How servitization changes global B2B distribution?

by Taru Hakanen (VTT), Nina Helander (TTY/VY) & Katri Valkokari (VTT)

Servitization development increases the scope of intangible assets in the offerings of manufacturers and increases the importance of customer interactions and ‘customer closeness’. At the same time several manufacturers rely on intermediaries such as agents, distributors, dealers and service providers in order to reach their business customers around the world. However, servitization development may influence global business-to-business distribution in several ways.

The way responsibilities are shared has previously been relatively clear in distribution: the manufacturer focuses mainly on R&D and production, and intermediaries take responsibility for local sales and marketing, customer relationship management and service provision (logistics, after sales services etc.). However, servitization may drastically change the way responsibilities are shared between manufacturers and intermediaries. If a manufacturer develops its offering towards a complex service- and knowledge intensive one, not all of the intermediaries are capable of selling those. Then, manufacturers should either provide sufficient training for the intermediaries or consider selling certain parts of the offering by themselves.

Understanding of the local context of customers, creation of a positive customer experience and adjusting interaction and service co-production to different customer needs and characteristics are at the heart of service business. However, when a manufacturer reaches its customers via the intermediaries of marketing and distribution channels they lack direct contact with their customers. Then, a major challenge occurs: how can a manufacturer develop customer-focused offerings and operations when they do not thoroughly know business customers’ perceptions and expectations of value and customer experience? Is operating via intermediaries then the best way to fulfil customer expectations for value and customer experience in global distribution?

In spite of the indirect marketing and distribution channels in use, manufacturers may reach their customers directly for example, via remote services and various digital channels. In an extreme case, intermediaries may end up losing their position in the distribution channel if the manufacturer pursues closer customer relationships for enhanced customer understanding and starts providing an increasing number of its own services. On the other hand, intermediaries may pursue a competitive advantage through servitization, too. Local services and customer closeness are undoubtedly the intermediaries’ central assets and justification for their role in the distribution channel. Therefore, intermediaries can take on an even stronger role as local service providers.

The optimal model for manufacturers may be a combination of different direct and indirect distribution and marketing channels in global business-to-business distribution. Manufacturers may take on greater responsibility for sales and provision of certain services while intermediaries deal with certain services and customer segments. That way manufacturers can tackle the so-called ‘glocal’ distribution i.e., they balance between, for example, global process efficiency and brand coherency and customizing the offering and service co-production to local customers’ preferences.

Although, huge changes have already taken place in global distribution, digitalization will undoubtedly change global B2B distribution even more!

Hakanen Taru, Helander Nina & Valkokari Katri (In Press). Servitization in global business-to-business distribution: The central activities of manufacturers, Industrial Marketing Management, http://dx.doi.org/10.1016/j.indmarman.2016.10.011

Dimecc REBUS program: http://www.fimecc.com/programs/rebus

What managers really think about networks?

by Katri Valkokari & Tiina Valjakka

“Business relationships are neither bright nor dark, but rather represent a combination of the two”*

Business networks as well as other collaborative settings, such as partnerships and alliances, are characterized by the co-existence of negative effects (several tensions, uncertainties and opportunism) and positive elements (trust, commitment, win-win).

We were interested in managers’ perspectives related to these advantages and disadvantages of relational business practices associated with the operations in business networks. Thus, we built and tested a set of metrics through interviews, thematic group discussion, and a pilot survey with 22 companies participating in an industry academia research program that develops relational practices in business networks in the context of the manufacturing industry. (see REBUS). The survey questionnaire, with 18 statements presented below, was designed based on the preliminary data and the research framework.

Positive Negative
Performance of network 1) strengthen growth of business and profitability

2) enhance access to new markets

1) increase the risks of our business

2) increase the expenditures of our business

Practices – networks as goal oriented entities 1) enhance an effective division of labor with our partners

2) increase available resources and capabilities

3) enable more flexible contracts

1) hamper new business ideas and innovations

2) decrease willingness to renew and develop

3) increase dependency on network members

Information – networks as knowledge creating platforms 1) enhance integration of ICT systems with our partners

2) enhance access to knowledge that is critical to our business

1) lead to the concealment of information and information-dependency

2) cause  knowledge leaks and the risks thereof

Socialisation – networks as controlled social systems 1) increase mutual trust in our business relationships

2) enhance comradery with our partners

1) hamper our independent decision-making

2) weakens our position in business relationships

Business networks was defined in the survey as “a set of companies and potentially other organisations (a minimum of three network actors) connected to each other for the purpose of doing business on a relational basis” (e.g., Halinen and Törnroos, 2005).

