Learn the 20 points required for every outcome-based product support business model for the commercial sector.

1. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
The target audience of this white paper is Business Developers, Customer/Product
Support Leadership and Financial Professionals employed by OEMs in the development
of business models designed to deliver outcome-based solutions for the support of a
product.
The objective of product support is to assist the end-user to:
• Assure the materiel readiness level of the product; when I need it, I can operate
it
• Grow the reliability level of the product; when I operate it, it works during my
time of use
• Retain the capability level of the product; when I operate it, it delivers what I
need it to deliver
• Reduce its impact upon Total Ownership Cost (TOC); I need to apply Continuous
Process Improvements (CPI) in managing costs
• Evolve the technology level of the product; I need to stay current with the value
that the product’s technology adds to the process in which it is employed
• Minimize its impact upon the field resource footprint; I need just enough people
and things to deliver a solution
The purpose of the white paper is to provide the reader with an overview of the 20
elements that are required to configure an Outcome-Based Product Support Business
Model.
This whitepaper is segmented into the following four areas:
1. Overview of the investment and economic value of products
2. What is product support
3. The 20 elements of an Outcome-Based Product Support Business Model
4. Conclusions and recommendations
Overview of the Investment and Economic Value of Products
As of the beginning of 2010, the US commercial investment in products, at Current
Replacement Value (CRV), is an estimated $11,000 billion, with a global investment
estimated at $35,000 billion. Commercial products are resources that are employed in
processes such as generating electricity (gas turbines), transporting goods by air (cargo
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2. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
aircraft), or moving pallets (forklift). This investment has been a primary enabler for
developed and developing economies to materially boost their labor productivity; the US
manufacturing process, as of 2010, through the investment in products, has seen a
four-fold increase in manufacturing output since 1960, with no increase in labor. Also
today the US, through investments in products, has been able to generate from the
farming process, enough food to feed 300 million US citizens and as many more people
outside the US, with only 3% of the US population engaged in agriculture; a far cry
from the 40% of the US population engaged in farming in 1900 in order to feed 80
million citizens, with little food exported outside the US.
The economic value of a product to an organization is its impact upon the outcome of a
process in which it is employed. The product will impact the outcome-efficiency (TOC-
per-unit-of-output) of the process, as well as impact the outcome-effectiveness
(benefits of the quantity of output) of the process. Below is a schematic of the inputs
and outputs of a process employing a product.
The following are examples of the outcomes of a process resulting from the
employment of a product:
• An Class 8 truck is acquired by a logistics organization in order to increase the
outcome-efficiency of the ground transport of goods process by decreasing the
TOC of moving a ton of goods one mile from $.050 ($5,000,000
cost/100,000,000 ton miles) to $.045 ($4,500,000 cost/100,000,000 ton miles)
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3. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
• A remanufactured mining excavator is obtained by a coal company in order to
increase the outcome efficiency of the coal extraction process by decreasing the
cost per ton of coal extracted from $73.35 ($7,335,000 cost/100,000 tons
excavated) to $68.11($6,811,000 cost/100,000 tons excavated)
• A mainframe computer is obtained by the research lab of a drug company in
order to impact the outcome-effectiveness of the process of simulating DNA
permutations by reducing the computation time from 13 minutes to 2 minutes
for a one result
• A refurbished Magnetic Resonance Imaging (MRI) Scanner is obtained by a rural
hospital in order to improve the outcome effectiveness of the body scanning
process by increasing the clarity/quality of the soft tissues imagery of the body
by 40%, as well as decreasing the average time to scan by 20 minutes
What Is Product Support
The annual cost for the support of these products is an estimated $700 billion in the US
and $1,800 billion globally. The lifecycle stages of a product are represented in the
figure below:
The following is a brief description of the processes employed in the Product Support
lifecycle stage:
• Correct a product that is in an unplanned-impaired condition (cannot fully or
partially achieve its value for the process in which it is employed; can occur
before, during or after use. This process is typically performed at the site where
the product is operated. It is driven by the following events:
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4. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
o Failure due to quality issues
o Past-due time/use-based scheduled activity
o Recall due to safety/quality issues (i.e. battery installed for electronic
component explodes under certain condition, requiring there rapid
removal)
o Non-catastrophic damage (i.e. product housing dented and requires
replacement due to cosmetic purposes)
• Prevent a non-impaired product from evolving into an unplanned-impaired
product. This process is typically performed at the site where the product is
operated. It is driven by the following events:
o Time/use-based activity schedule (i.e. part ABC removal required for
safety purposes every 1000 hours, and last removal occurred 950 hours
ago; non-expired part ABC removed)
o Condition-based monitoring trigger (i.e. part reaches predetermined
threshold of wear-and-tear parameters requiring removal
• Reset product condition, driven by a planned program, to the same condition
which existed before an event. It is driven by the following:
o After every use (i.e. after each wide-load East coast to West coast truck
roundtrip, product is thoroughly inspected and repaired).
