10 Non-Monetary Ways to Show Your Employees You Appreciate Them

Last week was Thanksgiving in the United States and I love the reminder the holiday gives to reflect and practice gratitude. I also moderated a panel last week on the labor shortage and the combination had me thinking about the criticality of showing our employees we’re thankful for them. We know that retention is an imperative aspect of the labor shortage and I am not confident we’re doing all we can to show appreciation for our employees in non-monetary ways.

Of course, your employees expect fair and equitable pay and let’s hope you’re all providing that. But today’s employees expect far more, and many companies haven’t taken the time to gain a solid understanding of what’s important to the new generation of workforce and how elements beyond pay make a huge difference when it comes to the employee experience, employee engagement and, ultimately, employee retention.

On last week’s podcast, I spoke with Dr. Jack Wiley, who is recognized internationally for pioneering research linking employee work attitudes to measures of organizational success. Most recently, Dr. Wiley was professor of psychology for Manchester University, where he founded the undergraduate program in industrial organizational psychology. He currently serves as the chief scientific officer at Engage2Excel, and as the president and CEO of both Jack Wiley Consulting and Employee Centricity. He was on to discuss his most recent book, Employee Centricity, for which he conducted vast research on what it is employees want from their managers.

“I think we're all aware of the fact that over the last 18 months, the workplace dynamic has changed in some ways that will be more or less forever going forward. I think some of these changes are simply going to be changes that we're going to be dealing with in our careers as we move forward. So, that represents an unprecedented challenge for managers. They have a lot of additional issues that they need to be attending with, especially today in the United States, we saw the August numbers show that 4.4 million workers quit. A recent survey that I saw indicated about 65 percent of employees are actually considering leaving their current job,” he shares.

I’ve seen some of these statistics, so they didn’t shock me as much as what Dr. Wiley shared next. “Over 70 percent of managers in the United States, and I'm talking about all industries, all different levels of management, smaller organizations, larger organizations, over 70 percent of managers either had no training in people management or the training they had received was limited to no more than four hours,” he says. “And so, when we consider the centrality of people management responsibilities in the context of the overall role of the manager, and over 70 percent had no more than four hours at best, also I think is part of the problem.”

Effective, engaged managers and overall company culture are critical to employee retention – so we must do a better job of understanding what our workforce wants and needs and ensuring our leadership is both committed to and able to provide that. There are many layers to this, but employees that feel more appreciated and valued is an important piece of the puzzle. With that in mind, here are 10 ways you can show your employees you are thankful for them that have nothing to do with compensation:

Recognition. We all want to feel that what we do matters, and we all want to feel valued for our contributions. This doesn’t have to be complex, but it is often overlooked. When is the last time you genuinely thanked an employee? We can start by doing more of that and we can build upon that by ensuring others within the organization see the hard work of employees, creating programs that showcase efforts, and even giving awards for those going above and beyond. “Providing recognition is about psychological appreciation,” says Dr. Wiley. “’Thank you for a job well done. I'm not going to take credit for your good work, I'm going to make sure you're in the spotlight up the chain of command.’”
Listen. Again, this sounds simple but happens far less than it should. Employees want to feel their voice matters and they want to know their ideas are valued. They want to feel comfortable coming to managers with thoughts, concerns, personal needs, and so on. Moreover, the input of frontline employees is double the gift, because not only does listening help employees feel more important and engaged – but their ideas are often different and very valuable when it comes to setting strategy and making investments. Creating a culture where employees across the organization feel comfortable speaking up is a must today, and this includes a willingness to be open minded and a preparedness to have hard conversations. A great way to show an employee appreciation is to ask in earnest, “What do you think?”
Offer mentorships. Mentorships are a great way to help employees stay engaged, motivated, and keep personal connections that build longevity and loyalty. New employees can “learn the ropes” and mentors can get to know employees in a deeper way, which can help with building on strengths and developing their careers. A mentee who feels a mentor is investing time in them will appreciate the opportunity to learn and grow and will feel valued by the company providing such an opportunity.
Provide career mapping. It’s very important for today’s employees to have options for growth and career progression. Employees feel appreciated when they have an opportunity to grow their skills, their experiences, and themselves within an organization. Career mapping provides this to your employees, but it also helps for you to map talent within your organization to retain as much as possible and to put stars in optimal roles.
Value outcomes over output. The traditional working world rewarded hours clocked in or pieces of parts made – output. The new working world needs to shift to ensuring employees feel valued for the outcomes they can achieve, not the output alone. Setting success criteria based on desired outcomes, and then measuring employees based on that, enables you to give employees more latitude on how they accomplish what you need them to accomplish which helps them feel like a larger contributor. “Employees want more flexibility in how they go about their work. So, they're looking for their managers to provide them with more autonomy. Help me understand what the work is you want accomplished but give me more room to decide how I'm going to go about doing that myself,” explains Dr. Wiley.
Look for opportunities to reskill or upskill. A great way to thank employees for their hard work and dedication is to give them the opportunity to learn a new skill or to advance their training. Whether something as simple as a “we’ll buy you a book a month” program – which I love – to more formal training, an investment in your employees’ education and future is a great way to show you appreciate them.
Give time back. What’s more precious than money? Time. Another great way to show gratitude is to give the gift of time back. In 2020, IFS decided to give every employee their birthday off. We also have an annual CSR day that we can use to volunteer however we’d like. These small gestures have a big impact.
Show your trust. Being micromanaged is a fast path to employee frustration and disconnect. We must learn how better to empower our employees, and this requires trust. Feeling trusted is another way for employees to feel appreciated and my guess is that most of the time, employee outcomes improve when trust is increased.
Prioritize mental health. Showing your employees you care about them as human beings, not just for their performance at work, is a great way to show your gratitude. The last two years have been challenging and many people need more connection than they did pre-Covid. Offering support and resources around mental health is a way to say thank you and a way to ensure your employees maintain their wellbeing.
Promote fun. We don’t all need to have ping pong tables in our offices, but there’s nothing wrong with having fun at work. Nurturing an environment where employees are encouraged to have fun – or perhaps even coordinating a fun-only activity or outing every so often – keeps morale high and helps employees know you appreciate them.

What would you add to this list? I’d love to hear!

Dr. Jack W. Wiley, who is recognized internationally for pioneering research linking employee work attitudes to measures of organizational success, joins Sarah to talk about his latest research and book around the traits and benefits of employee-centric management.

Sarah Nicastro: Welcome to the Future of Field Service podcast. I'm your host, Sarah Nicastro. Today we are going to be talking about the impact of employee-centric management. I'm excited to be joined today by Dr. Jack Wiley, who is recognized internationally for pioneering research linking employee work attitudes to measures of organizational success. Most recently, Dr. Wiley was professor of psychology for Manchester University, where he founded the undergraduate program in industrial organizational psychology. He currently serves as the chief scientific officer at Engage2Excel, and as the president and CEO of both Jack Wiley Consulting and Employee Centricity. That's a pretty big intro. Jack, welcome to the Future of Field Service podcast.

Jack Wiley: Thanks Sarah. I do stay busy. Yes, I do.

Sarah Nicastro: Yes, I can tell, and I like that. I prefer to stay busy myself. Excellent. Before we dig into our content today, is there anything you want to add, tell the audience a bit more about yourself, your background, anything you want to share?

Jack Wiley: Well, I think you've hit it nicely. My background is largely in the field of organizational psychology. I've worked both as an internal consultant to organizations and also spent most of my career as an external consultant. I've had the privilege of working in a variety of different countries. I've worked with leadership teams in 25 countries around the world. So, my research and my perspective really attempts to bring in a bit more of an international flavor, if you will.

Sarah Nicastro: Okay, great. Well, we're excited to have you here. I love the idea of this topic. So, the content that Jack is going to share with us here today is related to a new book that he has out called The Employee-Centric Manager, and he is going to give us a sneak peek into some of the content of that book today and have a discussion about that topic. I like it already, Jack, because we talk a lot here on this podcast about how employee engagement and employee satisfaction relates so significantly and directly to customer experience and customer satisfaction. And we always caution folks not to focus so narrowly on the customer experience that they forget to consider the employee experience. So, excited to hear what you have to say today.

Sarah Nicastro: Before we talk about some of the points and advice that you provide in the book, let's first touch on some of the dynamics that are contributing to the need for managers to become more employee-centric than perhaps they have been historically.

Jack Wiley: Right. Well, I think we're all aware of the fact that over the last 18 months, the workplace dynamic has changed and probably changed in some ways that will be more or less forever going forward. I think some of these changes are simply going to be changes that we're going to be dealing with in our careers as we move forward. So, that represents an unprecedented challenge for managers. They have a lot of additional issues that they need to be attending with, especially today in the United States, we saw the August numbers show that 4.4 million workers quit. A recent survey that I saw indicated about 65% of employees are actually considering leaving their current job.

Jack Wiley: Regardless of where you might be on the issue of vaccine mandates, we have two to 8% of workers who fall under the mandate who indicate that they're not interested or certainly not willing at least at this point to take the vaccine. So, all of this creates some tremendous challenges for managers because they're the ones at the end of the day who have to deliver the goods and services that the organization is committed to. They're not going to make that happen unless they have proper staffing.

Jack Wiley: And any of us who've been out and about in any kind of organization where we've gone to get goods and services, we know that supply chain bottlenecks and the understaffing of service organizations represents the real challenge for managers today.

Sarah Nicastro: Now, what about ... I'm curious your thoughts as well. Certainly, the pandemic has had an incredible impact on all of our working lives and particularly the way that managers need to consider the manager employee relationship. I'm also curious your opinion on the role that generational changes in the workforce has on this topic. So the need to become more employee-centric.

Jack Wiley: Right. I think that's a good question. I mean, we have really the cross of what are the current circumstances, as well as what are the generational differences? So when we think about the current circumstances, employees have indicated that there are things they want more of from their manager now during the course of the pandemic. And that really shows up in three ways. One is, and especially for employees who've gone remote, been in an office environment, now working remotely, possibly going back, perhaps they already have. We're going to end up with probably a hybrid work environment as the most common model.

Jack Wiley: Employees are saying under those conditions, they need more support from their managers, particularly if they're dealing with, if you will, fewer workers to accomplish the same amount of work, if they're working at home and under certain circumstances, they may have childcare situations that weren't like they were before, that place is greater demand on them, maybe the schooling of their children. So they want more support from their managers in terms of just managing the workload.

Jack Wiley: Secondly, as they think about going back to work, they also want more support around safety and their own physical security. Safety, of course, in relation to the pandemic, they want to make sure that the protocols are in place, that the value system really enforces safety in terms of their physical wellbeing. But the third thing is really flexibility. They want more flexibility in how they go about their work. So, they're looking for their managers to provide them with more autonomy. Help me understand what the work is you want accomplished, but give me more room to decide how I'm going to go about doing that myself.

Jack Wiley: Now, in relation to generational differences, I would say that in many cases, the differences are maybe lesser than the popular press makes them out to be, but there are some important generational differences. For example, for the older generation, they're very concerned about making sure that their pay and their income stays the same because they're preparing for retirement. They also want to make sure that they want work for managers who have high integrity.

Jack Wiley: For the younger generation, the emphasis is a little bit more on the values of the organization reflecting my personal values in terms of matching with the vision of the organization and how it operates and its culture, but also the opportunities for growth and development. So, getting into an organization, learning how things get done, but then being able to move up quickly. That's going to happen more readily in organizations that are growing. Everybody wants to be on a winning team and especially younger workers, because that creates more of a draft upward in terms of the possibilities they have with their own career.

Sarah Nicastro: That makes sense. So, before we get into some of the advice on how to be an employee-centric manager, what can you share related to the evidence that this approach is effective?

Jack Wiley: Right. So, I've had the opportunity over the last couple of years to measure the extent to which managers have actually displayed the attributes associated with being an employee-centric manager. What I found is, because I have such a large database, I have ratings on over 10,000 managers on the extent to which they display these attributes. That allows me to actually categorize managers as either top rated employee-centric managers, middle rated managers, or bottom rated employee-centric managers.

Jack Wiley: Then I've looked at the impact that has on the experience of employees, and especially looking at employee engagement index scores, interpersonal team chemistry scores, and then very importantly, team performance scores. What I found is that there is an overwhelming significant positive correlation. The greater the extent to which managers display these attribute that are important to employees, the much higher the employee engagement index scores are, much more our teams likely to say that we operate cohesively. There's good interpersonal team chemistry, and very importantly, team performance scores also pretty much are at the top of the potential for managers who are top rated in the display of these attributes.

Jack Wiley: Middle rated managers do okay, but bottom rated managers, their scores on all three of those metrics, employee engagement, team cohesion and team performance, are really in the toilet, so to speak. That forms your validity. That's what a scientist would look for, do measures on this particular set of attributes actually predict outcomes that organizations are interested in. That's what we call validity.

Sarah Nicastro: Right. Okay. Okay. So in the book you discuss, I believe it's five behaviors, one skill and two values that are imperative to an employee-centric approach. Now, obviously we won't have time to get into all eight of those things in great detail here, plus we want people to read the book. Right? But I'm hoping you can, at least, give us a synopsis of those things and a feel for what they are and what you're covering in greater detail in the book itself. So maybe we can start with the behaviors.

Jack Wiley: Okay. That's a great place to start. In fact, I would back up just a little bit from that. Because I think there are a couple of things I want to emphasize. There are an abundance of leadership theories out there today. Many of which are very good, have been very helpful and are well regarded. But my approach here, Sarah, was to actually rely entirely upon the voice of the employee to inform me about what they most wanted in an immediate manager. That was really the fundamental question that I went out with. Tell me what you most want from your immediate boss.

Jack Wiley: And I went to representative samples of employees in 27 countries around the world. These countries tended to be the largest economies, but I didn't want a US-centric only answer to this question. I wanted basically a universal answer. These countries to which I went in a representative way, present about 85% of the world's gross domestic products. So, my conclusions are fundamentally universal. So with that as a background, the five behaviors are really pretty straightforward. And by behaviors we mean things that managers do to influence or react to their subordinate employees.