The networks are considered an especially important means to access new markets, knowledge and resources

Based on the answers, it can be concluded that the respondents have distinctively positive view on networks and their effects on business performance. In the positive statements the average value of all the respondents’ answers was over 4 (agree), in 1-5 Likert scale whereas in the negative statements the average remains under 2,5 (between 3= don’t know and 2= disagree).

scale

The three most supported statements were positive statements: business networks 1) enhance access to new markets, 2) enhance access to knowledge that is critical to our business, and 3) increase available resources and capabilities.  This support a more general conclusion that potential drivers of networking – based on relational practices – lie more in intangibles, i.e., the effects on future competitiveness. The technical or tangible enablers in turn, are assigned lower importance by the respondents. From the negative aspects side, the results indicate that managers, while believing in the growth-boosting effects of networks, also acknowledge that this may be associated with specific costs of ‘losing’ something valuable. However, networks do not seem to weaken a firm‘s position or the ‘incentives’ for business development

When comparing the negative and positive statements, it can be concluded that the respondents consider knowledge and resource sharing an important reason for operating in business networks. On the other hand, the risks related to knowledge leaks were considered an important issue, which also highlights the importance of joint rules for knowledge management practices in business relationships and networks. While the respondents in our case recognized the potential hazards, they clearly have a positive view of the influence of networks on business performance, i.e., the managers perceive the overall outcome of networks and relational business practices as clearly positive.

*Abosag I., Yen, D.A. & Barnes, B.R. 2016. What is dark about the dark-side of business relationships, Industrial Marketing Management, Vol. 55, May 2016, pp. 5-9

Valkokari, K., Valjakka, T., Viitamo, E. & Vesalainen, J. Management over boundaries in the network era – what do managers really think about networks? 32th Annual IMP conference, “Change and transformation of markets, networks and relationships, 30 August – 3 September 2016, Poznan, Poland, IMP Group.

 

 

 

10 common mistakes that companies make with Total Solutions

by Taru Hakanen

Total solutions, integrated solutions, product-service systems… In the practical business world, they imply mainly the same thing: Companies package products and/or service as a seamless entity that is based on customer-specific needs. As a result, they accrue benefits for the customer through the combination of different competences and easier purchasing and cooperation.

Total solutions are visible in most companies’ web pages and other marketing material. In spite of the vast interest towards total solutions, we have seen many managers banging their heads against the wall with the same problems. These are 10 common mistakes that companies make with Total Solutions:

  1. Total solutions are sold to every business customer despite the fact that certain customers are not willing to purchase them. This only leads to wasted sales resources, when customers with the most potential have not been identified and sales efforts are not focused on those.
  2. Total solutions are sold to the wrong person in the customer organization. A total solution is not an answer to his/her problems. He/she is not even empowered to procure such large entities.
  3. Salesmen are not competent enough at selling or willing to sell total solutions. Everybody sells what they are used to selling and what they like to sell.
  4. Selling with the ‘one-stop shop’ principle fails. Individuals sell even the same solution from all around the organization without knowing each other. Contact persons are unclear for the customer.
  5. Customer-specific customization fails. The same solution is sold to every customer. Customer’s problems are not really listened and the solutions are not packaged accordingly.
  6. Creating a total solution always starts from zero and companies end up re-inventing the wheel. There are no productized service modules or a clear coordination model to combine them. Profitability and learning possibilities are lost.
  7. Coordination responsibilities are unclear. It is unclear whether the customer or the service provider takes responsibility of the coordination work. Different service providers from around the service provider organization compete over the position of being the ‘closest to the customer’.
  8. Service production is inefficient. The phases of the service process are fuzzy. Knowledge doesn’t flow between the process phases and service providers. Misunderstandings and delays occur.
  9. Total solutions are merely some business jargon of the ‘marketing men’. The total solution offered is not really a total solution. Service modules are still separate entities and gathering them as a total solution does not really benefit the customer in any special way.
  10. Putting a price tag on the coordination work that total solutions require is forgotten. Virtually everything is done for the customers to keep them happy, but the profitability of own company is lost.

Despite the long list of problems outlined in this post, it is definitely possible to make your customers happy with total solutions and enjoy a profitable business along the way! And you guessed right… We at VTT know how to solve these problems with you!

