Knowledge-Sharing Network for Product-Service System Development: Is it atypical? 1
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K. Chirumalla , A. Bertoni , Å. Ericson , O. Isaksson 1
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Functional Product Development, Luleå University of Technology, SE-97187, Luleå, Sweden 2
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Volvo Aero Corporation, SE-46181, Trollhättan, Sweden 2 {koteshwar.chirumalla, alessandro.bertoni, asa.ericson }@ltu.se;
[email protected]
Abstract The move towards offering Product-Service Systems (PSS) requires the involvement of stakeholders from different companies, possessing knowledge about the different product lifecycle phases. This setting poses unique challenges for traditional product manufacturers, which need to rearrange transaction-based relationships into long-term relationships of co-development. Knowledge sharing across organizational boundaries is, therefore, considered as a key enabler for the development of profitable PSS. The paper is based on a social network tie perspective, and its purpose is to describe and exemplify knowledge-sharing network for PSS development—in order to describe the impact of the shift toward PSS development on companies’ relationships and responsibilities. Based on the findings from two research projects involving various partners from the aerospace industry, the paper concludes that the development of profitable PSS relies on the development of strong and weak ties across the supply network. Finally, a five stages model of the evolution of tie strength is proposed for classifying relationships within the PSS knowledge-sharing network. Keywords: Product-Service Systems, Knowledge sharing, Knowledge-sharing network, Knowledge acquisition, Strength of ties, Weak ties, Supply network relationships.
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INTRODUCTION
Manufacturing companies have traditionally considered services as add-ons to their core product offering. Lately, manufacturers have started to integrate value-added services into their business offer with the aim to fulfil the dynamic needs of the customers [1]. Manufacturers are, therefore, exploring the possibility of moving beyond the ‘traditional’ product offerings to become service-oriented companies, offering solutions that include “sale of use” rather than on “sale of product” [2]. This new way of offerings are often referred in the literature as a ProductService System (PSS), where manufacturer offers the customer the ‘function’ or ‘result’ of a product while retaining ownership and responsibility throughout the entire product lifecycle [2]. On one hand, the adoption of PSS brings significant changes in the way of doing business in a value chain [3]. On the other hand, a PSS business model changes the relationship between the manufacturer and the customer, shifting from a single point transaction to an ongoing relationship throughout the lifecycle period of the product [4, 5]. In this way, the PSS business model helps to bind customers for a longer period than ‘typical product sales models’ and open new ways for economic benefits. Mont [1, p.71] defines PSS as: “…A system of products, services, supporting networks and infrastructure that is designed to be competitive, satisfy customer’s needs and have a lower environmental impact than traditional business models”. Accordingly, PSS dimension = Product + Services + Networks + Infrastructure. An example of PSS is the ‘TotalCare®’ package offered to airliners by the aircraft engine manufacturer Rolls-Royce [6], which is offering ‘power-by-the-hour’ availability contracts rather than transferring ownership of the gas turbine engine. In this case, the aircraft engine manufacturer, as a PSS provider, is responsible for all maintenance, repair, and operations (MRO) throughout
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the lifecycle while the customer only pays for the provision of the power. Based on Mont’s [1] PSS definition, PSS dimension in aerospace industry can be exemplified as follows: Product: Aircraft engine to be sold as ‘power-by-the-hour’ Services: Maintenance, repair, overhaul, disposal, engine installation in the aircraft, spare parts provision, service manuals provision, availability of service technicians at customer sites and airports, service training. Networks: Relation between engine provider, suppliers, service providers, recyclers and third business partners in order to deliver total solution to customer. Infrastructure: Service centers across airports, logistics and distribution channels, extended enterprise IT architecture, knowledge management systems. From the perspective of the network that supports the provision of PSS offer, the product is normally provided by one organization, whereas the services may be provided by members of their supply chain [7]. These partners posses knowledge about different product lifecycle phases, and it is valuable to involve them in the earliest phases of product design, to know how to better tailor the forthcoming solution, to achieve a successful functional life in a possible lifespan of more than 30 years, with minimum operating costs and environmental effect [9]. Thus, it is important to identify the right partners early in the development process, and to organize the interaction between them, in order both to consider their common interests, and to collaboratively design the PSS solution [8]. Hence, knowledge sharing in this extended enterprise setting need to be considered as a key enabler for enhancing system and subsystems knowledge acquisition to avoid costly mistakes and achieve experiential learning [10, 11]. However, the large differences among partners in management practices, IT infrastructure, working processes and cultures, may represent barriers to knowledge sharing that could cause