Jack Wiley: Number one, they want to work for managers who show support and understanding. They're accessible, they're available, they're considerate, they listen to employees and they respond. That's showing support and understanding. Number two, providing recognition. This is about the psychological appreciation. "Thank you for a job well done. I'm not going to take credit for your good work, I'm going to make sure you're in the spotlight up the chain of command."

Jack Wiley: Thirdly, and somewhat uniquely from other leadership theories, employees said that they wanted to be treated with dignity and respect. And so if we stop to think about that, that's really fundamentally the principle of reciprocity. Do unto others as you would have them do unto you. We find that tenant in most major religions around the world. Certainly in Christianity, we find that. So the whole idea is, I as an employee, am showing up at work to do a good job, trust me, trust my working style, treat me with dignity by asking my opinion about how we should go about doing things. That what people mean when they say dignity and respect.

Jack Wiley: The fourth is very task-oriented, communicate clear performance expectations, define success for me. I'm eager to get the job done, establish the priorities, give me some useful feedback, make sure I'm on the right course, but clearly communicate what performance you expect of me. Then finally, among the five behaviors would be, rewarding performance contributions. I bring my knowledge, my skills, my abilities, I lay it on the line. In return, I expect to be compensated fairly. But what employees said was it wasn't just about the pocketbook. Certainly, they wanted fair compensation, but they also wanted the opportunity for training and development and career advancement. That also is a form of compensation for employees. So the five behaviors are those.

Sarah Nicastro: Okay. All right. It's very interesting. I think what's interesting to me is the way they all sound very, in some ways, simple and fair, and certainly well-deserved by anyone that is committed to doing a good job in their role or their career. But if there's one thing I've learned over 15 years of interviewing folks, it's often in the simplest things where the most challenges happen. Right? So, let's talk then about the skill.

Jack Wiley: All right. The skill, interestingly enough is a lot like a behavior. I mean, a skill actually is a behavior. It's just a behavior that you're very good at, and you're good at it because you've practiced at it. you've learned from your past experiences, et cetera. I played high school and college basketball, free throws is a skill. You have to practice at it to get better. You're not going to step up to the line and hit 80% or 90% of your free throws if you don't practice. The same thing is true in organization settings with this particular skill, problem solving and decision making.

Jack Wiley: And the reason that's important to employees that they work for a manager who's good at doing that is because that knocks down barriers to getting the job done. It knocks down obstacles to serving customers, it puts people in a position to be more successful, especially if their manager can make decisions in a timely way that takes into consideration the implications of those decisions, so that there won't be blow back onto the work group. And also, employees don't expect their manager to get everything perfectly right. But what they do expect is that their manager will learn from a past experience, use that experience to become even better in the future.

Jack Wiley: So that's what they mean by problem solving decision making, be good at that, don't dither, don't waste time, don't drag things out, make the best decision you can and help us get on with the work that you've assigned us to do.

Sarah Nicastro: Yeah. Okay. What about the values?

Jack Wiley: Yeah. The two values are interesting because when it's all said and done, what I found was that, one fifth of the world's workforce identified one of these two values as what they most wanted. By values, I'm talking about personal standard of conduct. What are the personal standards of behavior that the manager brings to the workplace and is known for? And what employees said was, number one, we want our manager to be fair and just. So they're going to make equitable decisions, they're going to be objective, they're not going to play favorites. They're going to honor employees with fairness and justice and decision making.

Jack Wiley: The second is similar, but still different. It's being honest and trustworthy. So this is about the issue of walking the talk, doing what you say you're going to do, show up in and operate in an ethical way. Be transparent, don't say one thing to one group and another thing that's different to another group. Be honest under all conditions. As I said, one out of five employees worldwide identified one of those two values as what was most important for them. That tells me that there's a deficit in how these values show up in the workforce around the world today.

Sarah Nicastro: Yeah. Okay. All right. So here's a couple of questions for you.

Jack Wiley: Sure.

Sarah Nicastro: The first is, with some behaviors and skills and values that all seem very fair and attainable, where do you think the struggle comes in for those that are not in that top tier?

Jack Wiley: Yeah. I think there are probably two or three sources of the struggle. That's a great question. I think part of the struggle is in awareness. Interestingly enough, now this is U.S. specific data. But about a year ago, I asked 1,000 managers in the United States. By the way, there are 24 million managers in the United States who have people management responsibilities. So we're talking about a very large population. I asked a representative sample of 1000 of those managers to tell me what they thought was the most important thing that employees wanted from them.

Jack Wiley: Now, I won't go through all of the results, but let's talk about two areas in particular. Support and understanding. About 25% of employees in the United States would say that that's the number one thing they want from their manager, most important. Only 16% of managers identified that as the most important one. More astoundingly, 13% of employees said that recognition was what they most wanted from employees. Only 1% of managers identified recognition as what employees most want. So, that's one form of disconnect.

Jack Wiley: Now, to be sure, there are a number of those attributes that managers were pretty spot on in terms of expecting or understanding the employees needed from them. But there are also some pretty big disconnects. That's part one. Another part that I find very interesting is that, and organizational psychologists have known this for a long time, managers tend to have an inflated view of how successful they are as managers. So, I actually had managers rate themselves on some key dimensions like overall work management, people management, overall effectiveness, and I had employees rate managers on those same dimensions.

Jack Wiley: What I found was, on a scale of one to five, managers consistently rated themselves about 20% more effective than employees did. We have tons of research in our field that show that upward feedback measurement systems are quite accurate, employee views of how their managers perform are probably the most valid and reliable views of managerial performance that we have, but managers are overestimating how well they're performing.

Jack Wiley: The third thing I found out was, I asked people managers, how much training and development they had received as a people manager? This also is somewhat astounding, but what I found was, over 70% of managers in the United States, and I'm talking about all industries, all different levels of management, smaller organizations, larger organizations, over 70% of managers had either had no training in people management or the training they had received was limited to no more than four hours. And so, when we consider the centrality of people management responsibilities in the context of the overall role of the manager, and over 70% had no more than four hours at best, also I think is part of the problem.

Jack Wiley: Because we know that through awareness and through skill development and through reinforcement, managers can show up in the ways that employees most want them to show up. But if they're not aware of it, if they've got a misunderstanding of what's important, if they've got an inflated view of their own success, then I think these are all answers to the question you post.

Sarah Nicastro: I guess I do agree with you that if those things are addressed, those scores should raise and we should see more managers and not top tier. What concerns me is the people at the very bottom. Right? And some of the reasons that that could be, right, so it could be the inflated view of their own methods and their success. It could be just a lack of training or skill, but I think sometimes people end up in those positions that truly shouldn't be, and either cannot or would not raise to the level that businesses would like them to, or employees need them to. Do you agree with that, or do you think that everyone, even at the bottom tier has what it takes to be able to adopt these different behaviors skill and values and perform the way that you're prescribing in the book?

Jack Wiley: Yeah. I think that's another great question. I think most people do, but I couldn't go on record saying that all of them are capable of performing the way an employee-centric manager should according to the definition provided by subordinate employees. When you think about values, sometimes values are hard to change. If people don't have a historical record of being honest and trustworthy or being fair and just, you can help them understand the importance of this, but they really may have to make some pretty substantial changes in their orientation toward the workplace and toward others.

Jack Wiley: Now, when it comes to some of the behaviors, can I become better at listening? Can I become better at providing recognition? Can I do a better job of communicating clear performance expectations? I think things like this, you can build skill around, but they're going to be limited. If they don't have the cognitive mental ability, if they don't have the intelligence, they're going to be limited in their problem solving decision making skills. So I think underneath your question is also the notion that we can do pre-hire assessments of candidates for managerial positions to see whether or not they have the right personality attributes, whether they have the right amount of intelligence, if they have the experience, the past experience that would allow them to be successful.

Jack Wiley: But I fear a lot of organizations don't use pre-hire assessments very effectively. They don't use the behavioral based interviewing that we would recommend for how you determine whether or not someone is really qualified to move into first level supervision, let alone higher levels of managerial responsibility.

Sarah Nicastro: Yeah. I also think there's an issue of, it's one thing to tackle this from a new hire perspective, it's another thing to tackle it if you're looking at all of the incumbent talent and where they rank and what the deficiencies are, and what needs to be done to address it. I think I do feel that the values part of this is the most important in terms of coachability. Right? If that is there, right, the behaviors can be taught. If that's lacking, that's a problem in and of itself.

Sarah Nicastro: I was curious, Jack, if you could talk a little bit about ... and maybe this is an unfair question, but have you noticed, or do you surmise that there's a correlation here to where those leaders ranked and what the culture of the business is? Because to me, this seems that while there would certainly be some individual variation, it also seems like something that has a trickle-down effect in the sense that, if the company culture is one that those at the top are employee-centric, it would be more likely for the managers among the ranks to have some of those behaviors and skills, et cetera. Do you see any correlation there? Exactly.

Jack Wiley: No, I am totally on board with that assertion. If we think about the culture of an organization, typically it's tied back, especially in younger organizations to the behavior of founders of the organization. If you want to assess the culture of an organization, the two things that I think you look for, first of all, is the behavior that's modeled by people at the top of the house. Secondly, to understand how rewards are allocated, because the behavior of the people at the top of the house and how rewards within the organization are allocated, are going to provide tremendous insight into the culture of the organization.

Jack Wiley: So, if you've got people at the top who aren't modeling the kind of behavior associated with the employee-centric managers, that's going to be a deterrent to displaying those behaviors at lower levels. Obviously it doesn't make it impossible, but you won't see it as rewarded or valued by higher level executives when they look at and evaluate the performance of lower level managers. So, absolutely I am on board with culture being extremely important as a variable that determines a behavior of managers.

Jack Wiley: Now, at some point in time, employees are going to do their own assessment. Managerial employees are going to say, "Either I fit with this culture or I don't, and if I've got the option, I'm going to vacate my position and try to find an organization where I believe that's a better fit for me." When you think about what organizations can do, which is the flip side of this, they can do a better job of pre-hire assessment. They can encourage and put the spotlight on managers at higher levels who model the right kind of behavior.

Jack Wiley: They can implement upward feedback systems to get a readout on how managers are doing against these eight attributes. There are a number of things that they can do. And just like your question suggested, if they're rewarding these behaviors at lower levels, they're much more likely to see those behaviors displayed.

Sarah Nicastro: Yeah. That was going to be my next question, which is, for an individual manager, if you wanted to learn what these attributes are and reflect on whether or not you exemplify them, et cetera, you can read the book and get a sense of that. What I was going to ask about is what you just commented on, which is, the organization's responsibility to drive employee-centric management as part of its culture and what are some of the things that those companies can do or implement or track to move this in the right direction.

Jack Wiley: Right. It is kind of interesting. Let me tie in some other research that I've done that's related to this. When we think about a manager's performance, and if you're a superior to a particular manager and you're responsible for managing their performance and evaluating that performance, what are the variables that you consider? Well, you might be considering the engagement of employees who report to that manager, you might consider whether or not it's a functional cohesive team with good interpersonal chemistry. Certainly, you're going to look at whatever measures of team performance you have.

Jack Wiley: Those are all going to be contributors to your determination of whether or not that manager is doing a good job. Well, the fact of the matter is, that what I've been able to demonstrate is that if we can measure the attributes of managers on these employee-centric managerial attributes, if I know the scores on those attributes, I can actually predict two thirds of what their overall rating is. Now, there are other things that are going to filter in and affect that rating, but basically I can explain or account for two thirds of a manager's overall performance rating based on these eight attributes.

Jack Wiley: So, what's the relevance of that? Well, the relevance of that is that if we want to help managers become more effective in their display of these attributes, and more importantly, in their overall performance levels, then we can help them understand better how to demonstrate these attributes, because that becomes the pathway to achieving a higher performance rating as a subordinate manager.

Jack Wiley: The other thing that I found out, we do this through statistical regression analysis. So we create an equation that predicts an outcome. Well, variables enter at different levels. The three variables that most impact a manager's overall performance rating boil down to just three things, obviously. The first is to listen to employees. If you're seen as a good listener of employees, that's number one. Number two, to be good at problem solving, decision making. So make decisions quickly, make good decisions, bust through obstacles to getting the work done. But then thirdly, providing employees with recognition.

Jack Wiley: Yeah, you have to be smart and experienced to make better decisions, but you have to be aware of the importance of listening and of providing recognition. Really, anyone should be able to do that with a proper awareness and maybe some skill building. So those three things alone can really drive how effectively the manager is perceived by those employees who report into that manager. Again, when we think about overall performance, we can largely explain how a manager's going to be rated on overall performance by taking a look at how they're evaluated on these eight attributes of the employee-centric manager.

Sarah Nicastro: I don't know if you noticed me grinning a little bit, but I was just thinking, when you were talking about decision making, you have to be experienced, you also have to be empowered. Right? I mean, it's just interesting to me how this ties back to the overall company culture. Right? And whether organizations want to foster and nurture this type of behavior or whether they are intentionally or subconsciously doing things that are stifling it. Right? And so, it's just really interesting how those things intersect.

Sarah Nicastro: And to your point, why an individual manager at times gets to a crossroads where they need to question, "Am I at the right place? Am I in an environment that I can be true to the type of leader that I want to be?" Right? And if not, they obviously know they need to go elsewhere. But I think that it's going to become more and more important for companies to move in in this direction overall with the culture and the top leadership.

Jack Wiley: I think you're absolutely right, Sarah. I mean, think about it this way. If I'm a manager of subordinate employees, but my manager isn't treating me with dignity and respect, isn't showing respect for my thoughts and opinions, never ask for my input, if my manager hasn't provided me with clear performance expectations that defines success and gives me permission to pursue that with a sense of autonomy, then it's going to be really difficult for me to show up as a manager to my employees in a way that allows me the full range of possibilities in terms of making good decisions.

