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

Lost in Network? Network picturing as a tool in dynamic network management

By Tiina Valjakka and Katri Valkokari

This post illustrates how picturing networks from different actors’ perspectives affects the network management and facilitates the building of new connections. It is based on a paper we presented last month in the IMP 2015 Conference in Kolding, Denmark. The aim of the paper is to extend understanding of strategic management in dynamic business networks, especially from the viewpoint of SMEs operating in a B2B context.

moniverkosto

Firms are simultaneously acting in various networks in different roles (see picture above).  Each of the actors has its own perception of the network and its position within it. Managers’ understanding of perceptions across boundaries is a key to a firm’s success in networked business ecosystem, where knowledge and resources are dispersed and value co-creation requires integration of resources. Drawing from the management point of view, our preliminary research question was: How to picture and combine the different network perspectives in order to better manage the business network?

Network pictures can be seen, and utilized as:

  • Business actors’ subjective mental frameworks of their surroundings, and thus as sense-making tools that underlie decision-making in networks
  • a tool used by researchers and practitioners to grasp actors’ understanding of their surrounding business network(s)
  • boundary-spanning mechanisms which serve as an interface between different organizations

In our case study, we utilized network picturing as a tool for strategic management in a SME. We first draw two focal company perspectives; factory and sales, identified their most important connections, and described the roles and content of interaction with these first-level partners. The other network perspectives depicted were end-users’ network pictures from different customer segments. These network pictures, snapshots from different network actors’ perspectives, were then utilized for drawing the network management perspective. Network picturing resulted in the identification of new relevant network actors and needs for building connections to them.

The managerial challenge is to guide the development within business networks. Often, companies anchor themselves to a single vision of their customer needs and network structures, which may preclude considering the viewpoints of other network actors. Many businesses have a complex nature, and network picturing gives a possibility to see beyond the most obvious and traditionally closest actors. Our study highlighted that in order to act as a change driver in their business environment, a SME must have broader connections than the relationships with the direct customers and suppliers.

Reference

Valjakka, Tiina; Valkokari, Katri; Kettunen, Outi. 2015. Utilizing network picturing in the management of dynamic networks. IMP Group. 31th Annual IMP Conference and Doctoral Colloquium 2015 “Organizing Sustainable BtoB Relationships – Designing in Changing Networks”, 25 – 29 August 2015, Kolding, Denmark.

The rules of the game: How to survive and thrive in Business, Innovation, and Knowledge Ecosystems

by Katri Valkokari

“How dreadful… to be caught up in a game and have no idea of the rules.” –Caroline Stevermer In Sorcery & Cecelia or The Enchanted Chocolate Pot

The purpose of this blog post is to describe the rules of the game (i.e., the logic of action) in the three different ecosystem types: business, innovation, and knowledge ecosystems (see Figure below), while these three ecosystem types are interconnected from the viewpoint of the ecosystem actor. For practitioners, the aim is to shed more light on how the different types of ecosystems differ and demonstrates that different models are needed in order to operate in different ecosystems.

ecosystems

In business ecosystems as well as service or industrial ecosystems, the economic outcomes and business relationships between actors are highlighted. The approaches of innovation (eco)systems and regional clusters focus on mechanism and policies fostering the creation of innovative startups around so-called regional hubs or clusters. Finally, knowledge ecosystems have their main interest and outcome in creation of new knowledge through joint research work, collaboration, or the development of knowledge base. The table below clarifies how the ecosystem types differ in terms of their outcomes, interactions, logic of action, and actor roles.

Table: Characteristics of ecosystem types

Business ecosystems Innovation ecosystems Knowledge ecosystems
Baseline of ecosystem Resource exploitation for customer value Co-creation of innovation Knowledge exploration
Relationships and connectivity Global business relationships both competitive and co-operative Geographically clustered actors, different levels of collaboration and openness Decentralized and disturbed knowledge nodes, synergies through knowledge exchange
Actors and roles Suppliers, customers, and focal companies as a core, other actors more loosely involved Innovation policymakers, local intermediators, innovation brokers, and funding organizations Research institutes, innovators, and technology entrepreneurs serve as knowledge nodes
Logic of action A main actor that operates as a platform sharing resources, assets, and benefits or aggregates other actors together in the networked business operations Geographically proximate actors interacting around hubs facilitated by intermediating actors A large number of actors that are grouped around knowledge exchange or a central non-proprietary resource for the benefit of all actors

