Packaging of Training Services in Valmet Automation Inc.
Case study for Strategic Management
TABLE OF CONTENTS
Competition today is a part of everyday. To improve competitive advantage companies have to be able to offer high-quality, low-cost services to their customers in addition to their tangible goods. Typical examples of such serv-ices in customer project oriented high-technology companies are: customer training, support services, spare part sales, upgrades and extensions of exist-ing systems and application insight.
In this project work we concentrate to look closer at Customer Training pack-ages in Customer Service at Valmet Automation Control Systems and place it on the Service-Channel Matrix.
We found it interesting to study the case in practice. The most useful help and the kick-off of the project work we got in discussions with Mr. Jarmo Kuikka, Service Manager of Valmet Automation Inc., Controls Systems. From him we got very useful and practical ideas and theoretical references to the study.
When coming closer to the subject, Customer Training, Mr. Juha Nieminen, Training Manager of Valmet Automation Inc. was very helpful, when we inter-viewed him. We became more and more convinced about the importance of packaging the training and the use of latest information technology not only because of re-use possibilities and positive financial results but also making the learning process active and interesting to trainees. A big surprise was that the customers are willing to pay for training because they consider it as a good investment.
In chapter 2 we introduce the case company, Valmet Automation Inc. In the following chapter we tell about the theoretical model of Service-Channel Ma-trix and how it applies to Customer Training. In chapter 4 we present the principles of packaging services with service products. Finally we present Customer Training packages of Valmet Automation.
2 THE CASE COMPANY, VALMET AUTOMATION INC.
Valmet Corporation is the world’s leading supplier of paper and board ma-chines. It has production plants and service operations in all the most impor-tant market areas in Western Europe, North America and Australia. Paper, board and tissue machines, stock preparation equipment, paper finishing ma-chinery, roll handling and the related automation account for the greatest majority of Valmet’s net sales. Valmet’s income after financial items in 1996 was MFIM 1056, consolidated net sales MFIM 11764 and personnel 12871.
The case company in this project work, Valmet Automation Inc. is 100 % owned by Valmet Corporation. It specialises in measurement, control and management solutions for the process and energy industries and environ-mental services. It has a high market share globally for distributed control systems and also within paper machine monitoring systems, as well as pulp consistency and oil and gas pipeline controls.
Operations provide useful synergy benefits to paper machinery as 44 % of its turnover is paper related. Development of quality and process systems for paper machines emphasises the focus on increasing speeds of the paper machines.
Operations are divided between control systems (process automation, quality control and information systems), measurements (analysers, sensors and transmitters), Sensodec (runnability and condition monitoring systems) and Sage Systems (supervisory control and data acquisition systems).
Valmet Automation’s income in 1996 was MFIM 140 and it was 37% higher than previous year. Also net sales grew over 26% and was MFIM 1581. R&D investments in 1996 were MFIM 113.
A particular success with customers has been a system called Damatic XDi which replaces all paper documentation with a mouse-directed screen sys-tem. Its newest innovation is a replay function, whose operating principle is similar to that of a video recorder. From the accumulated historical database, it is possible to look back at what happened in the production process, ena-bling the origin of any disturbance to be discovered.
The company has now built out sales and customer support units in 27 coun-tries, with 200 employees focusing on the after market. Eight more service offices were opened in the last 18 months.
3 SERVICE-CHANNEL MATRIX
Hayes and Wheelwright first developed a Product-Process matrix to analyze production capabilities by comparing a company’s product life cycle to its process structure. Vepsäläinen has given by developing it to suit service or-ganisations. Vepsäläinen’s Strategy matrix has been further developed by for example Tinnilä in his licentiate thesis (Siihola 1997, 12). He calls the model Service Process Analysis matrix (abbreviated SPA). Siihola has applied the matrix in her pro gradu -thesis. She calls the model Service-Channel matrix and she has used it when studying the packaging of training services in a Finnish high-technology company, Vaisala Oy. Different types of training services are presented in figure 1 (Siihola 1997, 20). TYPE OF SERVICE ContingentRelationship CustomisedDelivery StandardContract MassTransaction Principal/Customer/Owner Internalsystemstraining ProductionCosts TYPE OFCHANNEL Agent/Alliance Training of a complex system ServicePersonnel Computer user training or quality training InformationNetwork TransactionCosts Routine language training
Figure 1 Different training services placed on the Service-Channel matrix
The internal systems training is placed in the upper left-hand corner of the matrix. Accordingly, a training that is very standard and relatively simple, is places in the lower right-hand corner of the matrix. These positions are pos-sible only, if the services are delivered effectively, i.e. their delivery channel is in accordance with the type of service.
According to Tinnilä (1992, 30), when analysing a particular service process, we can distinguish the delivery channel of that service. The service channel defines who actually provides the service and which systems are used to reach customers. The service channels comprise both the organisations in-volved and the information system between them. Therefore, the cost of the service mostly arises from the delivery channel.
