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Towards customer-oriented productisation in services

Katriina Valminen

Aalto University, School of Science and Technology, BIT Research Centre

Abstract

This conceptual paper discusses involving the customer in the productisa-tion process. Even though customer-orientation has been emphasized by several service theorists and also productisation is increasingly gaining ground in service research, are these two perspectives seldom combined. Productisation is commonly seen an internal activity of the provider com-pany, and customer specificity has usually been taken into account by leaving enough space for modifications of the productised prototype in the actual service encounter. The benefit that service companies seek through productisation is first and foremost an increase of efficiency, prof-itability and competitiveness. While striving for these goals the service companies should be careful not to lose the customer perspective.

1. Introduction

Customer-orientation has been emphasised by several service theorists, particularly within the service marketing school. According to Edvardsson (1997) the service company cannot actually produce a service without the customer. It can, however, develop the best and right prerequisites for well-functioning customer process and attractive customer outcomes. In newer literature, scholars have emphasised that customers are not only important information sources for successful service devel-opment, but it would be beneficial to develop services in a more tight cooperation with customers.

The systematic development of services has been studied using different approaches – broader and narrower, process-oriented and product-oriented: the effective produc-tion of services has been a central research issue for decades. However, the concept of productisation has been used rarely in the academic field. Productisation is usually a comprehensive approach, which pursues the systematisation of both the develop-ment and the production of services and which includes all service components. In this paper productisation is defined as defining and systematising of new and already existing services. The above-mentioned procedures can be restricted to both compa-ny‟s internal processes and service elements that are visible to the customers. Productisation does not mean standardisation, but development of basic processes and structures which are then supplied with case-specific elements.

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The benefit that service companies seek through productisation is first and foremost an increase of efficiency, profitability and competitiveness. The production of a care-fully defined service is less time consuming, and the increased concreteness makes the service easier to market (Edvardsson, 1997). A well designed service can provide the firm with a key point of differentiation from competitors (Bitner et al., 2008). An important benefit is the increasing stability of the service quality – an issue with which service companies have struggled for decades (Edvardsson and Olsson, 1996). However, productisation includes the danger of simplifying things too much which in turn can lead to losing the customer perspective.

Despite the recognition of the importance of both productisation and customer orien-tation, it is difficult to find explicit analyses of the linkages between them. One reason may be that productisation is in its basic nature an internal activity of the provider company (Heusinkveld and Benders, 2005). Customer specificity has usually been taken into account by leaving enough space for modifications of the productised pro-totype in the actual service encounter (cf. Edvardsson, 1997). The aim of this con-ceptual paper is to raise discussion of a more tight linkage between productisation and a strong customer view.

After this introduction, the paper has been structured as follows. We start by present-ing the basic concepts and theoretical frameworks linked to the aim of systematising service production. Thereafter, we examine the specificities of customer-orientation. In the fourth section we combine the productisation and customer perspectives through a framework. The fifth section includes our concluding discussion.

2. Different approaches in productisation

2.1 Academic discourse and different conceptual frameworks

The term „productisation‟ is not commonly used in academic literature; however, the basic idea has been actively debated for decades. The theoretical roots of this de-bate can be traced back to the early days of services marketing research, when the issue of efficiency in services was raised.

In short, productisation can be defined as an activity where the service offering is made more „product-like‟ through systematisation of its components. The term (in the form „productivisation‟) originates from authors who have analysed the transformation of management knowledge into marketable services in consultancy practice (Heu-sinkveld and Benders, 2005; Huczynski, 1993). As marketability often requires the clarification of the nature of a service as a commercially valuable commodity, some authors use the term „commoditisation/commodification‟ (Coombs and Miles, 2000; Fincham, 1995). We prefer the term „productivisation‟ because it enables a broader interpretation, including the systematisation of internal processes within an organisa-tion. Today the term is often shortened to the form „productisation‟, particularly in managerial texts, but also in some research articles (e.g. Feller et al., 2008). We ap-ply this form in the present paper.

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We can identify three levels in the academic discussion concerning the systematisa-tion (productisation) of services: 1) the general „industrialisation - servitisation‟ debate with respective recommendations, 2) deeper and more targeted analyses that sys-tematise the service offering or its development process, 3) the most focused ap-proaches that develop some service element. In the following, we first examine cen-tral characteristics of each approach, and thereafter summarise them and evaluate their contributions and limitations.

