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Servitization: Selling Usability and Performance

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Image Source: Anete Lusina | Pexels

Sell the mobility, not the vehicle! Sell the light, not the lamp! Sell the cooling, not the AC!

In a continuously changing market with intense competitiveness and constant shifts in the customer’s behavior, traditional manufacturers have to keep adapting and innovating to maintain their positions. 

An innovative business strategy that shifts the traditional way of doing business is servitization, a process through which the producers go from a product based model to a Product-Service System (PSS). Companies are no longer producing and selling products alone. They are selling services, integrated solutions, and an overall greater experience for the end consumer.

According to Miying Yang and Steve Evans’ study on “product-service system business model archetypes and sustainability,” a generally agreed-upon way to classify the PSS is to include it in one of the following models:

  1. Product-Oriented – when the provider sells the product that ends in the buyer’s ownership. Other services such as consultancy or maintenance can be sold.
  2. Use-Oriented – when a business provides customers with the utility of a product while keeping its ownership. Examples are renting or leasing.  
  3. Result-Oriented – when the company sells the results of a product or the value being delivered to the customer. The customer only buying the consumed light instead of lighting products is a relevant example of this typology.

To remain relevant in an always-evolving environment, companies should seize every opportunity to enhance their performance and obtain competitive advantages. Servitization is a win-win model benefiting all the involved parties that’s  why an increasing number of businesses are approaching it. 

Competing through advanced services is, first of all, an opportunity for growth and profitability as the revenue streams are more diverse. By offering complimentary ongoing services, the income gates certain stability due to recurring and incremental revenue streams.

The relations with the clients are strengthened as their satisfaction is increasing and their loyalty is drive-up. Greater alignment with the customer needs facilitates a long-term relationship and a better relationship with the customers means higher barriers to competition.

Using a servitization model can become an important source of insights for further innovation because providers are still connected to their service which eases the detection of improvements and can spark ideas for new services. Additionally, services are more labor-dependent and less visible which makes them more challenging to replicate and become a sustainable source of competitive advantage.

With all the above benefits also come challenges that companies face in their process to adopt servitization. The biggest problem results from the aversion to change. Old habits die hard while shifting towards servitization requires fundamental changes in the way companies are doing business, affecting every aspect from the strategic approach to everyday operations.

It is a time-consuming transition that needs to be done gradually to avoid putting pressure on the enterprise’s resources. Also, it requires adjustments in the existing capabilities, new technologies need to be deployed to support the services offered, and the employees need to develop related competencies.  Customers’ perception is another challenge that companies face, as clients may be reluctant to adopt an unfamiliar servitized solution. 

Selling Performance: Pay-per-lux and Power by the Hour

Philips Lighting, currently activating as Signify launched the ‘Pay-per-lux’ model, a ‘lighting-as-a-service’ offer for its customers. Signify handles the entire lighting service – design, installation, maintenance, and upgrades while the customers pay a monthly service fee for light. The program considers circular principles and uses advanced technologies like AI and the Internet of Things. In this model, Signify keeps the ownership of the lighting systems and offers a five-year performance contract, which is based on a series of key performance indicators such as light level, uptime, and energy savings.

The solution was first deployed for the National Union of Students from the United Kingdom. Signify is responsible for the lighting system for 15 years, while NUS pays a quarterly fee. As a result, the energy costs have been minimized while the technologies used are continuously updated, and annual checks are done to assess the system’s health and prevent maintenance. 

Rolls-Royce manufactures engines for the aviation industry and implements a servitization model named Power by the hour through which customers have access to a service package by a dollar-per-flying-hour payment mechanism. CareServices solution offers a variety of services to customers such as engine monitoring to predict potential maintenance problems and ensure the aircraft is ready to fly on time, efficiency services to balance the low fuel consumption with optimized flight operations, asset and safety management solutions, in addition to world-class customer support.

The most recent service agreement has been signed with South Korean airline T’way Air. It will benefit from a service concept based on predictability and reliability that will secure the cost of operating, maintaining, and enhancing aircraft availability.

To sum up, there are many other companies from different industries that are moving their focus towards servitization. Even though it is not shielded from risk, the model can create significant benefits in relation to resource efficiency, growth, customer relationship, resilience, and impact on competitiveness. For a traditional manufacturer, a gradual transition from product commercialization to a servitize offering can become a decisive factor in its long-term sustainability.

To ensure a smoother transition from the traditional way of doing business to servitization, join the Certified Strategy and Business Planning Professional course offered by The KPI Institute. Develop the right plan and strategy for your business in achieving servitization. For further details, visit kpiinstitute.org.

