Bestserv Managing Service Business

8/3/2019 Bestserv Managing Service Business

http://slidepdf.com/reader/full/bestserv-managing-service-business 1/32

Iiro Salkari, VTT

Vesa Salminen, Lappeenranta University of Technology

Juhani Pylkkänen, T20

BestServManaging Service BusinessWinning best practices and

success stories



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© Technology Industries of Finland

All rights reserved. No part of this publication may be reproduced, stored in

a retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior per-

mission of Technology Industries of Finland.

Publisher

The Federation of Finnish Technology Industries

Eteläranta 10

00130 Helsinki

tel. (09) 19 231

http://www.techind.fi

Printed in Finland by

Tammer-Paino Oy, Tampere, 2007

Layout: Mainostoimisto Sulake Oy

ISBN 978-951-817-942-2



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ABSTRACT .........................................................................................................................................4

1 INTRODUCTION ............................................................................................................................5

2 SERVICE BUSINESS CHARACTERISTICS AND COMPETENCES.....................................................9

2.1 Product Business and Service Business Characteristics................................................................9

2.2 Industrial Service Business Competences ...................................................................................9

2.2.1 Service Business Model Key Competences......................................................................10

2.2.2 Practical Example: Providing solution instead of individual equipment

resulted in a long-term service partnership .....................................................................11

2.2.3 Practical Example: Maintenance Partner .........................................................................11

3 BUSINESS MODELS AND SERVICE BUSINESS MODELS ...........................................................13

3.1 Introduction to Business Models..............................................................................................13

3.2 Definition and Elements of a Generic Business Model .............................................................13

3.3 Elements of a Generic Service Business Model .........................................................................14

3.4 Services Offering .....................................................................................................................15

4 GENERIC MODELS FOR DIFFERENT TYPES OF SERVICES .........................................................19

4.1 Product Centric Business – Product Servitisation ......................................................................19

4.2 Service Centric Business – Service Productisation .....................................................................20

4.3 Change Management in Service Business ................................................................................21

4.4 Network Centric Service Business ............................................................................................23

5 SERVICE BUSINESS EXPANSION ................................................................................................25

5.1 International Service Concept Expansion .................................................................................25

5.1.1 Virtual Entry to the Russian Market (selected new market) .............................................25 5.1.2 Market Entry Prerequisites .............................................................................................26

5.1.3 Specific issues in the Russian Market ..............................................................................27

5.1.4 Road map for entry to the Russian market .....................................................................28

5.1.5 International service concept expansion road map .........................................................28

5.2 Licensing ................................................................................................................................29

5.3 Franchising .............................................................................................................................30

6 CONCLUSIONS ............................................................................................................................31

REFERENCES .....................................................................................................................................33

TABLE OF CONTENTS



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Abstract

Industrial service business is a fast-growing business area within engineering and manufacturing. In order

to create new business, many companies have tried to develop industrial services – but many of these have

failed. Often, customers have not appreciated the service models proposed due to lack innovativeness (i.e.

added value) in comparison with current co-operation models between suppliers and customers.

This publication will summarise the findings based on the BestServ Forum, a collaborative forum of 32

Finnish enterprises operating in the manufacturing industry. The objective of the forum is to benchmark

best practises, establish current status, development needs and future challenges related to services busi-

ness in the Finnish industry, non-exclusively focusing on the manufacturing industry. In addition to such

industry-oriented objectives, the forum has identified topics for future research and development.

This publication will report some of the findings of this forum. It will also provide insight into potential

research topics in the area of industrial services. This publication will approach the challenges from a

business model viewpoint and also present a collection of case studies and best practices with regard toservices business collected by the BestServ Round Table Groups. The case studies and best practices cover

a variety of businesses implementing various types of business models.

The authors have utilised the work of the BestServ Forum and the BestServ Round Tables carried out since

the forum started its work. The text is further based on existing research and public case studies, which

have been referred in the text.



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1 Introduction

The business environment is influenced by a variety of economic and dynamic trends, according to which

companies have to consolidate on a global scale. At the same time, companies may be driven by technol-

ogy and business innovations as well as by various deregulation and customer requirements. All these

factors and trends add to the complexity of solutions development and make introduction of fast new

products and services even more important and challenging.

The engineering industry is currently undergoing a transition from having been a product provider to

its new role as a provider of customer value and product-related value-added services. Enterprises have

proclaimed and attempted to undergo this transition, but have actually failed in several respects. Some

of the product-related services are partly implemented by way of technological solutions, but most of

the industrial services are mere pilot schemes. The challenge is to identify critical customer processes and

develop services to support these processes.

This transition from “ownership” to “access” and potential sustainable business growth is based on crea-tion and capture of these services. Business-related industrial services tend to grow out of a commodity

trap. This transition can be referred to as “framework of value transition”. This framework covers the

complete transition of the industry from “component supplier” to “value provider” (Figure 1). It points

out the main elements which an enterprise or a value network of enterprises needs in order to become

an integrated product/service provider.

Figure 1. Value transition framework.

Overall

responsibility

by Customer

Overall

responsibilityby Provider

Tangible Value Share

Asset ManagementProduct Sales

Intangible Value Share

Capability ManagementValue Operation

Value Transition Process

SERVITISATION

PRODUCTISATION



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Figure 2 summarises a case study carried out by IBM. The figure illustrates the business transition from a

product-oriented approach towards a service-oriented approach.

Figure 2. IBM’s case describing their transition to become a servitised enterprise by Spohrer (2006).

In practice, this value transition means that traditional products are developing into solutions involving

products as well as services. Typically, customers are unable to utilise such solutions without solution

provider services. The transition from product to solution creates a basis for new business and new co-

operation models between networked companies. As knowledge- intensive business and services offer-

ings increase, the importance of capability is emphasised. Product business and products are very well

documented, but in the services business and with services you should manage skills and competences

hands-on without documentation.

Most businesses face a serious need to develop their products and their service management in open system

architecture (Salminen & Pillai, 2005). Business concepts are changing to take a knowledge-intensive and

value-critical approach covering entire product lifecycles. Value networks of companies are responsible

for solution offerings containing service and product elements provided by several enterprises. Offering

structure management and further innovations requires a semantic structure.

In recent years, feasibility studies have been carried out on the state of industrial services in the Finnish

industry. The studies have been carried out by several research groups under a project called BestServ.

According to these feasibility studies, a common understanding has been created about what industrial

services are and how they interrelate with normal product business (Kalliokoski, Salminen, Andersson

& Hemilä, 2003). In terms of customer intimacy, manufacturing companies position themselves differ-

ently in terms of their industrial services offerings and operations. For practical reasons, at the beginning

of their study, the BestServ Forum defined six different supplier positions or “roles” (Figure 3) in relation

to customer intimacy:

• Material, component and module suppliers. Material, component and module suppliers focus on

working as networked operative partners for specific machine components.

