The 5 Ps of Service Transformation: A Blueprint for Becoming the Benchmark w/ Emrah Ercan, Hitachi

00:01
John Carrol
Good morning, good afternoon, good late afternoon to some of you. My name is John Carroll. I’m the CEO and founder of the Service Council. And welcome today’s in Service podcast segment. This one is really exciting and an interesting topic. The five Ps of Service Transformation, A blueprint for becoming the benchmark. You know, it’s a really critical discussion for many organizations that are taking on a transformation, a continuum of transformation as they lead forward to the next era of service. Today’s podcast will be 30 minutes plus or minus in length, and I’m joined by Emre Ircon. Emra is the VP of Services for North America for Hitachi Energy. Emra, a really warm welcome to you. Thank you so much for joining.

00:49
Emrah Ercan
Thank you for having me, John.

00:51
John Carrol
Outstanding. Before we get into our discussion, today’s podcast will be recorded. So if you want to play it back, if you want to share it with colleagues, by all means, please visit your favorite podcast channel where you subscribe and get your podcasts. It’ll be there. It’s on our LinkedIn account. For those of you joining us from LinkedIn, hello. We see you. We welcome you to engage with us and submit comments, questions, reactions, which Emra has been so kind to lean in on and welcome those. So without further ado, let me set up the topic and then we’ll go ahead and jump in and get an introduction to Emra. So, you know, people throw around the phrase best in class like. Like it’s a trophy. And, and Emorett and I were just in the.

01:32
John Carrol
In the green room here before going live talking about sports and trophies and championships and his Philadelphia teams versus our Boston teams, and his 76ers got the best of the Celtics, but not sure if they’ll get the trophy this year. I don’t think there’s that much confidence with some of the injuries there, but we’ll see. Time will tell. But the truth is, best in class isn’t a finish line just like digital transformation. There’s no start and finish, right? It’s not who gets there first. It’s a discipline. It’s a continuum. And this is the reason why we’ve seen people kind of reframe this whole concept of best practices as next practices, because it’s not you achieve this finish line and you stop and you’re okay, let’s celebrate, right? It’s what’s next. What is the next thing? What is the next iteration.

02:23
John Carrol
It’s also what happens when a person, a team, or a company commits to standards that don’t drift when things get difficult, you know, best in class is really being flashy. It’s not about, you know, celebrating the wins and using it as a marketing, you know, technique. It’s more about consistency. It’s about clarity. It’s about the willingness to obsess over details in your business that most people ignore. And that’s why we framed today’s discussion around the five Ps which we’re going to get into. The five Ps being the five pillars of service and transformation. And maybe the biggest misconception is that best in class means perfect because it doesn’t. Frankly. The path there is usually messy. It’s full of iteration, humility, uncomfortable feedback, leadership changes, regime changes, personnel changes. And what separates great from everyone else is their relationship with improvement. Right?

03:18
John Carrol
So you don’t accept status quo. You aim to break it, you aim to improve it and refine it. So the real question isn’t really are we best? It’s more of are we building habits? Are we building systems? Are we building a culture that make excellence or best in class achievement inevitable over time? Because, you know, best in class is not just that title that you claim, that trophy that you accept. It’s more of a reputation that other people place at your feet. So I wanted to set the conversation with just a little bit of a talk track here. Our research has signaled some of the metric achievements that best in class are realizing. And we’ll kind of pepper those into today’s discussion. But why don’t we turn to our guest here today? I’m so pleased to be joined by Emma Arkhan.

04:11
John Carrol
Emre, welcome back to the discussion. We know and love you. You’ve been an advisory board member at two pit stops in your career. Could you please introduce yourself? Both your career, what led you up to your current role and what is your current role at Hitachi Energy?

