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BEM 3005: Business Project
Implementing a Customer Centric Service Culture within an International Organisation:
A study of Siemens Industry Customer Services Division
May 2014
Student Number: 590020515
Supervisor: Dr. Alan Benson
Word Count: 11,924
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Acknowledgements As part of this project, I would like to thank: My supervisor, Dr. Alan Benson, for his input and guidance whilst researching and writing this project. All at Siemens Industry Customer Services Division, in particular Dr. Alexander Gogoll, Jan Saeger and Roberto Schild for their support with this project. My parents and Alex for helping me get here and for all their support and kind words throughout.
Abbreviations
In order to save time and space the following abbreviations will appear throughout this project: Siemens I Siemens Industry Siemens I CS Siemens Industry Customer Services CS division Siemens Industry Customer Services division CRM Customer Relationship Management OCM Organisational Change Management
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Executive Summary
The purpose of this project is to examine and determine the extent to which the strategic
change programme occurring at Siemens Industry Customer Services division follows a move
towards a customer centric strategy. It will also determine how successful the Industry CS
division has been at implementing a service oriented culture. This involved a deep study of
the relevant customer orientation management literature by investigating the topic of
customer centricity as well as the role of CRM, OCM and organisational culture change. The
fact that, whilst the benefits of such a strategy are beginning to become clearer, the
implementation of a customer centric strategy in large international organisations is still
relatively unknown, was the motivation behind this project.
An industrial field study was carried out where information was gathered using interviews
with employees within the I CS division at Siemens as well as using internal corporate
documents and data. The findings have shown that, with detailed planning and the right type
of leadership style, such a strategy can be implemented within an organisation. However the
study also finds that there are many factors that can affect such an implementation and all of
these should be addressed in order to successfully implement such a strategy. This project
makes an attempt to outline the important considerations and the guidelines to follow, to
successfully implement a customer centric cultural change.
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Contents
1.0 Introduction......................................................................................................................................... 4
2.0 Literature review............................................................................................................................... 5
2.1 The evolution of customer focused strategies and its importance.................................... 5
2.2 The role of customer focused strategies: CRM and Servitisation......................................11
2.3. Customer focused implementation strategy: creating a customer focused culture
within an organisation................................................................................………………………………….14
2.4 OCM – potential problems and solutions to organisational change……………………...17
3.0 Industrial Field Study .................................................................................................................... 20
3.1 Siemens organisation introduction and their reasons for change.................................. 20
4.0 Industrial Field Study Results..................................................................................................... 21
4.1 Design of questions……………….........................................................................................................22
4.2 Results: How Siemens I CS Division is implementing their Service Culture change
management strategy……………………………………………………………………………………………..25
4.2.1 Results from Interview 1………………………………………………………………………………..25
4.2.2 Results from interview 2………………………………………………………………………………...28
5.0 Analysis – to what extent does the Service Culture initiative support the theory?...30
5.1 Changes in Perspectives and vision of the Organisation .....................................................31
5.2 CRM towards a Customer Focus......................................................................................................31
5.3 Implementing Cultural Change........................................................................................................32
5.4 Leadership and OCM.............................................................................................................................34
5.5 Analysis and Evaluation summary.................................................................................................35
6.0 Conclusion...........................................................................................................................................37
6.1 Recommendations.................................................................................................................................38
7.0 Research challenges and limitations.........................................................................................38
7.1 Future research.......................................................................................................................................39
References……………………………………………………………………………………………………………..……40
Appendix....................................................................................................................................................46
Appendix 1........................................................................................................... .............................................46
Appendix 2............................................................................................................................. ...........................46
Appendix 3........................................................................................................................................................47
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1.0 Introduction
The aim of this project is to determine the extent to which the strategic change programme
occurring at Siemens Industry Customer Services division follows a move towards a customer
centric strategy, as well as to determine by what means and how successful the Industry CS
division has been at implementing a service oriented culture. This was done by analysing their
CS Excellence Programme and Service Culture initiative. This study also aims to provide clear
conclusions and several recommendations.
As increased costs and increased competition puts strain on organisations profitability and
success, it is important to find a way to stand out. One way to do this is to focus on creating a
service orientated or ‘customer centric’ organisation where a competitive advantage can be
gained by providing customers with attractive service offerings and long term relationships.
This study looks to determine to what extent this is possible and how an organisation can
successfully implement such a strategic change with Siemens Industry Customer Services
division as a main case study.
The research undertaken consisted of four different stages, with each stage giving detailed
research into the study.
The first stage of this study involved carrying out an extensive literature review to develop a
clear understanding of the leading academic theory behind the term ‘customer centricity’
along with discovering how an organisation can successfully implement organisational change
towards a service orientated culture with an emphasis on change management and customer
relationship management.
The second stage involved a detailed industrial field study to discover how Siemens Industry
Customer Services division has actively tried to implement a service orientated culture within
the division. This study involved interviews with the management team of the CS division as
well as the use of internal strategic documents and communications.
The third stage of this study aim was to critically analyse the methods and strategy adopted
by Siemens I CS against the academic theory, to determine how and to what extent their
strategy fits the ‘customer centric’ model and how their implementation strategy is consistent
with the theory on OCM and CRM as well as organisational culture.
Finally, the paper closes with conclusion and recommendations for the CS division as well
future research opportunities and limitations.
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2.0 Literature Review
This literature review explores the shift that many manufacturing companies are experiencing
towards ‘customer centricity’ whilst embracing ‘servitisation’ and how this shift can have a
positive effect on organisations. This focuses on the reasons and needs for such a shift and in
particular how organisations can go about implementing such a change. This review will also
consider which elements of organisational change are the most important to successfully
become a fully ‘customer centric’ organisation and the possible implications and problems
which may arise from implementing such a strategy.
Although customer centric and customer focused strategies are being observed in a wide
variety of markets and industries, this project, and therefore this literature review, will focus
on international engineering and explore the role this strategy plays within this industry.
2.1 The evolution of customer focused strategies and why it is of importance today
In order to fully understand the importance of a customer focused strategy and why its
importance has evolved over the past twenty years, it is essential to look firstly at its
evolution as a theoretic concept. A thorough study of the term ‘customer centricity’ by
Bezuglova (2013) explored how it has developed over time. Figure 1 shows Bezuglova’s
(2013) evolution of customer centricity framework which clearly lays out a chronological
evolution of well-developed customer centricity organisational thinking. Her unpublished
research findings fully support Pillar and Ihl (2009) who state a view ‘…. that the origins of
customer centricity comes from a market orientation via a customer orientation towards
customer centricity.’ During the early market orientation stage it can be argued that ‘customers
lost their uniqueness, as they became an “account number” (Pillar and Ihl, 2009) as a result of
increased competition, during industrialisation and globalisation. This view is supported by
(Chen and Popovich, 2003). However, Drucker (1982) stated that the relationship between
customer and supplier was ‘the largest remaining frontier for gaining competitive advantage –
and nowhere has such a frontier been more neglected,’ which has therefore resulted in the
realisation of how significant such relationships can be, and the facilitation of the
development of sustainable long run customer centric strategies, within organisations. This
understanding of the relationship potential has developed from the realisation that customer
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value is created from a customer centric focus, which ‘puts customer interests at the centre of
the business operations and creates superior value offerings by treating every single customer as
an individual’ (O’Cass and Ngo, 2011; Tseng and Piller, 2003 in Bezuglova, 2013, p. 13).
Figure 1 – The evolution of the customer centricity (Bezuglova, 2013)
A recent study by Booz & Co. (2010) found that although many organisations are tempted to
drop customer centric strategies in troubled economic times, they found that companies’
customer retention rate is far higher when a truly customer centric business model has been
adopted. They also outlined that the most successful companies in this field have two major
aspects in common; …. ‘strong leadership and good advance planning’ (Booz & Co, 2010, p.4).
However these cannot be the only elements that lead to success, with Gulati stating in a HBR
article (2007) that all successful customer centric organisations engage in coordination,
cooperation, capability development and connection activities. The extent to which a
customer centric strategy can be implemented will be explored further in this paper, but it is
important to firstly look at the theory behind customer centricity and customer orientation
which has developed since the 1990’s to determine why it has become such a researched topic
over the last twenty years.
