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Transformation towards service business requires new capabilities

Services create new possibilities for goods-oriented manufacturing companies, but the transformation towards service business can be a slow and demanding process. A recent study helps companies identify the requirements of the service business transformation and discover new service potential.
The ‘Service Business Capabilities’ research group: Postdoctoral Researcher Sanna Nenonen, Professor Miia Martinsuo and Doctoral Students Lauri Vuorinen and Eija Vaittinen.
The ‘Service Business Capabilities’ research group: Postdoctoral Researcher Sanna Nenonen, Professor Miia Martinsuo and Doctoral Students Lauri Vuorinen and Eija Vaittinen.

Servitisation, i.e. the shift from a goods-oriented business towards a service business, offers new business development opportunities for manufacturing companies. Extending the business toward services is demanding, however, as it requires strategic and practical changes to the established goods-oriented mindset.

“Servitisation does not only require new service ideas but also new capabilities and changes in the operations and cooperative relationships of the affected companies,” says Professor Miia Martinsuo from the Department of Industrial Management at TUT.

The researchers of the Department of Industrial Management have recently completed their ‘Service Business Capabilities’ research project. The research results help industrial companies identify opportunities and requirements related to servitisation, find new means to develop services in-house as well as establish collaboration with new partners.

According to the research, the paths of servitisation are winding and they may even lead to dead ends.

“The transformation towards service business is increasingly common among manufacturing companies, but it is also possible for them to discard the servitisation option. Services are not the recommended strategic choice for all companies,” the researchers note.

Not everyone is cut from the same cloth

According to the research, the shift from a goods-oriented mindset to service provision may be restrained by a lack of management commitment, a reluctance to change, the immaturity of the goods business and goods-oriented sales. Companies may not notice new service opportunities even if they come across them at the different phases of customer processes and collaboration life cycles. Furthermore, the development of collaborative relations with customers, suppliers and third parties may not always be straightforward.

“Not all manufacturing companies reach their servitisation goals, and even if they do, the road may be winding – and unique to every company. It is impossible to compile a uniform handbook for servitisation. However, best practices and learning experiences from other manufacturing companies that have taken the step may prove beneficial at the initial stages of establishing service business,” says Martinsuo, the leader of the research project.

Pilots and exploration

The servitisation-related goals and focus of companies may change along the way. During the 5-year research project, the researchers were able to track how servitisation proceeded in the participant companies.

Even if the initial phases were slow, companies took several steps towards a more service-oriented and customer-focused mindset. The companies implemented pilot service projects, mapped service possibilities with their customers and explored the potential for service-related collaboration in their partner networks.

“Aiming for increased service provision affected the companies’ readiness and strategies for servitisation. They specified goals and planned new actions towards the new direction, but in one of our cases, a decision was also made to withdraw from the servitisation process,” Martinsuo recounts.

The ‘Service Business Capabilities’ research project was a part of DIMECC’s Future Industrial Services Research programme. The project was implemented by TUT’s Department of Industrial management.  Ruukki/SSAB (Ruukki Metals and Ruukki Construction), Cembrit, Stalatube, Konecranes ja Nokian Tyres participated in the project as case companies.

Additional information: 
Professor Miia Martinsuo tel. +358 40 849 0895, miia.martinsuo@tut.fi
The final report of the research project is available at http://hightech.dimecc.com/results/final-report-futis-future-industrial-services
Center for Research on Operations, Projects and Services website: www.tut.fi/psb/en

News submitted by: Sanna Kähkönen
Keywords: science and research, servitisation