The service marketing literature is full of examples about servitization of products. How companies like Rolls Royce, KONE, IBM and many others have turned the game around by servitizing the traditional product oriented business. The literature has been evolving from product-related services to service orientation and new services development as areas of exploration for manufacturers. Recently the literature has been questioning why companies are servitizing and what are the benefits and related problems related to this shift (Turunen 2013).
Taija Turunen from Aalto University found a gap in the operational implications of this phenomenon: How to actually make such transformation? Turunen’s doctoral dissertation examines and explains the process of servitization, the organizational structure characteristics assisting transformation and the operational premises allowing this revolution, like the author strongly describes the organizational change, needed in order to succeed.
The thesis explores organization’s journey from product centric business towards service orientation and servitizing. Turunen’s study is based on wide literature review together with 8 case studies and 95 interviews. Turunen defines servitizing as the transformation process of product companies towards services, including service aspects to the product. In the literature review Turunen shows the evolution of literature related to servitization from 1988 all the way to day. Thesis draws the background with literature review exploring the provider benefits associated with servitization and the market orientation as a driver for servitization. Turunen then continues discussing the challenges associated with servitization: The different logic between products and services, transforming company to service culture, service development and innovation, managing service operations, building a service strategy, and understanding the customer interface. Based on Turunen these are all factors that are yet unfamiliar to fully product oriented manufacturing firms. Turunen does not claim that much this kind of companies exists but wants to describe the contrast between the two extreme ends. Ford’s legendary T-Ford car works as an example for the extreme behavior of manufacturing firm: The whole design was based on the goal of not needing any after-sales services. The car was made so simple that any farmer could fix it with their own tools. Manufacturer had no interest about the usage of the product. This aspect of behavior has later brought challenges to the manufacturers who have tried to move towards servitization. They have had no record about their products: who bought the product, where the product is now, how the product is used, etc.? They did not have the interest before to collect this data.
The author challenges traditional ways of gathering information for innovation in products and services. In this book, Ulwick introduces an outcome-driven innovation process, which he presents as new and productive.
The book has a refreshing point of view on customer involvement and distribution of work between customers and experts. It is important to know precisely what inputs an organization or a company wants from the customers in order to find business opportunities and create value. According to the book, a significant business opportunity lies in knowing which outcomes are important and which unsatisfied needs the customers has. After exploring these factors, solutions are evaluated and carried out by the experts.
Based on our understanding of the book and the outcome-driven innovation method, we started to think of the methods as an “innovation toolbox”. Ulwick is offering the following 8 tools in his book:
The 6th foundational proposition on service dominant logic is: “The customer is always a co-creator of value: There is no value until an offering is used – experience and perception are essential to value determination.” So the co-creation is a goal to reach. By achieving that you can highlight the customers view and clarify customer needs (Payne, Storbacka &Frow, 2008).
Grönroos and Ravald (2011) point out that customer as co-producer (participates in e.g. defining new service) differs from customer as co-creator of value. They argue that it is always the customer who creates the value for himself and that the supplier is more a value facilitator. Supplier becomes a co-creator of value if it can create value for itself at the same time with the customer. Michel, Brown and Gallan (2008) see also that companies cannot fulfill all the needs but only create value propositions for the consumer to choose from. The goal is to mobilize customers to take advantage of the offerings. One of the challenges for the future will be to create business models that successfully integrate the service provider’s processes with the customer’s process of value creation.
“The effective service innovation happens if entrepreneurial innovation group with technical capabilities can unite material, service and experience to provide market accepted new service. “
The subsequent blog post peeks into the book “User-based innovation in Services” by Jon Sundbo and Marja Toivonen and takes you to insight concepts as to how and why these concepts are useful. The subsequent sections will discuss about the interesting concepts and topics from the literature.
Before we start it’s important to understand the term ‘Users’. Let’s quickly make our understanding, users or receivers of the services are generally termed as customers, clients or consumers. The customer is the One that buys goods or services and can still resale after processing. The consumer is the one that acquires goods or services for direct use or ownership rather than resale. The client is a party for which professional services are rendered.. The “Users” is used as super set, has full blown ecosystem which is driven socially, culturally or individually. Now when we understand users’ as the driving force for service innovation and users’ various distinctions, let’s move towards various concepts.
The Handbook of Innovation and Services: A Multi-disciplinary Perspective, edited by Gallouj & Djellal, brings together 49 international specialists to discuss innovation as it relates to services. This handbook investigates the role of innovation in services from a variety of directions and provides a good source of comprehensive reference material on this field.
Out of the many topics discussed in the book we chose to look at innovation from a company point of view. First we identify the background on what is innovation in services, then discuss the impact of innovation on the start-up service companies, and conclude with the importance of involving customers in innovation process. Continue reading →
This is going to be an unusual day for you! Because you don’t start checking your emails or Facebook, or logging into your Skype, MSN or whatever instant communication system you use at work. But look over the edge of your coffee cup and dare to discover the possibilities in your daily routines.
You Are More Than Just You
Sometimes even the smallest matter can make a difference in your work or in your organization. Take the distance to see what your habits are, and then unlearn the bad habits. Easier said than done, but try to identify what you could do differently. This way you have more space to learn new things and new point of views. You are probably reachable online all your work day. But what if you change all that and take a small piece of the day and be offline. Take the time and fine tune the mindset. Think why you are working as you are? Why weren’t you part of the meeting, handling tasks which produce the upcoming tasks for you? Surely there could’ve been some input to be said. Maybe you have some new thoughts about the existing service offering? Be brave and act with courage. Who other than you and specifically why not you should stand out? Continue reading →
Vast number of new service concepts fail (> 4 out of 10), because they are build first and then introduced to the market (Bettencourt, 2010). The focus should be another way around and shifted away from the service solutions and back to the customer. Rather than asking, “How are we doing?” companies must began asking “How are the customers doing?
The key questions in service innovation are “How the customers define value?” and “How the companies approach customer needs?”. Outcome-driven innovation is an innovation philosophy and process built around the understanding that people “hire” goods and services to get jobs done (Bettencourt, 2010). By concentrating on these jobs, companies are capable of creating services beyond traditional services. For example when a person opens a bank account, creates a budget etc. the fundamental job is managing day-to-day cash flow. Service innovation in this case would be to create service to help the customer manage cash flow on daily bases. Creating a tool to help the customer make a budget in an easier and better way would not be service innovation but service development. Continue reading →