Having established the origins of customer centricity it is now important to explore some of
the key elements of this concept and various ways it can be implemented into a strategy in
relation to the Resource Based View (Barney, 1991) to determine whether this focus can
produce results. Despite there still being ambiguity around the term customer centricity, with
some preferring to call this customer focused or service dominant logic (Vargo and Lusch,
2006) , it is important to note the unanimous directional change of these terms; from product
focus to customer focus, to prevent confusion. The shift towards customer focused
organisational structures has been observed by many (Homburg et al., 2000; Gebauer and
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Kowalkowski, 2012; O’Cass and Ngo, 2011; Tseng and Piller, 2003) with Gebauer and
Kowalkowski (2012) noting that many companies are shifting their organisational structures
to be ‘responsive to customer needs’ thus becoming more customer focused. Shah et al. (2006)
use of the term customer-centricity refers to an organization's customer focus and the
particular elements this focus entails. They go on to state that ‘customer centred organizations
are held together by a central value that every decision begins with the customer and
anticipated opportunities for advantage’ (p. 116). The extent to which this is feasible is
debatable and will be explored later on in this report, but the reason top management have
recently put more focus on customer centricity is described by Tseng and Pillar (2003) as
being due to an ‘increased individualisation of demand.’ This requires a more customer focused
service offering, a practice they deem to be of top priority in many industries.
Peppers (2013) outline the difference between product centricity and customer centricity
which is outlined in figure 2. The extent to which a firm meets its customer needs is the
extent that firm is customer centric. However if a firm becomes too focused on the customers
every need, there may be difficulty in
reaching a large customer base and
the customer will be more satisfied
with the relationship built. This is
dependant on the industry in which
the firm is operating in, but must be
taken into account when
implementing such a strategy. If a
customer focused strategy is
successful, a study by Sirmon, Hitt
and Ireland’s (2007, in O’Crass and
Liem, 2011) found ‘that creating
superior value for customers enables
firms to enjoy a competitive
advantage and increased owner wealth.’ This is because many top managers are realising that
they can link their actions to non-financial indicators which when nurtured correctly, enable
their organisations to enjoy a competitive advantage (O’Crass and Liem, 2011). These
indicators are intangible resources and capabilities such as reputation, customer value and
culture. The competitive advantage (CA) that can be achieved is addressed by Barney (1991)
Figure 2 - Product Centricity and Customer Centricity
(Peppers, 2013)
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who states that a positive reputation within an organisation could lead to a sustained
competitive advantage (SCA) if the resource is rare (only held by a small number of
organisations). This is because such a reputation is considered an intangible resource and it is
also therefore difficult to imitate and is also non-substitutional (Barney, 1991). Despite
certain criticisms of the Resource Based View (RBV) (Kraaijenbrink et al., 2010; Fiol, 2001;
Eisenhardt and Martin, 2000; D’Aveni, 1994) it still remains an important indicator to
determine a firm’s intangible resources and capabilities in relation to competitive advantage
(Newbert, 2008; Barney and Hesterly, 2001; Hall, 1993) and will be used as an underlying
theory to support this study. Hall’s (1993) developed a framework that centres on how such
intangible resources can lead to a SCA, finding that reputation, employee knowledge and
culture are the most intangible resources that can help to lead to a SCA. However, if that can
be sustained it is because SCA ‘is no longer rooted in physical assets and financial capital, but in
effective channelling of intellectual capital’ Seubert, et al. (2001), thus stating that a
successfully focused customer centric strategy will result in competitive advantage as it will
contain ‘softer’ intangible elements.
This strategic importance is also noticed by Sanchez and Iniesta (2006), whose research
suggests that customer value creation is considered to be ‘a critical strategic tool to attract
and retain customers’ (p.42). Despite some difficulties in implementation, due to globalisation
and increased competition amongst organisations, this customer focused market-driven
strategy is becoming more and more important (Day, 1999). Huber et al. (2001) see the
potential for such a change and suggest that although a customer focused strategy resulting in
customer value was ‘traditionally an "off the balance sheet" asset’ there is clear evidence from
their study to suggest that this value is being seen by managers as a way of creating CA.
Bowman and Ambrosini (2000) study, looking at how value is created and retained, is also
another important factor in determining how firms can stay competitively advantageous. The
creation and retention of the value created from implementing a market driven strategy, with
a focus on culture and service, is key in determining the strategic success, as it’s the value it
creates which will determine if the strategy helps the company increase market share,
revenue and profits and therefore satisfying stakeholders on a corporate level.
Not all have agreed with the concept of customer centricity and some have developed
alternatives to the evolution of customer centric theory. Despite the vast array of support for
a customer orientated and customer centric focus, the success of customer centric strategies
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has been viewed by some with caution (Gummesson, 2008a; 2008b; Vargo and Lusch, 2004;
2006) even being described as a ‘fuzzy concept’ by Gummesson (2008a) due to its difficulty to
validate. Gummesson’s (2008a) forward looking paper looks at customer centricity but tries
to focus the role of the customer in the context of a network of relationships rather than just a
single entity. This analytical research prompts more debate about whether customer centric
approach is appropriate. He outlines several contradictory perceptions which examine the
value of customer centricity and what it can bring to an organisation. Gummesson, (2008a)
states that ‘management often have doubts about the profitability of customer centricity. They
are afraid that customer centricity incurs cost but contributes no revenue’ (p318). He calls for
strategic focus to be on this ‘balanced centricity’ rather than ‘customer centricity’, as this will
have the interests of both customers and suppliers as a focal point. He concludes his findings
by suggesting that customer centricity cannot be fully implemented in practice and calls for a
‘network based stakeholder approach,’ which he calls: ‘balanced centricity’ (Gummesson,
2008a; 2008b).
The ‘balanced centricity’ approach outlined by Gummesson (2008a; 2008b) is important to
address, but despite Gumesson’s argument, Vargo and Lusch (2004) put forward a compelling
argument for a service dominant logic of marketing which states that customer centricity
‘means more than simply being consumer oriented; it means collaborating with and learning
from customers and being adaptive to their individual and dynamic needs’ (p. 6). Vargo and
Lusch (2004) also acknowledge the shift towards intangible assets and the key role such
assets can play in retaining customers and producing a CA or even a SCA as these are the
resources which will enable a firm to create such relationships and adapt to their various
needs. Hunt (2000, 2004, in Day et al., 2004) looks at Vago and Lusch’s (2004) ideas and
applies resource-advantage theory to their model of competitive advantage. Hunt states that
value is created not by ‘exchange but by the extent to which each resource contributes to the
firm’s ability to efficiently/effectively produce market offerings that some market segments
perceive as having value’ (p. 22). This suggests that if a firm is able to do this, they will have a
CA. It appears that many other theorists (Day, 2004; Hunt, 2000, 2004; Gummerson, 2004;
Rust, 2004) agree with the direction Vargo and Lusch (2004) suggest that marketing is
continuously developing. It will therefore be interesting to see to what extent this
development occurs at an operational level in organisations such as Siemens and whether the
new era shift in marketing is having a positive effect on an organisations CA.
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The Service dominant (SD) logic of marketing outlined by Vargo and Lusch (2006; 2004) is a
new form of marketing which represents a shift to an emphasis ‘on operant resources and
dynamic resources that act upon other resources’ (p.43). This form of marketing therefore
complements those approaches outlined above (O’Cass and Ngo, 2011; Tseng and Piller, 2003;
Bezuglova, 2013; Sirmon et al. 2007, O’Crass and Liem, 2011; Gummesson, 2008a; 2008b) in
that they are all various ways to focus attention on the customer in certain ways to offer a
customer focussed service, with the aim of helping to stay competitive. Vargo and Lusch
(2006) also determine their SD approach has resulted in a transition from an industrial to a
service era, thus fitting with Bezuglova’s (2013) evolution of customer centricity research
shown in figure 1. Hunt and Madhavaram (2006, p.70) look at how resource advantage theory
can complement the SD perspective. They determine that some resources which are a result
of the SD logic such as culture and processes are not easily copied or acquired (relatively
inimitable) and may therefore ‘be a source of long-term competitive advantage.’ However,
despite the apparently obvious advantage that a customer focused SD logic can bring, Day
(2006) questions the applicability of the SD logic in all situations and companies, stating that
managers may be wary of implementing such a strategy as the benefits are not easy to predict.
He also notes that although 63% of fortune 100 companies offer solutions (Sharma, Lucier
and Molloy, 2002 in Day 2006, p.88), they do not actually offer the full SD logic that Vargo and
Lusch (2004) outline. Therefore suggesting that it may not actually be possible to implement
such a SD strategy in many market situations. Brodie, Pels and Saren (2006) also challenge the
thought that Vargo and Lusch (2004) SB logic will emerge as dominant logic (i.e. ‘goods
towards services’) and suggest that it is more likely to be ‘a pluralism of marketing practices
(i.e. goods and Services)’ (p.314) as one entity cannot exist on its own. Despite the doubts
raised, the SD logic view is supported by Heskett, Sasser and Schlesinger (2003) who establish
that the move towards the service sector in established economies means that firms have
focused on their support services as a key part in their ‘competitive product service package’
(p.39). Although their research only focuses on the U.S economy and on U.S companies, this
does seem to be the opinion many firms have taken to stay competitive against cheaper
alternatives from emerging market economies. They state that in spite of much resistance to
service orientation and offerings in many firms, some have started to regard service activities
‘as stand-alone businesses supporting not only products sold in-house, but competitors’ products
as well.’ (p.40) In the face of these critisms of the SD logic, Vargo and Lusch (2006) continue to
point out the dynamic and incomplete nature of their research and therefore it still has
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serious potential to have a positive impact on organisations strategies as long as other
conditions are also taken into account.
