During the Fields Service Asia in Singapore, Martin Fischer (Carl Zeiss Microscopy), Chistian Schmid (Belimed), Mikael Lindholm (Telenor Group) and myself had a keynote panel discussion on why field service should be a profit centre or not, what are important obstacles in establishing a profit centre and how to overcome these obstacles.
Some key points we touched are:
- There are profit-centres and profit-centres. Different companies have different not all established the same level of profit-centre. The basic is having a solid profit&loss statement in which all service revenue and cost are recognized and allocated (management accounting). Next is also being accountable for the profit (governance), which requires having the power to control cost and revenue. This doesn’t necessarily mean you need to have a dedicated service sales team, as long as you can drive which services are being sold, how and for which price.By the way, this also means the service team has its budget to invest and innovate.
- How you design the profit-centre depends on the business strategy. In cases where service is rather insignificant, and the aim is to grow the service coverage on your installed bases and to monetize these services, it makes sense to increase focus and allow more autonomy in the service department to drive this development and preventing it to drop off the table because of other priorities.However, when you’re transitioning to an integrated offering, like pay-per-use, te focus is not any more on building a service profit, but about integration of business.
- Development of services will become quite visible. Success heavily depends on the level of collaboration and support from the sales, marketing, R&D, the board and others. So the name of the game is establishing a shared concern, a common goal and aligned strategies.We should become equal partners with the other stakeholders, become entrepreneurial business-leaders, be bold and take ownership towards these stakeholders and being “customer obsessed” like Mikael Lindholm advised.
- Do not discount services. However, service can be part of an integrated, packaged value proposition, in which service is not invoiced seperately. One of the challenges is to always articulate the value of service..