This week, I am hosting a TPSA webinar on the topic of strategies that drive service profitability. This is also the theme of our Fall summit in Vegas. To understand where a service business is losing ground, I have found it helpful to think in terms of two concepts:
1. The Common Phases of the Customer Engagement Work Flow
Every service opportunity passes through similar phases. This is lots of literature dissecting the customer engagement workflow. Let’s use a simplified version that covers six steps that every service organization should recognize:
Identify: The step of identifying new service engagement opportunities.
Qualify: The step of qualifying service engagement opportunities to determine if the customer has budget, the solution being offered is really a potential fit.
Propose: The process of creating a formal proposal to win the service engagement.
Source: The process of assigning delivery resources to execute the service engagement.
Deliver: The act of actually delivering the solution proposed.
Learn: The steps taken to capture any lessons learned that can be leveraged in future service engagements.
Now, with a common taxonomy the service management can use to describe how the service organization engages with customers, we can layer on a second concept to discuss profit leaks.
2. The Marble Model
About four years ago, I created this picture to help a hardware company pinpoint where the service organization was leaking service project margins. The framework is based on the children’s game where you drop a marble from the top of a set of pegs and you attempt to get the marble to bounce into a specific slot at the bottom. The visual works well if you think about a new service opportunity dropping down from the first step in the customer engagement workflow to the last step. At the bottom are the project margins the service engagement achieves in the end. The hope is that the marble keeps bouncing in a way that the final project margin meets or exceeds the target project margin.
To illustrate this visual framework, let’s take the scenario I call the “sales divot.” A new service engagement opportunity is poorly identified and qualified. The proposal process is also less than optimal so that by the time the delivery team shows up on the customer site, they realize it will be very difficult to meet the customer expectations within the customer budget. However, the project team puts their shoulder to the wheel and delivers a herculean effort to get the project done as close to on time and on budget as possible. The scenario is shown on the marble model below:
Now, where does the marble bounce in your service organization? Do you lose ground early in the customer engagement life cycle, or does the marble start bouncing left after a reasonable service deal is signed?
To find out three practices to keep the ball bouncing right for your service organization, join me on webcast Thursday.