Managing Servitizationthrough Modularization - CBS Servitizationthrough Modularization Professor MSO...
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Managing Servitization through Modularization Professor MSO Juliana Hsuan Dept. of Operations Management [email protected] Copenhagen Business School June 12, 2017
Transcript of Managing Servitizationthrough Modularization - CBS Servitizationthrough Modularization Professor MSO...
Managing Servitization through Modularization
Professor MSO Juliana HsuanDept. of Operations Management
Copenhagen Business School
June 12, 2017
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Today’s Agenda
What is servitization Product and service innovation What is modularization Servitization strategies
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Harmony of the Seas
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Servitization - creating value through the provision of services
Servitization is about competing through value propositions that integrate services with product offerings
Servitization based on physical product:- Adding services- Offering functions- Total solutions
Essentially it is about ‘interfering’ in your customers’ processes
Selling an asset Providing recovery
Maximizing availability Offering outcomes
(Source: Avlonitis et al. 2014)
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Value propositions and customer expectations
Type of value proposition
Customer expectations Example
Selling an asset Quality and performance of equipment
Offer customized product
Providing recovery of an asset
Minimum disruption in case of equipment failure
Repair of equipment afternotification
Maximizing the availability of an asset
Fault free equipment Provide remote and preventive maintenance
Offering outcomesfor the customer
Assisting customers to achieve their goals
Take over customer functions/activities
A product goes into the processes of the customer(Source: Avlonitis et al. 2014)
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How can we make servitization and related
complexity easier to manage?
Can we operationalize it?
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Through modularity, but why?
Platform strategies
Technological change
Outsourcing
IT integration
Increased service focus
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Individual Components Portfolio of Products
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VAG inter-firm product platform development
Audi TT
Audi A3
VW Golf
Seat Leon
Skoda Oktavia
High
LowOverall cost leadership
DifferentiationGeneric strategy
Productprice
(Source: Muffatto & Roveda 2000)
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Product Platform & Product Architecture Designs Consider… Design strategies (modular vs. integral product
architectures) Component composition How components are linked Tightness of coupling Upgradability Substitutability, commonality sharing Customization Decomposition => outsourcing
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How can we organize complex products and services efficiently?
Through decomposition
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AirlineCarnival TravelAgentIndustry
Kitchen Waiters Laundry Maintenance Monitoring InspectionService Package /
Component
CabinOperations etc.EntertainmentPools Engine
RoomService BundleFood andBeverage
PortOperations
Legend of the Seas
Jewelof the Seas etc.MarketingService Company /
Supply ChainIndependence
of the Seas
Independence of the Seas
RoyalCaribbean
(Source: Voss & Hsuan 2009)
Decomposition of a Sea Cruise Services
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Examples of components
Restaurants
Kitchen Waiters Sommelier Bus boys Laundry Hostess Menus Etc.
Pools
Water cleaning Life guards Bar Kitchen Tanning Etc.
Engine Room
Maintenance Monitoring Control Cleaning Etc.
Cabin Operations
Maids Laundry Room service WIFI Safety Etc.
Specialized or unique components
Replicability factor
(Source: Voss & Hsuan 2009)
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Deg
ree
of m
odul
arity
M(u
)
Pool
Restaurant:Most modular bundle of services
Cabin Operations
Engine Room:Least modular bundle of services
u
Nf
u
euM 2
2
)(
u : number of unique componentsN : total number of componentsf : replicability factor
simplest
Most complex
Voss, C. and Hsuan, J. (2009) “Service architecture and modularity,” Decision Sciences, 40(3), 541-569.
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Benefits of Modular Designs Task specialization Platform flexibility Increased number of product variants Economies of scale in component
commonality Cost savings in inventory and logistics Lower life cycle costs through
incremental improvements such as upgrades, add-ons and adaptations
Flexibility in component reuse Independent product development Outsourcing System reliability due to high production
volume and experience curve
Examples: elevators, mobile phones, IBM PCs, Lego toys
Benefits of Integral Designs Interactive learning High levels of performance through
proprietary technologies Systemic innovations Faster access to information Protection of innovation from imitation High entry barriers for component
suppliers Craftmanship
Examples: Formula One cars, satellites
Mikkola, J.H. (2006) “Capturing the degree of modularity embedded in product architectures,” Journal of Product Innovation Management, 23, 128-146.
Product Systems
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Service Systems
Specialized services Piracy prevention training R&D Consulting Software updates
Standard/generic services Fleet management Preventive maintenance Call centers Availability of spare parts
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Servitization Strategy MatrixStandard serviceIntegral product
Servitization 2availability of spare
parts for cruise ships
Standard serviceModular product
Servitization 3 repair of galleys in
bulk carriers
Specialized serviceIntegral product
Servitization 1consulting of R&D sourcing strategies
for cruise ships
Specialized serviceModular product
Servitization 4software upgrades
for navigation systems
Product System
Serv
ice
Syst
em
integral/complex modular
specialized
standard/generic
(Source: Hsuan et al. 2012)
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Dynamics of ServitizationStandard serviceIntegral productServitization 2
Standard serviceModular productServitization 3
Specialized serviceIntegral productServitization 1
Specialized serviceModular productServitization 4
Product System
Serv
ice
Syst
em
integral/complex modular
specialized
standard/generic
(Source: Hsuan et al. 2012)
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Challenges of delivering advanced services and integrated solutions
• Create leadership support from top management to sales and operations managers
• Make the necessary investments to develop and implement services and solutions
• Change the mind-set and capabilities of the organization to selling and delivering services and solutions
• Make a strategic effort to capture the potential of the installed base
• Develop KPIs and align incentives to ensure integrated sales and delivery of products combined with services
• Coordinate and align the development of new products integrated with new services
• Involve customers in the development process
• Create the necessary flexibility and adaptability to enable customization
• Formulate attractive value propositions through better understanding of customer needs
• Ensure that the quality of service provision lives up to customer expectations
• Specify Service Level Agreements to ensure an appropriate balance of risk and rewards in the face of information asymmetry
• Develop trustful relationships to support the investment in customer specific competencies
• Manage the geographical and cultural distances in a globally distributed network of service partners
(Source: Avlonitis et al. 2014)