All You Need to Know About Customer Experience

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The customer experience is based on all the interactions a customer has with a company or brand during their relationship. This spans every touchpoint with an establishment which includes accessing them via in-store, online, customer support, and product which encompasses every relationship a customer has with a brand. In essence, customer experience refers to the customer’s view of a brand based on the totality of each interaction. 

If you are a business owner, you know that every interaction with your customers, big or small, can impact their experience and how they feel about your brand. You cannot create a unique experience until you know where and when your customers are interacting with your brand. Not all customers know what they specifically want from you, so making this step more enjoyable will help them focus and engage with your brand.

As a business, if you can understand how customers perceive your brand, you can provide them with a better customer experience. Actively collecting customer feedback to understand what is working well and what needs improvement provides a clear picture of how you and your customer service team can improve the customer experience over time. You can use this valuable information about your customers to identify improvement opportunities and enhance the customer experience. Armed with this understanding, employees in the organization can better identify gaps between the desired and current performance, and refocus efforts on new areas of customer service that can be improved. 

Importance of a positive customer experience

One thing is for sure: to provide a positive experience, you need to know your customers better than ever. A positive customer experience can also be a huge ROI benefit given that nearly 65% ​​of consumers consider customer experience to be more important than the price of a product or service. This is important to note because if the customer experience is poor, other areas of the business will be affected. Improving customer experience would not only positively affect other areas of the business but also be a great way to increase profit margins. Therefore, creating a positive customer experience is critical to the success of your business because a happy customer is more likely to become a repeat customer who can help you increase your income.

When customers are happy and satisfied with their interactions with your business, it leads to a positive customer experience that increases customer loyalty, repeat customers, and customer retention, as well as encourages branding. When customers feel valued and can appreciate the overall experience of doing business with your brand, they become loyal customers that can help your business expand. Not only that, but loyal customers help spread positive feedback about your brand and attract new customers through referrals. 

A great customer experience is based not only on the quality of the products and services you offer but also on how you invite customers to interact with your brand across the multiple touchpoints that you have available. This results in great customer reviews through positive word of mouth that can promote your brand in ways you never imagined possible. 

Once you get to know your customers well enough, you can use that knowledge to personalize every interaction. That is why it is so important to provide an amazing experience and make customers want to keep doing business with you. Customers are your best asset in building your brand awareness.

Onboarding Strategies during a Post-pandemic Scenario

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To integrate new employees into a company, the process of onboarding is done so they can learn about the organization and its structure, culture, vision, mission, and values. Most organizations have developed onboarding plans and strategies that go well with the traditional working setup of going to the office to have a physical presence and touch-based environment amongst employees which changed drastically in the past few years due to the global lockdown. Now that businesses are moving towards a  post-pandemic era, there is a need to revisit the onboarding process to get the desired productivity and longevity of an employee in the organization. 

The onboarding process, which normally consists of a series of activities spanning several weeks to months, has shrunken to a few days or even a few hours due to the change of the working environment to a remote online setup. While there is an ongoing transformation of the working culture, the change in the onboarding process is currently unable to keep up with the pace. This is resulting in a detached workforce that is unable to gel with the company’s culture, norms, and systems which eventually causes a loss in desired output while employees start looking for other opportunities. This becomes more apparent when an organization hires experienced individuals with the presumption that they can start delivering just after the orientation program. 

Improving the onboarding process

It has become imperative to differentiate between onboarding and orientation. While orientation is limited to completing paperwork and other routine tasks, onboarding is rather a comprehensive process that can last up to a few months wherein various internal process owners are involved. A study by Gallup found that only 12% of employees felt their company did a great job with onboarding; those same employees were nearly three times as likely to say they have the best possible job. Additionally, the study also identifies seven possible problems with any organization’s onboarding program. 

There are a few suggested approaches that an organization can take to ensure that they have the best and most appropriate onboarding policy. There should be a well-structured integration policy to ensure newcomers are in line with the organization. The policy should have elements like pre-boarding, orientation, onboarding, and induction for each type of role. 

The hiring procedure should be well-documented that include all the steps that need to be done in preparation for the new employee when joining the company. Templates of communication with new recruits should be available to be used during the pre-boarding stages. The organization should also have an onboarding that includes a structured plan for the new employee by job type (usually for executive, management, expert, and other individual contributor roles) and levels within its ecosystem. 

