Critical incidents in complex service contracts: Safety challenges and means of prevention

Transcription

1 Critical incidents in complex service contracts: Safety challenges and means of prevention Chara Makri and Andy Neely This is a working paper. The study is part of the research that Cambridge Service Alliance has been conducting in partnership with BAE Systems and is sponsored by EPSRC. Why this paper might be of interest to Alliance Partners: Increased competition, extended product life-cycles and the large number of suppliers and partners involved in services are only some of the challenges that product manufacturers moving into service provision are facing. The increased complexity of service networks can impact safety and increase risks, especially for manufacturers operating in safety-critical environments. In this paper we explore how complex service networks can affect safety by using data from 23 exploratory interviews with experts within the field. We find that even expert service providers feel that the complexity of service networks can lead to confusion over accountabilities and impact safety. Even in cases where accountabilities are clearly defined in contracts, a general lack of control, due to the large number of partners involved, can prevent manufacturers from taking the proper actions with devastating consequences. Rules and prescriptions simply do not work. It is judgement, knowledge and competence, that is required to decide what is reasonable and what is practicable, you cannot manage health and safety through rules and ticking boxes, Dame Judith, Health and Safety Executive1 We propose that manufacturers turning into service providers will need to have a clear understanding of three main issues within their service network. These are: a) Duty Holder & Governance the structures and hierarchies, the legislation under which the partners operate and the procedures that dictate how things are done within the service network; b) Attitudes individual people and attitudes, organisational incentives and a constant battle between commercial and operations; and c) Competencies the competency of employees, the training and assessment procedures in place and the technology and systems available. Furthermore, they need to consider that these characteristics can change depending on the the wider context in which each partner operates. This depends, not only on the size of the firm, but also on the sector and country in which the partners operate. Managers should therefore have a clear understanding of these characteristics and how these may change, in order to be able to drive the right behaviours within their network and sustain a high level of safety. July 2016 Find out more about the Cambridge Service Alliance: Linkedin Group: Cambridge Service Alliance 1 Health and safety: the journey back to common sense and personal responsibility. Source: accessed on 25/05/16 The papers included in this series have been selected from a number of sources, in order to highlight the variety of service related research currently being undertaken within the Cambridge Service Alliance and more broadly within the University of Cambridge as a whole. Cambridge Service Alliance 2016

2 Critical incidents in complex service contracts: Safety challenges and means of prevention Chara Makri, Andy Neely Cambridge Service Alliance, University of Cambridge This study examines how servitized manufacturers can sustain a high safety level in services given the large networks involved in service provision, by conducting 23 exploratory interviews with experts in the field. The results suggest that organisations need to have a clear understanding of three main issues within their network in order to drive the right behaviours and promote a safety culture. These are: a) Duty Holder & Governance the structures and hierarchies, the legislation under which the partners operate and the procedures that dictate how things are done within the service network; b) Attitudes individual people and attitudes, organisational incentives and a constant battle between commercial and operations; and c) Competencies the competency of employees, the training and assessment procedures in place and the technology and systems available. Finally, this study finds that these characteristics are interrelated and are also affected by the wider context in which the partners operate. This context depends not only on the size of each firm, but also on the sector and country in which the partners operate. Introduction Globalisation in modern economies has forced manufacturers to transform their business models from a product-centric to a service-centric paradigm in an attempt to enhance their competiveness. This shift, the so-called servitization of manufacturing, has also been motivated by the customers increasing eagerness to outsource the risks associated with the ownership of a product, such as, uncertainty with respect to future maintenance and support costs (Ward et al., 2005). Despite the expected benefits from adopting a servitization strategy, this shift entails significant risks. For example, as Nordin et al. (2011) point out, servitized manufacturers remain responsible for the through-life management of the product and associated services and as a result, face substantial operational, performance and financial risks. This is because services are particularly complex since they involve long-term contracts and various suppliers and partners in both the manufacturing process of the product and the operation of the service network (e.g. Neely 2008). While several studies have identified a transfer of responsibilities from the user to the servitized manufacturer and discuss the risks that this entails, there is paucity of research regarding the impact of the large networks involved on the safety of the products and associated services. This is a significant shortcoming in the literature especially when considering that in the case of manufacturers operating in safety-critical environments these risks may result in criminal charges further than financial liabilities. To this end, we conduct 23 exploratory interviews in order to explore the challenges that servitized manufacturers face with regards to safety and how they could best manage them. Particularly, this research attempts to examine how servitized manufacturers can sustain a high safety level in services given the large networks involved in service provision. 1

