similar mutual objectives.
Step 1: Identify the right counterparts on the customer side, develop a trustful and fluid relationship, agree on development steps and align around the mutual goals for the initiative.
Step 2: Identify high-level sponsorship on both sides.
Step 3: Identify key stakeholders on both sides. For Air Liquide, this included approximately 10 chief technology officers, for ST roughly 10 vice presidents of marketing and product development.
Step 4: Identify the key pain points and constraints of the customer’s current technological developments in the domain of Industrial IoT and Industry 4.0. For Air Liquide these included development of effective systems to track compressed gas cylinders, sensors to monitor the oxygen content in the blood, methods for measuring hydrogen flows in fuel cell vehicles and devices for predictive maintenance.
Step 5: Share pain points prior to the engagement to allow full preparation on the customer side.
Step 6: Run the“Innovation & Cooperation Expedition.” This full-day workshop provides a forum to exchange ideas and advice, and to collectively select the most promising elements for future collaboration.
Step 7: Establish a joint development roadmap encompassing additional networking opportunities, joint R&D activities and development of proofs of concepts (PoC) with the goal of eventually positioning the “supplier” to acquire the “customer’s” solutions.
Step 8: Present engagement outcome and shared roadmap to high-level sponsors to ensure support during the follow-up phase.
While this initiative has proven very successful, it did take time to implement because both sides had to enlist the participation of a relatively large number of executives, with busy schedules, and who needed to understand the project’s potential benefits. Additionally, Air Liquide had to engage all its chief technology officers and then formally identify all the technological constraints and “pain points” associated with every aspect of its digital transformation.
The project’s long horizon (18 months) also presented its own challenges, namely keeping stakeholders mobilized, motivated, open-minded and informed while the engagement unfolded. In the end, the results have proven extremely positive:
Relationships have been established between the various stakeholders on both sides, with the engagement followed immediately by a more in-depth exchange of information.
Air Liquide’s chief technology officers have received invaluable guidance in terms of examples, ideas and long-term vision from their ST counterparts.
Air Liquide and ST established a priority list of three potential PoCs, with accountable personnel assigned on both sides and a roadmap for future development. Moreover, additional ideas have been discovered in later discussions that may lead to additional projects.
ST has invited Air Liquide delegations to own initiatives usually devoted to ST’s own customers.
Ultimately, Air Liquide and ST plan to share the benefits of successful PoCs with other strategic customers of Air Liquide, thus leading to positive customer experience for Air Liquide, further customer intimacy between ST and Air Liquide, and new business opportunities for ST — a new virtuous circle of value co-creation among the three companies.
Ultimately, the progress of this initiative is monitored by both companies’ CEOs — a sure sign of a mutually beneficial customer-supplier relationship.
Is there a business challenge today that’s both more important, and yet less understood, than digital transformation? Back in July SAMA and ERP software provider QAD hosted a full-day symposium featuring senior leaders discussing how to drive digital transformation at their own companies and at their customers’.
Here, SAMA offers ten important truths about digital transformation from Volkhard Bregulla, VP for Global Accounts Germany and Central Eastern Europe at Hewlett-Packard GmbH. (Click here for the first part in this series.)
First-mover’s advantage is real and growing. The speed of adoption is taking place faster than ever, with new technologies emerging at unprecedented space. This is expanding the gap between the leaders and the laggards.
Business outcomes are the key. Entrenched customers aren’t going to get excited by new digital technologies for their own sake. To hook them, you need to connect the technology to the KPIs they care about. To produce a digital transformation in the manufacturing space, customers need to see double-digit improvement in those critical KPIs.
Start with predictive maintenance. In manufacturing, this is by far the easiest place to start implementing digital transformation. First, it’s easy for the customer to understand. They want to push their machines as hard as they can without risking them. Second, with the wealth of data available, the algorithms are already quite strong. Third, there is enormous money to be made from optimizing asset utilization and predictive maintenance.
Data must be integrated horizontally. Simply capturing data isn’t enough; you have to be able to integrate it across all points on your value chain.
The analytical engine has to sit as close to the process or manufacturing line as possible. Mission critical decisions need to be made in microseconds. That’s why Gardner predicts 70 percent of all processing power will move out of the data center in the next five years. Be prepared.
Find the right people to talk to. If all that processing power is leaving the data room, your SAMs need to learn how to have different kinds of conversations (around KPIs) with different customer stakeholders. (HP estimates that each year two percent of its budget moves away from the people at the customer with whom the company currently engages.) Instead of focusing on the “manager of data,” Bregulla recommends concentrating on the “manager of results.”
Defend, extend, create, disrupt. This is the framework executives use to conceptualize their business. When your SAMs are talking to these people, they need to frame their conversations along one of these four quadrants and be prepared to place your solutions in the context of one of these scenarios.
Bandwidth is the most precious natural resource of all time. The amount of processing power required to run AI and other technologies is astronomical. There will always be computing bottlenecks somewhere; you need to move them around creatively and efficiently.
Your SAMs will need to be trained differently. At HP that means putting its top client executives through a customized, 12-week “Digital Master’s” program that teaches them the fundamentals of driving digital transformation. They are also training these executives on how to sell to the line of business, rather than to IT. It’s a matter of zeroing in on the right customer stakeholder, identifying the KPIs that these stakeholders care about, and connecting it to the right part of HP’s portfolio.
Invest in partnerships to build real-life use cases. Many customers, especially in manufacturing, are inherently conservative. It is hard to sell them on digital transformation with a PowerPoint, no matter how persuasive it may be. That is why HP has invested in partnerships that put HP technology inside actual customer sites. It gives HP’s SAMs and salespeople not just real data (which is huge) and real use cases, but also a real-life setting in which customers can see HP’s digital solutions in action.
Establish a clear, simple process for pushing digital transformation with customers. At HP, it’s the following: (1) Establish credibility on the KPI level (see “Find the right people to talk to” above). (2) Establish what you can do for the customer to impact their critical KPIs. (3) Offer use cases. (4) Establish partnerships within the ecosystem.
Wish you could have engaged with Volkhard in person? SAMA’s Executive Symposium series offers SAMA corporate members the chance to learn from senior SAMs and SAM program leaders facing the same challenges as you. To learn more about the benefits of SAMA corporate membership, contact SAMA Director of Membership & Strategic Accounts Chris Jensen at email@example.com or +1 312-251-3131, ext. 10.