The positive outcomes potentially achieved by implementing a customer focused strategy, as
seen above, are attractive to a vast majority of organisations. However further criticisms have
emerged with regards to potential problems in implementing such a strategy (Day, 1999;
2006, Hart 1999; Sawhney and Brobst, 2002). Day (1999) outline several problems with
implementing a customer driven strategy, things which could easily cause the strategy to fail
and therefore elements that managers need to be aware of. He points out one major problem
would be if the organisation were to focus too much on its internal environment and not on its
external environment resulting in the firm preventing itself from ‘seeing its market.’ Another
reason Day (1999) points out is that some firms may ‘bend over backwards to do what the
customers want’ and therefore fail to implement ‘discipline in their strategy.’ Both these factors
are dangerous when implemented. They will result in a distorted and disadvantageous
implementation, harmful to the organisation. Other concerns with customer centricity have
looked on the relative ease of asserting the concept, but the difficulties that arise when trying
to build and sustain its implementation, especially in large organisations (Hart 1999, in Shah
et al. 2006). Sawhney and Brobst (2002, in Shah et al .2006, p. 114) even quote a CEO sasking
“customer focus and customer centricity is in every annual report, but who can really do it?”
These findings show that it is most likely to be the unknown and unpredictable elements of
implementing the strategy which seem to be the reason that so many top managers are
reluctant to introduce this. In spite of the difficulties that some firms face when trying to alter
their organisational structure, Shah et al. (2006) believe that firms that have successfully
implemented customer centric strategies ‘have reaped rich rewards in the form of superior
financial performance and loyal customers’ (P.123) and it will therefore be important to
discover successful ways of implementing this later in this literature review.
2.2 The role of customer focused strategies: CRM and Servitisation
While some criticisms have emerged from the customer centric theory as seen in section 2.1,
one element of this concept has been at the forefront of the vast majority of research; the
ability to attract, retain and service customers has proven to have unanimous support as a
source of CA in established markets, if implemented in the correct way. It is therefore
important now to explore the role of CRM as well as servitisation and the role service plays to
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help firms sustain a CA. A 1999 HBV article noted the change that was occurring in
engineering companies towards focusing on a downstream strategy ‘providing financing and
spare parts’ as this ‘is where the money is’ (Wise and Baumgartner, 1999, p. 134). As
‘companies are realizing that customer centricity provides the best means to develop close and
profitable relationships with their customers (Shah et al., 2006) and therefore helping to
maintain a CA, CRM is playing an ever growing role in customer centric organisations. For this
review the definition of servitisation outlined by Baines et al (2009) will be used; ‘an
[innovative] shift from selling products to selling integrated products and services that deliver
value in use’. As Gebaur et al. (2005) ‘found that no company struggling to achieve high service
revenues has a clearly-defined service strategy’ (p.16) it is important to explore ways both CRM
and Servitisation can improve an organisation’s market position and why such strategies are
being adopted by so many organisations. It is also important to determine which challenges
might be faced by organisations and to determine which measures can be taken to reduce
their impact in the implementation stage.
Despite Senn (2006) noting that ‘ironically, managers are often not aware of the strategic
importance of a particular customer relationship compared to, for example, an average country
market,’ these relationships have been proven to be a large part of retaining key accounts and
maintaining a CA. Chen and Popovich (2003) state that CRM ‘is an enterprise-wide customer-
centric business model that must be built around the customer’ with benefits being greatest to
those companies that fully implement such CRM strategies (Lange, 1999). Bruhn (2003)
suggests three strategies that can help an organisation stay competitively advantageous
through relationship marketing. The customer acquisition, customer retention and customer
recovery strategies can help to gain a CA, but they also state that CA through relationship
orientation can be affected by the output type. This is confirmed by Senn et al. (2013)
research which looked at the role of customer relations managers in organisations. Their
research raises some interesting questions about which level of customer management should
be adopted. They develop three perspectives of customer management. One of these, their
‘network perspective,’ aims to provide ‘a deeper level of value creation and risk
management…..offers higher relational rents and competitive advantages that neither party
could achieve on its own’ (Senn et al. 2013, p.43) suggesting that a bilateral relationship
between the two organisations is created. This supports Bruhn’s (2003) research which found
that, in terms of business-to-business industrial relationship marketing, a relationship is
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maintained by ‘creating barriers with contractual, technological, institutional or psychological
bonds.’
One way that this relationship can be implemented within an organisation is to employ
executives throughout the organisation, who can effectively build and maintain strong
customer relationships, thus creating a customer-centric organisational structure (Senn,
2006). This ‘hard’ factor, together with ‘soft’ factors, such as shared values and employee
behaviour, need to change in order to implement service orientated business practices
effectively (Homburg et al., 2003). Difficulty in such changes can arise because the intangible
nature of services make the relationship management more complex as it is more difficult to
‘assess customer requirements and to fix an objective service standard’ (Olivia and Bean, 2008).
Olivia and Bean (2008) also look in more detail at how a service quality management (SQM)
simulation can help mangers with the changes which a service offering need. However, the
heterogeneous nature of organisations makes it more difficult to see the full benefit and
managers must be aware that their own organisations and businesses will have different
situational needs. Looking at the implementation of such a strategy in different areas, allows
firms to analyse their situation before introduction, therefore being most likely to succeed.
Although servitisation is not the only way to stay competitive, Lay et al. (2002, in Gebauer et
al. 2005) found that competing with a strong service offering can ‘earn the highest potential
margins’, more than other strategic focuses such as innovation or product quality. Gebauer et
al. (2005) determine that not all service businesses are capable of achieving high amounts of
revenue from their service business (they reach the service ‘paradox’), whereas some are able
to gain up to 40% of their revenue from such services. It therefore seems vital to determine
which factors positively affect this revenue stream in order to stay competitive in a service
business. Olivia and Kallenberg (2003) outline three main reasons why providing service in
engineering is an attractive strategy to take. ‘Long life cycle service products can offer
substantial economic benefit’ (p.321) to an organisation and are also far ‘less susceptible to
economic shifts and therefore are a more stable form of income’ (Quinn, 1992). They also state
that the less visible nature of services mean ‘they can be considered less imitable, thus making
them become another portfolio offering resource that can help create a SCA’ (Heskett et al. 1997
in Olivia and Kallenberg, 2003). Despite doubt about the extent of SCA, these three benefits
are highly attractive to organisations and therefore encourage a deeper look into how such a
service strategy can be introduced. Regardless of the benefits outlined, the doubt and
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misunderstanding which managers have about service implementation hinders their success
(Gebaur et al. 2005; Olivia and Kallenberg, 2003).
2.3 Customer focused implementation strategy: creating a customer focused culture within an organisation
So far this literature review has focused on exploring the benefits and limitations of a
customer centric focus and how successful CRM and servitisation can have a positive effect on
organisations. From the review thus far it has been clear that in order to successfully
implement such organisational changes towards a customer focused strategy it is very
important to focus on the intangible ‘soft’ factors within the organisation. It has also been
clear that culture plays a vital role in this successful implementation and therefore its role will
be explored further.
Exploring various types of culture and how they help to determine the structure of the
organisation, is also important in determining how companies can move towards a service
orientated culture. Deal and Kennedys (1982) four generic cultures, although relevant at the
time, can now be determined as too limiting in a modern setting, despite being updated some
twenty years later (Deal and Kennedy, 2000). Handy (1993) focused on a structural review of
cultures which explore four types of culture (Power, Task, Role and Person) but these also,
have their limitations and neither model depicts a truly service orientated culture which a
organisation may try and adopt. It is therefore necessary to nurture a new type of culture in
order to implement a customer centric strategy successfully.
In order to truly adopt a customer centric
strategy an organisation needs to not only
implement cosmetic marketing but also a
complete reorganisation of their service
business, including culture. (Gulati, 2010)
and Christensen (1997, in Sheth et al.
2000) agree that ‘the corporate culture of a
firm will greatly affect the adoption of
customer centric marketing’. It is therefore
important to be sure the culture is a
suitable one. Nevertheless the intangible
Figure 3 – The Organisational Iceberg
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‘informal’ nature of organisational culture means that it is far harder to change than the
formal elements of an organisation, such as strategy. This is depicted in figure 3 (French and
Bell, 1990 in Senior and Swailes, 2010) where the organisational iceberg depicts the largest
and most difficult to change elements within the organisation, are also the unseen elements.