3 Theoretical Background Nowadays, the provision of services is a key aspect of a manufacturer s business. The shift from offering products to offering a combination of goods and services in order to create more value is called servitization of manufacturing, a term first introduced by Vandermerwe and Rada (1988). An increasing number of previously traditional manufacturing organisations will need to adopt this strategy in order to remain competitive in the current globalised economic environment (e.g. Mont, 2002; Neely, 2008). There are several benefits for a manufacturer to offer services. To be more specific, as a result of the highly customised nature of services, manufacturers offering them can lock customers in, lock competitors out and increase their level of differentiation (Vandermerwe and Rada, 1988). In addition to these strategic motives, there are also economic reasons that lead manufacturers to offer services to their customers. For example, services can significantly increase sales revenues due to the long term nature of service contracts, especially for products with extended life cycles such as aircrafts (see, for example, Neely, 2008 for a discussion). Finally, servitization can offer environmental benefits since services can significantly extend the life of a product and force customers to change their conceptions of ownership (e.g. Mont, 2002; Neely, 2008). In summary, the motives for a manufacturer to offer services are mainly based on strategic, economic and environmental considerations (see also, Goedkoop et al., 1999; Wise & Baumgartner, 1999; Oliva & Kallenberg, 2003; Tukker, 2004; Labuschagne & Brent, 2005; Baines et al., 2007; Yang et al., 2009, among others). Similarly, customers also benefit from servitization by reducing the risks associated with the ownership of a product (e.g. Ward et al., 2005). In the 1990s, for example, the British Ministry of Defence decided that its interest lay in the capability that military equipment provides to perform operations and not on the actual ownership of the equipment. This led to the launch of Smart Acquisition in order to have equipment delivered 'faster, cheaper, better (Ministry of Defence, 2006). Despite these compelling arguments, as several authors point out (e.g. Oliva & Kallenberg, 2003; Martinez et al., 2010), the transition to services involves significant challenges that render the success of the servitization strategy far from certain. In fact, according to evidence provided in a number of empirical studies (e.g. Fang et al., 2008; Neely, 2008; Visnjic & Looy, 2013; Suarez et al., 2013), it seems that manufacturers are not generally able to achieve the financial benefits of servitization they might have expected, a finding that is widely known as the servitization paradox. Indeed, product manufacturers turning into service providers need to develop a whole new set of capabilities and adapt their organisational structures and processes so that they reflect the relationship-based nature of services (e.g. Oliva & Kallenberg, 2003; Davies, 2004; Gebauer et al., 2005; Baines et al., 2009; Martinez et al., 2010). Since these capabilities are outside the organisations core competences, manufacturers need to engage in partnerships with a large number of suppliers, customers and even competitors in order to deliver the service to their customers (Mont, 2002; Oliva & Kallenberg, 2003; Davies, 2004; Ward & Graves, 2006; Neely, 2008; Martinez et al., 2010). What is more, by taking over the customers operations, servitized manufacturers have to deal with greater responsibilities than before, and for long periods of time. In particular, since they have to deliver results rather than products they have to assume uncertainties that were previously the concern of the customer (Oliva & Kallenberg, 2003; Tukker, 2004;Ward et al., 2005; Ward & Graves, 2006; Neely, 2008; Nordin et al., 2011). While several studies have identified this transfer of risk and discuss the challenges associated with the shift to services, most of these focus on the operational, performance and financial risks of services (e.g., Nordin et al., 2011). On the contrary, the impact that the large networks of service provision can have on safety is a subject that has yet to attract the required attention in the 2