A primary motivation for utilising ecosystem concepts in management studies has been the desire to exploit self-organizing properties of natural ecosystems. Although formal authority is invisible in man-made ecosystems, they are not entirely self-organized: they are organizational designs that are held together on the condition that their members are in formal or informal agreement about shared purpose (baseline) and operation modes (logic of action). Previously, research has typically focused on only one of the ecosystems at a time, when in the real-world systems the interest of actors (i.e., organisations), who are the ecosystem inhabitants, come bundled together with multiple ecosystem parts. In an ecosystem, each actor has their own role to play and, in this way, they view the partially overlapping ecosystems from their own unique perspective. Thus, relationships and interactions between ecosystems types need to be analyzed at several levels in order to understand how connections flow between different ecosystems in the real business world.

All these ecosystems are dynamic, changing, and also changeable through ecosystem orchestration. Different organisms (i.e., species in natural ecosystems or actors with complementary roles in man-made ecosystems) are necessary to keep the ecosystem balanced, and removing one can cause a chain reaction felt throughout the entire ecosystem. Biological ecosystems are characterized by one or more equilibrium states, where a relatively stable set of conditions exist and maintain a population or nutrient exchange at particular levels. It is, however, important to note that the equilibrium of biological ecosystems is seldom optimal from the viewpoint of all species in the ecosystem. Thus, an ecosystem always induces both competition and cooperation, which leads to the selection and adaption of species. And, despite hitherto mainly positive approaches to man-made ecosystems, which have typically perceived ecosystems as positive and collaborative systems, that is also true within business, knowledge, and innovation ecosystems. In order to survive and thrive in an ecosystem, the essential point is to understand that different forms of interaction are required in different ecosystems.

Reference:

Valkokari, K. Business, Innovation, and Knowledge Ecosystems: How They Differ and How to Survive and Thrive within Them. Technology Innovation Management Review; 5(8) pp.17-24. http://timreview.ca/article/919

Keywords:

business ecosystem, innovation ecosystem, knowledge ecosystem, ecosystems, platforms, communities

Customer value determinants

By Jukka Hemilä (jukka.hemila@vtt.fi)

The ongoing “Determinants of value and vulnerability in customer-oriented service network” CUSTOR-project aims to identify customer value determinants and their vulnerabilities in a multi-actor service supply network. We expounded on this topic in our recent conference paper “Value Creation in Product–Service Supply Networks”.

Customer value propositions combine functional, economical, emotional, and symbolic customer value determinants (Rintamäki et al., 2007). Traditionally firms emphasized creating value through offering high quality product or services, and the value proposition was based on the features of product–service offerings, i.e. functional value. Product technical specification, capacity, performance, dimensions or other measurable determinants is this traditional way to argue value for the customers. Today functional value is still valid and cannot be forgotten, but it is in many cases no longer the competitive advantage.

Economic, emotional and symbolic value in B2B context

Economic value has been a hot topic since mass customization and is still so today in times of global economic crisis. Offering low prices is no longer the preferred means to attract new customers. In consumer business, there is always a need for both luxury and low-cost products and services. Also in the B2B context, customers are willing to pay more, if they can acquire a more valuable product or service. In that case, value is something other than economic value. More firms have begun competing against each other by building brand equity, but industrial brand equity is still quite a minor research topic (Leek and Christodoulides, 2012). Brand equity conveys a number of intangible benefits to buyers; it can increase both the buyer’s confidence in, and their satisfaction with, their purchase decision, and can also reduce the level of risk and uncertainty in the purchase decision (ibid). Emotional value is not only about the brand, it is also feelings, experiences, reputation, trust, etc. The B2B purchase process has been more rational than the B2C purchase process, and emotions and feelings have not been so relevant. Today, in high competitive markets, product and service measurable determinants can be quite similar, so buyers include emotional determinants in decision making. In the future, the importance of symbolic value will rise. Consumers prefer recyclable materials, organic food, human rights in production, and other symbolic values. Consumer brands are focusing on symbolic value creation. In a B2B context, symbolic values are becoming more important, and even now industries have focused on CO2 emissions and green technologies. It is clear that tangible elements are crucial in conveying value to buyers, but the role of emotional and symbolic value propositions is becoming more and more important in a B2B context (Rintamäki et al., 2007; Leek and Christodoulides, 2012).

