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Copyright © 2016 MM+O Ventures Inc. Digital Transformation for Aftermarket Sales & Service How to Create a Frictionless Customer Experience that Enhances Service Delivery, Drives Productivity and Increases Profitability

Digital transformation for aftermarket sales service

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Page 1: Digital transformation for aftermarket sales service

Copyright © 2016 MM+O Ventures Inc.

Digital Transformation for Aftermarket Sales & ServiceHow to Create a Frictionless Customer Experience that Enhances Service Delivery, Drives Productivity and Increases Profitability

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MM+ODigital transformation for aftermarket sales & serviceAftermarket sales & service businesses are being disrupted by a rising tide of customer expectations and increasing competition. Leading companies are addressing the challenge now.

1. Rapid changes in aftermarket sales & service. Driven by retail market experiences, B2B buyers have raised their expectations, competitive service offerings have expanded and new entrants are crowding the field. In a disruptive marketplace, manufacturer revenues, profitability and customer satisfaction become increasingly vulnerable.

2. Companies who embraced digital are more productive and more profitable. Research shows that by integrating new technologies, applying new business models and finding new ways of delivering aftermarket products and services, digital leaders not only exceed customer expectations but also become more profitable and productive.

Table of ContentsCustomers forcing change in the aftermarket ……………………………...3New technologies, new opportunities…4Digital leaders are winning ………….…6Case: A&D manufacturers ……………. 7How to start your firm’s digital transformation …………………………..8 About MM+O ...……………………….. 10

3. Many manufacturers have been slow to address the changing landscape. For example, a recent survey of the customers of A&D manufacturers revealed that most companies’ customer-facing digital services failed to meet customer expectations. Other manufacturing industries show similar trends.

4. Digital transformation is a complex undertaking that requires a combination of senior business leadership and specialist knowledge. Firms successful in making the digital transformation have CEO commitment, strategic clarity and shared vision across the senior leadership team. We offer a proven structured approach that enables leadership teams to quickly define and align around their digital strategy, and create an actionable transformation roadmap.

Executive SummaryThis industry brief outlines the key challenges and opportunities facing the aftermarket businesses of advanced manufacturers. We discuss the rapid changes to the business landscape affecting manufacturers’ aftermarket operations along with the opportunities for improvement offered by emerging technologies. We have included a specific example of how some aerospace and defence manufacturers are failing to meet their customers’ expectations. In conclusion, we outline a proven method to navigate and accelerate the complex process of defining a digital vision and creating a transformation roadmap.

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The emergence of technologies such as Social, Mobile, Analytics, and Cloud (SMAC) are profoundly disrupting long-established business models in manufacturing aftermarkets and distribution channels. Customers expect self-serviceInfluenced by consumer online shopping, banking and customer support experiences, B2B buyers have brought their expectations for seamless customer experiences to work.

Customers are forcing change in aftermarket sales & serviceCustomer expectations of aftermarket sales & service have shifted: retail-like seamless customer experiences are now table-stakes across industries.

66% of B2B companies say their customers expect omnichannel webstore capabilities to research products and services, and buy online1

58% of B2B companies say their customers want self-service tools to access customer service on-line1,2

52% of B2B companies say their customers want self-service toolsto access customer service via smartphone (mobile)1,2

In survey after survey, across industries, B2B buyers, engineers and technicians say they want easy, self-service online tools to assist in product research and configuration, procurement and customer support.1 Where possible, customers are prepared to switch suppliers to those who offer services that are easier to use, open 24/7/365, and available on any device.2While leading companies are responding to this shift in customer expectations, those who don’t will see customer satisfaction decline and risk customer defections.3

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Manufacturers embracing digital technologies to transform their aftermarket sales & service business models have a lot of options to consider – from customer-facing systems that enable seamless self-service to embedded sensors that monitor in-service equipment and help engineers improve product performance and reliability.Few firms can do everything at once, so embracing digital technology means strategically selecting where to focus first. Here are a few areas where leading companies have made significant improvements.Create better customer experienceseCommerce and digital customer self-service offer companies ways to get closer to customers by offering seamless personalized customer support and sales, 24/7/365. For multi-business companies, this can be challenging; but for companies that have successfully deployed omnichannel capabilities, customer satisfaction is up while the cost of serving customers is down.4

New technologies offer profitable opportunitiesLeading manufacturers are finding new ways to improve operational excellence while increasing productivity.

