How do you transform your field service department from a cost center to a profit center?

For years, companies viewed customer service solely as a cost center. The goal of the service department was to complete the list of problems as quickly and efficiently as possible, preferably at the lowest possible cost. Service was often cut back and human interaction with customers was reduced by technological means. Witness the often long queues on the phone and the sometimes impenetrable self-service options. That may have worked, but for the customer experience, such a service model, focusing on the lowest possible cost, was often very pernicious.

Service as profit center

Today, there is growing awareness that substandard service costs money. More than that, the risk of losing customers is real after a bad experience with customer service or field service. Companies are also recognizing that field service personnel, not necessarily the sales team, are often the only point of contact with a customer. They are there at the critical moments when the customer needs help, is looking for knowledge, or even looking for a new product.

Services are also taking on an increasingly important role in the business model of manufacturing companies. According to a recent study by ABN Amro, large machine builders such as ASML (high-tech), Marel (food), Philips (medical) and Vestas (wind energy) now derive 20 to 40 percent of their turnover from services. Some organizations take this even further and turn to servitization, offering additional services to complement the product. Sometimes customers simply buy a result instead of a product. One example is Philips, which offers LED lighting as a service to retail customers.

The benefits of servitization can be great. Service contracts (in addition to traditional product and machine sales) provide a stable and predictable source of revenue and create a natural long-term relationship with the customer. A report by enterprising bank NIBC shows that many companies' average EBIT profitability (operating profit after depreciation and amortization) of services is a factor of 2 to 5 higher than that of their products. Small note: our recent survey on Digital Maturity among manufacturing and supply chain companies did find that only nearly a fifth of those surveyed intensively embrace the "as-as-service" model. So there is still some growth to come.

But how do you make a service department profitable? A first way is to make your service more efficient, including by using new technologies. In addition, service professionals also need to take on a different role.