In addition to types of channel, can services be classified in terms of fre-quency and timeliness of transactions, uncertainty and information complexity involved, and types of resources used (Tinnilä 1992, 32). The contents of a service describes what the customer gets, i.e. how complex or customised the service is, and what the relationship between the customer and the serv-ice provider is like (Siihola 1997, 16).
4 PACKAGING SERVICES IN VALMET AUTOMATION
According to Jorma Sipilä (1992,12) packaging services means defining, planning, developing, describing and producing the services offered. As a re-sult, the benefits for the clients can be maximised and the defined profit tar-gets met. In practice, packaging comprises of the development of internal work methods and different tools to make customer services faster and more effective.
Speciality services are now considered as products. Usually the word ”product” refers to physical tangible items, but that is now expanded to in-clude intangible items as well. For specialists, it can also be difficult to define distinct products. In fact, they have difficulty answering the question: ”What are you selling?” Maybe it is the case that the company doesn’t have a prod-uct catalogue or it may be just that they can’t come to a consensus of what they are selling.
Packaging services is a part of the practical implementation of product and product development strategies. Packaging services can be carried out gradually and they can be in different stages. Sipilä points out that packaging can only be considered proper when services are formed into distinct service packages or processes that can be offered to clients as such. A service prod-uct is packaged when the rights of the service can be sold further. In practise, the completely packaged service is transformed into a physical product, like a computer program.
Background An important reason to start a packaging project in Valmet Automation came from the company’s service personnel. They wanted to be able to explain to their customers what the service department has to offer them and what was included in their services, as was the case in physical products. Also, Valmet wanted to develop their whole business to increase profitability and so they felt that they had to develop their service business.
Customer-orientation Valmet Automation started the packaging of technical after-sale services by defining the needs of the customers. According to Jarmo B. Kuikka it’s impor-tant to develop the company’s service packages so that they satisfy the needs of its customers. Also the different service packages to be developed should be selected and built on the basis of customers’ needs, not on the company’s internal competencies.
To make things easier, Valmet Automation defined the following service groups based on the needs of their customers:
¨ training ¨ support services ¨ spare part sales ¨ upgrades and extensions ¨ application insight.
Packaging They have begun to develop service products for each service group. Now each of the service groups formed their own service packages for Valmet Automation.
The company aims to sell the packages in a form of service agreements called Customer Advantage Agreement. The company strives to negotiate service agreements with all its customers for one-year periods at a time.
The development of all products includes a definition of product contents and prices, developing the names and presentation material of products, and de-fining the responsibilities of product development. Through internal marketing they ensured that the terminology used was uniform.
Benefits of packaging Valmet Automation has received a lot of benefits from packaging their serv-ices. It has been easier to measure activities. They have been able to esti-mate if there is enough supply to meet the needs of customers and if there is enough personnel, who can provide products. Customer satisfaction re-searches are made according to service groups. Feedback can be addressed to the right persons in the company. They have been able to make more meaningful budgets and use a comparison with actual results to plan for higher profits.
In Valmet Automation, packaging services has been a good frame to develop their activities in the service business. The directors of the company have paid more attention to services and they understood better the possibilities of the service product line.
Packaging has increased the profitability of the company and also the service quality has improved.
5 CUSTOMER TRAINING IN VALMET AUTOMATION
The case company has packaged most of its customer training. Actually the packaging of the training courses started more than fifteen years ago in the case company, based on customer needs. We can call them “products”, and each training course has a product number. Some training courses can be customised, too. Customising means that special issues will be emphasised according to the customer needs. Valmet Automation sells process automa-tion systems, and part of the training sold is often included in the main sales contract, especially basic courses. The level of customising depends on where and to whom the training is sold.
The customer training specially for local operators is arranged close to the customer in area units, i.e. in Tampere, Atlanta, Toronto, Singapore, Bor-deaux, Munich, Vienna and Stockholm. The training material comes from Tampere, and it is translated in local languages by local specialists, if needed. In Europe the language skills and the level of fundamental knowledge of mi-crocomputers and digital technology among trainees are not problems, but in Asia Pacific the level of basic technical education differs sometimes quite much, and this means special requirements to trainers.
Trainers are qualified and skilled people. They have to be able to speak technical English very well, and their attitude to train has to be positive and ability as a public performer has to be good. Some of today’s trainers have been teaching in technical collages, and training centres. Valmet Automation has six full-time trainers in Tampere.
Training methods have changed and they are very advanced today. During the courses demo devices, computers and simulators are used. The latest information technology in training, including Internet, Customer Based Train-ing (CBT) and multimedia give the trainers new challenges to teach and trainees new interesting ways to learn the Damatic XD automation system. The target is to have “paperless” customer training courses in the future.
