[CAT® MARINE] Services: Starting with the End in Mind

Sergio Tigera: Welcome to the Cat® Power podcast, where we deliver powerful insights into the world of Cat Marine, showcasing the latest in technological advancements and highlighting the stories of the industry's most dynamic leaders. I'm your host, Sergio Tigera. Now let's get ready to power up with the Cat power podcast. Welcome to the Cat power podcast. My name is Sergio Tigera, your host, and we come to you each and every episode with some fantastic content that you're not going to want to miss, tremendous leaders, technological advancements as you heard, and today's no exception. We got my good friend Matt Rayson coming to us from Geneva, Switzerland from the marine division. Welcome, my brother. How are you?

Matt Rayson: Hey, Sergio. Good to be here. Thanks for having me.

Sergio Tigera: Cool. So Matt is the services portfolio manager for CAT Marine, so we're going to be getting into all of this about how services impact the customers' life cycle, all their services, the way they perform, and definitely their outcomes, which is what we're talking about. But before we get into that, Matt, you're in Geneva right now. You've been with CAT quite a few years. Tell me a bit about your background, how you got to where you are, and where your expertise comes from.

Matt Rayson: Yeah, sure. So, yeah. I joined Caterpillar coming up to 20 years ago now. It's hard to believe it's been that long, but joined in 2001. I came up through the Perkins business, so the Perkins engines. IPSD, which is a division of Caterpillar. Joined straight from university and spent some really great years in that business. Took me through the various roles. Sig sigma. Really learned my trade in the aftermarket business selling Perkins parts in Africa believe it or not and working a lot with the Perkins distribution network down in Africa beating the streets, selling aftermarket parts, had the time in my life, and really learned the parts business in that space. I was fortunate enough to have the opportunity within IPSD to go out and live in Asia, and I was in Singapore for six years, spent a lot of time traveling the region. We established a whole new distribution network in Asia for Perkins engines and put distribution channels into the Philippines, into Vietnam, into Laos, into Korea and Japan, and then ended up being the product support manager for IPSD, which is really where I started to get into the Caterpillar business. Then in 2016 I got the opportunity to come full CAT yellow through the global aftermarket solutions division. Then yeah, was the industrial consultant working in that business and then got the opportunity in 2020 last year to come across into the marine business as the marine services portfolio manager. So yeah, it's been quite a journey. I can't believe it's been 20 years, but yeah. Here I am still going strong.

Sergio Tigera: Yeah. Yeah. Well, you don't look a day over 21 years old, man, so you're looking good. So yeah.

Matt Rayson: Thank you.

Sergio Tigera: So as business has changed over the years, obviously strategy changes to serve customers better in a more impactful way and we're hearing a lot about now services as a primary means to serve our customers in a greater way, right, that focuses more on the outcome versus what they're getting physically. Instead of just, " Here are your parts", it's you're saving time, you're saving money. Tell me a bit about that because obviously that's happening across all business sectors and it's perfect timing for you guys in this industry as well. So tell me a little bit more about that.

Matt Rayson: Yeah. I mean, if you've been watching what Caterpillar has been doing the last few years, there's a huge push at an enterprise level on the services message and yeah, CAT has a bold goal of growing their services business from$ 14 billion to$ 28 billion by 2026, so it's a huge task. Marine are no different. If you look at the CAT business, a traditional CAT business, the really cornerstone of that has been our dealer network, and they still to this day provide world- class service to our customers through providing parts and labor and product support to our customers when they need it. But customer needs are changing just as they are in our personal lives, right? We're all looking for ways of being more convenient for saving time and for saving money. That's no different in our business. Then our customers are looking for partnerships with organizations that can help them grow their business, can help them concentrate on what they do best., so in Caterpillar Marine we spend a lot of time listening to our customers to really understand what their requirements are, and we want to help our customers drive outcomes regardless of what segment they're in. So within CAT Marine we have about 10 segments that we serve; fishing, dredge, tugs, etc., so we're spending a lot of time talking to those customers and really understanding what outcomes do they want to drive from services. Some of those customers inaudible uptime, availability of their product is really important. Other customers it's more around cost and fuel efficiency. So by talking to those customers and understanding their requirements we want to work back and work with our dealers to build services that can provide those outcomes, and that goes beyond the physical part and the physical labor. You start to tie in more digitally enabled services, more outcome- based services. How can we help you have your engine run for longer? How can we help you have your engine run more efficiently? How can we guarantee that your engine's going to start when you wake up in the morning? They're the types of services that we want to build, because that allows a lot of value to what our customers do that allows them to concentrate on what they do best, and then we become a long- term partner with that customer and that's our primary focus.

Sergio Tigera: So you start with the end in mind and each segment within Marine is going to have a different end, right? So a dredging boat's going to have different priorities versus obviously a luxury yacht, right? So you speak with them and give me an example. So in one of the channels of let's say fuel efficiency. If fuel efficiency is the main outcome that that customer relies on, how do you then go back and start... Give me an example of a service that's customized or packaged in a way that really serves that customer.