Jack Wiley: I may be delayed in my decision making, I may be steered to make a decision that I don't think is the right decision, but I have to agree to it because my boss is demanding it, and that boss at the higher level, really isn't delegating authority to the lower-level manager in a way that really demonstrates confidence in that manager's ability. So that's going to be a stifling factor.

Sarah Nicastro: Yeah, it would be interesting, I know we don't have time for this today, but there's a lot of things at play. When you talk to organizations and you examine some of the different layers of change that are going on in leadership and company culture, I think you spoke earlier about, when we talked about recognition, this idea of people being rewarded or compensated based on outcomes, not output, that type of mentality. There's just so many things going on that I think are really interesting about how the landscape of leadership and company culture is evolving, and I think that it's a really interesting area to talk about.

Jack Wiley: Well, it is, and of course, some of the consequences, we've talked about consequences that are measurable by, let's say attitude surveys, like employee engagement, or even team cohesion. But then there are some hard measures too, that gets back to quit rates and absenteeism and other forms of acting out. If employees see that this really isn't a good fit, managers aren't showing up the way they should. They're not being sensitive. They're placing more demands with fewer resources. All of this creates a sense of stress. I mean, that is the definition of stress.

Jack Wiley: When the demands placed on me outstrip the resources available to me to accomplish what it is I'm asked to do, I'm going to consider myself to be stressed, and over time that's ultimately what leads to burnout. At some point in time, we look at work life balance, we look at other things that affect the family. People end up making decisions that I would be better off exiting this organization and going to work for another organization.

Jack Wiley: But what that means for the company that experiences that regrettable turnover is now they've got to replace that employee. And if that employee is effective, if they're knowledge worker who's performing at a high level, the estimates are that it's going to be the replacement costs to bring someone new into an acceptable level of performance, is roughly approximate to the annual salary of the departing employee. So when we think about what the costs are for ineffective management, it's not just in poor results to a work experience survey or lower employee engagement index scores. There are some real costs associated with absenteeism, with sickness, with decisions to leave an organization and the trailing costs that those represent.

Jack Wiley: So, the more that we can quantify these things and help leaders of organizations understand how they might be really spilling money unnecessarily because of ineffective management, then we begin to get their attention, and open up doors or avenues of thinking about how these things can be managed much more effectively and in a much more cost-effective way as well.

Sarah Nicastro: Yeah. I think acceptance of responsibility. Right? I mean, I think that's one of the things when I keep coming back to the overall company culture, I think it's because it's very easy to point fingers at an individual manager and say, "Well, they're not doing their job." Right? In some cases in that bottom tier, that's why I brought up, can they be coached up? Some probably can, some probably can't. So, it's not to disregard the role of the individual, but I think a company has a responsibility to also consider how the environment of the organization is impacting that performance or not. Right? And look at what those things are.

Sarah Nicastro: The other thing is, when you think of the impact of one poor manager and people leaving, there was two things I wanted to say, you can calculate the cost of replacement. What's impossible to calculate is the opportunity cost. That person that left the organization, you don't know what they would've gone on to do or contribute. Right? So, you don't know what damage you're doing by just allowing this to persist.

Sarah Nicastro: A lot of times, I attended a web event a few weeks ago, and it was a group of folks talking about being gaslighted by manage and the vast majority, if not all of the people that were contributing to the conversation said, yes, they've experienced this, and they just left. They didn't fight back, they didn't bring it up. They didn't often even give a reason as to why they were moving on. Right? Because they don't have hope that the company will handle it appropriately. So they just concede and go somewhere else, to your point. Right? That is very unfortunate.

Jack Wiley: Right? So, an additional cost then more generally in the place of operation of that business is their employee value proposition, and the brand of the employer. It becomes diminished, it becomes hurt when there's a continual flow of people exiting the organization because of a poor experience, whether it's with an individual manager or managers more generally who aren't well trained and aren't reinforced and rewarded for the right kinds of behavior and the right approach to managing others. It's quite unfortunate, but it can be adjusted if there's a willingness at the top to take the actions necessary.

Jack Wiley: Now, to your point, if you think about this, if an organization were to engage in assessing their managers up and down, the totality of that would really provide them with a training needs analysis of what we need to do differently within this organization to reflect the attributes of the employee-centric manager, which going back to a point you made earlier, we know the validity of the model because of what it predicts in terms of outcomes. So this is a pathway to greater success, but sometimes that pathway starts with creating an understanding of where you are right now, so that you can figure out what it is the actions are that you need to take in order to get better.

Jack Wiley: But again, that presumes a certain level of enlightenment and belief in employees and value in employees so that you're creating the right kind of circumstance for them to excel at their work, to want to stay where they are, to be enthused, to provide that higher level of discretionary effort that every employer would want from their employees.

Sarah Nicastro: Absolutely. Very interesting stuff, Jack. I appreciate you coming on and talking about this. Let folks know where they can find the book.

Jack Wiley: Right. You mentioned early on that one of my roles is the chief scientific officer for Engage2Excel. So you can go to the Engage2Excel website. Engage2 as in to the number, engage2excel.com. There are a number of resources there that you can access, but certainly you can gain access to ordering my book. The other way in which you can do that right now is to go to my website at www.employeecentricity.com, and that will show you how you can order the book. Now, in the near future, possibly by the time this is published, we'll be up and running on Amazon as well. Most of us know how that works, but look for The Employee Centric Manager.

Sarah Nicastro: Okay, excellent. I'll make sure the links are in the show notes, and really appreciate you coming and spending some time with me today.

Jack Wiley: Thanks for the invitation and thanks for the great questions. Really appreciate.

Sarah Nicastro: Absolutely. You can find more by visiting us at futureoffieldservice.com. You can also find us on LinkedIn as well as Twitter @TheFutureOfFS. The Future of Field Service podcast is published in partnership with IFS. You can learn more at ifs.com. As always, thank you for listening.

By Sarah Nicastro, Creator, Future of Field Service

When Field Service Palm Springs 2020 was cancelled, I wondered when we’d ever be at the point of being able to return. It’s an event I look forward to every year and last week, that return happened with Field Service Palm Springs 2021. I can’t explain how happy I was to be back in California, sharing thoughts, ideas, smiles, and, yes, drinks with so many colleagues, co-workers, friends, and new connections. The sentiment of not being able to replicate the energy you get from an in-person event any other way is one I heard shared by many attendees.

The event took place over three days and included mainstage keynote sessions, panels, fireside chats, and afternoon breakout track session and roundtables. It was interesting to hear stories of how companies weathered the storm of the pandemic and what’s top of mind as we move ahead. There were some great success stories shared by folks like Larry Blue of Bell and Howell, Tim Spencer of BUNN, and Gyner Ozgul of Smart Care Equipment Solutions. And while I think it’s important to listen to how others are making progress and learn from their journeys, I think it’s also critical that we work to examine some of the barriers holding field service back from its ultimate success.

So, with that in mind, I’m sharing here the five barriers I heard this week that seem to be in the way of companies deriving the full potential of service.

Barrier #1: No Service Identity

We know there’s a continuum of service maturity that companies are progressing through, from break-fix on one end to outcomes-based service at the other. And no company matures in one big leap. However, the barrier here seems to be a lack of service identity for some organizations. To achieve true outcomes-based service, you’re talking about a fundamental change in how business is conducted. In reality, it’s a change in company identity versus service identity – or the incorporation of service identity into the overall company identity.

The evolution to outcomes cannot be achieved in the service function alone – it requires a top-level recognition of the opportunity service presents for the business and a company-wide commitment to the journey of adopting that identity. I believe that for us to witness a surge in progress through that continuum, we need greater and more pervasive acceptance of the fact that service must become a part of the company’s identity. We made strides when we moved from perceiving service as a profit center versus a cost center but what’s needed now is the elimination of the silo in total and for it to be seen as an integral aspect of the company value proposition.

Barrier #2: Digital Alignment

This is tied to business identity in a way, because as companies work to create a more cohesive and service-centric value proposition, the realization occurs that greater digital alignment is required. Rather than a disparity of digital tools in use across the business, however well-functioning they are, companies need to become more cohesive in their digital strategy and digital investments.

We discussed this need here where we explored the barriers to digital transformation success and the idea of building the Digital Dream Team. To create the customer experiences we need to, we must look at digital more holistically so that we ensure a seamless customer journey, so we gather the right data at the right time, and so we set the stage to be able to leverage that data as a strategic differentiator.

Barrier #3: Legacy Company Culture

The need for innovation has never been greater, but for many organizations there’s a legacy culture really stifling creativity and employee empowerment. This disparity was evident in some of my discussions where you could see almost two entirely different worlds exist – on one end, you have companies that are embracing change and working to create environments where employees feel valued, know they can provide feedback and share ideas, and feel comfortable speaking up and trying things because failure is seen as an opportunity not a disaster.

On the other hand, you hear people talking about how rigid the management is, how narrow the focus, how outdated the employee experience. And I would say that, right now, this is sadly still the majority. But I do believe it won’t be for long. There’s simply no way to remain relevant without adapting and adopting a more modern culture. Your customers will demand it and your employees will, too. There are so many resources on employee engagement, company culture, and modern leadership and my opinion is that these topics absolutely need to be woven into the event agenda more going forward because this is an area that needs attention.

Barrier #4: The Talent Gap

This was one of the number one topics of discussion, and of course we do a lot of content on this topic. You can read my advice on how to control the controllables around the talent gap here, but while on site I also recorded a podcast with Roy Dockery of Swisslog that you’ll see soon. Roy has strong opinions on this subject and at the heart his though is, “There isn’t a talent gap, companies are just lazy in how they hire.” He’s not wrong.

What he means is that companies have always hired on experience, and that experience is quite frankly becoming extinct. We must then become more creative and, yes, work harder to find talent and develop it versus expecting experienced workers to show up in droves. There are layers to this to explore, including more modern recruiting practices, the importance of the employee value proposition, company culture and employee engagement and retention, and how technology can ease the burden. It’s a topic that will continue to be important, but I hope the audience is willing to listen to Roy’s point and begin to think differently about how to close the gap.

Barrier #5: Data Aggregation vs. Storytelling

There was a lot of discussion at the event around collecting data and leveraging ML and AI, but the barrier I believe is that companies are still focused on the aggregation of the data rather than the stories it can tell. Of course, the aggregation must come first, but ample attention needs to be put into knowing what you can do with that data and ensuring you have systems – and talent – to appropriately translate your data into valuable business insights.

This isn’t necessarily a barrier, but more data storytelling and a deeper understanding of how to use data to drive customer value is absolutely key to the future of service and I think there’s a lot of exploration to do on best practices around this topic.

If you attended the event, I’d love to hear your thoughts and takeaways! Also, the event is back to its normal schedule for 2022 and will be happening April 26-28. If you missed last week’s event, stay tuned here for the agenda and perhaps I’ll see you in the Spring.

By Tom Paquin

In November 2020, the Centers for Medicare & Medicaid Services launched the Acute Hospital Care At Home program to provide hospitals expanded flexibility to care for patients in their homes. This is but one of many at-home hospital care programs that have begun to pop up, in an effort to keep high-risk patients safe, mitigate capacity issues at hospitals, and to simply allow people the dignity of care from their own home. And while we’ve spoken about medical devices before, it’s interesting to take this conversation into medical care itself.

While this certainly is a nice option for individuals with chronic conditions who would prefer to stay in their own home rather than make regular trips to the hospital, it’s impossible to not see this as what it is: Yet another vector for field service management. And in-home medical care being another service option means that what was once a simple, centralized function now has tendrils that extend far outside a single network of buildings. Let’s talk about what that means.

Scheduling in the Another Dimension
Under even the rosiest of circumstances, coordinating a staff of personnel across a business is a challenge. Take “Making the rounds” and move it to a statewide scale, and you’ve added another dimension of challenges, logistics, and pain. Do you embed individuals in homes? Do you subdivide labor between at-home and in-office? Do you bring on contingent labor and merge them with salaried staff?

In service, we know that this can be most effectively managed by a full-featured optimization system. For staffing effectiveness (especially in the face of a labor shortage), this is an imperative. Getting this right will allow hospitals and associated organizations to offer the care that patients need, when they need it, in a way that maximizes value and limits overhead.

Decentralizing the Service Supply Chain
For medical devices, especially consumables, there’s a variety of interesting opportunities to provide decentralized service. Should consumables be sent directly to the patient? What are the compliance risks of doing so? What about remittance and disposal of hazardous materials? There’s a lot of potential for value add, money saved, and more thoughtful utilization of materials.

Getting all that figured out will be beholden to understanding parts management and reverse logistics across all channels of care. That means fusing in-office care with field care, in a single view, across use cases.

Always-on Device Management
I can imagine that home medical care would be particularly appealing to individuals on dialysis, or who receive lengthy treatments of other kinds. Obviously many of those types of treatments require and include complex machinery in order to function correctly. And when that equipment falls out of physical view, tracking becomes all the more important.

We’re quick to articulate the invaluable connection between asset management and service management, and that becomes doubly true when medical property is in a customer’s home. For things to run efficiently, you need to know that there’s an issue with a piece of equipment before the appointment, not at the beginning of an appointment.

Whenever service comes into play, these sorts of considerations naturally arise. And while it’s important for all service organizations to get service right, the stakes are often much higher for medical care. Fortunately, today’s tools for service deliver can rise to meet those challenges, and help initiatives like this succeed.

Kevin Bowers, Director of Field Services Research at TSIA (Technology & Services Industry Association) joins Sarah for a chat about some of the biggest misperceptions, thrown around terms, and doubts about As-A-Service as well as a discussion around why this journey is so important to embrace and educate ourselves on.

Sarah Nicastro: Welcome to The Future of Field Service Podcast. I'm your host, Sarah Nicastro. Excited to welcome a special guest here with me today, Kevin Bowers, director of field services research at TSIA. Kevin, welcome to The Future of Field Service Podcast.

Kevin Bowers: Well, thank you, Sarah. How are you today?

Sarah Nicastro: I'm doing well. How are you?

Kevin Bowers: I'm great.