Drive operational excellenceNew technologies offer opportunities to strengthen a company’s existing continuous improvement (CI) initiatives. For example, by integrating and automating customer-facing processes, leading companies have dramatically reduced order-entry errors and consequent costs associated with short- and over-shipments. Other firms have improved the quality of service by implementing best practices, ensuring consistent quality across the organization.Improve productivityLeading companies rarely undertake digital transformations for productivity gains alone. They make strategic investments to increase operational flexibility, offer higher-value, differentiated services or enhance customer service-levels. The resulting productivity improvements are how change programs are financed. In most aftermarket organizations, there are many opportunities to improve productivity : Externalize work: Take advantage of your

customers’ labour. They are happy to self-serve. Give them the tools.

Eliminate duplication: Most aftermarket organizations suffer from poor integration, requiring workers to enter and re-enter data into multiple systems. Without accounting for the cost of errors, the elimination of duplicated effort often represents significant savings.

Automate transaction processing everywhere: From order-entry through payment to delivery, many back-office labour costs are consumed with tasks that could and should be automated.

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Grow revenuesFacing competition from new entrants to their markets, some manufacturers and distributors are advancing aggressively to protect and expand their aftermarket market-share by launching B2C-like eCommerce capabilities. While initially a defensive strategy, firms that have implemented these capabilities are realizing that being the preferred storefront for their customers offers other opportunities for revenue growth. Increase market-share by becoming the

preferred source for parts and parts information

Broaden catalogue to include kits and third-party components

Repatriate catalogues previously discarded or sold-off

Use new techniques – such as auctions or analytics-based promotions – to sell slow-moving parts

New revenue streams now coming onlineLeading manufacturers are exploring new ways of generating revenues, and new business models.

Offer new high-value servicesManufacturers increasingly depend on aftermarket value-added services to drive margin. Now, embedded technologies and sensors, along with analytics, enable manufacturers to offer new high-value services such as health monitoring, diagnostics, and maintenance management programs. Further, access to fleet-wide performance information has enabled companies to offer highly profitable pay-per-hour commercial programs where the customer pays for asset maintenance based on usage profile.Other advanced technologies, such as augmented reality, are finally becoming more economical to incorporate into service instructions, dramatically reducing technical risk, equipment damage, and labour costs associated with complex maintenance tasks.And finally, the data generated by always-connected assets, performance data fed back into the product design cycle helps improve product reliability and improve overall product quality.

Create new business modelsNew technologies are emerging daily that offer manufacturers opportunities to make disruptive changes to industry business models. Take, for example, 3D printing. It’s not unreasonable to expect that, within the decade, some advanced manufacturers will ‘print-on-demand’ and ‘print-at-point-of-need’ parts for aftermarket sales, eliminating manufacturing, warehousing and logistics processes. Imagine, for instance, a remote customer accessing a geometry file from the equipment OEM and printing a replacement part or component for an urgent field repair. This scenario has already played out in tests; it won’t be too long before some firms make it business-as-usual.

The first 3D-printed turbine engine. See note 5 for further information.

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Return on digital Research has shown that digital leaders outperform their peers across a number of key financial dimensions: 13% greater revenue productivity, 50% more profitable, 19% higher market valuations, and 50% greater revenue growth potential.6In manufacturing industries, most firms have been slow to react, however. But those who have are responding to changing customer expectations by deploying new technologies and processes that enable step-changes in productivity, revenue growth and customer satisfaction.Some firms are experimenting with advanced, integrated asset performance management, trending and analytics capabilities. Others are figuring out how to leverage Big Data capabilities to improve product performance and preventative maintenance regimes across large in-service fleets.

Digital leaders are winningManufacturers who have incorporated Digital into their aftermarket sales & service are more likely to grow revenues and increase profitability.

* Note: Average performance difference from firms in each quadrant versus the averageof all firms in the same industry sector for the 184 publicly-traded firms in the sample.ARP = Average Revenue per Asset unit, or total revenue divided by number of units ofresource. EBIT = Earnings Before Interest and Taxes.Adapted from WESTERMAN, George, et alia: “The Digital Advantage: How DigitalLeaders Outperform Their Peers in Every Industry”; MIT Center for Digital Business andCapgemini Consulting; and from Leading Digital: Turning Technology into BusinessTransformation; Harvard Business Review Press, 2014.