4 literature. For example, many organisations are trying to gain the new required capabilities through experimentation, by offering services without gaining direct financial benefits (Oliva and Kallenberg, 2003). There are however, organisations that cannot afford to learn from experimentation, since they operate within safety-critical environments, such as service providers within the aviation or defence industry. A potential failure in these sectors can lead to critical incidents, the consequences of which are socially noticeable (see, for example, Sullivan & Beach, 2009) and may involve further than fines, increased mortality and high environmental costs (Saleh et al., 2010). Indeed, considering that such failures can impact the safety of all those involved, it is important for servitized manufacturers to understand how to reduce the risk of such failures in services. As Fielder et al., (2014) point out, manufacturers need to have a clear understanding of where accountability lies in the event of failure of a provided service throughout its life (i.e., through-life accountability) in order to reduce the risk of failures and hedge the organisation against liabilities. They define through-life accountability (TLA) as the duty to inform, justify and accept the consequences of decisions and actions taken during the entire lifecycle of assets and associated services. As the authors explain, it involves understanding the boundaries of and responsibilities for safe and consistent outcome delivery over an extended service contract involving multiple organisations. They further point out that...understanding this nested nature of accountability accountability for decisions, for actions and for the consequences of these decisions and actions is important in the context of through-life accountability, where decisions may be taken by one party, but actions carried out by another (p.7). Naturally, understanding of through-life accountability is of paramount importance for servitized manufacturers operating in safety critical sectors and industries. However, this is far from straightforward since the complexity of service environments does not always allow control of all the elements involved (Fielder et al., 2014). Nonetheless, manufacturers still need to adapt within these complex environments and provide a fail-safe service for everyone involved. Yet, what gives rise to safety risks and, most important, how a manufacturer can best manage them, are issues that still have to be addressed. Moreover, there is paucity of research on the guidance or tools that can be used by manufacturers for identifying and managing accountabilities and reduce the risk of failures. The accident causation literature provides three main themes with an organisational and managerial focus: Man-Made Disasters (Turner, 1978), Normal Accidents Theory (Perrow, 1984) and High Reliability Organisations HROs (Roberts, 1990). The main contribution of the first two, although presented in a different way, is that management and organizational matters (Saleh et al., 2010) characterized by complexity and tight coupling (Perrow, 1984) are the key contributors to accidents. More importantly, these contributors can extend much further in the past (Saleh et al., 2010), highlighting the importance of through-life. The HROs literature examines organisations that cannot afford to fail (see, for example, Weick & Sutcliffe 2007; Fielder et al. 2014), and highlights the key characteristics that successful organisations should have in order to promote safety. Roberts (1990) defines HROs as follows: Within the set of hazardous organizations, there is a subset which has enjoyed a record of high safety over long periods of time. One can identify this subset by answering the question, how many times could this organization have failed resulting in catastrophic consequences that it did not? If the answer is on the order of tens of thousands of times the organization is high reliability (p.160). These organizations are characterised by the following attributes that allow them to achieve high levels of reliability (e.g. Roberts et al. 1994; Tranfield et al. 2003; Hopkins 2007; Sullivan & Beach 2009; Saleh et al. 2010; Lekka & Sugden 2011; Sutcliffe 2011; Makri & Neely 2015): commitment to standard procedures, culture of continuous learning, commitment to results and safety, flexible structures, in-built system and human redundancy, outstanding technology, effective communication, reward systems for reporting failures and 3

