Future Avenues In Industrial Service Research and Business

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1 IBM University Programs worldwide, accelerating regional development (IBM Upward) Future Avenues In Industrial Service Research and Business Jim Spohrer, Director IBM IBM Almaden Research Center San Jose, CA For: BestServ Forum, Helsinki, Finland Service Day Tuesday May 29, 2012

2 Industrial and Business Services - BestServ Juha Hulkkonen Welcome and why service? (1985) Service level economic cycles; Long-term relationships; profitable; growth; new job opportunities; closer to clients; smarter business Jarmo Hyvonen Toward a service mindset custom solutions (1981) Fastems; Automation solutions; Machine tools; 8760 annual production hours; 1500 robot application & flexible manufacturing systems; Customized tools co-created with customers; Risto Gylden Rapid prototyping listening to co-create value Engineering company; Power and productivity for a sustainable world; Deal with infrastructure; Stage-gate model; Service product development is based on listening and communications; Measuring service value; 2

3 Outline: Learning to learn - faster Growth of service offerings from product firms KPIs and value propositions Engineering culture and customer constraints Some Finnish businesses in Forbes 2000 list Future Avenues Europe 2020: Service Innovation Outcome-based & Life-Cycle (Irene Ng) Sector analysis (IBM CBM) Acquisitions & Universities (Ecosystems) New Directions - Accelerated Co-Learning Learning to invest ( doing more with less ) Learning to balance new measures ( new competitive framework ) 3

4 Growth of service offerings from product firms Kowalkowski, C. (2011), The service function as a holistic management concept, Journal of Business & Industrial Marketing, Vol. 26 No. 7, Over the past decade, a growing amount of attention has been paid to service offerings in manufacturing, information technology, and other non-service sectors around the world. This phenomenon is often described as a goods-services transition, in which firms such as Caterpillar, Ericsson, Huawei, Siemens, and Tata have increased their provision of services. The phenomenon is often ascribed to industry commoditization, which is characterized by increasing homogeneity of products, higher price sensitivity among customers, and lower switching costs (Reimann et al., 2010); it is also ascribed to opportunities to achieve competitive advantage through closer customer relationships and higher profit margins (e.g., Gebauer and Friedli, 2005; Jacob and Ulaga, 2008; Matthyssens and Vandenbempt, 2008; Raddats and Easingwood, 2010). The increasing strategic importance of service offerings to market-leading industrial firms has made the ability to manage the service business in a manufacturing context ever more vital (Kowalkowski et al., 2011a; 2011b). Furthermore, the differences between an industrial, goods-dominant business logic and a coproduction/ creation, service-dominant business logic (Kingman-Brundage et al., 1995; Normann, 2001; Ramírez, 1999; Vargo and Lusch, 2008) have made it particularly interesting to investigate the management of firms that produce goods as well as services. 4

5 KPIs and Value Propositions (see book Value Merchants ) Value propositions coordinate & motivate resource access Second foundational premise of service science Service system entities calculate value from multiple stakeholder perspectives Stakeholder Perspective (the players) Measure Impacted Pricing Decision Basic Questions Value Proposition Reasoning Value propositions are the building blocks of service networks A value propositions can be viewed as a request from one service system to another to run an algorithm (the value proposition) from the perspectives of multiple stakeholders according to culturally determined value principles. The four primary stakeholder perspectives are: customer, provider, authority, and competitor Citizens: special customers Entrepreneurs: special providers Parents: special authority Criminals: special competitors 1.Customer 2.Provider 3.Authority 4.Competitor (Substitute) Quality (Revenue) Productivity (Profit, Mission, Continuous Improvement, Sustainability) Compliance (Taxes and Fines, Quality of Life) Sustainable Innovation (Market share) Value Based Cost Plus Regulated Strategic Should we? (offer it) Can we? (deliver it) May we? (offer and deliver it) Will we? (invest to make it so) Model of customer: Do customers want it? Is there a market? How large? Growth rate? Model of self: Does it play to our strengths? Can we deliver it profitably to customers? Can we continue to improve? Model of authority: Is it legal? Does it compromise our integrity in any way? Does it create a moral hazard? Model of competitor: Does it put us ahead? Can we stay ahead? Does it differentiate us from the competition? Spohrer, J & Maglio, P. P. (2009) Service Science: Toward a Smarter Planet. In Introduction to Service Engineering. Editors Karwowski & Salvendy. Wiley. Hoboken, NJ.. 5

6 Some Finland Businesses on Forbes Global

7 Europe 2020 aging population welfare services under pressure climate change and sustainable growth. 7

8 Learning to invest Learning To Invest Do It Exploitation Exploration Invent It Run Transform Innovate Operations L Internal Incremental Maintenance Copy It External Radical Insurance Interaction Super-Radical 8 March, J.G. (1991) Exploration and exploitation in organizational learning. Organizational Science. 2(1) Sanford, L.S. (2006) Let go to grow: Escaping the commodity trap. Prentice Hall. New York, NY.

9 New competitive framework to balance measures Innovativeness Equity Sustainability Resiliency 9