The analysis of PSS business models of the companies involved in the three case supply networks describes the potential for advanced services and increasing integration of manufacturing processes. This potential did not become strongly evident as a result of the Step 1 analysis. Rather, both in the meetings with the three companies that provided their bill of materials data for the analysis and in the interviews with the industry federation representatives, the changing role of services companies was emphasized, particularly that of the intermediates in trade and logistics:
While more and more products and materials are available online and more established ways to organize delivery and money transactions between the market actors become available, the intermediates seek to provide “information as a service.” In other words, information attached to the products or materials enables an efficient flow of resources, transparency of operations and verification of compliance with standards. Digital tools and the data attached to products (digital products) allow developing efficiency from design and planning to production of materials and components, to prefabrication of elements and to assembly on site, and further, to use and maintenance throughout the whole construction life cycle, and beyond to reuse and recycling of the products and materials. The same data would in the future also allow connecting an individual building to its environment, including smart energy systems, waste management and mobility.
Digitalization of the construction industry and the real estate sector, international projects in smart cities and the Internet of Buildings were mentioned by the industry federation representatives as major sources of change.
In the Step 2 analysis of PSS business models of supplier companies, the same observation was made regarding the manufacturing companies that offer digital tools and digital objects of their products. Some large manufacturers of tools and machinery explicate their involvement in developing the Internet of Things (IoT), although such solutions were not directly detectable in the material flows of the three prefabrication supply networks. Thus, the evolution of the role of intermediates and the services business is interlinked with the manufacturing sector, and new complementary assets can be seen to form across the industrial sectors. Also in primary production, the forest-based companies offer digital tools and services for private forest owners in order to ensure traceable raw material flows, including fulfillment of sustainable management and use of forests.
The evolving digital systems, information infrastructures forming out and the changing roles and tasks by the companies in the supply networks illustrate an increasing integration across manufacturing, services as well as the primary production. The empirical data, however, does not foretell the forthcoming developments. Instead, servitization provides a new angle to discuss the system dynamics of the construction sector, renewal of wood products companies, as well as the evolving bioeconomy.
6. Discussion
The PSS typology developed for servitization in manufacturing (Baines et al., 2007; Neely, 2008) was used in this study to assess servitization embedded in production processes. The analytic framework elaborates how business model changes at company and activity system levels can affect the regime dynamics. Thus, the servitization processes within the supply networks for
industrial wood construction and consequent renewal of wood products companies may support to maintain the old, disrupt or balance a new socio-technical regime of construction.
These developments interlink with the bioeconomy transitions in several ways. For example, in addition to wood in the analyzed prefabricated products, the forest-based industries also supply other materials to manufacturing networks for construction. These companies are integrated industries ranging from raw material supply (forestry and wood procurement) to wood products and energy, pulp and paper and biorefineries. New bio-based materials developed in biorefineries represent substitution potential in several chemical industry material streams, such as in adhesives and plastics. Plastics are used in several supplies for construction, such as in products for heating, ventilation and air conditioning (HVAC), and in packaging of materials and interim products. Many of these types of products used in construction have international standards, and consequently, global markets. The forest-based biorefineries have already been mentioned as a future source of sustainable materials for construction (e.g., Dessbesell et al., 2016). Yet, the interlink between wood products companies and biorefineries is often assessed on biomass, cascade use and efficient material flows, instead of the organizational changes in the supply networks that enable increasing efficiency. The opportunities for de- and re-configurations of supply networks are already detectible, but the emerging bio-industries along the supply networks for industrial wood construction do not unfold with the standard metrics. Focus on the extant products and production modes serves as a means to maintain the established processes.
The wood construction literature recognizes servitization as a characteristic of a mature industry and thus as an opportunity for manufacturing companies to extend the product life cycle and provide new revenues by moving downstream in the value chain (Brege et al., 2014). The supply network analyses in this study illustrated that due to local regulations, norms and standards in
construction, services that are necessary for designing the technical solution for the target market need to be acquired in the country where the wood products are used. Moving downstream, as a servitization option for the wood products companies, would be a place-based and market-specific decision, limiting the options for companies that seek large-volume international markets. The products analyzed in this study were standardized wooden elements, and still, the supplier companies displayed several forms of servitization. Thinking of servitization as a profound system change, i.e., how value is created, distributed and captured, provides a different angle to changing business models of wood products companies. For example, the material properties of lightweight and easy-to-modify wood provide new benefits for the customer processes by reducing transportation costs, increasing material efficiency and saving time during installation, maintenance and renovation. Increasing efficiency of construction processes can support market leverage of wood-based solutions, but such opportunities cannot be detected without deep understanding of the customer processes.