Despite the challenges of changing an organisation’s intangible ‘informal’ elements, it is still
vital, as Porter (1985, p. 24) states, ‘culture can powerfully reinforce the CA a generic strategy
seeks to achieve, if the culture is an appropriate one.’ It is this suitable cultural implementation
that is fundamental in order to be successful with Olivia and Kallenberg (2003) stating that
one of the hardest aspects of adopting a service orientated business is the ‘required cultural
change’ which can often take a long time to implement (Kumar, 2000; Booz & Co, 2010). If
successfully implemented, Gronroos (1991) found that developing a service culture and
internal marketing go hand in hand with other elements of external marketing and
organisational behaviours as a whole, meaning all elements of the organisation should
embrace the same core values.
As well as determining the importance of continued promotion and nurture needed to
implement a service focused culture, Gebaur et al (2005) also acknowledge the potential for a
‘clash between different norms and values (cultures) can be viewed as a clash between a
dominant culture and a counterculture’(p. 16) which can occur because of the differences
between strategic goals of a ‘product orientated firm (mainly efficiency, economies of scale)
compared to service orientated firms values (mainly innovation, customisation and flexibility)’. It
is consequently
important to have a
‘de-centralized service
organizations with
profit-and-loss
responsibility’ (Gebaur
et al., 2005; Olivia and
Kallenburg, 2003) in
order to avoid problem
and potential harm. It
has been noted that a
service organisation
Figure 4 – Implanting a customer centric culture at differing levels within an organisation (Deloitte, 2012)
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must also have performance measures, such as employee satisfaction, as a focus (Heskett et
al., 1997) as well as the development of a new set of guiding principles to succeed with
servitisation (Olivia and Kallenberg, 2003) as engaging employees to embrace this cultural
change is vital for its success and therefore vital to produce a CA. According to Geleti (2007)
the cultural elements of successful customer centric organisations are based around a ‘set of
values that put the customer front and centre [reinforced]… through cultural elements, power
structures, metrics, and incentives that reward customer-focused, solutions-oriented behaviour’
(p. 5). This is supported in a report by Deloitte (2012) which urges organisations to embed
customer centric practices into their DNA. They state that employees need to embrace the
core values an organisation develops, in order to provide a tailored and effective service to
their customers. One way they say this is possible is by ‘creating an environment where
individuals feel they have a degree of creativity and empowerment within a structure’ (p.8) as
well as a ‘culture of innovation,’ therefore allowing them to personally add to the customer
experience. If this is embedded into an organisation’s culture it will have a positive result on
customer service in any type of organisation. An outline of their approaches to implement
such a cultural change into a strategy is shown in figure 4. Despite the diagram not taking into
account the size or maturity of the organisation or its existing relationship with their
customers, it still proves to be a very relevant set of principles to follow when implementing a
cultural change within an organisation. According to Kumar (2004) the firm must create an
‘environment where individual creativity flourishes,’ by bringing together a variety of
employees with diverse perspectives and capabilities. (p.198) but also acknowledges that the
size and age of an organisation can affect their ability to develop such an environment as they
tend to be more ‘bureaucratic, set in routine and risk averse’ (p.204) therefore making such
changes more difficult.
With a change in corporate culture, a refocus on an organisation’s ethical position is also
needed as succeeding in the long term ‘means not doing things in the short-term that create
harm in the long-term’ (Jondle et al., 2014, p.40) as this will obviously cause problems further
down the organisation’s life cycle. Chen, Swayers and Williams (1997) look at how the
support and reinforcement of ethical behaviour by organisations helps individuals also to
adopt such ethical practices and how an ethical culture within an organisation can affect an
individual’s response when they are faced with an ethical decision. This is true to a certain
extent. However, decision making is also down to many other factors which are not
necessarily connected to the corporation’s culture. Despite this, Brown (1987 in Chen et al.
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1997) states that corporations can have a positive or negative effect on an individual,
depending on the culture they promote. Francis (1990 in Chen et al. 1997) believes that
working in organisations with a more cooperative and malleable form of management where
people can engage freely to form a culture, is more successful in promoting ethical behaviour
than in a large bureaucratic organisation structure. This is a view that needs to be explored
further to determine its feasibility.
2.4 OCM– potential problems and solutions to organisational change
In order to understand
the problems which
can come about from
organisational
change, it is
important to identify
types of change and
the differing reasons
organisations have
for implementing
change. Nadler and
Tushman (2004a, pp. 564 – 565) outline various types of organisational change in figure 5.
These changes can either be strategic (redefining or changing the organisation) or
incremental (enhancing the organisations effectiveness whilst following the strategy and
aims) and Reactive (forced on the organisation as a result of change in their external
environment) or Anticipatory (change in anticipation to provide a CA). Although Nadler and
Tushman (2004a) state that ‘organisational transformations need to be initiated and
implemented rapidly’ (p.563) in order to stay competitive in a global market, we have seen
that the complexity of organisational change and type of change which is occurring
(depending on figure 5) will have a large impact on the rate of change possible.
Figure 5 – Types of organisational change (Nadler and Tushman, 2004a)
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Figure 6 – Eight errors common to organisational change and their consequences (Kotter, 1996)
The success of implementing a
service centred strategy within
an organisation, is not only
determined by identifying the
type, or success of cultural
change taking place (as outlined
in section 2.3, )but also limiting
resistance to this change in order
to successfully focus the whole
service organisation towards the
customer and the organisation’s
service offering. Sheth, Sisodia
and Sharma (2000) study into
some of the boundary conditions
which may have an impact on
customer centric strategic
change adoption, into a
business’s strategy, determine that
this should see the alignment of
‘sales, marketing and customer services function’ (p.63). The organisation becomes a customer
focused department, thus avoiding resistance due to interdepartmental differences. However,
successful implementation goes even further than just aligning departments; it also requires a
focus on promoting the change internally to avoid anxiety which the unknown outcomes
change can create (Kotter, 1996; Nadler and Tushman, 2004a; 2004b; Ogbonna and Harris,
1998). Kotter (1996) outlines 8 key reasons for failure in figure 6 with Nadler and Tushman
(2004b) determining anxiety, power and control as the three main issues with organisational
change. Anxiety amongst employees seems to be the largest of these as a study by Ogbonna
and Harris (1998) proved, concluding that it can have a severe impact on the overall outcome
of the change process. Anxiety occurs as a result of employees being left in the dark about the
change process and often wondering ‘what’s going happen to me?’ (Nadler and Tushman
(2004a). Despite earlier studies by Dachler and Wilpert (1978) and Locke and Schweiger
(1979) finding that there is only a certain benefit that can be achieved from engaging
individuals in the decision making process, it has become clearer over the last twenty years
19 | P a g e
that change implementation is far easier when people are working with you, rather than
against you (Pasmore, 1994) and therefore clear dialogue and team work between top
management and employees on all levels is vital. Pasmore (1994) also emphasises the
importance of fully adopting a participation method if participation is going to play a role in
the organisational change, otherwise it is destined to be only ‘half-hearted participation’
(p.63), something that will not lead to success. The difficulties of implementing change
programmes in hierarchal autocratic organisations can also create problems for successful
change programmes (Barnett and Carroll, 1995). Another important factor to consider is
when employees, who have experienced unsuccessful change management processes in the
past, are far more resistant to embracing a new change management strategy (Kotter, 1996).
It is also vital to be successful in implementing such change to avoid creating doubt within a
work force.
Kotter (1996) outlines a further fundamental reason for change not being as effective as it
should be. Increased globalisation and competition, as well as opportunities, have resulted in
the need for dynamic faster change, something which was not needed or even attempted
some 50 years ago. This has resulted in organisational structures being unable to embrace
change quickly enough, as top management are not used to this rapidly adapting
environment. Obviously in smaller modern organisations adaptation and change is easier, but
in international organisations these problems can be a key reason why their change
management strategies fail or do not meet expectations. Kotter (1996) states that successful
transformation is ‘70 to 90 percent leadership and only 10 to 30 management’. Although exact
figures are debatable, the underlying truth is that without a strong leader who can lead the
change process, it is far more likely to fail. Nadler and Tushman (2004a) agree, and state that
charismatic leadership is fundamental in implementing successful organisational change,
stating that a charismatic leader should envision, energise and enable. However, they also
outline limitations to this as elements such as ‘unrealistic expectations, dependency and
reluctance to disagree with the leader’ (p. 567) can all affect the success of such change.
The extent to which Siemens Industry CS division has successfully implemented a customer
focused strategy is explored in the next section of this paper.
