Designing for services course Service Business and ...€¦ · Designing for services course...

Designing for services course

Service Business and business models –

lessons learned from the theory and praxis

Lasse Mitronen

February, 7th 2018

7.2.2018

7.2.2018

Lasse Mitronen

• Professor (Professor of Practice) Aalto University, School of Business

• 24 years experience in different positions for KeskoCorporation, the leading retailing company in Finland and Nordic countries, positions for examples:– Concept and development Manager for non food stores– VP Business Planning and Strategic Development

• Some professional affiliations in service business, for example:– Chairman for the steering group leader for Tekes, Serve

program 2007-2013– Steering group member of the Finpro global service business

program and service advisor for Finpro world best studying and working environments project 2009-2014

Service Business LMi

Thinking and sleeping at the

same time


7.2.2018

What is marketing?

”Marketing is an organizational function and a set of

processes for creating, communicating, and delivering

value to customers and for managing customer

relationships in ways that benefit the organization and its

stakeholders (AMA definition of marketing 2004)”

”Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and

exchanging offerings that have value for customers, clients, partners, society at large”

(AMA definition of marketing 2007)


7.2.2018

Towards a paradigm shift in marketing

Vargo & Lusch 2008


Evolution of marketing

• 4P - Product- Price, - Place - Promotion

• customer as passivetarget

• Logistics• Channels• Distribution• Products to market

• Value co-creation• Customer value

proposition• Service• Relationship• Customer as active

participant

Lusch, R.F. (2007) Marketing’s Evolving Identity: Defining Our Future. Journal of Public Policy & Marketing. Vol. 26(2), pp. 261–268

7.2.2018 Service Business LMi

Defining service (old school)

• For decades, service was seen through functions and outputs (e.g.,

acts, deeds and performances, Berry, 1980), the characteristics of

which were described with IHIP-mallin model(Zeithaml,

Parasuraman, Berry, 1985)

– Intangibility = immaterial, can not touch

– Heterogenous = can not standardize

– Inseparability = Simultaneous production and consumption/use

– Perishability = can not be stored

• Based on the idea that products are fundamentally different from

services

• Why should they be different? Often they are not!


How service is defined in the 21st centuryService is the application

of operant resources

(knowledge and skills) on

behalf of another party1

Service is cocreation of

value between the

customer and the

provider2

Service is support to

another party’s everyday

practices in a way that

enables value creation in

those practices3

1Vargo, S.L., Lusch, R.F. (2004), ”Evolving to a new dominant logic for marketing,” Journal of Marketing, Vol.

68(1), 1-17. 2Hsu, C. & Spohrer, J. (2009): Improving service quality and productivity: exploring the digital connections scaling

model. International Journal of Services Technology and Management.3Grönroos, Christian (2009): Towards service logic: The unique contribution of value co-creation” Hanken

Working papers

Competive advantage fromknowledge and skills

Competitive advantage fromredifining participant and IT roles

Competitive advantage fromfacilitating customer’s own value

creation

Service is

about creating

customers

value from the

perspective of

buying and

using

7.2.2018Service Business LMi

However, Disciplines Still Debate Definition of Service

Economics & Law

Game Theory

Management

Information

Science

Anthropology

& Psychology

Organization

Theory

Computer Science/

Artificial Intelligence

Information

Science


7.2.2018

Strategic

management level

Fit or tension in service business?

Customer

using level Customer

serving level

Operational

management level


Summary: from product and old service

orientation to new service orientation

• From customers as passive targets to customers as active participants

• From selling products or services to delivering solutions

• From product and service features to customer benefits

• From managing one organization to managing networksof organizations

• From one channel to multiple channels

• From investments in logistics to investments in information and digital solutions as an offering


Perspectives to value

• Low price

• I can get what I want

• Quality compared to what I pay

• What I get vs. what I give

Zeithaml V. 1988, Consumer Perceptions of Price, Quality and Value: A Means-End Model and Synthesis of

Evidence, Journal of Marketing, vol. 52, pp. 2-22.