The ‘industrialisation – servitisation’ debate

Levitt (1972, 1976) was one of the first authors, who argued that service companies should „apply the kind of technocratic thinking‟ that is general in manufacturing. He argued that the quality and efficiency of services can be improved only if manufactur-ing principles – such as standardising and packaging – are applied in them. His views can be justifiably criticised for the idealisation of manufacturing and for the simplifica-tion of the nature of services: seeing services as tangibles that can be specified a priori at quite a detailed level. Levitt apparently ignored the wide variety of services, and his examples were selective – which the use of McDonalds‟ as a best practice case illustrates. Later discussion about the industrialisation and standardisation of services can be identified as the continuation of this kind of reasoning (e.g. Northcraft and Chase, 1985).

On the other hand, Levitt‟s concrete suggestions for the improvement of service pro-duction include ideas that are not restricted to the manufacturing-based paradigm. He underlined careful planning, the use of automation when possible, auditing for quality control, and regular reviewing for performance improvement and customer reaction. According to him, it is important that companies define what they sell, analyse the nature and composition of the tasks to be done, and redesign these tasks by creating new tools, processes, and organisations. (Levitt, 1972) Further development of these basic ideas can be found in almost all efforts for the systematisation of services.

In the 1980s, services marketing research developed in a direction which strongly highlights the interactive nature of services. The concept of service encounter be-came central and brought to the fore the importance of personal input by service pro-viders and customers. (Jaakkola, 2009) Service quality models, which were actively built, highlighted the notion that quality is determined by customers (e.g. Grönroos, 1984; Eiglier and Langeard, 1988). The most recent developments, particularly the service-dominant logic perspective, have revitalised and strengthened these views. In fact, whilst „industrialisationists‟ argued that manufacturing logic should be applied to services, the service-dominant logic requires that service logic should be applied to manufacturing (Vargo and Lusch, 2008).

Despite the emphasis on the uniqueness of service interaction, also the need for sys-tematisation of services has been recognised – both within the marketing school and outside it. For instance, marketing scholars have considered it important to structure the service offering into the core service and the supporting and facilitating services (Grönroos, 2000; Normann, 2000). Reddy et al. (1993) speak about tangibilising, which in their approach means concretising the image of the service firm, and adding tangible elements to the offering. Sundbo (2002) recommends modulisation as a way to combine customisation and standardisation: modules are fixed but their combina-tions are unique. Modulisation, as well as the related notion of mass customisation

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(Hart, 1995; Jiao et al., 2003), are reasonable ideas whose further development in the service context has, however, been usually limited to IT services (Toivonen, 2004).

Productisation based on a service model or a systematic development process

A significant part of newer research focusing on the systematisation of services has been carried out within the New Service Development (NSD) -framework (linked to the services marketing school). Some researchers have focused on the systematisa-tion of the development process of services; others have concentrated on modelling the service in order to facilitate its systematic development.

The first-mentioned studies highlight the significance of a formal development pro-cess – with clear pre-planned stages – as a prerequisite for a successful service (e.g. Cooper and Edgett, 1996). The number and categorisation of stages vary in different studies, but the basic elements are idea generation, development, piloting and com-mercialisation. This development model is generally used in manufacturing, and it has spread quite widely in services, too. However, it has also been criticised: re-searchers have pointed out that important market information is missed due to the strong emphasis on in-house planning (Engvall et al., 2001). As an answer to this critique, input from customers has been added as an element to different stages of the development process (Alam and Perry, 2002).

Modelling the service as a means to support its systematic development is a central aim in the writings of Edvardsson (1997; see also Edvardsson and Olsson, 1996). A great benefit of the model is that it provides a reasonable description of how to com-bine unique individual service acts with a pre-planned service. The starting point is that each individual service consists of both a customer-perceived outcome and a customer-unique process. The service company cannot actually produce a service without the customer. It can, however, develop the best and right prerequisites for well-functioning customer processes and attractive customer outcomes. These pre-requisites include three basic components: the service concept, the service process and the service system.

The service concept describes the customer‟s needs and how they are to be satisfied. The content and structure of the service are specified here.

The service process is the prototype for every customer process and describes the chain of activities that must function properly when the service is actually produced.

The service system constitutes the resources required by the realisation of the service: the staff, the physical/technical environment and the organisational structure.

Corresponding to the model, the development process of a service includes three sub-processes: the development of the concept, the system and the process. Re-garding each sub-process, Edvardsson specifies a number of detailed tasks. For in-stance, concept development involves – in addition to the analysis of customers‟ needs, and the content and structure of the service – the following tasks: analysis of target markets; a cost, income and price analysis; analysis of the fit of the service into the general portfolio of the firm; analysis of competitors; and analysis of institutional preconditions.