• Machine suppliers. Business relationships focus on delivering specific pieces of machinery or equip-

ment meeting customers’ technical specifications.



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• Solution providers. Business is focused on system delivery, for example production lines usually de-

signed for specific customer processes comprising a wider scope of supply than just individual pieces

of equipment.• Maintenance partners. Business focus expands to include ongoing supplier involvement during the

entire lifecycle of the delivery. This role also adds contractual after-market elements, such as spares

and consumables agreements, to the supplier-customer relationship.

• Performance partners. In this role, suppliers are closely involved in operating their customers’ technical

processes by assuming partial responsibility for system performance, for example by way of availability

warranties. This role requires suppliers to maintain at least a minimum of ongoing on-site presence.

The focus of such customer relationships is to secure efficient operation of the units or production

lines concerned.

• Value partners. Suppliers are directly involved in their customers’ business, for example through ‘op-

erate and maintain’ agreements, where customers pay a pre-determined price for the actual output

of a system. Both parties focus on profitable daily operations, and the suppliers are responsible for

day-to-day operation of the plant or line concerned.

Each of these six supplier business models has a “mindset” of its own. Progressing from one model to the

next, suppliers will face tough challenges, mostly in terms of getting customers involved to develop their

own technical and business competences in order to proceed. Strategic positioning decisions between

suppliers and customers are important and need to be prepared as thoroughly as any other strategic

decisions.

Process

(Maintenance

partner)

Solutions

provider

Machine and

systems supplier

Components and

ConfigurationsOperations Process Business

Customer ’s

business

Customer ’s

process

Customer ’s

operations

Customer ’s

resources

Network

Competencies

Customer

intimacy and

relationship

management

Material, components

and modules supplier

Performance

partner

Value

partner

Figure 3. Business model analysis according to customer intimacy (modified from Kallikoski et al., 2003).



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The first three models are focused on supplier activities concerning customer investment decisions and do

not concentrate too much on supporting customer process lifecycles. In their offerings, solution suppliers

need an ability to understand and interpret their customers’ actual operations. Maintenance partnersconcentrate on professional maintenance management as ongoing processes. Performance partner sup-

pliers may assume responsibility for the actual daily performance of their customers’ processes. Value

partner suppliers are involved in their customers’ value generation, for example by producing optical cable

in a cable factory and maintaining given quality and price levels in accordance with estimated market

needs. Suppliers must have competence in their customers’ business. Knowledge and experience levels

are increasing and create competence for productive communication between value network partners.

While there is much taxonomy of services and related jobs, you should be aware of which type of services

you are involved in. Figure 4 highlights services for people, businesses, products and information. While

services targeted at people and products are important, services targeted at business and information seemto be increasingly growing faster than others. This publication will concentrate specifically on industrial

“business to business” services.

According to future trends, entire societies seem to be moving towards service business. Europe and

USA are rapidly becoming service-minded societies. China is moving rapidly towards service deliveries.

People in India are service-minded. So, strong market forces are influencing fast business environment

changes. On the other hand, in Japan people traditionally require services but knowledge workers are

not too interested in providing the services themselves. They are already too accustomed to having serv-

ices delivered for them. Different markets need different marketing strategies and more precise market

segmentations.

Figure 4. Four worlds of service jobs, upstream and downstream by Spohrer, IBM (2006).



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2 Service Business Characteristics and Competences

2.1 Product Business and Service Business CharacteristicsIt is important to study and understand the characteristics of traditional products and service packages

and related successful business concepts. Most industrial companies have had decades of traditional

product business experience before entering into real services business. There are significant differences

between product business and services business.

Traditionally produced product characteristics may be described as follows:

• Products have detailed specifications

• Products are produced in well-planned and controlled processes

• Product uniformity is the target

• Customers are not involved in the production

• Internal quality control compares output to specifications; improperly produced products can be re-

called

• Production worker morale and skills are important

The characteristics of services can be described as follows:

• Services have been described and illustrated

• Services are being implemented

• In services production, the target is uniqueness

• Customers are often involved in the implementation of the services

• Customers conduct quality control by comparing expectations to experience; if improperly performed,

apologies and reparation are the only means of recourse

• Service provider morale and skills are critical

The descriptions above are based good practices as presented by Erkki Peura of Nokia Networks in

2005.

2.2 Industrial Service Business Competences

Successful product and service business is based on company vision. Market, product and service strate-

gies and respective road maps should be derived from the vision. Strategies and road maps seem to be

more important with services than with products. In a traditional product business, shortages in strategies,

road maps and customer input can be compensated in many ways, for example by following market

trends and competitors. In a services business, direct customer contacts are most important and cannot

be compensated by any other actions.

The most critical competences of a successful services business as identified by the work groups organized

by the BestServ Forum in 2005 are as follows:

• Knowledge of customer processes by way of handling entities

• Acquisition of new competences needed in a customized services business

• Ability to sell and produce services

• Network build-up in accordance with product and service packages

• Ability to integrate own key competences into related customer processes

• Competence management by way of development and knowledge transfer from the customer

Key account managers play an essential role in maintaining customer relations, continuously updating

customer needs and ensuring correct customer business information and understanding.



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2.2.1 Service Business Model Key Competences

Good service business management and performance need key competences, expertise and skills to be

organised and made available for contracted tasks and responsibilities. The following definitions are used

in this book:

• Competence means ability, power, authority, skills and knowledge to perform an agreed task.

• Expertise means certified expertise, knowledge and skills needed to support the performance of an

agreed task.

• Skill means ability to do something related to an agreed task expertly and well.

Key competences and expertises by level of industrial service business models will be briefly discussed.

Industrial service business levels are defined as follows:

• Material, components and module suppliers

• Machine and system suppliers

• Solution providers

• Maintenance partners

• Performance partners

• Value partners

Material, components and module suppliers feed materials, components and modules into proc-

esses of machine suppliers or directly into modules at system supplier erection sites. Key competences

identified are as follows:

• Manufacturing skills in terms of cost efficiency and quality

• Knowledge of customer manufacturing processes and product requirements

• Focused expertise related to material, component or module know-how, e.g. hydraulics

• Logistics and material handling management

• Short lead time management

Machine suppliers provide devices and systems meeting customer request and market demand. Custom-

ers specify their needs and suppliers try to fulfil them by way of existing product modules and engineering.The key competences can be described as follows:

• Development of products and systems based on customer needs

• Development of service packages to support product sales

• Ability to apply advanced technologies economically

• Ability to manage market information, respond to market changes and follow business trends

• Order-delivery process and supply chain management

• Product and process cost management

• Systems installation and erection

• After sales services and spare parts

Solution providers provide total solutions to their customers’ problems by way of problem-solving ex-

pertise and customer collaboration. Focus is set on customer concerns and commitments to customers are

relatively long-term. Solution providers work pro-actively and in close relationship with their customers.