Value =BenefitsSacrifices


Relationship marketing

perspective to customer value

• Episode value is based on individual transactions and

other interactions

• Relationship value represents the value added resulting

from ongoing and enduring relationship

• Complementary perspectives with different types of

benefits and sacrifices

Grönroos, C. 2000 Service Management and Marketing. John Wiley & Sons, Sussex

Value =Episode Benefits + relationship benefits

Episode Sacrifices + relationship sacrifices


Basic value, value added and future value

1. Basic value: From the customer’s perspective, the critical

expectations are met. If failed, the customer relationship will

probably fail.

2. Value added: Additional value and differentation appreciated by

customers. Complements basic value. Value added can only be

created if basic value is delivered. Basic value and value added

result in a strong combination.

3. Future value: Enhanced processes, new offerings. New

channels and services. Customer insight concerning customer

needs, lifestyles, values and changing behaviors. Dynamic and

timely change.

Based on: Kautto, M., Lindblom, A. ja Mitronen L.2008. Kaupan Liiketoimintaosaaminen. Talentum.


Customer value in B2B

Customer value can be seen as monetary evaluation of

• Technical,

• Economic,

• Social, and

• Service related benefits

Anderson and Narus treat price separately from value:

• Value (i.e. technical, economic, social and service

related benefits in monetary terms ) – price

• Value minus price must be greater than the next best

alternative at the market

Anderson, J.C., Kumar, N., & Narus, J.A., 2007,Value Merchants. Demonstrating and documenting Superior value in

business markets. Harvard Business School Press, Boston


Defining customer value proposition

A customer value

proposition (CVP) should:

• increase the benefits and/or

decrease the sacrifices that

the customer perceives as

relevant;

• build on competencies and

resources that the company

is able to utilize more

effectively than its

competitors;

• be recognizably different

(unique) from competition;

and

• result in competitive

advantageRintamäki, Kuusela & Mitronen (2007) Identifying competitive customer value propositions in retailing. Managing Service Quality,

Vol. 17, No. 6, pp. 621-634

A good CVP

• Is both strategic AND

operational tool for

explaining what kind of

value is created for the

customer and how

• Guides actions internally

• Positions the company

externally


How value is created?

• Co-creation of value often requires reconfiguring resources or access rights to

resources, and value proposition is a value co-creation mechanism that communicates

a mutually agreeable plan to collaborate and co-create value (Spohrer and Kwan 2009)

• Creation of value can be described as a continuum on which the roles of customer,

company, and products/services vary (e.g., Vargo and Lusch, 2004; Gummesson 2006;

2008; Grönroos and Ravald, 2011; Mele and Polese, 2011)

Company

perspective:

Company

delivers value,

customer has a

passive role

Customer

perspective:

Customer creates

value, companies

facilitate customers

value creating

processes

Balanced

perspective:

Value is co-

created by the

company and

the customer


Customer value and experience in the hospital

7.2.2018

Berry, L.L., Wall, E.A & Carbone L.P 2006. Service Clues and Customer

Assessment of the Service Experience. Lessons from marketing.

Academy of Management Perspectives


Value in the retailing

PRODUCTION LOGIC SERVICE LOGIC

MANAGEMENT

STRATEGIC

CHOICES

OPERATIONS

Product- and production

based value creation

Customer-based

value creation

Customer

experience, value

co-creation

Tangible resources

(machines and

materials)

Intangible resources

(Knowledge and

partnerships)

Supply Chain

Management

Mitronen, L. & Rintamaki, Timo (2012): Arvopohjainen toimintalogiikka julkisen sektorin palvelujen ohjausjarjestelmissa. In:

Julkisen ja yksityisen rajalla. Julkisen palvelun muutos.

Anttonen, A., Haveri, A., Lehto, J. & Palukka, H. Tampere University Press


Customer value B2C (and B2B)

Monetary costsTime Effort

Stress

IrritationDecision cost

Shame

Monetary

benefits

Convenience

Speed

Enjoyment

Status

Safety

Self-esteem

Sense of

belonging

”Focus in

price”

”Focus in

solutions”

”Focus in

customer

experience”

”Focus in

meanings”Economic

value

Functional

value

Emotional

value

Symbolic

value


Motives revisited – both perspectives are

needed!