For a work-from-home scenario, a few innovative practices can be adopted like inviting entry-level hires to participate in a variety of team-building exercises, asking them to conduct a comparative study with competitors, having direct interaction with clients/customers, and providing them a series of familiarization training courses. 

Finally, a matrix is to be used to check the effectiveness of the onboarding plan. There should be a feedback system to check if the onboarding process gives the new employees confidence so that the organization’s employee value proposition can be realized. Other metrics can have parameters like time-to-productivity, turnover/retention rates, retention threshold, new-hire surveys, and informal feedback. 

To conclude, the onboarding process helps new hires in understanding an organization’s culture, mission, employee value proposition, brand, and other relevant foundations that must be imbibed and strengthened consistently. It is difficult for new hires to absorb all of the information in a short span of time, so it is important to anticipate that it will take many months to learn and apply them. As such, the organization’s unique values and aspirational goals should help in developing an effective onboarding program.

Latest Trends in Managing Sustainability in the Corporate Environment

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An understanding of global business trends is essential these days. Changing international market structures and integrations can affect decision-making and strategies in the corporate environment.

New trends are percolating at the grassroots level. The role of trends may influence larger organizations over the coming years. Nowadays, adapting to new ways of working and workplaces is no longer a challenge for innovators and early adopters. Innovations in working style and work setup quickly become mainstream and rudimentary for most companies. Get ready to embrace these new approaches, or you may find that most other organizations already got it and moved on. 

As suggested by Nobel Prize laureate Paul Krugman, ”Let us just consider climate change as the root of the whole problem lies in the carbon-dominated industry. To change it may give a strong impetus to the research and development of carbon-free energy resources and may open an era of new technological development.”

New trends come with several driving forces, such as the integration of corporate, economic liberalization, free trade, transfer of technology, corporate financial flows, and transnational companies. 

All trends are affected by technology and vice-versa. Technological developments are and will be affected by social, economic, and marketing trends. 

The rate of change in work and the workplace is shifting into a much higher gear. Today, work is conducted across an increasingly broad range of settings, geographies, and time frames propelled by four major trends. These trends can impact how sustainability is managed and the fulfillment of a sustainable corporate environment:

Image Source: Md Ahbabur Rahman

The availability of enabling technologies and social collaboration tools. Technologies for collaborating with co-workers continue to become cheaper, easier to use, and ubiquitous. They are already being combined and synthesized into platforms that feature a wide range of tools to collaborate asynchronously and synchronously.

On the other hand, it becomes more difficult for workers to stay engaged and connected as they are more dispersed physically. So planners need to link conscious workplace strategies with social technologies and work policies to encourage socialization.

The shortage of knowledge workers. There will be a shortage of younger knowledge workers in the coming years. The Baby Boomer generation retires and younger workers take their place. Organizations will have to compete for workers who are more comfortable with and seek flexible work and alternative workplaces. 

As for the solution, there’s a need for cultural change. The hardest part of changing the workplace is not the physical environment or technology but changing the people. 

Knowledge workers are the core of an organization. They possess a high level of creativity and productivity. These workers are described as people who “think for a living.” Knowledge workers invent new products. They create and develop ideas and strategies rather than doing manual labor. 

To sustain knowledge workers, they should be given platforms where they can nurture ideas and create. Also, knowledge workers need to have a working environment where voices and opinions can be shared during the planning process. 

Knowledge workers are technology-dependent. So keeping up with the trends is a must for them. Allow them the choice of when, where, and how they are comfortable working. Let knowledge workers choose what working style and setup is beneficial as learning and growing are valuable for them while working.

The demand for more work flexibility. Workers will demand more work flexibility—the ability to decide how they should define and tackle specific problems and tasks and when and where work is done. 

To develop a solution, corporations can adopt new workplace practices. With workers increasingly scattered geographically, work practices need to adapt because it is no longer possible to communicate casually with a distributed work team. Leaders need to formalize good work practices for the team.

The World Economic Forum predicts that we are on the cusp of a fourth industrial revolution. Technological, socioeconomic, and demographic shifts are transforming the way we work. These shifts have made flexibility important in the way individuals, teams, and organizations work. 

There are many ways to incorporate flexibility into the corporate environment. These are the ability of employees to include the opportunity to change their working hours, work remotely, learn new software, and take on new roles. Flexibility also concerns employers as they need to assess strategy quickly according to the working style and personal needs of their employees. 

Some companies are switching to a hybrid work setup. This means that employees will report to the office on specific days and work from home for the rest of the weeks. This system comes with challenges and inconveniences, such as communication issues, coordination in terms of schedule, and the availability of resources in both types of workstations.