Offerings include devices, installation, field service, upgrades and consultancy. Solution providers should

manage system supplier competences, and also need to:

• Have knowledge of customer processes and collaborative business

• Manage projects and project business within a partnership network

• Manage field service, upgrades and retrofits as well as consultancy



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Maintenance partners provide availability by assuming responsibility over entire system lifecycles. Of-

ferings include performance measurement and monitoring, field service and data availability guarantees.

Maintenance providers should manage system supplier and solution provider expertise in collaborationwith the same and further have the following competences:

• Competence and technology transfer between customers and responsible providers

• Managing interfaces between customer and provider processes

• Access management to back office systems

• Management of HR resources in merger situations

• Management of collaboration contracts

Performance partners provide process efficiency by taking over some functionally defined parts of

customer operations. Partners will normally integrate their own systems and control into contracted

performance units. Offerings include process availability and performance data, forecasts and decision

support aids. Performance providers should manage system supplier and solution provider expertise in

collaboration with the same as well as the competences of maintenance partners and further have:

• Data mining and supply abilities• Knowledge of operative competitivity factors such as productivity, quality, on-time delivery and

costs

• Process efficiency development abilities

Productive front end cooperation with key customers cannot be properly managed unless resources,

competences, expertise and skills have been organised and made available on a level required to maintain

good customer relations.

2.2.2 Practical Example: Providing solution instead of individual equipmentresulted in a long-term service partnership

A customer wanted to buy a considerable number of wind sensors and other weather measurement

equipment from Vaisala. The deal would be significant but not exceptional. Still, it raised a question at

Vaisala: why was the customer willing to make this investment, what did they really need? Based on thesethoughts, Vaisala started discussions with the customer in order to find out what equipment would really

support the customer’s value creation in the best possible way.

During these discussions it became evident that the customer needed to know and forecast exact wind

conditions in a specific (and relatively limited) geographical area. They had a wind mill park under con-

struction in this area and needed information about wind conditions in order to plan how to operate

the wind mill park in the most efficient way. For instance, what should the blade angles be like, how

many generators should they run. So, as it soon turned out, they did not need data from a single wind

sensor, but needed to able to combine the data and turn it into a plan on how to operate the park and

its individual wind mills.

As a solution Vaisala offered a service to allow them together with their partners to provide what the

customer really needed. Besides wind sensors, the solution required for example digital data collection

and storage equipment. From a businesses viewpoint, the deal turned out to become a long-term busi-ness relationship instead of a one-off business relation. The customer profited in the form of reduced

costs (as compared to doing all this alone and building the required skills and competences) and ability

to focus on their core business, production and sales of electric energy.

2.2.3 Practical Example: Maintenance Partner

This example describes a full-service contract of a manufacturing facility. The service concept involves

services provided to a customer including spare parts, preventive maintenance, fixing breakdowns, inspec-

tions and training, repairs and refurbishment as well as comprehensive service. The contract also includes

a bonus clause with regard to incentives for process performance improvement.



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Regarding key competences, expertises and skills needed for the full-service activities, the following issues

have been carefully considered:

• Interfaces between customer and service provider processes have been defined and discussed.• Communication, meeting and reporting rules have been agreed and discussed at a kick-off meeting

together with the customer's personnel in charge.

• Competences needed have been defined and competence and technology transfers between customer

and service provider have been agreed.

• Access to customer’s and service provider’s back office systems has been defined and agreed.

• System supplier and solution provider expertise with regard to production lines have been listed and

collaboration plans agreed by way of separate contracts.

• Performance measuring and monitoring of the production lines have been put in place.



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Business

model

concept

Business

model type

Business

model type

Business

model of a

company

Business

model of a

company

Business

model of a

company

Real world

company

Real world

company

Real world

company

Definition:

- What is a business model

Meta-Model:

- What elements belong into a business

model

Taxonomy of types:- Which business models resemble each

other

Sub-Meta-Models:

- What are the common characteristics

Instance

Modelled instance

Real world company

1

2

3

3 Business Models and Service Business Models

3.1 Introduction to Business ModelsIn order to be able to define generic business models, it is necessary to understand the limits of applica-

tion of these generic models. Osterwalder (2005) has defined three business model levels: 1) definition

of a business model and a meta-model defining the generic elements; 2) taxonomy of types and sub-

meta-models; 3) instances and modelled instances. The levels defined by Osterwalder are depicted in

Figure 5.

In this chapter, we will form a common basis to define a concept business model and to establish its generic

elements. We will also discuss services offering development. Subsequently, we will move on to the next

chapter, where we will go more deeply into the taxonomy of types: we will identify two basic business

model types and, based on the common characteristics of these business models, build a services business

sub-meta model of elements. The different service business models will be illustrated by some cases and

examples. We will also discuss change management related to extending offerings towards services.

3.2 Definition and Elements of a Generic Business Model

Osterwalder et al. (2005) define business model as follows: “A conceptual tool that contains a set of elements and their relationships and allows expressing the business logic of a specific firm. It is a descrip-

tion of the value a company offers to one or several segments of customers and of the architecture of

the firm and its network of partners for creating, marketing, and delivering this value and relationship

capital, to generate profitable and sustainable revenue streams” .

According to a definition by Pulkkinen et al. (2005), business models link strategic and business process

levels. Therefore business models cannot be unambiguously defined: Firstly, they are rather iterative

towards strategy and secondly, towards business processes. There are the same and/or similar elements

as in strategies and in business processes, but the content is more towards implementation than in the

case of strategy and also more conceptual than in a business process. A conceptual definition of a busi-

ness model by Pulkkinen et al. (2005) identifies the following elements: value creation, value capture,

Figure 5. Levels of business models as defined by Osterwalder (2005).



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earnings (incl. pricing), business model development and organisational structure development.

Osterwalder (2004) has defined the following elements of a business model (a meta-model):

• Value propositions: Company offerings bundling products and services into value for customers.Value propositions will create utility for the customers.

• Target customer segments: Which are the customer segments a company wants to offer value

to? This is to describe groups of people with common characteristics, for which the company creates

value. The process of defining customer segments is referred to as market segmentation.