CUSTOR research continues with a detailed case analysis, that is to say measurement and KPIs in value alignment, but also creating a management model for the value creation in product–service networks (picture).

custor focus

This posting is based on a published conference article:

Hemilä, Jukka; Vilko, Jyri; Kallionpää, Erika and Rantala, Jarkko (2014): Value Creation in Product–Service Supply Networks. The proceedings of the 19th International Symposium on Logistics (ISL2014): Designing Responsible and Innovative Global Supply Chains. Ho Chi Minh City, Vietnam, 6-9th July 2014

CUSTOR is financed by Tekes F€€lings –programme. Research partners are VTT, TUT and LUT. Six companies participate in CUSTOR project.

References

Leek S, Christodoulides G (2012), “A framework of brand value in B2B markets: The contributing role of functional and emotional components”, Industrial Marketing Management, Volume 41, Issue 1, January 2012, Pages 106–114.

Rintamäki T, Kuusela H, Mitronen L (2007), “Identifying competitive customer value propositions in retailing”, Managing Service Quality, Vol. 17 No 6, pp. 621–634.

How SMEs Can Manage Their Networks – Lessons Learnt from Communication in Animal Swarms

By Katri Valkokari and Pasi Valkokari

Ants, wasps and bees are known and studied because of the amazing efficiency of their collective efforts. Therefore, the current debate on business ecosystems inspired us to question if network management could learn from the ‘swarm intelligence’-based activities of animals. The interaction between business organisations is at the heart of the network approach as well as interaction of individuals in animal swarms. The fundamental managerial issue in building and renewing business networks is how to operate as a network, i.e. how small and medium-sized enterprises (SMEs) can ensure that all network actors do their best for the network and not only for themselves.

SME cannot manage the network like the alpha male or the queen bee, which controls the swarm and expects other network members to follow their given roles. There is still an opportunity for the SME to manage the network as a swarm of equals and to communicate its visions of the common best in order to commit to the other network members. Our recent research suggests that different managerial tools – such as network mapping, business models, partner evaluation and LCC tools – can be utilised as communication means also by SMEs (Figure). In other words, these tools serve as boundary-spanning objects supporting shared sense-making between network members.

Framework_blog

In line with the lessons learnt from the collective efforts in animal swarms, we suggest that SMEs can manage their business networks through communication, which is based on understanding of interests and expectations of other network actors. Anyhow, the question considering network level common evaluation still remains unsolved and we hope that our study will encourage further empirical research on applying new thinking to business networks and their management.

Reference:

Valkokari, Katri & Valkokari, Pasi (2014) How SMEs Can Manage Their Networks: Lessons Learnt from Communication in Animal Swarms, The Journal of Inspiration Economy: An International Journal. Vol. 1, No: 1, pp. 111 – 128 Link: https://journal.journals.uob.edu.bh/Article/ArticleFile/844

Monikriteeri ja monitoimija -näkökulmat arviointitoiminnassa

Systemaattinen arviointitoiminta on ollut osa strategista päätöksentekoa jo vuosikymmeninen ajan. 90-luvun yhteiskunnallisessa ja taloudellisessa tilanteessa kasvanut tehokkuuden ja tuottavuuden vaatimus sekä vallalle noussut julkishallinnon johtamistapa (New Public Management) ovat johtaneet siihen, että keskeisiksi julkisen sektorin toimenpiteiden arvioinnin kriteereiksi ovat vakiintuneet taloudelliset ja yhteiskunnalliset vaikutukset. Arviointitoiminta on kehittynyt pitkälti osana tilivelvollisuusraportointiin kuuluvaa ohjausta, mikä on johtanut siihen, että arviointeja on alettu pitää julkisten toimijoiden ja toimenpiteiden legitimoinnin välineenä.