04:24
Emrah Ercan
Well, thank you, John. Look, I think piggybacking on the sports and your reflection in Philly, we say trust the process, right? The process is the transformation. I think that is my, that is the threat of my career up to this point. I’m new to the power industries. I’m a chemical engineer. I moved through the industrial, the spaces, the life sciences, industrial automation and now energy. And I think the different industries, always the same underlying question. How can we remain relevant and continue to transform ourselves to service our clients? Today I’m leading the service business for Hitachi Energy North America. We are serving the utilities, the data centers and the large industrial customers. And in the current role, I am in charge of our North America. Hitachi Energy owns the world’s largest transmission and distribution equipment in the world.

05:32
Emrah Ercan
And yet only a small share of this very critical infrastructure is under the service agreement. So from that perspective, the grid really depends on the life cycle solutions and services to stay alive to fuel the economy, our society and civilization.

05:54
John Carrol
Outstanding. Outstanding. Thank you for that overview. And you’ve made an impact to our organization and our community along the pathway of being a board member here. You’ll be joining us actually with your colleague who leads HR for your organization, Kirsty LaFreese. I don’t know how to pronounce it correctly. Apologies Kirsty, but we’ll be talking about the relationship between HR and services. Right? So there’s a real important relationship there and we haven’t done that in the history of the symposium. So I’m really excited to have you serve as a keynote at our Smarter Services symposium. Shameless plug mark your calendars September 14th through the 16th in Chicago. Once again, hope you can join us. So you’ve inherited this business, right? And and you stepped into a service organization with a bold ambition. You want it to become the benchmark in the industry.

06:46
John Carrol
Before we get into the how, what did you inherit and what does becoming a benchmark mean in today’s service economy or environment?

06:54
Emrah Ercan
Oh, thank you. Hitachi Energy, traditionally a product company, we actually started our services business unit as a separate the business unit a year ago. So we just celebrated our the first anniversary. It’s a strong service organization but still shaped by the products company operating model. Right? The service organizer, the products more than the customers outcomes. And just like many service organization as a cost line rather than a strategic growth engine. And we are on a journey to change that. So our field team has a very deep expertise in the high voltage this highly specialized the power industry. But the commercial model did not always give a service a seat at the customer’s strategic table. So I think the opportunity in front of our organization is to move from the pockets of this excellence to a scalable operating model that partners with the other customers.

07:58
Emrah Ercan
So when we say benchmark, I think just like you said, this is not something a trophy. It is a continuous effort. And this is not a title that you can claim by yourself. And I think our customer sets that benchmark. And I believe you know, you are the benchmark. When the customers cannot describe their own operating model without describing the partner who helps them to run it. I believe that is the true definition of being a benchmark.

08:28
John Carrol
I love it. Those are Great viewpoints and I love the first point you made about the recognition and the importance of leadership in terms of steering the culture and transforming the culture. I keep talking about, you know, are we making progress in terms of services recognition in my opening statements every year at our symposium. And you know, if you look at Wall street, there’s not much progress, right. C suite executives overseeing service is still hovering around 10 to 15% of Fortune 100 companies. But when we look at best in class frameworks and those that are achieving best in class, the presence of leadership overseeing the services business is somewhere in the 67 to 75% range. Right. So three out of four. So I appreciate that Hitachi Energy has put you at the leadership position to take this organization forward because they’re in good hands.

09:24
John Carrol
You’ve spoken about the funeral of run to failure and the shift toward becoming a digitally enabled lifecycle partner. What’s driving that shift and how does it fundamentally change the role service plays in the business and for the customer?

09:40
Emrah Ercan
I think the customer’s profile, the risk profile has changed. So from that perspective I use that the term run to failure, the funeral. If I give analogy, if you’re driving a Honda Civic and we run to failure means you wait for the light to change, the oil and such. When it comes to critical infrastructure that really just powers the society and industries. Aging infrastructure, the workforce constraints, all this, the new coming low to our 40 year old grid, the reliability expectations do not tolerate a reactive posture. And I do believe this is not just a service shift, it’s the business model shift. Customers are moving from just buying equipment and emerging responses to buying an uptime predictability asset, life and risk reduction. Because the redundancy that was built in the power industry has gone. Our lead times are five, six years ahead.

