Future industrial service research and business  201205289 v4
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product companies with service offerings, BestServ, Service Day, Finland

product companies with service offerings, BestServ, Service Day, Finland

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  • Reference content from this presentation as: JC Spohrer (2012) Future Avenues In Industrial Service Research and Business. Service Day. BestServ Forum. Helsinki, Finland, Tuesday May 29th, 2012 Permission to redistribute granted upon request to spohrer@us.ibm.com
  • Service system entities calculate value from multiple stakeholder perspectives Four Key Stakeholder Perspectives: P = Provider C = Customer A = Authority S = Substitute (Competitor)
  • Service system entities learn to systematically exploit info & tech Learning Systems – Choice and Change Do = operate in comfort zone, applying existing knowledge Copy = to be the best, learn from the rest Invent = double monetize from internal use and external sales Add Rickets “Reaching the Goal” for Internal-External-Interaction Constraints. Explain Incremental-Radical-Super-Radical in terms of units (scientific measurement) For more on Exploitation-Exploration see below.. http://sonic.northwestern.edu/wp-content/uploads/2011/03/Keynote-Watts_Collective_Problems.pdf Lavie D & L Rosenkopf (2006) BALANCING EXPLORATION AND EXPLOITATION IN ALLIANCE FORMATION, The Academy of Management Journal, 49(4). 797-818. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.123.8271&rep=rep1&type=pdf “ Pressures for exploration. Whereas inertia drives firms’ tendencies to exploit, absorptive capacity facilitates counter pressures by furnishing the mechanism via which firms can identify the need for and direction of exploratory activities. Exploration is guided not only by inventing but also by learning from others (Huber, 1991; Levitt & March, 1988) and by employing external knowledge (March & Simon, 1958). Absorptive capacity, defined as the ability to value, assimilate, and apply external knowledge (Cohen & Levinthal, 1990), helps firms identify emerging opportunities and evaluate their prospects, thus enhancing exploration. It adjusts firms’ aspiration levels, so that they become attuned to learning opportunities and more proactive in exploring them. Indeed, prior research has demonstrated how absorptive capacity enhance organizational responsiveness and directs scientific and entrepreneurial discovery (Deeds, 2001; Rosenkopf & Nerkar, 2001). It also increases the likelihood of identifying external opportunities and can therefore lead to exploration in one or more domains of alliance formation.” For more on Run-Transform-Innovate see below… When I asked how he measures the performance and effectiveness of IBM's IT team, Hennessy pointed to its "run-to-transform" ratio. IBM's IT department is divided into three groups: a "run" organization that's responsible for keeping systems running smoothly; a "transform" team focused on business-process simplification and other business transformation; and an "innovate" unit that pursues leading-edge technology initiatives. Hennessy reports to Linda Sanford, IBM's senior VP of on-demand transformation and IT. Practicing what it preaches, IBM doesn't think of its IT organization as being merely an IT department. "We call it BT and IT," Hennessy says, giving business transformation equal billing to the software, systems, and services side of its mission. http://www.informationweek.com/blog/main/archives/2009/04/ibm_cio_turns_d.html IBM CIO's Strategy: Run, Transform, Innovate Posted by John Foley on Apr 30, 2009 11:05 AM Like other CIOs, IBM's Mark Hennessy knows that a dollar saved on data center operations is a dollar earned for business-technology innovation. IBM has moved the dial on its IT budget 10 percentage points toward innovation in recent years, and Hennessy says there are still more operational efficiencies to be gained.I sat down with Hennessy for more than an hour recently in New York to talk about how he has adapted to being a CIO. A 25-year IBM veteran, he took over as CIO about 18 months ago, having spent most of his career on the business side, in sales, marketing, finance, and, most recently, as general manager of IBM's distribution sector, which works with clients in the retail, travel, transportation, and consumer products industries. Hennessy's IT team supports the company's strategy in three broad ways: by running and optimizing IBM's internal IT operations, by working with IBM business units in support of their objectives, and by facilitating company-wide collaboration, innovation, and technology requirements across 170 countries. In times past, IBM had as many as 128 different CIOs across its businesses. These days--in support of CEO Sam Palmisano's strategy of establishing a global, integrated enterprise--it has only one, and Hennessy is it. When I asked how he measures the performance and effectiveness of IBM's IT team, Hennessy pointed to its "run-to-transform" ratio. IBM's IT department is divided into three groups: a "run" organization that's responsible for keeping systems running smoothly; a "transform" team focused on business-process simplification and other business transformation; and an "innovate" unit that pursues leading-edge technology initiatives. A few years ago, IBM was spending 73% of its IT budget on keeping systems and services running and 27% on innovation. This year, its run-to-transform ratio will hit 63%-37%. Roughly speaking, IBM is shifting an additional 2% of its IT budget from run to innovation each year, and Hennessy has every expectation that his group will continue moving the ratio in that direction. "I don't see an end in sight," he says. In fact, Hennessy says that IBM's run-to-innovation ratio has improved more this year than last. "So it's actually accelerating for us," he says. Where do the efficiencies come from? The same place other CIOs find them. Server virtualization, data center consolidation (IBM has consolidated 155 data centers down to five), energy savings, applications simplification (from 15,000 apps to 4,500 apps), end user productivity, organizational collaboration, shifting skills globally, and business-process simplification. IBM has internal IT projects underway now in the areas of its supply chain, finance, workforce management, and order-to-cash processes. Hennessy reports to Linda Sanford, IBM's senior VP of on-demand transformation and IT. Practicing what it preaches, IBM doesn't think of its IT organization as being merely an IT department. "We call it BT and IT," Hennessy says, giving business transformation equal billing to the software, systems, and services side of its mission.
  • Before we talk about the future of technology…. We should remember rules matter a lot too…. How we design systems matters….. Both how we design the technology & the rules (or institutions we live in) matters a lot… It matters for four key measures of systems – innovativeness, equity, sustainability, and resiliency… Societal performance on these four measures depends on technology (infrastructure), rules (institutions), skills (individuals), and what we value interms of quality of life (information)… Why are these people smiling? Every year NFL (National Football League) teams select the best new college players who indicate they are eligible for the NFL Draft…. Stanford’s quarterback Andrew Luck is one the best from 2011 What’s interesting is the Indianapolis Colts, the team he will play for the next decade, is one of the worst Source: http://www.rgj.com/viewart/20120426/SPORTS/304260061/NFL-draft-Colts-take-Stanford-QB-Andrew-Luck-open-draft http://en.wikipedia.org/wiki/National_Football_League_Draft

