Implementing customer solutions successfully

Implementing customer solutions successfully Gerhard Gudergan, Ralf Frombach, Norbert Skala, Peter Thomassen FIR – Research Institute for Operations Management, Pontdriesch 14/16, 52062 Aachen, Germany, [email protected], [email protected], [email protected], [email protected] Abstract Nowadays successful enterprises see themselves as solution provider. Though, it is clear that navigating the enterprise through the complex world of strategic issues is essential. This paper deals with a holistic approach to manage the different strategic tasks to become or stay such a solution provider. In this context, an enterprise has to handle not only the development of products and services in a way to fulfil customer needs. Furthermore, issues like human resources, process management, marketing, procurement, logistic and so on have to be concerned. In the following, a systematic approach will be introduced that covers all strategic tasks under the topics of "initiation", "positioning", "value creation", "change" and "performance measurement". The additional value of this approach is the management of the interactions of these topics that leads to a holistic strategic management tool for practitioners. Keywords Solution Provider, Product Service Systems, Engineering, General Management Navigator

1 Introduction Providing business related services more and more means to solve a customer problem and deliver an individualized solution that is able to substitute a customer internal process or function rather then just to deliver a single service in a single transaction. For example, the automotive industry requires pre-production services (such as design services and research and development), production-related services (such as maintenance and IT services), afterproduction services (transport and distribution services) and financial services and finally other business services such as accounting or legal services. In business to business settings of producing companies, these services are usually bundled into an integrated offering which is configured by different tangibles such as capital goods, spare parts and intangibles such as repair services, remote services, joint project management and others [Gudergan et al, 2008]. It has been well realized that this integration of high quality services, business related services in particular, is crucial for the competitiveness of existing and future economies. Thus, producing companies increasingly link products, parts, after sales services and valued added services such as training, business consulting and engineering services into an integrated solution system to successfully differentiate from worldwide competition. The underlying strategy in industrial markets is to substitute the subsequent and single offerings by integrated value adding solutions which lead to lasting relationships to closely link providers and customers. These often are characterized by collaborative engineering efforts and even link providers and customers on an emotional level. Belz has first introduced the term solution system to describe the integrative character of the solution delivered [Belz, 1997]. Enterprises in the future have to develop and establish solution systems to generate superior value to the customer [Schuh, 2004]. The corresponding concept is illustrated in the following picture.

Joint Marketing, Customers partner visits, ... Operations and productivity services, ... Joint Development, Individualization ... Service, Consulting, Training, ... Periphery, Parts, ... Modular Extension

Expected Value by the customer

Delivered Benefit

EDM 2000

Product Productsystem Parts, assortment Services Integration of solution Integrated project management Emotional relationship, Trust, Image

Figure 1: Solution system to deliver value to the customer [1] The transformation towards a solution provider however has tremendous impact on the whole company. It is not only important to formulate the appropriate strategy including for successful differentiation, it is the integration of all relevant company activities which has to be achieved: strategy, product definition, marketing concept and the solution design process itself have to aligned and inherently linked. An unbalanced change in organisational transformation processes will cause tension and finally the fail of the initiative [Bleicher, 2004]. The proposed framework has been developed and tested within an industry driven research project. The overarching goal was to develop a framework and guideline which supports producing companies in their development towards a solution provider.