5 establishment of minimum requirements. Servitized manufacturers would therefore need to possess the aforementioned attributes and operate as HROs, in order to reduce the risk of failures. However, since the HROs literature focuses on the analysis of single organisations, while it could provide useful insights, whether these can deal with the unique complexity of service environments is not clear. Based on the aforementioned considerations this research attempts to answer the following research question: How can servitized manufacturers manage safety challenges given the large networks involved in service provision? Research Design In order to gain an in-depth understanding of the risks that servitized manufacturers are facing, the case study approach is adopted. As this study is addressing a nascent research problem that is, a topic for which little or no previous theory exists (Edmondson and McManus, 2007, p.7), exploratory interviews are appropriate for data collection (Edmondson & McManus, 2007). Indeed, the open discussions during the interviews can help reveal factors that were not considered before. To this end, a grounded theory approach is adopted, as it is commonly used for exploratory cases and its iterative process can reduce bias and increase consistency (Corbin and Strauss, 1990). Data Sampling, Collection and Analysis In order to answer our research question, the unit of analysis is set as a challenge that servitized manufacturers face within a complex service network. For ensuring consistency the Cambridge Dictionaries on line 2 definition is adopted: a challenge is something that needs great mental or physical effort in order to be done successfully and therefore tests a person s ability. With the aim of gaining an in-depth understanding of the challenges, the interviews include open ended questions with a focus on the multi-dimensional aspect of services and its impact on managing the organisation s accountabilities. They typically consist of questions like: What sort of service contracts are you familiar with? What are the challenging aspects of these? How would you define accountability? How does the shift to a multi-organisational focus influence your perception of accountability? What mechanisms do you use to manage TLA within your organisation? Grounded theory, as a qualitative research method, requires theoretical sampling, and selection should rely on enrolling organisations or individuals most representative of the phenomenon under investigation (Corbin and Strauss, 1990; Starks and Trinidad, 2007). To this end, we select participating organisations to include a wide range of servitized manufacturers and service providers, from both public and private sectors. The defence and manufacturing sectors represent the majority of the selected sample as both industries have an increasing interest and experience in service provision. Particularly the defence sector, provides an ideal sample of servitized organisations operating in safety critical environments. A total of 23 interviews were conducted. Details of the interviews are provided in Table 1. 2 Cambridge Dictionaries on line: [Accessed on 13/11/2015]. 4

6 Each of the interviews lasted from 30 to 90 minutes and was recorded and transcribed in order to perform conventional content analysis (Hsieh and Shannon, 2005). As grounded theory requires, data analysis began as soon as the first data was collected, by frequently looking for emerging themes and adjusting the interview questions accordingly in order to incorporate them in the discussions (Corbin and Strauss, 1990). To be more specific, the analysis began by reading each transcript carefully, highlighting any text that described challenges the interviewees felt they are facing, along with the ways they currently use in order to manage them. After working through the first transcripts, we read the highlighted text more carefully and attempted to assign each to a code. Following this process we repeated the first step for more transcripts in order to assign more identified challenges to one of the emerging codes. In cases that new data could not be matched with a pre-existing code, we assigned new ones. The same steps were followed iteratively until all transcripts were coded. To assist this process, the NVivo software was used. This process resulted in an initial list of 286 references all assigned against one or more of the codes. Next, all 286 references were depicted in a consolidated mind map against the assigned codes. Some of the codes were grouped in the same category, while others who seemed to fit in more than one were moved to different ones until all the codes were mapped against one of the final categories. Table 2 presents the frequency in which each category was identified in the interviews. Table 1. List of interviews Sector Type Size Interviewee 1 Defence Manufacturer Large Head of Product Safety 2 Defence Manufacturer Large Operations Manager 3 Defence Manufacturer Large Head of Product Safety 4 Safety Public Med Head of Maintenance 5 Defence Manufacturer Large Head of Product Safety 6 Defence Manufacturer Large Availability Manager 7 Consulting Public Small Researcher 8 Consulting Service Med Health and Safety Director 9 Defence Manufacturer Large Engineering Manager 10 Consulting Service Med Projects Director 11 Transport Manufacturer Large Safety Manager 12 IT Service Med Head of Engineering 13 Defence Public Med Head of Planning 14 Energy Manufacturer Small Head of Business Development 15 Defence Manufacturer Large Safety Manager 16 Transport Manufacturer Large Capability Developer 17 Defence Manufacturer Large Head of Sustainability 18 Defence Manufacturer Large Delivery Manager 19 Defence Manufacturer Large Safety Engineer 20 Defence Manufacturer Large Design and Safety Engineer 21 Defence Manufacturer Large Product Safety Manager 22 Defence Manufacturer Large Mechanical Engineer 23 Defence Manufacturer Large Product Safety Engineering Manager 5

