2022 A Year in Review: Aftermarket Service Resilience
Happy new year! As we start our journey into 2023 it’s important to celebrate successes, acknowledge and learn from challenges, and understand the economic, operational, and technology trends that are impacting businesses globally. From a pandemic and geopolitical conflicts to record high inflation and supply chain bottlenecks, 2022 has been a year of uncertainty. Let’s explore some of the key trends we have seen throughout the year and how they are driving strategic changes for 2023.
Top 2022 Key Business Trends and Focus Areas
- Service Models: It’s become more apparent that the rate at which the “optimal” service model changes is approaching the rate at which fashion trends change. Technology advancements could be the culprit behind the speed of changing perspectives given we learn more about our businesses and customers each day with increasingly capable data analytics. Which model is the best for your business? That’s up to you to decide. It’s definitely getting louder though with all the noise and different perspectives.
- Labor: If you’re having trouble hiring and maintaining staffing levels as a service organization, I have good news and bad news – the good news is you’re not alone, the bad news is this problem likely won’t go away anytime soon. Every conference, conversation, and article around service that we’ve read this year is connected to the labor challenges in service organizations in one way or another. This problem is here to stay and it’s up to technology and innovation to fill the gaps.
- Sustainability: From the UN to various state governments and countless companies, climate change has been defined as one of the largest global threats we are currently facing. For Syncron, 2022 has highlighted both the opportunities and challenges that companies are encountering on their journey to carbon neutrality and how Syncron (and other technology providers) must be a trusted, enabling partner on this journey.
- Artificial Intelligence / Machine Learning: Another year down, another year closer to Skynet becoming a reality (see the Terminator movie series for the Skynet reference). OpenAI’s ChatGPT is the latest disruptor that has most of the population genuinely enthusiastic about technological opportunities and slightly nervous about the capabilities of AI. There’s no doubt service organizations will be disrupted as these technologies continue to scale.
- Servitization: Is everyone tired of hearing how they need to have a plan to transform their business to X-as-a-Service (XaaS)? With the increasing cost of money due to quantitative tightening, it’s refreshing to see companies re-think the optimal approach to service instead of jumping on the XaaS train. Do what’s best for your customers and your company.
- Economic Downturn: As we wrap up this year, I found myself having mixed feelings based on the discussion occurring on CNBC. One year ago, many analysts had targets over $5,000 for the S&P500 at the end of 2022. Quantitative tightening, global conflict, COVID-19, and inflation quickly made that price target into a meme or two. One thing’s for certain – the future of economic conditions is anything but certain at the moment. As a former mentor once told me, “Focus on what’s in your control and have a plan for the worst-case scenario.”
- Data: Big data. Machine learning. Augmented reality. These are just a few terms that are thrown around without an understanding of how to achieve value. Without a roadmap defined to structure data within your organization, many of these terms remain just words on paper. Companies are quickly realizing that being sold an outcome without understanding the journey may be costlier than expected.
Customer-Centric or Asset-Centric. What’s the Best Approach?
For years, many service leaders have agreed that the path to running a successful service organization requires putting the customer at the center of everything you do. At the end of the day, making sure the customer is happy leads to increased and better-quality revenue, less risk, and can strengthen the brand. It has been critical to develop trusted advisor relationships with the customer and have the right solutions to make their service experience seamless.
Over time the path to success has evolved to also put the asset at the center of everything you do. You can have the best omnichannel support solutions in the world, but if a customer is dealing with significant unplanned downtime, they might not be a customer for very long. For many industries commoditization has created an environment where it’s much easier to make changes. This is why world-class service organizations have made investments in tracking and monitoring the overall health of an asset so they can take action before you have a critical service event.
As Syncron has met with global service teams over the past year it seems like there is a third phase of evolution on the path to running a successful service organization. It requires putting the employee at the center of everything you do. The best way to ensure an asset is maintained and repaired correctly while keeping the customer happy is to make sure your employees have the right solutions with the right answers at the right time. The pandemic has empowered the workforce and it’s critical to prioritize their success, growth, and satisfaction. This requires building the right team culture in a remote world, rethinking hiring profiles, and investing in the right technology solutions.
What the Heck Happened to the Workforce?
