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Bringing Service Strategy to Life The Accenture approach for translating an abstract strategy into actionable initiatives in the communications, media, and technology industries
Reacting to service trends and challenges in the communications, media, and technology industries many clients are currently adapting their service strategies and need a pragmatic approach to bring those strategies into the organization. During several client engagements Accenture has developed a comprehensive and industry-proven framework as a guiding principle for all relevant internal and external service stakeholders. Supported by real-life project examples this point of view will
• provide a pragmatic approach how to break complex service operating model into single elements, improve them and merge back together to ensure a successful translation of an altered service strategy into daily service operations
• provide a toolset to define actionable measures to implement the new service operating model
As a response to the market situation and to pursue individual business goals, companies are looking for ways to adapt their service strategy. Telecommunications companies, for instance, look to recoup their investments in network capacity and technology, since customers expect high-speed networks with unlimited data capacity at no additional cost. And consumer and enterprise technology companies may see promise in service operations as a way to respond to volatile trends and higher customer expectations.
Likewise, aerospace and defense companies have recognized the value of the service business and are introducing their own service offerings instead of allowing competitors to generate those revenues. Medical equipment technology makers, on the other hand, may consider revamping service operations as a way to meet increasing regulatory demands for end-to-end supply chain transparency. These are just a few of the ways companies are adapting in the face of many broad market challenges in the communications, media and technology industries.
As a whole, all these firms face shorter time-to-market cycles and increasing product convergence and complexity. At the same time, customers put a strong emphasis on support, maintenance, and repair services and spread the word quickly when services fall short. These factors come together to raise the stakes and make it that much more difficult to provide high-quality service operations that are actually profitable.
Often, service executives create a vision for their service operations but struggle to get C-level attention and a budget for their service overhaul ideas. In addition, service executives may face difficulties turning a grand vision into daily operations.
The struggle companies face is understandable, considering the complex service operating models that are typical to the communications, media and technology industries. What may appear to be a small problem in isolation or a small change to the operating model can actually impact service operations in a variety of ways. That’s because single elements of the operating model, which we will discuss in depth, interact and influence each other. Complicating matters more, the service operating model must be effective inside complex organizations and within a quickly changing market.
Given these constraints, Accenture believes companies should begin with a full understanding of the service setup that is right for them and the impact of the setup on implementing a service strategy. Using our deep aftermarket experience, Accenture helps clients cut through operating model complexity with an end-to-end framework for implementing service operations. The framework is used to break complex service operation models into single components that are defined, refined, and rolled out in daily service operations.
We do this with our enhanced mix of strategy, processes, and execution, drawn on our service operations capabilities. These include service strategy definition, integrated warranty, return and repair management, service inventory optimization, predictive analytics, and pricing optimization. This is all combined with a portfolio of managed services, where applicable.
Once in place, elements of the model can be altered as the need arises. However, each time a component changes significantly, clients will need to go through an iterative process to reassemble the model’s interdependent elements so that the whole process is consistent once again.
“Using our deep aftermarket experience, Accenture helps clients cut through operating model complexity with an end-to-end framework for implementing service operations."
After-sales service in the communications, media, and technology industries is of growing importance. Service is moving to the forefront as a business strategy. As competition continues to erode product margins, companies are exploring service to better connect to their customers and to generate new revenue streams. More and more customer satisfaction programs are being launched, with an understanding that the customer experience will be a major brand differentiator. At the same time, service cost reduction through process efficiency and asset optimization still remains a high priority.
Introduction
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Break down
To help clients understand and redefine their industry and company-specific service operating models, we must break down the model into the smallest possible components that require management.
Merge and align
Once ideas have been sparked for closing the gap between as-is and to-be strategies, Accenture pulls them together, merging the defined initiatives into an overall service operating model. We fine-tune single elements, consider interdependencies, eliminate redundancies and transform the model into a coherent whole using an iterative approach.
The objective is for all initiatives in the operating model to work together smoothly so that as a whole, the service strategy reaches the goals defined by the client and can be adapted as those goals change with market demands.