7 Results The analysis reveals a number of interesting insights. For example, as seen in Table 2, only 5% of the interviewees described any challenges arising from a lack of, or failure to follow standard procedures, although commitment to standard procedures is one of the identified attributes required to achieve high-levels of reliability. What is more, only 8 out of the 286 concepts identified in the transcripts (3%) were related to this category. Likewise, only 5% of the respondents identified human redundancy as a challenge, or as a practice to deal with challenges, although this is another HRO characteristic identified in the relevant literature. Similar is the case for the categories of communication (9%) and culture of continuous learning (14%). Although both of these categories were identified as key characteristics by two respondents, most of the interviewees assigned the challenges to other reasons. For instance, about half of them (55%) felt that a lot of challenges arise from a general lack of control due to the large number of partners involved in service provision. One example that illustrates this case was highlighted by one of the defence manufacturers. The specific organisation is responsible for training the customers personnel to use the equipment they manufacture. As the respondent mentioned, although it is the manufacturer s responsibility to provide the training, the level of training needed is under the customers control. Taking into consideration that organisations face a constant battle between reducing costs and identifying acceptable levels of risk, there can often be a compromise on the level of training the customer is willing to undertake. What is more, quite often these customers are located outside the EU, meaning that legislation does not necessarily provide any minimum health and safety (HSE) requirements potentially compromising the quality of the working environment. However, while the manufacturer is responsible for the safety of the training instructors, and although they have no control over the quality of the customers infrastructures, the manufacturer would still be accountable in the case of a working accident. What is more, and again in contrast to the case of HROs, analysis from the interviews suggests that the use of outstanding technology is an attribute that can increase the risk of failures due to the increased complexity it involves. Considering that technological advancements are considered key drivers for servitization (Neely, 2008), this finding suggests that there may be a trade-off between technology adoption and risk of failures. The analysis further reveals that especially with regards to safety, incentives pose a great risk of bringing the opposite results. More specifically, since safety results are hard to measure, incentives tend to focus more on financial targets thus, increasing the battle between costs and safety and potentially compromising the latter. Nevertheless, incentives need to be aligned across all partners and customers involved in the service network or the risk of compromising safety can increase even more. Most of the interviewees related many of the challenges that servitized manufacturers face with either organisational issues (73%) or a confusion over accountabilities (64%). As one of the interviewees mentions: I don t think it will ever fully be defined of who is accountable and responsible for what, within a service contract, and that is where we are putting our emphasis now, in making people understand. Considering that the transformation from traditional manufacturers into service providers is a relevant recent topic in both academic and managerial studies, it is not surprising that interviewees identify more challenges in general categories rather than being able to identify more specific root causes. Finally, about one third of the respondents identify other challenges related to cultural issues, failure to report incidents or conflicting accountabilities. 6

8 Table 2. Challenges identified in descending order of frequency Codes Interviews References Codes Interviews References Organisational 73% 16% Legislation 27% 4% Confusion over Technology accountabilities 64% 12% 27% 2% Lack of control 55% 10% Cultural differences 23% 3% Incentives 45% 6% Cultural Issues 14% 1% Balance between cost and risk 36% 7% Culture of continuous learning 14% 3% Culture (safe - just) Normalisation of 36% 9% deviance 14% 1% Conflicting Communication accountabilities 32% 3% issues 9% 3% Culture (personal - Complacency ethics) 32% 3% 9% 2% Culture (other) 27% 5% Human redundancy 5% 1% Incident reporting Standard 27% 6% procedures 5% 3% Discussion In order to provide a contextual framework, that can assist servitized manufacturers face the identified challenges, all 286 references were re-grouped again to form some wider characteristics. These are presented in Table 3, illustrated in Figure 1, and described in detail below. According to the suggested framework, servitized manufacturers first need to clearly understand the wider context in which every partner and customer operates. To be more specific, the context depends not only on the size of each firm but also on the sector and country in which the partners operate. In more detail, the size of each organisation can affect everyday communication and the way decisions are made. What is more, as one of the interviewees points out, in bigger organisations often people assume that someone else is responsible for doing a certain job and, therefore, fail to take the proper actions with devastating consequences on safety. On the contrary, in smaller organisations people are willing to take on even more responsibilities. However, as another respondent points out everyone is nervous of smaller companies which don t have the experience, or the pockets in the event that something does go wrong. As a result, organisations are more cautious when it comes to including smaller companies in their service network. At the same time, each sector can have different approaches to safety and acceptable levels of risk. For example, the acceptable level of risk in military environments is different than civil ones, as one of the interviewees explains in the former case the trade of safety versus performance is absolutely part of the trading space, because it is a weapon. Last but not least, as one of the interviewees suggests, in developing countries with less available recourses, people tend to be more creative in order to complete certain tasks increasing the risk of accidents. Within this wider context we identify three main characteristics that servitized manufacturers should consider in order to sustain a high level of safety. 7

