1. The strategic importance of servic for manufacturing companiesHeikoGebauer Associate Professor for Service Management at the Institute of Technology Management (University of St.Gallen) in Switzerland Guest Professor at the Service Research Center (Karlstad University) in Sweden

2. Meaning of services in manufacturingcompanies (1/2) Theoretical perspectivesPractical illustrationTransition from product manufacturers to services providersOutsourcing services for manufacturing small volume carsMoving downstream towards servicesConstruction and design of components Design of small volume carsServitisation in the manufacturing sector Service business developmentLogistic support and technical adviceCapital equipment manufactures moving towards high-value solutions Product-service-systemsSources: Wiseand Baumgartner, 1998; Davies (2004), Vandermerwe and Rada, 1988, Oliva and Kallenberg (2003), Mathyssens and Vandendempt (1998 and 2008), Brown, Gustafsson, Witell, 2009 3. Meaning of services in manufacturing companies (2/2) Theoretical perspectivesPractical illustrationTransition from product manufacturers to services providersOutsourcing services Service leverage (logistics or IT)Moving downstream towards servicesService for other products Full services (service level agreements, extended warranty)Servitisation in the manufacturing sector Service business developmentParts, field service, modernizationCapital equipment manufactures moving towards high-value solutions Product-service-systemsSources: Wiseand Baumgartner, 1998; Davies (2004), Vandermerwe and Rada, 1988, Oliva and Kallenberg (2003), Mathyssens and Vandendempt (1998 and 2008), Brown, Gustafsson, Witell, 2009 4. Why should companies move into the service business? Anecdotal evidences"The [service] market is bigger than we ever dreamt, Jack Welch the former CEO of General ElectricSiemens announced the goal to create 50% of the total revenue through servicesIBM extended the service business (1993, 35.7% to. 60.2% of revenue attributed to services in 2003).FinancialStrategicService opportunities Marketing Augmenting the product offering More intense customer relationshipAdditional revenue Higher profitability than products More resistant to economic cyclesSources: Mathieu, 2001, IBM Annual reports, Simon, 1993Adressing more comprehensive customer needs Co-created competences as resource barrier 5. Companies face strong challenges by extending the service business Anecdotal challengesIndustry challengesThyssenKruppsells its industrial service business because it could create synergies with its other business units.Service offerings are mainly restricted to basic services for the installed product baseComau increased the share of service revenue from 14 to 19% (2005-2008), but the corporate revenuedeclined about 29% Drrprovided outsourcing services, but the corresponding challenges led to the decision to sell the service unit.Sources: Belzet al. 1997, Gebauer et al. 2005, Neu and Brown 2005Investments in the service business do not create the corresponding returns leading to the service paradoxService are often given free during the negotiation of the product Service approach lack sufficient professionalization and systematizationDespite expectations of about 50% revenues created through service, most companies still achieve less than 20% 6. Objectives on service business development TodayFuture New service in more than 5 years New services in 3 to 5 yearsParts and field servicesIncreased service contributionIncrease total service revenues Higher share of service revenues Increase service profitability Increase customer satisfactionParts and field servicesLearning objectivesPotential barriers for service business development Strategic paths for service business Implementation of these paths 7. Understanding the complexity of service business development Learning objectives Barriers Strategic paths ImplementationService business is more complex than the product business ParameterProduct businessService businessNature of demandMore predictable, can better forecastAlways unpredictable, sporadicRequired responseStandard, can be scheduledas soon as possibleNumber of product generationsLimited10 to 15 times higherCognition can limit the extension of the service business Strategy formulationOveremphasis on tangible features Disbelief in the economic potential of services Considering services as too riskyStrategy implementationOveremphasis on tangible features Focus on employees and not the service system Aggressive goals undermine credibilitySources: Cohen et al. 2006, Gebauer 2009 8. Identifying strategic paths through visualizing service opportunities Learning objectives BarriersReconfigurationStrategic paths ImplementationHow do service opportunities occur?)Pre-SalesSalesAfter-salesExtensionPrimary customer activitiesSupplementary customer activitiesWhere do service opportunities occur? AdaptedfromSawhney, 2004 9. Exploration and forming a new value constellation Learning objectivesHilti has formed a new value constellation through its fleet managementBarriersNew