Break down• Break down the service operating model into single elements
Analyze and define• Assess as-is and define to-be for each single element
• Specify initiatives to close the gap
Merge and align• Merge the elements and the defined initiatives into a complete new service scenario
• Eliminate inconsistencies by fine-tuning the single to-be initiatives
Recommend• Calculate business case
• Prioritize initiatives and derive implementation roadmap
Additional steps to reduce complexity in the "Analyze and define" phase and to improve consistency of to-be scenario
Typical project methodology
Prepare• Identify and evaluate factors that impact service strategy
• Comprehend current service operating model specifics
Bringing strategy to life approach
© 2013 Accenture. All rights reserved.
Our Approach
Figure 1: Strategy implementation approach
Our end-to-end framework features five steps. Two of the steps are not typical, but they are important for service strategy implementation projects. Accenture integrated these two steps into its methodology over the years, since the steps proved to be crucial for success.
Accenture’s additional steps for bringing service strategy to life are:
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Prior to starting, the key factors that influence a service operating model need to be identified and their influence on the model must be fully understood. For instance, internal factors, such as targeted SLAs, as well as case volume and distribution, will have a big impact on how the model performs. Likewise, the complexity of the technical product and the value of the devices and components are important.
External factors that influence a model must be equally understood. They include the market infrastructure and legal environment, competition (for both products and services), and the maturity and ability of suppliers to provide components and services.
Practice example
A healthcare equipment manufacturer had significant problems with its internal and external repair supply chain.
The repair network had grown to encompass a large number of suppliers. Repair lead times were two to three months, the repair yield and scrap rates did not meet targets, and the fragmented nature of the repair process meant the company had little oversight. As a result, the company faced significantly higher repair costs than budgeted, and it operated with an outdated portfolio of parts to repair.
In addition, the product mix changed over the years, and manufacturing shifted to emerging markets. Adding to the complexities, company executives were uncertain about which repair strategy to follow in the future.
For many companies, it’s often tempting to tackle one or two single problem areas. But if companies stop there—without considering all problems and the interdependencies of the entire repair supply chain—opportunity is lost. Accenture helped the client form a strategy that addressed all its challenges in the right order, based on a thorough understanding of internal and external factors that impact the healthcare equipment manufacturing business.
Internal factors
Typical operating model influencing factors
CustomersCase volume & distribution
Targeted SLAs
SuppliersComponent availability
Service supplier availability
Competitors
Service competition
Product competition
Market
Infrastructure
Legal environment
External factors
Technical product complexity
Value of devices/components
Technology/ products
© 2013 Accenture. All rights reserved.
Figure 2: Influencing factors
Step 1: Prepare
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6
Each company in each industry has its own ideas about how to differentiate itself against the competition using services. Companies must take sufficient time to comprehend the specifics of a given service operating model prior to breaking it down. Generally, however, service operations are conducted with three main areas: operations governance, operations execution, and operations management.
The effectiveness of these areas depends on people, and it is supported by IT systems and infrastructure. Of course, service doesn’t take place in a vacuum. The overall model is impacted by the market and technology as well, which we consider when designing a service strategy.
To analyze the impact of a service strategy change on a complex operating model, the structure of the model must be broken down into single elements that can be assessed separately. Deep functional and industry knowledge is essential to define single elements as specific for a company as possible and to make best use of this assessment.
Practice example
In one case, Accenture worked together with a manufacturer of aircraft to design a greenfield service strategy. The company wanted to offer full MRO service and support for in-flight aircraft, but it did not have the required capabilities.
Accenture and the client designed the overall service business model, defining which services would be offered in the service portfolio and how they would be provided (i.e. either internally or through external partners).
To do so, we analyzed the service operating model elements one by one to form an overall service organization and its operations. The proposed model was mapped in a business case that showed how the company will make money from services and provided a roadmap for the rollout of the service initiatives.
