Capabilities for a value-based solutions business

Solution business holds a great promise for many manufacturing companies. Yet, increased solutions business volume does not always translate into profit. Many of the companies find it difficult to define the required capabilities needed for successful service and solutions business.

The service business capability audit (SCA) is one of the tools that allows companies to explore the extent to which their capabilities support or don’t support solution business.The tool can be used to systematically analyze the service business capabilities in various types of firms. The SCA tool itself is a methods that determines a company’s maturity on 12 capability measures, which have been identified to correlate with successful service transformation. Method can be used to measure and define capability areas that need further development. During Futis project, the method was applied in four organizations resulting in totally new service business models for certain product categories and several operational improvements.

The service SCA is developed in collaboration with leading service companies and research organizations. The origins of the tool date back to 2012 when, together with University of Cambridge, 12 successful service businesses were studied in order to understand the capabilities that underpin successful service transition journey. The tool has now been tested and verified in several organisation in North Americas and Europe.

In the early stages of FutIS, it was realized that service and further value-based business require a new set of capabilities and resources from companies. The SCA tool was built in order to better understand these capabilities and to measure which of the identified categories would lay a foundation for successful service business in a broad context and in various industrial domains. This was done in order to resolve the so-called service paradox, where companies are increasing the service volume, but which doesn’t always correlate with returns.

Results are in active use within the participating organizations and general results are published in scientific outlets for further stimulating research on the topic.

Based on our research, we have provided the following company guidelines for service transition:

  1. Recognizing the current competitive state seems to be one of the biggest challenges. This is problematic because the state defines strategic fit and the need to prioritize certain capabilities over others. The SCA tool helps companies better analyze their situation and to take the right actions in different situations.
  2. Increasing competition is changing the market structure in many industries. Time to market becomes critical factor and companies need to find strategies that allow rapid experimentation, i.e. low cost probes. In a highly competitive market setting, rivalry is so fierce that sustainable competitive advantage is very hard to protect. Instead, companies can seek network opportunities to provide more flexibility and adaptability on their operations.
  3. Networks offer channels to increase different elements of a service offering. The capability requirements have shifted toward combining social and technical service systems, making cooperation between actors increasingly important. Networks may increase the complexity of an offering, but this can be managed by strategies that allow flexibility and adaptability.
  4. Platforms offer one way to create and manage these collective offerings and in creating flexible organizational structures. Our research indicates that companies can utilize different platform strategies depending on the current situation. We have presented three different platforms logics, including (i) connecting, (ii) sharing, and (iii) integrating.

Our results indicate that by building value constellations and utilizing inter-firm resource complementarities, companies can overcome the challenges of comprehensive internal change, capability requirements, and the service paradox.

Taija Turunen, Aalto University, School of Business

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