Sarah Nicastro: Awesome. So some of you probably know Kevin quite well from the research that he does and leads at TSIA and we'll talk about that a little bit more in case there are any folks that are not already plugged into that, but Kevin recently wrote a column about as a service. And I came across that on LinkedIn and I thought I really love the idea of industry folks collaborating together to improve understanding, elevate awareness, et cetera. So I asked Kevin if he would want to come on and talk about some of the myths and truths, misperceptions, and realities that both of us are seeing related to the as a service conversation. So that's what we're going to do here today. So Kevin, before we get into the nitty gritty, tell our listeners a little bit more about yourself.

Kevin Bowers: Okay, well, we'll start with the important stuff. I'm a husband, father of six. Fun fact. I'm fluent in Japanese. I spent many years in my teen years living there and I like cooking on my big green egg in my free time all year round.

Sarah Nicastro: Nice.

Kevin Bowers: But then professional side of that coin, as you said, I'm the director of field service research at TSIA or the Technology & Services Industry Association. We're a for-profit research institute where we do a lot of deep operational benchmarking to help industrial equipment healthcare enterprise IT companies increase their revenue and optimize their profits by using fact based business frameworks and best practices. And prior to TSIA, I spent 20 years in the industrial equipment arena, specifically machine tools here in Chicago, where I was in operational roles and then the last 10 years running service parts training and contact centers. So that's how I started my career in spare parts and then ended it in service and spare parts. So now I'm talking to people to do that every day. So it's great.

Sarah Nicastro: Awesome. All right, cool. So as I mentioned, this conversation is stemming from an article that Kevin recently wrote related to this topic. So definitely take some time to check him out, check out his and other analysts' research at TSIA because it is another excellent source of information and industry insights. So what I want to start with is in the article, you start with talking about some of the reasons that... And we're saying equipment as a service, and I think some of this is specific to equipment and particularly the equipment that the types of companies TSIA serves. But I think there are aspects of this conversation that are going to be applicable, regardless of whether it's actual equipment or what as a service offering we're talking about. At the beginning, you talk about some of the reasons that equipment as a service can be ignored or underplayed by those organizations that could and potentially should be taking a closer look. So can you talk a little bit about what some of those reasons are?

Kevin Bowers: Yes. So I think it comes down to it. You're right. My research focuses on people with equipment on premise. However, a lot of the themes of as a service, whatever the buzz words you want to use is, is applicable across many different industries. Software and things of that nature. I think it's a trend that is specifically for on premise people, it's coming, it's been enterprise, IT, Salesforce, all that kind of stuff. And it's slowly making its way across the spectrum to other industries. But when we talk to our members, they'll say one and two things like you can't put my stuff in the cloud, it's physical or we already do that. No problem. Why do you want to talk about this?

Kevin Bowers: But my job is to try to help translate what enterprise IT and all those folks went through for people that are just starting to catch its wave. And it's like you said, it's over LinkedIn. Every time you look, it's as a service something, robotic, software, equipment, whatever infrastructure. So it's there, it's coming. I think people still may think it's a buzzword, but it's not. I think that it's something that we need to talk about. And that's why I wrote this blog. My boss, Val also did an interview earlier in the year talking about it. So I think it's coming and it's better to plant a tree now for when we need it in five, 10 years.

Sarah Nicastro: Yeah, absolutely. And I want to go back to the two main points that you made in that article, which are the belief or misperception that when you talk about something as a service, you're automatically talking about a cloud offering. And that is not always the case. So that's one thing that it can be a part of the overall value proposition, but they are in no way synonymous and it doesn't necessarily have to be a part of it. The other that I think is really important that you mentioned is that people just assume that as a service just means leasing equipment period, like, okay, well, people just don't want to pay CAPEX, so we'll let them lease it and they can pay OPEX.

Sarah Nicastro: And it's really just a conversation about a different way to finance an asset, which is also not the reality when we're talking about the importance of this topic to the companies that have something they could provide as a service, the opportunity it presents. It's that opportunity is not well represented by just moving to a leasing model. So those are two really important things to get out of the way of if either of those two things are things that have precluded you from looking deeper into this opportunity, you need to set those aside and take a closer look. So is there anything else we should clarify about what as a service is not?

Kevin Bowers: Well, you did it pretty good justice. And in my blog, I had the quote where my boss's boss often says, when he does advisory, he goes, do you know what the S in as a service stands for? It doesn't stand for subscription. It doesn't stand for solution. It's for the service. And it's about adding value to that piece of equipment. It's not, like you said, CAPEX, OPEX. It's about adding the value and helping the customers achieve something that they're after. And it can be done. It doesn't have to be in a cloud. There could be parts of your offer that is in a cloud. Software is a prime example of that, but you can have a large 100 ton press that could be as a service if you set it up correctly and understand the value that you need to bring to the customer.

Sarah Nicastro: Right. Yeah. And I think that's a really important point, because again, what we're really talking about here is the journey to delivering outcomes instead of delivering products or services. So even I would go so far as to even say it's even more than just service being the S because I was at a conference in September and Mike from NCR was presenting. And one of his first points when he got up was our customers don't care about our products and they don't care about our service. They just care about the outcome. And it's a very simple statement, but it has a lot of meaning for companies in this space that are ignoring that reality or are... Another reason I also wanted to have this conversation with you on this podcast is because I think there are a lot of companies who think they get it or think they're embracing it, but there's a lot here that can be misconstrued or confused, or there's some maybe beliefs or default actions that you want to embrace it, but then you caution yourself.

Sarah Nicastro: And so then you're hedging your bets in a way that just waters down the opportunity itself. And so, what we're really talking about is this idea of providing outcomes, and so it isn't about offering a product on a subscription. It isn't even about servicing a product. It's about what are the customer needs, challenges, insights that you are uniquely positioned to apply or provide and how do you create a value proposition that is representative of all of those things in a way that delivers on outcome. The simpler, the better, all of those things. And so if we look at the conversation, as anything as a service is a route to delivering outcomes, let's talk a little bit more about why this is so powerful for companies to have that light bulb moment and begin to embrace.

Kevin Bowers: All right. So, as Mike said, and at TSIA, we've been saying it for seven, eight years now, that customers don't care about your product. And you posted about your experience at your event in Netherlands, just recently, talking about it's not about the product, the service. It's about the story, and more and more, that story is about outcomes. And to be clear, it's about the customer's outcome, not your outcome. You're not driving towards more revenue for you or whatever. You're trying to help the customer gain more revenue. So I think that idea still ruffles feathers. Everyone thinks that they've built a better mouse trap, and to say that their product's not important is sacrilege, but at the end of the day, if you have a technological advance, someone's going to catch up in 12, 18 months anyway. So it's about the other things you can bring to it. And another great quote from one of my colleagues is we need to stop calling the product the technology.

Kevin Bowers: It's about the complete offer, the product and the data analytics around it to get you to the customer outcomes. So last month TSI did a conference and each research practice gives a keynote. And I talked about this topic, but when I was starting to research and think about my story, I was thinking about, well, when did I first hear about as a service, and I was digging, digging, digging. I finally, I found a trip report from June of 2009. I took the COO of a large locomotive OEM to Japan to meet our boss, and in my trip notes, it specifically says, I don't care about your product, Kevin, I'm here to learn about how you can make me better. Cool. It didn't register to me then. And it was back then it was the example was Rolls Royce or anyone that had a locomotive, it was connected as a service, blah, blah, blah. But no one else was doing it. So it fell by the wayside. But progressive customers were thinking like that in 2009. So it's not a flash in the pan.

Kevin Bowers: So anyway, as you said, this as a service is a lever, a method to deliver outcomes. And I think outcomes scares people. They think it's complex, but it's not. There's three flavors. You can increase the customer's revenue, you can decrease their costs, or the often forgot one is mitigate risk. Those are the three types of leverage you can pull. And then you have to think about it vertically. What happens with oil and gas is quite a bit different than point of sale in a grocery store, but the same ideas revolve around there. And it is important to understand. And it's important, like you said, you don't want to hedge your bet, but it's not like you have to all of a sudden make every product that you have in your portfolio as a service. We talked about you have the segment, there's some things that it's not worth it. There's no value that you're going to add and help the customer achieve any other outcomes, but you can segment it.

Kevin Bowers: Start to get the data off the product and it'll start to help you I think drive those outcomes and ultimately customers want outcomes. Think in everything that happens in B2C comes to B2B. Think about you want your internet to always work because we have to be on this podcast today. We don't want to... This is a great conversation, but I don't think we want to spend another 45 minutes re-recording. So the outcome is internet service so that we can do business, and it's coming to B2B, so we have to be ready.

Sarah Nicastro: For sure. I think the point I made in that presentation and in the article I wrote after is companies are very accustomed to telling the story of what their products or services do. And increasingly customers do not care about that story. The story they want to hear is how it helps them. And so it's really, I think to start, it's a process of reframing the way you think about your product services and entire value proposition from the mindset of what those customers need help with. And so we did a podcast a while back with Howard Boland from Schneider Electric in Australia, and they've introduced power as a service. And he was joined by a gentleman, Scott Weller from Mossrake Group who has worked closely with them on it. And one of the things that I thought was really interesting about that conversation is this idea that when you think about the early parts of understanding this journey, you have to start with the go to market.

Sarah Nicastro: What is the hook? What is the offering? What is the outcome? And then reverse engineer that into so what does that mean in terms of changes within our business we would need to make to deliver that? Because I think it's really a lot around the communication and articulation of the value proposition, the customer buy-in that companies that have been historically product oriented, they are not used to communicating in those ways and building relationships in those ways. And that in a lot of instances can be a really big initial hurdle to overcome. So to your point, you can do that in an area of the business. It doesn't have to be we're flipping a switch. Today we deliver products. Tomorrow we deliver outcomes, so let's maybe talk a little bit, Kevin, about the idea that I think we both agree that outcomes is the future. And as a service is a very important aspect of how companies can get there. What are some of the challenges?

Kevin Bowers: All right. Well, especially for field services, as you said, go to market, all these things are important. So it's not just a heavy lift for field service. It's the organization that has to do it. And every webinar conference presentation, you see people talk about silos. I think everyone grew up on a farm as much as they talk about silos, but it's true. Everyone has to be in line, and the field service has to have a seat at the table. There's a lot of things that they're going to have to do different. At the end of the day, when you really get to this outcome based pay per use consumption type model, when field service in the past, they didn't get there on time, it was just a missed SLA. All right. There might be a smack on the hand, some penalty, but now you don't get paid.

Kevin Bowers: So that's a mind shift and it's way away from the product. So the service teams, do they have the infrastructure in place? Do they have the ability to resolve the issue quickly? Did a webinar yesterday, actually. And in it, we asked about the different types of SLA offers that field service members had and still only 40% have something around resolution time, but that's all that's going to matter as we move to outcomes. If you get there and mess around for two days, no one cares. They want you to get there and solve it. So that's quite a paradigm shift for most organizations. So you got to put a lot of investment in there. And then again, we talked a little bit about it, but you need the connectivity, that data that comes off the equipment's going to give you all sorts of insights before you go.

Kevin Bowers: So to be efficient, proactive, insightful for the customer, you really need this telemetry. And that'll ultimately drive other types of outcomes when you get that data. I think the data that comes off the product's way more valuable than the product. And like you said, people, it's hard to get people out of the blinders away from the product. We can't be product focused anymore. We got to start to move to efficiency, proactiveness, and then ecosystems that help customers achieve their outcomes, I think, and then you got to, like we said, focus on the metrics. That's what the basics. Can you fix it right the first time? To fix it right the first time everything has to be hitting on the cylinders, you have the right training, the right tools, the right people, software that can help route you the right people.

Kevin Bowers: So, you can't run field service on an Excel sheet anymore and have pie dreams that you're going to deliver an outcome. And then there's also, as you said, financial implications to this, moving from CAPEX to OPEX, every OEM loved that big paycheck 10, 30 days before the product even was installed, they got this huge chunk of money and then little money trickled in. Well, the idea of outcome or as a service is that initial selling is the lowest amount of money you're ever going to get. And at TSIA, we call it swallowing the fish. Your costs go up, your revenue goes down for a while, and then you got to do things to mitigate that. So a lot of that is how fast you resolve things and what data you have to offer different, additional outcomes and offers to help offset that. So it's a lot of fun I think. I don't want everybody to think it's impossible, but you have to think about it and you have to communicate, and it's all aspects of the company really.

Sarah Nicastro: I think the point you make about silos is important in the sense of, I think it's one of the most fundamental challenges here that this is not a field service conversation. This is not a service operations conversation. This is a company-wide strategic direction conversation. And so it has to happen at that level. Or it's a waste of time, quite frankly. And so, one thing we see is you see leaders of service in a ton of different companies that get it, that are working in organizations that don't yet get it and trying to drive this change in a way that causes them a lot of frustration. That's actually another aspect of what we talked about on the podcast with Scott Weller of Mossrake which is he calls it the microcosm approach, but how you can rather than giving up, ultimately you have to get the company on board, but when that feels like an insurmountable task, he talks through some of the things you can do to create this change in a microcosm to prove it out, to help shift those minds.

Sarah Nicastro: But let's just say the top level leadership of the company gets it. And let's say that there's some top level buy-in on the direction of this. So that's imperative. You're still talking about a fundamental change in the way that you do business, in the way that you manufacture, install and deliver products, in the way that you handle your company financially and the way that you deliver service. So again, to your point, none of this is to dissuade anyone from this journey, because I am a firm believer that the writing is on the wall here. So you can ignore that and get further and further behind, or you can embrace it and start working on this change. But I think another big challenge that I've noticed, Kevin, is the idea of there is inherent risk in this model. And it's far different than the risk that these companies are accustomed to. So I also recently interviewed Dave Mackerness from Kaer, K-A-E-R, and they do cooling as a service in Singapore and other places. And they were pretty early adopters of as a service.