• Distribution channels: What various means would a company implement in order to get in touch

with its customers? This is to describe how a company would enter the market with reference to the

company's marketing and distribution strategies.

• Customer relationships: What links would a company establish between itself and its different

customer segments? The process of managing customer relationships is referred to as customer rela-

tionship management.

• Value configurations: Configuration of activities and resources.

• Core capabilities: The capabilities and competences necessary to implement the company's business

model.

• Partner networks: Networks of cooperative agreements with other companies needed in order to of-

fer and commercialise value efficiently. This is to describe the company's range of business alliances.

• Cost structure: Monetary consequences of the means employed in the business model.

• Revenue model: To describe a variety of revenue flows materialising into revenues for a company.

With many elements and meta-model definitions, the challenge is that they originate from product (tech-

nology) based business and, accordingly, underestimate some of the central services business elements

based on the characteristics of services. The models may be based on transaction-based business, while

long-term collaboration and process characteristics (instead of product characteristics) of the services are

not in the very centre of these models. For example, analysing true customer value creation and customer

participation in the services business and services delivery is underestimated.

Similarly, the need for continuous development as a part of the services may not be included in the models,

although this could be of great value to service customers. From a company point of view, the capabilities

should focus on new services-related issues, for example training of service sales people, sales of services

via sales channels, services delivery and development. Therefore, the application of existing models as a

basis for services business must be done carefully and critically: some elements may actually need to be

added when describing service business models.

3.3 Elements of a Generic Service Business Model

This chapter will introduce elements for describing a business model in which the characteristics of serv-

ice business are emphasised, i.e., understanding customer business, understanding customer business

environment and markets, and using competences needed in order to facilitate customer business. These

are essential due to the company border-crossing process nature of the services.



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These elements are based on the generic business model mentioned above (by Osterwalder), but due to

the challenges of many prevailing models identified, we have also included additional elements which

are characteristic to services and service business. These additional elements are mainly based on work by

RT3/2006 to provide a service concept definition framework. This service concept framework makes it is

possible to describe a service in sufficient detail to be communicated to a customer (this was the starting

point of the RT3 work). Although a service concept definition is not exactly the same as a business model

for a service, it will tackle the question of value creation and value capture for a customer. Therefore

it contains many elements that can be utilised to define a framework for the purpose of describing a

services business model.

3.4 Services Offering

Development of total offerings and services offerings as a part thereof is based on strategy work. During

this work, the desired offering entity is defined and goals for developing the existing offering entity are

set. As a prerequisite, the existing offering portfolio needs to be known. Accordingly, successful strategy

work requires foresight related to market and technology development: how do markets and their needs

change, what are the new technological enablers that may push market changes.

When an understanding of these has been reached, it is possible to plan and steer product develop-

ment of the services and products in order to develop the offering portfolio in the desired direction. In

the case of services development, the pressure towards company strategy is more intensive than with

products: services tend to challenge existing strategies, business models and market structures. As a

Element classification Element DescriptionStrategic business choices Position in

company strategyPositioning of the (service) business in the company strategy.

Target customersegments

Customer segments to whom a company wants to offer value and whocan understand the value of the offering.

Customerrelationships

Links a company establishes between itself and its different customersegments.

Core competences,capacity and tools

Capabilities, competences and their capacity necessary to implementand develop the business model successfully during certain periods of time.

Partner network Network of cooperative agreements with other companies neces-sary to efficiently offer and commercialise value. This is to describe acompany’s range of business alliances.

Value proposition Describes the offering (service, service bundle, service and product

bundle) providing value to customers.Customer Concern:

Understanding and supportingcustomer value creation

Customer valuecreation

Understand customer value creation, address customer concerns in thecustomer segment.

Value capture Describes how value is being created for customers.

Customeradvantages

Describes the competitive advantages customers will get by utilisingthe business model based services.

General customerprerequisites

General requirements which must be met by any customer in order tobenefit from the services.

Implementationmodel

Services provider and customer implementation.

Profitable Service Business Earning logic The logic of how to turn customer value into earnings for the servicesprovider.

Pricing

Delivery Delivery channel Describes how a company delivers services to their markets.

The elements of a service business model are:



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result, we need to consider correct development portfolios comprising different kinds of services during

the innovation process. Figure 6 provides an understanding of the principles of planning, steering and

developing service offerings.

Figure 6. Planning, steering and developing (services) offerings.

Integrated product-service developmentAccording to the good practices identified in the Round Table discussions of the BestServ Forum in 2005,

service development processes have been quite well described and implemented. However, the industrial

services part of the business, visions and strategies, as well as management grip could be more empha-

sized. To summarise the present situation with regard to integrated product and services development,

an example of good practices has been illustrated in Figure 7.

Ideal product and services development must be derived from company vision. Market, product and

service strategies as well as respective road maps are derived from vision and customer focus. In services

development, direct customer contacts are most important and cannot be compensated by any other

action. In creating and fostering customer relations, the management grip is extremely important.

The authority of a project leader should exceed the organisational borders of the company as far as project

tasks are concerned. In the case of service and/or product development projects, the management will

• set objectives and metrics

• implement and perform follow-up

• decide about customers to be invited and build up customer relations

• ascertain that customer needs are defined sincerely, correctly and precisely enough

• be responsible for active communication throughout the organisation

• arrange a project launch kick-off meeting in order to discuss and approve objectives, persons in charge,

roles and mode of action, milestones and gate criteria

• take care that resources are prioritised.



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The resources allocated to a services development project could represent various functions and organisa-

tions within the company. However, the most important competences should be considered. In the case

of services development, these are:• knowledge of customer processes by way of handling entities

• acquisition of new competences needed for customised service business

• ability to sell and produce services

• network build-up in accordance with product and service packages.

The Key Account Manager’s role is essential in terms of maintaining customer relations, updating customer

needs and ensuring correct information and understanding of the customer’s business. Good customer

relations and correct market information need to be continuously maintained. It is recommendable to

maintain close and ongoing communication with selected key customers during the development project

implementation of the service product concerned.

Development and responsibility for service products and concepts could be centralised, but service per-

formance should be customised and localised in order to meet customer requirements and other local

conditions.

When working to develop services offerings, partners, interest groups and services logics need to be taken

into account: who does what, whose strategy is suitable, what model for producing the services should

be selected, etc.? This is because services and services business are systemic within a company network

and likewise towards customers. Figure 8 depicts principles applied for planning services-related roles,

tasks and responsibilities. This matrix also forms a basis for understanding business logic and customer

needs from a service point of view.

Figure 7. An integrated product and service development concept (Rabbe Ringbom and Erkki Peura, Nokia Networks, 2005).