Legitimoinnista kumpuavaan arviointitoimintaan liittyy kuitenkin monenlaisia haasteita. Ensinnäkin, arvioinnit ovat tyypillisesti taaksepäin katsovia, jonka vuoksi ne eivät tuota riittävästi päätöksentekoa tukevaa tietoa nopeasti muuttuvan yhteiskunnan tarpeisiin. Toiseksi, lähestymistapa niissä on usein ”atomistinen”; fokus on yksittäisten toimenpiteiden, ohjelmien ja organisaatioiden arvioinneissa, eli huomio ei riittävästi kohdistu vaikutusten syntyyn monien eri toimijoiden ja toimenpiteiden yhteisvaikutuksen tuloksena. Kolmanneksi, mittaamista ja kvantitatiivisia indikaattoreita painottava arviointitoiminta yksinkertaistaa sen kohteena olevaa ilmiön, eikä huomioi vaikutusten syntymistä dynaamisten ja kompleksisten prosessien tuloksena. Toisin sanoen, arvioinnit perustuvat vielä usein lineaariseen panos-tuotos-vaikutus -tyyppiseen ajatustapaan, joka ei vastaan nykyaikaista käsitystä innovaatio- ja kehittämistoiminnan luonteesta.

Yhteiskunnan palveluistuminen asettaa oman haasteensa arviointitoiminnan kehittämiselle. Palveluiden osalta haaste liittyy erityisesti nykyisin käytössä oleviin indikaattoreihin, jotka keskittyvät palvelujen tehostamiseen teknologian avulla ja mittaavat tuottavuutta ottamatta huomioon asiakkaan saamaa hyötyä. Näin ollen olemassa olevat indikaattorit eivät tavoita palvelujen erityispiirteitä, kuten niiden aineetonta, vuorovaikutteista ja systeemistä luonnetta. Siksi myös palvelu-uudistusten pitkällä aikajänteellä synnyttämä tuloksellisuus ja yhteiskuntaan laaja-alaisesti kohdistuva vaikuttavuus (esim. kansalaisten hyvinvointi ja kestävä kehitys) jäävät näkymättömäksi.

Tutkimuksessamme kehitämme uudenlaista laaja-alaista ja ennakoivaa lähestymistapaa arviointitoimintaan. Lähtökohtana on kaksi tunnettua mallia (monikriteeri- ja monitoimijamallit), joita tarkastelemme yhteisessä viitekehyksessä ja kehitämme edelleen. Monikriteeri -lähestymistapa tekee näkyväksi kehittämishankkeiden ja uudistusten moniulotteisen luonteen ja huomioi niiden synnyttämiä vaikutuksia. Teknologisten ja taloudellisten ulottuvuuksien lisäksi tarkastelemme toimijoiden välistä vuorovaikutusta (suhdeulottuvuus) sekä kansalaisten hyvinvointia ja ekologisesti kestävää kehitystä (vastuullisuusulottuvuus). Monitoimijainen lähestymistapa puolestaan ottaa huomioon sen tosiseikan, että vaikutukset ovat erilaisia kehittämistoimintaan osallistuvien eri toimijoiden näkökulmasta (päätöksentekijät, yksityiset ja julkiset palvelujen tuottajat ja käyttäjät). Kehitämme lähestymistapaa erityisesti ympäristö- ja energiasektorilla, mutta se on sovellettavissa arviointitoimintaan myös muilla sektoreilla.

 

Kirjoitus on tiivistelmä konferenssipaperista ”A multi-criteria and multi-actor perspectives for the evaluation of sustainability services”. Kirsi Hyytinen, Faïz Gallouj, Marja Toivonen.