9 Duty Holder & Governance The first characteristic is strongly related to a general lack of control to take proper actions and is a concern several interviewees acknowledged. According to their responses a lot of these issues can arise from the large number of parties involved in service networks and depends on which entity has the right to govern or take decisions at each point in time. To this end, it is important to have clear governance with well-defined accountabilities and a unified incident reporting system that promotes a culture of continuous learning. Three main sub-categories were identified. The first sub-category refers to the procedures that exist within the partners. According to the interviewees, procedures determine the way things are done and also drive behaviours. The second one refers to the general structures and hierarchies that exist within the network. In more detail, organisations should seek partners who have designated safety managers and safety management systems independent from commercial departments. This is critically important since safety managers need to be able to put the delivery of a project on hold if they think something is not right. For the third and last sub-category, servitized manufacturers will need to consider the legislation under which their partners operate. While this is not something that can be affected, it provides crucial information for setting up the processes and communication paths between the partners. To be more specific, legislation is important as it determines the acceptable levels of risk (per country or per sector), the requirements for both safety management and incident reporting systems and any ISO and HSE requirements. Attitudes Second, organisations will need to consider the individual people involved within their service network as their personal attitudes and values can affect the way everyday processes are performed. Servitized manufacturers not only need to understand these, but also find a way to drive the right behaviours. This would require a better understanding of the personal cultures of the individuals involved. While this is not an issue unique to large networks, more differences are expected to arise within these complex service environments. These differences could arise from an individual s country of origin, religious beliefs and professional background. For example, when considering safety, an individual s profession can require different approaches. For instance, high esteemed professions such as medical doctors can be discouraged from incident reporting due to fear of revealing flaws in their professional competence (Waring, 2005). Although there is not a lot of research investigating incident reporting outside the health sector, strict hierarchies within the defence sector could pose a similar threat. Therefore, it is important for servitized manufacturers to be able to distinguish between these different attitudes and behaviours in order to be able to deal with them efficiently and promote a safe and just culture across the whole service network. The next level highlights the importance of a joint and aligned incentives system across the whole network. As mentioned previously, incentives drive behaviours and need to be linked with a just culture or can bring the opposite results. What is more, safety targets are harder to measure and as a result the safety message tends to get watered-down because it is not what pays people s wages. This brings back the issue of finding the right balance between cost and safety and the last level that highlights the constant tensions between commercial and operational functions of organisations. For instance, as one of the interviewees points out, product based organisations have far less things to consider compared to service based organisations, since the latter need to consider the support of a product for the next 10 to 20 years. Even the shift from maintenance contracts to through-life support contracts can lead to changes in culture. In maintenance contracts the supplier benefits from replacing as many parts as possible, whereas in through-life support contracts the service provider prefers to re-use as many as possible. Similarly, even differences between departments need to be considered. An example that illustrates this 8

