Delivering value added services

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This presentation and workshop was part of meeting at General Electric in Florence, Italy. The presentation illustrates aspects such as service innovation and growth in service business. It contains group works and presentation slides.

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Delivering value added services

  1. 1. Delivering Value-Added Services Heiko Gebauer •ACMS: optimize for today...Driving organic growth initiatives, through an external focus •Florence 2010 •Department Innovation Research in Utility Sectors - Eawag: Swiss Federal Institute of Aquatic Science and Technology •University of St.Gallen (Switzerland) •Karlstad University (Sweden)
  2. 2. Agenda Session 1: Adding value through service innovation Introduction 8:00-8:10 Session 1: Adding value through service innovation •Presentation on organic growth in service business 8:10-8:40 •Group work on service innovations 8:40-9:10 •Selected presentations of service innovations Coffee break 9:10-10:00 10:00-10:30
  3. 3. Agenda Session 1: Adding value through service innovation Introduction 8:00-8:10 Session 1: Adding value through service innovation •Presentation on organic growth in service business 8:10-8:40 •Group work on service innovations 8:40-9:10 •Selected presentations of service innovations Coffee break 9:10-10:00 10:00-10:30
  4. 4. Services are much more complex than the traditional product business Parameter Product business Service business Nature of demand More predictable, can better forecast Always unpredictable, sporadic Required response Standard, can be scheduled As soon as possible Number of product generations Limited 10 to 15 times higher Product portfolio Largely homogeneous Always heterogeneous Adapted from Cohen et al. 2006
  5. 5. Continuous extension of the service offerings – Bosch Packaging Selling products • Core product • „Own“ service products • Provide services for own products • Parts • Field service • Modernization Providing productrelated services • Bundle basic services • Bundle & optimize services to full packaging • Service level agreements • Extended warranty • Parts & labour package • Service for other products • Conduct services for competitor products Offering solutions • Outsourcing services • Provide full functionality & responsibility for complete lines • Product unrelated services • Leverage to other services such as • Logistics provider • IT support
  6. 6. BOSCH PACKAGING extends the share of service revenue in total revenue Total revenue Market share in service market Service revenue Customer 45% 34% 66% 25% 30% 22% Field Service 55% Spare Parts 23% Modernization Revenue of machines and products Third party suppliers Quelle: R. Hänggi, 2006
  7. 7. Leverage your unique skills for extending the service business Leveraging of competencies Examples Using it for innovative services FESTO Didactic’s personell development services Leveraging TRUMPF’s services (SYNCHRO) on production optimization TOYOTA’s services on lean production practices Unique competencies and skills PORSCHE engineering services on automobile development
  8. 8. Identifying strategic paths through visualizing service opportunities Reconfiguration How do service opportunities appear?) Pre-Sales Sales After-sales Extension Primary customer activities Supplementary customer activities Where do service opportunities appear? Adapted from Sawhney, 2004
  9. 9. Exploitation or exploration: How to approach the service opportunities? Exploration Reconfiguration How do service opportunities appear?) •Radical improvement Pre-Sales Sales After-sales •New value constellation •Dynamic capabilities Exploitation Extension •Incremental improvements •Value-adding to existing value constellation •Development of operational capabilities Primary customer activities Supplementary customer activities Where do service opportunities appear? Adapted from Sawhney, 2004, Fischer, Gebauer, Guanjie, Gregory and Fleisch. (forthcoming 2010)
  10. 10. Exploitation or exploration: How to approach the service opportunities? Exploration Reconfiguration How do service opportunities appear?) •Radical improvement Pre-Sales Sales After-sales •New value constellation •Dynamic capabilities Exploitation Extension •Incremental improvements •Value-adding to existing value constellation •Development of operational capabilities Primary customer activities Supplementary customer activities Where do service opportunities appear? Adapted from Sawhney, 2004, Fischer, Gebauer, Guanjie, Gregory and Fleisch. (forthcoming 2010)
  11. 11. Exploitation and the corresponding service strategies Development partner After-sales service provider Customer support service provider Outsourcing partner Service focus Source: Gebauer, Fischer and Fleisch (2010)
  12. 12. Operational capabilities for implementing the service strategies Service orientation in the operational capabilities¹ A – abstract value of services, B – role understanding, C – personnel recruiting, D – training, E – compensation, F – distinction product and service organization, G –proximity to customers Development partners A 1 G B Customer support After-sales 0.5 service providers service providers 0 A A F C 1 1 G B G B 0.5 0.5 E D Outsourcing partners 0 0 F C F C A 1 E D E D G B 0.5 F Legend (0 – low, 1 – high – cluster means)¹ 0 E C D Source: Gebauer, Gustafsson, Edvardsson and Witell (2010), Neu and Brown (2005 and 2008)
