product service systems as a service based competitive strategy
TRANSCRIPT
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Cranfield Innovative Manufacturing Research Centre
Product Service Systems as a service
based competitive strategy
Tim Baines & Howard Lightfoot Cranfield University, UK
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Cranfield Innovative Manufacturing Research Centre
Structure
Part 1: Product-Service Systems
Part 2: Servitization
Part 3: Conclusion
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Cranfield Innovative Manufacturing Research Centre
The challenge from the UK funding council (EPSRC)
Manufacturing Technology Research
Management and Manufacturing
Systems Research?
“What is the research theme that will bring together the existing Cranfield capabilities in technology and management?”
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‘Our strategy is to help more manufacturers to move up the value
chain and to reap the benefits of high-skilled, knowledge-intensive manufacturing operations’
Patricia Hewitt, Secretary of State for Trade and Industry, The Government’s Manufacturing Strategy, April 2002;4.
A popular response
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Reflecting on competitive strategy
Customer Intimacy:…creating the best total
solution for the customer
Product Leadership:…the best product on the market
Operational Excellence:…delivering the best total cost to the customers
Three ways of
competing
Adapted from Treacy & Wiersema, 1997
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‘Power by the Hour’Rolls-Royce have successfully moved towards greater ‘customer intimacy’
A Product Service Systems refers to the technologies, processes & practices that specifically enable such a business model
This move from ‘manufacturer’ to ‘service provider’ places new challenges on the enterprise and manufacturing operations
Competitive strategy in practice
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Cranfield Innovative Manufacturing Research Centre
Previous work on Product Service
Systems
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Cranfield Innovative Manufacturing Research Centre
What is a Product Service System?
[definition]An integrated product and service offering that delivers value in use. A PSS offers the opportunity to de-couple economic success from material consumption and hence reduce the environmental impact of economic activity. (Baines et al 2006)
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Traditional purchase of an excavatorUse
Selection & disposal
MonitorCash
Consumables
Cash
Technology
Service
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….buying an excavation capabilityUse
Cash
Disposal
Cash
Technology
ServiceMonitor
Consumables
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PSS’ Examples
Selling the “flying”…-- Royce Rolls Engine
Source: http://news.bbc.co.uk
Selling the “copying”…..-- Xerox, Canon, Oce & HP
Source: mont, 2002
Selling the “washing”….
Source: www.mccoubreyselectrical.com
Selling the “driving”…..
Source : www.carsharing.ca
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Scandinavia
Scandinavia is a region of northern Europe that geographically consists of Norway and Sweden and the country of Denmark.
Source: worldatlas.com
PSSMost papers are from the Scandinavian countriesA few papers from AsiaIncreasing no. of papers from UK
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Distributions of Journal Papers
The Journal of Sustainable
Product Design
Journal of Cleaner Production
International Journal Services Operations and Informatics
Environmental Technology and
Management
Journal of Design Research
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Goedkoop et al, (1999), “Product Service Systems: Ecological and Economic Basics”, Amersfoort, The Netherlands: Pre Consultants
One of the earliest PSS reports
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The Most Popular AuthorsManzini. E
Most authors are from Environmental, Sustainability, Economics and Ecology disciplinesFewer authors from design, engineering and manufacturing
Tukker. A
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PSS is capable of achieving sustainable goal if it is properly designed
Existing works mainly concentrated in Europe, with picking up interests from Asia
Still very much at the conceptual stages
No formal international working group formed thus far
PSS [Summary]
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Cranfield Innovative Manufacturing Research Centre
Previous work on Servitization
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Vandermerwe & Rada (1988), “Servitization of Business: Adding Value by Adding Services”, European Management Journal
The earliest use of the term ‘Servitization’
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What is ‘Servitization’?
[definition]
… the increased offering of fuller market packages or ‘bundles’ of customer focussed combinations of goods, services, support, self-service and knowledge in order to add value to core corporate offerings (Vandemerwe & Rada 1988)
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Cranfield Innovative Manufacturing Research Centre
‘Servitization’
Most definitive papers are from the USAFollowed by the UK and Western EuropeContributions from Asia and the Far East are lacking
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Sources of Papers / Articles
The Journal of Sustainable
Product Design
Journal of Cleaner Production
Environmental Technology and
Management
Harvard Business Review,
International Journal of Operations and Production Management,
European Management Journal,
MIT Sloan Management Review,
International Journal of Service Industry Management
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Chase & Garvin. 1989 HBR ‘ The Service Factory’
Wise & Baumgartner. 1999 HBR‘ Go Downstream: The new profit imperative in Manufacturing
Oliva & Kallenberg. 2003 International Journal of Service Industry Management ‘Managing the transition from Products to Services
Quinn et al 1990. HBR ‘Beyond Products: Services-Based Strategy’
‘Servitization’[Widely Cited Articles]
Vandermerwe & Rada. 1988 HBR ‘ Servitization of Business: Adding Valueby adding Services’
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‘Servitization’[Distribution of Topics / Themes]
General Concept and Definition Drivers and BarriersTools and Methodology Classification of Service Operations Service ModelsCustomer ValueSuccess Factors
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‘Servitization’[Routes to Servitization]
Aftermarket services – a high margin business which can account for large chunks of corporate profits (Wise & Baumgartner 1999, Cohen 2006)
Applications of Innovative Technologies – sensors and systems to provide machinery health monitoring, diagnostics and predictive maintenance
Customer Intimacy – an obsession with the processes of solution development (Treacy & Wiersema1997)
Product Service Systems – integrated products and services that deliver value in use (Baines et al 2006)
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A concept which has been around for over 25 years
Most prevalent in the USA
Examples of successful implementation exist: GE, Xerox, Rolls-Royce
Shifts the focus from operational performance to Customer Allegiance
Literature on service operations strategy is small but growing
‘Servitization’[Summary]
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Part 3: Conclusion & future work