10:47
Emrah Ercan
All our factories are spoken for. We just cannot keep up with the critical assets. The, the parts are not available as they used to be. And once again that 40 year old grid is taking on such a big load that the redundancy replace itself being a very proactive life cycle partnership to from that perspective we are on a journey and I think the other journey has three legs to it. You know, just like many services organizations, John, the transactional service needs to become an outcome based life cycle partnership. And there is a mid layer, the second step which is the managed services. And I think the many of us moving to stage one, to stage three and most of us the hard work, we forget that it is in the middle which is the managed services. This is also where the transformation takes place.

11:43
John Carrol
Absolutely. And I want to encourage our listening audience, if you’re comfortable or want to get involved, to be our participating audience. We welcome you to comment and submit questions or reactions via the comment field. So thank you. When were talking about the planning of this podcast, you and I were talking about how we’ve reframed the traditional framework of people process technology and data around 5P’s philosophy or purpose people process platform where technology and data converge and parts right in many especially asset centric industries, the importance of parts and not treating parts as a silo but more integrated in service operations is something that we’ve been advocating and building energy around. Why is the evolution necessary and what gaps does it address in how organizations approach transformation?

12:40
Emrah Ercan
Look, I’m a big fan of the 5p because if you just look at the traditionally the people process technologies by control data, it’s a great project diagnostic framework. But I do believe that the 5Ps is stronger as a business architecture. And I always say the underlying the first thing non negotiable piece of the 5P is the philosophy which is really forcing ourselves to ask why are we digitizing what we are transforming into, what business we are actually becoming. From that perspective, I think the transformation skips usually the question is on risk are we a product company or does service or we are a customer outcome company that uses the equipment, our services and the digital as an instrumentation to become a life cycle partner.

13:40
Emrah Ercan
From that perspective we are going to go dive into the five Ps but the platform and the parts portion makes the traditional 3P framework real. I think the platform connects intelligence but at the end the parts very integral to our services really determine whether our promises turns into uptime at the customer site. And that’s almost I always say it’s our 2am reality check when things really break down that is 5p is at work or not.

14:18
John Carrol
Yeah, I love that you started with the philosophy and the purpose. We agree. Last year we put our thoughts on paper around the culture philosophy that we’ve been building in market called Services Humanity and it outlines all the different elements and pillars of creating a culture of care and why is it important and how do you sustain it and all the good things Related Bob Finer, my colleague, co author, helped put this into a framework that was consumable. And you know, when you look at all the leading companies in the world that are really doing well in their respective industries, they all have embraced a culture of care and they’ve empowered their teams to exhibit care and not Just focus on operational efficiencies and cost reduction and throughput and all the things that lead to employee burnout and all the other things. Right.

15:18
John Carrol
So I love you started there. And it starts with empowerment. Right. So and let’s build on this philosophy element a little bit. So you talked about purpose and cultural transformation as the foundation. What does it look like when service is truly treated as that strategic business, not just a support function? And how do leaders actually embed that mindset in the organization?

15:44
Emrah Ercan
Thank you. First of all, the service is humanity. What a great work. So thank you very much was putting together. We are reading, we encourage our teams to read it. The whole care and I think that is the pillar of the core pillar of the philosophy. Right. And when I look at the services from where I sit, it is not a department, it is really the integration point where the business model transformation and the digital transformation meet the customers. I think if we do not see it that way, we will under invest. And when the service becomes a P and L, it’s not just a title, it’s not elevation in the hierarchy which means that now the service actually have the power for the capital allocation. So it has its own leadership team and having a seat at the executive table.