potential benefits to be lost [12]. Whilst there is a considerable body of literature available on the knowledge sharing aspects in the context of traditional product development network [e.g., 13, 20, 29], there is less academic evidence of research on knowledge-sharing network in the context of PSS. Moreover, it is essential to know: who are the actors in PSS development network? How they differ with ‘traditional’ product development network? What kinds of interactions are needed in PSS network? What kind of knowledge to be shared in between PSS partners? How are the shifts in manufacturer-supplier-customer relationships while moving towards PSS? Given the previous issues, the purpose of this paper is to look at the possible knowledgesharing network for PSS development, describing the knowledge that needs to be shared and describing the impact that the shift toward PSS development may cause into the existing relationships and responsibilities. The paper has taken a social network tie perspective [e.g., 14] to describe and exemplify knowledge-sharing network for PSS development. 2
RESEARCH METHOD
The empirical base for this study is based on the experiences from Swedish and EU-based research projects run in the aerospace industry. The aerospace companies were chosen as the main research context due to their rich experiences with cross-functional collaboration and product-service offerings. In the first project, the studies have adopted a case study approach [15] and interviews have been conducted both at an aircraft engine component manufacturer level and at a process technology supplier level. This approach was applied to obtain generic data on the product and service development process to define scenarios for internal and external knowledge sharing in light of the implementation of a PSS paradigm. Data has been collected through semi-structured interviews, workshops, virtual/physical meetings, and focus groups [15]. The second project has provided access to aerospace supply chain companies, where data has been collected through authors´ active participation in physical and virtual meetings.
new products and services. Therefore, it is important to have a common interpretation of knowledge, so that other person/organization can perceive and use that knowledge in new situations. Hansen [20] formulates knowledge sharing as the provision or receipt of task information, know-how, and feedback regarding a product or procedure. Thus, knowledge sharing, as a special kind of team interaction, can construct a shared understanding or shared mental models. Hoopes and Pestrel [21] have showed that how knowledge sharing can create “shared knowledge” among the interrelated functional communities in product development, thereby allowing consideration of specialties’ constraints during the design process for reducing glitches, which will result in superior problem-solving decisions, and hence the improved product development performance. Research states that sharing knowledge among individuals and across organizations does not always flow smoothly [20, 21] because there is some knowledge that will always remain tacit [17]. Most of the knowledge acquisition activities in organizations, therefore, occur in an informal manner, mainly through day-to-day social interactions with colleagues and with established networks of contacts [12, 22]. In this way, knowledge workers are increasingly boundary crossing, acquiring or accessing knowledge in different ways through collaboration, expert networks, communities of practice, or social ties [23]. Nonaka and Takeuchi [18] describe this phenomenon of organizational learning in organizations with four-stage spiral model of knowledge conversion as a SECI (Socialization, Externalization, Combination and Internalization) model. Accordingly, tacit knowledge is made explicit so that it can be shared, combined, and then internalized by applying it in new practical situations. Harrison [6] has highlighted the need of social nature of the interaction in a PSS context to ensure shared learning process (i.e., double loop learning [24]) from service operations, where the combination of both explicit data (factual) and tacit knowledge is important to challenge preconceptions and to interpret “what we know” in the context of a new design environment. 3.3 Knowledge-Sharing Network
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THEORETICAL FRAMEWORK
3.1 Definition of Knowledge The knowledge management literature describes the transformation from data to knowledge as a continuum where data represents facts or numbers, information represents data that has meaning or purpose, and knowledge represents information combined with context, insight, and reflection [16]. One common classification of knowledge in organizations has been identified as tacit knowledge and explicit knowledge [17, 18]. Tacit knowledge is personal knowledge embedded in individual perceptions, experience, beliefs, intuition, context and values, which cannot be expressed or written down in an easy manner [17]. In contrary, explicit knowledge is formal, codified knowledge that can be relatively easy to transfer and share. 3.2 Knowledge Sharing Product development is often considered as information and knowledge intensive work [19]. The success of any product development organization is, therefore, characterized by their ability to continually create new knowledge, share it, and employ it in the development of