Matt Rayson: Yeah, sure. So for a customer where fuel efficiency is really important, we can work with that customer to build a package. We're calling these CVAs, customer value agreements. We can build packages with our dealers to say to that customer, " Okay. This is the life cycle of your asset. Tell us how many hours you're going to be using that product for, tell us where you're going to be using it and what types of conditions", and in conjunction with our dealers we can build services packages that meet the requirements of that customer depending on the life cycle of the asset. But the other way that we can get really smart here is by digitally enabling the product and the engine, and by connecting the engine and tying it back with a CVA that enables us to collect the data on how that engine's performing in the conditions in which it's operating in, and we have millions of hours of expertise around engine operations. We have engineers in house through monitoring centers that can monitor that equipment and look at the trending that's happening with that engine and how it's performing, and we can provide services that help the customer operate that engine in a more fuel- efficient way. You combine that with using genuine CAT parts, genuine CAT fluids, that creates a perfect storm for the customer then to really maximize the productivity and the fuel efficiency of their engine and they can see real cost savings there. So whilst we get to become a partner with a customer, but the customer gets a great outcome at the end of the day, too. So there's a lot to it, and we're working hard to ensure that we can provide that to our customers. So it's a journey we're on, and we're going to be there soon.

Sergio Tigera: And as equipment gets more complex and much more digitally based and powered, finding those micro improvements, right? Like 1% improvement is so valuable, right? And you can't do it without the digital side. Absolutely we're moving into another area so I can see how that's definitely providing value. So in terms of relationships, how does this service approach improve relationships with clients and dealers as an ecosystem?

Matt Rayson: Hmm. Yeah. I mean, it definitely creates that long- term relationship and that partnership, which as we talk to our customers it's exactly what they're looking for. Having a CVA, having a digitally enabled CVA, enables the customer and the dealer to share information, to understand operations, and really go into that long- term partnership and help the customer achieve their goals. So it is really important that the customer and the dealer work together and they agree up front on the scope of that agreement and what that outcome should be. But the partnership is key because it enables us to understand the whole operation of the vessel, it enables us to understand the whole operation of the customer, and then with those circumstances that's when we can best understand how that engine can operate and how we can drive most efficiency for the customer. So, yeah. Communication is always key in those moments, too.

Sergio Tigera: It's working as a team, right? Everything great that we come out with is a team effort. You can't do it by yourself. If you do, you're going to struggle quite a bit. So let's say an engine is about to fail or it's within that range, that danger range. What happens at that point?

Matt Rayson: Yeah. Well, assuming the engine's connected... Let's say the scenario it's not connected, right? The customer runs a real risk. If the engine's not connected the danger is they run into that danger zone and you could end up failing in a difficult situation. It creates a safety hazard or a major failure on the engine, which can be expensive to fix. If it's connected and supported through our dealer network and our core operation center, which is in Houston in Texas, we're able to monitor that equipment and we're able to pre- warn the customer of pending failures. That provides an extra layer of risk management for the customer, because we can communicate with the customer and say, " Hey, your engine's in danger. Please slow it down, shut it down. Limp home", because we don't want a customer to be in a situation where they fail and they're in a dangerous situation or they fail and it creates a major failure on the engine, which causes them a lot of downtime and a lot of money. So we can monitor the equipment, we can pre- warn, we can predict, and we can also mobilize. So we obviously have a global network of dealers, and we can mobilize our dealers wherever that customer is in the world. We can mobilize the local dealer to go out and support that customer as and when they need it. So we can very much get in front of the issues and really help provide that risk coverage for our customers, because availability, uptime of the customer's equipment, is paramount. It's paramount to what they do. If you're a fisherman, you need to be fishing and you can't-

Sergio Tigera: crosstalk stop, you're not making money.

Matt Rayson: Exactly. Yeah. So that is at the forefront of our minds, and everything we do around our services and our services capability within our dealer network is really focused on maximizing the customer's uptime because that's what's important to them.

Sergio Tigera: It's also peace of mind from a safety perspective, too, that you know that you have a company like CAT and the dealers monitoring where you are, the condition of your equipment, and how you're doing in case anything goes wrong. You also have that extra set of eyes.

Matt Rayson: Exactly. Yeah. I mean, safety is a huge thing these days, as you know, and so it should be. But also sustainability. Sustainability and being more environmentally friendly is a key theme that we're hearing from our customers. And again, monitoring equipment, maintaining equipment to the highest standard with genuine CAT parts and fluids, enables us to help the customer be as sustainable as they possibly can. So we're very focused on that.

Sergio Tigera: Nice. And so when customers want to look into this and see what might be that customized program for them, they start it off with their dealer, correct?

