1 INTRODUCTION
This research explores service development in industrial settings. It focuses on the development of service portfolios instead of singular services. In particular, this study addresses customer involvement, which is one of the central phenomena in service development but has been sparsely studied in the industrial service context.
This chapter introduces the rationale and objectives of the study, the selected research approach, and the structure of the thesis.
1.1 Background and rationale
In a business-to-business (B2B) setting, firms (i.e., service providers) offer services to help other organizations (i.e., customers) to achieve their own business objectives and run their operations (see, Kowalkowski and Ulaga, 2017, p. 21). This study deals with industrial services, which are a particular form of B2B services (Holmlund, et al., 2016). Industrial services cover a wide range of B2B services, such as maintenance services, logistics services, consulting, or data-analytics, that are developed and delivered in an industrial context (Rabetino, et al., 2015; Raddats and Easingwood, 2010; Raddats and Kowalkowski, 2014; Story, et al., 2017). In this study, the focus is on the service portfolios instead of individual services. Accordingly, the term
“service portfolio” is used to refer to the total mix of services offered by a firm.
Changes are typical for firms’ service portfolios. The change can be incremental or radical (Gallouj and Weinstein, 1997; Snyder, et al., 2016). It can be about the actual service concept (Edvardsson and Olsson, 1996; Jong and Vermeulen, 2003) or about how services are bundled together with other services or products (Evanschitzky, et al., 2011; Nordin and Kowalkowski, 2010; Tuli, et al., 2007). The change can also be about increasing the share of services in the company portfolio (Oliva and Kallenberg, 2003; Vandermerwe and Rada, 1988), about customer service (Johne and Storey, 1998; Storey and Easingwood, 1998), about technology (den Hertog, 2000; Jong and Vermeulen, 2003), or about cooperating and creating value with other organizations (Edvardsson, et al., 2006; Moeller, et al., 2013; Prahalad and
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Ramaswamy, 2000; Vargo and Lusch, 2004). Moreover, the change can be originated in the company itself or initiated by external pressures (Hrebiniak and Joyce, 1985;
Pfeffer and Salancik, 1978). Nevertheless, all organizations face the need to renew their portfolios at some point. Therefore, a key question for any organization is how service portfolios are or should be renewed.
Although it is not the only direction, both business practitioners and academics have increasingly turned to customers in leveraging service development in recent years (Biemans, et al., 2016; Carlborg, et al., 2014; Mendes, et al., 2017). This may be attributable to several reasons. First, customers are expected to hold a lot of valuable information. For example, customer needs can be communicated to suppliers, customers can give feedback for the services they are familiar with, and customers may have ideas for novel services (e.g., Alam, 2002; Edvardsson, et al., 2006;
Kristensson, et al., 2008). Customers can also possess more original ideas and think differently than the company employees (Kristensson, et al., 2002; Magnusson, et al., 2003). Second, customers may take a more active role by participating in the ideation and development of new services. For example, customer involvement can take the form of co-creation or the innovator’s role can even be entrusted to the customer (Cui and Wu, 2016; von Hippel and Katz, 2002; Prahalad and Ramaswamy, 2000;
Vargo and Lusch, 2004). Thus, the rationale behind listening to the customer voice is apparent. Customer involvement is expected to help organizations in developing superior products and services, consequently leading to financial rewards (e.g., Bogers, et al., 2010; Mahr, et al., 2014; Witell, et al., 2011).
Despite the considerable interest of both business practitioners and academics in customer involvement, the scholarly understanding is still incomplete (Bogers, et al., 2010; Hoyer, et al., 2010; Storey and Larbig, 2018). The impacts of customer involvement on management practice have also remained somewhat modest (see, Homburg and Kuehnl, 2014; Mahr, et al., 2014). For example, the prior customer involvement literature has predominantly addressed the development of services at the level of individual projects (e.g., Mahr, et al., 2014; Storey and Larbig, 2018;
Westh Nicolajsen and Scupola, 2011), or more rarely at the level of programs (e.g., Alam, 2002), but not the firm portfolios as a whole. As a phenomenon, however, portfolio development is more strategic and complex than the development of individual services. For example, it may require consideration of a firm’s overall business strategy, balance between various services and products, and maximizing the value of the portfolio (Cooper, et al., 2001).
Moreover, majority of prior customer involvement studies have taken a broad approach to customer involvement by addressing both products and services (e.g.,
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Chang and Taylor, 2016; Cui and Wu, 2017; Homburg and Kuehnl, 2014; Witell, et al., 2014). Studies focused on services have covered both B2B and business-to-consumer (B2C) services (e.g., Carbonell and Rodriguez Escudero, 2015; Hsieh and Hsieh, 2015; Storey and Larbig, 2018). With only a few exceptions (e.g., Alam, 2002;
Martin, et al., 1999; Westh Nicolajsen and Scupola, 2011), B2B services have not been the sole focus in prior studies on customer involvement. Moreover, very few studies, if at all, have particularly focused on customer involvement in the realm of industrial services.
Industrial services and other B2B services have some similarities. For example, they share the idea of organizations (instead of individuals) as customers, and the portfolio perspective to service development is of high importance to them both, as service providers typically offer and develop a range of services that can be of different types. However, the industrial services context also has unique characteristics that arguably have an influence on service development and related customer involvement. In particular, the industrial services context is characterized by a service transition process through which industrial firms change from product manufacturers to service providers by expanding their services offered and finally may proceed to taking over customers’ operations (Oliva and Kallenberg, 2003;
Vandermerwe and Rada, 1988).
In consequence, industrial firms develop services toward more relational, bundled, customized, or output-based offerings (Raddats and Kowalkowski, 2014).
At the same time, the firms continue delivering and improving traditional after-sales services, such as maintenance, spare parts, supply management, and warehousing services (Baines and Lightfoot, 2013; Kowalkowski, et al., 2015; Rabetino, et al., 2015). Furthermore, many industrial organizations increasingly develop sophisticated “advanced” services that are critical to customers’ core processes to grow their revenues and profits and to add value to customers (Baines and Lightfoot, 2013; Story, et al., 2017).
Accordingly, the recent research has demonstrated that industrial organizations simultaneously offer a wide range of diverse services (Raddats and Kowalkowski, 2014), can concurrently follow different transition trajectories in the process of adding more services to their portfolio (Matthyssens and Vandenbempt, 2010), and need to adopt parallel business logics (Windahl and Lakemond, 2010). Therefore, industrial service development is characterized as a multidirectional and multifaceted phenomenon (Kowalkowski, et al., 2015).
How to simultaneously renew and manage a set of diverse services is an issue that has only recently been addressed in industrial service research (Kowalkowski, et al.,
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2015, 2017). In particular, a lack of customer involvement has been highlighted as one of the main hurdles in advancing service-based growth strategies in the industrial setting (see, Kowalkowski and Ulaga, 2017, pp. 24–26). For example, customer knowledge that companies extract in practice is said to be variously underutilized, ill-suited, or insufficient to help companies in matching their offerings with market opportunities (Wiersema, 2013). Current research on exploring how customer involvement differs between distinct offering development forms (e.g., Cui and Wu, 2016; Edvardsson, et al., 2012; Witell, et al., 2011) and how organizations can benefit from customer involvement in developing industrial offerings in multiple directions (e.g., Kowalkowski, et al., 2015; Matthyssens and Vandenbempt, 2010; Raddats and Kowalkowski, 2014; Windahl and Lakemond, 2010) is particularly scarce.