QuickTime™andadecompressor

are neededtosee this picture.

Create service capability

QuickTime™andadecompressor

are neededtosee thispicture.

Plan

Service Capability Creation (SCC) Process

DesignPlanDefine Implement Verify Ramp-down

E0 E1 E3 E4 E5 E6 E10

Planremoval

Ramp-

down(Glo)

Ramp-

down(Loc)

SustainSupport

E2 E7 E8 E9

Maintenanceactivities

SCC Project

activities

Product Creation Process

Design &implement

PlanDefine Integrate

& verify

Ramp-up

Maintainproduct

Ramp-down

Planremoval

Ramp-

downProd.

-downDel.

SustainSupport

Design Implement

B2 E0 E1 E3 E4 E5 E6 E10E2 E7 E8 E9

Ramp

Verify Maintain

Service Creation Process (SCP)



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Figure 8. Designing a services business in a network comprising several service providers.

Solutions

Comprehensive

service

Repairs &

Refurbishment

Spare parts

Inspections &

Training

Breakdowns

Preventive

maintenance

Finanching &

Rental

Service By

Customer

Service With

Customer

Service For

Customer Dealer



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4 Generic Models for Different Types of Services

In this chapter, we will define some generic business models suitable for different types of businesses.

In these descriptions, services viewpoints are emphasised even when the services are not the very core

of the business. This is to facilitate understanding of role and position of services in the overall business

in different cases. We approach to illustrate services containing business models at the two ends of the

product-service continuum:

• Strongly product-centric models with some added services to support products

• Service-centric models, where products are irrelevant (in the background or non-existing) for the

customer.

The models we present are suitable for use in different cases and by definition, none of them is better

than another. Looking at Figure 3, it is not a value as such to climb up towards the top right corner. Suc-

cess of the different models would rather depend on the following factors:

• Maturity of offered products and related technologies:• Has the product offered become a commodity already, is it being offered by a number of competi-

tors with practically no or only very limited technological differences?

• Has the product’s technological development reached a maturity level which is very expensive /

difficult to overcome?

• Has differentiation and profitable growth based on technological solutions become a less viable

alternative than differentiation by way of services?

• Markets: whether customers are ready for the services and certain of their own core business:

• Have customers defined their core business narrower than before in order to gain competitive

edge?

• How well have customers defined their core business and competences?

• Are customers willing to buy the services and is this possible under current regulations?

• Can services be offered to (lead) customers to help customers potentially see the added value ofthese services to their key processes? Service providers must not be regarded as competitors.

• Can complex services be developed together with a key customer, who would contribute a customer

viewpoint and later act as a reference?

In addition to the two extremes, we also describe change management in creating services business. This

would take place when offerings are extended towards services. Actually, real-life business models will

seldom represent any end of a product-service continuum, but would be rather mixed models occurring

somewhere in between the two ends.

4.1 Product Centric Business—Product Servitisation

This section takes a manufacturing industry company viewpoint. It is generic and will not cover all pos-

sible businesses.

In product-centric business, manufacturing companies assume that use of their products will create value

for customers. Subsequently, the assumption is that customers are willing to pay for getting the product

and that earnings will materialise accordingly.

Along with the product in question, there may be some services facilitating a manufacturer’s product-based

business, which may not be considered interesting, profitable or any business at all by this manufacturer.

A manufacturer may consider such services “a must” for product sales (i.e., to their product-centric busi-

ness). Such services would often typically be transaction-based and focused on problem solving: services

targeting to solve an existing, bounded problem typically observed and even analysed by customers.



20

Customers are willing to buy this type of services in order to keep their machines running at a high

capacity, or because problem-solving or maintenance requires some special know-how. In such cases,

customers may consider product-related operation and even maintenance to be their key competences.Customers may therefore consider manufacturer efforts to extend their offerings to include services

a threat to their own business. Table 1 summarises the elements and typical generic descriptions of a

product-centric business model.

Table 1. Generic product-centric business model.

A generic model for product centric business

Elementsclassification

Element Description

Strategic busi-ness choices

Position in companystrategy

Companies are “product houses”, their main competitive edge is in technologicallyadvanced products.

Offerings Product-centric offering, possible services offered are to support this product-centricbusiness. All services have been defined or conceptualised.


Our products (and some supporting services) support customer value creation be-yond product price. (Meaning that our products are purchased by customers whosevalue creation they support).


Transaction-based business, related distant relations. Information exchange towardscustomers may be discrete. End customer relations may be owned by a distributor.


Technological competences: we have a technology-leader product. Our manufactur-ing lines (and individual machines) limit our capacity.

Partner network Subcontractor network delivering components for our products – invisible tocustomers.

Value proposition Value comes from products and obligatory supporting services like spare part sales.(Typically there are also some favours delivered to keep customers satisfied – fa-vours are unsystematic services, which are not business)

Customer

concerns:Understandingand supportingcustomer valuecreation

Customer value

creation

Our products produce something that is needed for our customer’s end product.

Value capture Customer value comes from use/operation of our product and customers are awareof any use-related issues based on their experiences. Cost efficiency is the keydriver: the cheaper, the more competitive.

Customeradvantages

Customers know how to effectively and efficiently utilise our products support theirown processes.


Customers’ own competences to operate and maintain our products.

Implementationmodel

Delivery of product to customers. There may be some favours or services to supportthe introduction of our product.

Profitableservicebusiness

Earning logic Earnings are transaction-based and based on product deliveries to customers.

Pricing Cost-based pricing (cost + margin), hypothesis: the value created by our product ishigher than cost+margin.

Delivery Delivery channel Local distributor network (wholesale) or own sales companies.

4.2 Service Centric Business – Service Productisation

Service-centric business starts off with an understanding of customer value creation. Once the value

creation processes are understood, the next step is to create an offering (consisting of services including

products), designed to capture value. In this model, as customers consider the value for their business to

come from services, they are ready to pay for these as well. Business relations are typically long-term and

income is accrued over a longer period of time. The model includes more uncertainties, risks and related

risk sharing than a product-centric model: over a long commitment time period, several cases of uncertainty

may occur, for example issues related to the question what really needs to be delivered in order to fulfil

the value proposition. Table 2 summarises a generic description of a service-centric business model.



21

Table 2. Generic service-centric business model.

A generic model for product centric businessElementsclassification

Element Description

Strategic busi-ness choices

Position in companystrategy

Companies are value partners supporting their customers’ (segments’) value crea-tion in order to provide solutions to meet customer needs, including subconsciousneeds.

Offerings Consist of bundled services and products meeting customer needs and support-ing customers’ value creation. Services are understood as processes to supportcustomer value creation processes.