 

Hakanen, Taru (2014). Co-creation of integrated service solutions in business networks. Doctoral Dissertation, VTT Science: 71, Espoo.

Fimecc S4Fleet – Service solutions for fleet management

Palveluiden digitalisaatio – videovälitteiset palvelukohtaamiset vakuutuspalveluissa

by Hannamaija Määttä & Inka Lappalainen

Palveluiden digitalisaatio on lisääntynyt vauhdilla viime vuosina, mikä luo sekä paineita että monipuolisia mahdollisuuksia uusille palveluinnovaatioille. Yksi ihmisten arkea merkittävästi helpottava uudistus on ajasta ja paikasta riippumaton asiointi verkossa, joka laajenee kaiken aikaa niin julkisissa kuin yksityisissäkin palveluissa. Digitalisaatio on muuttanut ihmisten asiointia koskevia odotuksia, ja niissä korostuvat entistä enemmän muun muassa joustavuus ja asiointitavan valinnanvapaus henkilökohtaisten mieltymysten, elämäntilanteen sekä palvelutarpeen mukaan. Palvelun monikanavaisuus alkaakin olla arkipäivää, mutta monikanavaiseen saumattomaan palvelukokemukseen on vielä monella alalla matkaa. Opettelua on myös siinä, kuinka erilaisia palvelukohtaamisia hyödynnetään palvelukehittämisessä verkottuneen arvonluonnin kannalta.

Yksi esimerkki käynnissä olevasta palvelukehityksestä vakuutus- ja pankkialalla on palveluneuvojan ja asiakkaan kohtaaminen verkossa videoyhteyden kautta. Verkkotapaaminen mahdollistaa fyysisen läsnäolon tunteen, kun molemmat osapuolet näkevät toisensa. Sen on todettu edistävän henkilökohtaista ja luottamuksellista palvelukokemusta, mitä erityisesti vakuutuspalvelussa arvostetaan. Niin ikään se mahdollistaa reaaliaikaisen keskustelun ja käsillä olevan asian työstämisen yhdessä, kun palveluneuvoja pystyy jakamaan oman näyttönsä asiakkaan kanssa. Keskeisinä hyötyinä ovat molemminpuolinen ajansäästö ja resurssitehokkuus. Asiakas voi esimerkiksi halutessaan varata verkkotapaamisen ja säästää itsensä jonotukselta puhelinpalveluun tai matkalta paikanpäälle toimistoon. Kuulostaa helpolta ja vaivattomalta, mutta onko sittenkään kyse vain videovälitteisestä asiointikanavasta?

Osana VALIT-tutkimushanketta (www.valit.fi) olemme tutkineet tämän kaltaisten uusien palvelukohtaamisten potentiaalia innovaatioareenana, eli uudistuvan arvonluonnin, osapuolten arvo-odotusten sekä vaihtoehtoisten innovaatiologiikkojen näkökulmasta.

Keskeisiksi kysymyksiksi nousee, kuinka luodaan vakuutuspalvelussa olennainen luottamuksellinen suhde osapuolten kesken, kun välissä on teknologia? Mitä uusia osaamisvaatimuksia verkkotapaaminen asettaa asiakaspalvelijalle sekä asiakkaalle? Miten uudistuva palvelu ja sen arvolupaus rakentuu osapuolten kesken? Miten tämän kaltainen vuorovaikutus muuttaa asiakaspalvelijan työkäytäntöjä sekä asiantuntijuuden muutosta systeemisestä näkökulmasta?

Case-tutkimuksessamme keskityimme videon välityksellä tapahtuvien palvelukohtaamisten kehittämiseen LähiTapiolan vakuutuspalveluissa. Osapuolia palvelevien tehokkuustavoitteiden ohella verkkotapaamisella pyritään yhtiöryhmän uudistuneen strategian mukaisesti entistä helpommin ja luontevammin turvaamaan ja edistämään ihmisten arkea yhteistyökumppaneiden kanssa. Alustavien tutkimustulostemme perusteella verkkotapaaminen parhaimmillaan yhdistää oivallisesti asiakasläheisyyden, joustavuuden ja tehokkuuden. Siten se on jälleen yksi askel vakuutuspalvelun integroitumiselle entistä luontevammin osaksi ihmisten arkea. Tämä kehityssuunta tarjoaa jatkuvasti uudenlaisia arvonluonnin mahdollisuuksia. Verkkotapaamisten sisällössä painottuu entistä enemmän ennakoivuus, elinkaarinäkökulma, henkilökohtainen ja yhteisöllinen kokonaisturva ja uudistumiskyky. Siten se asettaa uudenlaisia osaamis- ja asennevaatimuksia molemmille osapuolille. Nämä vaatimukset on otettava huomioon, jotta voidaan edistää uudenlaisten palvelumallien rakentumista.