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In the Edvardssonian model, the concept, the process and the system are all seen as equally important from the viewpoint of development. There are, however, approach-es that focus on only one of these components, usually either on the concept or the process. The level of analysis is deeper in these approaches, and the blueprinting approach – which focuses on the process – brings to the fore the dynamics of ser-vices, not discussed in detail by the other models.

Productisation based on concept development and process blueprinting

Some researchers argue that conceptualisation or concept development is at the heart of service design. The service concept refers to a mental picture, „service in the mind‟ (Clark et al., 2000); it describes the customer‟s and the provider‟s expectations of what a service should be. According to the proponents of this view, an explicitly formulated service concept acts as an integrative element between the organisation‟s business strategy and the delivery of its services. It facilitates decisions at all levels (strategic, operational and service encounter level), ensuring that the focus is on cus-tomer needs. The service concept can also be employed in determining appropriate performance criteria to evaluate the output of the service system. (Goldstein et al., 2002) However, conceptualisation is quite an „abstract‟ approach, i.e. distant from the practical implementation. Thus, it is rarely sufficient as the only means of service de-velopment.

Researchers focusing on the service process strive first and foremost to solve the problems that emerge from the central role of customers. These problems include the acquisition of relevant information of customer needs, and the decision to include/not to include customers in the actual service process. It is essential to make sure that customer participation takes place when, where and in the way that is needed to op-erate efficiently without neglecting customer satisfaction (Palmer and Cole, 1995). An old method of service blueprinting has been reintroduced to clarify the roles and re-sponsibilities of, and the interaction between, the customer and the service provider.

Blueprinting is a method invented by Schostack (1982) and developed further by Kingman-Brundage et al. (1995) to visualise service processes. A blueprint is a two-dimensional picture of a service process: the horizontal axis represents a chronology of actions conducted by the customer and the provider, and the vertical axis distin-guishes between different areas of actions. Today‟s blueprints usually include the following types of action areas: customer actions, actions of front-office staff, actions of back office staff, support processes, and management processes. These different actions are separated by „lines‟: a line of interaction, a line of visibility, a line of inter-nal interaction and a line of implementation. Everything that appears above the line of visibility is seen by the customer, while everything below it is invisible. The line of in-ternal interaction separates the support processes from back-office employees. Also the physical evidence of the service (documents etc.) can be included in a blueprint. These are all the tangibles that customers are exposed to that can influence their quality perceptions. (Fliessand Kleinaltenkamp, 2004; Bitner et al., 2008).

Compared to the other approaches, blueprinting is narrower and more tool-like. Thus, using it as a part of some more comprehensive model is often beneficial. An essential feature in it, as in recent productisation models generally, is that the aim is not to make different service acts as similar as possible (i.e. standardisation), but to devel-

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op a basic concept and prototypes that are flexibly applied in various customer situa-tions. Table 1 below summarises the above outlined three levels of academic discus-sion concerning productisation.

Table 1. Summary of different theoretical approaches to service productisation

I Manufacturing as the ideal Partial application of industrial practices

Author(s) - Levitt (1972,1976) - Reddy et al. (1993)

- Sundbo (2002) - Hart (1995); Jiao et al. (2003)

Main arguments

- applying technocratic thinking, - using manufacturing models in services

- some manufacturing practices, but not all, are applicable in services

Emphasises - efficiency, automation - carefull planning - regular reviewi ng, quality control

- tangibilisation - modulisation - mass customisation

Linkages to productisation

- standardisation of services - concretising the image of the service firm and adding tangible elements to the offering

- modulisation and mass customisation

Limitations - simplifies the nature of services - limited in meeting individual customer‟s demand

- the need for systematisation has been recognised but has often been limited to IT services

II Systematisation of service offering Systematisation of the service

development process

Author(s) - Edvardsson et al. (e.g. 1996) - Cooper & Edgett (1996)

- Alam & Perry (2002)

Main arguments

- services cannot be produce without the customer

- a systematic development process is a prerequisite for a successful service

Emphasises - service consists of both a cus-tomer-perceived outcome and a customer-unique process

- formal development process with clear pre-planned stages

Linkages to productisation

- developing a service model which consists of the concept, the process and the service system (resources)

- systematises the form of the devel-opment process

Limitations - does not include very much original contribution regarding the process of development

- lack of market information due to strong emphasis on in-house planning

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III Concept development Process blueprinting

Author(s) - Clark et al. (2000) - Goldstein et al. (2002)

