Outlook Journal, May 2003
It's become a familiar story in just about every industry: As their products become commodities, companies watch their competitive advantage erode and growth stagnate. A number of executives, however, are turning to an unexpected source to sustain healthy returns and boost profits: the once lowly area of after-sales service.
"Customers are seeking comprehensive solutions," notes Ed Starr, managing partner of the supply chain unit of the Accenture Communication & High Tech operating group, and one of the authors of this issue's cover story on service management. "Innovative companies are responding to this trend by bundling excellent products and strong service offerings, which they find can differentiate their companies in the marketplace and help drive growth."
Once regarded by many companies as something of an ugly duckling compared with much higher-profile manufacturing and selling activities, the role of after-sales service in a company's overall profitability is undergoing reevaluation. In a cross-industry survey conducted earlier this year, more than 70 percent of the executives polled told Accenture that the introduction of new service offerings could increase overall revenue by anywhere from 10 percent to more than 30 percent, depending on the maturity of the industry and the nature of the product.
In their article, Starr and his colleagues explore the new strategies, tools and infrastructure requirements associated with service management, as well as the wider benefits. "It's a kind of virtuous circle," says Starr. "Knowledge gained by the service organization through contact with the customer is fed back to the manufacturing organization to help make product improvements, which in turn can mean additional sales and profit." Hence shareholder value is enhanced not only by virtue of increased service revenues but by lower operational costs and capital expenditure as well.
Two companion articles in this issue echo these themes. In his column, Accenture's chief scientist, Glover Ferguson, puts the delivery of service through products and the evolution of other strategic initiatives in the larger context of the perennial search for sustainable competitive advantage. And another article looks at the extraordinary potential of telematics, a wirelessly enabled, computer-enhanced tool for gathering customer information that will be an important element in successful service management.
Making service an integral part of the product will require a fundamental shift in focus and emphasis that not all companies will be comfortable with—at least, not initially. But the transformation of after-sales service from one-time loss leader to growth engine will make the journey well worth taking.
David Cudaback
Editor-in-Chief, Outlook
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