16:41
Emrah Ercan
So if the service only appears when something is broken, I think we are all missing one of the strongest source of our customer intelligence. And I do believe that we have this mindset and showcase where we spend the time as the company. And I always say the culture is the residue of the leadership attention. If the leaders really stay close to the service, the organization learns that customer outcomes and what that matters to us.

17:16
John Carrol
Yeah, yeah. And you know what was really shocking? Through our research we just completed analysis on the service leaders agenda. And my colleague Gerardo Palaio commented on some of the shocking revelations from the data set this year. And what we saw that was revealed was that almost 50% year over year increase in the proportion of service leaders that didn’t achieve their previous annual targets for customer experience and business experience, whether that be profit margin, revenue, etc. But when we, you know, with so many of the technological investments and initiatives that are aimed at removing friction, you know, from the service process, it stood out that only 12% identified employee experience as the one where most progress is expected this year. So we continue to see employee experience be a little bit down the totem pole in terms of focus.

18:19
John Carrol
Commonly it’s the number fourth priority among service leaders. And if you believe in theory that customer experience is the overflow of employee experience and it will never be greater than employee experience. Then we ought to change that and flip it on its head. Right? So I’d love to see employee experience come up the ladder. So let’s get into people in process and the integration of people in process. Obviously the talent crisis continues, both fueled by the retirement crisis, but also the engagement crisis. At the same time, processes are becoming more hybrid and human and digital together. How do you simultaneously solve for workforce challenges while redesigning processes that require both human expertise and augmentation, but also the digital augmentation and subordinating different tasks in service delivery that might not be human aided. How are you balancing that?

19:17
Emrah Ercan
Great question. I mean when we look at the talent, the scarcity of the talent, I think it’s a problem in every sector. But I don’t think the talent issue is not just the headcount and just the number of the folks. I think the work itself is changing. The world has changed, is becoming more digital, more integrated. So our current, the field team right now they find themselves in a place that where they have to really understand the sensor data diagnostics. The new software is coming every day. I don’t want to talk about the AI, but also AI, right. And of course with in the midst of everything they are also becoming understanding the customer’s commercial judgment. What I mean is when we say we are becoming a lifecycle partners that also shifts the dynamic to truly understand our customers outcome. Because that is the.

20:21
Emrah Ercan
That is when the whole shift really changes and we have our position to become a truly lifecycle partner. So from that perspective we are changing our the capability building. You will hear more curiously we launch a service academy. We are looking at the cross training that our other services team are learning more about the digital tools, more about the finance, more about the customers levers on top of their already strong knowledge of the subject matter expertise. So from that perspective I think it is becoming a hybrid. I think for that reason the process has to be redesigned around the customers, the mission critical moments and what they are trying to achieve. And if you do that, that transformation, especially having the digital layer, that digital really improving our judgment and we say not replacing it.

21:28
Emrah Ercan
And I think service is a great place because service is the. The relationship with the digital layer, right. Not the digital business with a human layer. From that perspective that changes in the how the work itself. So it’s just changing how we are seeing our organization is reshaping.

21:50
John Carrol
You know what I There’s a lot of interesting things that you made in terms of your points there on that journey you’re on. But one of the things that stands out to me is the lack of congruence in terms of leadership is driving for X and frontline and workforce is driving for Y when they should be driving for the same thing. So let me give you an example of that. You know, leadership. One of the employee metrics that we’ve seen rise up the ladder in terms of importance is time to value. So how can we onboard quicker get them to be independent in the field and to be part of your capacity planning model, a resource that you can use where perhaps we should be thinking about it differently?

22:36
John Carrol
You know, we all know that the pathway to becoming, you know, expert level in service is somewhere between 18 to 24 months on that horizon, right? You go through apprentice and mid stage and later stage. And sometimes it takes years in complex service industries, asset industries, where man the knowledge saturation, learning all the abundance of asset knowledge that you need to have, you know, that can take even longer. So time to value has become an important metric amongst service leaders. But really at the end of the day it should be enjoyment of the team, right? Enjoyment of the process. Did they enjoy the onboarding experience, the training, the upskilling, reskilling the day to day, right? Are we creating an enjoyment platform for employees? Because I think that overflow will hit the customer experience. So I’d love to see that mindset shift.