Sarah Nicastro: I believe they started offering it in 2012. And I think in 2018 maybe, 15, can't remember, they went all in on it and stopped offering anything else. But what he talks about is the fact that Netflix is $10 a month, and so you can sign up today, you can watch it for a month and then you can cancel at the end of the month, if you're not enjoying the outcome. If Netflix was $10 a month and you had to sign a 10 year contract and pay six years upfront, the model is not successful. And so companies that, again, this is what I was talking about that try and embrace this, but then want to hedge bets, you're really shooting yourself in the foot because that's just not how it works. So there's this idea. I think one of the other challenges is to understand enough about the opportunity and what that opportunity means to your business, to have the confidence you need to accept the risk involved because in most instances, when we're talking about the move to outcomes, customers want guarantees. They want uptime guarantees.

Sarah Nicastro: They want deliverable guarantees, so you are putting yourself in a position where you have to make good on that. And so I think these are some of the things that once people dig in and understand that, they panic and run, but what we're here saying is don't panic and run because you need to face it and tackle it and commit to the journey. There's a customer IFS has in, well, it's a global company, Cubic Transportation, but they do a lot of work with the London underground. And they actually were an earlier adopter of outcomes based service because Transport for London came to them and said, hey, we want to deliver our customers guarantees, which means we need you to deliver guarantees to us. And so they stepped up to that challenge. And going back to the point you made about, so where does technology fit into this, Mike Gosling from Cubic has said many times over, we would not have been able to scale in manpower to meet those deliverables and to uphold those guarantees.

Sarah Nicastro: We had no choice but to rely on technology to automate and optimize things in a way that makes it possible for us to do that. And so that's where you get into first understanding what the outcome is the customer wants. And then like I said, digging into then, okay, how do we evolve to make this possible? You provided a couple of examples in your article that were other ways that companies have started to overcome some of these challenges and take steps in this direction. Can you talk through a couple of those?

Kevin Bowers: Yes. As you mentioned, we're both pretty active on LinkedIn and you'll always scroll down, you see those landscape maps, who's doing this. And there's always these equipment as service ones. And whenever we talk in conferences, generally the same names. Rolls Royce, GE, Heidelberg, Kaer air conditioning as a service is another great example, but I think everyone thinks there's four people doing this. I've seen 50, 60 companies doing this, which there's a lot more, but the point is, it's expanding and there's this ecosystem around them expanding. You need the software, you need the technology, you need the sensors, you need the IOT platform. So you're right. It's here. So back to your question, some examples, so in my blog and also in my conference, I talk about a company called TRUMPF.

Kevin Bowers: They're in industrial equipment. They make laser cutting equipment. And they have a full pay per part, full OPEX. They roll everything in, but they also have this other model where you buy the piece of equipment and it has a six kilowatt laser. And you say six kilowatt laser. What does that mean? It means either I can cut up to maybe a three quarters of an inch pretty efficiently or thinner material I can go faster. Well, what happens if one day you get a job where it's an inch or an inch and a half thick? Well on the machine, they have built in more laser power. And then if you want to go from six to 10, all you do is hit a button. You've signed this contract. Now you start to pay per hour for this laser. Well, that's a subscription.

Kevin Bowers: No. We're helping them meet additional production needs. So, TRUMPF still gets the great, a big chunk of CAPEX upfront, but then they get this incremental amount of money from every time someone wants to jump up in laser power. And they also make a promise if you use it enough, you paid for it. It's yours. So, it's a blend of the traditional model buy an upgrade in the field or pay per use. So I really like that idea because it mitigates some of that risk. You still got the OPEX in front, but you still have the opportunity to show some value and add some more things. And we all always tell our members, make this connectivity option and opt out. You as the OEM need the data, so if the customer opts out, great, Mr. Customer, no problem.

Kevin Bowers: That means it's going to cost you more. And our service levels are going to go down because we need that data to help you achieve your outcome and that's a mind shift. And the other thing that people, I think that you said they shy away from these conversations of guarantees. Well, if you can provide the tangible value and show you what the outcome's going to be and how that's going to help them, you can start to flip the script and say, well, what if you need me to fix an issue in four hours, what if I do it in two? What are you going to give me? That's a conversation you can start to have granted it will not be probably well received, but if you balance it with the value you bring, they'll say, oh, well, that makes sense. And they still gain because they're back to obtaining their outcome quicker.

Kevin Bowers: A lot of things have to change when you start to do this, but it's not all on the customer side. Once you get all this data coming in, it's going to help you on things that aren't as a service. Start to build up your data models for predictive and prescriptive type service for people that are still paying CAPEX. So I think getting the data, it's a win and you should go through some of this pain to do it. And I think this is a great way to do it personally.

Sarah Nicastro: Yeah. Some of what you said made me think of another conversation we had on a podcast here with the CMO of Park Place Technologies. And that was a really interesting conversation because I think they've done an especially good job of how they market these offerings. And again, for some companies that have a deep, rich legacy as a product manufacturer or equipment provider, that type of marketing and communications is very unfamiliar. And she gave some really good advice, but they have a tagline and it's related to their first time fixed guarantee and she talked about what went into identifying the opportunity of offering that and then digging back through, okay, what do we need to do?

Sarah Nicastro: We can't say it and then not do it. So what do we need to do as a business to be able to make that claim and then uphold it? So, yeah, there's a lot of interesting stuff to this. So I wanted to ask too, Kevin, when we talk about the role field service plays in this picture, how do you see that role evolving as we move more and more to delivering outcomes instead of break, fix type service?

Kevin Bowers: Well, we talked a little bit about it. It's a team play. It's not field service. It's not service offer or management. It's not product. Everyone has to play here, but at the end of the day, field service is on the bleeding edge. When product's not working, producing the outcome, who goes? Field. So they're getting beat up. So they have to have a seat at the table. Inform here's what we're capable of. If you want more, we need more parts in more local locations. We need more training. We need more capacity. We need these types of data hooks in the product. Please develop this. So it'll help us. So feedbacks is critical, and really field service's best friends is the contact center. And traditionally the contact center's goal was to solve everything remotely, because it's a lower cost to serve. Well, that myopically doesn't work because overall the customer care is when I call and when it ends, the resolution time.

Kevin Bowers: So field and contact center have to work closer together. So everyone has to come together and break down these silos. I think that's pretty critical. And then like you said, the investment in the structure and the technology, because it's like a pyramid. Automate what you can because you're not going to probably get all the head count you need, think about maybe outsourcing some of the simple stuff that maybe it's not legacy equipment that's not as a service. So that starts to free up capital. So you can invest in your people that you still have and make them the experts. So when it does hit the fan, boom, we're there, we have the density and we get it done. So field's going to take the brunt of this when it doesn't go well. So they're going to have to have the mechanisms to give the feedback.

Kevin Bowers: And at the end of the day, they're the best ones to know what outcomes the customers want. A lot of sales is going to be digital now. Travel budgets are gone. They're never coming back. But field service is and how it has been going on site, from our benchmark data, they go on an average of 40 visits a month. So they're the only ones who are going to give you real feedback from the customer. And if we recall the outcome is the customer's outcome. So you need to know what that is and field's going to get that for us I think.

Sarah Nicastro: I agree. And I think I would take it a step further and say that when you talk about changing the identity of a business from being a product manufacturer and provider to as a service offering or an outcome, a solution provider, and then you think about the fact that to your point in many situations, the field service talent is the most frequently engaging with customers or the only one engaging with customers in a face to face way. So how are they representing the brand? And it's not just about their ability to do the job. And to your point, the tools that you are enabling them with to make sure that outcome is possible, but it's also about their ability to build relationships and to represent your organization and its value proposition in a way that is going to build customer loyalty and all of those things, those are new and different aspects of that role in many ways.

Sarah Nicastro: And so companies need to be thinking about what that means in terms of their need to upskill or re-skill or what they're looking for in the talent they're now bringing in so you're right. They'll bear the brunt of it when it doesn't go well, there's also a lot of opportunity and in many ways the criticality and the importance of the frontline field service workforce increases as we go down this path. I had a conversation recently with Karin Hamel from Schneider Electric and she brought up a really good point, which is well, salespeople get to go on these presidents' club trips, why don't field service people? And some sales people I'm sure would be like, what? But it's a good point and it might be an even more relevant point as this matures because to what degree are we relying on them to nurture and maintain these relationships that are what we are dependent upon for this recurring revenue?

Kevin Bowers: No, you're exactly right. And the CFO is going to drive utilization, get in, get out, get the next job. So we know that getting training time is a premium. So if you only get nine days of training time, you're going to focus all on technical, so you can fix it faster, but that doesn't serve your brand. We need customer service skills, professionalism. If we want to drive this incremental revenue and this land and expand ideas for the field service, we got to give them some skills to do that. And not every field service engineer is good at that. If they wanted to be in sales, they would've went into sales but with the right training, some certifications and like you say, incentives, a president club. And we had a lead generation program at my last company and only 40% of the people did it.

Kevin Bowers: 60% were like, no, I don't want it. But those 40%, when you started to say, hey, I brought home an extra $1,000 this week, can you post that type of information? Boy, boy, does that drive some adoption. Field service is the trusted advisor. I know we don't want to compromise that, but they have the context, they have the immediacy, they're on site. They know what the customer's doing. They know what good looks like because they see bad. So it's a great opportunity for them to drive and keep adding to this revenue and the more incremental revenue you get, it makes that fish smaller and makes the switch a little more palatable. So that's critical.

Sarah Nicastro: For sure. Yeah. All right. So this has been great, Kevin. Is there any other thoughts or comments or advice that you would offer related to as a service, the myths, the facts, the opportunity, any closing thoughts?

Kevin Bowers: Well, so I like quotes and in my blog I had one quote from a Roosevelt and then I found another one the other day from a Roosevelt. So the first one was from Theodore. It says nothing worth doing comes easy. This isn't going to be easy. And the second for Eleanor Roosevelt was it takes as much energy to wish as it does to plan. So you can wish this away. It's not coming from me, but I think we've done a fairly good job explaining that it is so it's planned. Just plan for it. And maybe it's five, 10 years away, but we start planning now, all these muscles you build around all the other things that we talked about were necessary, it's going to help you with your customers today. You're going to start to see the reward there.

Kevin Bowers: So when everyone on the team decides, yes, we're going all in on as a service, you're ready. So start talking about it, start researching, reading about it. Hope they listen to our podcast. Great. Find more research on it, come talk to TSIA, whatever. You have to plan and plan now, I think. It's not going to be easy, but it's not all doom and gloom. And hopefully we tried to dispel some of that today.

Sarah Nicastro: Yeah. Keep looking for the examples of how companies are working through these challenges and making progress and use them and their knowledge to learn from and shape. I know you just had an in-person event the first in a while. When is the next?

Kevin Bowers: The next one is in May, in Orlando. So nice weather. Disney adjacent. So you can bring your family as you learn about things. And it's unbelievable conference. I've been on board at TSIA a year and a half now, and my first three were virtual, which great experience, but-

Sarah Nicastro: Nothing like it.

Kevin Bowers: No, I didn't realize how much I missed people. I'm generally an introvert, but it's like, wow. The interactions. And it was great. And it's like you said, field service, we need to work together and share some of these experiences so that we can have the right ammo to go to the top and say, this is what we need to do the things you want us to do. So we're a community.

Sarah Nicastro: Absolutely.

Kevin Bowers: For sure.

Sarah Nicastro: Good. So everyone check out the May event TSIA is doing, and certainly check out Kevin on LinkedIn, on the blog. And Kevin, I really appreciate you coming and spending some time with me today.

Kevin Bowers: It was my pleasure. It was great. Great experience.

Sarah Nicastro: Good. You can learn more by visiting us at futureoffieldservice.com. You can also find us on LinkedIn and Twitter @TheFutureOfFS. The Future of Field Service Podcast is published in partnership with IFS. You can learn more at ifs.com. As always, thank you for listening.

By Sarah Nicastro, Creator, Future of Field Service

If you listened to the recent podcast with Dave Mackerness of Kaer, you should understand the value that the As-a-Service business model holds. However, it seems that there are some common myths around what it really means to introduce an As-a-Service offering that holds companies back from it potential. On this week’s podcast, I welcome Kevin Bowers, Director of Field Service Research at Technology & Services Industry Association to discuss the myths and truths of As-A-Service.

Kevin recently wrote a column on this topic that prompted me reaching out and inviting him for a podcast discussion. In that column, he shares the two most common misperceptions he’s witnessed – that As-a-Service means simply leasing equipment or that it is related to a cloud offering. “My boss’s boss often says, do you know what the S in as a service stands for? It doesn't stand for subscription. It doesn't stand for solution. It's for the service,” says Kevin. “It's about adding value to that piece of equipment. It's not, like you said, CAPEX, OPEX. It's about helping the customers achieve something that they're after. And it doesn't have to be in the cloud.”

I agree with these points fully. As-a-Service gets brushed off as nothing more than giving customers a way to pay that is OPEX versus CAPEX, but the true value of this opportunity is in delivering far more than different payment terms. It’s about offering customers an outcome they need, an experience they desire, and the peace of mind they seek. As such providing something As-a-Service is really one method of migrating to an outcomes-based model. When companies simply try to re-label their traditional products and services “As-a-Service” and wonder why customers aren’t interested, it’s because the true value of the model is in the outcome not in the offer.

Simplicity Sells

One of the benefits of introducing As-a-Service is in its simplicity – you are solving a problem your customer has, reliably and consistently, as a service. This is easy to understand, highly compelling, and likely to succeed. What happens, though, is that companies over-complicate the idea of As-a-Service based on legacy thinking by trying to position it as the capabilities that enable the company to provide X-as-a-Service rather than articulating the outcome to the customer.

What companies must understand is that today’s customers are far less interested than ever in the products you sell or even the services you provide – they care about how you can help them. This is the root of As-a-Service. It doesn’t mean repackaging what you’ve always done with a shiny new bow, it means reorienting your business to guarantee outcomes that your customers need and value. “At TSIA, we've been saying it for seven, eight years now: customers don't care about your product,” says Kevin. “You posted about your experience at your event in Netherlands recently, talking about how it's not about the product, the service. It's about the story, and more and more, that story is about outcomes. And to be clear, it's about the customer's outcome, not your outcome. I think that idea still ruffles feathers.”