We select customers (customer segments), where business may be supported byway of our services in order to be able to utilise our core competences to deliverservices.


Long-term relationships/partnerships, close relations with joint processes and denseand continuous exchange of information. Joint processes: service providers movecloser to end customers in the value chain.


Competences related to understanding customer business, processes and operations(at least to some extent), and information management within service networks.Competent personnel are required to deliver the services. The capacity may belimited in some geographical areas.

Partner network May be strategic service partners and partners delivering services at some sites /locations. Partner networks often operate under the brand of the company acting asan integrator.

Value proposition Value comes from solutions supporting customer value creation. Such solutionsconsist of services and products.

Customerconcerns:Understandingand supporting

customer valuecreation

Customer valuecreation

Customer value creation and related processes need to be understood.

Value capture Customer value comes from solutions best supporting their value creation – theservices supplied may even add to the value of whatever the customer outcome is.

Customeradvantages

Customers get solutions without spreading their resources beyond their core com-petences.


Customer key competences and businesses are well understood by customers.Customers accept the services and commit to developing their own business at dif-ferent levels (strategy, process, operations) in order to fully benefit from the services.Purchasing know-what and know-how.

Implementationmodel

Joint service configuration and implementation. Implementation involves differentlevels provided by service providers and customers. Setting right Key PerformanceIndicators (KPI’s) is elementary.

Profitableservicebusiness

Earning logic Earnings are accrued over time and are based on value created. Jointly defined KPI’spinpoint over- and underperformance for both parties (provider – customer). Thereare agreed principles in place for dealing with performance-related risks.

Pricing Value-based pricing: our services should deliver certain value exceeding service-related costs. Therefore, a righteously dividable “value” surplus will be generated.

Delivery Delivery channel Own delivery set-up or use of service delivery networks, which can be organised invarious ways to enable local offerings yet still profitable business. Service deliverynetworks may not own customers.

4.3 Change Management in Service Business

The main question for a service business strategy is customer business evolution. This means that

customer value changes should be captured by offering new service solutions. Different market trends

(e.g. technology, market and community trends) are changing the business. Companies competing in

the industrial services business market should track potential and value of the benefits which custom-

ers may get from the services. Based on expected values, the main concept of service offerings should

be designed to cover customer process life cycles. The BestServ framework (Figure 3) identifies steps to



22

enable technology companies to develop their business from product-centric towards becoming service-

centric (value-centric). The framework is based on the idea that such extension would take place by way

of providing different types of lifecycle services for the products and to customers, and these serviceswould help technology companies to implement service-centric models, as illustrated in the top right

corner of the framework in Figure 3.

Example: a maintenance partner is offering maintenance lifecycle services to support their own products

and applications or their installed product base. The basic idea is to provide higher product availability by

way of reducing time or supporting applications by way of proactive maintenance. Proactive maintenance is

enabled by way of knowledge of products and applications. Maintenance costs can often also be reduced

as compared to customers’ in-house maintenance functions. On the other hand, a performance partner

is offering process efficiency by way of taking care of some parts of their customer’s technical processes

and ensuring high performance for this part. Value creation takes place in collaboration with customers

and dense information exchange and joint processes are needed. Along with technical process availability

on certain performance levels, offerings include performance data, forecasts and decision support aids.

Looking at the BestServ framework (Figure 3) on a more sophisticated level, the services provided havea continuous positive influence on customer process performance. For instance, value partnerships and

performance partnerships represent such more sophisticated levels and service- centric business. On such

service-centric levels, service providers are not only responsible for operative issues, but they would also

be involved in their customer’s innovation and development activities. For example, a value partner might

be responsible for the operation of some production machinery or system and thereto related customer

process development activities. In an extreme services example, the service would be to provide the de-

sired outcome and the customer might not even know what machinery or systems are used to produce

the outcome, nor where the outcome is being produced.

A well understood and structured business model supporting the business architecture is a very important

strategic tool when business is evolving according to market requirements. Lifecycle innovation needs

new approaches and leads to business-concept management. In future, it will be possible and essential

to sell business models based on the available architectural structure of a company.Knowledge-intensive business is undergoing continuous evolution. Lifecycle challenges may be faced and

competitive advantage achieved in knowledge communities (Tammela & Salminen, 2006). Increasing parts

of innovation processes are taking place outside individual companies. On a global scale, information is

available anywhere where an internet connection is available. Communities share the same information

at the same time. The question is how to integrate and synchronise knowledge, technology, competences

and processes, especially when creating something new in networked lifecycle business.

Case Study: KONE Service Business

KONE was among the first Finnish machine suppliers to proceed from key supplier to service partner.

Today KONE serves clients looking for the best long-term ownership value for their property as well as

clients targeting for lower total costs. KONE’s maintenance service covers their own products as well as

products made by other manufacturers.

KONE offers new comprehensive service concepts to support value partnerships. The KONE Care for Life

concept ensures safety of use, trustworthiness and usability during the entire lifespan of a device. KONE

Care of Life tools help define safety risks of devices, usability problems, ageing technology and quality

levels of appearance. Based on definitions, clients and KONE will jointly prepare the plans for service and

modernisation of the devices in accordance with client repair time schedules. The KONE Care for Life

concept can be utilised regardless of manufacturer of device.

KONE offers real-time services to customers looking for performance excellence by utilising technolo-

gies such as remote control or field terminal devices for their service personnel. KONE service centres

are available and at their customers’ service 24 hours a day. With the help of technology, service quality



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4.4 Network Centric Service Business

The cost pressure of global competition serves to accelerate networking within industrial services. A tran-

sition from product-centric business towards industrial services is in progress. When proceeding towards

services, the aim is to provide increasing value into the customer lifecycle process. This will create new

business opportunities.

Enriched offerings are usually achieved by providing particular knowledge to other companies along the

supply chain in order to increase the value of customer processes or products. As a result, companies are

moving closer to or even into the operation of their customers, which requires different organisational

approach and “networked thinking”. A network in this sense consists of individuals and organisations

with their available resources, which are taking part in a process and interacting accordingly. This network

perspective should be implemented in the service development phase already. Competition takes place

not only between individual enterprises but also between networks of businesses. In 2006, the “Service

Excellence” roundtable recognised that the partners of a value network assume joint responsibility for

final customer process performance and its continuous development. Networked business also means

new ways for earnings logic. According to Salminen and Pillai (2005), value and benefit of lifecycle cus-

tomer processes have to be developed in collaboration with service partners. This benefit should also be

presented to customers. Along with further development of business ecosystems and increased require-ment levels, some partners in the network will face the trend to produce industrial services consisting of

service and dynamically interlinked products only.

