SME’s (surviving) thriving guide to business ecosystems

Tiina Valjakka @tiinavaljakka & Katri Valkokari @valkatti

Businesses operate in broad interlinked networks – business ecosystems – where the variety of habitats is as wide and competition as fierce as in natural ecosystems.

ekosysteemi

Some food chains in the ecosystem are easier to depict than others. Each firm has its own perception of the closest network and its position within it. Typically, each firm also tends to find, or draw, their own business as the core of the network and the closest collaborators around it. In practice, this is one of the reasons why attempts to manage a network often fail or create no response, while the network actors have not considered the interests of others, or even the existence of the further away ecosystem.

Due to their network position, firms have different opportunities to influence or control other actors, network relationships, and the whole network. Even with a more objective view of their surrounding habitats, managing the network position is a hard task.

Small businesses have traditionally been in the outskirts of business ecosystems but digitalization, e.g. sensor technology and the real-time data available is providing them with new means to become a more valuable and influential actor in the ecosystem. Our case firm here is an example of an SME that has looked around when formulating new strategy and offering concept.

Lännen Tractors- a Finnish SME exploiting the opportunities in the outcome economy

Lännen Tractors develops and manufactures machines for demanding applications. The long term objective has been to become a strong international player.  Three global megatrends: climate change, resource efficiency, and urbanization, set the base for the new ambitious strategy of the firm.

The analysis of a Lännen Tractors’s own position among the networks as well as different networking directions offered new ideas how their business networks will look like in the future and who are the relevant network actors and partners to contact and collaborate.

The strategic aim of the firm is to change the industry in the direction they believe is profitable to them and also to the other actors in the ecosystem (service purchasers, service providers, and contractors). The vision of the management is that “less is more”; that the modern mobile multi-purpose machinery is more productive and environmentally friendly than conventional solutions that have often led to sub-optimization on work sites.

The keystones of the offering in the new strategy are multi-purpose, mobility, productivity and sustainability and the concept is marketed as the “Heavy-duty multifunction backhoe loader with all terrain mobility”. The core capabilities are relevant to a single-machine contractor, to a service provider managing a larger fleet and also from service purchaser’s perspective. The aim of the concept is to concretize the meaning of “less is more” – productivity, and productivity goes hand in hand with environmental sustainability. One multipurpose machine compared to separate machines means less fuel consumption and less staff. Utilizing the full qualities of multi-purpose machinery increases productive work time and lowers the impact on the environment by decreased exhaust emissions, decreased noise levels, less disruption to traffic and residential areas and lower impact on the landscape.

See also:

DIMECC REBUS  programme final publication

Practices for Network Management – In Search of Collaborative Advantage

 

 

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