University of Vaasa | Department of Management | Rabetino et al.

THE STRATEGY MAP OF SERVITIZATION:

LEARNING FROM PREVIOUS RESEARCH AND

ONGOING IMPLEMENTATION EXPERIENCES

Rodrigo Rabetino (UVA),

Marko Kohtamäki (UVA), and

Seppo Luoto (UVA)

University of Vaasa | Department of Management | Rabetino et al.

Servitization is not a simple process and positive outcomes are never guaranteed.

Implementation matters.

As competition intensifies, servitization will become an industry recipe. Thus, strategy

implementation, rather than the strategy itself, will emerge as the source of competitive

advantage.

Previous studies have discussed core issues met by manufacturers in the execution of

an industrial service strategy. However, specific responses (actions) to these issues

have not been extensively analyzed.

Only a few studies have described activities needed to execute an industrial service strategy

(Baines & Lightfoot, 2013, 2014; Storbacka, Polsa, & Sääksjärvi, 2011; Storbacka, 2011).

RQ: what micro-level actions and tools do manufacturers adopt to support

critical processes while shifting their focus to advanced services?

MOTIVATION

University of Vaasa | Department of Management | Rabetino et al.

THE FRAMEWORK: STRATEGY MAP

(KAPLAN & NORTON, 2004) T

he m

ap inclu

des f

our

str

ate

gic

pers

pectives

- how can companies guarantee long-term value for shareholders while

balancing the strategic trade-off between long-term revenue growth

goals and the short-term financial goals of lowering costs and increasing

productivity?

- What is the value proposition for the targeted customer segments?

Internal processes define how the

company creates and delivers the

value proposition

The intangible assets must be

aligned with the strategy to create

value

…a cause-and-effect tool for describing the

architecture of a strategy while identifying

critical sources of synergy and value creation.

University of Vaasa | Department of Management | Rabetino et al.

LITERATURE REVIEW

University of Vaasa | Department of Management | Rabetino et al.

LITERATURE REVIEW (CONT.)

University of Vaasa | Department of Management | Rabetino et al.

RESEARCH METHODOLOGY

We base our research on an abductive process.

The empirical part of this study draws on 42 face-to-face interviews

conducted as part of an ongoing research project.

• FUTIS is a five-year project (2011–2015) that includes19 manufacturing

companies in the metal and machinery industries headquartered in

Finland (Finnish Funding Agency for Technology and Innovation,

TEKES).

Based on the data collected during our research project, we first conducted a pilot

study to identify the initiatives implemented by companies.

In the second stage, we included Wärtsilä, Outotec, and Valmet in the multiple-

case study while collecting detailed information on the strategy map in a new

round of interviews with these three companies.

University of Vaasa | Department of Management | Rabetino et al.

Establishing processes of value co-creation, co-

production, and appropriation: The internal perspective

Customer Relationship Management processes: Value co-creation

continuous cash flow, long-term relationships, customer satisfaction and loyalty

Comprehensive strategic account management (SAM) programs multilevel

structure (e.g., site-, key-, corporate- and strategic-account managers and corporate

sponsors).

to ensure access to strategic decision-makers at higher levels of the customer

organizational structure.

Multilevel and cross-functional sales teams and cross-selling negotiations.

Clear sales processes and use different tools to achieve higher degrees of sales

performance (e.g., sales funnels, success stories, and information from CRM and

PDM systems).

The outcomes of value-based pricing systems or manual methods of estimating

value-added and cost-savings results are used.

University of Vaasa | Department of Management | Rabetino et al.

The internal perspective (Cont. I)

Innovation Management: Value co-production differentiation and novel

sources of revenue, easy to serve products

Many service innovations emerge from customer interactions (pilot and co-develop

with leading customers),

Processes for service concept development are less established than those for

physical product R&D

Analyzing customers’ processes and including service representatives in the

product design team

Designing physical products for service is not always possible.

Case firms have broadened their service portfolios through mergers and

acquisitions.

University of Vaasa | Department of Management | Rabetino et al.

The internal perspective (Cont. //)

Operations Management: Value appropriation mass-customization,

modularity, scalability, economies of scale, scope and repetition, quick

response time…

Implementing end-to-end operations (particularly for the newest business lines):

business services unit is integrated into other businesses,

Integrating the supply chain operation,

Modularizing their offering and using long-term service agreements,

Organizing the service business based on service portfolios,

Structuring new service networks. A clear need to control field service provision,

Implementing risk-management models and protocols.

University of Vaasa | Department of Management | Rabetino et al.

Aligning intangible assets to promote competitive

advantage: The learning and growth perspective

Cultural management

Using internal marketing and communication tools (CEO statements are

important),

Involving employees in strategy development workshops, and

Designing training programs to facilitate a shift to a service-oriented

mindset,

Sometimes, replacing the staff was the only viable solution.

Internal relationship management.

Capture team leaders and cross-unit and ad-hoc teams,

Frequent formal cross-functional workshops an shared meetings,

Double-hat people sitting in different units.

University of Vaasa | Department of Management | Rabetino et al.

HRM:

Hiring new personnel is a common method of obtaining the required skills and expertise.

The acquisition of service companies also emerged during the interviews as a means of obtaining

skillful human resources (integration is the challenge).

The companies completed comprehensive analyses of available and necessary skills at the job-

family level while designing specific training programs to address gaps.

Knowledge management (3 core ICT systems ): 1) customer relationship management

systems (CRM), 2) enterprise resource planning systems (ERP), and 3) product data

management (PDM) or product lifecycle management systems (PLM).

Systems for condition-based monitoring (CBM) also serve as important sources of information

about customer behaviors as they use products (risk management + cost savings).

The learning and growth perspective (Cont.)

University of Vaasa | Department of Management | Rabetino et al.

FINAL THOUGHTS

Servitization is a complex and multidimensional process.

A well-known business concept can develop into an emergent strategy

during the implementation process. Execution is rarely straightforward:

Numerous iterations are generated before companies achieve a satisfactory

degree of fit between all components of the business model.

Companies have extensively utilized external consultants to achieve best

practices and to develop appropriate service structures and training programs.

University of Vaasa | Department of Management | Rabetino et al.

IMPLICATIONS

Based on Kaplan and Norton (2000), our study is the first to further develop the ‘servitization strategy

map’ concept. The present study:

Extends recent debates on service-based business models while discussing how different dimensions

of strategies are related.

Illustrates how strategy mapping can be used as a tool for understanding and describing the strategic

logic of manufacturers during servitization.

We illustrate the multidimensionality of a servitization strategy.

We provide information to managers and other key actors about initiatives that can enable the

successful implementation of servitization strategies.

These results will enable managers to develop early-stage servitization strategies.

For manufacturers in more mature stages of servitization, these results may offer guidelines

for re-inventing servitization strategies.

University of Vaasa | Department of Management | Rabetino et al.

LIMITATIONS

Our study only examines those activities and processes mentioned by the

respondents (more interviews, more companies, other industries…)

We present a holistic map. However, different servitization strategies may need

specific maps.

As this study sacrificed result generalizability due to the use of comparative case data,

future studies may operationalize processes and activities to examine performance

effects using quantitative data. Future studies may thus identify causalities using

larger datasets.

The strategy map applies a highly rational and economic approach while positioning

the analysis at the organizational level.

Future research may adopt multilevel perspectives while using psychological and

sociological approaches to understand how implementation processes and their outcomes are

influenced by individual perceptions, behaviors, and interactions between individuals.

University of Vaasa | Department of Management | Rabetino et al.

THANK YOU !!!!!!!!!!!

rodrigo.rabetino@uva.fi