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3.0 Industrial Field Study
The primary data from this study came from interviews conducted with an employee of the
Siemens Industry CS division. Before the results of the study are presented, it is firstly
important to introduce the organisation and the reasons for their strategic shift towards a
more customer focused sector structure with the emphasis on a service culture within.
3.1 Siemens organisation introduction and their reasons for change Siemens AG is an international engineering company headquartered in Munich, Germany.
Although the operations of the company run across four sectors; Healthcare, Infrastructure
and Cities, Industry and Energy, this study will be concentrating on the Industry sector, with a
focus on the Customer Service (CS) division within this sector. With 24% of Siemens’ revenue
and 99,600 employees (Siemens AG, 2014), the Industry sector is the largest sector within the
organisation.
The Customer Services division, led by CEO Dirk Hoke, has a core offering ‘technology-based
services’ with the aim of increasing customers’ ‘productivity, efficiency and flexibility’ (Siemens,
2014, p. 12). According to Siemens’ 2013 annual report, the CS division…
‘…. offers a comprehensive portfolio of services and supports industrial customers in their efforts
to increase their productivity. The portfolio includes product-related services and software
solutions like condition monitoring designed to enhance the reliability, profitability, efficiency
and environmental performance of industrial plants’ (Siemens, 2013).
How is Siemens Industry Customer Services (I CS) able to achieve this standard of quality and
service for their customers? The restructuring of Siemens in 2007 saw the ‘slimming down’ of
the whole company under the watch of the new CEO Peter Löscher. This also involved a
restructuring of the Industry sector into 3 divisions; Industry Automation, Drive Technology
and Customer Services (with the addition of a sector led business unit; Metals Technology).
This large internal strategic movement emphasised the focus on Services, with very similar
components to a customer centric organisation as outlined in the literature review in sections
2.1 – 2.4. This study will therefore compare, analyse and evaluate the strategies adopted by
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Siemens I CS to become more customer focused, against the academic theory outlined in the
literature review (sections 2.1 – 2.4).
It is important firstly to understand the reasons for the restructuring and the aims of the new
CS division. The CS division was established ‘in order to be perfectly aligned to the needs of our
customers’ (Hoke, 2012a) bringing all areas of service in the Industry sector together, and was
successfully implemented on October 1st 2011. Because of increased competition, and ever
stricter climate and environmental protection requirements (Hoke, 2012b), the aim of this
was:
1) to be there for customers before they need help,
2) knowing customers plants and facilities inside out
3) being there for any eventuality (Hoke, 2012a).
Being a large change, this strategic shift towards a service orientated division, can cause
problems, as outlined in the literature review. Therefore, along with the strategic alignment of
the service offerings of Siemens Industry into the CS division, an internal excellence
programme; the CS Excellence Programme was established. Within this overarching
excellence programme the CS Service Culture module was also introduced with the aim of
implementing a service focused service culture within the division.
4.0 Industrial Field Study Results The primary data for this study came from an industrial field study of the Industry CS division
of Siemens AG based in Erlangen, Germany. This was based mainly on a telephone interview
and a face-to-face interview with different employees within the CS division. The main
participant of the interviews was the head of Strategy Development within the I CS division
who took a leading role in the implementation of the ‘Service Culture’ initiative within the I CS
division. The questions asked (See appendix 1) were used as a guide to promote further
discussion around the topic, which played an important role in the interview process. The
interviews were supplemented with internal archive documents comprising of corporate
reports and presentations.
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4.1 Design of Questions
The design of the questions asked was deliberately kept as open as possible to develop further
discussion of the academic theory outlined in the literature review. A list of questions can be
found in appendix 1. The questions asked were designed around the key points raised during
the literature review. The key points can be seen below in table 1.
CONTRIBUTION
AUTHORS
Changes in Perspectives and vision of the Organisation
A movement towards customer orientation and customer centricity
A strategy that is responsive to customer needs
Every decision begins with the customer and anticipated opportunities for advantage
A strategy that is tailored to the ‘increased individualism of
demand’
Create a new customer focused team
Define a clear strategy
(Pillar and Ihl, 2009; Bez, 2013) (Kowalkowski, 2012) (Shah et al., 2006) (Pillar, 2003) (Bezuglova, 2013) (Bezuglova, 2013)
Customer Relation Management towards Customer Focus
Clearly defined service strategy Coordination, cooperation, capability development and
Connection activities with each customer
Develop close and profitable relationships with customers
Bilateral relationship between two organisations
Create barriers to entry with contractual, technological, institutional or psychological bonds
(Gebaur et al., 2005) (Gulati, 2007) (Shah et al., 2006) (Senn et al., 2013) (Bruhns, 2003)
Implementing Cultural Change
(Deal and Kennedy,
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Determine a clear type of Culture
Select the appropriate culture for CA
Avoid a clash of cultures between product and service operations
Create a decentralised service organisation with profit and
loss responsibility
Develop a new set of guiding principles to succeed with
servitisation
Ensure employees embrace the core values an organisation develops in order to provide a tailored and effective service to their customers
create an environment where individuals feel they have a degree of creativity and empowerment
Bring together a variety of employees with diverse
perspectives and capabilities
1982; 2000; Handy, 1993) (Porter, 1985) (Gebaur et al., 2005) (Gebaur et al., 2005; Olivia and Kallenburg, 2003) (Olivia and Kallenberg, 2003) (Deloitte, 2012) (Deloitte, 2012) (Kumar, 2004)
Leadership and Organisational Change Management
Determine the type of organisational change Align sales, marketing and customer services function to avoid
resistance from interdepartmental differences
Promote change internally to avoid anxiety created from the unknown outcome change can create
Strong leadership and good advance planning
Dialog and team work between top management and employees on all levels is vital.
Avoid half-hearted participation
Avoid ‘what’s going to happen to me?’ type questions by being
transparent
Does the organisational structure restrict rapid organisational change?
(Nadler and Tushman, 2004a) (Sheth, Sisodia and Sharma (2000) (Kotter, 1996; Nadler and Tushman, 2004a; 2004b; Ogbonna and Harris, 1998) (Booze and Co, 2010; Kotter, 1996) Pasmore (1994) (Pamore, 1994) (Nadler and Tushman, 2004a) (Kotter, 1996)
24 | P a g e
Charismatic leadership avoiding unrealistic expectations Reward and award employees
(Nadler and Thushman, 2004a)
Table 1 - Table of the key features of a customer focused organisation and the actions which need to be taken to successfully implement organisational change towards a customer focused strategy
The table shows the aspects that the author determined to be of most importance when
planning, developing and implementing a ‘customer focused’ or ‘customer centric’ strategy
within an organisation. These points have therefore become the focus of the study, with the
approaches used by Siemens I CS division analysed and evaluated in relation to the main
academic theory on this subject, which can be seen below.
The initial interview focused on the background of the service culture initiative as well as the
content developed during the planning process. The questions therefore mainly relate to the
aims of the process before the implementation stage had fully got underway. A full transcript
of questions can be seen in appendix 1.
The follow up interview aimed to focus more on the academic theory behind customer
centricity, the benefits successful culture changes can have as well as implementation
strategy. This interview also aimed to have an up-to-date review of the processes and
development of the service culture initiative at Siemens I CS over the seven months since the
last interview.
As well as interviewing a senior strategist within the I CS division, this study also uses internal
and external corporate presentations and documents to give in depth results as well as to aid
the analysis process. The results presented below are drawn from all information provided by
the I CS division.
4.2 Results: How Siemens I CS Division is implementing their Service Culture change management strategy
4.2.1 Results from Interview 1
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1. Please explain some of the background and reasons behind the service culture initiative
and the overall CS Excellence Programme.
i. Aims: The change process involves two elements, the CS Excellence Programme and
the Service Culture Initiative. The CS Excellence programme aims to create a customer
orientated division within Siemens Industry sector. The CS Service Culture initiative
aims to engage all CS employees worldwide to embrace the new service culture
initiative; therefore all working together to provide the best service for customers all
over the world. These aims have been summarised by CEO Dirk Hoke as…
‘….want[ing] our colleagues to do their job at CS not only for the money’s sake, but
because they enjoy their work and because they are aware of the contribution that they
are making to our overall business success’ (Hoke, 2012).
ii. Timeframe: from 2012 to 2017 (5 year implementation strategy)
iii. Initial Research: In order to successfully plan and implement a service culture
initiative into the organisation, the service culture Taskforce (made up of I CS
employees) initially used benchmarking to evaluate successfully implemented service
initiatives taken on by other similar companies. They also carried out extensive
academic research into the topic using many theories to determine the most important
aspects of this. They found Heskett and Sasser (1980) of particular significance, with
their focus on the importance of people.
2. What was the overall plan for the implementation of Service culture and at what stage
are you at now?