Paperi esitellään HSSE-konferenssissa Krakovassa, Puolassa 19 – 23.7 2014

Terveydenhuollon uudistuksen monimutkaisuuden tarkastelu

Julkisella sektorilla on käynnissä paradigmamuutos; aiemmin vallinnut uusi julkishallinnon johtamistapa (New Public Management), joka on perustunut vahvasti liiketoimintamaisiin toimintatapoihin, on kehittymässä verkostojohtamisen (Network Governance) suuntaan. Verkostojohtamisen palvelumalleissa korostetaan vuorovaikutus- ja partnerisuhteita sekä kansalaisten voimaannuttamista. Terveydenhuollon järjestelmät ovat suuren kehityspaineen alla johtuen väestön ikääntymisestä sekä julkisen rahoituksen haasteista. Vastauksena ongelmiin on alettu kehittämään CCM –malliin (Chronic care model) perustuvia integroidun hoidon ohjelmia, joita on sovellettu monissa maissa. Näissä uudistuksissa on systeeminen fokus: ne tähtäävät yhtäaikaiseen organisaatioiden, teknologioiden, palveluiden ja partnerisuhteiden kehittämiseen. Kansalaisten voimaannuttaminen ja monitieteellinen yhteistyö ammattilaisten välillä ovat avainasemassa. Tavoitteena on voimaannuttaa potilaat ottamaan suurempi rooli oman terveytensä edistämisessä ja tukea omahoitoa uusilla palveluilla. Potilaiden voimaannuttamisen odotetaan vähentävän taloudellisia rasitteita sekä parantavan hoidon vaikuttavuutta.

Tätä ilmiötä on tarkasteltu empiirisen tapaustutkimuksen kautta perusterveydenhuollossa. Asiakkaiden ohjaaminen kevyempiin, omahoitoa vahvemmin tukeviin palveluihin ja hoidon parempi koordinointi ovat keskeisiä toimintatapamuutoksia tapaustutkimuksen kehitysprosessissa. Näiden käytäntöjen mukaanotto hoitoprosesseihin vaatii ihmisten käyttäytymiseen ja vuorovaikutukseen liittyvien tekijöiden huomiointia. Yksi suurista käyttöönoton haasteista liittyy kulttuuriseen ajattelutavan muutokseen asiakkaan ja asiantuntijan vuorovaikutussuhteessa. Tämä vaatii uudenlaista vallanjakoa hoitoprosesseissa, sillä molempien toimijoiden roolit muuttuvat; asiantuntijan otteesta tulee valmentava ja asiakkaasta tulee aktiivinen partneri oman terveytensä edistämisessä. Asiantuntijoiden ja asiakkaiden suhtautuminen on kriittinen tekijä uusien toimintatapojen käyttöönotossa, ja siihen vaikuttaa suuresti asenteet terveydenhuoltoon liittyen sekä arvomaailma, jota ei helposti muuteta. Uudet toimintatavat vaativat myös uusia taitoja fasilitoinnissa, neuvottelussa, tiedon kokoamisessa ja asiakkaiden oma-aloitteisuuden hyödyntämisessä, erityisesti tehtäessä systemaattista hoitosuunnitelmaa, joka lähtee asiakkaan itse asettamista tavoitteista. Tiedon saatavuus ja parempi mahdollisuus valmistautua hoitotapaamisia varten ovat merkittäviä kehitysaskelia, sillä asiakkailla on täysin uudenlainen mahdollisuus hyödyntää omia terveystietojaan. Tässä korostuu tuen, ohjeistusten ja koulutuksen merkitys sekä ammattilaisille että asiakkaille.

Tutkimuksen tulokset ovat näyttäneet kuinka perinteinen reaktiivinen ja asiantuntijakeskeinen lähestymistapa perusterveydenhuollon asiakasprosesseihin luo itseään kuormittavan vuorovaikutusketjun. Tämä johtuu prosessien tehottomuudesta ja jatkuvasti kasvavista potilasmääristä. Systeemidynaamisen mallinnusmenetelmän avulla on tunnistettu kuinka vakiintuneita rutiineja on vaikea murtaa, vaikka terveydenhuollon organisaatio olisi sitoutunut muutokseen, asettanut selkeät tavoitteet ja konkretisoinut niiden sisällön. Tunnistamalla ja analysoimalla prosessien kriittisiä pisteitä voidaan edistää itseään ruokkivia positiivisia vaikutusketjuja hoitoprosesseissa, lisätä tietoisuutta ja edistää muutosta.

Systeemidynaaminen mallinnus on menetelmä, joka auttaa jäsentämään ja ymmärtämään monimutkaisten järjestelmien käyttäytymistä. Mallinnuksen avulla hahmotimme terveydenhuoltojärjestelmän sisäisiä syy-seuraus-vaikutusketjuja sekä takaisinkytkentöjä järjestelmän osien välillä. Monimutkaisissa järjestelmissä vaikutusketjut ovat pitkiä sekä ajallisesti (arkisten tekojen kaikki vaikutukset eivät näy heti) että paikallisesti (teot vaikuttavat myös muiden henkilöiden ja yksiköiden toimintaan).

