From Products to Services and Solutions. Embracing Customer Centricity in B2B

Interview with Mary Jo Bitner and Stephen W. Brown, co-authors of the book “Profiting From Services and Solutions: What Product-Centric Firms Need to Know”. The interview was recorded in July, 2014, when the book first came out. To learn more about the Service Infusion Continuum framework introduced in the podcast, check out CSL webcast Profiting from Services and Solutions available on the CSL blog.

Podcast Transcript

This podcast was brought to you by the Center for Services Leadership, a ground-breaking research center in the W. P. Carey School of Business at Arizona State University. The Center for Services Leadership provides leading edge research and education in the science of service.

Darima Fotheringham: Today I’m joined by Professor Mary Jo Bitner, the Executive Director of the Center for Services Leadership at the W.P. Carey School of Business, Arizona State University, and with Emeritus Professor Steve Brown, Distinguished Faculty with the Center for Services Leadership and a Strategic Partner with the INSIGHT Group, a global services growth consulting firm.

Q: For those who may be new to the Center for Services Leadership, can you tell us a little bit about yourself and your coauthors?

Mary Jo Bitner: We represent a 4 member faculty team that wrote this book together. We worked together on the research and the writing of the book from the very start to finish. One of the foundations for the book is a major research project that we did with 5 Fortune 100 companies seeking to understand their challenges, their successes and insights as they moved from being product-centric to customer-centric and service-centric firms. It was a long project, over multiple years. The co-author team is Steve Brown and myself, also Valerie Zeithaml, who is a Marketing professor at University of North Carolina. She’s internationally known for her work in Service Quality and Customer Equity and also in the work that we did for the book. Steve Brown is an Emeritus Professor of Marketing at ASU. He founded and led the Center for Services Leadership for over 25 years. Now he’s a consultant, author and an executive teacher focusing on helping firms in this area. Jim Salas is the fourth author of the book. He’s an Assistant Professor of Marketing at Pepperdine and he recently graduated with his PhD and his dissertation work focused on strategies helping firms move into services. And then myself, Marketing Professor here at ASU and Executive Director of the CSL. We worked together as a team of four from the beginning to the end and are very excited to have our book out.

Q: What inspired you to write “Profiting from Services and Solutions: What Product-Centric Firms Need to Know?”

Steve Brown: There are several things. One, of course, is working with all the member companies of the Center for Services Leadership. Many of them, over the years, came to Mary Jo and myself and others and talked about how they, being very product-centric companies, wanted to grow into services and solutions. This is probably the biggest catalyst for the research project that underlies the book. We also knew that there was relatively little known about this topic except anecdotally. And what the book tries to do is study in depth these 5 companies but also integrate some of the latest literature on this topic and then feature several rich examples from companies that have either gone through this transition or are going through this transition right now.

Mary Jo Bitner: As Steve said, this was something that we were observing from our member companies but also in our work and travels around the world. We were seeing that this was really a global phenomenon and a lot of the challenges and issues and strategies that firms were approaching in this area were really happening all over the world. We could see that it was something that would be valuable to research and also to let companies know more about.

Q: In the very first pages of the book you talk about importance of adopting customer logic to be successful, especially in B2B services. Can you explain what it means and share an example?

Steve Brown: That’s a very good question. You know, we have learned that B2B product companies tend to be infatuated with their technology and their products and often have a very long standing engineering mindset. And a true customer-logic company is actually infatuated with their customers and they are even interested in how they can help their customers achieve their objectives, their outcomes and deliver value in some cases even to their customers. So for example key performance indicators of customers become as important in many cases as their own company’s KPIs. An example might be from General Electric who’s going through this transformation right now. GE has made locomotives for a long time but in recent years they’ve been deploying software, sensors attached to their products and also analytics to provide services and solutions. They’ve applied it very effectively with railroad on Norfolk Southern, which has been a customer of theirs for locomotives but now is using some of these new higher value services to help them better utilize the locomotives, keep the trains on the track longer, keep even maybe increases miles per hour in certain situations, while still maintaining the safety levels. GE report and Norfolk Southern report that they are saving the company over 300 million dollars a year already from this service GE is providing.

Q: In your book you introduce a concept of service infusion continuum. What does it mean?

Mary Jo Bitner: As we did this research, we developed what we called a service infusion continuum. It shows the different types of services that manufactures and technology companies and others offer to their customers and it’s a variety of different types of services. They start on the one side of the continuum with services and support of their own products. This is something that almost every manufacturer, every technology company does, things like warranties, repair and maintenance, customer service phone lines. Things that they need to do to be in business around their products. But we were seeing that companies were moving into a lot of other types of services. And that was really for the purposes of growing, profiting and building their business. As they moved across the continuum, those services increasingly became more complex and more sophisticated. They are moving in the direction of services that really support their customers now, not so much supporting the products, but services that support the customers themselves. As they move along that continuum and get all the way to the very end that’s where we talk about services and solutions that really do whatever is needed that the customer needs to solve their problem rather than services associated directly with the product.

Q: And as companies move into different services along the continuum, what are some of the challenges they need to tackle?

Mary Jo Bitner: As they move along the continuum, we found a number of challenges that they face and it’s interesting that we found that these were common challenges. It’s not unique to one company necessarily. As they move into these more sophisticated, more complex services they need to carry out new activities, develop new capabilities. For example, customers expect greater customization of the service as they move along that continuum. A warranty service doesn’t need to be all that customized, but a service that is supporting a customer solving a particular complex problem is probably going to be fairly customized to that customer. And the decision on how much to customize and how much to standardize is a key decision that companies make. They also find that they need new skills and capabilities as they move along the continuum, the type of sales people they need, the expertise that those sales people need to have in understanding customers and working directly with customers is much different from the types of skills they need to sell a warranty package or say repair and maintenance service. So capabilities, I think, was one of the really big challenges that many companies have, even when they recognize the capabilities they need, then finding the right people for those jobs can be very challenging. Also all around the structure of the company. How to structure the business in order to most effectively deliver these services, should they have a separate service unit? Or should they try to integrate these services across units or into existing parts of the organization? And again, a key question that we address in the book.