o After extraordinary period of use (i.e. construction equipment is deployed
in rural China for 12 months and returned to U.S. where it is disassembled
and reassembled and the condition of the product is returned to where it
was before it was deployed)
• Change product condition or configuration, but not increased capabilities,
through:
o Remanufacturing/overhaul; bring product back to original capability and
reliability, as well as insert any technology upgrades
o Insert technology upgrade
o Insert reliability improvements
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5. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
• Repair catastrophic damage resulting from accident
• Store product short/long-term retaining current condition
The 20 Elements of an Outcome-Based Product Support Business
Model
“The business model is a collection of elements that represents one way in which an
organization obtains monies. It is a combination of factors, not a single element, that
together represent each of the key interactions that the enterprise will have with its
environment. An Enterprise is a collection of one or more business models that
describe how various entities come together to provide value and make money. An
enterprise is basically an abstract notion that describes a set of business models that
come together,” A. Nicklas Malik, “Enterprise Business Motivation Model.”
All the elements below are required to be reviewed in crafting an Outcome-Based
Product Support Business Model. Note that for each of the Product Support processes
discussed above, a business model must be crafted. The totality of the business models
creates an Outcome-Based Product Support Enterprise.
1. Product employed in process (i.e. laser-cutter employed in manufacturing
process)
2. Event driving demand for a solution (i.e. unplanned failure of a critical repairable
component)
3. The specific organization that is demanding a solution (i.e. General Electric,
Aircraft Engine manufacturing maintainer organization)
4. Weekly operating environment of organization employing product (i.e. 16 hour/6
days)
5. Specifications of solution demanded (i.e. enable a Production Manager to re-
employ a laser-cutter product after the unplanned failure of one of the product’s
critical components is resolved)
6. Outcome of the solution (i.e. non-impaired component to be provided for
installation to maintainer unit within no more than 4 hours, based on 24/7 clock-
time)
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6. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
7. Organization that “owns” relationship with customer of the delivery of the
solution (i.e. GE Technical Customer Support)
8. Organization that delivers solution to customer (i.e. GE service parts distribution)
9. Solution delivered to customer (i.e. operator/maintainer removable/installable
critical repairable that are available from a supplier-forward like-kind exchange
program distributed from Regional Distribution Center located in customer’s
region)
10. Processes employed to deliver solution (i.e. create/add repairable components to
exchange program, maintain repairable components in program and remove
repairable components in program)
11. Resources employed for each process (i.e. personnel, materials, facilities,
equipment, software)
12. Risk management of unfavorable outcomes (i.e. not being able to adapt to
changes operating environment in a timely manner)
13. Relationship with customer (i.e. how will customer order parts and how will the
customer be informed as to the status of their order)
14. Relationship with suppliers (i.e. Vendor Managed Inventory programs provided
for all parts at depots employed for repairing repairable components)
15. Payables structure (i.e. pay supplier fixed cost per period, such as extended
warranty, with award fee for reaching or surpassing outcomes)
16. Receivables structure (i.e. obtain payment from customer on a fixed price per
transaction basis)
17. Managerial cost accounting (i.e. construct allowing the comparison of actual
expenditures and planned expenditures)
18. Required subject matter expertise (i.e. Off-hour Tech Support coverage
personnel with 20 years experience)
19. Geography and location (i.e. global support with centralized planning and control
in CONUS)
20. Constraints (i.e. Hazardous Material content transportation restrictions)
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7. White Paper: The 20 Elements Of An
Outcome-Based Product Support Business Model
Conclusions and Recommendations
Crafting a comprehensive Outcome-Based Product Support Business Model is an
extremely challenging task. The use of an Integrated Product Support Team, reporting
directly to the Product Support leadership is critical to the success in the delivery all the
different business models required to create a Product Support enterprise.
The Product Support Enterprise models are to be revisited throughout the life of the
product driven by the comparison of what was planned and the realities of actual
events. Without such adjustments, a model is strictly an intellectual exercise of minor
value.
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