Tutkimustuloksemme osoittavat kuinka perinteinen reaktiivinen ja asiantuntijakeskeinen toimintatapa terveydenhuollossa voi itsessään vaikeuttaa siirtymistä kohti uudenlaista toimintatapaa kun samalla järjestelmän kuormitus kasvaa lisääntyneiden potilastarpeiden myötä: Reaktiivisen toimintatavan vuoksi potilaiden jatkohoitoa ei suunnitella tarpeeksi hyvin vastaanotoilla, jolloin potilaille ilmaantuu uusia oireita ja he kuormittavat terveydenhuoltoa tarpeettomasti myös jatkossa. Tästä syntyy noidankehä, sillä järjestelmän kuormituksen vuoksi suunnitelmallisuutta on vaikea saada aikaan myöskään jatkossa. Asiantuntijakeskeisen toimintatavan vuoksi potilaita ei myöskään ohjata tarpeeksi uusien kevyempien palveluiden piiriin, mikä helpottaisi työkuormaa terveydenhuoltojärjestelmässä ja voisi tätä kautta auttaa lisäämään hoidon suunnitelmallisuutta.

Tietokonesimulointien avulla tarkastelimme järjestelmän keskeisten muuttujien (ml. hoitojonon pituus sekä uusien palvelujen käyttäjien lukumäärä) käyttäytymistä ajan yli erilaisissa tulevaisuuden skenaarioissa. Simulointitulokset osoittavat, että samat järjestelmän rakenteet, jotka saavat aikaan nykyiset noidankehät järjestelmässä on mahdollista valjastaa toimimaan itseään ruokkivina positiivisina mekanismeina. Jos esimerkiksi hoidon suunnitelmallisuutta saadaan lisättyä vastaanotoilla, potilaita voidaan tehokkaammin ohjata uusien palvelujen piiriin. Tämän seurauksena hoitojonot lyhenevät, mikä mahdollistaa entistä suunnitelmallisemman hoidon jatkossa.

Simulointitulokset tuovat myös esiin myös mahdollisia riskitekijöitä, jotka on syytä huomioida järjestelmän kehityksessä. Esimerkkinä tästä on uusien palvelujen tehokkuus, joka vaikuttaa uusien palveluiden hoitotuloksiin ja sitä kautta siihen, kuinka paljon niihin ohjatut ihmiset kuormittavat terveydenhuoltojärjestelmään jatkossa. Oleellisia tekijöitä ovat myös ihmisten asenteet uusia palveluja kohtaan, jotka muuttuvat hitaasti. Onnistuneet kokemukset uusista palveluista ja niiden hyödyn osoittaminen verrattuna perinteisiin vastaanottoihin on tärkeä saada sekä terveydenhuoltohenkilöstön että potilaiden tietoisuuteen.

Kirjoitus on tiivistelmä kahdesta konferenssiartikkelista:

Määttä, Hannamaija, Sampsa Ruutu, and Marja Toivonen. 2014. “Revealing the Complexities of Health Care Renewal : A System Dynamics Approach.” Proceedings of the 5th International Conference on Applied Human Factors and Ergonomics AHFE 2014, Kraków, Poland 19-23 July 2014.

Ruutu, Sampsa, Hannamaija Määttä, and Marja Toivonen. 2014. “Adoption Dynamics of Chronic Care Model.” The 32nd International Conference of the System Dynamics Society, Delft, Netherlands, July 20 – July 24, 2014 (Submitted manuscript)

The Cloud and many facets of value

ValueBy: Kaisa Koskela-Huotari and Andrey Sirotkin

The word value has been used lately a lot in the discussions related to business and the Cloud. What do we, however, mean by value in this context? Roughly, one can argue that the concept of value has evolved into two quite distinct meanings [1]. Firstly, value is used to portray ‘goodness’ of something physically external to a person. This something can be another person, a product, an activity or anything else. Secondly, the concept of value can also describe ‘goodness’ as determined by an individual personally and culturally, and in an ethical sense. Usually in this meaning the plural term – values – is used.

Value (of something) and the Cloud

There are three ways to discuss the concept of value (of something) [2, 3, 4] and the Cloud.

