New Service Development – an area of opportunity

Reflections on course module 6 – “New Service Development”

The article “Having a strategy for new service development – does it really matter?” (Edvardsson et al, 2013) provides some interesting facts:

  • The number of new services put on the market and then withdrawn because of low sales remains as high as 43 percent.
  • Of the companies in the sample, 38 percent invested little or nothing in the development of new services.
  • … a large proportion of service companies lack a clear service development strategy and service development process…

This is some food for thought – keeping in mind that this comes from a discussion related to service companies. What situation can then be expected in a goods-focused manufacturing firm?

Taking BillerudKorsnäs as an example, with paper and board for packaging applications as core products, a new product development (NPD) process is certainly in place. Whether an explicit new service development (NSD) process exists is more uncertain. However, looking at Anders Gustafsson’s introduction of a NSD process I think that on an overall description level the logic is quite similar to NPD – an initial phase of insight, idea and concept generation (Understand) followed by a design (orchestrate), test and launch/implement phase (Build). On a more detailed level the NSD process will be different but this has most likely not been explicitly articulated.

BillerudKorsnäs’ offer includes “Solution services”, used in a previous post as examples of servitization. How may these Solution services have emerged without an explicit NSD process?

Edvardsson et al. (2013) refer to Menor and Roth (2008) who found that formalized processes play a less important role in the success of NSD than other factors. The most important factor was market acuity, a factor capturing a firm’s ability to see the competitive environment and anticipate and respond to customers evolving needs.

This may indicate what is at play – an orientation to the market and the customers that has driven the development of the Solution services. Also noting that the Solution services are grouped by product area and that the supporting lab facilities (Box Lab, Pack Lab, Sack Lab) are in different locations and located at production sites related to the particular products. This may support that they have been developed driven by market orientation and customer dialogues in the different product segments.

Customer interaction is repeatedly stated in the literature as a key driver in new service development. Interacting with customers in and through the labs has most likely been a strong driver in adding new capabilities in the labs, and corresponding new offered services.

The Solution services and the labs I believe are good examples of developing product related services.

But continuing with some observations in Edwardson et al (2013) regarding NSD

  • for a long time, NSD has failed to receive the attention it deserves
  • being an ad hoc process associated with improvisation

With inspiration from theoretical frameworks and academic examples, I believe there are rich opportunities to do more in this area. Opportunities to create more value with and for customers.

BillerudKorsnäs Solution Services – an example of servitization

 Reflections on course module 5 – “Servitization”

Using BillerudKorsnäs as an example – the company’s offer contains in addition to “Materials” also “Solution Services”.

Solution Services

The solution services are focused on the customers’ application areas of the products, e.g., Sack Solutions, Corrugated Solutions, Carton Solutions, etc., or focused on steps in the customer value creation process, e.g., Service Your Way/Material Supply, Brand & Product Identity Services.

Using Sack Solutions as an example this aims at helping “producers significantly increase productivity at every stage of the value chain by providing them with optimised sack solutions for building materials, industrial minerals, chemicals and other powder products”.

The offer is focused on the value creation in using the sack to fill and transport material, for example building materials (cement is a large application).

A set of technical services are available based on knowledge and lab capabilities regarding how the paper properties and sack construction affect the customer’s use of the product to fill and transport material. The technical service contain several elements – sack design, strength performance, printing and surface properties, deareation performance, moisture barrier performance, filling performance, thermography performance – representing key properties affecting the customer’s use of the product.

Knowledge of the sack application is also captured and illustrated in a “Sack Handbook”.

Referring to the framework of service maneuvers presented by Nina Löfberg, this example illustrates the “productization” maneuver. Services are named and described, and knowledge is captured in tangible reports and documents. In addition the overall presentation of the company offering in “Material” and “Solution Services” serves as an example of the maneuver “separation of good and services”.

Continuing with the “Sack Solutions” – in further building on the knowledge of application and the related value chain also “Sack Solution Events” are offered. These can be designed as training seminars for customer employees or as events for the customer (the sack producer) and his customer (who fills the sack with material).

Referring to the transition from product to services described by Oliva and Kallenberg, the Sack Solution example illustrates product related services , e.g., the technical services described above.

In addition there are also examples of process oriented services. “Sack Solutions offers a concept called TCV (Total Customer Value), which is a development concept in close collaboration with the customers.

TCV

The advantage of the TCV program is that the analysis of the value chain is combined with cost calculations that make the total costs visible. These calculations can then be used to simulate the effect of the different improvement measures.”

 

Although BillerudKorsnäs core offer is “Materials”, I think the “Solution Services”, here exemplified primarily with Sack Solutions, provide clear examples of servitization.

PACCESS – a service innovation in packaging

Reflections on course module 4 – “Service Innovation”

Paccess, which is a part of the BillerudKorsnäs Group, I think can serve as an example of a service innovation in a goods-logic dominated industry.

While paper grades liner and fluting, used to make corrugated cardboard, which in turn are used to make boxes, are traditional BillerudKorsnäs products, the value proposition of Paccess is different.