Systeemisestä näkökulmasta vaikuttaisikin, että verkkotapaamisten mahdollistamat avoimet (kasvokkain tapahtuvat, välittömät, vastavuoroiset ja epämuodolliset) palvelukohtaamiset toimivat osaltaan vakuutuspalvelun dynaamisena innovaatioareenana verkottuneen arvonluonnin ja digitalisaation murroksessa. Tämä edellyttää kuitenkin, että nykyiset toimintamallit haastetaan kokeilevalla yhteiskehittämisellä, asiakkaiden käyttökontekstin syvällisellä tuntemuksella sekä systeemisellä kehitystavalla, huomioiden eri toimijoiden arvo-odotukset.

Kirjoitus pohjautuu käynnissä olevaan tutkimustyöhön sekä konferenssijulkaisuun: Määttä, HM. & Lappalainen, I. 2015. ICT-based service encounters as an innovation arena. XXV. International RESER Conference, September, Copenhagen, Denmark.

Hold your horses just for a minute before digitalizing your service business!

by Taru Hakanen and Pasi Pussinen

Digitalization offers immense opportunities for making your service business bloom. It brings new channels for reaching your customers, interacting with them, and involving them in service co-creation. Whether it is a matter of the Internet of Things (IoT), the industrial internet or any digital solution, we all want to win this race. However, before rushing into purchasing a number of new gadgets, sensors and applications, take a minute and think through: where exactly you are heading with digitalization?

The five questions below guide you to find the very core of your business development aims and provide examples of the ways that digitalization can help you in achieving those:

Discovering new markets and customers?

  • Acquiring customer knowledge (e.g. CRM, marketing information systems, IoT for user data collection)
  • Analysing and interpreting customer knowledge (e.g. CRM, analytic tools)
  • Increasing the visibility of own company and services (e-marketing)

Renewing and designing attractive service portfolio?

  • Collection of new ideas from customers and other stakeholders for service innovation (e.g. co-creation platforms, social media)
  • Complementing service portfolio with new digital services and ‘smart’ products (e.g. smart IoT solutions)

Increasing sales and the efficiency of sales processes?

  • Utilizing digital sales tools and solutions (e.g. CRM, digital visualisation)
  • Exploiting digital sales and marketing channels (e.g. online shopping, social media)
  • Collecting sales leads from the customer interface (e.g. IoT technology for machine condition monitoring, mobile solutions for service personnel)

Designing cost-efficient service processes?

  • Efficient management of internal and customer resources (e.g. ERP-systems, resource management software solutions, mobile solutions)
  • Designing self-services and remote services (e.g. online training, real-time monitoring and remote problem solving with IoT)
  • Online shopping and digital distribution channels

Enhancing customer satisfaction and creating positive customer experience?

  • Real-time reporting for customers and future forecast
  • Implementing new channels of customer interaction in service co-creation (e.g. co-creation platforms)
  • Enabling multiple channels of customer feedback (e.g. social media)

All of the above business aims are undoubtedly salient in service business. But as we all know, we have to start somewhere and prioritize our decisions and actions, especially when significant development investments are involved. When you have a clear vision of the drivers for your business success, selecting adequate digital solutions also becomes easier!

Fimecc S4Fleet programme: https://www.fimecc.com/content/s4fleet

Pk-teollisuuden palveluviennin uudet mahdollisuudet

by Taru Hakanen

Suomen valmistava teollisuus vastaa tavaraviennin lisäksi myös suurimmasta osasta palveluvientiä: yritykset tarjoavat muun muassa investointihyödykkeisiin liittyviä huolto- ja kunnossapitopalveluja ja teknistä tukea maailmanlaajuisesti Koneen ja monen muun ison yrityksen tapaan. Kun tavaraviennin arvo on ollut viime vuosina n. 55 miljardia, palveluviennin arvo on ollut 20 miljardin luokkaa.

