1. Successful Service Infusion How Do Manufacturers Offer Differentiated Value to Customers? Why Do Collaboration with Customers and Suppliers Matter?
Prof Stephan C. Henneberg
Dr Nima Heirati
Business Ecosystems Research Group (BERG)
Queen Mary University of London

2. Who We Are? Business Ecosystem Research Group (BERG)
Introduction
Business Ecosystem Research Group (BERG)
The Business Ecosystems Research Group (BERG) is a research group at Queen Mary University of London focusing on issues around B2B marketing, supply chain management, especially business relationships, and inter-organisational networks
BERG is meant to be a platform for research on business ecosystems, particularly with regard to systemic and interactive phenomena of business life. KAM is part of our area of interest.
BERG is a unique hub that brings together pioneer academics and practitioners across the world interested in business ecosystems

3. Innovation & Entrepreneurship Business Relationships
Who We Are?
Introduction
Business Ecosystem Research Group (BERG) – Research Streams
Network Dynamics
Corporate Social Strategies
Sustainable Systems
Business Model Innovation
Service Infusion
Innovation & Entrepreneurship
Supply chain Management
Customer Participation
Triadic Service Infusion
Business Relationships
BERG

4. Innovation & Entrepreneurship Business Relationships
Who We Are?
Introduction
Business Ecosystem Research Group (BERG) - Engagement
Network Dynamics
Corporate Social Strategies
Sustainable Systems
Business Model Innovation
Service Infusion
Innovation & Entrepreneurship
Supply chain Management
Customer Participation
Triadic Service Infusion
Business Relationships
BERG

5. Service Infusion - Servitization
Introduction
Definition Service Infusion (or Servitisation)
Service infusion is about competing through value propositions that integrate services with product offerings
Supplier-driven rationale: Competition, growth, market differentiation, cost efficiency
Customer-driven rationale: Differentiated value in forms of effectiveness/efficiency gains

6. Service Infusion - Servitization
Introduction
Different Forms of Industrial Services
Source: Annual Manufacturing Report 2017

7. Service Infusion and KAM
Introduction
KAM relationships are those that are complex, often involving customizing products/services, and sometimes pricing and distribution methods in the interests of developing collaborative long-term relationships
While KAM relationships are responsible for over 50% of sales in many firms, these relationships involve costs (investing in customization) and risks (customer and/or supplier power or dependence) that make value capture challenging
Service Infusion can be a new game changer in business relationships to offer superior value to customers and capture value for the firm and its suppliers
Source: Annual Manufacturing Report 2017

8. Service Infusion Benefits
Introduction
Source: UK Servitization Impact Study 2013

9. Service Infusion Challenges
Introduction
Successful Service Infusion
Over 50% of many manufacturers’ revenue is from services
Manufacturers in 500 Fortune list are positioning themselves as solution providers
Few firms (less than 20%) succeed with their service transition strategies
Service infusion seems to represent a costly ‘business model innovation’, which is not always counterbalanced by benefits (e.g. by customer buying more, being more loyal, etc.)
Source: Annual Manufacturing Report 2017

10. Service Infusion Challenges
Introduction
Source: UK Servitization Impact Study 2013

11. Service Infusion Research Programme
Introduction
Service Infusion Research Objectives
Success seems to be contingent, success factors seem not fully understood
Research Programme Objective is to gain a better understanding of:
Contingencies
Success and Failure factors
Supplier and Customer perspectives
Mechanisms of service infusion

12. Service Infusion Research Programme
Introduction
Service Infusion Research Programme
Interlocking research studies on service infusion
Service Infusion 1.0 “Sensitisation for Phenomenon” (FINISHED)
Objective: Deep understanding of dynamic elements relating to service infusion
Perspectives: Multi-actor, business model innovation
Service infusion 2.0 “Wide Structuring of Phenomenon” (FINISHED)
Objective: Structured comparison of phenomenon
Perspectives: Configurations, dyadic (supplier/customer), business model structure
Service infusion 3.0 “Generalisation of Phenomenon” (ONGOING)
Objective: Detailed generalizable understanding of multiple sub-areas of phenomenon
Perspectives: Multiple studies, focussing on portfolio, stage, capability, or mechanisms
Service infusion 4.0 “Triadic Service Networks” (ONGOING – Started in March 2017)
Objective: Multi actor (eco-system) perspective of phenomenon
Perspectives: Configurations, Triadic supply network structure

13. Service Infusion 1.0: Infusion/diffusion
Introduction
Understanding the Service Infusion Process as a Business Model Reconfiguration (IMM 2016)
SI 1.0
Sensitisation for phenomenon; longitudinal interviews with supplier, customers, distributors – Case of Norwegian automated warehouse manufacturer
Main findings: Equilibrium within system (service diffusion necessitates service infusion elsewhere); business model realignment driven by knowledge management activities
Findings

14. Service Infusion 1.0: Infusion/diffusion
Introduction
Understanding the Service Infusion Process as a Business Model Reconfiguration (IMM 2016)
SI 1.0
Findings