Customer Training unit has time schedules and prices for training courses arranged in Tampere. The courses are arranged both in Finnish and English. Customers are aware of the courses and they can send participants there. Fi-nancially, each course has its own cost account number, and both the reve-nues and expenses are followed course by course.
There are the following training packaged training courses available:
1 Damatic XD Basic Training, which gives a comprehensive overview of the op-eration, structure and operating concepts of the Damatic XD automation system. The training course also covers the basic structures of the Damatic XD equipment and hardware units, their use and functions. The basic Training is recommended for persons responsible for the maintenance, planning and programming of the Damatic XD automation system. A fundamental knowl-edge of digital technology and microcomputers is recommended.
2 Damatic XD Operator Training provides an overview for the operator of the system’s basic structure. Participants learn the basic operating concepts by using demonstration equipment. This training is recommended for production personnel, supervisors and managers.
3 Damatic XD Maintenance Training provides details of the functions, structures and maintenance procedures of the system hardware units and peripheral devices. This course gives insight into troubleshooting, fault correction. measuring and maintenance by using the diagnostic station. This course is recommended for persons responsible for maintenance of the automation system.
4 Damatic XD Engineering Training provides a comprehensive review of the different phases of system application engineering. Participants learn the dif-ferent phases of carrying out the most common modifications with on-line tool. This course is recommended for persons responsible for the application engineering and programming of the automation system.
6 TRAINING PACKAGES IN A MATRIX
We have applied the Service Process Analysis -matrix and Service-Channel matrix in customer training of Valmet Automation as follows:
Figure 2 Training packages of Valmet Automation in a transitional matrix
A Internal Systems Training - represents a training that is connected to an internal system that is very complex, such a the internal computer system of a company. This usually applies to internal trainers within a company since the system is specific to only that company. Valmet’s systems are not so customised so as to fit into this area. As you can see by the matrix, this placement of service delivery involves best cost for production and the highest cost for transaction.
B Training of Complex Systems - represents training that is provided to the customer by someone from outside of their firm. If the system that training is provided for is fairly complex, it may require some internal ”agent” to develop or interpret customised delivery. This type of training may be appropriate in the case of a new or ”beta” product where standardised parts and diagnosis is still being fully developed. In our case we are looking at more standardised packaged training modules.
C Damatic XD packaged Training Systems - although complex, it is possible to develop standardised training modules for each level of the systems. This type of channel uses separate service training personnel to deliver the train-ing materials. Valmet customer service uses this system to hold training workshops at regional location throughout the world. Training therefore has to be scheduled when and where the training is offered and since there are sev-eral different products to cover, scheduling may not always meet the needs of the customer. This contributes to higher costs to both the service provider and the customer in both the time commitment to get the two parties together, and the presentation or hard costs associated for training that is capable of being packaged for mass distribution.
D Routine packaged training modules - usually very standard since they are construed with mass produced systems, procedures or items. This type of training could ultimately be delivered through self-study of a package deliv-ered by mail or even over the internet. Valmet may be able to achieve this level of mass training but will likely have to continue with a certain level of service personnel support. On the other hand, packaged approach to training reduces company contact and reduction of personal service and contact.
7 SUMMARY AND CONCLUSIONS
In our project work we used the theoretical model called Service-Channel Matrix, because it has been used as a model for packaging of training services in Vaisala Oy.
Valmet Automation sells technical customer training usually together with physical goods. They have packaged their training and other after-sale serv-ices according to their strategy. It is important that service packages are built on the basis of customers’ needs, not on the company’s internal competen-cies. Packaging services has resulted in better marketability and profitability on service products of Valmet Automation. Also customers are more satisfy when they know what is the concrete service and what they are paying for.
Packaging services takes years. In Valmet Automation they began in the early 80’s and continue to develop it. Standardised training services are the basis of the training products. Now, the main subjects of development are the methods of learning and utilising new information technology.
Additionally Valmet Automation can market their new packaged training serv-ices more effectively to their old customers. By developing and analysing their registers of customers and course attendants they can offer training services more actively. It is profitable for Valmet to develop new packaged training services, because the profit margin on this area of business is quite good.
Siihola, Tuija Packaging of Training Services in a Hightechnology Company Pro gradu -thesis, Helsingin kauppakorkeakoulu, 1997
Sipilä, Jorma Asiantuntijapalvelujen tuotteistaminen WSOY:n graafiset laitokset, Porvoo 1996
Tinnilä, Markku Development of Industrial Logistics - A Service Process Analysis Licentiate thesis, Helsingin kauppakorkeakoulu, 1992
Kuikka, Jarmo Service Manager, Valmet Automation Inc., Control Systems 21.3.1997
Nieminen, Juha Training Manager, Valmet Automation Inc 4.4.1997
Valmet Corporation, Annual Report 1996 Valmet Automation Inc., Sales material on Valmet Automation Services
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