23:27
John Carrol
And you kind of had many of those points in your talk track there. Let’s get into the whole platform and parts side of the 5Ps story where transformation really gets real, right? AI and everything going crazy right now. Transformation often breaks down at execution, especially when you think about disconnected systems, parts logistics being over here, disparate databases, you know, that single source of truth and the time suck of finding information that might be important in that moment of truth with the customer. So can I get your viewpoints on two things on platform creating interoperability across data and technology? Why don’t we start there and I’ll come back to you on the second part of the equation.

24:14
Emrah Ercan
I mean let me start with the platform. Platforms are great. Platforms are also trapped because I think the most companies, they confuse the platforming or the digital transformation as just buying a new fancy new platform or a software. But I think as you mentioned, the real test is interoperability. Can these platforms read from anywhere and write to anywhere and improve how the decisions are made on our customers too? Just to use analogy, if you are in the weather business and if we just have the latest and the greatest platform that predicts the next storm coming in 72 hours. And if our umbrellas get stuck in somewhere in the basement and we don’t know where find is, that platform is only going to say, hey, it’s going to rain. You need your platform, you need your, an umbrella.

25:10
Emrah Ercan
But umbrella is nowhere to be found too. Right. So I think for that reason that the interconnectivity, also the platform and the resources deployed, the parts is the major one. This is when the uptime is one or lost. Right. Again, a platform can predict 72 hours ahead, but if the part is six weeks away, customers will remember the day that we could not fix it or we couldn’t bring the umbrella to the rain.

25:40
John Carrol
Yeah, yeah, you’re totally right. And you know, and so, you know, how is that manifesting itself inside the organization? We’re seeing, you know, missed triage and diagnosis parts shotgunning, which erodes cost or, excuse me, inflates cost and erodes margin. But also ultimately it’s creating an environment of missed SLA commitments, penalties, but also customer outcomes and customer success. Right. Asset downtime and asset performance. And what is the cost of asset downtime? Have you done analysis of X? Every hour of asset downtime impacts the customer Y. Right. Have we looked at it like that? Because I think we’d be thinking differently. And the other thing I think you bring up, which is interesting, is if we trusted Doppler and Weatherman, we might find ourselves in tricky weather at times.

26:36
John Carrol
So you gotta get the platform correct and you’ve gotta think about data serving as the informant, but also balancing that with the human side of things in terms of the engagement of the customer and then trickling that down to the front line so that there’s full transparency. So we keep on framing it out as. You got to think of transformation as human and technology and humans moving forward are going to start growing symbiotically together with technology. Right. And so that’s how we’ve been looking at it from a research standpoint.

27:11
Emrah Ercan
Augmentation. Augmentation. And you know, I just can’t agree more, John. And I think the other, again, the parts miss everything we talk about, the culture. It’s all about creating the trust cycle. Right. I think that the small trust leads to a momentum. So we need to build, continue to build on trust with the other customers. If you wanted to be a partner.

27:34
John Carrol
Yeah, absolutely. Let’s get to the. So having a vision, but then moving it to execution some of the lessons learned and some of the things that you’ve applied to the business. So as you’ve gone through this journey, where are you finding some of those moments where you’ve maybe got some bruises? Or on the other flip side of it, where are some of the things that you’re like, wow, this really worked well. And I would definitely model and emulate against this. Could you share that with our audience?

28:07
Emrah Ercan
I can. Look, I think as many of us in the services business, we walk around with many bruises. So the first one that comes to my mind, let me give maybe two examples. The first one comes to my mind is the build versus buy. I’m an engineer, I work in many different industrial companies. And in our DNA, we are wired to build just because we built the product, why not to software, why not everything around it? Right. But I do believe that the we do these digital mistakes coming from really undervaluing the partnership. So I think we have to be very honest, we have to be very clear about ourselves, what we must own, then the partners. And when we realize this is where we should partner, we should really partner aggressively for everything else that is outside of our domain.