This mindset or identity shift can prevent companies from seeing the realities of the transition to As-a-Service, which then prohibits their success because they are hedging their bets instead of taking a leap. One important aspect of As-a-Service to understand is that risk is inherent, and the more you try to mitigate your risk, the less value you’re delivering to customers which means that your shift to the model will appear unsuccessful when you never truly embraced the model at all. Companies who offer outcomes take on a certain amount of risk, which is part of the appeal for customers. There’s no way around that, so rather than looking for a shortcut, you should spend your energy determining what you need to change within the business to be confident in accepting more risk.

This is where technology plays a huge role. It’s incredibly challenging, if not impossible, for a company to scale its operations to guaranteed outcomes with manpower and sheer will. You need data, automation, and intelligence of modern tools to enable this transition. “Historically a missed SLA was a missed SLA. In the world of outcomes, when field service doesn’t arrive on time, you don’t get paid,” explains Kevin. “This means you have to have the right infrastructure in place. You can't run field service on an Excel sheet anymore and have pipe dreams that you're going to deliver an outcome.”

This brings about another misperception, which is that the introduction of As-a-Service is a service transformation. It’s not, it’s a business transformation. You cannot, as a company, introduce As-a-Service in just one silo – it is an overarching strategy and shift in companywide approach. This realization can scare some folks away and it needn’t. While ultimately the move to delivering outcomes is a change in company identity, it isn’t a matter of flipping a switch – it can most certainly start and be proven in an area of the business and then expanded strategically over time. This approach was discussed in the podcast with Kaer and Kevin gives another example in our discussion this week.

The truth Kevin and I, along with many others, agree on is that As-a-Service isn’t a trend or fad but a proven business model that will only continue to become more prevalent. So, take stock of what misperceptions you may have and consider what you stand to gain by breaking those down and examining the truths of companies like Kaer seeing immense success from embracing risk and being willing to innovate.

By Tom Paquin

If you’ve been following the work that we’ve done on State of Service here at FoFS, you’d have a fresh view on how the many challenges of the last two years have culminated in our current expectations around service delivery. So I figured let’s dig into the archives and see what we were saying back when this site got started.

Sarah brought me into the Future of Field Service family in early 2019, and my tenure began with a couple of articles in January of that year. Let’s take a look at some of them, how things have changed, and what remains the same. Here’s my first article for FoFS:

Is Field Service The Retail Game Changer?
Most of the existing examples listed here have been among companies selling complex tech products, but that should not be the limit to retail’s service footprint. If field service right in every instance? Absolutely not. I think we’d all be a bit alarmed if a Victoria’s Secret technician rang your doorbell for a 3PM hosiery service appointment. But Victoria’s Secret actually does have a robust in-store service offering that works great for them. Think of what would have happened if Border’s, or Circuit City, or Blockbuster had developed service systems in-store for consultation and unique services. These companies failed because they tried to compete against the superior capabilities of competitors, rather than improving, and utilizing their unique set of strengths.

Have you been to your local mall recently? Yikes.

I remember the first time I ventured into an indoor mall during COVID times, and I was shocked by the dramatically different landscape. Legacy brands and corporate strongholds had eroded, leaving a swath of vacancies, some new local businesses, and a surprising number of storefronts now taken up by something I wouldn’t even think that they were zoned for: Restaurants.

With Amazon slowly gobbling up the world of retail commerce like a big, exploitative Galactus, businesses have needed to flex their services in order to stay relevant. This is true across retail, from grocery curbside and delivery to personal shopping, to vastly expanded pick up in store.

Some businesses are more creative than others, and in what is apparently a burgeoning “Metaverse”, the utilization of online channels to deliver service solutions will increase as well.

The reality is that brick and mortar stores were tasked with the drive to innovate or die before COVID, and COVID advanced digital transformation by a half-decade or so. Some businesses have not survived the transition, while others are innovating their way towards new revenue, better customer experiences, and meeting (often literally) their customers where they are.

Next time, we’ll talk about the death of the frankensystem.

Dave Mackerness, Director at Kaer, shares not only the details of the Singapore-based business’ journey to Cooling-as-a-Service but also the reason for their passion around the business model, what they learned in being an early adopter, and his perspective on what the future holds.

Sarah Nicastro: Welcome to The Future of Field Service Podcast. I'm your host, Sarah Nicastro. I'm excited today to be here with Dave Mackerness, who's director at Kaer, to talk about Kaer's journey to cooling as a service. Dave, welcome to the Future of Field Service podcast.

Dave Mackerness: Thank you very much, Sarah. It's great to be with you.

Sarah Nicastro: Thank you for being here. Okay, so before we dig into the conversation, and there's a lot to it, tell our listeners a bit about yourself and also a bit about Kaer.

Dave Mackerness: Sure. So I'm a director at Kaer. I've been with them for about 12 years and they have been in Asia for about 70 years, in various lines of cooling houses and buildings around South East Asia, and we pivoted to Cooling as a Service back in 2012, and we offer that for commercial buildings, so your offices, your shopping malls, data centers, pharmaceutical manufacturing, those sorts of facilities. That's sort of now our core business and as we're expanding throughout the region into India and some other Asian markets, that's our only offering that we're bringing to those markets.

Sarah Nicastro: Okay good. And you're based in Singapore, correct?

Dave Mackerness: Yes.

Sarah Nicastro: Okay, awesome. All right so it's night time Dave's time, morning time Sarah's time, so good. All right so one of the things that I really loved in talking with you Dave is the conviction you have around this business model. Right? And so I think that's evident, you said you started this journey in 2012, and I think that's certainly on the early side, in my opinion, for the industry and probably the region. So, before we dig into the specifics of the journey, can you talk a little bit about where that strong belief comes from that this business model is the path, not only for Kaer, but for a lot of other organizations?

Dave Mackerness: Yes, so I think. You're right back in 2012 there was no such thing in our industry. I mean servitization had been happening around the world in different industries, but nothing in cooling. And for the first three to four years, we didn't know if we were crazy or had a great idea, because no one else was doing it. It sort of came around, it was actually... I wasn't involved in the decision to move to Cooling as a Service, my CEO was and he was talking with our chairman back in 2012 and asked him the question essentially how do we servitize cooling? Essentially every time they came up against a reason they couldn’t do it, he’d say well let's investigate that a little bit more, let's see how would we would apply it, and let's try it. I think that the key thing was they tried it in our first project in 2013.

Dave Mackerness: And as that went along, I think we learnt more about the model and the more I learn about it, the more I speak to people like yourself and other professionals in the industry, the more I'm convinced that we've made the right decision, and I think we see this momentum gaining and this is doing two things.

Dave Mackerness: I think one is, it's delivering a far better experience for our customers. Someone who has, was used to buying CDs and has moved to Spotify, or was used to going to Blockbuster and then signing into Netflix. It's a very obvious difference and it's chalk and cheese, in terms of the experience you get at the moment and that was the first thing that became apparent to us. The second thing was we have a real challenge specifically in that, people that are in the built environment may not be aware of this, but people who aren't won't be aware the role that cooling plays in terms of meeting some of our sustainability and climate change goals and target. In Paris in 2015 we set out this agreement that said we would limit the global temperatures rise by 2.5 degrees and that's something everyone understands and is working towards.

Dave Mackerness: What people don't understand is that cooling has a major effect on what we can do that or not. It's almost make or break, if we can solve the cooling challenge we can make it, if we can't we won't. Cooling now makes up 10% of the world's energy consumption. That's today. The need for cooling is going to triple in the next 30 years, so if we don't have more sustainable systems and better performing systems, the energy consumption of the world will be 30% cooling, so that's unplannable, we can't manage that.

Dave Mackerness: So, I think the cost essential benefits of the model is that drew us to it, and now it's really being, we're seeing that is the most sustained way and really the only way to hit these goals in terms of sustainability, so that is why I think we're getting more and more passionate about it, because we see it as the answer and by transitioning to this business model we really can make a difference.

Sarah Nicastro: Okay, so I loved what you said about, then when you started in 2012 you didn't know if you were crazy or if you on to something, right? Because to me that is a very accurate description of true innovation, right? Because you aren't jumping on a bandwagon at that point, you aren't making a minor enough change that it's very comfortable, right? That's an uncomfortable feeling, but I think that is a real signal of real innovation and so, I just think it's interesting to point that out and to let folks know that, sometimes the most significant evolution come from a place of being very uncertain and being very uncomfortable and to your point just trying it out. You can have a contingency plan if this doesn't go well we can do X or we can revert to the standard but, I think a lot of the leaders, the category leaders are in those positions because they're willing to takes some risk. So, okay-

Dave Mackerness: And on that certainly, you're right. There was no leader, there was no one we could look to, to understand is this going to be successful or not. I mean we work for a company that allows us to try new things and you're right, we tried it so we added it as a service. So we did all of our legacy work that we had done for 70 years in cooling and then we said lets add this as a product or as a service... We started it and got a few customers on board. So what we did throughout year five we actually did all of our legacy business products and these as a service offering as well and then after about five years we looked at the data and there was two metrics we looked at. The first was NPS, net promoter score and we measured the net promoter score of our traditional model and it was okay, I can't say it was bad, it was just okay.

Dave Mackerness: We looked at the net promoter score of our Cooling as a Service customers, and it was 57%. Which is extremely high. So our customers were just way happier and the same people were offering the other service model on our legacy products, so really it was the power of the model which unlocked that. The second thing was the sustainability, we had been talking about sustainability and performance in cooling systems since 1993, when Kaer opened its doors. Kaer was set up on that premise and we were doing okay, building we were making inroads and making an impact, but it wasn't significant. With Cooling as a Service we've never been in a position like we're in now to make a real considerable difference, so I was always thinking this thing.

Dave Mackerness: Just this morning there was something, I think it was on the BBC or LinkedIn or something and it talked about there's a facility, I think it's in Denmark, it's somewhere in Europe that is doing carbon capture, and it's capturing 1000 metric tons of carbon from the air every year. And I read that and I went and looked it up, there is a 55000 metric tons of carbon every year, so just the impact we could have is incredible alone. So when we looked at those two bits of data, the sustainability metric and the NPS metrics, we actually decided in 2018 to stop all of the legacy business, and just focus everything on Cooling as a Service because we thought, we have to really go all in. It was scary and it took five years to get that data to make that decision.

Sarah Nicastro: Yeah, that makes sense and I think that also an important point Dave for the audience which is, you want to take risk, you want to take calculated risk, right? So this idea of when you were doing this you didn't know if you were crazy, right? Which is the calculated part came from not just shutting off the rest of the business, right? You decided to offer this as a choice to see how it went and to test it out, now over that five years not only do you have the data on NPS and you have the data on the sustainability impact but, you also are building up, I would imagine a variety of customers testimonials that you can leverage so that when you decide to go all in you have a lot of proof points behind you to say "here's why where doing this", "here's why we know that this will work".

Sarah Nicastro: So it's, you didn't just jump off a cliff without a parachute, right? You did so in a way that was pragmatic, but allowed you to get to this point of being able to have the factual evidence to back up the decisions to go all in. Right?

Dave Mackerness: Yeah and I think it was, actually so there's two points of the decision to try it which was back in 2012-2013. The second one was to discontinue or phase out are other product line in 2018. Now you would think that that would've been the scariest point, but by that time we had convinced ourselves and allowed in Singapore and in other markets in Asia, that this was the way forward. So actually that was not a hard decision to make in 2018 because it was backed up by data.

Sarah Nicastro: Right, that makes sense. So maybe you consider this an unfair question Dave because you already said in 2012 when that initially decision was made you weren't really a part of it but, if you have the backstory I'm just curious, if you're in that place where you're wondering are we crazy or is this going to work what was the initial catalyst that sparked the idea within Kaer of, Okay we think this is a feasible opportunity and we want to give it a go. What was the primary drive?

Dave Mackerness: So I do know the backstory. So actually it was a conversation between our chairman and our CEO, and they were having a discussion around why can't we just sell air? If we sell cool air, why can't we sell that? I think they had a discussion around Evian and water. How can we brand, they managed to brand water and sell water, so why can't we do the same thing with air? And that was the catalyst to start thinking about, instead of selling equipment and selling products that people needed to make air, can we sell air itself? And I think it was an idea that was sort of thrown around a few evenings, but then out CEO who started putting it together and so what would that look like, and I think that was the thing that was important for us was that, so Justin Taylor is our CEO and he's been with us since 1995, and had this discussion let's see what it would look like and explored various different models, how we would do it.

Dave Mackerness: And essentially servitization wasn’t then, really so much as a known thing as it is now. So looking at different industries, what they were doing and seeing how we would do that and then put together a contract. Put together some friends and web in source and customers and then, it was over those five years, cooling service today is nothing like when we started out. The contracts are different, the deliverables are different, the level of service is different, so working with our customers to figure this out and put something that we were then confident with in 2018 that we could move I think was really important and he's always been a massive advocate of the business model and really a massive advocate of customer experience. He never talked about equipment, he always talked about customer experience which now is obvious and everyone is talking that way, but back in 2012 it was so common.

Sarah Nicastro: So Dave I think that is a really good point is, want you're saying what it makes me think of is that when I talk to companies that are really struggling with innovating to the degree that Kaer has, when it comes to really doing a 180 in business model, it's often because it's the folks at the top that don't understand the value or don't really want to make the change, so one of the things that comes up very frequently is that this type of evolution really requires top level buy in, so your story kind of reinforces that fact and I think it's really interesting to me that in 2012, he had those view points because you're absolutely right that in 2021 as a service and customer experience are sort of part of our daily vocabulary but, in 2012 they definitely weren't, so I think that is super interesting and I think that I would be interested in picking his brain about that at some point so but, kudos to you all for being really on the cutting edge as far as that goes.