The initial stage involved setting up an interdisciplinary task force with members from
different departments within I CS. This team decided on creating four work streams
which would help to split up and develop the tasks required to implement the service
culture initiative.
1st work stream – International Engagement Workshops
The first work stream focuses on setting up workshops in 17 countries worldwide to
engage employees from every corner of the CS division (The 17 initial workshop
countries can be seen in appendix 2). At these 2 day global workshops, colleagues were
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asked to give their own input into what service means to them, encouraged to share
their own service experiences together and engage with the service culture initiative.
These ideas were taken back to headquarters where senior management shortlisted
them into 10 guiding principles for CS. There will be further workshops around the
world to help other CS employees understand these Guiding Principles and use them to
share experiences.
Positive results have been seen from the initial workshops as employees enjoy the
large variety of engagement; from top management, sales and service technicians all
coming together to design their own initiatives which are of importance to them.
Engaging in different cultures worldwide has given even further perspectives on what
every employee deems important with I CS.
2nd work stream – Service Excellence Award
The second work stream focuses on measuring the global engagement of the
developed guiding principles with a service excellence award. This involves four types
of award. These awards are: an individual award (rewarding individual engagement) a
team award (rewarding collaboration within teams), country organisation award (to
show the successful implementation of the service culture within the country
organisation) and a Partner Collaboration award (to reward trustful collaboration
which will eventually include collaboration between Siemens and particular
customers).
3rd work stream – Communities
The third work streams aim is also aimed at engaging all I CS employees. This involves
setting up an interactive Siemens social network, similar to Facebook. This internal
social network aim is to provide another channel of communication amongst
employees located worldwide which is integrated into the intranet and share point
systems. Although certain groups (both public and private) are for I CS topics and
communication channels, the social network provides communication for all Siemens
employees. This social network was developed using benchmarking with similar
systems used by other large organisations such as Swisscom and Lufthansa, who
already have similar systems currently operational.
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4th work stream – Measuring Success: Global Engagement Survey
The global engagement survey relates to the guiding principles developed in the first
work stream with an aim to see the maturity of the guiding principles in different
countries to see best and worst practices. For example, Italy have already proven very
strong at creating ‘trustful partnerships’ and therefore has already been taken as an
example to show other areas how this can be best implemented. Benchmarking is used
to discover which areas are slightly weaker, but aims to avoid finger pointing and
instead encourages collaboration and working together to improve certain areas. A
‘pulse check’ survey is also used to show the speed at which the guiding principles are
developing in regions.
3. How are these processes going to be/being implemented worldwide and what problems
may arise?
Regular communication is essential. On a management level, regular communication
calls are required between I CS managers in various regions worldwide which include
updates as well as feedback.
Service culture is one arm of the CS Excellence Programme and therefore works in
conjunction with this to ensure seamless transition from the old system to the new
integrated CS division. In order to be successful, continuous engagement is being
carried out to address problems as soon as they arise. One example is CS in Sweden,
who have expressed the need for one of the workshops to be carried out. This is
therefore being arranged.
Due to the size of the I CS division it is important to plan the whole service culture
implementation process properly and to avoid problems. The setting of standards is
vital and this is something that has already been done.
It is also important to align the activities of I CS with the overall corporate aims of the
whole organisation. On a corporate level, Service Initiative is a key strategy. Therefore
the I CS Service Culture initiative and the CS Excellence Programme fall under the
overarching corporate strategy. Despite difficulties arising due to the very different
sectors at Siemens, service is a core strategic pillar. Although the I CS Service Culture
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initiative is an internal and therefore different from the customer/company service
culture, its aims are about engaging employees to go one step further and therefore
help to develop a customer focused strategy.
4.2.2 Results from Interview 2
1. Update and progress of the service culture initiative.
1st work stream: the initial round of workshops has been completed. 500 ideas were
gathered with the top 50 being sent to senior management for the implementation
phase. At the workshops it was found that one of the most effective methods used was
the development of posters in teams to promote service. These were personalised at
the workshops and had no input from headquarters. The second round of
workshops are about to begin, including Sweden and Canada.
2nd work stream: the service excellence awards first round has been successful and
was very engaging.
3rd work stream: the Siemens social network went live in autumn 2013. This has
received positive feedback and is continuing to develop with feedback encouraged.
99% of countries have embraced this element to create a culture community.
4th work stream: the global engagement survey continues to give important feedback.
2. Theory suggests (O’Cass and Liem, 2011; Olivia and Kallenberg, 2003; Gebaur and
Kowalkowski, 2012) that a customer centric organisational works best as a matrix
structure with product and service as well as customer focused strategic business units
(SBU’s). Does this represent the CS division?
Siemens is organised using a matrix structure. The Industry sector service offerings are
supported by the CS division with IA and DT divisions offering various product ranges
and the CS division offering comprehensive service offerings for all aspects of the
product offerings.
3. How have you avoided ‘focusing too much on servicing the customer’ (Day, 1999), thus
neglecting either the internal or external environment to improve the other?
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As the Service Culture initiative is aimed at promoting an internal service culture it
avoids this problem. The aim in not to just service the customer, but is about engaging
employees to ‘enjoy their work… because they are aware of the contribution they are
making to the overall business success’ (Siemens I CS, 2012). This is therefore
promoted internally (strengthening the internal environment) which in turn promotes
the best possible service to customers.
4. How has/is the I CS division aiming to sustain the customer focused strategy outlined in
the long run, as in large international organisations, change is harder to implement and
sustain?
This is a long term plan; a 3-5 year cultural change plan for up to 20,000 I CS
employees. It therefore has the long term implementation embedded at its core. The
processes and work streams, mentioned previously, are all aimed at the long term
engagement and success of the internal service culture initiative.
5. Have there been instances of resistance to change? And how has I CS tackled/ planned to
avoid such instances?
Avid support from top management has been fundamental in avoiding resistance to
change as well as continuous engagement with employees on all levels and continuous
analysis of the process as it happens. Bottom-up planning and engagement workshops
have encouraged everyone to take part and be involved in the planning and initiation
phases. The workshop activities and layouts were designed by a varied team of CS
employees at headquarters, with a leading psychologist amongst the team, who
developed the workshops with engagement elements embedded within. Receiving
feedback and adapting to suggestions quickly and effectively along with regular
communication has also been vital to reducing the chances of resistance.
5.0 Analysis – to what extent does the Service Culture initiative support the theory? Having established the process that Siemens I CS is currently undertaking it is now important
to analyse their actions to determine to what extent the Service Culture initiative fits with the
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theories and academic research in sections 2.1-2.4 of the literature review. In order to
successfully and clearly do this, table 1 will be used to analyse the key points of this study’s
literature review against the processes carried out at Siemens I CS (results section 4.2.1 –
4.2.2.).
5.1 Changes in Perspectives and vision of the Organisation
The reorganisation of the Industry sector at Siemens into three divisions, including a
dedicated Customer Services (CS) division is strong evidence to show that the strategic
decisions taken were as a realisation of the importance of the customer and complements the
definitions of customer centricity outline in the literature review. The continued recognition
that service is fundamental in challenging economic times (Hoke, 2013) reinforces the need to
look to tailor services towards customer needs and although Siemens I CS haven’t fully based
‘every decision by [beginning] with the customer and anticipated opportunities for advantage’
as Shah et al. (2006) suggest this should happen. They have indeed focused their strategy
towards a fully customer focused division to stay competitive against their rivals. This
therefore fully supports Pillar (2003) who claims a strategy tailored towards the ‘increased
individualism of demand’ as the service offerings offered by Siemens I CS (see Appendix 3 for
full lifecycle service offerings) clearly offer individual solutions to their customers. Despite
Day (2006) doubting a shift towards customer centric practices focussing on services for the
customer not always being applicable in all industries due to doubt of the benefits it can bring
about, in this case, the benefits of such a strategy are far clearer as the demands of the
customer are long term and very specific.
Day (2006) also points to the implementations of service dominant strategies focusing too
much on the customer and therefore not focusing on their internal structure and organisation.
However as the Service Culture initiative is such an important element of the CS Excellence
Programme, the focus both internally and externally will help Siemens I CS prevent this
problem from arising. The results also clearly show that there has so far not been a problem
with doubt about the advantages of customer centricity (Gummesson, 2008a) as these
changes are being led and fully supported by the CEO’s of both the Industry sector as well as
the CS division. ARC’s analysis of Siemens Industry’s service offerings pointed out that
reducing maintenance cost can have serious negative effects on business, however Siemens
Industry CS divisions offering has shown they are capable of ‘the optimum cost/performance
ratio … in certain verticals,’ (Humphrey, 2013) reducing concern that the service offering
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might not be effective in increasing their market presence. Their wide service offering
therefore shows that the core strategy, again, was focused around the customer.