“Paccess develop and deliver global packaging solutions that increase the quality of brands and lower the cost of supply chains.”

Paccess offers a brand owner a set of services

  • To manage the packaging supply chain
  • To design, develop and optimize the packaging solution
  • To secure and control quality of the brand.

An offer that is quite different from selling material to make boxes.

Several aspects characterizing service innovations are exemplified in this case.

First of all it is based on a strongly customer centered approach. The offering takes its starting point in the particular product the customer wants to pack and transport between certain locations, using certain modes of transportation.

Further is it interdisciplinary – to create the specific solution several aspects need to be understood and solutions developed, e.g., defining the requirements of the packaging, designing the packaging, selecting raw materials, sourcing the materials, producing the corrugated material and boxes from the raw material.

A significant amount of knowledge is built into the particular solution (box) that results of solving the problem. Although the resulting transaction is represented by a box – this box embodies a number of services performed to address the particular customers specific need, with a single point of contact for the customer.

A phrase in the “Strategic Agenda for Service Innovation in Sweden” captures this well.

“Service innovation is interdisciplinary, spanning several sectors, with a user-centered focus in which goods and services often complement each other in order to create the best offering for the customer. This requires new skills and knowledge, work methods and co-operations.”

 

Looking at the Paccess case using the framework for service innovation by Michel, Brown and Gallan, presented by Lars Witell, there are changes both in the customer role and value creation dimensions.

Regarding the customer role, the role of buyer changes in that Paccess simplifies and performs several buying tasks for the customer, e.g., souring of material, identifying and contracting a producer of the corrugated material. In doing this Paccess leverages its knowledge and expertise in these packaging materials and this industry – which are typically not core area for the customer, the brand owner

Further, on the value creation dimension, the resulting product (the box) can be considered a smart offering in that it is designed to solve a brand owner’s particular transportation problem. There is also a change in the value constellation where Paccess is drawing on a network of packaging producers to source the packaging on behalf of the customer. The roles in the value constellation between the customer and the packaging producer are changed.

Using this framework to determine whether Paccess is a service innovation we find that – yes it is.

Paccess is indeed a service innovation.

Creating a customer experience – in a B2B context?

Reflections on course module 3 – “Customer Experience”

Customer experiences can be described as personal, memorable, emotional, and occurring in situations where customers are treated as guests. It seems as customer experiences are intended for end consumers. Or does it have a meaning also in a business to business context?

In the paper on Customer Experience Creation by Verhoef et.al. there are several points to reflect on from this perspective. The paper has a retail perspective with end consumers as customers, but it highlights several points of interest from a B2B perspective. Here are a few reflections:

  • Customer experiences are personal. B2B may be thought of as rational, fact-based transactions between two organizational entities (companies) – i.e. not very personal. But in these transactions people, often several, are involved for who the experience of the transaction is, or can be made, personal (no news to sales people…). The less distinct advantage a product has, the more important this element of creating good experiences for the customer representatives involved becomes. Providing good customer service is one example.
  • The customer experience involves both direct (purchase, use, service) and indirect contact. This indirect contact involves unplanned encounters, word of mouth, news reports etc. This highlights the importance of building the reputation of a company (provider) and its products (and services). As examples – participation at fairs and conferences, publication of reports and press releases, engagement in local community activities, event sponsoring, and the value of employees giving positive views of the company, also in non-work related settings.
  • There are elements outside company control involved. Our customers’ experience is formed not only by the things we control, but also by for example customers’ internal goals, their experience with competitors offers, their knowledge level and technical maturity, ambitions and requests from the customer’s customer in the value chain, etc. Elements outside the provider company control. As a provider a deep understanding of the customer’s situation will improve the ability to provide a good customer experience – also factoring in elements outside control.
  • The customer experience is affected by moderators. In the model presented in the paper situational and consumer moderators influence the customer experience. Situational moderators such as economic climate (expansion, recession), season, competitive intensity, market supply/demand situation etc. are clearly relevant. Consumer(customer) moderators can perhaps be seen on two levels – from the customer company perspective, e.g., company mission/goals, financial situation, etc – but also from the perspective of the individuals involved, e.g., career situation, personal interests, knowledge and experience, personal objectives and incentives, etc.
  • The customer experience is dynamic and evolves over time. This is highly relevant in many B2B situations as relationships often are long term. Over time investments are often made by both supplier and customer in learning and adjusting processes and procedures to optimize the function of a supplier’s product in the customer’s process. Clearly the customer experience evolves over time during this process, and also involves several people and often different organizational units. Creating a strong customer experience on multiple levels can form a strong and long lasting beneficial relationship. Further, the experience and relationship need to continue to evolve over time to stay ahead of the competition.
  • Customer experience management strategies are important. Working to improve the total customer experience can be a powerful competitive approach. However, as pointed out in the article, creating a superior customer experience can become expensive, and it needs to also generate a positive financial return. And as for consumers, also B2B customers are different and often one size does not fit all. Approaches are needed to create the appropriate customer experiences for several different customer groups.