value constellation capturing nearly all customer activitiesStrategic paths ImplementationAfter-sales service provider or customer support service providerDynamic capabilities Sensing opportunities beyond existing industry barriers Seizing the business model Reconfiguring companies assets and structure 10. Exploitation and the corresponding service strategies Learning objectivesDevelopment partnerBarriers Strategic paths ImplementationAfter-sales service providerCustomer support service provider Outsourcing partnerSource: Gebauer, Fischer and Fleisch (forthcoming 2010) 11. Service strategies and the corresponding service offerings and value proposition Learning objectives BarriersService strategyService offeringsValue propositionAfter-sales service providersSpare parts, repairs, inspections, hotline, installation, trainingReact as soon as possible to product failures in customer processesCustomer support service providersPreventive maintenance, process optimization, and aftersales servicesPreventing product failures in the customer processOutsourcing partnersOperational services, operating customers maintenance functionReduce fix costs in the customer processesDevelopment partnersDesign and construction servicesApply development competencies to improve customer processesStrategic paths ImplementationSource: Fischer, Gebauer, Gustafsson and Witell (forthcoming 2010) 12. Operational capabilities for implementing the service strategies Learning objectives Barriers Strategic paths ImplementationService orientation in the operational capabilities A abstract value of services, B role understanding, C personnel recruiting, D training, E compensation, F distinction product and service organization, G proximity to customers Development partners A 1 G B Customer support After-sales 0.5 service providers service providers 0 A A F C 1 1 G B G B 0.5 0.5 E D Outsourcing partners 0 0 F C F C A 1 E D E D G B 0.5 F0 ELegend (0 low, 1 high cluster means) Source: Gebauer, Gustafsson, Edvardsson and Witell (forthcoming 2010), Neu and Brown (2005 and 2008)C D 13. Illustration of implementation actitivies Learning objectives Barriers Strategic pathsStrategic pathsImplementation of operational capabilitiesAfter-sales service providers to customer support service providersChanging the awareness from service as add-on to services as essential part of value creation Changing the employees roles from reliable trouble shooter to preventing failures Setting-up a separate SBU for services Increasing the service responsiveness in the human resource management Changing from central to decentralized service deliveryCustomer support service providers to outsourcing partnersTurning the service SBU into an independent company Focusing on recruiting former employees of customers Training the role of reliable performance enablersCustomer support service providers to development partnersSet-up an integrated R&D team for design services Enhance service orientation in values, behaviors as well as human resources (recruiting, training, and compensation) Train behavioral and customer-focused attitudesImplementationSource: Gebauer, Gustafsson, Edvardsson and Witell (forthcoming 2010), Neu and Brown (2005 and 2008) 14. Objectives on service business development TodayFuture New service in more than 5 years New services in 3 to 5 yearsParts and field servicesIncreased service contributionIncrease total service revenues Higher share of service revenues Increase service profitability Increase customer satisfactionParts and field servicesLearning objectivesPotential barriers for service business development Strategic paths for service business Implementation of these paths 15. Reflecting the learning objectives Potential barriers for service business development Managers often underestimate the complexity Cognition limits management efforts in formulating and implementing the service strategies Strategic paths for service business Service opportunities arise around primary and supplementary customer activities as well as extension and reconfiguration of customer activities Service opportunities can be either exploited or used to explore new value constellations Exploitations arises around extension and primary customer activities, whereas exploration focuses on the reconfiguration and the supplementary activities Exploitation creates strategic paths around after-sales service and customer support service providers as well as development and outsourcing partners Implementation of these paths Exploitationrequires the development of operational capabilities (culture, human resources and organizational structure) Explorations requires dynamic capabilities (sensing, seizing and reconfiguration) 16. Thank you very much for your attention Any questions?Heiko Gebauer Associate Professor for Service Management at the Institute of Technology Management (University of St.Gallen) in Switzerland Guest Professor at the Service Research Center (Karlstad University) in Sweden 17. Research proposalHeikoGebauer Associate Professor for Service Management at the Institute of Technology