2 A Framework for the Transformation towards Solution Providing HyProDesign (funding code 01FD0674) is a research project funded by the German Federal Ministry of Education and Research (BMBF) which deals with the transformation of enterprises towards solution provider. The goal is to assist enterprises by providing the know-how for the systematic and purposeful development and commercialization of customer solutions. Partners from industry within this project are Niles Simmons (machine tool industry), Putzmeister (manufacturer of concrete pumps) and Sitec (automation industry). Apart from the coordinator FIR (Research Institute for Operations Management in Aachen) the project is supported by the University of Duisburg-Essen and ICM (Association of the mechanical engineering industry in Chemnitz). The deliberate transformation from the traditional producer towards the solution provider is jointed with a conceptual realignment of the enterprise. Due to its long-term characteristics and its impact on the enterprise policy, processes and organisation, this transformation is allocated to strategic management. The task of strategic management is the integration of internal functions as well as the determination and direction of long-term enterprise policies. Hereby, strategic management covers all key issues concerning the development and design of an enterprise. Particularly creating and safeguarding success potentials are of high relevance, which accompanies the realignment towards solution providing. Marketing, sales and human resources for instance are areas of such a new alignment which have to be adjusted. Besides those activities the new alignment has impact on the structures and the staff behaviour as well. Here, strategic questions are characterized by its non-linearity,

specifically resulting from the problematic of difficult market and competition forecasts. Another challenge is the ambiguity and insufficient decomposability of strategic tasks. Though, it is essential to structure strategic tasks in a sensible framework. By now, there are several models and methodologies addressing this target. In the context of the project HyProDesign the St. Gallen Management Model is used. The core of this model is the breakdown of the management levels into normative management, strategic management and operative management as well as the breakdown of the enterprise developments into activities, structures and behaviour. Concerning the goal of the project, HyProDesign deals with the relevant fields of action on the way towards solution providing which regard following fields of action:       

product and service portfolio development process operational structure organizational structure communication behaviour of staff and management brand and price policies

To handle these interdependent fields of action, a dynamic view of the strategic management is necessary. For this purpose a framework was developed to deal with strategic initiatives on a procedural level. Here, the General Management Navigator (GMN) was adopted and adjusted to the requirements of the transformation towards solution providing. How do we want to shape strategic initiatives and / or their context?

How do we want to position the company in relation to its stakeholders? (External relations) Genesis

Initiation

Positioning Conttent

Prozess

Performance Measurement

Change

Value Creation

Impact How do we want the strategic initiatives to become effective and change the company?

PM: How do we want to observe and assess the strategic initiatives of the company

How do we want to shape the company‘s creation of value? (internal relations)

Figure 2: The General Management Navigator (GMN) Originally, the GMN was developed on basis of the St. Gallen Management Model as a guideline to execute strategic initiatives. In its basic design, the GMN consists of five stages representing all aspects to manage such initiatives:

 Initiation  Positioning  Value Creation  Change  Performance Measurement Basically, strategic initiatives start with the stage Initiation. Here, the need for a strategic change is recognized and formulated. The focus is on the aspects of the enterprise policy concerning the formation of strategic initiatives within the enterprise. The form of this policy is depending on the individual characteristics of the enterprise. An example for an initiation an entrepreneur may be contemplated, who has to deal with decreasing sales volumes in slackening economic activity. The Initiation stage is characterized by two steps starting with the refection of the current strategic situation. This will be done by a reference framework answering the questions: What? Who? How? Whereby? When? Where? Based on the results the following step will define the future strategic situation as solution provider by the same reference framework and will compare it with the current situation. The stage results will then represent the strategic goals, the strategic mission and / or mission statements.

How?

When? Whereby?

Who? Where?

Initiation

What?

Strategic Initiative TODAY - FUTURE

Goals, Mission, Statement

Figure 3: The Initiation Stage The stage Positioning of the GMN applies to the external relations of the enterprise. The focus of this stage is the determination of the connections between the enterprise, its stakeholders and the environment. Especially strategy audits, market- and customer satisfaction analysis are proven to be helpful in this context. Thus, this stage starts with an analysis of current and potential business units, business fields, stakeholders and skills. Based on the analysis the next step will define (new) business units and will design market strategies, competitive strategies and communication strategies for each business unit. The design includes various characteristics like style, place, tactics and substance. Connecting all these strategies of each business unit is part of the last step by positioning the entire enterprise. The stage output is the positioning strategy to all stakeholders. The stage Value Creation considers the internal relations within the enterprise. Main aspects of this stage are the organization and the design of the value creation. Core competences, strength, weaknesses and value creating processes within the enterprise are examined to define activities

and resource strategies. Addressing various business units issues like management systems, structure, interaction and capitalization have to be considered holistically as well as individually. The stage result is a business model including the positioning strategy.