10 case is the relationship between procurement and the engineering department where there is a constant battle between conflicting accountabilities (cheaper vs. safer). As one of the interviewees mentions: if we are having to do that in our own business, imagine then what it is like working with our suppliers and with our customers, over even same placed contracts, you know, safety is engineering, you know, it is not procurement, it is not operation. Not surprisingly, most of the categories presented here are closely linked. This tension between commercial and operations for instance, explains why safety managers should be independent to the commercial managers in order to be able to take proper actions when required. Competencies The third and last characteristic that requires attention is related to the competencies of the partners. To begin with, manufacturers need to consider the competency of employees along with the assessment and training partners provide for them. Competent people are required for the successful and safe delivery of the service. What is more, they need to be continually assessed and developed in order to have a clear understanding of their accountabilities. Furthermore, even if all accountabilities are clearly explained and presented in the service contract, they will need to be reviewed constantly and understood on a case by case basis. This requires genuine knowledge and employees who are not hiding behind their organisation but are willing to take on personal accountabilities. Last but not least, the technology and systems available within every partner are to be considered. While a lot of interviewees linked complex technology with increased risk, it was also recognised that technology can be used as a tool to clarify accountabilities, drive behaviours, improve everyday communication and as a result, maintain a high level of safety. Table 3. Final characteristics in descending order of frequency Duty Holder & Governance 41% Procedures 39% Hierarchies & Structures 37% Legislation 25% Attitudes 37% Individual Attitudes & Values 47% Commercial & Operations 35% Incentives 18% Competencies 22% Competency of People 42% Assessment & Continuous Learning 29% Technology & Systems 29% 9

11 Competency of People Individual Attitudes & Values Incentives Assessment & Continuous Learning Commercial & Operations Technology & Systems Structures & Hierarchies Procedures Legislation Figure 1. Suggested framework Conclusions and Managerial Implications Nowadays, the provision of services is a key aspect of a manufacturer s business. An increasing number of manufacturers in developed economies will need to adopt this strategy in order to remain competitive in the current globalised market. What is more, continuous technological advancements are only likely to increase the transition to services even more (Neely 2008). However, increased competition, extended product life-cycles and the large number of suppliers and partners involved in services are likely to further increase the complexity and risks involved for servitized manufacturers. Nevertheless, delivering services in a safe manner is of the essence for firms. While the risks associated with the shift to services have been extensively discussed in the literature, these studies mainly focus on operational, performance and financial risks. However, there is paucity of research on the impact of servitization on safety, especially with regards to critical failures. It seems that the literature on HROs can offer key insights on how to reduce such failures in services. However, these studies focus on single organisations and we therefore need evidence to support this claim. Motivated by these considerations we examine how servitized manufacturers can sustain a high safety level in services given the large networks involved in service provision by conducting 23 exploratory interviews with experts in services. The analysis reveals two key insights. First, the attributes of HROs identified in the relevant literature did not attract much attention in the discussions. Instead, most of the interviewees focused around the issue of conflicting accountabilities and a general lack of control to perform necessary actions. Thus, it seems that even organisations with experience in services struggle to understand all sources of risk stemming from service provision and in turn, identify ways to manage them. Second, and most important, we find that servitized manufacturers need to be aware of three main issues when setting up their service network in order to promote safety: a) Duty Holder & Governance due to the large networks involved in service provision, different entities have the right to govern or take decisions at each point in time leading to a general lack of control for servitized manufacturers. To this end, they need to have a 10

12 clear understanding of the existent structures and hierarchies, the legislation under which the partners operate and the procedures that dictate how things are done within the service network. b) Attitudes individual people and attitudes, organisational incentives and a constant battle between commercial and operations change the way organisations do things. Servitized manufacturers not only need to understand these characteristics for every partner within the service network, but they also need to be able drive the right behaviours in order to promote a safe culture within the network. c) Competencies the competency of employees, the training and assessment procedures in place and the technology and systems available all have the potential to improve safety. Especially with regards to technology extra attention is required as it was identified both as a tool that can improve communication and clarify accountabilities and as factor that can increase complexity and thus, risk of failures. According to the analysis, these characteristics are interconnected and also affected by a wider context that depends on the country and sector that partners operate and on the firms size. The insights gained regarding the impact that large networks involved in service provision have on service safety allow servitized manufacturers to take the first step towards facing safety challenges and support them in the challenging path towards the services of the future. Naturally, potential benefits extend beyond just financial, with major implications on the safety of service offerings. In this study we focus on 23 exploratory interviews from experts in the service field, and discussions are based on the challenges faced due to the large networks involved in service provision. However, using a sample from additional sectors could provide promising avenues for further research and insights on whether the HRO literature can provide useful practices for service provision. 11

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