Research on knowledge networks state that knowledge flows more efficiently through established relationships spanning subunit boundaries [21]. Hong et al. [25] have shown how shared knowledge, defined in three types— shared knowledge of customers, suppliers, and internal capabilities—during front-end activities enhances product development performance. Similarly, a study on Toyota [13] confirms that the company has generated a great deal of “shared knowledge” while considering a broader range of possible designs and manufacturing options in early phases. The use of their inter-organizational knowledge-sharing network and network-level knowledge sharing processes was a key to the success [13]. Thus, the knowledge-sharing network can provide sustainable competitive advantage by creating and recombining knowledge due to the diversity of knowledge that resides within a network as well as by observing and importing each other practices. It is suggested that successful knowledge sharing networks must devise methods to (1) motivate members to participate and openly share valuable knowledge, (2) prevent free riders, and (3) reduce the costs associated with finding and accessing different types of valuable knowledge [13]. From a development perspective, a PSS strategy requires the coordination of complex networks of product and service providers [7]. Johnson and Mena [26]
suggest that the characteristics of supply networks for PSS are different to those of ‘traditional’ supply networks. PSS requires the careful synchronization of product and service supply chains in order to deliver a complete product-service solution to the customer. Moreover, whilst the presence of service aspects (i.e. installation, maintenance, repair, training) in PSS offering is mostly classified as tacit know-how assets [3], it is critical to employ learning routines between the members of the supply network to acquire each other competencies and to achieve continuous learning and improvement [13]. These learning routines can be seen as an ability to manage knowledge flows in inter-firms networks [13], which further effect customer and supplier relationship processes [26]. Harrison [6] stresses the importance of using the lessons learned from previous products (e.g. inservice knowledge) and of applying them in the context of the new products design, to minimise lifecycle costs, repair plans and efforts spent on technical manuals production. Suppliers in PSS network can be mainly benefited through knowledge sharing in order to understand and consequently respond to PSS provider operational and strategic decisions that directly impacted their business [3]. Lindahl et al. [27] propose a learning network approach to stimulate experience sharing and cooperation between companies that want to make the journey of moving from selling traditional products to PSS solutions. In this way, companies have the possibility to learn from each other for achieving successful organizational changes in their companies. 3.4 Social Network Tie Perspective Research on the knowledge-based view of the firm has suggested that social networks facilitate the creation of new knowledge within organizations [28]. Accordingly, firms can acquire and utilize new knowledge through their social ties [29] and inter-firm networks [30], which are formed by social capital. However, effective knowledge acquisition and sharing depends on the degree of closeness and intensity of a relationship between partners [13]. The degree of closeness and intensity is often represented with “ties”, which range from weak at one extreme to strong at the other [13, 29]. According to Granovetter’s weak-tie theory [14], distant and infrequent relationships are proper since they provide access to novel and diverse information from disconnected actors. In contrast, strong ties, can only lead to redundant information due to high degree of emotional closeness and reciprocity, where everyone knows what the others know. Although tie strength has typically been applied to relational bonds among individuals [14], a growing body of researchers has applied tie-strength concepts to understand the knowledge flows, frequency, and intensity of interaction processes within cross-company settings [13, 29, 30]. For instance, Dyer and Nobeoka [13] describes the evolution of the network as occurring in phases, from weak ties, to strong bilateral ties with the convener, to strong multilateral ties among suppliers. Mu et al. [30] found that weak ties help firms to build initial relationships and strong ties help firms to acquire higherquality and fine-grained knowledge. Previous research [13] states that strong ties are helpful for the diffusion (exploitation) of existing knowledge in the network because of higher-level trust and embedded relationships; whereas weak ties are useful to explore a new knowledge (exploration). Based on tie-strength research at organizational settings, the difference between weak and strong ties is summarised in Figure 1:
Figure 1. Key characteristics of weak and strong ties at organizational level setting. 4
KNOWLEDGE-SHARING NETWORK FOR PSS DEVELOPMENT: AN AEROSPACE EXAMPLE
Aircraft engine OEMs have traditionally focused on designing, developing and manufacturing the physical product, transferring the ownership of the hardware to the airlines. Airlines have traditionally managed their own inhouse maintenance, repair and overhaul (MRO) operations, getting routine and reactive maintenance support from engine OEMs during the initial warranty period [31]. In this context, a major part of the development process is a technical requirement fulfillment process, in which knowledge sharing and integration usually occur in ‘black-box’. The knowledgesharing network in such a context is limited to few actors with established strong bilateral ties with the convener as shown in Figure 2.