Sarah Nicastro: So I want to dig in a little pit deeper to some of the different area of impact that the Cooling as a Service model bring for care. So the first is the customers so let's talk a little bit about that customer experience because I think that it is really important for organization to understand exactly what it is that their customers want, and be able to sort of reverser engineer how the business needs to change to deliver that, right? So talk a little bit about what this has allowed you all to provide in terms of brand new customer experience.

Dave Mackerness: So I think the business model itself sort of forces you to be relentlessly focus on your customer and I think that every company now says they’re customer centric. Everyone wants to be but, do they actually do it? Is their business set up around it, or do they just talk about how they throw catchphrases out into the market place. So with us, as a service provider, the only way to keep your customers or to get new customers is by differentiating through that experience. Because at the end of the day, our 24 degrees air is a commodity. I mean anyone can put that together, it’s how you deliver it and how you give confidence to your customers that they will have that exactly when they need it with the exact requirements that they have is really important, also how you build relationships around that, how they interact with you as a provider is really important.

Dave Mackerness: In the past, in all business models you get customers by product innovation, so can you get slightly incremental improvement on the speed of your computer and so on. It's all product features and price and branding and marketing as well of course but, if you think about... Let's think about Spotify and Apple Music, they're offering very similar things to kind of the same people and if I sign up to Spotify today I can sign off tomorrow and stop my contract with them. The only way they can hold onto customers is better experience and so it's forces you to do it, so you can't rely on product innovation or things like that. I think that the first thing is because you have, and I talk about this a lot when I talk about circularity and sustainability, but it's valuable for a customer in that when you have a portfolio of building and a portfolio of customers that you're looking after, that portfolio gives you more data and gives more justification and verification for investing in innovation.

Dave Mackerness: So if I had 10 customers and could invest 50 million on something that could improve their experience it might not be so feasible, but if I have 1000 customers and now I invest that money and that improves the service across my entire portfolio, it justifies the investment. So I think when you're looking at customer experience, you need to look at data and technology you can deliver to those customers and the approach that gives you the ability to do that. So we have changed dramatically, I mean we've been talking about cooling for decades, but we don't look anything like what we used to five years ago and that's because of the scale that we have. It allows us to invest in technology, it allows to invest in software and that experience. It also means that you shift the kind of people that you bring in to your organization. So we now, we've never had data scientist and app developers and web developers in our company before because that wasn't seen as core to our business. Now, in the eyes of service world, is absolutely core to our business, it's as core as cooling itself.

Dave Mackerness: So the business model really makes you shift the way you approach your customers and the way you partner with your customers. This isn't a go out and win a job, leave the day after. We are with our customers for years, hopefully longer. So our longest customer is I say 2013 and we're looking now at extending that and staying with them for even longer. So it forces you to be customer centric I think.

Sarah Nicastro: Yeah. There's so much in this story that is really cool and I'm actually thinking of Dave in real time, not to put you on the spot but, there's a couple areas I would love to have you back to dig into in a full episode, because I just think in sort of telling the initial story type conversation it's hard to go deep enough on some different areas and I think, one of those is certainly around risk.

Sarah Nicastro: I think that the conversation around risk is a really important one because I think it's scares a lot of people away or it forces them to dip their toe in instead of leap. Then what they’re doing is not this true shift, it's sort of watered down version of it, right? Which then doesn't accomplish the objectives that they set and then they feel like, oh it doesn't work. But it doesn't work because they're not doing it the way they need to do it to really see what the outcome would be. And I think that there is probably a whole conversation we could have just around excepting the risk that comes with this and why it's worth doing that. So if you're game, I might ask you to come-

Dave Mackerness: So I would love to do but, just one or two minutes on risk. You're absolutely right. When you're talking about Netflix and software as a service businesses, it's different investment of dollars in infrastructure, into physical buildings and what happens is that the providers then get nervous around return on investment or some of the risk around what's going to happen with cooling in the future because you're now investing. The problem is you cannot look at it this way. You have to understand what is your business risk and what is your customers risk and you cannot mitigate your own risk by putting on your customers contract clauses and penalties that you bake into the business model or essentially tying them down into things or locking them into things to secure your revenue.

Dave Mackerness: Those two things really kill the business model. So whilst you'll be able to mitigate your risk, you will also essentially spoil your customers away and that is why when Netflix came around they said to me "Dave give me 10 dollars a month I'll give you all you want" and I thought, I don't really know, once I've watched them all what is going to happen? But I said "I'll do it, 10 bucks a month". If they had said to me "Dave it's 10 buck a month but, you have to sign a 10 year contract and you have to pay me in advance for the first year and to terminate the contract you have to pay me a penalty of six years’ worth of revenue" I would've said "Yeah, no but thanks very much". So you have to stay true to the business model and I would love to talk to you about that it's really interesting.

Sarah Nicastro: Yeah. I think we should do a completely separate episode on that because I just think there's too much to that we can't touch on in a couple minutes but, I mean you think of that as you were describing the Spotify versus Apple experience and you can sign up for one today, try it, see if you like it, if you don't like it switch to the other one tomorrow and I'm just in my mind seeing people cringe and think ugh that's not for me, because it's just not the norm and it is very scary but, Kaer is an example of how it can be very worthwhile to take that risk and I think it would be well worth the time to kind of dive into the layers of that and share a bit how you mitigate it what you need to just be comfortable with and why it's worth doing that, all of those different things. So okay.

Sarah Nicastro: Anything we haven't mentioned in terms of impact on company or sustainability that you think we should add? I know we've talked quite a bit on the benefits of the business model, anything else related to the benefits to care and the benefits in terms of the circular economy in that which you talk about.

Dave Mackerness: So I think with sustainability, you can look at it in a building by building approach or angle, and from that I mean we could talk a lot about systems that we're building and including because of used data and used technology you can be far more sustainable this way. We’ve found also, it's great when you go into this business model you keep finding the benefits. We got a call from the Ellen MacArthur Foundation and they said we want to do a case study on you because we've heard what you're doing. And they were all about circularity. So a circular business model, which when they called and I said "Yeah, of course we're circular," I had no idea what that meant so then I started reading about it and understand more and the circularity benefits that you get so not just around sustainability and energy consumption and those sort of things but, if you're looking at multiple buildings with in a portfolio how do you manage that in the most sustainable way.

Dave Mackerness: So at the moment in the cooling industry, you buy your equipment, you put it into the building, and you cannot change because it's big infrastructure in the basement of your buildings. As that building goes through its life cycle, if it needs change, you're stuck with the same system that you had when you built it or when you estimated what you were going to need, way back when you constructed it. So you’re locked in a system and you just have to do the best you can with it. Generally that's not a great approach and then at the end of the life you throw it away or recycle it, you get rid of it and build a new system. Very linear, and now that we're working with the portfolio buildings we are able to take a more circular approach.

Dave Mackerness: So, let me give you an example. During Covid we had customers that fell into one of three categories, one was customers that weren't really affected with their cooling requirements (not so many of those), others were customers that their cooling requirements fell through the floor, so buildings were shut, people were at home - think about offices and shopping malls in the last year. And then you had other customers on the opposite of that coin whose needs went through the roof because they were in pharmaceutical manufacturing potentially, they were data centers, so we're all watching Netflix not in the office.

Dave Mackerness: So their load requirements went through the roof. What would happen in those cases under a traditional model is they would have very poorly performing systems. With Cooling as a Service, the customers that had increased capacities could serve that new requirement. We could take from where we had excess capacity and move to where we need capacity over here. So what we do is we design modularly we can plug and play cooling capacity.

Dave Mackerness: It doesn't matter what the equipment is it just matters the output. So for our shopping centers, we would move stuff to our data centers. One example where we had an increase in the load, the cooling requirements tripled in about an 8 month to 12 month period and they, on their roof top they can only have four big chillers, 4 bits of equipment. So what they would do in the old world is throw away the four smaller chillers and put in bigger chillers. What we can do now is we can take down those smaller chillers to use elsewhere and we can install new technology or increase capacity but, it allows us that ability to be a modular design. And that's really changed and extended the life of our assets.

Sarah Nicastro: Yeah, that makes sense. So this is really interesting too, there is a lot of areas we could dig more into but, that makes sense and I think that the level of flexibility that you have and how the assets are leveraged, to your point the insights you have that you can use when you are responsible for the assets versus the customers, right? And you have all the information you need to really fully utilize all of those things is really impressive. Okay, so I have watched a couple presentation of yours and you're a very good presenter Dave, I have to say I've been impressed and I've heard you share a couple of analogies that I would love for you to relay to the audience because I think there really interesting. And the first is your cow analogy, I know there is usually visuals to go along with these but, walks folks through the cow analogy.

Dave Mackerness: So this was how my CEO explained it to me and then I stole the idea. The way it goes is that when we are looking at servitization, we look at innovation in different industries and we looked at different companies and the standard companies come up when you think about what's disruptive and what's innovative. So it was Zoom, Office 365, Spotify, Netflix, IBM Cloud, Amazon Web Services, and when you're looking at all these, Grab Food, the ride hailing Uber, and those sort of companies, we wanted to determine what they have in common. And what we realized was, what they had in common is that they stole their business idea from someone else. Which is quite a controversial statement and then we went on to say, that they all stole their business ideas not just from someone else but, they stole their business ideas from the same person.

Dave Mackerness: And the person that they stole it from was a guy called GW Maxwell. So in 1906 I believe it was in the US, GW Maxwell was the guy who invented the milk carton and he for the first time around, I think it was in San Francisco, he allowed people within that area to, instead of owning a cow to get the benefits of getting the milk that they wanted without buying a cow. They could now buy milk. And we had this analogy that we should be buying milk, we shouldn't need to be buying cows.

Dave Mackerness: If we want milk in our coffee and our cereal in the morning, none of us own a cow in our house and most of us don’t’ have the ability to do so. So it was that milk carton, that was the first time we ever seen the service business model utilized, which is back in 1906 and since then every single company has used that or stolen that idea whether in entertainment, logistics, ride hailing, or in cooling. It's not specific to a particular industry. So that's the cow analogy. We say buy milk, don't buy cows.

Sarah Nicastro: Yeah, there is a lot of people still trying to sell cows. Metaphorically, right? And so it's such a good analogy because it's very true come back to customers want outcomes, right? Customers want simplicity, they want peace of mind, they want what they need when they need it, not and entire cow in their backyard full of milk that they don't need, right? So it's a really good analogy.

Dave Mackerness: And then that's, I think that was part of the original conversation that Justin was having, was we're selling something that people don't want, people don't want cooling systems. They want cool environments that are comfortable to work in or they want process cooling or whatever it may be. So why are we selling something that people just don't want? it's almost like a means to and end to get the benefit that you are actually looking for.

Sarah Nicastro: Yeah, now the other analogy is the caterpillar.

Dave Mackerness: Yes the caterpillar effect is something I was looking at, a couple of months ago and it though now it's hard see this, but as soon as you see it, it just makes so much sense. So what I was looking at was the performance of cooling systems in different buildings across different markets. You could look at the performance of systems in terms of their sustainability metrics or their carbon emissions. And I was trying to look at how wide is the spectrum in terms of performance and not oddly, it's a very standard bell curve in that you have some people that are doing extremely well but there is not many of them, you have some people are doing extremely poorly, and then you have the vast majority of us in the middle that are doing okay. I then was thinking about the fact that we had to improve because of the Paris Accord and what people were talking about in terms of sustainability.

Dave Mackerness: I started looking at how it's moving, how the distribution is changing and essentially what happens is the people who are at the forefront, that really care about and have money to drive performance of their systems, they go and buy new technology they have more data and they improve then it goes out a bit and that kind of flattens the bell curve and what happens next is that technology that was expensive yesterday is not so expensive today because there is newer technology so now the people that were in the middle of the bell curve, they have access to more technology and they have access to more data and the wisdom from those guys who went out and tried new things, so they catch up. So the people and the front go forward and then the rest of the world catches up, people go forward and then the rest of the world catch up. I did some slides and was looking and this animation and it just looked exactly like the way a caterpillar crawls. So then it drags the body behind it, moves forward, and then drags the body behind it.

Dave Mackerness: But the thing is, it's extremely slow and the movement happens in a way we don't see it. And this is really important. The reason we don't see it is because we are improving and the front of that caterpillar is moving quite well this axis of performance. So we don't look at the whole caterpillar we just look at the head, where we were in 2015. And then we get excited and we feel good about ourselves and go and what we do is look at the back of the caterpillar and realize that the vast majority of buildings are still performing worse then the head and to get past that 2015 bench mark will take about 20 years. So it was the caterpillar and how it crawls up this X axis that really got us to think about, okay we can't stand by and just cheer on this caterpillar and say "Come on, you’ve got to go faster, I'm sure you can do it, come on we will have conferences will go to COP20.” Cheering this caterpillar on just seems like such a ridiculous image to me.

Dave Mackerness: And then we looked at the as a service business and as a service business is not limited by the caterpillar effect because you don't have this bell distribution that crawl along the X axis of the graph. You have every single customer gets the exact same level of performance, every single customer gets the exact same level of, if you're talking Netflix which is what I was using as an example, they get the same content, they get the same features. If Netflix improves overnight, every customer gets the new improvement. So I'm a Seinfeld fan, and when Netflix bought Seinfeld rights, overnight the whole world that's plugged in to the Netflix service model got Seinfeld. It didn’t take 20 years for us all to catch up to that.

Sarah Nicastro: And here you are binging, for days on end.

Dave Mackerness: I've seen the first two seasons already, but you know it just really hit me in the face, that the caterpillar takes 20 years to get somewhere and if you move the business model or change it so you are not limited by that it takes 20 hours to get everyone up to that level and it's really powerful.

Sarah Nicastro: I think in our follow up episode that's another good point to dig into which is, you see people that are again, some working in earnest that don't really understand the options for transforming models, some maybe trying to mitigate risk to the point of being detrimental to the truth of the model but, you see people trying to do, let's do tiered service contracts, let's do, and to your point every customer gets the same thing, right? So I think that's another part to kind of dig into which is, what is the integrity of the model and why is it so important? Versus what are some of the common interpretations of the model that often lead to failure or less than ideal results? So, we don't have to do that today, that's going to be our follow up but, I think it's a good point.