Digital leaders outperform their peers across a number of key financial dimensions6

13%greater revenue productivity (revenue-to-asset ratio or ARP (Average Revenue Product))

50% more profitable19% higher market valuation

2Xmore likely to achieve increased rage of revenue and profit growth7

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The slow arrival of customer self-serviceWith few exceptions, most manufacturers and distributors have been slow to adopt new customer-facing technologies to drive business performance.For example, a recent survey of airlines and FBOs shows 13 of 17 aircraft and engine manufacturers failing to deliver basic online experiences customers now expect.4Aftermarket sales & service represents a large and growing share of these companies’ revenues and profits. Leading companies are investing aggressively, not only to address customer demands, but also to take advantage of new technologies that will enable new services, help improve product performance and generate higher levels of value.

Aerospace & Defence companies fail to make the gradeA&D manufacturers fail to meet customer expectations for self-service eCommerce and support tools. Digital leaders are making investments to change the game.

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MM+OHow to start your digital transformationProven, structured methods accelerate executive alignment, ensure strategic completeness and coherence.

Step 1Assessment

Step 2Identify opportunities

Step 3 Vision & Roadmap

Any transformation can be a daunting undertaking, especially in environments where sustained management attention is difficult to secure. Few executives would admit they are able to define a compelling vision and roadmap in an afternoon or over a weekend retreat. Data-driven decision making requires research and analysis, framed by questions relevant to the business and meaningful to the executives. Using proven, data-driven methods helps facilitate senior management alignment:

■ Step 1: Assessment: Setting well defined scope and context for any transformation is key. Then, rigorous capabilities assessment, benchmarking and customer input is critical to defining the value levers on which the executive will focus.

■ Step 2: Identify opportunities: Quantifying and prioritizing improvement opportunities is the next critical step. Top-down/bottom-up analysis and risk weighting helps increase confidence to ensure opportunities are not oversold.

■ Step 3: Vision & roadmap: Improvement opportunities are sequenced with other enterprise initiatives, prerequisites or constraints, fully integrating the proposed change program into the corporate roadmap. 8

Phase 1 – Assessment, Vision & Roadmap

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MM+ODigital opportunities for the aftermarketWhat does digital mean for your aftermarket sales & service?

Digital value leversNew SMAC technologies (Social, Mobile, Analytics, Cloud) offer a broad spectrum of opportunities for aftermarket sales & service operations to improve business performance. Reduce cost of service delivery while

increasing customer satisfactionLeading companies are figuring out how to improve customer service levels while reducing operating costs. For example, enabling customer self-service across its aftermarket operations, a large aerospace firm achieved 24/7/365 customer service across all business and customer support lines, while reducing internal labour costs associated with handling customer requests. Customers welcome service level improvements because they are now able to find answers quickly and easily, or perform transactions that would otherwise require an email or phone call.

Reduce transaction processing costs by automating core processesMany companies have failed to complete the automation of back-office value streams such as order-to-cash, often because they support multiple business units with multiple interfaces to the customer. Deciding on a primary

customer interface for order placement and payments, for example, allows firms to streamline and automate core processes.

Increase aftermarket revenues Grow market share of aftermarket parts sales, repair and overhaul business and increase the value of technical support services. Over 60% of business buyers now start their spare parts research online. Over 70% of buyers will purchase from an online catalogue rather than through another channel, if they have the option. For OEM/OPMs, this trend means that distributors and new pure-play eCommerce entrants are gaining advantage. Even in the dealer- and distributor-rich automotive industry, 50-60% of online orders go to pure-play eCommerce parts distributors.

Enable new sources of revenueNew technologies are enabling manufacturers to enhance the value of their offerings by integrating digital services tightly with their products. Leading companies are already offering performance monitoring, trending and alert services. Others offer integrated fleet and maintenance management services.

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What we doMM+O is a management consulting firm specializing in strategy and business transformation of customer-facing operations for manufacturers and distributors.We work with the leadership teams of advanced manufacturers to measurably improve the performance of their aftermarket businesses.We have a singular focus: enabling our clients to deliver superior performance in their aftermarket businesses. Operational efficiency IT strategy for aftermarket businesses A/M supply chain optimization Customer experience design Mobile-enabled field operations Contact/Command center design Business transformation Technical instruction

About UsMM+O works with senior leadership teams to imagine and implement better ways to deliver aftermarket services that both delight their customers and increase profitability.