Palveluviennin arvoa olisi mahdollista kasvattaa enemmänkin ottaen huomioon sen, että kansainväliset palvelumarkkinat kasvavat paljon tuotemarkkinoita nopeammin. Tässä kohtaa – isojen yritysten hienon panoksen lisäksi – katse voidaan kääntää myös mahdollisiin uusiin kasvualueisiin: pk-yritysten palveluvientiin ja digitaalisten palvelujen tuomiin mahdollisuuksiin palveluviennin kasvattajana.

Tavara- ja palveluvienti tukevat toisiaan eikä toisen kasvattaminen ole toista vastaan – päinvastoin. Panostuksia tarvitaan molemmissa, mutta uutta kasvua voisi hakea yhä voimakkaammin myös pk-yrityksistä ja palvelualoilta, joissa tarjoomassa ei ole tuotteita ollenkaan. Näitä palveluja voisi lisäksi kehittää ja skaalata erilaisilla digitaalisilla ratkaisuilla.

Suomessa on valtavasti pk-yrityksiä, jotka ovat jo mukana palveluviennissä ja joilla olisi potentiaalia kasvattaa sitä merkittävästi. Tällaisia aloja ovat esimerkiksi konepajateollisuus, IT, suunnitteluala ja konsultointi. Yritysten on mahdollista uudistaa tuotetarjoomaa radikaalistikin täydentämällä sitä palveluilla tai jopa rakentamalla tarjooma palvelu edellä – ja valita vasta sitten palvelun mahdollistavat teknologiset ratkaisut.

Menestykseen kansainvälisillä markkinoilla on vielä paljon tehtävää: Tarvitaan rohkeita palvelustrategioita, syvällistä asiakasymmärrystä yritysasiakkaiden ostokäyttäytymisestä kansainvälisillä markkinoilla, uudenlaisia ansaintalogiikoita, houkuttelevaa palvelujen konseptointia sekä asiakaskeskeisten ja tehokkaiden myynti- ja palveluverkostojen luomista. Menestyksekkäimmät kv-markkinoilla toimivat yritykset osaavat mallikkaasti yhdistää asiakasläheisyyden ja tehokkaat palveluprosessit.

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Kohti diginatiivia palvelubisnestä!

Northern Service Day NSD2016 kokosi Ouluun yli 150 innovaatioekosysteemin osallistujaa pohtimaan digitaalisen murroksen mahdollisuuksia. Osallistujakyselymme paljasti, että digitaalisen palvelubisneksen osaamista tarvitaan Suomessa.

Treenaamassa oli sekä yritysmaailman, julkisten toimijoiden sekä tutkimusmaailman osaajia. Sami Karhunen, Solinor Oy, herätteli kyseenalaistamaan nykyisiä ajattelutapojamme – entä, jos olemmekin väärässä? Marja Toivonen, VTT Oy, muistutti, että digitaalisuudessakin on kyse yhteistoimintamalleista.  Kari-Pekka Kronqvist, Oulun kaupunki, kutsui kaikkia osallistumaan yhteistoimintaan kaupunkialustoilla.

Digitaalisen murroksen konkreettisia mahdollisuuksia tuotiin esille monipuolisesti.  Minna Törmälä, Oulun Kauppakorkeakoulu, kertoi brändäämisestä digitaalisuuden avulla.  Minna Åman-Toivio, MedKit Finland Oy, jakoi esimerkin, miten he ymmärsivät kerryttävänsä asiakkaille arvokasta tietoa. Kristian Luoma, OP, yllätti sanomalla, että pitää ymmärtää että firmojen sisällä tehdyt suunnitelmat ovat lähtökohtaisesti väärin, mutta että asiakkaiden kanssa tehtävän yhteiskehittämisen kautta päästään kohti oikeaa, arvokasta palvelua.  Myös Sakari Sipola, Oulun yliopiston kauppakorkeakoulu, kehotti tavoittelemaan kokemusta.

Ville Hulkko, Valossa Lab Oy, kiteytti, että diginatiivius on nopeaan muutokseen sopeutumista, ja peräsi asennetta. Asennejumppaa tehtiinkin konkreettisen jumpan lisäksi myös henkisesti: tilaisuuden miniluennot antoivat mahdollisuuden keskustella käytänteistä ja työkaluista.

Lämpimät kiitokset kaikille tilaisuuden puhujille, osallistujille ja järjestäjille.  Jatketaan jumppaamista — pelkästään nykyisen liiketoiminnan digitalisoiminen ei riitä, vaan meidän pitää pystyä kehittämään ihan aidosti uudenlaista, diginatiivia bisnestä!