29:03
Emrah Ercan
You do not want to be a mediocre software company. You want it to be a great service company that partners with a great software company and such too. And the other thing is what are we digitizing or what are we transforming? So I think I learned throughout my career that do not lead with the org chart, lead with the outcome, lead with the customers, understand what is changing and lead with that mission and let the people choose to belong to it. And I think when the structural changes become, I always believe that these changes becomes easier when the purpose is clear and what we are trying to become a strategy before structure, right?

29:46
Emrah Ercan
So instead of just digitizing a wrong department and wrong the work orders and processes, I think we should just really just stay back and understanding what is changing, what needs to be transformed and how can we align ourselves to be able to surf that change.

30:08
John Carrol
I love it. I love those viewpoints. You’ve got to start with a capability lens. First of all, you got to start with what are we solving for, right? You got to work from the customer backwards. And then you’ve got to train your eye on the capability layer. Like what are. Before we start to evaluate systems, we’ve got to map out what business capabilities, what impact that’s making, what are the outcomes that are being achieved. And then you can use this survive, transform and replace methodology in terms of, you know, do we Modernize. Are our legacy systems built for scale? Are they built for AI? Are we going to drive ourselves nuts because they just can’t scale? Right. We can’t API, and we’re going to create a Frankenstein approach and have a disparate, you know, in the opposite of interoperable framework. Right.

30:56
John Carrol
What are we doing? Are we wasting energy? Are we wasting effort and investment? So I appreciate the viewpoints there, and I think they line up really well with what we’re framing back to our community. So, Emra, this has been a great conversation and it’s always good to leave our audience, our listening audience, with something about you outside of work. So on a personal note, what’s something outside of work that keeps you grounded or energized as you lead through life outside of service?

31:26
Emrah Ercan
I was about my kids and chasing them. I surf and I. I think the surfing has taught me a lot of. About the other transformation. I’m from Turkey. When I first moved together to California. California, it just became, you know, my calling, so. And you learn a lot of things about the other surfing. And I think we talk about, you know, sustaining the energy. And I think you find out when you serve. I think the best surfers are not always the strongest ones. Right. They are the ones that. Who really read the ocean better than anybody else. And I think to me, that is where the. When we are transforming, changing, just understanding our circumstances, where we are in the lineup of the ocean is behaving. So that is to me, a huge. The learning.

32:17
Emrah Ercan
And of course, you know, the sort of thing is all about timing, patience and commitment. So which means that you need to some. You need to let some wave go, because if you cannot leave one wave, you will never be in a position for the next one. So I think that also requires us just to reflect. Continues to ask ourselves, how are the, you know, the macroeconomics changing? How are our customers changing and what can we do? And not just being very, you know, reactive and having that patience, having that, the timing. Surfing is a lot of teachings, but I think this is the one that taught me about the transformation, resilience and sustaining our energy.

33:01
John Carrol
Yeah, my kids are into the surfing, too. During summer vacation, I try to get out there, but my goodness, I’ve got a lot of work to do there, so I’ll catch the next wave. But listen, he’s Emra Urshan, right? Am I pronouncing it correctly now? I use the American way of pronouncing your name.

33:18
Emrah Ercan
It’s close, I take it.

33:21
John Carrol
So he’s the Vice president of Service for North America for Hitachi Energy. He’s a board member of the Service Council, and he’s made so many impacts in sharing and imparting his wisdom on our community, including today’s podcast. Emra, this has been a great conversation. Thank you for enriching our community and we’ll see you on the next episode. And thank you for joining today’s In Service podcast. We’ll see you next time.

33:42
Emrah Ercan
Appreciate you for having me. Thank you.