The first one is the value-in-exchange perspective, where the focus is on outputs. Value is seen as something created by companies in their production activities and embedded in company outputs such as tangible products. Therefore, value is measured by the exchange transaction and is equal to money. In the case of the Cloud this perspective would mean e.g. that a Cloud-based service would be regarded valuable on its own – without being used by someone. We would be more worried about what our sales numbers are than do our customers perceive our service beneficial or not.

The second, value-in-use, perspective provides a very different view on value and value creation. Here, the attention is focused on the process of use, and the locus of value creation shifts from the producer’s end to the customer’s end. Hence, value is seen as something that emerges as a person uses or applies a resource provided to him/her by somebody else. For a Cloud-based solution the value-in-use perspective would mean that we would view the solution valuable only when someone is using it – e.g. to share photographs with family and friends – and therefore perceiving the service valuable for him/her.

The third value-in-context perspective can be seen as an extension of the value-in-use perspective. In this perspective value is seen as an experience. This experiential view on value implies that the perception of value is not a linear, cognitive process restricted in isolated events of use but an iterative and circular process including both lived and imaginary experiences as well as individual and collective dimensions. The value-in-context perspective for a Cloud solution would mean that we acknowledge that the value of a service does not remain the same for the individual using in, but that the perception of value constantly alters as the time, place and context of use changes, and also that the perception is influenced by social interaction.

When tapping into the potential of the Cloud it is important that we take into consideration all the different perspectives on value (of something) as they all provide us important information on how we can create solutions that are beneficial both from the business’ and customers’ perspective.

Values as beliefs

A concept of human values is different from that of value (of something). Human values are principles and beliefs that people use to evaluate goodness, fairness and the legitimacy of experiences. Human values are defined in axiological sense. These values are beliefs that people hold in aesthetics (e.g. beauty, harmony, goodness) and ethics (e.g. right, wrong, fair, legitimate). What makes values especially interesting in business studies is their motivational character. Values guide individuals’ choices, evaluate behaviour, and provide meaning to experiences (e.g. [5], [6], [7] and [8]).

Although values are abstract concepts, they are practical for understanding customer experience. By understanding we mean an ability to find reasons or explain meaning. Regardless of whether such explanations are rational or irrational they contain cues for companies for what experiences customers may value. When customers have difficulty with anticipating what future product and services they will value (in terms of goodness of something), they can describe their view of reality in terms of desires and values. Thus, values can be a very useful source of information about customer experiences.

Because values are remarkably stable and resistant to change even in dynamic environments, they may serve as a vector of strategic differentiation. That is, a strategy can be intentionally focused on the perceived value of experience, which is a key differentiation factor. Values, for example, can be used to describe customer desired experiences, which, in turn, can be disseminated throughout the organisational processes. As a result, values bring together strategy, marketing and development functions in a unified effort of staging an experience that customers will value.

This posting is modified and shortened from the original article. To see the full version and to read about more about our research in the Cloud context, check out the newest edition of VTT Research Highlights – Value-driven Business in the Cloud.

References:

[1] Ng., I.C.L. & Smith, L.A. 2012. An Integrative Framework of Value. In Vargo, S.L. & Lusch, R. F. (eds.) Special Issue – Toward a Better Understanding of the Role of Value in Markets and Marketing. Review of Marketing Research, Vol. 9. Emerald Group Publishing Limited. Pp. 207–243.
[2] Vargo, S. L., Maglio, P. P. & Akaka, M. A. 2008. On value and value co-creation: A service systems and service logic perspective. European Management Journal, Vol. 26. Pp. 145–152.
[3] Chandler, J. D. & Vargo S.L. 2011. Contextualization and value-in-context: How context frames exchange. Marketing Theory, Vol. 11. Pp. 35–49.
[4] Helkkula, A., Kelleher, C. & Pihlström, M. 2012. Characterizing value as an experience: implications for service researchers and managers. Journal of Service Research, Vol. 15. Pp. 59–75.
[5] Boudon, R. 2001. The origin of values: Sociology and philosophy of beliefs. New Brunswick, New Jersey, USA: Transaction Publishers.
[6] Kahle, L.R. 1996. Social values and consumer behavior: Research from the list of values. In Seligman, C., Olson, J.M. & Zanna, M.P. (eds.) The psychology of values: The Ontario symposium, Vol. 8. Mahwah, NJ: Lawrence Erlbaum Associates, Pp. 135–151.
[7] Schwartz, S.H. 1992. Universals in the content and structure of values: Theoretical advances and empirical tests in 20 countries. Advances in Experimental Social Psychology. Vol. 25. Pp. 1–65.
[8] Rokeach, M. 1979. Understanding human values: Individual and societal. The Free Press: New York