To discover how our industry expertise can help increase your customer satisfaction, productivity and profitability, contact:John Mertl [email protected]+1 416 550-9872

Why MM+OThe consultants at MM+O have dedicated their careers to improving the customer experiences and the performance of manufacturing and distribution businesses.Using proven, structured methods, we work with senior leadership teams to identify and implement business improvement opportunities that deliver quantifiable results.We are experts in aftermarket, service strategy, digital business transformation, industrial design, leading practices in product support, aftermarket business systems, and aftermarket IT systems. We work our clients’ senior leadership teams to imagine and implement new and better ways to deliver aftermarket services that both delight their customers and increase profitability.Our clients include Fortune 500 firms across a number of industries, including aerospace & defence, heavy equipment, discrete manufacturing, electronics and semiconductors. 10

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MM+OPartner Profile John Mertl

SpecialtiesStrategy & business transformation, enterprise architecture, supply chain, CRM, ERP, B2B e-commerce,mobile, digital services, sales and customer service operations, omnichannel, customer service, supply chain, product support operations, outsourcing, TOGAF practitionerIndustry expertiseAerospace & defene, advanced manufacturing, telecommunications, mining & exploration, and federal public sectorsSelect clientsAccenture, AT&T, Bell, Boeing, Booz Allen Hamilton, CSC, Department of Defense, Department of National Defence, FTQ, Government of Canada, Government of Ontario, General Dynamics, Hitachi Semiconductor, Internal Revenue Service, John Deere, Lockheed Martin, McDonnell-Douglas, Pratt & Whitney Canada, RBC Royal Bank Group, Texas Instruments, TMX Group, UNESCO, UNICEF, United Nations, Verizon, Vodafone

ContactCity: TorontoCountry: CanadaMobile: +1 416 550 9872Email: [email protected]

John Mertl is a senior strategy and technology consultant who brings over 20 years of consulting and operating experience in helping the leadership teams of Fortune 500 firms, public sector organizations, start-ups and NGOs develop and implement strategies that improve competitiveness, increase customer satisfaction, grow revenues, and optimize operations.He is expert in framing and launching complex, large-scale, technology-intensive business transformations for engineering-intensive companies. He specializes in customer-facing operations, value-streams, technologies and platforms, including: ERP, CRM, eCommerce, enterprise content management, technical instruction production & delivery, customer support, product configurators, marketing automation, payment systems, mobile, omnichannel platforms and organizations, and collaboration platforms.

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Company StatsCompany: Pratt & Whitney Canada Corp.Industry: AerospaceProducts: Aircraft enginesA/M Catalogue: Millions of partsFootprint: 30 service facilitiesGeography: 200+ countriesCustomer/Operators: 12,000 (approx.)Customer/Contacts: 40,000 (approx.)Engines In-Service: 52,000 (approx.)Employees: 8,800 (approx.)Program + Program StatsBusiness Processes: 50+Function Points: 3,000+Interfaces: 50+Use Cases: 100+User-types (personas): 12Localization: English (US)External Users: 70,000Internal Users: 500Concurrent Sessions: 3,000+Platforms: SAP, MS-Dynamics, Oracle,

MS-SharePointeCommerce: CustomFrameworks/Languages: .NET, ABAP; AngularReliability: High-Avail. (5-9s)Vendors: Deloitte, Accenture, CSC,

Thoughtworks, Avanade, and others.

Implementation Team: 120+ (at peak)PMO: 4Governance: PMT, C-Level

Opportunity Baseline aftermarket operating model could not

scale to meet increasing customer demand while achieving customer satisfaction, market and financial goals.

Executive aligned on vision and strategy to transform businesses to omnichannel, customer-self-service enabled service operation, and to lead market in digital service delivery by 2017.

Challenges Large number of executives and line

management to be aligned on vision for future-state operating model

Highly-complex global business, encompassing seven unique business lines, IT, Finance, and Compliance

Large, heterogeneous customer base 50+ core business processes Large product portfolio, with large installed base Internal IT capabilities fully consumed supporting

baseline operations Large aftermarket product catalogue (millions of

parts); new and reconditioned Regulated environment (TC/FAA, ITAR & EAR) Mission-critical, high-availability systems

Timeline2011 Capabilities Assessment & Vision2012 Blueprint & Roadmap2013 Requirements & Pre-implementation

Planning; RFP & Implementation vendors selected

2014 Implementation, Organizational Change Program

2015 Implementation, Organizational Change Program, and Cutover

Results System and business organization opened

Beta in fall 2015. Successive end-user customer onboarding is ongoing

100%+ of baseline scope delivered Forecast program ROI on track Positive initial end-user response &

acceptance

Our Roles Strategy, Blueprint & Roadmap development Program chief architect Co-led program w/ P&WC from concept

through completion

Aftermarket business transformation: sales and aftermarket servicesCase Study

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F-117, U2, F-22 ILS Technical Support

