Lessons learned from missed servitization opportunities

Mikael Gidhagen, Kristina Heinonen

Research output: Chapter in Book/Report/Conference proceedingConference contributionScientificpeer-review

Abstract

The current business landscape is represented by increasing global competition and technology advancements. Many organizations therefore acknowledge the importance of being service-oriented and customer-focused. Researchers and managers alike advocate that the benefit of shifting from a product to a process perspective is the change in focus from the reduction of internal costs to value creation for all stakeholders through service delivery. To apply a service-oriented perspective is not a minor change of culture; it is a paradigm shift and involves the entire organization. Yet many organizations are still technology-focused rather than customercentric and are struggling to change their culture and processes. Service infusion is not done overnight, and requires extensive effort for shifting the mental mindset across the organization. Most existing service research is focused on the potential benefits of service infusion and key steps for integrating a service logic in the organization. Yet, understanding failed servitization attempts or missed opportunities for integrating a service logic in organizations can provide fresh insight into the benefits of service infusion.

Purpose - The purpose of this paper is to delineate key tensions in business performance by applying a servitization lens on a failing business venture. Although we can only assume and hypothesize any alternative outcome, we can by considering the aspects of servitization provide a framework for pinpointing certain areas and opportunities in subsequent cases. Analyzing what could possibly have been made differently, and which potential resources and opportunities were not acknowledged, the findings may serve as valuable input in addition to benchmarks and success stories.

Design/Methodology/Approach - In business reports and marketing research we often see accounts of success stories and prime examples, serving as benchmarks and input for theory building and effective business practice. But there is good reason to also consider and learn from less successful ventures and service failures – in order to avoid repeating mistakes or missing opportunities, following the logics of service recovery (e.g. Hart, Heskett and Sasser 1989; Michel, Bowen and Johnston 2009) and double loop learning (Argyris 1976). One way of analyzing and learning from decisions made, as well as preempting unnecessary consequences from contemporary business challenges, is adopting a service logic (e.g. Vargo, Maglio and Akaka 2008; Grönroos and Ravald 2011) and the essence of servitization (e.g. Vandermerwe and Rada 1998; Baines et al. 2009); thus moving from a product-oriented to a customer-oriented perspective. Through post-ante analyzing any missed servitization opportunities in a case of restarting iron ore mining business, we provide an example of what can be learned for future business.

Findings - the findings show that there are four major missed servitization opportunities in the mining start-up case, in general due to an inside-out focus: 1. Inability to move away from production oriented focus, too narrow and short-term focus on pricing strategies; 2. Failing assumptions about customer expectations; product quality adequate but problems with supporting services. Somewhat of logistical restraints, although being able to provide low-cost shipping, but customers were not asked about what other issues could be important; 3. The service system and surrounding region was consulted, but too much focus on own skills and knowledge resulted in the disregarding of knowledge of former business and surrounding community; 4. Sustainability and environmental issues were not initially considered as prioritized aspects.

Originality/Value - The paper contributes to the literature on servitization and service infusion. In particular, it provides insight regarding the dark side of service infusion – what wrong and/or ineffective decisions are made that do not exploit the potential of a service logic. Through analyzing and understanding what could have been made differently in an unsuccessful business venture, particularly in terms of acknowledging a customeroriented focus on integrated product-service offerings (e.g. Baines et al. 2009) rather than a product-oriented pricing focus, the elaborated framework for applying a service perspective in an industrial setting stresses a need for identifying potential resources in service systems. It also indicates the necessity of incorporating a broader stakeholder perspective on business activities to integrate the views of the surrounding environment and other external stakeholders such as governmental or political stakeholders. This is in line with the current emphasis of service research on service (eco)systems, that promote the linkages and activities between a network of relevant actors. We can only speculate about the role of actor-to-actor interaction in the outcome of the business venture.
Original languageEnglish
Title of host publicationService Dominant Logic, Network and Systems Theory and Service Science: Integrating three Perspectives for a New Service Agenda : Proceedings of the 2017 Naples Forum on Service
EditorsEvert Gummesson, Cristina Mele, Francesco Polese
Place of PublicationTricase
PublisherYoucanprint Self-Publishing
Publication date2017
ISBN (Print) 978-88-92667-57-0
Publication statusPublished - 2017
MoE publication typeA4 Article in conference proceedings
Event2017 Naples Forum on Service - Naples, Italy
Duration: 06.06.201709.06.2017
Conference number: 5
http://www.naplesforumonservice.it/public/index.php?node=214&nm=Proceedings+of+the+5th+Naples+Forum+on+Service

Keywords

  • 512 Business and Management

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    Gidhagen, M., & Heinonen, K. (2017). Lessons learned from missed servitization opportunities. In E. Gummesson, C. Mele, & F. Polese (Eds.), Service Dominant Logic, Network and Systems Theory and Service Science: Integrating three Perspectives for a New Service Agenda: Proceedings of the 2017 Naples Forum on Service Youcanprint Self-Publishing.