Strategic Options for Service Transformation
Executive seminar:
Service Transformation Strategies for Manufacturing Companies
30.8.2012
Anna Salonen
Researcher
Aalto University School of Business
Department of Management and International Business
anna.salonen@aalto.fi
What is a service transformation?
A shift on the product service continuum towards greater service intensity
Target
position
Relative
importance of
tangible goods
• What do you
offer today?
Relative
importance of
services
• Why do you want to expand
your service offering?
• What position should you
occupy on the change line?
• How should the change take
place?
• What are the most challenging
change aspects?
Tangible goods
as add-ons
Services as
add-ons
Current
position
• Why don’t you want to go
even futher?
Source: adapted from Oliva and Kallenberg (2003)
Service based offerings
Basic
services in
support of the
supplier’s
product
e.g product
installation,
maintenance,
and repair
Basis for offering customer solutions
Ad-hoc
reactive
services
•
Services offered
to sell more
products
Maintenance
contracts
•
•
Integration
services
Services a distinct •
business
opportunity
Better capacity
•
utilization of
service
infrastructure
Operational
services
•
Enhances
competitiveness
of the product
based business •
Bridge towards
advanced
services
•
Consulting
services
Helps to grow
•
service business
further
Can be
accompanied
with
performance
guarantees
Supplier can
retain ownership
of equipment
resulting in ”pay
for use”
Can be sold on
standalone
basis, but often
included as part
of total solution
Advanced
services
in support of the
client’s action
e.g process
oriented training
or consulting
What is a solution?
•
•
Definitions context-dependent and vary depending on the scope of the
offering, the type of elements integrated, or type of industries studied (Lay,
Schroeter, and Biege, 2009)
Best to draw on a process-oriented view
– longitudinal, relational processes that comprise the definition of
customer requirements, the integration and customization of solution
elements, the deployment of these elements into the customer’s
process, and various forms of customer support after the delivery of the
solution (Storbacka, 2011; Tuli, Kohli, & Bharadwaj, 2007).
Key solution ”themes”
•
•
Analysis of 52 multinational enterprises (mostly HQ in Finland, Netherlands, and
Sweden), 216 in-depth interviews, 15 one-day workshops involving 151 managers
4 key themes that capture changes in provider’s business model
– Customer embeddedness: they target selected customers and become
embedded in their situations and processes
– Offering integratedness: they integrate technical, business, and system
elements, and as a result, aim at changing the earnings logic
– Operational adaptiveness: in order to flexibly adapt to customers’ processes,
they apply modular thinking
– Organizational networkedness: they orchestrate a network of actors around the
selected customers.
Storbacka, Windahl, Salonen, Nenonen (2012)
Final remarks
•
•
•
Installed base industries attractive for building product related services, many firms
extremely successful in building basic product related services
Shift to services in support of the client’s process (i.e solution business) a significant
departure (organizational mindset, capabilities, structure etc) and many struggle
Struggle towards advanced services a useful one as it helps to reorient the firm’s
value creation efforts from a goods to a service dominant logic
(products/technologies enable rather than create value)
Additional reading
•
•
•
Fischer, T., Gebauer, H., Fleisch, E. (2012). Service Business Development,
Strategies for Value Creation in Manufacturing Firms. Cambridge: Cambridge
University Press.
Salonen, Anna (2011). Service Transition Strategies of Industrial Manufacturers.
Industrial Marketing Management, 40(5): 683-690.
Salonen, Anna; Gabrielsson, Mika; and Al-Obaidi, Zuhair (2006). Systems Sales as
a Competitive Response to the Asian Challenge: Case of a Global Ship Power
Supplier. Industrial Marketing Management, 35(6), pp.740-750
And a warm welcome:
Thesis defense: Essays on globalization and evolving competitive strategies of Finnish
MNEs: transitioning from products to services and solutions. Fri, 2.11 2012 at 12,
Chydenia Building, Stora Enso Hall.
References
•
•
•
•
•
Lay, G., Schroeter, M., & Biege, S. (2009). Service-based business concepts: A typology for business-tobusiness markets. European Management Journal, 27, 442-455.
Rogelio O. and Kallenberg, R (2003). Managing the transition from products to services, International Journal of
Service Industry Management, 14(2):160-172.
Storbacka, K. (2011). A solution business model: capabilities and management practices for integrated solutions.
Industrial Marketing Management, 40(5), 699-711.
Storbacka, K., Windahl, C., Salonen, A., and Nenonen, S. (2012). A Solution business model: comparison across
business contexts. Presentation at the American Marketing Association SERVSIG International Service Research
Conference, Hanken School of Economics, Helsinki, Finland, 7-9.6.2012.
Tuli, K.R., Kohli, A.K., & Bharadwaj, S.G. (2007). Rethinking customer solutions: from product bundles to
relational processes. Journal of Marketing, 71(3), 1–17.