3rd International Business Servitization Conference 13-14 November 2014 Bilbao

1. University of Vaasa | Department of Management | Rabetino et al.
THE STRATEGY MAP OF SERVITIZATION: LEARNING FROM PREVIOUS RESEARCH AND ONGOING IMPLEMENTATION EXPERIENCES
Rodrigo Rabetino (UVA),
Marko Kohtamäki (UVA), and
Seppo Luoto (UVA)

2. University of Vaasa | Department of Management | Rabetino et al. Servitization is not a simple process and positive outcomes are never guaranteed. Implementation matters.
 As competition intensifies, servitization will become an industry recipe. Thus, strategy implementation, rather than the strategy itself, will emerge as the source of competitive advantage.
Previous studies have discussed core issues met by manufacturers in the execution of an industrial service strategy. However, specific responses (actions) to these issues have not been extensively analyzed.
Only a few studies have described activities needed to execute an industrial service strategy (Baines & Lightfoot, 2013, 2014; Storbacka, Polsa, & Sääksjärvi, 2011; Storbacka, 2011).
RQ: what micro-level actions and tools do manufacturers adopt to support critical processes while shifting their focus to advanced services?
MOTIVATION

3. University of Vaasa | Department of Management | Rabetino et al.
THE FRAMEWORK: STRATEGY MAP (KAPLAN & NORTON, 2004)
The map includes four strategic perspectives
-how can companies guarantee long-term value for shareholders while balancing the strategic trade-off between long-term revenue growth goals and the short-term financial goals of lowering costs and increasing productivity?
- What is the value proposition for the targeted customer segments?
Internal processes define how the company creates and delivers the value proposition
The intangible assets must be aligned with the strategy to create value
…a cause-and-effect tool for describing the architecture of a strategy while identifying critical sources of synergy and value creation.

4. University of Vaasa | Department of Management | Rabetino et al.
LITERATURE REVIEW

5. University of Vaasa | Department of Management | Rabetino et al.
LITERATURE REVIEW (CONT.)

6. University of Vaasa | Department of Management | Rabetino et al.
RESEARCH METHODOLOGY We base our research on an abductive process.
The empirical part of this study draws on 42 face-to-face interviews conducted as part of an ongoing research project.
•FUTIS is a five-year project (2011–2015) that includes19 manufacturing companies in the metal and machinery industries headquartered in Finland (Finnish Funding Agency for Technology and Innovation, TEKES).
Based on the data collected during our research project, we first conducted a pilot study to identify the initiatives implemented by companies.
In the second stage, we included Wärtsilä, Outotec, and Valmet in the multiple- case study while collecting detailed information on the strategy map in a new round of interviews with these three companies.

7. University of Vaasa | Department of Management | Rabetino et al.
Establishing processes of value co-creation, co- production, and appropriation: The internal perspective Customer Relationship Management processes: Value co-creation  continuous cash flow, long-term relationships, customer satisfaction and loyalty
Comprehensive strategic account management (SAM) programs  multilevel structure (e.g., site-, key-, corporate- and strategic-account managers and corporate sponsors).
 to ensure access to strategic decision-makers at higher levels of the customer organizational structure.
Multilevel and cross-functional sales teams and cross-selling negotiations.
 Clear sales processes and use different tools to achieve higher degrees of sales performance (e.g., sales funnels, success stories, and information from CRM and PDM systems).
 The outcomes of value-based pricing systems or manual methods of estimating value-added and cost-savings results are used.

8. University of Vaasa | Department of Management | Rabetino et al.
The internal perspective (Cont. I) Innovation Management: Value co-production  differentiation and novel sources of revenue, easy to serve products
Many service innovations emerge from customer interactions (pilot and co-develop with leading customers),
 Processes for service concept development are less established than those for physical product R&D
Analyzing customers’ processes and including service representatives in the product design team
 Designing physical products for service is not always possible.
 Case firms have broadened their service portfolios through mergers and acquisitions.

9. University of Vaasa | Department of Management | Rabetino et al.
The internal perspective (Cont. //) Operations Management: Value appropriation  mass-customization, modularity, scalability, economies of scale, scope and repetition, quick response time…
Implementing end-to-end operations (particularly for the newest business lines): business services unit is integrated into other businesses,
Integrating the supply chain operation,
Modularizing their offering and using long-term service agreements,
Organizing the service business based on service portfolios,
 Structuring new service networks. A clear need to control field service provision,
Implementing risk-management models and protocols.

10. University of Vaasa | Department of Management | Rabetino et al.
Aligning intangible assets to promote competitive advantage: The learning and growth perspective Cultural management
Using internal marketing and communication tools (CEO statements are important),
Involving employees in strategy development workshops, and
Designing training programs to facilitate a shift to a service-oriented mindset,
Sometimes, replacing the staff was the only viable solution.
Internal relationship management.
Capture team leaders and cross-unit and ad-hoc teams,
Frequent formal cross-functional workshops an shared meetings,
Double-hat people sitting in different units.

11. University of Vaasa | Department of Management | Rabetino et al. HRM:
Hiring new personnel is a common method of obtaining the required skills and expertise.
The acquisition of service companies also emerged during the interviews as a means of obtaining skillful human resources (integration is the challenge).
 The companies completed comprehensive analyses of available and necessary skills at the job- family level while designing specific training programs to address gaps.
Knowledge management (3 core ICT systems ): 1) customer relationship management systems (CRM), 2) enterprise resource planning systems (ERP), and 3) product data management (PDM) or product lifecycle management systems (PLM).
 Systems for condition-based monitoring (CBM) also serve as important sources of information about customer behaviors as they use products (risk management + cost savings).
The learning and growth perspective (Cont.)

12. University of Vaasa | Department of Management | Rabetino et al.
FINAL THOUGHTS Servitization is a complex and multidimensional process.
A well-known business concept can develop into an emergent strategy during the implementation process. Execution is rarely straightforward:
Numerous iterations are generated before companies achieve a satisfactory degree of fit between all components of the business model.
 Companies have extensively utilized external consultants to achieve best practices and to develop appropriate service structures and training programs.

13. University of Vaasa | Department of Management | Rabetino et al.
IMPLICATIONS Based on Kaplan and Norton (2000), our study is the first to further develop the ‘servitization strategy map’ concept. The present study:
Extends recent debates on service-based business models while discussing how different dimensions of strategies are related.
Illustrates how strategy mapping can be used as a tool for understanding and describing the strategic logic of manufacturers during servitization.
 We illustrate the multidimensionality of a servitization strategy.
We provide information to managers and other key actors about initiatives that can enable the successful implementation of servitization strategies.
These results will enable managers to develop early-stage servitization strategies.
For manufacturers in more mature stages of servitization, these results may offer guidelines for re-inventing servitization strategies.

14. University of Vaasa | Department of Management | Rabetino et al.
LIMITATIONS Our study only examines those activities and processes mentioned by the respondents (more interviews, more companies, other industries…)
We present a holistic map. However, different servitization strategies may need specific maps.
As this study sacrificed result generalizability due to the use of comparative case data, future studies may operationalize processes and activities to examine performance effects using quantitative data. Future studies may thus identify causalities using larger datasets.
The strategy map applies a highly rational and economic approach while positioning the analysis at the organizational level.
Future research may adopt multilevel perspectives while using psychological and sociological approaches to understand how implementation processes and their outcomes are influenced by individual perceptions, behaviors, and interactions between individuals.

15. University of Vaasa | Department of Management | Rabetino et al.
THANK YOU !!!!!!!!!!!
rodrigo.rabetino@uva.fi