System: IETM Design/Build

Solution Architecture, Implementation

eChannel Program:Aftermarket Service

Digital Transformation

Chief Architect, Program Co-Lead

Commercial Aircraft Technical Support

System (Components)

Solution Architecture, Implementation

Commercial Aircraft Technical Support

System (Components)

Solution Architecture, Implementation

Semiconductor Technical Data

Publishing System (Components)Solution Architecture

Semiconductor Technical Data

Publishing System (Components)Solution Architecture

R&D Knowledge Management System

Solution Architecture, Implementation

Technical Publishing & Knowledge

Management System

Solution Architecture

Selected Projects

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SaaS Consumer-Deployed VAS Applications

Vendor Project Executive

SaaS Consumer-Deployed VAS Applications

Vendor Project Executive

SaaS Consumer-Deployed VAS Applications

Vendor Project Executive

SaaS Consumer-Deployed VAS Applications

Vendor Project Executive

SaaS Consumer-Deployed VAS Applications

Vendor Project Executive

SaaS Consumer-Deployed VAS Applications

Vendor Project Executive

SaaS Consumer-Deployed VAS Applications

Vendor Project Executive

SaaS Consumer-Deployed VAS Applications

Vendor Project Executive

Selected Projects

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Collaboration & ECM System to Support Secure Multi-party

NegotiationsPlatform Vendor & Implementation

Selected Projects

Maine State LegislatureLegislation drafting,

engrossing, management &

distribution systemArchitecture, Project Executive

DoD DoACollaboration & ECM

System for 300K Service-Members

Enterprise Collaboration & ECM

System

Collaboration & ECM System to Support Secure Multi-party

NegotiationsPlatform Vendor & Implementation

Collaboration & ECM System to Support Secure Multi-party

NegotiationsPlatform Vendor & Implementation

Multiple collaboration & ECM system to support

Secure Multi-Party Negotiations

Platform Vendor & Implementation Platform Vendor & ImplementationPlatform Vendor & Implementation

Enterprise Collaboration &

Knowledge Management SystemArchitecture, Project Executive

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Copyright © 2016 MM&O Ventures Inc.MM+O Ventures Inc.Project: InternalClient: InternalAuthors: John Mertl Revision: 0.9Date: 24 January 2016This document is current as of the initial date of publication. The performance data and examples are presented for illustrative purposes only. PROPRIETARY NOTICEThis document is the property of MM+O Ventures Inc. You may not possess, use, copy or disclose this document or any information in it, for any purpose, without MM+O’s express written permission. Neither receipt nor possession of this document alone, from any source, constitutes such permission. THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT.

Please Recycle

1. Forrester Research; “Building the B2B Omnichannel Commerce Platform of the Future: B2B Buyer Expectations are Driving Sellers to Deliver Fully Functional Omnichannel Experiences”, November 2014, and revise 2015. And, Oliver Wyman; “The Emergence of Omnichannel Operations in B2B: Oliver Wyman, 2015, amongst numerous other studies. These two are the most succinct.

2. Forrester Research: “Mastering Omnichannel B2B Customer Engagement”, October 2015.

3. Westerman, G., et alia: “The Digital Advantage: How digital leaders outperform their peers in every industry.”; MIT Sloan, 2014; See pp. 9-10, figure 5. Maturity by Industry; and figure 6. Maturity Breakdown by Industry.

4. MM+O: A&D Industry Benchmark Study on correlation of Customer Satisfaction, Manufacturers’ Omnichannel Capabilities, and Service Delivery Cost Structures. Not published. January 2015.

5. Picture of the first 3D Printed jet engine, courtesy of Monash University, Melbourne, Australia. The research team have printed two complete jet engines using metal 3D printing technology. The process, which took two years to complete, involved obtaining permission to 3D scan the internal components of an existing turbofan auxiliary power unit used in smaller aircraft. Each scanned part was then printed in solid metal using the EOS and Concept Laser gear at the Monash Centre for Additive Manufacturing in Melbourne.For more information, see: http://www.engineering.com/3DPrinting/3DPrintingArticles/ArticleID/9726/First-3D-Printed-Jet-Engine.aspx

MM+O6. Westerman, G. et alia: Leading Digital: Turning

Technology in to Business Transformation; Harvard Business Review Press, 2014; pp. 18-22

7. PricewaterhouseCoopers, 2015 Global Digital IQ Survey

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