IT systems
Infrastructure that supports service processes
People enablement
Change management activities that ensure the required skills and capabilities of employees
Influencing factors
Elements and trends that are difficult for service executives to change, such as markets and technology
Service operations
Governance end-to-end service operations governance, including organizationstructure, roles and responsibilities
Executioncarrying out processes to deliver customer services
Managementservice asset management, as well as controlling of operational costs and quality, internally or with partners
Governance
Execution Management
People enablement
© 2013 Accenture. All rights reserved.
Serviceoperations
Supporting systems and tools
Influ
encin
g fact
ors: m
arket, tec
hnology/products, customers, competitors, suppliers
Figure 3: Service operating model framework
Step 2: Break down
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After companies have identified the single elements of their desired service operating model and what influences those elements, they can begin with an assessment. To do so, companies must first create a vision for the “to-be” status and compare that to the “as-is” situation. If a company discovers a gap between the two, an initiative must be specified to close the gap.
We will now examine the three main parts of the service operations model—operations governance, operations execution, and operations management— with a view on how to assess and define them.
Service operations governance
Operations governance is about structuring and steering end-to-end processes and parties involved in the organization. It defines how functions interact in the end-to-end value chain and how each contributes to the overall strategic objective. Operations governance should to balance both, functional and process views, and to enable an integrated decision making.
The fundamental governance decisions, such as, service set-up within a company or decision for a process- vs. a function-led organization, are often beyond the responsibility of a sole service business, as they need to follow the overall company’s strategy. Even so, service business should proactively manage its stakeholders and their roles and responsibilities. This may include employees, customers, suppliers, shareholders, regulators, the environment, and the community at large.
One of the simpler ways to do this is with a RACI matrix. The matrix can create a full picture of services to be delivered and the relevant stakeholders.
RACI stands for the following roles: responsible, accountable, consulted, and informed. By mapping these roles to the organizational structure, companies can quickly identify: • if a service organization is responsible
and accountable for its key functions • which functions are redundant or
missing within the organization• which stakeholders have a high impact
on service functions and if they are involved sufficiently
Accenture experience shows that after a RACI assessment, several organizational changes are usually needed to support the new service operating model.
Practice example
A global consumer products company was using a call center to support product sales. The call center was governed centrally and was not able to meet specific needs of different business divisions. A consumer electronics division was using the call center for its after-sales service as well. Due to a lack of technical product knowledge, call center workers were not able to narrow down the problems that customers faced (i.e. to determine whether the customer faced a technical problem, the inability to use a product, or buyer’s remorse).
As a result, the company suffered high no-fault-found rates that led to expensive service operations. Accenture helped the company realize the need for an organizational change so that the division could interact with the call center and agents could provide customers with professional after-sales support.
Service operations execution
Operations execution is the essence of every service organization and comprises the core functions of the service value chain: from customer interaction at various touch points to transport, on-site and back-end repair, and service parts handling.
Companies should answer each of these questions to define the future service operating model: What is the scope of service operations? How will the service be operated? Who will execute the operations? And where will the operations take place?
After answering the questions, a company will have the information at hand to create a to-be scenario for operations execution. Once designed, the gaps between the current status and the to-be status must be identified.
Step 3: Analyze and define
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Customer touchpoint Transport Repair Service parts handlingWhat? How?
Who? Where?
Figure 4: Key questions for the set-up of operations execution
What? What kind of service will be provided?• Technical complexity: 1st,
2nd, … level support• Scope: sales, usage or
technical support• Cost differentiation:
premium, standard, self-service, etc.
What is the scope of transport operations?• Transport from point
A to B• Initial screening• Simple repair
What products will be repaired?• Repair decision: volume,
cost-effectiveness, availability of new parts, technical criteria, regulations, in –service/ out of service
What is the scope of service parts handling?• Replenishment (incl.
order mgmt.)• Supplier (lead time)
management• Warehousing• Pick-pack-ship, incl.
labeling• Scrap management
How? How will the service be delivered?• Delivery channel: call
center, Web, retail, etc.• Technology: phone,
remote, chat, etc.
How will the transport be executed?• Transport mode: air,
sea, etc.• Service timing: express,
standard, specific hour• Consolidation: bulk vs. single
How will the products be repaired?• Personal repair• Swap and scrap• Swap and repair
How will the service parts be handled?• Service parts ownership• Degree of automation• Warehouse management• Pick-pack-ship strategies
Who? Who will deliver the service?• In-house or outsourced• If outsourced—which
partner?