Within networked industrial services delivery there is a trend towards increased knowledge intensiveness.

There is a need to produce services and provide information and knowledge handling and management.

The critical success factor will be the capability to find and handle information and knowledge in a chang-

ing environment to support in-house and customer lifecycle processes.

Figure 9. Kone applications life cycle care at customer site.

and speed can be improved, and on the other hand the same technology can be utilised to improve the

productivity of the service. Figure 9 illustrates lifecycle thinking at Kone Elevators.



24

Successful networked business requires jointly agreed rules between networked businesses, collabora-

tion management, deep information technology integration as well as fast and easy partnership creation

skills. Increased knowledge intensiveness will simultaneously increase the intimacy between the partnersof a value network.

There are already enterprises working to help companies understand the relation between life cycle costs,

system reliability and availability promise. Lifecycle considerations are gaining importance as customer

intimacy is increasing in collaborative relationship.



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5 Service Business Expansion

Many issues need to be considered and prepared prior to launch of service business expansion. Firstly,

one needs to create a functional strategy based on relevant market information. Decisions to launch ex-

pansion should be taken with full management commitment. Further, in terms of success, it is important

to recognise and prioritise certain target customers and geographical areas, particularly in case of large

markets. In addition to above, service concepts and related delivery processes as well as service perform-

ance competences and cultural aspects should be well in place. With regard to these prerequisites, this

chapter will discuss the following strategies commonly used for service business expansion, penetration

to new markets and growth:

• International service concept expansion

• Licensing

• Franchising business models in services

5.1. International Service Concept Expansion

International service concept expansion based on best practices and a practical virtual entry into the

Russian market are discussed here. The topic was processed by the Round Table of BestServ Forum in

2006. Special attention was paid to service concepts, international expansion roadmaps, expansion in the

Russian market and dedicated success factors to be observed in this specific market. Due to the fact that

development functions have been better and more efficiently organised for the part of products than for

services in traditional product business-oriented companies, the integration topic was considered mainly

from a services point of view. Finally, an ideal road map for international expansion on service concepts

for the Russian market was created by the participants. The road map could be applied for any other

new market entry.

5.1.1 Virtual Entry to the Russian Market (selected new market)

The Russian market was selected to represent a new market in this virtual market entry exercise.

The service concept considered in the exercise has been illustrated in Figure 10 in the form of a matrix

split. The concept selected is a practical industrial case dealing with real service needs, offerings and service

providers. Export of machinery is in place and this business is growing in the market looked upon here.



26

5.1.2 Market Entry Prerequisites

As discussed, there are many issues to be considered and prepared prior to taking a decision to entry any

new market. A sufficiently functional strategy based on relevant market information should be created,

and the decision to expand should be taken with full management commitment. In terms of success, it

is important to recognise and prioritise certain target customers and geographical areas, particularly in

large markets.

The first service offering should be defined based on current needs and situations of the prioritised cus-

tomers. For a smooth start-up, a training concept and modules should be available according to a defined

offering. In addition, sufficient language and cultural skills are required.

Detailed actions planned for the expansion should be carefully communicated, fully understood and

agreed among all contributors. Management commitment should be requested for all actions. It is rec-

ommendable to apply Deming’s Plan-Do-Check-Act Circle in the implementation of actions in order to

assure proper completion of the entry.

Opening a branch office involves the following preparations:

• Proper premises should be available and contracted.

• Minimum personnel should be available and properly trained.

• Necessary tools and tooling should be arranged and properly located.

• Logistics management in the target country should be well in place.

• Order placement, contract, delivery and invoicing processes should be functional.

• IT and ICT infrastructures should be implemented and verified.

• Administration and business control procedures should be in place.

Figure 10. Description of an industrial service concept

X

Solutions

Comprehensive

service

Repairs &

Refurbishment

Spare parts

Inspections &

Training

Breakdowns

Preventive

maintenance

Finanching &

Rental

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

(x)

Service By

Customer

Service With

Customer

Service For

Customer

Dealer



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5.1.3 Specific issues in the Russian Market

The following key issues specific to the Russian market have been collected here according to Tapio Rii-

hinen’s presentation on April 28, 2006. Tapio Riihinen’s remarks ‘Russian markets and business environ-

ment are changing quickly’ should also be considered.

In a stereotyped Russian company culture, the top management knows and decides everything. Employee

growth potential and independent thinking is completely neglected. Western companies can quickly

establish strong and long-term commitment and motivation observing the following rules.

A common understanding on strategy and on how we will jointly manage its implementation will enhance

employee commitment and efficiency in all operations. This also includes structural understanding. This

is why a concrete easy-to-communicate strategy and a measurable strategy implementation plan are the

first steps to build up sustainable success in Russia.

An efficient and flexible (lean) management system documented into an Operation Manual is a most

critical matter in the complex Russian bureaucracy. The management system will be built up on a flexible

western format to comply with local law, and constantly questioning the “not possible” statements fromthe statutory accountants. In the case of take-overs involving Soviet-era units, the best way to start is to

destroy all existing financial and administrative procedures and start from scratch.

Inclusive incentive schemes to cover the entire organisation will be an essential part of the management

system when building up a clear and inspiring motivation system.

Establishing a strong aligned company culture plays an essential role for successful industrial expansion

in Russia. The best parts of the company’s own culture and values must be imported to Russia. However,

the dynamics of the Russian market sets special requirements. Winning cultures are always characterised

as follows

• Competitiveness in all actions

• Speed and agility – fast reaction and decision-making

• Being constantly alert

Finnish or Western cultures cannot cope with all these requirements. This is why these elements must be

enhanced by the local management. This must be considered particularly when recruiting a local general

manager.



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5.1.4 Road map for entry to the Russian market

A penetration road map to the Russian market is presented in Figure 11. The road map was created by

summarising the results of the virtual new market entry exercise completed at the Round Table Meeting

of the BestServ Forum on April 28, 2006.

Figure 11. Penetration road map to the Russian market (Best Serv 2006, Round Table 5).

To summarise the meeting conclusions, one needs to carefully consider the following factors of successful

market entry into Russia:

• Basic knowledge of Russian language

• Understanding of Russian and Slavic mentality

• Adapted concept for the Russian market

• Well done studies

• Courage to jump into a new culture

• Trust people, but check from time to time

• Forget Soviet era players

5.1.5 International service concept expansion road map

The road map for entry to the Russian market could be applied for any new market penetration. An

industrial service concept and a proper offering should be in place and all prerequisites considered and

decided prior to taking the first market entry actions. Market-specific issues cannot be avoided in any

new markets.