Self-fulfilling prophesies – Part 2

In an award winning article Ferraro, Pfeffer and Sutton (2005) show how the ideas of economics affected our view of social reality. More specifically, they show how the underlying assumptions of self-interest and market mechanism become part of the language and institutional design, and shape the beliefs about what is appropriate. As a result, language, institutions and values work together to create a social reality, which corresponds to the initial assumptions and ideas of economics. Thus, the theories become true, rather than explain social reality as it is observed.

We discuss this topic here because – as the article demonstrates – the same mechanisms that make theories self-fulfilling permeates managerial decisions and behaviour, business practices and employer-employee relationships. We draw two lessons from Ferraro and colleagues’ article. First, organisational management can recognise these mechanisms and influence the social structures of their business to adopt a different worldview. The way an organisation views the world around it affects its ability to innovate and, hence, compete. Second lesson parallels the blue ocean strategy by Chan Kim and Renée Mauborgne (2005), that suggests that companies can create market space for their offerings rather than compete in the existing markets. In other words, the same mechanisms that are not recognised in self-fulfilling theories, when understood, can be used to advance the competitive position.  That said, it should be mentioned that such mechanisms are not easily recognised and are difficult to manage because of their emergent nature. But the exploration of such processes is part of management research.

Ferraro et al. illustrates when the self-fulfilling mechanisms take root.

  1. ‘To successfully diffuse in a society or an organization, the assumptions and language of economics need to resonate with at least some of the existing norms’ (p.17). When ideas resonate with some critical elements of the culture they engage with the existing cultural and social norms. With time the correspondence between assumptions and existing beliefs will begin to contribute to the definition of the norms.
  2. Although different cultures will have different rate of acceptance of the assumptions of economics their affect is global. This is because ‘contemporary organizations all over the world are increasingly characterized by practices that embody the dominant behavioral assumptions of economics and its language, creating the conditions for the operation of the self-fulfilling process… at a global level’ (p.17). In other worlds, organisations borrow managerial practices from each other thereby defusing them globally.
  3. The existence of explicit or implicit processes of accountability fosters the sense that assumptions are natural and intuitive. ‘Accountability is the implicit or explicit expectation that one may be called on to justify one’s beliefs, feelings and actions to others’ (ibidem). Accountability creates conditions for social actors to personify the behaviour, which is assumed to be legitimate.

Why is this important for service or experience? When organisation sets out to provide a service or create an experience it acts on its assumptions about human nature. For example, an assumption that customers are motivated by self-interest is to design a business model that offers value in accordance with this reality. As a result a company engages customers in the behaviour that corresponds to the prior assumption. Because service and experience exist only while provider produces and customer consumes (Ng and Smith, 2012) ‘motives are learned… from those in the immediate situation’ (Ferraro et al., p.20).

Imperial studies will show how well spread these mechanisms are. But one final point seems to follow from the article. Namely, customer value and motivation is not exclusively exogenous to the organisation but is also endogenous to the organisational activities.

Source: Fabrizio Ferrano, Jeffrey Pfeffer, Robert I. Sutton, 2005: Economics Language and assumptions: How theories can become self-fulfilling. Academy of Management Review, Vol. 30, Issue 1, pp. 9-24.

Kim, W.C. and Mauborgne, R., 2005: Blue ocean strategy: How to create uncontested market space and make the competition irrelevant. Harvard Business School Press.
Ng., I.C.L. and Smith, L.A., 2012: An Integrative Framework of Value, In Stephen L. Vargo, Robert F. Lusch (ed.) Special Issue – Toward a Better Understanding of the Role of Value in Markets and Marketing (Review of Marketing Research, Volume 9), Emerald Group Publishing Limited, pp.207-243. doi: 10.1108/S1548-6435(2012)0000009011.