Crosby, Lawrence A. & Johnson, Sheree L. (2008) Experience required, Marketing Management


Often decreasing sacrifice is more effective

than new benefits

SYMBOLIC/SOCIAL SACRIFICE

• Social cost, breaking existing norms,

experiencing shame

EMOTIONAL SACRIFICE

• Psychological cost, irritation and

dissappointment

FUNCTIONAL SACRIFICE

• Costs measures as time and effort. Effort

can be physical or informational (decision

cost)

ECONOMIC SACRIFICE

• Monetary cost, price

Based on: Kuusela, H. & Rintamäki, T. 2002, Arvoa Tuottava Asiointikokemus: Hyödyt ja Uhraukset Henkilökohtaisen ja Sähköisen

Asioinnin Kehittämisessä, University Press, Tampere.


Rintamäki, Kuusela & Mitronen (2007) Identifying competitive customer value propositions in retailing.

Managing Service Quality, Vol. 17, No. 6, pp. 621-634

Identifying competitive

customer value proposition


Rintamäki, Kuusela & Mitronen (2007) Identifying competitive customer value propositions in retailing.

Managing Service Quality, Vol. 17, No. 6, pp. 621-634

Examples of positioning based on

customer value propositions


Walmart: Economic value

Fromartz, S. (2009) The Mini-Cases: 5 Companies. 5 Strategies, 5 Transformations,

MIT Sloan Management Review


Tesco: Functional value


Barnes & Nobles: Emotional value


BodyShop: Symbolic value

OUR VALUES WHAT WE BELIEVE

97% of our loyal Love Your Body™ card members surveyed said that The Body Shop Values are either ‘important’ or ‘very important’ to them as customers.*

Dame Anita Roddick

Human Rights Activist.

Founder of The Body Shop

Dedicate our business to the pursuit of social and environmental change.

Creatively balance the financial and human needs of our stakeholders: employees,

customers, franchisees, suppliers and shareholders.

Courageously ensure that our business is ecologically sustainable, meeting the needs

of the present without compromising the future.

Meaningfully contribute to local, national and international communities in

which we trade by adopting a code of conduct which ensures care, honesty,

fairness and respect.

Passionately campaign for the protection of the environment, to defend human rights,

and against animal testing within the cosmetics industry.

Tirelessly work to narrow the gap between principle and practice, whilst making fun,

passion and care part of our daily lives.

MISSION STATEMENT OF THE BODY SHOPOUR REASON FOR BEING IS TO:

“The business of business should not just be about money, it should be about responsibility. It should be about public good, not private greed.”

Anita believed that businesses have the power to do good. That is why the Mission

Statement of The Body Shop opens with the overriding commitment, ‘To dedicate our

business to the pursuit of social and environmental change.’ Our Mission Statement is

as relevant today as it was over 30 years ago, when the company was founded:

In order to make sure that our business continues to live by this Mission Statement,

The Body Shop created five core Values. These Values act as a practical guide to

decision making at all levels of the company, helping us to ensure that our profiits

are made with principles.

* Survey sent to over 100,000 customers in the UK, the USA, Singapore and Canada. For more details go to section ‘Making the most impact’

10


7.2.2018

Framework for Industrial Services- Focus of customer relationship and competencies

changes

Parts &Machinary

Operations Process Business

Customer’sPurchasing

Customer’s Operations

Customer’s Process

Customer’s Business

Supplier Competencies

Solution/ Value Partner

Machine Supplier

System Provider

Maintenance Partner

Performance Partner

Source: BestServ Program


7.2.2018

From value added to value proposition


7.2.2018

Manufacturer of welding equipment has

launched service business solutions activities

Kemppi Oy

DM 32154

11-2007 Copyright © Tekes

• Besides welding equipment, the Kemppi ARC System

provides customers with data collection and transfer

software and equipment

• Additional expert services are also offered

• Weak links and bottlenecks in the customers‘ processes

can be identified with the data provided

by the collection system

• Service business provides

expanding fields for business

activities and new ways of

differentiating oneself

• www.kemppi.com


http://www.kemppi.com/

Wärtsilä Services


7.2.2018

Wärtsilä Services


7.2.2018

Wärtsilä Services

Wärtsilä Services


7.2.2018

Fondia – Legal Department as a Service


Multi-channel and cross-channel service

Co

mp

an

yV

irtu

al

Ph

ysic

al

Physical Virtual

Cross-channelbusiness

CustomerMitronen & Rintamäki, 2012

• Multi-channel refers to

business model where e.g.