Some companies are also configuring the office layout in response to the hybrid work setup. One of the drawbacks is not everyone will have their own desks in the office anymore. This change means that employees may encounter problems with accessing and moving the resources they need for work or making sure they have a spot each time they return to the office. 

Before making any modifications to how work is done,  organizations should establish a system that will harmonize the time, tasks, and resources of employees. It would help ensure that everyone’s goals are aligned and the workplace remains a happy and productive environment.  

Pressure for more sustainable organizations and workstyles. Perhaps the 800-pound gorilla is the push for organizations to drastically reduce their carbon footprint, whether through regulations or market-driven incentives and disincentives. 

Organizations will have to examine all major sources of greenhouse gas emissions, in relation to how, where, and when people work. Group locations, building efficiencies, commute patterns, and air travel practices must be observed. 

Employees have different workstyles also. Some feel comfortable when working independently, and some are more productive when collaborating. Some employees are emotionally aware and create supportive work environments. Some are ideal and detailed-oriented workers.

Edelman Data x Intelligence, an independent research firm, conducted a survey among 31,092 full-time employed and self-employed workers across 31 markets between January 12, 2021 and January 25, 2021.

In 2021, some employees were given the freedom to choose where and when they work. While 67% of employees chose in-person work collaboration, 73% of 31,092 full-time and self-employed people decided to stay at home and continue to work remotely. 

Sixty-six percent (66%) of leaders considered redesigning their office spaces to accommodate employees. The same study shows that leaders faced challenges and implemented changes just to give the best of both worlds to their employees. 

If you would like to improve your knowledge in corporate sustainability,  explore these sustainability-related publications:  Sustainability ReportingThe Health, Safety, Security and Environment KPI DictionaryThe KPI Dictionary Volume I: Functional Areas, and The Resources KPI Dictionary.

Employee Turnover and Retention: The Impact of Various Talent Management Practices

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The Great Resignation was among the top headlines in 2021. It highlighted the significance of employee retention. Even though most businesses are aware that the expense of replacing employees is substantial, management is still not putting enough emphasis on retaining their personnel. The possibility is that the failure occurred due to a lack of serious effort or an inability to implement retention effectively. In any case, knowing the interrelationship between turnover, talent management, and retention is critical for HR decision-makers. 

The Global Business and Organizational Excellence journal published their research done in 2021 to investigate talent management practices as a strategic technique for employee retention, to control employee turnover intentions, and to analyze how talent management practices affect employee retention and turnover intentions. This article will go over each of the sub-objectives, hypotheses, and associated outcomes, and then draw conclusions.

Before diving into the study, it may be worth taking into account the employed research method. The proposed hypotheses are tested using a quantitative method-multiple linear regression. The samples used are 236 responses from Indian IT companies. 

The following  are the four sub-objectives that influenced the research on retention intentions:

  1. Recruitment and selection

    The first hypothesis is framed in terms of the impact of recruitment and selection on employee retention: “The higher the degree of satisfaction with the recruitment and selection process, the higher the rate of employee retention.” The result shows that it has a positive effect on employee retention intentions, but was not statistically significant. This means that the recruitment and selection process can affect employee retention intentions, but is not as significant as other practices discussed later.

  2. Performance and career management

    The second hypothesis states that “Employee performance and career management positively affect turnover and retention intentions.” This means that employees who have opportunities for development and career progression are more likely to stay in the company for a longer period of time and feel happier and more loyal to their employers.

  3. Teamwork and management support

    The research’s third hypothesis is that “Teamwork and management support positively affect employee retention intentions.” This proposition is also statistically supported by the result, meaning that teamwork and management support increases employee retention intentions. The result showed that teamwork and management support increases an employee’s retention intentions. Employees that work as a team form bonds and trust with one another, which can help in employee retention.

  4. Salary and compensation

    Last but not least, the fourth hypothesis of the research is that “There is a significant positive association between salary and compensation and employee turnover and retention intentions.” The test revealed that the positive relationship between compensation and retention intentions was approved and statistically significant. Moreover, salary and compensation emerged as the most important factors for employee retention, which is also in line with other research.

In summary, the result of the research highlights the importance of talent management practices on talent retention. The talent retention process starts from recruitment, then the company’s performance management system and team support would provide a comfortable environment for employees to grow and progress their careers. Salary and other forms of compensation are important to attract and retain talent, as salary is one of the primary motives for employment.

These talent management practices each contribute in their own way, but when executed collectively, you may not need to find new talents as frequently as you usually do.

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