Figure 4: The Positioning stage

Vertical Range Supply Chain

Value Creation

Sector?

Benchmark? Structure

Value Analysis Management Systems

Kosten

Structure

Capitalization

Interaction

Value Creation Model

Orientation

Activity, Resource

Composition Resoruces

Design

Departments Corporate Governance

Figure 5: The Value Creation stage The stage Change describes the impact of strategic initiatives on enterprise processes and gives a guideline for the implementation with the goal to achieve operative effectiveness. Usually, the results of the stages Positioning and Value Creation are the main driver for the change. After analysing current change aspects like management behaviours, project management and change management the first step will create a schedule dealing with the issues timing, actors, accents and framework. The second step covers all activities for the implementation which starts after the schedule is established.

Project Management

Management

Change Management

Change

Behaviour

Change Analysis Timing

Framework Accents

Actors

Change Management

Schedule

Figure 6: The Change stage The stage Performance Measurement is related to all contemplated stages afore. Thereby, the progress of the strategic initiative is monitored and measured with regard to the overall goal as well as to single tasks within the project. This stage is characterized by three steps starting with auditing the planning results from Initiation, Positioning, Value Creation and Change. Based on the audited attributes the implementation will be measured by a scorecard as second step. Connecting both steps with the financial result describes the last step. The result of Performance Measurement is the current strategy performance.

Figure 7: The Performance Measurement stage

Although the general sequence through the GMN is Initiation  Positioning  Value Creation  Change, the order is not stipulated. Moreover, the concrete order characterizes the strategic initiative. Only the stage Initiation is always at the start of all initiatives. Regarding the transformation towards solution providing, two orders are relevant. Apart from the general sequence the order Initiation  Value Creation  Positioning  Change is reasonable. The first order Initiation  Positioning  Value Creation  Change describes the concept where the strategic positioning on the market depends on internal competences, resources, strength and weaknesses. The entrepreneur mentioned in the example above might realize core competences in his enterprise characterized by high expert knowledge and capabilities of the staff. To use these internal strength, the transformation towards solution providing is done by customized products and services. Here, the design of the external relations follows the internal relations. Contrary to the first order the second order Initiation  Value Creation  Positioning  Change is characterized by the design of the internal relations after the external relations are defined. Here, the analysis of the market is the starting point for changes within the enterprise. Instead of asking “What are we good at?” which correlates with internal relations, the question is “What do customers want?”. However, both orders represent the extremes of strategic reorientation. Neither pure market orientation nor solely concentration on competences will lead to success. Thus, concerning both views in a combination is essential to find the optimal solution. By its dynamic structure the GMN allows to switch between stages and therefore an integration of both market orientation and resource orientation. All in all the adapted GMN represents a practical guideline for entrepreneurs to support the transformation towards solution providing, especially for the definition of the strategy and its implementation. References Belz, C. (1997). Leistungssysteme, in: Thexis, Leistungs- und Kundensysteme. Kompetenz für Marketing Innovationen, Schrift 2, 1997, P. 12 – 39. Bleicher, K. (2004). Das Konzept integriertes Management. Campus Verlag, Frankfurt am Main. Gudergan, G. and Thomassen, P. (2008), Fakten und Trends im Service 2008. Verlag Klinkenberg, Aachen. Müller-Stewens, G. (2005): Strategisches Management – Wie strategische Initiativen zum Wandel führen, SchäfferPoeschel, Stuttgart. Schuh, G., T. Friedli and H. Gebauer (2004), Fit for Service: Industrie als Dienstleister. Carl Hanser Verlag, München, Wien.