- Schostack (1982) - Kingman-Brundage (1995) - Bitner et al. (2008)

Main argu-ments

- the service concept is the inte-grative element between the or-ganisation‟s strategy and ser-vice delivery

- detailed description of the „customer path‟ increases customer under-standing and the quality of a service

Emphasises - creating service concepts that

focus on customer needs - visualizing service process - planned customer participation:

when, where and how

Linkages to productisation

- concept development is one phase in the productisation pro-cess

- blueprinting is a means to generate flexible prototypes of service pro-cesses

Limitations - abstract and narrow: insufficient as the only method of producti-sation

- narrow and tool-like: insufficient as the only method of productisation

3. Customer-orientation: from customer information to customer understanding

3.1. Customer information – knowledge about, from and to the customer

The significance of customer information for the service development has been broadly recognised. Studies suggest that working closely with customers generates more value in terms of new knowledge and ideas than a traditional transaction pro-cess (Abramovici and Bancel-Charensol, 2004). Tools to support customer involve-ment have also been developed. Alam and Perry (2002), for instance, have built a model which shows how the input from customers can be taken into account at every stage of the New Service Development process.

Although the importance of customer information for the service development has been recognized, the possibilities and potential of customer information are still not totally understood and utilised by the service companies. Customer information is typically perceived as necessary knowledge about customers. In fact however, cus-tomer information can be divided in three different types: 1) knowledge about the cus-tomer – what kind the customer is, 2) knowledge from the customer – what the cus-tomer know, 3) knowledge to the customer – what knowledge the customer needs to make the interaction with the service provider work efficiently and smoothly.

When customer information is understood in its narrow form, knowledge about cus-tomers, the customer information is collected through methods that do not involve the

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customer‟s participation. Companies can gain quite easily customer information, such as customer behavior and customer relationship, from Customer Relation Manage-met systems. Journals, newspapers and expert knowledge can serve as external sources of customer information. However, the drawback with these approaches is that they fail to catch tacit customer knowledge. According to Nonaka and Takeuchi (1995) tacit knowledge is highly personal and deeply rooted in personal experiences and background as well as personal ideas, emotions and values. At the same time, it is also difficult to catch the tacit customer needs if only using the above mentioned approaches. In order to understand what the customers really desire and need, a more tight cooperation with the customers is needed.

Slater and Narver (1998) argue that a customer-oriented business continuously cre-ates superior customer value, by discovering both expressed and latent customer needs through the use of traditional as well as more proactive research techniques. When customer information is understood in a broader form, knowledge from the customer and knowledge to the customer, the customer information is usually col-lected through more versatile methods. Also the role of the customer is seen more active: In the first case, knowledge from the customer, the customer is seen as a source of information. Interviews, inquiries, focus groups and participatory observa-tion are commonly used to gain this type of customer information. Through these ap-proaches the more latent customer information can be reached. Moreover, the cus-tomer‟s role is seen more than just a source of information, the ideas are produced and tested in a cooperation. In the second case, knowledge to the customer, the cus-tomer‟s role is a co-developer. Lead-user methods, employee exchange and custom-er advisory boards are typically used to create deeper cooperation and co-development with the customer. As its best co-development can lead to better identi-fication of customer needs, and the close interaction process between the provider and customer, favours creativity (Abramovici and Bancel-Charensol, 2004).

3.2. Development of customer understanding – an important in-house process

Knowing what customers need and want is, however, not enough when pursuing deeper customer-orientation. The key is to process customer information into cus-tomer understanding. The concept of customer understanding encourages organisa-tions to go beyond the needs, wants and requirements of customers to consider what can be offered to customers within the limits set by their objectives and possibilities. Customer understanding is generated in the in-house processes of the company where the information is structured, analysed and evaluated and in which the cus-tomer can be involved in different ways. (Nordlund, 2009)

According to Nordlund (2009) customer understanding can be constructed by creat-ing three kinds of spaces for action and interaction: closed, conditionally open and open spaces. These spaces differ from each other in relation to customer conscious-ness of the service development, customer commitment, role of the customer and the nature of knowledge processes between the company and customers. A closed space is as the name implies closed from customers. Customers are not conscious about the development initiatives either. It can be stated the role of the customer is an outsider. A conditionally open space is more open than closed space but only par-tially and with certain conditions. The role of the customer is still an outsider but more

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an involved outsider. Also in this space, like the previous one, the control over the development is in the hands of company representatives not in customers‟. An open space is open to customers: customers are let in the space and they become insid-ers. Customers may also be involved as members of the development team. Collabo-ration with customers is deep and tight and often the collaboration process last for a relatively long time. (Nordlund, 2009) Nordlund (2009) states that in striving to under-stand customers organisations need to balance the different spaces.

4. Combining the perspectives of customer-orientation and productisation

On the basis of the analysis of the various theoretical approaches and their manage-rial applications we suggest a framework which summarises the focal points in the productisation of services. We have identified two needs in particular in our literature analysis that form the starting point for our framework: 1) the need to describe both the productisation process and the service that is the target of this process, and 2) the need to include both customer-orientation and detailed intra-organisational tasks (Figure 2).

Figure 2. A productisation framework combining the customer-orientation with intra-organisational tasks

The upper part of the framework provides a simplified description of the productisa-tion process, customer-orientation being the main thread throughout. The beginning and the end of the process are strongly outwardly-oriented – the process starts from the gathering of customer information, and ends with the planning of marketing activi-ties. The interim consists of quite a long stage, where the work is to a great extent carried out within the organisation. However, the goal is to elaborate customer infor-mation into genuine customer understanding. The lower part of our framework de-

Elaborating customer information into customer understanding and using it in all stages of the productisation process

Customer-oriented progress of the productisation process

Concept creation: The basic idea for satisfying clients‟ needs and the role of the service in the firm‟s strategy

Defining the con-tent and structure of the service; analysing its market characteristics (target markets, price, competitive advantage)

Intra-organisational tasks in productisation

Gathering customer information

Planning the marketing and communication

Mapping existing competences and other resources (technology etc.), and needs for their development

Describing the service process: roles, responsi-bilities and interac-tion in various stag-es (e.g. blue-printing)

Building indicators for the evaluation of success

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scribes this intra-organisational stage as detailed tasks. Here the focus is on the ele-ments of the target service. The tasks consist of concept development, description of the content and structure of the service, modelling and analysis of the service pro-cess, analysis of the resources needed, and building the indicators for the evaluation of success. The last mentioned task is very important, and on the basis of our study also realisable: measures like the growth of turnover, new customers, and new mar-ket areas can be used even in small companies. The description of the other tasks is a summary of Edvardsson‟s service model (1997) and the models of concept devel-opment and blueprinting.

The aim of our framework is to bring customer-orientation into productisation through emphasising the process perspective. Edvardsson‟s model that has served as inspi-ration to our framework, models first and foremost the target of the development: the service itself.

On the path towards becoming customer-oriented service providers, the service companies should also put effort identifying and choosing the right customers. The challenge is to be able involve different customers and in various ways in different phases of productisation process.

5. Concluding discussion: the possibilities and challenges of customer-oriented productisation

This paper has examined combining productisation of services and customer per-spective. Based on our theoretical analysis concerning productisation we conclude that the systematic development of services has been studied using many different concepts and approaches, some of them process-oriented and some of them prod-uct-oriented. In managerial texts the concept of productisation has been used more generally than in scholarly literature but corresponds to the same basic idea.

The key prerequisite of a successful productisation process is to identify and under-stand the relevant and important customer needs both explicit and latent. Productising services without strong customer understanding can be seen thought-less and it can even put the service company‟s future in risk. Linking customer-orientation in productisation does not mean that customers should be co-developers but involving customers in different ways and in different roles, and turning customer information into customer understanding and using this through out the productisation process.

The main challenges of customer-oriented productisation lie in organisation culture and recourses. In many service companies even the everyday service development is near mission impossible and attitudes towards service productisation are sceptical. Lack of recourses and know-how does not make this task any easier. When attempt-ing to make traditionally in-house productisation processes more customer-oriented through more versatile customer involvement it is essential to make sure that the re-course and know-how issues are taken care of. The communication towards the cus-tomer is important. Finding and choosing the right customers is also crucial.

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One important function of productisation is that it creates a platform for common learning in the service company: it enables the company to accumulate systematical-ly the valuable experiences deriving from individual customer contacts. Thus, the sys-tematic modelling of the company‟s services promotes the building of shared under-standing among the employees.

Finally, we want to remind the reader of two things. Firstly, productisation does not solve all problems: unrealistic service ideas does not turn into successful services after productisation, for instance. Secondly, service providers need to update their productisated services – customers‟ needs keep changing and the competitors are just around the corner ready to strike.

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Author:

Katriina Valminen, Researcher Aalto University School of Science and Technology BIT Research Centre Innovation Management Institute P.O. BOX 15500, 00076 Aalto, FINLAND E-mail: katriina.valminen@tkk.fi

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