Management (University of St.Gallen) in Switzerland Guest Professor at the Service Research Center (Karlstad University) in Sweden 18. Research proposal: Service management in manufacturing industries Research activitiesResearch fundings Basic funding from the University 10%)Faculities (internal) SNF (Swiss National Science Foundation) Industry foundations (GebertRueff foundation)International cooperationOther faculities EU-Project KTI (commission for technology and innovation management) Industry projects Guest professorshipContributions Scientific contributions (publications in selected academic journals) Contributions for managers and companies (publications in management journals)(5- 19. Research approach Theoretical perspectives Contingency theory Resource-based view and capabilities Service-Dominant Logic (Value Creation) Behavioral theory of the firm Cognition theoryIndustries Manufacturing sector Infrastructure sectors Public transport Energy utilities (Smart Grid) Research methods - Empirical and not conceptual driven - Empirical includes both qualitative and quantitative research approaches 20. Research agenda -1) The development of operational capabilities in the service business towards core capabilities 2) The impact of dynamic capabilities in the service business development 3) The role of market-orientation in the service business development 4) The organization theories on organizational structures. 21. Lecture concept Managing service operationsHeikoGebauer Associate Professor for Service Management at the Institute of Technology Management (University of St.Gallen) in Switzerland Guest Professor at the Service Research Center (Karlstad University) in Sweden 22. Managing Service Organisations (1) ContentChapter 1: Characteristics and categorization of services and their implications on managing services, customer integration Chapter 2: Strategic perspective on services service strategies, strategic approaches to achieve differentiation opportunities and cost advantages, resource-based and market-based view in the context of services Chapter 3 and 5: Operational perspective on services Service innovation innovation process, innovation approaches and tools Service delivery service operation, service delivery, service recovery Service marketing moments of truth, gap-model and communication of services Chapter 6: International perspective on services international service strategies, internationalization process and market entry, cultural impact on service innovation, service delivery and service marketing Chapter 7: Leadership perspective on services management processes, human resource management, performance measurement systems Chapter 8-9: Service management in specific industries Manufacturing industry Health care services Energy sector Banking and insurance industry 23. Managing Service Organisations (2) Learning objectivesGuidance for developing service strategies and to achieve sustainable competitive advantages through services and in service industries Usages of tools and decision support systems to analyze strengths and weaknesses in the service innovation, service delivery and service marketing processes Understanding of potential challenges and conflicts in the leadership process Guidance for driver, limitations and strategies for the internationalization of services In-depth application of these competencies in selected industriesDidacticsAttendance in class is favored Interactive learning processes Theoretical knowledge is presented through the actual application Practical examples to illustrate the argumentation Case studies 24. Thank you very much for your attention Any questions?Heiko Gebauer Associate Professor for Service Management at the Institute of Technology Management (University of St.Gallen) in Switzerland Guest Professor at the Service Research Center (Karlstad University) in Sweden 25. Exploitationorexploration: How to approachtheserviceopportunities? Learning objectives BarriersExplorationReconfiguration Radical improvement New value constellation Dynamic capabilitiesStrategic paths ImplementationHow do service opportunities appear?) ExtensionPre-SalesSalesAfter-salesExploitation Incremental improvements Value-adding to existing value constellation Development of operational capabilities Primary customer activitiesSupplementary customer activitiesWhere do service opportunities appear?AdaptedfromSawhney, 2004, Fischer, Gebauer, Guanjie, Gregory and Fleisch. (forthcoming 2010) 26. Exploitationorexploration: How to approachtheserviceopportunities? Learning objectives BarriersExplorationReconfiguration Radical improvement New value constellation Dynamic capabilitiesStrategic paths ImplementationHow do service opportunities appear?) ExtensionPre-SalesSalesAfter-salesExploitation Incremental improvements Value-adding to existing value constellation Development of operational capabilities Primary customer activitiesSupplementary customer activitiesWhere do service opportunities appear?AdaptedfromSawhney, 2004, Fischer, Gebauer, Guanjie, Gregory and Fleisch. (forthcoming 2010)