It is also important to note that successful strategy implementation and success ‘generates a
success bias among decision makers’ (Barnett and Pontikes, 2008) and therefore can lead to
bias results emerging. However, in the case of Siemens Industry, the research and realisation
of their market condition, before the change process, despite helping to increase their market
position, should avoid such a bias because of the long term nature of this change process. The
realisation of such bias amongst top management is also an important factor that will help to
prevent this. Their continuous self-analysis through Work stream 4, the global engagement
survey, clearly shows that they are not taking their success for granted and realise that
continuous improvement over time will put them in a competitively advantageous position. It
is this organisational maturity that shows they should not fall into such a bias.
It can consequently be concluded that the structural changes within the Industry sector at
Siemens do represent a definite shift towards a customer centric business model with
features of their strategy echoing the ‘good s and services’ pluralism of marketing outlined by
Brodie et al. (2006) with the IA and DT division providing the goods and the CS division
providing the services. However the organisational restructuring is only a small element of
aligning an organisation to become more customer centric. It is now therefore vital to analyse
how this structural change has so far been implemented to create a customer focused culture
to successfully sustain the competitive advantage against their major rivals.
5.2 CRM towards a Customer Focus
A clear defined service strategy (Gebaur et al., 2005), again, is of high importance when
implementing a customer focused CRM strategy. The planning and implementing of the CS
Excellence Programme clearly shows a firm strategic focus on service and the benefits that
customer focus and strong customer relationships can bring to Siemens. Looking at the
relationship that Siemens I CS have with Minera Peñasquito, the largest mining operation in
Mexico (Siemens I CS, 2013) it is clear to see the mutual benefits that the relationship that
Siemens and Minera Peñasquito have, a relationship that has, and will continue to keep both
firms profitable with a healthy cooperative long-term contract. The types of relationships that
Siemens I CS has, strongly support the view that close, bilateral and supportive relationships
are a must (Gulati, 2007; Shah et al., 2006; Senn et al., 2013) and prove that CRM is vital in
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staying competitively advantageous. The contractual and technological bonds that Siemens I
CS has already created with its customers, are clearly beneficial, however it is currently
difficult to see and analyse if or what benefits the institutional or psychological bonds
created, have or will bring to the relationship between the two companies, as the study has
not involved contacting and interviewing Minera Peñasquito.
Although it is perhaps too soon to determine the full extent that Siemens I CS has benefited
from this strategic shift, their decisions to focus on their customers and the relationships
between these customers should be significant enough to benefit greatly and achieve a CA
against their main rivals. However, within this industry the benefits a customer focused
strategy with an emphasis on excellent CRM are widely recognised, and therefore competition
will still be high for Siemens to gain new customers. This therefore emphasises the
importance of retaining customers and building up long term relationships, supported by a
strong support network; a strategy that Siemens I CS is currently adopting. If they continue to
build strong long lasting relationships with customers such as Minera Peñasquito as well as
customers in other industries they should continue to gain a CA.
5.3 Implementing Cultural Change
Successful cultural change requires multiple factors working together (as shown in table 1),
this section will therefore analyse the success of the I CS division’s cultural implementation
programme.
It is firstly vital to determine an appropriate and clear type of strategy for CA (Deal and
Kennedy, 1982; 2000; Handy, 1993; Porter, 1985). As shown in the above analysis (sections
5.1 & 5.2), it has been determined that the approach to determining the type of cultural
change needed, and which direction, came about from extensive analysis of the company’s
current position and strategic aims. Therefore it can be determined that the type of cultural
change being implemented, complements the overarching strategic aims of the I CS division.
The establishment of an exclusive CS division within the Industry sector which supports and
offers services to the other two divisions within the sector (IA and DT) fully supports Gebaur
et al. (2005) and Olivia and Kallenburg (2003) who determine that the setup of an individual
service entity is vital to avoid conflict and increase the chances of success within the new
structure and cultural change. However, the theory does not fully address problems that still
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might occur between these separate divisions, particularly as customers may still be confused
about which area of the division they are dealing with. Although Siemens Industry haven’t
identified these as specific problems, problems of this type would not only be potentially
harmful to the customer relationship, but also to the integrity of the service culture that is
currently being implemented and therefore would have a negative effect on the cultural
implementation.
Olivia and Kallenberg (2003) determine developing a new set of Guiding Principles to be very
important, when implementing cultural change. At Siemens, new Guiding Principles were
developed as a result of work stream 1 (section 4.2.1) to act as a guide to all I CS employees
defining what it means to be part of the CS division, and the values that guide good service
amongst all employees. These guiding principles were developed from a long running and
well organised system which involved hundreds of employees worldwide. As a result of this,
Siemens I CS not only managed to develop a set of guiding principles that embraced a wider
range of employee’s beliefs and feelings about service and service culture, but also managed
to engage these employees within the process, a process that Kumar (2004) and Deloitte
(2012) deem vital. Despite there still being a chance that problems could arise due to some
colleagues not fully understanding or believing in the new guiding principles that were
developed, the meticulously planning and implementing of this process to engage as many
colleagues as possible, has certainly done as much as is realistically possible to avoid such
issues, and success, although not evident yet, is likely to be achieved over the 5 years the
initiative is expected to last.
A further important aspect that needs to be taken into account, is that, although Humphrey
(2003) determines that ‘a certain pride and attractiveness to work for CS seems to be emerging’
after attending the announcement that the ‘streamlining [of] administrative operations’ will
result is 500 jobs being cut at the Industry headquarters (Webb, 2013). This announcement
will obviously cause concern amongst employees. This could counteract the positive
implementation of the Service Culture initiative, if not handled effectively. They could even
have a negative effect on the whole process. It is obviously very important to cut costs and
streamline business. However, the internal costs of such actions must also be noted. Although
the success of the Industry CS Customer Excellence Programme is starting to be seen, overall
Siemens is still falling short of their competitors, GE, who posted a 12.2% operation profit in
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the 3 months up to December 2012, with Siemens sitting at 9.1% (Webb, 2013). Clearly the
company still has a way to go to overtake their competitors.
The realisation that introducing and nurturing a new culture within an organisation,
especially a worldwide concern, takes time and is the most crucial factor. If Siemens I CS
continue to remember this and take time to engage with employees, as they have so far been
doing, there is very little doubt that the cultural change will be successful, even if small
pockets of resistance are seen.
5.4 Leadership and OCM
To analyse how successful the implementation of a service culture has been, it is firstly
important to determine the reasons for the cultural change. The CS divisions cultural focus
change has not occurred due to a profound need for change, nor from a crisis resulting in
necessary change. It came about from ‘increased competition, a continuous focus on price and
environmental protection requirements becoming stricter [where] innovations in plant
technology alone are no longer enough. Our customers need intelligent service with added value’
(Hoke, 2012b). Therefore the type of change can be determined to be incremental and
anticipatory (Nadler and Tushman, 2004a). As a result of this change being incremental and
anticipatory, it allowed Siemens I CS to spend a long time rigorously planning and developing
their change management techniques and processes. This resulted in the four ‘work streams’
outlined in section 4.2.1 which have been vital to cover all aspects of the change management
process in order to limit both the amount of resistance and doubt amongst all employees. This
was most important when starting the whole process. The international engagement
workshops, Work stream 1(outlined in section 4.2.1), were very successful in engaging the
widest group of CS employees possible. Although they could have engaged more, by
conducting more workshops, the initial stage comprised of 17 countries across 5 continents,
therefore giving a wide range of ideas, as well as engaging as many employees as possible
with the resources available. The continued workshops in other countries also show the
dedication of the CS management to engage the widest possible number of employees.
Although some may still not be engaged in this process, and therefore may still doubt the
service culture initiative, other work streams such as work stream 2, the service excellence
award, encourage all employees, as well as rewarding them for their hard work in embracing
the service culture initiative, an element of change management Nadler and Thushman
(2004a) deem vital in order to achieve successful implementation.
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A further aspect that is seen as vital in successful change management, is the role of a
charismatic leader who does not announce unrealistic expectations for the other members of
the division to aspire to (Nadler and Thushman, 2004a). The leadership of the CS division CEO
has been vital in the whole CS Excellence Programme and Service Culture initiatives
implementation. The bottom down methods, together with top down leadership, have
provided continued dialogue through regular updates as well as the understanding that ‘this
will not occur overnight’ (Hoke, 2013). The emphasis on wanting CS colleagues to see the
positive effect they are having, and not just working for money, as well as the continued
emphasis on ‘togetherness’ within the division, is another positive way management have
been able to engage with employees and successfully implement the change process. Although
this study does not look further at others opinions in this matter, the theory suggest that this
is the correct way to lead organisational change, avoiding unknown, half-hearted participation
and promoting constant dialog between management and employees (Kotter, 1996; Nadler
and Tushman, 2004a; 2004b; Ogbonna and Harris, 1998; Booze and Co, 2010; Pasmore,
1994).