Who will transport?• In-house or outsourced• If outsourced—which
partner?
Who will repair?• In-house or outsourced• If outsourced—which
partner?
Who will handle service parts?• In-house or outsourced• If outsourced—which
partner?
Where? Where will the main touch -points be?• Location: on-shore,
near-shore, off-shore• Density: number of service
points• Management: central vs.
regional
Where will the main hubs be?• Density: number of hubs
and partners per country/region
• Management: central vs. regional
Where will the main repair locations be?• Location: on-shore,
near-shore, off-shore• Density: number of
partners per country/region
• Management: central vs. regional
Where will the service parts handling locations be?• Density: number of
locations per country/region
• Management: central vs. regional
© 2013 Accenture. All rights reserved.
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Figure 5: Service operations controlling cyclesService operations management
The third pillar of the service operations model—operations management—includes parts and inventory management, as well as service operations controlling.
Unlike service parts handling within operations execution, parts and inventory management here refers to the management activities related to spare parts, as opposed to their actual handling. The goals can be strategic or operational and include logistics network configuration, integrated supply chain planning, product life cycle management, supply and demand management, inventory optimization, and order management.
Service controlling activities are designed to make sure service costs, revenue, performance, and customer satisfaction levels meet internal objectives and those of service partners. They can be part of mid- or long-term strategic plans to phase-in or phase-out service partners. Or they may be related to daily operations, like support for repair partners, performance reporting, or claim and invoice validation.
As companies design their controlling cycles, they must carefully select and implement the activities that fit with their internal and external environment and target service strategy. KPIs and processes that make sense for a network of 40 service partners that repair low-priced gadgets will not be the same as for a network of two repair partners that work on highly complex electronics.
Supporting systems and tools
Just as companies plan ahead to enable people to carry out the new service strategy, they must consider IT early in the planning process, since IT will likely be impacted by any significant change in the service operating model. During the planning process, companies will see the impact that IT can have on cost cutting and quality improvement, as well as how it can be used as a competitive differentiator. Given the wide range of service-related requirements companies need to fulfill—and the variety of service systems available—IT should be considered as part of a separate process. For this discussion, we are limiting ourselves to matters of operating model design.
People enablement
To monitor that the new service strategy is “lived” by employees within an organization, companies must plan ahead on how changes will impact the workforce and how those changes will be communicated. It is not enough to have systems and processes ready; proactive change management needs to be carried out as well to ensure the buy-in of people impacted by the changes.
People change process will be managed with leadership, communication, training and the development of targeted work cultures. To take an example of one change element, companies must communicate about the strategy implementation differently to different groups, to help achieve commitment to the goal. Managers may require only condensed information on the progress and budget, while people in operations typically need a detailed understanding of how the changes will impact their daily tasks. The way the information is delivered is important, too. Depending on the situation, management may choose personal communication, a newsletter, e-mail, an intranet article, a meeting, or a survey.
By making sure people see the advantages of the new strategy and are kept abreast of its impact on them, companies can prevent costly failure during a strategy rollout.
Phase-in
Phase-out
Go live
Escalation
Enabling cycle (quarterly/yearly)
Improvement
Audi
t Analysis
Training
Reporting
Impr
ovem
ent
Analysis
Communication
Operational cycle(monthly)
© 2013 Accenture. All rights reserved.
and review
mea
sure
measures
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Once companies have defined their to-be operating model and initiatives for the governance, execution, and management of service operations, the entire operating model must be pulled together. Any potential redundancies or gaps among the initiatives need to be recognized and eliminated, keeping interdependencies in mind. By doing so, companies can optimize separate areas of service as well as the overall service, from a business and a customer perspective. Let’s say a company wants to reduce the cost of rendering a service by raising its no-fault-found (NFF) rate. To accomplish this, it may reroute customers to the company’s own Internet service portal.