Matt Rayson: Absolutely. Yeah. Yeah. I mean, as you know we work hand in hand with our dealers. It's the way we go to market. So we're very much working closely with our dealers around the world to ensure we are managing and helping them with their capability around services. Any new products and services that we're bringing to market, we're bringing those to the dealers. And of course, the digital journey, right? Helping the dealers bring our customers on that digital journey as well is important. So yeah, if a customer wants to find out more, they contact the local dealer and we are working very closely with them to build this services capability on a global basis.

Sergio Tigera: What do you envision as the future five, 10 years from now? Where do you see things going in a general way in terms of the technology and the partnerships? And obviously I think it's just going to be deeper and deeper of a relationship and an integration where CAT the dealer and the client are all involved in this ecosystem in a much more meaningful and tighter and closer way, because that's the only way to make those continuous improvements, right?

Matt Rayson: Yeah. Yeah. Yeah. I mean, I think as I look out on the blue dot, I mean, digital plays a huge part in that and the whole automation of it today, whilst we can be digitally connected, there's an element of human intervention there and so there should be, right? We need to understand what's happening with the assets and what's happening with the engines. But in the future, my vision for our services business is that a customer can come to us and get a full life cycle of services products. At point of sale as they put their vessel into the water, they know that that engine is covered and managed, connected, and monitored 24/ 7 with full protection from Caterpillar, and when there is an issue, and there always is with engines, right? That's the nature of the product.

Sergio Tigera: Sure. It's not if but when.

Matt Rayson: Yeah, exactly, and how do we manage that? We are making sure that our dealers and our contacts and our customers and ensuring that they're bringing them in at the right time. We're there at the dockside with the right parts, the right labor to support them as and when needed, reducing their risk, making them safer, making them more environmentally friendly, and ensuring that maximum productivity from the CAT engine that they've invested in. So, yeah. For me, it's very much about digital. It's very much about connectivity and the outcome- based services that can drive inaudible predicting and extending service intervals. Again, driving outcomes for our customers, right? Imagine if we could extend your service interval by 500 hours. Imagine the time that that can save the customer. Imagine the money that that can save the customer. And if we can do that in a way that we know is safe, we can do that in a way that enables the customer and ourselves to have the peace of mind that engine is going to perform, even though we're extending the service intervals. For me, that adds value to everybody. So, yeah. That's where we want to be, and that's what we're aiming towards with the services and the digital enablement that we're working on today.

Sergio Tigera: Yeah. I think that has tremendous value because as a business owner, what I'm looking at is consistent and predictable revenue, consistent income, and managing risk to the point as much as possible where you can get to your goals without having to think about all these other things. There's so many unpredictable things that can happen to you on the water and your vessel with nature, you don't need another thing to worry about. You need fewer things to worry about that are in your control that are manageable, and this provides a really good tool to do that.

Matt Rayson: It does, and also when things do go wrong you're either warned about it or you can conveniently access and get support when you need it immediately. I mean, again, going back to your personal life, you generally migrate towards companies where things are easy. They're easy to do business with. It's straightforward. With my teams, I'm always trying to push that simplicity. Put yourself in the shoes of the customer. You want to drive simplicity. You want to drive a clean route to market, a clean understanding of what the service is and what it provides and how I get it. That's really important to me, that whole customer experience, and on a global basis, because we have to remember in the marine business boats move and they move across territory, right? They're transient. They move across many dealer territories. If they're not connected they're very difficult to track, and if we don't know where they are and we don't know what condition that engine's in, it's very hard for our dealers to plan to have the right parts on the shelf and have the right level of labor available to go out and support those customers. So that's another area in which connectivity really helps us is that whole planning phase, and the more we can plan the better position we can be to support our customers.

Sergio Tigera: Yeah, and it helps to have a deep and extensive network that you can get the parts out there when you need them as quickly as possible because time is of the essence.

Matt Rayson: That's a great competitive advantage we have. I mean, our global dealer network is second to none and we're very proud of our dealer network, and then they do a tremendous job for us every single day and we are just working with them as hard as we can to increase their capability in the marine space and make sure we get that capability and that coverage delivered to our customers to keep them running, making more money, fishing, more dredging, more whatever they need to do.

Sergio Tigera: Matt, I think you guys are doing some great things with this approach. I mean, it's going to deliver tremendous value to the customers in a huge, huge way, and I think they're going to be really happy with it, man. So keep doing what you're doing and keep at it with the strategy, buddy.

Matt Rayson: We will. We will. We'll keep pushing, and we're very much looking forward to delivering these outcome- based services to our customers. We're massively excited about it. I think it's going to be industry leading. To go alongside our industry- leading prime products, we're going to have an industry- leading world- class services product portfolio with a world- class dealer network, and for us that's the winning formula.

Sergio Tigera: Thank you so much for listening. If you enjoyed this episode, please follow and rate us, and be sure to share it with a friend so that you can power up their life and their career. Thank you so much for listening. If you enjoyed this episode, please follow and rate us, and be sure to share it with a friend so that you can power up their life and their career.