New technology-enabled services create foundations for more integrated processes, and instead of thinking of advanced services as a move downstream in the value-added chains, servitization can also lead to higher value added attainable by moving upstream in the value-added chains. The traditional industrial logic would become challenged. In evolving circular economy business models, this is already recognized in circular material processes that call for rethinking the economics of business at the inter-company level (Ranta et al., 2018). A systemic approach to servitization provides a new angle to wood construction, including the questions how new bio-based products and processes interlink with manufacturing for construction, how technology affects resource-efficiency of all material suppliers, how cleantech solutions change the supply networks, and how the wood products companies can serve those customer processes that ensure their own success in a changing socio-technical system.
The potential changes in inter-industry activity systems are not limited to material-based innovations and higher production efficiency of engineered products, as they also include new types of solutions for architects (digital objects enabling mass production of individually designed components) or the real estate sector and end-users (sensors and monitoring for increasing efficiency or improving human health and wellbeing). Instead of substituting concrete or steel in the standard construction solutions, the question shifts to: what does wood provide for the customers, real estate sector and users beyond the present-day solutions in the built environment?
As signals of the foundations of a new regime in the making, the empirical data in this study illustrated similar examples as the previous studies (Bidmon and Knab, 2018; Sarasini and Linder, 2018), i.e., technology-enabled services, particularly the role of digital tools and information-as-a-service developed both in manufacturing and information-as-a-services. Upstream companies emphasize sustainable management and use of natural resources as benefits/services for society, end users, and policy- and decision-makers. The gains achieved, e.g., thanks to the traceability of raw materials, certification for sustainable management and use of forest resources, as well as multiple use of forests, are highlighted by forest industry companies, but it is less clear how these properties benefit the successive tiers of production in the construction supply networks. From the PSS business model perspective, bioeconomy transition seems to direct the focus on quantities and stable flow of raw materials (roundwood), rather than customer-specific qualities or functions for the customers further downstream (also in Makkonen, 2018). Simultaneously, technology-enabled services allow connecting the upstream and downstream operations in a novel way, extending the value potential across the whole supply network (Zott and Amit, 2010;
Zott et al., 2011); also the value potential by sustainable production could be redefined. Such ambitions for bioeconomy transitions, however, require disrupting the established regimes.
7. Conclusion
This study elaborated and tested an analytical framework to assess how servitization – which has been recognized over the past decades as a development in the manufacturing industries – interlinks with bioeconomy transitions within the context of construction. Previous studies have evidenced that inter-industry interlinkages and capability development are important for the renewal of industries. An extensive research work has been conducted in parallel for servitization in manufacturing (Baines et al., 2009; Rabetino et al., 2018), product-service systems in information systems, business management and engineering and design (Böhm and Thomas, 2015), and societal change towards functional economy (Tukker, 2015). Although these investigations have different research angles, they describe the phenomenon of increasing role of services, its implications, opportunities and challenges that so far have gained little attention in bioeconomy transitions.
Analyses of the wooden elements supply networks in this study provided insights on servitization from the perspective of changes in manufacturing, and interlinkages between the company level changes, inter-industry developments, and wider system dynamics. The quantitative analyses, i.e., division of value added in supply networks and the relative shares of different PSS business models among the companies, are not to be generalized beyond the analyzed supply networks. Instead, the analyses exemplify how the phenomenon of servitization resides at multiple levels in the prefabrication supply networks, and with respect to wood construction, connects primary production and the targets set by bioeconomy strategies to the increasingly integrated production processes. The analytical framework for servitization in bioeconomy transitions elaborates that renewal of wood products companies and the forest-based industries that supply to them is
determined by these companies’ response to the changes in customer industries and ability to adapt to the evolving supply networks within the socio-technical regime.
Socio-technical transitions are not fully manageable. Assessing servitization as reconfigurations embedded in socio-technical regimes highlights the non-technological changes that are difficult to perceive, but which may change the regime from inside out. Geels (2018) points out that low-carbon transitions connect both incumbent firms and new technological niches in multiple ways to energy, mobility and other such systems simultaneously. Also, bioeconomy transitions, e.g., material substitution with renewables by extant industries and emerging new bio-industries, affect several socio-technical systems. However, these transitions particularly impact on connecting the sustainable management and use of natural resources to socio-technical system changes, thus, forest-based raw materials but also multiple benefits from forests in terms of ecosystem services, such as carbon sequestration. This link often remains out of the scope of socio-technical change investigations.
The old and new bioeconomy evolve side by side, and better understanding is needed on the non-technological innovations and the processual changes such as servitization that are sources of gradual reconfigurations to both maintain and disrupt regimes. The analytic framework of this study does not provide an answer what the outcome of system dynamics will be. Instead, it provides a systemic approach to address the increasing role of services in manufacturing that can contribute to increasing efficiency and improve sustainability in bioeconomy transitions.
Acknowledgements
The corresponding author gratefully acknowledges the support from the doctoral school of the University of Eastern Finland (2014-2017) and the grant for the empirical data collection of this study by Metsämiesten säätiö Foundation (2016-2017).
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