Kaisa Still, Erikoistutkija, VTT Oy

Tilaisuuden järjestäjät: BusinessOulu, Oulun ammattikorkeakoulu,  Oulun Kaupunki, Oulun yliopiston kauppakorkeakoulu, Teknologian Tutkimuskeskus VTT Oy sekä Finnish Service Alliance, FSA

Mukana tukemassa: Tekes, Fluente Oy

Building a service business model for a manufacturing SME

By Jukka Hemilä

We published a journal article aiming to increase the understanding of service business development for manufacturing SMEs by further developing previous conceptual frameworks for service supply chain management, based on the current scientific literature and empirical cases. The main result of the study is a simple, but comprehensive step-by-step model for the development of the service business and service supply chain.

The previous literature includes many New Service Development (NSD) programs and models, but the methods are not described in such detail that SMEs can strictly follow them. A formalized process from strategy to implementation, with the usage of the best available resources, can ensure the success of the NSD program. The development models described in literature include typically four main phases: 1. strategic targets, 2. corporate environment, 3. service offering design and development, and 4. Implementation.

Based on empirical SME cases we noticed a need for a more detailed and simple, but comprehensive step-by-step model for the development of the service business and service supply chain. We created a step-by-step model with service development phases (SDPs), to define the required steps in the service business development:

SDP1 – Company present state and strategy

SDP2 – Products and their features

SDP3 – Customers, segments, needs

SDP4 – Product life-cycle

SDP5 – Services along product life-cycle

SDP6 – Service offering, service modules

SDP7 – Service organization, service processes

SDP8 – Earning logic, service pricing models, service value

SDP9 – Service sales and marketing models

SDP10 – Service launch to markets

SDP11 – Follow-up and improvements

For successful NSD in SME, project managers should involve all business functions and competent resources from the organization. When setting up a development project, sales, ICT, and R&D functions should be heavily involved. These functions have core knowledge and ideas required in the development of service business in manufacturing firms. The process should start with a strategic discussion of whether the firm’s future is based only on the product offerings, or whether there should be a services offering and what is its role. The most challenging part of the development turned out to be technology and the product itself, which is quite surprising. There were many people involved in product development, because they introduced new sensors, ICT, and structures to the final product. We had two empirical case studies in which we tested and validated our developed step-by-step model (see Table below). Case 1 was Chiller Oy, a cooling and heating equipment manufacturer. Case 2 was Oy M. Haloila Ab, a manufacturer of automatic wrapping machines.

Product offerings Turnover Employees Workshops Involved employees Involved positions
CASE 1 cooling and heating equipment 20 M€ 50 26 11 CEO, CFO, CTO, ICT and Logistics Director, Sales Director, employees from IT, Production and Service departments
CASE 2 wrapping machines 30 M€ 55 27 14 CEO, CTO, CFO, Production and Logistics Director, Sales Director, employees from R&D, IT, Production and Service departments

The implications of the study are beneficial from both the scientific and practical perspectives, which help to understand better the process and related factors in multi-actor service business development. The practical findings of the study give insights from manufacturing firms’ new service developments, and from the roles and resources required in the process. It was valuable for case companies to have a structured and formal process for the development. Companies with limited resources need external expertise, consultants or researchers, to support the development process.

The digitalisation brings entire new opportunities for the service businesses. Our SDP model can be used for the digitalisation of service business as well. Just contact us and let’s make your business even more competitive with the service offerings and digitalisation.

Reference:

Hemilä, J. & Vilko, J. (2015): The Development of the Service Supply Chain for a Manufacturing SME. International Journal of Logistics Management, Vol. 26 Iss: 3.

Entire article can be found from here: http://www.emeraldinsight.com/doi/full/10.1108/IJLM-01-2014-0001

IoT is first and foremost about service!

by Taru Hakanen

‘IoT’ and ‘industrial internet’ are major hype words in the current business world. IoT-solutions are already abundant in the market, but the main buzzing seems to circulate around the question: How to make money with IoT? How to build successful IoT business models?

What are services?

We argue that the most important prerequisite for building successful IoT business models is the realization that IoT and industrial internet are foremost about service!

And what services are, then? What are they about?