  13. 13. Exploitation or exploration: How to approach the service opportunities? Exploration Reconfiguration How do service opportunities appear?) •Radical improvement Pre-Sales Sales After-sales •New value constellation •Dynamic capabilities Exploitation Extension •Incremental improvements •Value-adding to existing value constellation •Development of operational capabilities Primary customer activities Supplementary customer activities Where do service opportunities appear? Adapted from Sawhney, 2004, Fischer, Gebauer, Guanjie, Gregory and Fleisch. (forthcoming 2010)
  14. 14. Service innovation process Extension of service offering Training of fire brigades on fire-fighting in tunnels Maintenance Repair service Mobile gas measuring devices Stationary gas measurement Compressed air breathing equipment Service Innovation Process Development phase Creating service ideas Preliminary service concept Business Plan Introduction to the market Activities Idea generation Idea selection Concept description Concept evaluation Concept selection Description of the Business Plan Market test Introduction
  15. 15. Address hidden customer needs Extension of service offering Fleet Management for Hilti tools, i.e. • One agreement for many Hilti tools • Additional services, esp. repairs and leasing No consumables, e.g. Hidden Customer Needs Incremental improvements and shortterm advantages Obvious customer needs • Battery packs, battery chargers • Insert tools • Fire stop, anchors, struts, pipe-rings, etc. „Hidden“ customer needs Sustainable competitive advantages
  16. 16. 1. Understanding the customer processes … Customer process: Construction operations Contracting Purchase Delivery Training Use / Operate Maintenance Locate
  17. 17. … with all its complexity Owner / Architect General Contractor Bank Customer process: Construction operations Contracting Purchase Supplier small & standard parts Delivery Supplier building materials Training Supplier heavy equipment Use / Operate Supplier construction tools Maintenance Construction logistics Locate
  18. 18. 2. Absorbing the complexity into own service innovations Customer process: Construction operations Contracting Purchase Hilti Delivery Training Use / Operate Maintenance Locate
  19. 19. 3. Orchestrating complexity in combination with suppliers Customer process: Construction operations Owner / Architect Contracting General Contractor Purchase Bank Supplier small & standard parts Hilti Delivery Supplier building materials Training Supplier heavy equipment Use / Operate Supplier construction tools Maintenance Construction logistics Locate
  20. 20. Achievements • Margin: price sensibility decreases dramatically; no upfront investment; schedule; admin work reduction • Customer retention: unbelievable; pay for hole, not for tool • Cross selling: spare parts, other tools • Imitation barrier: process and IT know-how – lists competitors on web to watch them dying • Customer intimacy: here is the real value Net sales (million SFr) Asia/Pacific North America Latin America Europe/Africa Source: Hilti
  21. 21. Conclusion Service business is much more complex than the traditional product business. Nevertheless, companies continuously try to achieve service growth Strategic paths for service business Service opportunities arise around primary and supplementary customer activities as well as extension and reconfiguration of customer activities Service opportunities can be either exploited or used to explore new value constellations Exploitation creates strategic paths around after-sales service and customer support service providers as well as development and outsourcing partners Service innovations Exploitation is about identify ideas based on existing and obvious customer need Exploration is about understanding customer’s complexity
  22. 22. Agenda Session 1: Adding value though service innovation Introduction 8:00-8:10 Session 1: Adding value through service innovation •Presentation on organic growth in service business 8:10-8:40 •Group work on service innovations 8:40-9:10 •Selected presentations of service innovations Coffee break 9:10-10:00 10:00-10:30
  23. 23. 1. Understanding the customer processes … Customer process: Wearing black socks Search Purchase Replenish Put on and wear (Hand) wash Emergency purchase Wear colorful socks Dispose
  24. 24. … with all its complexity Department store Bank Customer process: Wearing black socks Search Manufacturer Purchase Replenish Distributor Put on and wear Laundry (Hand) wash Hotel Emergency purchase Airport Wear colorful socks Clothes donation Dispose
  25. 25. 2. Absorbing the complexity into own service innovations Customer process: Wearing black socks Search Purchase Replenish Blacksocks Put on and wear Wash Emergency purchase Wear colorful socks Dispose
  26. 26. 3. Orchestrating complexity in combination with suppliers Customer process: Wearing black socks Department store Search Bank Purchase Replenish Manufacturer Distributor Blacksocks Put on and wear Laundry Wash Hotel Emergency purchase Airport Wear colorful socks Clothes donation Dispose
  27. 27. Achievements • • • • Margin: 98 CHF for 9 pairs of black socks; cash-in at day 1 Customer retention: unbelievable Cross selling: underwear Imitation barrier: process and IT know-how – lists competitors on web to watch them dying • Customer intimacy: here is the real value Source: Courtesy of Samy Liechty
  28. 28. Task assignments 1. Specify the customer processes and activities 2. Elaborate the complexity of the customer processes 3. Create ideas in how to deal and absorb the complexity into service innovations
  29. 29. Agenda Session 1: Adding value though service innovation Introduction 8:00-8:10 Session 1: Adding value through service innovation •Presentation on organic growth in service business 8:10-8:40 •Group work on service innovations 8:40-9:10 •Selected presentations of service innovations Coffee break 9:10-10:00 10:00-10:30

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