Figure 2. Traditional knowledge-sharing network in the aerospace industry. In a PSS context, engine OEMs, as a provider, should develop ongoing real-time monitoring and through-life service of the engine in order to deliver the availability of power [4, 5]. As stated in [6, p. 139], in a PSS context, “an engine is for life-not just (for) certification”. Aircraft engine is typically composed of thousands of parts with an expected lifecycle of 30 to 40 years. The product attributes targets have to be designed in conjunction with through-life service concepts and delivery structures. Hence, the major focus of engine OEMs is to design for service, maintainability and environment, rather than design for cost, time, quality, which requires a different knowledge base, in fact raises the knowledge baseline for designing a PSS offers. The number of actors in a PSS is, therefore, increased and their roles are different from those in a traditional manufacturing business model. The shift towards PSS prompts aircraft engine OEMs to rearrange their businesses from a ‘transaction-based’ to ‘long-term relationship-based’ approach and reinforce
Figure 3. Knowledge-sharing network for PSS development. traditional manufacturer-supplier-customer relationships as more dynamic networks. As a result, the engine OEM as a PSS provider is at the center of the cluster and is responsible for bringing the knowledge and competencies into a shared context through knowledge exploitation and exploration in the network. Hence, PSS development leads to developing several strong and weak ties across partners in the network (Figure 3) in order to gain competitive advantages by both exploring new knowledge and opportunities with weak ties and exploiting existing knowledge and building stronger partnerships with strong ties. The shifts from traditional relationships and knowledge exchanges to PSS development could, therefore, be described as: PSS provider: Engine OEM—in contrast to traditional roles as product seller and add-on service provider—is responsible for services at airports, which includes, for instance, inventory management and engine logistics. Being responsible for operational performance, PSS provider need to share strong ties with service centers and re-manufacturing centers across the globe to feedback in-service-related experiences, maintenance and re-manufacturing knowledge to PSS development teams, which may impact the design and the functionality of upcoming integrated products. As such, crossorganizational development teams could focus in developing new ideas and innovations to reduce inservice and maintenance costs. Furthermore, PSS providers need to develop weak ties with process technology suppliers, competitors, government to explore new knowledge, for instance, knowledge about new environmental targets, technology development, material selection, operational procedures, training materials etc. Customer: Airliner—in contrast to traditional role as an owner to gas turbine engine—transfers risks, uncertainties and responsibilities to the PSS provider, focusing upon their core business of moving people or freight from point to point. Hence, airliner needs to share strong ties with the end users (i.e., the passengers), the system integrator and the PSS provider. This could allow the airliner to
capture knowledge about passenger safety, comfort and related service functions on a routine basis, and then align these needs into future PSS requirements to develop seamless value offerings. Such practices may facilitate to capture the original design intent and rationale based on the end user needs and transfer it from one partner to another across the supply network. In addition, the strong ties between airliner and PSS provider will help to collect the data on performance and maintenance, thereby transforming it into useful knowledge to ensure continuous process improvements in the earliest phases to achieving high levels of operational performance. Since one key aspect for airliners is reliable and predictable operation – it is important that no system, or sub-system, causes disturbances. It is a common interest (weak link) that operational data is shared and understood inbetween all levels in the supply chain. System integrator: Aircraft manufacturer—in contrast to traditional role as a buyer of gas turbine engine—is interested in purchasing “capability” or “availability of the asset”. Hence, system integrator would need to play an intermediate role in the supply network and share strong ties with airliner, PSS provider and sub-system supplier, to ensure that all actors have the same knowledge base. In this way, aircraft manufacturer have the possibility to share the knowledge about service requirements, value models and design rationales that derived from the upstream value chain to downstream value chain suppliers. Furthermore, sharing the strong ties will help system integrator to share their experiential learning related to business models, design alternatives, training updates, etc. In return, the airliner could access the new technology developments from sub-system suppliers and PSS provider, for instance, knowledge on lightweight materials and welding technologies. Alternatively, the system integrator may require the weak ties with end user, process technology suppliers, service centers to explore the new knowledge related to passenger expectations, maintenance, machining tool technologies, re-manufacturing, end-of-life material value.