Figure 12 presents the key phases of a new market penetration. The first phase describes a general split

into after-sales and services business after expansion of the service concept. The second phase illustrates

the situation after consultancy services have been promoted. This creates substantial increase of perform-

ance contracted business. The Delight part of the service business with or without pricing and charges is

crucial to customer satisfaction and growth. Enlarged offering of sophisticated service concepts together

with customer relations build-up has a significant impact on growth and third phase splits. Finally, profit

is generated by way of optimal ratio of repairs and solutions and performance contracts.



29

5.2 LicensingLicensing of industrial property includes a significant amount of various services depending on the defined

content to be licensed. Licensing an entire profitable business including products, processes, business

models and brands gives a huge business opportunity with reasonable low capital deployment. How-

ever, licensing of an entire business requires precise definitions and documentation of product data and

functions, manufacturing processes and tools including IT, supplier network as well as related training

material, modules and resources. Further, description of business models and brand features and market-

ing materials packages add significant value to the license offered. Licensing could be more profitable

business than product sales but less profitable than services. Of course, profits will depend on the quality

of licensing services, brand image and documentation.

Figure 12. Development phases of an ideal market penetration showing business structureand main emphasis by phases. Export of traditional products to the market had been success-fully started prior to entering the first phase.



30

Entire business concept licensing is good practice for penetration to new selected markets and for brand

image enhancement. Capital deployed in penetration could be significantly reduced for the licensing

procedure compared to investments required to obtain the same capacity.

Service packages could also be licensed and this could be equally profitable as product-related licensing.

However, reduction of capital deployed is a minor issue for this type of penetration action. Licensing service

packages only could be profitable on a cost-related basis but actually create very little absolute money. Thefact that service business requires close customer relations and continuous relation management makes

licensing of services more complicated than licensing of products and processes. Further, precise docu-

mentation of service packages is a difficult task due to continuously changing business environments.

5.3 Franchising

Franchising is a model where trademarks and proved methods for doing business are provided to another

company for business purposes. The company providing these rights is called a franchisor and a company

utilising these is called a franchisee.

In addition to methods and trademarks, a franchise agreement will often include training, quality stand-

ards and guidelines. Compliance with these is controlled as one precondition for conducting franchise

business. The franchisee pays a fee for using the franchise agreement. Typically the fee is equal to an

agreed percentage of the gross sales or profits, or it may be an annual fee.

Especially in b-to-c service business, there are many franchising examples; express food chains, specialty

stores and similar. In industrial contexts there are also some service-centric franchise businesses, for ex-

ample in the cleaning business.

Figure 13. Product, licensing and service business profitability. Services and concept licensingbusiness provides high profitable opportunities depending on customer value and quality of the licensed package.

Product and After Sales

Licensing

Service Business

Right Price

Minimum Price

R e v e n u e

Margin

Cost Efficiency

Quality and Service

Entire Concept

Firm Brand

Service Packages



31

6 Conclusions

Ideally, services business requires the following matters to be emphasised:

1. Management grip and targets

In industrial services business, development ideally arises from company vision. Market, product and

service strategies and respective roadmaps are derived from the vision. Strategies and roadmaps seem

to be more important with services than with products.

When developing a product business, shortages in strategies, roadmaps and customer inputs can be

compensated in many ways, for example by following market trends and competitors. When moving

towards industrial services business development, direct customer contacts are most important and

cannot be compensated by any other action.

2. Business models and offering portfoliosGood business models outline strategic business choices, customer value propositions, earnings logic

and pricing including sales and delivery. In order to achieve excellent performance with regard to

customer relations and implementation, offering portfolios should be in line with business models.

All elements of services business and offering should be described and modelled in a customised way

according to business segments.

3. Resources and competences

The nature of industrial services business calls for dynamic hands-on capabilities, including optimal

mixture of leadership, customer relations management and delivery execution. Knowledge of cus-

tomer business and processes by way of meeting the required expectations are the most important

assets in the industrial services business. The expectations required cover matters such as customer

needs and values.

4. Customer front-end and market information

Good customer relations and correct market information should be continuously maintained. It is

recommendable to maintain ongoing communication with key customers in order to achieve a good

understanding of market developments and related changing customer needs.

Key account managers play essential roles in terms of maintaining customer relations, continuously

updating customer needs and assuring correct customer business information and understanding. In

order to learn about customer concerns and needs, it is recommendable to organise workshops at

the beginning of the quotation process and at delivery execution.

Customer-decision making and delivery satisfaction related to industrial services are highly emotion-

ally steered.

5. Organisation and processes

A service business organisation needs to be open and communicative especially with regard to delivery

execution, and also utilise multi-expertise teams. High-speed, unhindered information flow is neces-

sary between persons working in such multi-expertise teams. Communication content needs to be

in line with the services business.



6. Change management

The trend within industry is to find new competitive advantage by way of business networking. Sev-

eral businesses are in continuous transition from a product-centric business setup towards industrial

services and continuously search to identify new customer life cycle process values. This also involves

continuous change management on all value chain and network levels. Customer business evolution

is the main key point in a services business strategy. This refers to changes in customer values which

should be captured by offering new service solutions. This extension takes place by providing different

types of lifecycle services to customers, by way of which technology companies can proceed towards

knowledge-intensive services and networked centric models.

References

BestServ Forum Round Tables, RT’s, during 2004–2006. (Person/company names mentioned when ap-

plicable).

Kalliokoski P, Andersson G., Salminen V., & Hemilä J, (2003). BestServ Feasibility Study. Technology

Industries of Finland, Helsinki.

Osterwalder A., Pigneur Y., and Tucci C.L.(2005). Clarifying Business Models: Origins, Present, and Future

of the Concept. Communications of AIS, Volume 15, Article 9.

Osterwalder A., (2004). The Business Model Ontology – A Proposition in a Design Science Approach.

University of Lausanne, Switzerland. 160 p.

Pulkkinen M., Rajahonka M., Siuruainen R., Tinnilä M., Wendelin R. (2005). Liiketoimintamallit arvon-

luojina – ketjut, pajat ja verkot. Teknologiateollisuuden julkaisu 8/2005. Teknologiainfo Teknova Oy,

Helsinki.Salminen, V. & Pillai, B., (2005). Integration of Products and Services – Towards System and Performance,

International Conference on Engineering Design, ICED 05, Melbourne, August 15 -18.

Tammela, J. & Salminen, V., (2007). ̀Modeling Business Innovation Collaboration in Open Infrastructure',

ICE 2007, International Conference on Concurrent Engineering, Milano, June 26-28.

Spohrer, J. (2006) Service Sciences. IBM Presentation material.

Documents

Bestserv Managing Service Business