When service improvement is the key to strategic transformation
- A leading multi-billion dollar, global manufacturer and service provider of point-of-sale terminals, bar code scanners, and printer consumables had grown steadily for decades but now encountered acute market challenges and eroding margins as its products and services were commoditized.
- Leadership committed to transforming its global service delivery capability from a chronic operational liability into a competitive value driver for the company. They brought in AlixPartners to help develop a cross-functional plan to make service operations more effective and efficient.
- Working holistically to identify key growth drivers, and collaboratively across functions, the team identified five core programs to optimize for worldwide services transformation, which drove an 18-month roadmap of sequenced initiatives. The project resulted in nearly $200 mm in incremental operating income, and a commitment to continue the transformation.
THE SITUATION: LIMITED INSIGHTS HAMPERS OPERATIONAL EFFICIENCY AND GROWTH
The company’s vast patchwork of complex, highly customized product and service offerings presented a sizable barrier to true transformation. Compounding this situation, company leaders lacked mature business intelligence capabilities, leaving them without sufficient insight into the future to decide on new transformation strategies.
The 20,000 employees of the company’s global service delivery organization struggled to support more than 6 million devices in more than 180 countries and provide field support, technical support, and professional services. Several challenges hampered their efforts:
- Upstream demand drivers: Failures in product quality management and the sales process resulted in heightened downstream demand on the service organization and compounded operational complexity. It was not uncommon for the manufacturing organization to release new products without first familiarizing the service organization with their workings.
- Tactical focus on efficiency: The service organization kept up with year-on-year increases in demand through ad hoc efforts, leaving little time or organizational will to address spotty operational effectiveness. Additionally, other underlying issues resulted in the organization’s constant struggles and sparked frequent disputes with customers over service level agreements.
- Complexity in parts distribution and the service network: The aging product base, highly diverse solution stacks in the field, and widely varying contractual obligations created significant operational complexity that made change difficult and risky.
From this position, leadership brought in AlixPartners to help develop a cross-functional plan.
THE APPROACH: A HOLISTIC TRANSFORMATION OF SERVICE DELIVERY
As a first step, AlixPartners examined a wide range of options for enhancing productivity across the business—including areas like workforce utilization, organizational structure, contract management, and performance management. The team worked collaboratively across functions, including upstream functions such as sales and engineering.
Their mission: to identify five core programs to optimize for worldwide services capability, which were incorporated into an 18-month roadmap of sequenced initiatives. The core programs were: operational consolidation, third party spend rationalization, service delivery alignment, global contract management and global business intelligence.
THE OUTCOME: $200 MILLION IN INCREMENTAL OPERATING INCOME
The initiatives that AlixPartners designed have to date generated nearly $200 million in incremental operating income.
The new CEO has announced a drive to pivot the company from a hardware and software maker to a solutions and service provider. Toward that end, the company, in addition to realigning its overall operations, has implemented follow-on programs to reorganize its capabilities to deliver world-class solutions to its customers around the globe.
Each of the core programs drove measurable results:
- Operational consolidation: Established consolidated centers of excellence for back-office support functions and stood up a global routing and dispatch center in a low-cost location.
- Third-party spend rationalization: Optimized third-party spend related to parts, inventory, fleet, distribution centers and warehouses, contractors, and other vendors. Analysis of that spend revealed that the company often paid premium rates for commodity work or services and exposed a key lever to reduce labor costs without cutting into the in-house labor force.
- Service delivery alignment: Enhanced service delivery quality across all stages of the customer lifecycle, including onboarding, the transition from sale to after-sale service, field delivery, technical support, and renewal sales. Segmented and aligned workforce to match skills and experience to required work, enabling the company to effectively deliver on its brand promise and meet customer expectations.
- Global contract management: Established formal contract management function to reduce revenue leakage by managing standardization, processes, and renewals.
- Global business intelligence: Centralized business intelligence and reporting and invested in advanced training and business intelligence software to establish capabilities in advanced analytics, predictive modeling, and cluster analyses. Those moves have enabled the company to take proactive action before service issues become critical and are a crucial step in the company’s evolution toward a service-driven organization.
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