Steve Brown: What I think is interesting there too, Mary Jo, is that everything you cite is important enough that we feature on as a chapter in the book.

Mary Jo Bitner: And we find in the book, as Steve said, we have separate chapters on each of these topics and we look at the insights of these companies as well as some of the challenges. We look at the literature and other ways that they can solve these issues. A couple of the other big challenges are collaborating with customers as they move along the continuum. The companies find that they need to be much more collaborative with the customer in terms of designing the services itself, but then of course in delivering it and getting feedback on it and changing it; just a lot more direct collaboration with the customers, which some of them have not be involved in doing. Finally, one of the biggest challenges, often something that overrides many of the other ones, is the challenge of developing a service culture. A culture is really a mindset, and often these companies need to develop a new mindset that focuses on customers. Frequently, they have a very operations or product or engineering driven culture and this is a big shift for many of these companies.

Q: You name a number of areas that you really need to tackle to be successful, which can be an enormous task. How do you suggest that companies can prioritize if they can, and maybe share an example?

Steve Brown: Yes, that’s a good question Darima. It’s unlikely that any firm in this transformation is going to tackle all six of what we call “C”s in the book, simultaneously. Furthermore, for example, they may be farther along in the capabilities that Mary Jo discussed but way behind in terms of collaborating with customers. One of the factors that she discussed might be more important and need more immediate attention. All that being said, the real mega factor that Mary Jo alluded to is culture. I’ve seen some great company strategies to transform into services and solutions, yet too often those strategies fail because the company hasn’t addressed the necessary culture changes. A little phrase that we use in the book and I like to use with executive audiences is that culture will trump strategy every time. So companies devote a lot of attention to developing strategy to move across the continuum or grow services and solutions; but if they have overlooked or are dealing with a culture that they are also not willing to adjust, they are probably going to be disappointed in the results. An example of this comes from a global company based in Sweden called SKF which is a longstanding company manufacturer of bearings, not a very glamorous business. But if a bearing breaks, a production for chaos breaks out and millions of dollars could be at stake. Several years ago, the leaders of SKF recognized that a bearing was really a kind of commodity, and they decided to change their culture and to change their business. They broadened their capabilities by growing organically and also making some strategic acquisitions. They also dramatically changed their corporate culture, such that today, SKF no longer sells bearings. When I share that with someone, they are shocked that this longstanding company could no longer be selling bearings. But really what they have done through this change of culture is what they are selling now is customer uptime and customer productivity. Obviously they still manufacture bearings but the whole mindset of the company is based on customer outcomes or the value that they bring to their customers through this increased productivity and increased uptime. Yes, a bearing is a vehicle for that, but it’s not really what SKF is all about anymore.

Q: Great example, thank you so much for sharing. It was interesting to read in your book that sometimes recommending a competitor’s service or product over your own can actually help you. The idea of giving away business to a competitor sounds like a tough sell, can you explain why and when that can be a good idea?

Steve Brown: I love that question. I think that if your company is sincere in embracing the customer logic or the kinds of things we’ve been talking about, you’ll do what you can to help the customer, even if it means recommending products or services from a competitor. I call this offering agnostic. I think the biggest opposition to be offering agnostic comes from inside your own company rather than from your customers. Your customers are impressed and in some cases are flabbergasted that you would talk about and advocate for a competitor. Inside the firm, some people may say, and some very powerful people may say, what are you doing, recommending our competitors to our customers? Yet a B2B company that is eager for success in offering high level and higher value services can achieve a new level of respect and a new level of trust with their customers by being offering agnostic. Your credibility soars so the next time you make a suggestion or idea that might be related to what you have to offer, it’s a no brainer, they don’t even go out and check with the competitors, they just come directly to you for that need. IBM is probably the first corporation to embrace this idea. Now, we’re seeing more and more enlightened companies recognize that in some cases it’s in not only your customers’ interest but also your interest to recommend a competitor.

Q: Your book speaks to people in leadership roles who are transforming their organizations to grow through services and solutions. What can these leaders, and others, take away from this book?

Mary Jo Bitner: We know that there are so many in this position today and I think that one thing they can take away from the book is some of the lessons learned by others and lessons learnt that we were able to gather and find from the literature presented in a relatively short and straight forward manner. So they can take away some lessons, they can learn some things that can help them as they start on this journey. I think they can also gain a way to think about the journey and the variety of challenges that they are going to need to tackle because what we found is many of these challenges come up over and over again. As Steve mentioned, companies can look at these challenges and say, “this one shouldn’t be too difficult for us”, or “we’re already on the way on that one but we haven’t really thought about this particular challenge”. So each chapter of the book can provide them with some approaches, techniques, insights from others, even some little assessment tools to help them to get started on the journey. Also, I think encouragement that this is a journey worth doing but that it is not a quick fix. I think people sometimes need that encouragement as they start on a major strategic vision like this.

Darima Fotheringham: Professor Bitner, Professor Brown, thank you again for talking with us today. You were listening to an interview with Professor Mary Jo Bitner and Professor Steve Brown. Their new book is “Profiting from Services and Solutions: What Product-Centric Firms Need to Know”.

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