Putting the customer experience concept in a B2B context highlights several relevant points on how to create winning customer experiences. And it opens up for the challenge on how to do this, serving different customers with different needs, with a positive financial return.

However, when done well creating a great customer experience is clearly a strong competitive advantage.

Also in B2B.

Value co-creation in the packaging industry

Reflections on course module 2 – “Value exchange, value-in-use, value co-creation”

Listening to Christian Grönroos talking about value in use I get my coffee stuck in my throat. As a paper producer we cannot create value? Only the customer can! Meaning that no value is created in a paper machine?!?

In a paper producing company the notion of the paper machine creating value would be something of a foundational premise. A top three. Or top five at least. But not true?

Going deeper into the material, reading about value co-creation, things become clearer. Value is created from our product, the paper, when the customer is using it and integrating it with other resources, e.g., printing ink, plastics, etc, in creating a packaging material. Our paper product carries a potential value that the customer uses in his value creation.

It also becomes clear that the paper producer is part of a complex chain or network where value is co-created. The paper is converted into a packaging material by a converter. This material is then used by a goods producer to package the goods, for example milk being filled into a carton. This is distributed to consumers by a retailer. And the consumer can eventually drink a glass of milk – and value is created.

Referring Kaisa Koskela-Houtari’s post on value co-creation, it is an amazing set of efforts that are involved in creating such a milk drinking moment – co-creating value in a complex network. Think of all the effort, knowledge and equipment involved to produce paper, convert that into a packaging material integrating it with other resources, producing these other resources, producing the milk to fill in the package, the warehouses, trucks and retail outlets to distribute it, all the supporting systems for all these operations, etc. etc. And all the research and education of people required in making this happen.

And a whole liter of milk cost less than 10 SEK (~1 Euro) in Sweden. Including tax.This is amazing.

So in this complex co-creation of value, the paper machine does contribute to creating value – but not all, and far from it. Most of the value creation happens elsewhere in the network. And this is a useful change in focus. In a way this is also reflected in the headline of this post – value creation in the packaging industry, not in the pulp & paper industry.

Further, I find the split in provider sphere, joint sphere and customer sphere, described by Grönroos and Voima, useful as it clarifies, when looking at it from a provider perspective, how value creation can be influenced in the different spheres.

  • In the provider sphere only potential value for the customer is created and embedded in the physical product, the paper.
  • The joint sphere is the interesting area where the provider can participate in real value co-creation, however on the customer’s terms. And the size of the joint sphere can be influenced through interaction between provider and customer. But the interaction needs to be purposeful and well thought through to ensure a positive co-creation of value.
  • And for the customer sphere – how can we from a provider perspective best support the customer in this value creation, where we do not play an active part, through the potential value in the inputs, through information and knowledge made available, etc.

From a provider perspective the framework gives an insightful view on value creation and how to contribute to it.

And in the end Grönroos is probably right – value is created by the customer.

Service logic in the pulp & paper industry

Reflections on course module 1 – “Introduction to service logic”

The pulp and paper industry is based on manufacturing and refinement of materials, using manufacturing processes that were invented about 200 years ago. Output, and success, is primarily measured in tons.

So, the pulp and paper industry is largely driven by a goods dominant logic.

This applies on the producer side where the organization’s focus is strongly driven by the manufacturing processes. But it also applies on the customer side, where companies buying the paper material for further refinement into (in the case considered) packaging materials have learnt and adopted the same thinking and terminology. How many tons do we need? What are the material properties? What are the product specifications?

Goods dominant logic.

As referred to in the paper “Service-dominant logic: continuing the evolution” (Vargo and Lusch, 2007) this is the way we have been taught to think – “productive” means the creation of surplus tangible goods – for a long time. At least since Smith’s declaration in 1776.

But let’s then look at it from a service logic point of view.

The customers are (presumably) buying paper material to use it for something, not just to keep and maintain a nice inventory of paper material. They print it, laminate it, cut it, etc. – they convert it into a packaging material that can be used to protect other goods. The value for the customer is created in the converting moment, when the paper is used in their value creating process. As pointed out by Per Kristensson, the value is created when using the product. And the customer is actively involved in the value creating process.

  • Goods are a distribution mechanism for service provision (FP3).
  • The customer is always a co-creator of value (FP6).

So, a service dominant logic can clearly be applied for the case of using paper material in creating packaging materials.

Referring to Anders Gustafsson’s discussion on different bases of competition – product, service, solutions, experiences – this is clearly relevant for the paper industry. It is a mature industry with global market prices for standardized product grades. (Note however that paper is not just paper – there are many (many!) different paper grades with their specific properties. This may however be a reaction to, and expression of, the maturity and commoditization of the product.) The concept of shifting the basis of competitiveness to another level – service, selling solutions – is known, discussed and used in the industry. However, the primary focus is still in most cases on the product. And the tons.

I think there is a lot more to do, and great opportunities, in thinking about the paper business from a service perspective. What is it that the customer does in using the paper? What does the paper do for them? Realizing that

  • Service is the fundamental basis of exchange (FP1).

Foundational Premise #1.