Brick-and-mortar store and

webshop are managed as

independent entities

• Cross-channel refers to

business models where

multiple channels are

integrated for enhancing

customer value. In these

cases, movements of

products, money and

information are allowed

between channels, e.g. order

online and pick up from brick

and mortar store.

E.g. Chatterjee, P. (2010), “Multiple-Channel and

Cross-Channel Shopping Behavior: Role of Consumer

Shopping Orientations,” Marketing Intelligence &

Planning, 28(1), pp. 9–24.


Framework for multi-channel strategies

Müller-Lankenau et al. 2004


Retailing multi-channel examples


Uniqlooks (Uniqlo)

• A“fan page by the fans for the fans”,

UNIQLOOKS (http://uniqlooks.uniqlo.com

/), is a social platform for connecting its

customers around the world

• Customers who have purchased Uniqlo

clothing wear it in photos that they can

upload to the Web site or send via a

smartphone application to their friends or

for public display


http://uniqlooks.uniqlo.com

Navigation and servicing with

information

Simon Malls App

– http://itunes.apple.com/us/app/

simon-malls-free-

shopping/id395128180?mt=8


http://itunes.apple.com/us/app/simon-malls-free-shopping/id395128180?mt=8

7.2.2018


“Shouldice Hospital runs like a very well-oiled machine. All of your medical staff are so polite, knowledgeable and respectful

towards the patients and one another. My stay here was so very comfortable and I have every confidence that I was given the

best possible care. Thank you so very much for taking such an interest in my recovery.” Ruth – Etobicoke


New York Hudson River Park


City of Boston


City of Boston - Citizens Connect


City of Calgary

7.2.2018


Big, Medium and Small data as a resource

7.2.2018

Understanding Wisdom


New Service Business -

platforms• New service businesses such as

Amazon, iTunes, and Rakuten have a

common characteristic:

–they play a role of platform that

orchestrates and facilitates value

co-creation by customers and

providers.


7.2.2018

Platform types


Service

Experience

Service

ProviderCustomer

A Service System and Its Entities

1Kwan, S. K. & Min, J. H. (2008) “An Evolutionary Framework of Service Systems”.

Presented at the International Conference on Service Science, Beijing, China, April 17-18. 2017

Service System Worldview1


Typical platforms

Service Business LMi 5

7.2.2018

New platforms – Global marketplaces

in the world

7.2.2018

Service Business LMi 6


7.2.2018

Monipuolinen ansaintalogiikka

– case Alibaba Ecoystem

Source: https://www.alibaba.com


7.2.2018

New integrated services for the customers


Lähde: http://www.time2know.net/multichannel-multipuprose-commerce

87.2.2018

Learning platform - Claned

Service Business LMi28

7.2.2018

How to ”shop” a car - Autogravity

Service Business LMi 297.2.2018

Personal trainer - Polar

Service Business LMi 307.2.2018


Levi’s Tailor Shop

7.2.2018

7.2.2018

New business models and platforms

“Last Mile” logistics Mobil payment Customer services

Volym business Shareholder collaboration Private service


Customer value management in the

service business

Anderson, J.C., Kumar, N., & Narus, J.A., 2007,Value Merchants. Demonstrating and documenting Superior value in

business markets. Harvard Business School Press, Boston

Conceptualize

value

Formulate value

propositions

Substantiate

value

propositions

Profit from value

provided

Tailor market

offerings

Transform sales

force to value

merchants


Summary

• To support and develop value

creating processes consider the

following:

– Defining value from the customer

perspective, e.g. economic,

functional, emotional and symbolic

value

– Document and demostrate customer

value proposition

– Expand and redefine customer

experience

– Redefine roles and resources

– Identify the possibilites of cross-

channel solutions

– Have an open mind and remember to

look across industries for benchmark!IZOD Indy Racing at Macy’s, New York


Thanks!

Lasse Mitronen

[email protected]

+358 50 65707


mailto:[email protected]

Designing for services course Service Business and ...€¦ · Designing for services course...

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