Services are highly context-dependent resulting in increased need for understanding customers’ business and behaviour. Services are about interaction. They are about relationships between companies and company representatives. They are about customer participation in service co-production. Services are about mutual value co-creation, in which both the suppliers and customers have their own role. They are NOT products that are ‘pushed’ to the markets through logistic chains in containers or truck trailers with a hope that a customer would purchase them.

We embrace reversing the whole mindset in business model building, aiming rather for a ‘pull’ than for ‘push’ mode in IoT business model creation. IoT is not about developing and applying IoT-solutions and ‘pushing’ them to the markets, but about customer- and service-focus. After all, IoT is primarily used for creating new kinds of services and supporting the existing ones. This notion has an outstanding impact on IoT business model generation and also on creating new service innovations!

Five keys for successful IoT business models

The message of creating successful service-oriented IoT business models (Hakanen et al., 2015) is now condensed in five key points:

  • Ensure value creation for all the service ecosystem actors: Customer value is the reason for buying any services. A service provider’s task, then, is to identify customers’ expectations for value or discover totally new value that IoT brings and build an attractive business model accordingly. However, with IoT business models – not only customer value – but also reciprocal value creation between all the service ecosystem actors is pivotal (Jaakkola & Hakanen, 2013).
  • Design cost-effective and customer-focused service processes: IoT-solutions may change the way services are co-produced with the customer. IoT enables even new service innovations in terms of remote services but also in terms of closer cooperation with the customer due to increased knowledge exchange. Suppliers need to design channels and touchpoints of interaction with the customer and make a distinction between back-office and front-office service operations. A salient issue in developing successful IoT business models is, then, to plan the role of customer in the service process and include knowledge flows of the whole service ecosystem in service process mapping.
  • Ensure positive customer experience: IoT may have both positive and negative effects on customer experience. It may decrease face-to-face interaction because of knowledge exchange via various IT-tools and platforms. On the other hand, an IoT service supplier may grab a chance of increasing customer interaction with IoT. Some companies may even start building a new IoT business model from an innovative way of interacting with the customer and managing customer relationships!
  • Design global service networks: IoT is not only about integrating technology and IT-systems and applications but also integrating organizations in service co-production. Especially in the global setting, providing services locally – remedying the customer’s problem on-site on the other side of the globe – is expensive. Then, finding partners that take responsibility of local service co-production in different markets is pivotal in order to build cost-effective business models. And although there would be several service partners operating on the customer interface, they should be able to offer a coherent customer experience for the customer (Hakanen & Jaakkola, 2012).
  • Discover the most profitable earning logic: Earning logic and the way an IoT business model creates revenue for the suppliers are at the very core of a successful business model. The financial income largely relates to benefits that can be accrued for the customer. As IoT-services are complex in nature with multiple actors within a service ecosystem, one way of proceeding with totally new IoT business models is sharing risks and benefits in terms of revenue, if the business model proves to be successful.

 

‘Service-oriented IoT business model canvas’ in Hakanen, Taru; Antikainen, Maria; Pussinen, Pasi & Muikku, Matti (2015). Boosting service export – a roadmap for IoT enabled business models. To be published in The ISPIM Innovation Summit, Brisbane, Australia on 6-9 December 2015.

Jaakkola, Elina & Hakanen, Taru (2013). Value co-creation in solution networks. Industrial Marketing Management, Vol. 42, No. 1, pp. 47–58.

Hakanen, Taru & Jaakkola, Elina (2012). Co-creating customer-focused solutions within business networks: A service perspective. Journal of Service Management, Vol. 23, No. 4, pp. 593–611.

Betting on the new horse in Finnish metals and engineering industry: user experience as a business driver

By Hannamaija Määttä, Maaria Nuutinen and Maarit Halttunen

How to get the entire organisation on board with UX? Lessons learned from the FIMECC UXUS programme.

Five years ago, some of Finland’s metals and engineering industry companies decided bravely to bet on the new horse and embarked on an expedition towards user experience driven differentiation in the FIMECC UXUS programme. This post aims at illuminating one of the main conclusions of the programme: in order for companies to truly benefit from user experience (UX), a cultural transformation is needed throughout the organisation. All units have to adopt a user experience -based innovation and business logic, a UX-mindset. This hidden part of organisational culture exists within organisational structures, management styles and daily practices as well as in the attitudes towards renewals. Adopting a UX-mindset enables the transition from a strongly technology and product-oriented company towards a more customer and user value-oriented company, which is also needed when aiming to fully utilize UX-based competitiveness potentials.