Sub-system supplier: Aircraft engine component manufacturer—in contrast to traditional role as a supplier of aero-engine components—participates in risk and revenue sharing partnerships with financing and design responsibility and provides through-life support. In a supply network context elements of assumed risk with PSS business model is, therefore, transferred from the PSS provider to their suppliers at sub-system level and process technology level. Aircraft engine component manufacturer would need to share strong ties with both upstream and downstream actors, including system integrator, PSS provider and their partner companies, process technology suppliers, and PSS provider competitors. In this way, sub-system supplier could help to solve challenging design problems together with network actors, developing repair methods based on the experience from similar products as well as maintenance, updating the engine manuals with allowed limits for wear and damage. In addition, sub-system supplier could measures the part life consumption of the components based on data from actual flight missions instead of standard operating cycles, which could help the PSS provider to utilize their engines more effectively and reduce spare parts replacement. Although aircraft engine component manufacturer has a close contact with the PSS provider, sharing weak ties with the airliner, service centers and end users would be valuable for acquiring the aftermarket knowledge (i.e., components performances, components maintenance history and passengers’ safety and comfort inside the cabin) and feedback to their designers, that can impact the way in which they design their future aero-engine components. Process technology suppliers: Process technology suppliers—in contrast to their traditional role as a supplier of process tools and technologies—develop strong ties with sub-system supplier to identify value-adding opportunities in terms of developing new product and service combinations by observing the sub-system supplier process cycles in a continuous manner. Furthermore, they would need to develop weak ties with PSS provider and system integrator to better understand the market demands, adapt their offers to the changing environment, and continuously innovate products. 5
CONCLUSIONS
The move towards PSS shifts the development focus from product-based properties to lifecycle behavior of a product, which requires a shared understanding and shared context beyond established knowledge domains and organizational boundaries in the earliest phases. Synergies are therefore needed over a wide spectrum of competencies from many partners—not only in the early phases, but also throughout the lifecycle phases—in order to satisfy sophisticated customer needs and solve complex design problems. Thus, PSS context requires more experiential working knowledge and contextualized information from different stages of product lifecycle relative to a product development context. Since PSS solutions typically imply a transfer of service responsibility from the customer to the PSS provider, there is an increased need for sharing information and knowledge about how the product is used in service inbetween customer and PSS provider. This becomes even more complicated if the PSS provider depends on services and sub-systems delivered by business partners and sub-system suppliers. This paper has taken a social network tie theory to explore the possible knowledge-sharing network and relationships for PSS development—to highlight network
level learning processes in the PSS supply network through knowledge exploration (via, weak ties) and knowledge exploitation (via, strong ties). The study found that stakeholders network and their roles are likely to change when shifting from ‘traditional’ product development to ‘PSS’ development with actors from the different product lifecycle stages. On the one hand, the study found that the PSS context urges a higher level of interaction and degree of closeness between actors to exploit the existing knowledge from different lifecycle phases of the product. It is important to know specifically ‘who knows what’ across product lifecycle phases in the earliest development phases. On the other hand, the study highlighted the need of exploring new knowledge/areas/expertise in the network by bringing in new partners or new relationships through weak ties. This observation from the study leads to the conclusion that the successful development of PSS requires both weak and strong- ties in the supply network. In other words, PSS development needs exploration and exploitation of knowledge in the supply network. Consequently, from the knowledge sharing perspective, the evolution of these ties with respect to degree of closeness and intensity in sharing in the network may occur in series of stages. This study proposes five stages model of the evolution of tie strength regarding knowledge-sharing network for PSS development— namely, communication, co-ordination, co-operation, collaboration, learning, as shown in Figure 4.
Figure 4. Evolution of tie strength from knowledge-sharing network perspective. At the first stage, the weak tie may evolve when the PSS provider communicates and exchange information on one-pass basis with actors in the network. Second stage represents co-ordination, where the PSS provider starts working together with actors in the network for a goal or effect to fulfil the desired situation. At third stage, the PSS provider work in harmony with actors in the network by sharing its resources, expertises and contents. From tie perspective, third stage represents medium-tie, where the partners set goals and share mutual interest to act together. The fourth stage represents collaboration, where the PSS provider establishes common identity and common benefits within the network through bilateral ties. At this stage, the collective actions aiming to pursuit a common goal is defined. In the final stage, PSS provider establishes effective knowledge-sharing network through strong multi-lateral ties, which creates a high level of trust, openness, and reciprocity within the network to achieve routine-basis network level learning. In this way, one partner’s learning and experiences can influence other partners in the network to come up with incremental innovations and, thus, radical innovations. Thus, developing knowledge sharing networks in a PSS context could facilitate inter-firm knowledge exchange and network-level learning on a routine basis, which could lead to development of profitable and viable PSS offers.
The paper presents an example from aerospace, but researchers and PSS practitioners are invited to use and improve the proposed knowledge-sharing network and tie relationships for PSS development, and employ it in other manufacturing contexts for future studies. The future work for the authors of this paper will focus on investigating knowledge sharing processes for PSS development more in detail. In addition, future studies will focus on how to support these knowledge-sharing networks from a technology perspective. For instance, studies of how emerging Web 2.0 tools or social technologies can support knowledge sharing networks and processes for PSS development are already initialized.
[13] Dyer, J. H. and Nobeoka, K., 2000, Creating and managing a high-performance knowledge sharing network: The Toyota case, Strategic Management Journal, 21(3): 345-367.
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[18] Nonaka, I. and Takeuchi, H., 1995, The KnowledgeCreating Company: How Japanese Companies Create the Dynamics of Innovation. New York.
ACKNOWLEDGMENTS
The authors would like to extend our gratitude to the case companies that this paper is based on. They would also like to extend the gratitude to the participants in the “Functional Product Development” doctoral course at Luleå University of Technology during 2009-2010. 7
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