Although the methods adopted by Siemens I CS also have the potential to have aspects of bias
(Denrell, 2003; Donaldson and Grant-Vallone, 2002; Barnett and Pontikes, 2008) it would
seem that even the external analysis of the change management process adopted by Siemens
Industry CS division has received positive attention from ARC who state that the customer
centric strategy ‘benefits the working climate and employee satisfaction. As a result, internal
efficiency improves, as well as external effectiveness’ (Humphrey, 2013). With continued
leadership and support from across the division, Siemens I CS should be able to continue the
successful change process they are currently adopting.
5.5 Analysis and Evaluation summary
It would seem that even the external analysis of the strategy adopted by Siemens Industry CS
division has received positive attention from ARC who state that the customer centric strategy
‘benefits the working climate and employee satisfaction. As a result, internal efficiency improves,
as well as external effectiveness’ (Humphrey, 2013). However it must be noted that there is the
possibility of bias (Denrell, 2003; Donaldson and Grant-Vallone, 2002; Barnett and Pontikes,
2008) as this report has mainly used self-report measures which are ‘prone to many kinds of
self-response bias’ (Donaldson and Grant-Vallone, 2002: p. 246). Therefore stating that the
36 | P a g e
positive results seen by the service culture initiative could to some extent be down to this
type of bias, either intentional or unintentional (Huber and Power, 1985), (but given the
backing of the extensive research of both organisational change and culture creation as well
as customer centricity) it can be said that the backing of the research and the strong results
shown so far are enough to state that the CS Excellence Programme and the Service Culture
Initiative are currently successfully being implemented, even if some of this type of bias has
occurred. , This is summed up in table 2 which shows the overarching and extensive steps
Siemens I CS has taken to address the four main aspects of organisational change and culture
implementation towards a customer focus strategy.
From the analysis above, table 2 was developed to show clearly the strategic elements
Siemens adopted which address the main aspects that a customer centric strategy should
contain. This successfully shows how the two elements; the CS Excellence programme and the
Service Culture initiative were developed to address the various aspects of a customer
focused service strategy and successful change management theory.
Theory
Siemens I CS strategic approach
Customer Centric focus
Customer Relationship Management
Implementing cultural change
Organisational change management
Table 2 - The development of Siemens I CS’s strategy to embrace all aspects of a customer focused strategy implementation
6.0 Conclusion
The shift towards a ‘customer centric’ strategy has been discussed in depth, as well as various
alternatives that embrace elements of the service oriented nature of this concept. The various
types of customer focused elements identified in the literature review (mainly customer focus,
= CS Excellence Programme
= CS Service Culture
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customer loyalty and customer retention) clearly shows the extensive nature and increased
importance being placed on this concept. The main aspects of CRM addressed here have
shown that communication and mutual benefit are key to success in this field. Change
management process to implement a successful cultural change in this study concluded that
two way communication along with a bottom up planning and implementation approach with
a top down leadership style are the most important aspects to ensure successful cultural
change.
After critically analysing the results of the CS divisions CS Excellence Programme and Service
Culture initiative this study concluded that all four main parts of theory (a customer centric
focus, CRM, implementing cultural change and OCM) have been addressed in the planning and
implementation stage of this change process to address potential problems that will or may
arise. The aspects of OCM that cause most problems; employee resistance and
misunderstanding, have been successfully addressed by the division and, although the results
presented have the potential for slight bias, the successful implementation, along with the
positive customer relations already being shown by the CS division clearly show that the
strategic change is and will continue to have a positive effect on their market position and
profitability. It is also concluded that the strategy adopted fits all of the main aspects of
customer centricity as well as a service dominant marketing style and the division has
avoided many of the problems that could occur as a result of this, mainly becoming too
externally focused and therefore ignoring the organisations internal management and culture.
The Two tiered approach to the strategic shift successfully addressed these problems.
Despite the academic theory and previous results from industry finding that the majority of
change management processes and cultural changes fail, from the evidence and analysis
carried out this study it concludes that Siemens I CS division will successful implement a
service orientated culture if it continues adopt the strategy it has pursued. The
recommendations mentioned will help the division to further use this strategy successfully.
However, the extent to which a competitive advantage will be achieved is still debatable, as
the extent to which their rivals are adopting similar strategies is unknown, and the wider
market demands worldwide also remain to be seen.
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6.1 Recommendations
In order to successfully implement the aims of the CS Excellence Programme and Service
Culture Initiative Siemens I CS division should continue to focus on informing and training
their employees about the benefits that this strategy can bring in order to continue spreading
the message worldwide. The division should also:
emphasise the focus on the customer but continue to promote internal cooperation
and support,
avoid damaging the positive work of the programme so far, by adopting major cuts
avoid damaging the divisions,
continue to nurture and adapt the change programme, practically when problems
arise, to minimise their effect on the change process, and
continue the forward looking approach that has been taken from the start.
Taking these recommendations into account, this study concluded that the Siemens I CS
division will successfully implement their change programme towards a customer centric
organisation structure. However, the extent of the CA that will be achieved remains unknown
as the process will take time to complete and the full benefits will take a further period of time
to been seen as they create more long term service contracts with clients.
7.0 Research challenges and limitations
A major challenge of the research was that the process of discovering the key features and a
definition of customer centricity. Many academics refer to the term customer centricity, but
use differing names and definitions for it. It was therefore important to compare the features
of the change programme occurring at Siemens I CS with the main definitions of customer
centricity and customer focus, in order to determine the strategy that Siemens I CS are taking
and to determine whether the features of this strategy will result in success. Another
challenge was the analysis of the results, as there was no clear guide to implanting a
successful strategy with cultural change at its centre. Once this had been developed, it was far
easier to analyse the activities of Siemens I CS against the main points of academic theory on
this subject. One of the major limitations of this research was the emphasis and reliance on
internal data and results which could have resulted in a slightly biased image of the
organisation if this was not addressed whist analysing the results. A further limitation was
39 | P a g e
that the CS division has not yet finished its change programme and the full results are
therefore not available, this study instead provides analysis and conclusions of the process so
far and looks to see if the organisation will achieve its goals in the future.
7.1 Future research
Considering the limitations of this study, a further study should look back on this process after
the initial five year time frame is complete, to give a fuller analysis. Further research should
also analyse the process further by interviewing other members of the CS division in different
countries to analyse the success of the programme throughout the regions Siemens I CS
operate, along with carrying out deeper external analysis of the industry and competition,
something that was not possible with this study.
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Appendix 1: Interview Questions
A1.1 Interview 1: July 2013– face-to-face interview at Siemens AG, Erlangen, Germany
The initial interview focused on the background of the service culture initiative as well as the content developed during the planning process. The questions therefore mainly relate to the aims of the process before the implementation stage had fully got underway.
1. Please explain some of the background and reasons behind the service culture initiative
i. Aims to become more customer centric ii. timeframes
iii. initial research
2. What was the overall plan for the implementation of Service culture and at what stage are you at now?
3. How are these going to be/being implemented worldwide and what problems may
arise?
A1.2 Interview 2: February 2012 – Telephone interview
The follow up interview aimed to focus more on the academic theory behind customer centricity, the benefits successful culture changes can have as well as implementation strategy. This interview also aimed to have an up-to-date review of the processes and development of the service culture initiative at Siemens I CS over the past seven months since the last interview.
1. Update and progress of the service culture initiative. 2. Theory suggests (O’Cass and Liem, 2011; Olivia and Kallenberg, 2003; Gebaur and
Kowalkowski, 2012) that a customer centric organisational works best as a matrix structure with product and service as well as customer focused strategic business units (SBU’s). Does this represent the CS division?
3. How have you avoided ‘focusing too much on servicing the customer’ (Day, 1999), thus
neglecting either the internal or external environment to improve the other?
4. How has/is the I CS division aiming to sustain the customer focused strategy outlined in the long run, as in large international organisations, change is harder to implement and sustain?
5. Have there been instances of resistance to change? And how has I CS tackled/ planned
to avoid such instances?
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Appendix 2: List of countries with pilot service culture workshops
Country Country Cluster Argentina AAN
South Africa AFR Singapore ASP
Brazil BRZ Turkey CEE
Germany GER Cluster –wide workshop – UAE ME
USA NAM China NEA
UK NWE Russia RCA India SA Spain SWE
CS LS, CS LS & CS Corp. Headquarters
Appendix 3: Siemens Industry Customer Services division lifecycle service offerings
(Source: http://www.industry.siemens.com/datapool/industry/industrysolutions/services/CS/CS-Portfolio-brochure-poster-en.pdf)