So, let’s break this down. Your most senior workers – the people with 30 – 40 years of experience – want to retire! Can’t we move all of them into back-office positions where they support new employees? Probably not all. Alright, we have to hire some new workers. Wait, what? No one new has applied for our open positions and the one person we are interviewing is asking for a salary higher than our most senior-level technician. Didn’t we hire a bunch of new people about 6 months ago? Most of them left to work for the competition or to take a gig economy job.
Does this conversation sound familiar? The good news is you’re not alone. As Syncron has met with service organizations over the past year, workforce challenges have come up in every discussion. As mentioned earlier, the pandemic has empowered the workforce and people have many options for work. The latest report from the U.S. Bureau of Labor Statistics shows 10.3 million job openings. The U.S. birth rate has fallen by 20% since 2007. The U.S. Army missed its recruiting goal by 25% in 2022. So, what does this tell us?
- There are lots of jobs available
- The workforce pool is declining
- Look outside the military for additional workers
One thing we have observed over 2022 is service organizations getting more creative with their hiring profiles, recruitment process, and compensation plans to attract new talented professionals. At a conference earlier this year, we heard a service executive mention he started hiring a few stay-at-home mothers to become field service technicians for their business. They had great people skills, could build strong trusted advisor relationships with customers, and they were free from 9 a.m. to 2 p.m. More service teams are prioritizing soft skills over technical capabilities in their hiring profiles with the idea to leverage technology solutions and enhance enablement programs to fill the knowledge gap.
Sustainability – How to Become Carbon Neutral Without Going Broke
Unless you’ve been living in a cave, the transition to carbon neutrality has impacted your life in one way or another. For many individuals who do not work in manufacturing industries, these changes occur in ways such as seeing wind farms on a road trip, solar panels on new housing builds, and charging stations for Electric Vehicles (EV’s) at parking lots. Local governments such as the State of California are even mandating that all new automobiles sold in 2035 are EV.
As a manufacturer of automobiles, how do you continue to run a profitable business while meeting these increasingly aggressive mandates? On the manufacturing side, the technology around design and producibility has scaled more rapidly than I’m sure anyone could have imagined when we began the century. However, service organizations face a much steeper challenge given they must support the full lifecycle of the design and find ways to mitigate their carbon footprint.
Too often I hear service leaders say, “Manufacturing has the bulk of carbon reduction for our company – the designs will be more carbon neutral going forward.” While this may be true on a corporate level, there are undoubtedly actions that can be taken in service to further reduce carbon emissions in support of the company goal. Inevitably, there will always be situations when technicians need to travel to the customer or when inventory stock may be slightly higher to meet customer service levels. What happens if you can move the needle 5%-10%? Understanding the starting position of the organization and moving the needle a small percentage can have huge benefits.
To be clear I’m not recommending taking on an inordinate amount of debt and disrupting operations to meet a carbon emissions target. Companies may have been able to go above and beyond when debt was cheap; however, that world is now in the rearview mirror. As a service leader, understanding where you’re starting from and reviewing the service organization to understand if any carbon reduction strategies can be operationalized could prove to be a win-win.
Impact of Technology – Well, ChatGPT Wrote This, so I Think We Are All Set!
Kidding! While ChatGPT can absolutely write blogs, we at Syncron prefer to add our own touch to our literature. If you haven’t seen this capability in action, it’s quite impressive, to say the least. According to Search Engine Journal, ChatGPT is a large language model chatbot developed by OpenAI that has a remarkable ability to interact in conversational dialogue and provide responses that can appear surprisingly human. To translate what this means in a few scenarios, let’s review the following:
- Education: You can ask ChatGPT to write a 1,000-word report on the main themes of a given novel.
- Computer Programming: You can ask ChatGPT to write code with specific outcomes in a specific language or de-bug a section of code.
- Business Leader: You can ask ChatGPT to write you a change management business plan when transitioning from one business model to another.
- Service Technician or Customer: You can ask ChatGPT the optimal method to troubleshoot an asset based on a given fault or error.
Starting to get the picture? This is just one AI product that is in its initial research preview stage. Artificial Intelligence is becoming more and more prevalent across all industries – especially when it comes to optimizing service operations according to McKinsey’s latest review of The State of AI in 2022 – and a half decade in review. Companies that adopt and implement these capabilities going forward will have a distinct advantage in profitability growth, withstanding labor challenges, and meeting customer service levels.