Sarah Nicastro: Okay, so two more questions for today Dave. The first is what are your thoughts or predictions on the adoption of as a service and the advancement of it related to sustainability, whatever thoughts you are thinking about the forward look of all of this over the next 12 or 18 months?

Dave Mackerness: I think you will find that adoption of the model will steadily increase, which it has been over the last five or six years. I'm not sure when the tipping point will be. Will it be in the next 12 months, 18 months, 2 years? I'm not sure. But I think will, in terms of, if I go a bit further - maybe 5 or 10 years - I am fairly confident that buildings will be servitized in every part of that asset. From the cooling system, which we've shown it can be done with, to the furniture the office is fit with, I know people are looking at doing that already, the IT infrastructure. There are so many people now that are looking to be asset light and agile. I think this is the, it's the tip of the iceberg for cooling and it's the tip of the iceberg for the entire built environment.

Dave Mackerness: And I've seen the benefits of it and it's not revolutionary to be honest with you, because if you change the word instead of Cooling as a Service, if you called it a utility, electricity today from a utility provider, that's electricity as a service. They buy water, from a water utility provider, that's water as a service. So actually you're just adding cooling as a service, you will then add lighting as a service. You will have lifts as a Service. Why would you buy infrastructure for lifts in your building? Why don't you pay per floor that people travel? So technology and data and sensors in the built environment is allowing people to servitize these, until now, unservitizable building services. So I think you will see that happening across the entire board. It won't just stick to cooling and I think that will be 5 or 10 years.

Sarah Nicastro: Yeah, okay. So we’re going to do a follow up episode if you're willing on all sorts of different words of wisdom, lessons learned but, just to summarize today's conversation. What would be your number one piece of advice for listeners?

Dave Mackerness: I think if you're looking at servitizing your business, you will hear many times why it can't be done and many times why you need to write difficult contracts or complicated contracts in order to do it. And I think it's very simple for me – go back to that philosophy I was always told to ask why five times and if they can't answer on the fifth time then you know it's not a real reason. Change it a little bit, ask why not five times and every time someone gives you a follow up just say, why not and why not, and you'll get to the fifth one and you'll realize you don't have to stick to the old way of doing things. So really, I mean it's not easy, it's very difficult to do and there is a lot of business risk involved but, you can take it a step at a time, you can move towards it, and you can learn from other industries.

Dave Mackerness: We didn't develop this we stole the idea too, we stole the same idea that all these other companies did but, it's extremely rewarding and I think when you look at sustainability and circularity it is the single most important thing that we can do across every industry to buy as a service or offer it as a service.

Sarah Nicastro: Absolutely, okay. Ask why not five times, I like that. All right Dave thank you so much for being here today and I look forward to having your back and digging in a little bit more to some of the lessons learned and the risk conversation. So thank you very much.

Dave Mackerness: It's been a pleasure. Thank you for having me.

Sarah Nicastro: Yes. You can find more by visiting us at futureoffieldservice.com you can also find us on LinkedIn as well as Twitter @thefutureoffs the Future of Field Service podcast is published in partnership with IFS, you can learn more at ifs.com as always thank you for listening.

By Sarah Nicastro, Creator, Future of Field Service

When you talk about the future of service, the terms “outcomes,” “Servitization,” and “as-a-Service” are all sure to pop up. In reality, these terms all mean different things but are inextricably linked. Customers are more and more demanding outcomes (versus products and/or services), and “as-a-Service” is a method of delivering those outcomes that can work particularly well for manufacturers looking to Servitize their businesses – aka evolve from being a product provider to trusted advisor.

The intricacies can be a lot to wrap your head around, I know. Which is why stories like Kaer’s are so powerful – early adopters who make sense of it all in a way that achieves results, and then share that success for others to more easily envision how it applies to their own businesses and industries. I recently spoke with Dave Mackerness, Director at Kaer, to talk about the company’s journey to cooling as a service.

Kaer in a Singapore-based cooling company that serves South East Asia. The company has been in business for about 70 years and Dave with the organization for the last 12. In 2012, led by the company’s CEO, Kaer introduced Cooling-as-a-Service. Five years later, the company went “all-in” by focusing its efforts entirely on the new business model based not only on the success it saw as a company, but also based on how the modern business model positively impacted both the customer experience and the environment.

When you think about the timeframes here, I would consider 2012 an early adopter of an As-a-Service model, particularly for the cooling industry. When I asked Dave what sparked Kaer’s early willingness to embrace this level of innovation and change, the answer shocked me – it had to do with milk.

Dave joined Kaer after this journey had begun, so he retells how the CEO explained it all to him. “This is how my CEO explained it to me and then I stole the idea for my own presentations,” he says. “When we are looking at Servitization, at innovation, we look in different industries and we looked at different companies. There are standard companies that come up when you think about what's disruptive and what's innovative, like Zoom, Office 365, Spotify, Netflix, IBM Cloud, Amazon Web Services, Grab Food, Uber, and so on. We wanted to determine what they have in common. What we realized was, what they had in common is that they stole their business idea from someone else and not just from someone else, but they stole their business ideas from the same person.”

Wondering where milk comes in? We’re getting there. “The person they stole the idea from was a guy called GW Maxwell. In 1906 I believe it was in the U.S., GW Maxwell invented the milk carton and he allowed people to get the benefits of milk that they wanted without buying a cow,” says Dave. “They could now buy milk, without buying the cow. And we had this analogy that we should be buying milk, we shouldn't need to be buying cows.”

This early example of Servitization illustrates this still in-demand concept of allowing customers to benefit from an outcome – in this case milk – without investing in a particular product – in this case the cow. “If we want milk in our coffee or our cereal in the morning, none of us own a cow in our and most of us don’t have the ability to do so,” adds Dave. “So it was that milk carton, that was the first time we had ever seen the service business model utilized, which is back in 1906. Since then, every single company has used that or stolen that idea whether in entertainment, logistics, ride hailing, or in cooling. It's not specific to a particular industry. So that's the cow analogy. We say buy milk, don't buy cows – and that prompted us to look at how to offer Cooling-as-a-Service.”

The reality is, many of you are still selling cows – metaphorically speaking. But your customers want milk. And if you don’t find a way to offer it, a competitor will. Kaer’s journey to Cooling-as-a-Service is evidence that while the evolution isn’t a simple one, it is worthwhile in a number of ways.

As-a-Service Impact on CX

First and foremost, it delivers a better customer experience which will, in turn, keep your business in business. “Cooling-as-a-Service delivers a far better experience for our customers,” explains Dave. “Someone who was used to buying CDs and has moved to Spotify or was used to going to Blockbuster and now signs into Netflix, knows there’s a very obvious difference. It's chalk and cheese, in terms of the experience you get and that was the first thing that became apparent to us.”

The business model itself forces a greater focus on the customer needs and holds companies accountable for not just saying they are customer-centric but proving it in actions. “As-a-Service forces a relentless focus on your customer and I think that every company now says they’re customer centric. Everyone wants to be but, do they actually do it? Is their business set up around it, or do they just throw catchphrases out into the marketplace?” asks Dave. “Under this model, the only way to keep your customers or to get new customers is by differentiating through experience. Because at the end of the day, our 24-degrees air is a commodity. I mean anyone can put that together; it’s how you deliver it and how you give confidence to your customers that they will have that exactly when they need it with the exact requirements that they have is really important. Also, how you build relationships around that, how they interact with you as a provider is really important.”

While a product-centric model reinforces practices around incremental improvement, a Servitized model pushes companies to be more innovative and to focus more on experience and outcomes. “In the historical business model, you get customers by product innovation, so can you get slightly incremental improvement on the speed of your computer and so on. It's all about product features and price and branding and marketing as well of course,” says Dave. “But if you think about... look at Spotify and Apple Music. They're offering very similar things to kind of the same people and if I sign up to Spotify today, I can sign off tomorrow and stop my contract with them. The only way they can hold onto customers is better experience and so it's forces you to deliver just that.”

The Impact Around Sustainability is Clear

The other area of immense benefit Kaer has witness in its move to Cooling-as-a-Service is around sustainability. And while perhaps the benefit here is compounded by cooling’s impact on energy consumption, the reality is that even in other As-a-Service examples, the ability to positively impact the environment through more efficient and extended use of assets, higher asset utilization, and more built-in product innovation is proven.

“Cooling now makes up 10 percent of the world's energy consumption. That's today. The need for cooling is going to triple in the next 30 years, so if we don't have more sustainable systems and better performing systems, the energy consumption of the world will be 30 percent cooling and we can't manage that,” says Dave. “So, at the moment in the cooling industry, you buy your equipment, you put it into the building, and you cannot change because it's big infrastructure in the basement of your buildings. As that building goes through its life cycle, if it needs change, you're stuck with the same system that you had when you built it or when you estimated what you were going to need. You’re locked in a system and you just have to do the best you can with it. Generally, that's not a great approach and then at the end of the life you throw it away or recycle it, you get rid of it and build a new system. Very linear.”

Cooling-as-a-Service enables a more circular approach. “Now, we're working in a portfolio manner. Let me give you an example. During Covid we had customers that fell into one of three categories, one was customers that weren't really affected with cooling requirements (not many), others whose cooling requirements significantly decreased (think about offices and shopping malls in the last year), and those whose needs went through the roof (like pharmaceutical manufacturing and data centers),” explains Dave. “What would happen in those cases under a traditional model is they would have very poorly performing systems. With Cooling-as-a-Service, the customers that had increased capacities could serve that new requirement. We could take from where we had excess capacity and move to where we need capacity over here. We design modularly we can plug and play cooling capacity. We can change out technology to increase or adjust capacity with this approach, which has really changed and extended the life of our assets.”

Opportunity, Meet Risk

Dave talks further in the podcast about the benefits Kaer has seen in migrating to Cooling-as-a-Service and why he and other company stakeholders are, as a result, so passionate about educating others on the potential of embracing the opportunity to evolve in this way. However, a word of caution he offers is that if you are considering As-a-Service, you need to be ready to go all in.

This means risk. The model isn’t the model without it, and he tells tale of those trying – unsuccessfully – to mitigate risk or push it back onto customers in a way that all but guarantees failure. “This model requires a different investment of dollars in infrastructure and what happens is that the providers then get nervous around return on investment. You cannot look at it this way; you have to understand what your business risk is and you cannot mitigate your own risk by putting on your customers contract clauses and penalties that you bake into the business model or essentially tying them down into things or locking them into things to secure your revenue. It kills the business model,” cautions Dave.

Thinking about this in terms of Netflix helps drive home his point. “When Netflix comes to me and asks for ten dollars a month for all I can watch, I wonder what happens when I have watched all I want – but I know I can cancel anytime, so I go for it,” Dave says. “If Netflix asked me for ten dollars a month but told me I needed to sign a ten-year contract and pay in advance for the first year and if I needed to terminate the contract be held to a penalty of six years’ worth of revenue, they wouldn’t have a business model. For this to work, you have to stay true to the business model.”

As we discuss what the future holds related to this evolution, we agree that adoption of this model is – and will continue to be – on the rise. Dave leaves you with some last words of wisdom: “If you're looking at Servitizing your business, you will hear many times why it can't be done and many times why you need to write difficult contracts or complicated contracts in order to do it. My advice is – go back to that philosophy I was always told to ask why five times and if they can't answer on the fifth time then you know it's not a real reason. Change it a little bit, ask why not five times and every time someone gives you a follow up just say, why not and why not, and you'll get to the fifth one and you'll realize there is no good reason to stick to the old way of doing things.”

By Tom Paquin

We are quick to point out here at Future of Field Service that service does not stop and start with appointment booking. Service—true service—extends throughout a company’s lifecycle, and properly operationalizing, automating, cataloging, and tracking service requires a holistic understanding of business elements, from human resources, to parts, to procurement, to fleet management, and everything in between.

To cover their inability to meet these expectations, many service software providers gloss over their lack of capabilities by developing wide networks of ISVs: Independent Software Vendors. ISVs offer software that, when sold in tandem with a platform, provide functional support absent in the core system.

There are invariably some benefits to working with ISVs. If you work in a specialized industry, ensuring that you have all the modules that you need to be successful often requires configuration across a broader network than just what a core function offers. Furthermore, integration flexibility offers the ability to add on modules on the fly, so you can start with a core system, and deploy new systems as-needed.

For all the good, though, there’s a bad side, and it comes when you tip the scale from supported ISVs towards building an ISV Frankensystem on an underpowered core platform. The reality is that if you’re buying roadmap or implementations, you’re not buying software stability, and it’s imperative that you explore those options out of the gate. Here are some traps to avoid:

Implementation
We all know that you want to avoid as much customization as possible when implementing any system. Doing so means that the software is less likely to break, updates and further integrations are easier, and your “vanilla” experience is easier to support. ISVs often lead to a ballooning effect with customizations, which in turn increases the cost, resources, and time associated with implementing a new product.

Updates
The fraught nature of this patchwork post-implementation means that updates then can become a challenge. With inconstant product-by-product upgrade cycles, you suddenly run the risk of incompatible software, certain business-critical modules losing support, or inconsistent compatibility issued with specific hardware or internal processes.

Apps
We know that getting technicians to push the buttons they need to in order to use their software is often easier said than done, so using a specific FSM mobile app piles another layer of challenges on top of that. ISVs have the potential of extending that swath of apps beyond one to several, each, again, with their own UI ad idiosyncrasies. In the world of mobile apps, consistency is key, and more solutions means more possible failure points.

These are a few examples of where ISVs can let you down. I would preface this by saying that not all ISVs or ISV relationships are created equally. Many are very well-integrated, communicative with the core vendor, and avoid many of these pitfalls. But the broader the ISV network you employ, the more you roll the dice. That’s why it’s important to evaluate what actually comes in the box when you’re investing in new service technology.

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