Future industrial service research and business 201205289 v4 Presentation Transcript

  • 1. IBM University Programs worldwide, accelerating regional development (IBM Upward) Future Avenues In Industrial Service Research and BusinessJim Spohrer, Director IBMIBM Almaden Research CenterSan Jose, CAFor: BestServ Forum, Helsinki, FinlandService Day Tuesday May 29, 2012 © 2012 IBM Corporation
  • 2. 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”)2 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation
  • 3. 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. 3 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation
  • 4. KPIs and Value Propositions (see book “Value Merchants”) Value propositions coordinate & motivate resource access  Second foundational premise of service science Stakeholder Measure Pricing Basic Value Perspective Impacted Decision Questions Proposition – Service system entities calculate (the players) Reasoning value from multiple stakeholder perspectives – Value propositions are the building 1.Customer Quality Value Should we? Model of customer: Do blocks of service networks (Revenue) Based (offer it) customers want it? Is there a market? How large? Growth rate?  A value propositions can be viewed as a request from one service system to another to run an algorithm (the value Productivity Cost Model of self: Does it play to 2.Provider Can we? proposition) from the perspectives of (Profit, Mission, Plus our strengths? Can we deliver (deliver it) multiple stakeholders according to Continuous it profitably to customers? culturally determined value principles. Improvement, Can we continue to improve? Sustainability)  The four primary stakeholder perspectives are: customer, provider, 3.Authority Compliance Regulated May we? Model of authority: Is it legal? authority, and competitor (Taxes and (offer and Does it compromise our Fines, Quality integrity in any way? Does it – Citizens: special customers deliver it) of Life) create a moral hazard? – Entrepreneurs: special providers – Parents: special authority – 4.Competitor Sustainable Strategic Will we? Model of competitor: Does it Criminals: special competitors Innovation (invest to put us ahead? Can we stay (Substitute) (Market make it so) ahead? Does it differentiate share) 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..4 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation
  • 5. Some Finland Businesses on Forbes Global 20005 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation
  • 6. Europe 2020  aging population  welfare services under pressure  climate change and sustainable growth.6 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation
  • 7. Learning to invest Learning To Invest Do It Invent It Exploitation Exploration Run Transform Innovate Operations L Internal Incremental Maintenance Copy It External Radical Insurance Interaction Super-Radical March, J.G. (1991) Exploration and exploitation in organizational learning. Organizational Science. 2(1).71-87. Sanford, L.S. (2006) Let go to grow: Escaping the commodity trap. Prentice Hall. New York, NY.7 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation
  • 8. New competitiveframework tobalance measures  Innovativeness  Equity  Sustainability  Resiliency8 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation
  • 9. 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;9 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation
  • 10. Panel: History and future from BestServ experience  Petri Kalliokoski – Feasibility study; Report; Results  Hannu Tuominen – Beverage company; Visala;  Juha Hulkkonen – Strategy, development, execution; tough period survival; culture change and people skills  Iiro Salkari – Multidisciplinary10 IBM UPward (University Programs worldwide – accelerating regional development) © 2012 IBM Corporation