Future of Servitization
We won’t spend too much time on this topic given a recent blog that was written on Equipment-as-a-Service: A Devil’s Advocate Point of View. The brief takeaway from our perspective on the future of servitization revolves around whether or not companies should take on this type of transformation and if so, how far to go. X-as-a-Service has been the theme over the past few years, especially since COVID-19 decided to disrupt manufacturing revenue streams. While taking on a service model focused around servitization or Equipment-as-a-Service (EaaS) seems like a way to future-proof profitability, it also comes with a substantial investment of capital, thought leadership, and change management. Each service model is going to differ based on the products offered, staffing considerations, and more. It’s up to each and every business leader to do what’s best for their organization given the known and unknown variables at hand.
Navigating Economic Downturn
If you are reflecting on 2022 and wondering what just happened to the economy, you’re not alone. To simplify the situation, central banks have commenced quantitative tightening around the globe at a rate unprecedented during most of our lifetimes less than a year after the completion of the most aggressive quantitative easing in history (reference federal reserve balance sheet). Why did the central banks go down this path? Inflation. In some cases, triple-digit inflation year-over-year!
What does all of this mean to the consumer and the service providers? Essentially, central banks are trying to reduce inflation by tightening monetary policy to the point of reducing demand (i.e. people are unwilling to pay high costs for unnecessary products or services). As companies recognize the consumer trends in line with economic downturn, there are opportunities to pivot in a profitable manner vs. accepting the losses from top-line growth. The end customers may not want to buy a new asset anytime soon which means they’ll need to plan for maintenance, either via service contracts (potentially servitization) or one-off situations. Service organizations that are able to capitalize on the increased lifecycle value of the assets will be able to withstand potential headwinds on new product sales.
Can’t end the year without talking about data.
Data, data everywhere – but can we really use all of it? Most would agree unlocking data insights adds significant value to a business, but it seems like the focus is on the outcome versus the journey needed to achieve results. Many organizations have made investments in technology solutions, but more teams are realizing that to leverage the power of these solutions you need to go through a data journey first. It requires organizations to go through a project to clean, tag, and structure their data. They need to determine what systems to integrate and be prescriptive about the data points they are trying to measure. Finally, context must be added to create an on-demand experience to empower and enable a workforce.
Have you used YouTube recently to look up a how-to video for fixing or installing something in your home? Why do you think the most relevant videos are presented to you within seconds? Data unlocks potential but bad unstructured data can put your organization in reverse.
Thoughts on 2023
When planning for 2022, companies had a wide range of opinions on the strength of the economy and consumers and because of this, planning for the rapid change in the environment was limited. As we look ahead into 2023, many companies have a very different perspective (often pessimistic even) and are planning for a much more severe downturn in the economy. What does this mean for service organizations?
- Unemployment numbers may rise in non-service organizations and hopefully fill some of the voids from a labor perspective in service organizations.
- Companies have adapted to higher costs of doing business and will be faced with the increasing challenge of lower cost expectations from the consumer as deflation accelerates.
- Technology powered by structured, usable data will continue to play an increasingly important role in identifying and filling gaps as companies continue to try to navigate the turbulent waters ahead.
- Carbon reduction plans will transition to be more operationalized as the cost of capital continues to be high (i.e. companies will buy fewer carbon credits and look internally to meet their goals).
It feels like the past several New Years we’ve all celebrated the year being over and said, “Wow, did that just happen? No way the next year will be any worse!” The truth is no one can say for any amount of certainty what the next year holds and all we can do is focus on what’s in front of us and prepare for the challenges in a constantly changing environment.
About the Authors
Justin Konopaske is the Director of Industry Solutions at Syncron. He has extensive knowledge in both engineering and service from his time working in the aerospace industry. Justin has also spent time as a solution engineer for field service management solutions. In his current role, Justin leverages his experience to ensure Syncron products are aligned to value across industries.
Sarang Sambare is the Senior Director of Industry Solutions at Syncron. His background in global sales and strategy includes leadership roles in the service supply chain and field service management sectors. Sarang spent the last 16 years guiding OEMs through their digital transformation journey and developing differentiated service delivery models.
SHARE THIS POST