People use the term “thought leader” so often that it doesn’t carry the weight it should. However, after speaking with Dr. Wolfgang Ulaga for an hour about advanced services, it was clear to me that he’s an example of what a true thought leader is.
The AT&T Professor of Services Leadership & Co-Executive Director of the Center for Services Leadership at Arizona State University’s W.P. Carey Business School, Dr. Ulaga has spent more than 20 years consulting businesses on how to develop, refine, and sell advanced services across multiple industries, from waste treatment to medical devices.
In lieu of his breakout session at LiveWorx, “How to Successfully Grow Your B2B Service and Solutions Business” I spoke to him about some of the advanced services he discusses in his book, “Service Strategy in Action.” What followed was a straightforward, honest conversation about the different types of advanced services and the prerequisites to implementing them.
Process support services are activities whereby a company leverages its resources and skills to assist customers in “getting the job done.” The focus is on providing inputs, such as consulting or training. You perform an action for the customer. Process delegation services are when you guarantee an outcome. Generally speaking, there are four types of advanced services:
These services fit within the quadrant below. Both AES and PDS are output-based services because you promise customers that you’ll deliver a result (99% uptime, complete execution of a process, etc.). PDS is the most advanced service an organization can offer.
Dr. Ulaga's quadrant displaying the four advanced services.
So, there are core competencies you must develop before you can deliver PDS. You can’t just jump from PLS to PDS. Instead, you must focus on offering asset efficiency services or process support services first and refine the expertise associated with running whichever service you choose.
For example, let’s say you manufacture commercial HVAC equipment. All of your equipment has sensors. In order to offer AES, you have to acquire the means to collect, clean, and analyze the data from that equipment. That level of oversight allows you to say, “I’ll guarantee this HVAC unit will work 99.5% of the time over this four-month period.”
After mastering asset efficiency services, that’s when you can start thinking about whether you can get into the business of process delegation.
Let’s return to the example above. Moving from AES to PDS would require that you change the value proposition. Instead of guaranteeing equipment uptime (i.e. your HVAC system will be up and running 99.9% of the time), you now promise customers an agreed-upon temperature in your building. And it’s your job to achieve the result.
To get there, you need to build additional expertise in building management. What sort of problems do building managers encounter? What would enable you to prevent those problems, or resolve them more cost-effectively?
That’s where you have to make a critical decision: Is it worth it for your company to invest in developing expertise in customer processes? You need to carefully assess which areas would complement your product-related services.
Some customers don’t actually want PDS. Although it’s an advanced service model, it doesn’t make sense for every customer – or your company, for that matter.
So, let’s use airlines as an example. There are some very large airlines who have their own MRO capabilities, who manage their own supply chains, and are very good at executing those processes. For them, outsourcing jet engine maintenance and repair might not be a priority at all.
However, there are those economy airlines that look at the same issue in a very different way. All they care about is having a fully functioning aircraft so they can fly passengers. As such, they’d be very much open to the idea of another company handling their MRO process. So, two companies competing in the same market may have two very different attitudes toward process delegation services.
In addition, even if a company is open to receiving process delegation services, it may be very selective about which processes it chooses to hand over to a supplier. If a process has a huge effect on the strategic direction of your company, you don’t want to hand that over to a third-party.
The bottom line is that PDS isn’t a good fit for every service provider or customer. Customers must be mature enough and willing to closely cooperate with a vendor in this space to unleash opportunities for achieving cost reductions or productivity gains through PDS. Likewise, suppliers must acquire and build the competencies and skills before rolling out such offers.
Yes, for some organizations, it’s a goal to reach for, but it’s not applicable to every company in the world. There is a “happy life” to live for many suppliers without being a “solutions provider.” As the quadrant above shows, there are many other ways to grow your service business before venturing into this space.
To learn more about Dr. Ulaga’s session as well as others around aftermarket service innovation, explore the LiveWorx Service Transformation track below: