This document discusses aligning service metrics to customer value creation based on three industrial case studies. The first case study examines a wind turbine farm where the contractor was measured on technical availability but the owner's value was based on commercial availability during high wind periods. They learned availability metrics must consider seasonal impacts on revenue. The second case examines a gas turbine plant where the contractor was measured on availability but the owner's value was based on start reliability and capacity payments. They learned availability does not equal start reliability. The third case examines an oil and gas company that outsourced maintenance to reduce costs, but this led to poor reliability and production. Paying the contractor based on barrels produced incentivized improved performance.

1. Aligning&metrics&to&
customer&value&crea1on&&
for&the&maintenance&of&&
power&genera1on&assets&
&
Service&Opera1ons&Management&Forum,&22&September&2014&
Dr&Shaun&West&
shaun.west@hslu.ch&

2. Value&
The$challenge$of$defining$performance$metrics$
E 3&examples&with&3&different&challenges&&
E Vanilla&metrics&are&not&sufficient&
E Capture&the&pains&and&gains&and&match&them&with&service&capabili1es&
Service&Innova1on&|&Dr&Shaun&West&
&Iden1fy& &Create& &Deliver&

3. The$service$idea$derives$from$interviews$and$survey$
1. Industrial&input&from&a&workshop&with&Roland&Berger&in&2013&
2. Assessment&of&survey&data&and&insights&&
from&interviewees&responsible&for&service&
Service&Innova1on&|&Dr&Shaun&West&
120131118_2330_RB Service study 30_Final document_E_PUBLIC VERSION.pptx
Zurich, November 2013
Service 3.0
Unraveling Value Pockets in the Service Business
INDUSTRY STUDY

4. Gains&
Pains&
Gains& Pains&
The$customer$value$proposi8on$as$a$useful$framework$
Service&Innova1on&|&Dr&Shaun&West&
Have&we&become&complacent&with&&
the&iden1fying&customer&value?&

5. The$use$of$metrics$from$three$industrial$examples$will$be$used$
E 3&case&studies&provide&bases&for&the&presenta1on&
E Lessons&learned&from&them&will&then&be&presented&

6. WIND TURBINE FARM
Case&1&
Service&Innova1on&|&Dr&Shaun&West&

7. Contractor$and$owner$have$conflic8ng$views$on$availability$
E Availability&guarantee&of&92%&
E The&maintenance&company&hits&its&target&
E The&owner&is&unhappy&
E The&owner’s&pain&is&based&on&a&breakdown&

8. Seasonality$in$wind$speeds$has$a$major$impact$on$the$value$
E Fixed&feedEin&tariff&
E System&takes&what&is&delivered&
E Price&is&fixed&
E Agreed&availability&92%&
E Technical&availability&92%&
E Commercial&availability&of&78%&
There&was&no&considera1on&&
of&the&value&of&availability&on&&
a&monthly&basis.&
&
&
Figure 3-7: Original wind speed time series
8: Monthly averages for 7 years of original wind speed data
her a box-plot of the wind speed per month is plotted for thre
1000 1500 0 500 1000 1500
0
5
0 2 4 6 8 10 12
0
5
10
15
20
25
2000
2001
2002
2003
2004
2005
2006
Berg^ord,&2011&
Service&Innova1on&|&Dr&Shaun&West&

9. Use$Excel$to$help$understand$the$customer$value$crea8on$
Service&Innova1on&|&Dr&Shaun&West&
Revenue&at&92%&average&availability&
&
Revenue&at&78%&commercial&availability&

10. Gains&
Pains&
Coopera8on$of$both$par8es$iden8fy$the$correct$measures$
• Maximise&revenue&poten1al&
• Availability&during&‘windy’&period&
• Unplanned&maintenance&during&
‘windy’&periods&
• No&planned&maintenance&in&‘windy’&periods&
• Rapid&response&to&unplanned&windy&periods&
• Undertake&maintenance&in&‘calm’&periods&
• Openly&share&availability&on&a&regular&basis&
Service&Innova1on&|&Dr&Shaun&West&

11. The$Contractor$was$driving$to$technical$availability$
The$Owner$was$looking$for$commercial$availability$
Service&Innova1on&|&Dr&Shaun&West&
Metrics&
• Agreed&on&(technical)&availability&(92%)&
• Commercial&availability&not&discussed&
Performance&
• Agreed&availability&has&been&achieved&
• Contractor&wanted&to&be&paid&
Cause&
• No&discussions&on&key&revenue&periods&
• Contractor&was&not&sensi1ve&to&value&crea1on&
Learning&
• Drive&discussions&about&value&crea1on&earlier&
• Agree&metrics&that&align&with&value&crea1on&
Availability&(technical)&&
&&≠&&
Commercial&availability&&

12. GAS&TURBINE&POWER&ASSETS&
Case&2&
Service&Innova1on&|&Dr&Shaun&West&

13. An$O&M$company$proposes$improved$performance$metrics$
E Opera1onal&for&0.5%&of&the&year&
E Maintenance&performance&was&measured&on&availability&
E Owner's&customer&was&the&grid&company&
E Difficult&discussions&over&‘availability’&
Service&Innova1on&|&Dr&Shaun&West&

14. Owner’s$income$based$on$genera8on$and$capacity$payment$
E ‘Strike&price’&set&to&120EUR/MWh&
E Generated&for&0.5%&of&a&year&
E 50&starts&per&year&&
E 44&hours&genera1on&
E Income&based&on&genera1on&and&
capacity&payment&&
Swiss&spot&electricity&prices,&2013&
Service&Innova1on&|&Dr&Shaun&West&
Working&with&data&&
iden1fies&value&
&
&
&

15. Gains&
Pains&
Start$reliability$is$the$KPI$that$the$Owner$reported$
• Predicable&start&reliability&
• Failure&to&start&
• Unit&efficiency&
• Unit&capacity&
• Knowledge&of&startElikelihood&
• Machine&heath&check&provides&capacity&info&
• Start&log&(all&failures&create&Kaizan&item)&
• start&planning&with&predic1ve&monitoring&
Service&Innova1on&|&Dr&Shaun&West&

16. The$Contractor$was$driving$to$availability$$
The$Owner$was$looking$for$start$reliability$
Service&Innova1on&|&Dr&Shaun&West&
Metrics&
• The&contractor&was&&
measured&on&availability&
Performance&
• The&Owner&was&paid&on&&
start&reliability&and&capacity&
Cause&
• There&were&no&reliability&&
and&capacity&metrics&
Learning&
• Measure&the&contractors&&
impact&on&owner’s&value&crea1on&
Availability&
≠&&
Start&reliability&

17. OUTSOURCING&O&M&IN&O&G&
Case&3&

18. O&G$outsourced$O&M$to$a$service$company$$
to$drive$costs$out$of$business$
E Procurement&bought&on&T&M&basis&and&driven&out&cost&
E Ini1al&cost&reduc1on&plan&had&not&worked&
E Early&equipment&failures&and&reduced&produc1on&(bbl&of&oil&lined)&
E Conflict&between&focus&on&maintaining&vs&running&the&equipment&
Service&Innova1on&|&Dr&Shaun&West&

19. The$contractor$was$a$core$part$of$the$O&G$company’s$processes$yet$
was$separated$from$the$opera8ons$
E Equipment&supported&
E 17&gas&turbines&
E 40&compressors&
E Numerous&pumps&
E Contractor&profits&&
from&breakdowns&
E Site&safety&performance&&
a&major&issues&safety&&
To: Maintenance
From: Production
Site Performance report
Budget
…has for a further year been 15% above
budget.
Plant performance
…has for poor, availability was 5% below
expectation and there were too many
unplanned breakdowns.
HSE performance
…there have been too many accidents…
Service&Innova1on&|&Dr&Shaun&West&

20. Gains&
Pains&
Owner$moved$from$T&M$based$contract$to$payment$based$on$bbl$
• Revenue&the&more&oil&is&lined&
• Breakdown&payments&
• HSE&repor1ng&weak&
• Reduced&income&when&oil&not&lined&
• Integra1on&into&Owner’s&site&processes&
• Customer&feedback&from&several&func1ons&
• Payment&per&bbl&lined&
Service&Innova1on&|&Dr&Shaun&West&

21. Value$was$iden8fied,$created$and$delivered$in$each$phase$
Service&Innova1on&|&Dr&Shaun&West&
Metrics&
• The&contractor&was&measured&on&cost&
• The&contractor&made&money&when&&
equipment&needed&repairs&
Performance&
• There&was&poor&equipment&reliability&
• The&Owner&was&paid&on&bbl&lined&
Cause&
• There&was&no&focus&on&the&impact&&
of&the&poor&service&delivery&
Learning&
• Both&par1es&needed&to&understand&&
the&impact&of&their&behavior&
Low&cost&maintenance&&
≠&&
High&reliability&

22. The$owner$and$the$contractor$worked$together$to$align$drivers$
Service&Innova1on&|&Dr&Shaun&West&
Listening&to&the&customer&
(eg&NPS&or&other&tools)&&
helps&you&learn&about&their&
pains&and&gains!&
Mobiliza1on&
• Learn&to&work&as&as&a&team&
• Understand&the&cost&drivers&
• Iden1fy&areas&of&poor&performance&
Stabiliza1on&
• Stabilized&the&costs&to&the&owner&
• Improve&availability&
• Target&maintenance&costs&
&&Risk&&&&&
&&&&&&Reward&
• Bonus/damages&system&&
• Target&maintenance&costs&
• HSE&performance&
&Payment&&
&&&&by&results&
• Payment&based&on&O&G&pumped&
• Tough&reliability&targets&
• HSE&performance&

23. THREE&LESSONS&LEARNT&
Service&Innova1on&|&Dr&Shaun&West&

24. Lessons$learnt$from$the$case$studies$can$help$us$to$become$beNer$
Service&Innova1on&|&Dr&Shaun&West&
Availability&≠&commercial&availability&
Availability&≠&start&reliability&
Low&cost&maintenance&≠&high&reliability&
Maintenance&
metrics&&
must&align&
with&the&
customer's&
value!&Other&pains&and&gains&(eg&NPS,&accidents)&

25. Lessons$from$the$cases$that$are$oOen$forgoNen$in$daily$business$
Iden1fy&
value&
Create&
value&
Deliver&
Value&
Find&out&what&the&customer&values&
(based&on&job&to&be&done)&
Design&a&system&to&maximise&the&gains&
and&minimise&the&pains&
Measure&and&discuss&gains&and&pains&&
(Figure&based&on&Anderson,&2009)&Service&Innova1on&|&Dr&Shaun&West&

26. Service&Innova1on&|&Dr&Shaun&West&
Any&ques1ons?&
&
Dr&Shaun&West&
shaun.west@hslu.ch&