Outcome-centric service scenarios
In the final of four deep dive features where we explore the four service scenarios Gartner defined as being dominant in field service across the next five years we look at outcome-centric service scenarios…
Defined by Gartner as a scenario where a ‘Technician is a proxy to the owner with a financial interest in outcomes’, the outcome-centric scenario for field service delivery is potentially aligned to the equipment-centric scenario. However, a greater emphasis on risk is placed on the service provider in return for potentially more significant profits.
Before the pandemic, the shift towards outcome-based services was overwhelmingly the most common discussion within our sector. However, while we all hope that the pandemic and the global lockdowns that followed were a once-in-a-generation event, it did lay bare the exposure to risk that service organisations who had fully embraced an outcome-based scenario faced.
For example, in the aviation sector, where Rolls Royce’s power-by-the-hour offering had been widely adopted in various guises when air travel came to a standstill, outcome-based revenues fell off a cliff.
However, the benefits of an outcome-based approach to service remain alluring for both the service provider and their customers alike.
For the service provider, the acceptance of greater risk sees what can be significantly improved profit margins as well as longer-term service contracts and a greater stickiness with the customer as they no longer become a service provider that can be easily replaced but instead a business partner providing an intrinsic value to the customer’s operation.
The customer, of course, benefits from having a service provider taking ownership and responsibility for a layer of production. The service contract is now centred on guarantees of uptime as opposed to SLA’s, allowing them to focus on their core business without unexpected downtime and loss of production.
From a delivery perspective, much is shared within the equipment-centric scenario. Indeed outcome-based service approaches are, in many ways, an extension of the equipment-centric scenario.
Certainly, as with an equipment-centric approach, the shift away from traditional break-fix, SLA-based service delivery is replaced by guarantees of uptime. However, in an outcome-based approach, this is no longer merely the preferable model; it becomes the central pillar.
As such, once again, the ability to receive asset data in real-time and to be able to draw meaningful and actionable insight from that data is essential. The service provider has to be able to identify well in advance any potential failure and react effectively within a timeframe that allows for the required service to be delivered well ahead of that failure.
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"For the service provider, the acceptance of greater risk sees what can be significantly improved profit margins as well as longer-term service contracts and a greater stickiness with the customer as they no longer become a service provider that can be easily replaced but instead a business partner providing an intrinsic value to the customer’s operation..."
In an outcome-based service scenario, should the service provider not be able to ensure the uptime of the asset in line with the agreement, they will face a loss of revenue.
One aspect of the service delivery, where outcome-based and equipment-based scenarios can potentially vary, is the use of remote service delivery. Ultimately, when the customer is entered into an agreement that outlines a guarantee of uptime, as long as that promise is met, they have fewer requirements for how the uptime is maintained.
The reality is that a service organisation could position a field service engineer on-site 24-7 to achieve the uptime requirements or take a 100% remote service approach. While both are highly unlikely, the fact is that as long as they deliver the agreed uptime, then the customer remains satisfied.
While the approach to delivering an outcome-based scenario will vary on the circumstances of each organisation, it is one where the adoption of remote service could very much be seen as a mechanism for reducing the cost-lines of ensuring service delivery while still achieving the uptime guarantees of the contract.
In particular, for those organisations with an international or global footprint, the adoption of remote service support allows for local, third-party service providers to provide on-site service delivery.
Given the proactive nature of the service calls, and if the third-party workers are provided with similar levels of insight into the requirements of the work to be undertaken as we would provide to internal engineers, then the likelihood is that much of the work could be conducted without too much intervention from the OEM.
However, for those jobs that do require deeper subject matter expertise, then the ability to have an employee of the OEM or service organisation that can provide that support to their third-party technicians could have a dramatic impact on cost-reduction without sacrificing any levels of service delivery in the eyes of the customer.
"To successfully sell outcome-based contracts, it is essential that the conversation is held at a suitable level with the customer, and held in the correct manner, i.e. it is the establishment of a genuine business partnership rather than the transactional sale of a service offering...."
One area where remote service almost certainly cannot be utilised in an outcome-based approach to service delivery is for the remote expert to be guiding the customer’s own technicians. If the customer has agreed to a service contract based on outcomes, as we discussed earlier, how those outcomes are achieved may be of little concern. Equally, they are not likely to be expected to be part of the process in achieving those outcomes.
Another aspect of the outcome-based scenario is that while it is possible and has been put into practice in industries with complex equipment (again, aviation being a prime example), it is perhaps even more suited to sectors with less complex equipment (such as the print/copy/document management sector). Indeed, in such sectors, where many resolutions can be resolved remotely through firmware updates etc., the model becomes far more easily deliverable when aligned to asset connectivity and remote service capabilities.
However, a shift to outcome-based service models also requires a greater shift in thinking beyond the remit of service operations and delivery. As most service management professionals will attest, selling service is a very different proposition to selling products. Similarly, selling outcome-based services is a very different approach to selling a standard SLA-based service contract.
To successfully sell outcome-based contracts, it is essential that the conversation is held at a suitable level with the customer, and held in the correct manner, i.e. it is the establishment of a genuine business partnership rather than the transactional sale of a service offering.
As such, a challenger mentality is required from the service provider within the discussions, as opposed to what often passes for consultative sales, which all too often is just a reframing tool for an off-the-shelf service offering.
To be successful with an outcome-based model, the service provider must understand the customer’s business, the value they can bring to that customer, and the systems, processes and people in place to ensure that they deliver that value.
Additionally, the service provider has to be prepared to sacrifice the often-lucrative spare-parts revenue as this will become cannibalised within an outcome-based service contract.
In summary, if an organisation were to take an outcome-centric approach to field service, they should consider the following:
- Are they able to receive data from their assets in the field?
- Do they have the capability to monitor this data in real-time and draw meaningful, actionable insight from them?
- Does the organisation have the personnel, structure and resources to meet the guarantees of uptime required for such a model?
- Is there an appetite for customers within their sector for such a model?
- Given the potential exposure to risk that outcome models can bring, would they be looking to operate this model alongside other service solutions?
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