In the beginning of the FIMECC UXUS -project, getting the UX message across to the entire organization was considered as a great challenge by the participating companies. Many times, UX was seen as the responsibility of a design team or an R&D team. In other words, UX was understood to be something extra to be included in physical products, not a shared philosophy or mindset guiding the organization’s business operations. One of the greatest challenges was to get sales people on board, as they were distant from R&D and did not participate in the development of UX-products. Connecting UX goals to an organisation’s larger goals is important when aiming to make all employee groups participate in adopting a UX-mindset. When UX is visible in the organisation’s brand or strategy, it is also acknowledged inside the organisation, and its meaning is easier to understand and its benefits are more clearly seen by all. Having UX on the management’s agenda is thus crucial. Special attention should be given both to the actors involved in product development and to those collaborating closely with customers.

One of the key prerequisites for adopting a shared UX-mindset is that all employees in the organisation should understand how they can provide good experiences through their own work. It is crucial to get people talking about UX by building experiential forums that enable stronger collaboration with customers and users, and within the organisation between different units. During the Fimecc UXUS programme, the participating companies discovered that various different means can be utilized to strengthen the UX-mindset:

  • KONE’s People Flow Day, an experiential training event for employees:
    • An event organized every year to help all employees better understand what the UX –based strategy of KONE means. The event is designed to bring the employees normally not connected to UX-issues closer to the users and customers by acting as researchers, talking to customers, interviewing the public, making on-site observations and filling in questionnaires. Through this event, KONE supports the mindset transformation from product-centric thinking to experience-based thinking within the organization.
  • Konecranes’ field study methods:
    • Field studies are utilized as a method to support the holistic understanding of the customers and users and of the contexts they operate in. The field studies are conducted by R&D people, who interview and observe customers and users at customer organizations. Disseminating the knowledge gained increases the awareness of what UX means in the context of various customers and markets.
  • Rocla’s internal collaboration between R&D and marketing and communications:
    • The interaction and collaboration of R&D and marketing has been strengthened by integrating the two units. They work closely together and through the collaboration ensure that marketing people understand the technology behind product features and that the R&D people’s thinking is based on user-benefits, not only technical features. Through co-creation, specific messages and tools for different touchpoints can be created (for example in sales situations) that bring out the UX features essential to products.
  • Metso Automation’s visualisation and storifying:
    • To spark discussion and enthusiasm towards UX, Metso Automation utilizes visualisation and storifying: stories from users, videos from user environments, illustrated concepts and prototypes of future tools are efficient ways to arouse discussion around UX. The prototypes and visualizations build an innovation environment where the whole organization, developers, customers and users, can discuss the present and future products.

Now, at the end of the FIMECC UXUS programme, the time has come to claim the prizes. If you wish to learn more about how the participating companies have succeeded in making UX a competitive factor in their business, browse through the presentations at the final seminar, see the videos and booklets – and familiarise yourself with the final publication that will be published November 17th 2015.

If you also wish to learn more about the results from other Fimecc –programmes, register to the 8th annual Fimecc seminar held November 17-18, 2015 at Oulu:

http://www.fimecc.com/sites/www.fimecc.com/files/FIMECC_Annual_seminar_program_2015.pdf

References:

Määttä, H., Nuutinen, M: & Halttunen, M. Adopting a UX-mindset – means for getting the entire organisation on board with UX. In: User experience and usability in complex systems 2010-2015. Final Report 1/2015, Fimecc publications series 8, Tampere, 2015.

Heikkinen, M. and Määttä, H. (2013): “Design-driven product innovation in enhancing user experience oriented organizational culture in b-to-b organisations”, presented in Tsinghua International Design Management –conference 1.-2.12.2013

Nuutinen, M., Heikkinen, M. and Määttä, H. (2013): “Evaluating the levels of design management in user experience-oriented companies –experiences from Finnish metals and engineering industry”, presented in the 2nd Cambridge Academic Design Management Conference, 4.-5.9.2013 http://www.cadmc.org/CADMC2013Proceedings.pdf

Nuutinen, M., Seppänen, M., Mäkinen, S. J. & Keinonen, T. (2011). ”User experience in complex systems: crafting a conceptual framework”. The 1st Cambridge Academic Design Management Conference, University of Cambridge, 7 – 8 September 2011, Institute for Manufacturing (IfM).