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Service Business Growth in Manufacturing Companies

The emerging service business

After some time, a successful manufacturing company has created a large footprint in its market; a large installed base. All of the products in operation require services to be performed by either their owner or a third party, typically the manufacturer.

If the manufacturer has a direct go-to-market model, service units are established in all major markets/countries and, after a while, in the evolution of the service business, services comes to represent 10-20 per cent of total company revenue. With the continued success of product sales, the service business will just continue to grow, as service business is mostly cumulative.

Ambitions to develop the service business

Typically, this is the point where the HQ service manager position is established to take on responsibility for the profit/loss of the global service business, which is the consolidated revenue and costs of all the service units.

The service organisation

The HQ service manager is either given direct control over the service unit managers in the subsidiaries, or more commonly, the organisation is set up as a matrix organisation in which the service manager is a functional manager for the local service managers in each subsidiary and the line manager for the local service manager is the subsidiary’s managing director or business line manager. Each subsidiary has a number of service units that are under the umbrella of the local service manager.

In a manufacturing company, customer service is rarely viewed as core business and many people do not understand the business logic behind a service business. The members of the company’s management team do not understand the HQ service managers’ opportunities and challenges, making the HQ service manager position a lonely one.

Therefore, the company set-up and its internal support are not fully aligned with the requirements of the service business, which causes problems for the service manager when hiring people, following up on financials, investing in IT and driving change in the service units.

Service business development

There are three ways for a global service manager to develop a service business:

What we have observed is that the last option is the one that makes the difference from an earnings perspective but that, on the other hand, is also the most complicated to achieve because it involves agreeing on a common way forward (best practice) for many of the service units and then convincing them to implement that best practice.

As a service manager, when you want to grow your service business, one of your goals is probably to address the offerings and the way of selling in the service units. Service delivery is a well-known capability that has been developed for decades, but the commercial side of services is a more delicate area where the in-house organisation has less experience.

Add experience and resources?

If you want to grow your service business by improving your service offering or way of selling services, we recommend that you investigate whether you have:

If any of these criteria are not met, you risk drastically delaying the project and not achieving even close to what you expected in revenue increase because of a poor solution or an only partially implemented solution.

This will cause what we call “lost revenue”. That is, the expected revenue increase does not materialise.

You can make use of our experience

Balder Consulting helps service managers create the right conditions and has experience of this type of project. In fact, it is the only thing we do. Therefore, we can help you minimise risk and lost revenue and our fee will be only a fraction of the improvement in lost revenue.

We want you to be even more successful.

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