The company will also need an enhanced knowledge management solution and a returns management system to ensure that the Internet service portal has the desired functionality. Once the improved NFF filtering rate is achieved, the number of returns will decline (by up to 40 percent in some cases in the consumer electronics industry).
At that point, the network of repair partners and the logistics flows will need to be consolidated, since fewer logistics providers may be needed when shipments and returns processes are made standard.
Therefore, an investment into a returns management system should be considered for all the benefits it may create in multiple business areas (due to model interdependencies). Or, to state it another way, companies may fail to get the full benefit of their investments if they don’t have the right overall strategy in place.
Step 4: Merge and align
Figure 6: Impact of improvement initiatives on service value chain
Scenario „Reduction of returns trough no-fault-found filtering
CustomerTypical aftersales service value chain
Exemplaryinitiatives and theirimpact on the servicevalue chain
Initiative
TouchpointsTransport and parts handling
Warehouse
Shop
Repair
Route customers to
preferred touchpoints
Requires detailed case and person
data
Increases repair
lead times
Increases call center
volume
Changes logisticsrequirements
(e.g.pick-up, pre-paid postage)
Requires improved
knowledge management
Indroduce RMA
concept
Requires warehouase screening function
Results in a consolidation
of the logisticsprovider network
Impact/prerequisite
Consolidationof repair vendor
network
Reducesrepair
volume
Reducesrepair volume
Warehouse
Workhouse
12
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In the final planning phases, companies must set priorities for the initiatives they have defined and pulled into a coherent, overall strategy. Often, this is easier said than done, given the sheer volume of changes planned for the service operating model.
To set priorities, some companies choose to assess the initiatives based on a cost- benefit analysis. They assign a possible monetary value for specific goals, such as better NFF filtering, reduced repeat repairs, and lower logistics costs, and they examine the effort and costs involved. Companies may also consider the time it will take to implement the initiatives and the impact on customer satisfaction. Even with a high-level assessment, companies can spot initiatives that are relatively easy to help implement and bring potential benefits.
During this step, it is important to group initiatives which need to be implemented together, given their interdependencies. An ideal implementation plan can be made once critical points for each initiative have been mapped out, including priority, time needed for implementation, availability of resources, interdependencies, and qualitative factors, such as compliance. It all comes together into a solid business case that will help win buy-in internally and secure the required budget.
Step 5: Recommend
Ease ofimplementationlow high
Fill the gapAvoid
HarvestInvest
Knowledgemanagement
system
RMAconcept
Wave 2
Wave 1
Benefitpotential
Wave 3or skip
?
Skip
© 2013 Accenture. All rights reserved.
Tight repairvendor
controlling
Repairdecisionrevision
Consolidaterepair vendor
network
Harmonizationpoint-of-sales
conditions
Figure 7: Initiatives assessment matrix
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About the Authors
Till [email protected]
Till Habel is leading our practice area “Service Strategy & Operations” in Accenture’s Management Consulting Group, in Munich, Germany.
He has worked in management consulting with many leading consumer electronics and high-tech companies in Europe for more than five years. His functional expertise covers all key aspects of service—from strategy to process and network optimization, service revenue generation, and business process outsourcing.
Prior to joining Accenture, Till worked for more than 11 years for mobile communication companies.
Aiste [email protected]
Aiste works in Accenture’s Management Consulting Group, in “Service Strategy & Operations” practice area and is based in Munich, Germany.
She has been working in management consulting for multipleyears with a focus on supply chain and after-sales strategy, business process optimization, and implementation.
Aiste has worked with global leading high-tech companies and supported them in their service strategy and operations.
Marc [email protected]
Marc Perbix works in Accenture’s Management Consulting Group, in “Service Strategy & Operations” and is based in Munich, Germany.
He has six years of management consulting experience in after-sales service strategy development, process optimization, and managed services projects.
Before joining Accenture, Marc worked for a mobile communication company and was involved in various customer care optimization projects.
About Accenture
Accenture is a global management consulting, technology services and outsourcing company, with approximately 289,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page is www.accenture.com.
This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative.
Copyright © 2014 Accenture All rights reserved.
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