15. Service Infusion 2.0
Introduction
Driver Configurations for Successful Service Infusion (JSR 2017)
Wide structuring of phenomenon
3 studies as part of SI 2.0 (progression of perspectives)
25 business relationships, use of multiple key informants (usually CEO and/or production director on customer side; CEO and/or service director on the supplier side).
94 interviews with supplier respondents, 43 interviews with customer respondents (interview length min.); Scandinavian manufacturers (average size 22,000 employees; average service share 35%) as suppliers.
Starting point: Questions remain how successful service infusion can be achieved, i.e. what are key drivers and how do they work (together)?
Conceptual Framework:
Service infusion as a business model - Use of business model concept by Johnson, Christensen, and Kagermann (2008) as they focus on the levers available to effectively change business models
This includes a value creation and delivery focus which necessitates dyadic considerations (i.e. how an offering provides value at the customer) – Three different perspectives on service infusion value are employed:
Supplier service infusion value - Customer service infusion value - Dyadic service infusion value
SI 1.0
SI 2.0

16. Service Infusion 2.0 Business Model Components Configuration theory
Introduction
Business Model Components
Value proposition (Service offering)
Profit formula (SI Price de- bundling)
Key resources (Service capabilities)
Key processes (SI Process)
Configuration theory
Configuration theory allows to identify different recipes for success based on different contingencies
SI 1.0
SI 2.0

17. Service Infusion 2.0 Introduction
Service offering: presence indicates service infusion is based fully on SSCs, absence indicates service infusion is based fully on SSPs.
Service pricing: presence indicates that all services are de-bundled, absence indicates that all services are bundled together.
Service infusion process: presence indicates service infusion process is radical, absence indicates service infusion process is incremental.
SI 1.0
SI 2.0
Findings

18. Service Infusion 2.0 Introduction
Service offering: presence indicates service infusion is based fully on SSCs, absence indicates service infusion is based fully on SSPs.
Service pricing: presence indicates that all services are de-bundled, absence indicates that all services are bundled together.
Service infusion process: presence indicates service infusion process is radical, absence indicates service infusion process is incremental.
SI 1.0
SI 2.0
Findings

19. Service Infusion 2.0 Introduction
Service offering: presence indicates service infusion is based fully on SSCs, absence indicates service infusion is based fully on SSPs.
Service pricing: presence indicates that all services are de-bundled, absence indicates that all services are bundled together.
Service infusion process: presence indicates service infusion process is radical, absence indicates service infusion process is incremental.
SI 1.0
SI 2.0
Findings

20. Service Infusion 2.0 Findings & Implications Introduction
There are different recipes for success – “There is no single solution” or “‘more is not always better”
Configurations causing customer value (e.g. based on price-de-bundled SSPs) are in fact not mirror images of those for supplier service infusion value (e.g. based on price-bundled SSCs)
A dyadic perspective shows that both SSCs as well as SSPs can be successful (as part of particular configurations).
Our findings suggest the important and active role customers play in securing service infusion success.
For all solutions of dyadic service infusion success, internally facing customer service capabilities are present.
Service infusion can be achieved based on very different capability endowments in the business relationship (with virtually no capabilities being present by both customer and supplier; or all being present).
SI 1.0
SI 2.0
Findings

21. Outlook on Service Infusion 3.0 (ONGOING)
Introduction
Service Infusion 3.0 “Generalisation of phenomenon”
SI 3.1: Understanding service infusion portfolios
SI 3.2: Understanding customer service infusion value mechanisms
SI 3.3: Driving Service Infusion Adoption
SI 3.4: Understanding service infusion states
Multiple survey and objective data from manufacturers (tool manufacturer)
14 quarters of 50,000 customer data, sells ‘tool solution’ offering
Objective data min. 500 customer relationships
Objectives:
Understanding value creating mechanisms and contingencies
Understanding of drivers of ‘jump’ from product offering to service infusion
Understanding of drivers of transitions between stages and performance implications
SI 1.0
SI 2.0
SI 3.0

22. Outlook on Service Infusion 4.0 (ONGOING)
Introduction
Service Infusion 4.0 “Triadic Service Networks”
SI 4.1: Understand triadic service infusion process
Interview with Key Account Managers
SI 4.2: Success factors of different service infusion strategies (triadic perspective)
Survey from managers and objective data
SI 1.0
SI 2.0
SI 3.0
SI 4.0

23. Outlook on Service Infusion 4.0 (ONGOING)
Introduction
Service Infusion 4.0 “Triadic Service Networks”
SI 4.1: Understand triadic service infusion process
Interview with Key Account Managers
SI 4.2: Success factors of different service infusion strategies (triadic perspective)
Survey from managers and objective data
Invitation
We would like to invite KAM managers in Equipment and Machine Tool Manufactures to participate SI 4.1 – 20 minutes interview at your company’s premises or over the phone/skype
We do not ask confidential information and there are no costs to your organization
The findings will be disseminated to participants through a documented report and a workshop – Please contact Dr Nima Heirati:
SI 1.0
SI 2.0
SI 3.0
SI 4.0

24. MANY THANKS