Compared to other industries, medical device manufacturers have been slow to add revenue generating services to their offerings. According to the research of Stephen W. Brown, PhD, one reason may be that pioneering companies fail to anticipate three common and significant barriers to success. Dr. Brown is director of the Center for Services Leadership at Arizona State University, and one of the founders of The HSM Group.
For starters, successful service offerings require a seismic shift from a product and transaction-focused model to a longer-term people and relationships-centric model. In some company cultures, this reorientation can be difficult to achieve.
Executive commitment to an entrepreneurial undertaking is also essential so that diverse resources and consistent effort can be harnessed in a way that bridges individual department goals. According to Abbott's Mark Wheeler, Vice President of Global Services in the Diagnostics Division, "You've got to have executive sponsorship, and the local country general manager is critical. [Services] must be viewed as a growth opportunity, not a cost."
Lastly, one of the most daunting hurdles may lurk within a company's sales force. "When sales are down, sales teams tend to focus on what product features the competition has instead of looking for opportunities to understand the customer's business challenges and improve processes, resulting in improved profitability," observes Angelo Rago, Abbott Medical Optics, Division Vice President of Global Customer Services. Moreover, salespeople are often accustomed to offering services as a value-added deal sweetener.
"Some of our people are extremely strong at the product sell, but have never actually sold services before," says ConvaTec's ostomy division President Nino Pionati. "As we consider packaging services, we may need to approach the sales call differently, and ensure our product selling messages are aligned with the new service model approach." The sales call could include a deeper knowledge of customers' operations and relationships at a higher level in the organization. Given differences in the price structure for services vs. products, reconciling sales incentive plans need to be considered as well.
Companies can assess organizational readiness for services by auditing internal capabilities, resources, and attitudes: what do we do well, what competencies are missing, and what are we structured to support well? Similarly, organizations need to understand the impact their employees have on customer perceptions and loyalty: Do our people feel adequately trained, supported, and compensated? How do they communicate with customers about our company and their roles?
In our third Ebriefing, we'll discuss strategies for success some companies have employed in making the transition to services. You can also click here to see a copy of Steve Brown's article in the June 22, 2009 edition of the Wall Street Journal.