This presentation and workshop was part of meeting at General Electric in Florence, Italy. The presentation illustrates aspects such as service innovation and growth in service business. It contains group works and presentation slides.

1. Delivering Value-Added Services
Heiko Gebauer
•ACMS: optimize for
today...Driving organic
growth initiatives, through an
external focus
•Florence 2010
•Department Innovation Research in
Utility Sectors - Eawag: Swiss
Federal Institute of Aquatic Science
and Technology
•University of St.Gallen (Switzerland)
•Karlstad University (Sweden)

2. Agenda
Session 1: Adding value through service innovation
Introduction
8:00-8:10
Session 1: Adding value through
service innovation
•Presentation on organic growth in
service business
8:10-8:40
•Group work on service innovations
8:40-9:10
•Selected presentations of service
innovations
Coffee break
9:10-10:00
10:00-10:30

3. Agenda
Session 1: Adding value through service innovation
Introduction
8:00-8:10
Session 1: Adding value through
service innovation
•Presentation on organic growth in
service business
8:10-8:40
•Group work on service innovations
8:40-9:10
•Selected presentations of service
innovations
Coffee break
9:10-10:00
10:00-10:30

4. Services are much more complex than the
traditional product business
Parameter
Product business
Service business
Nature of demand
More predictable, can
better forecast
Always unpredictable,
sporadic
Required response
Standard, can be
scheduled
As soon as possible
Number of product
generations
Limited
10 to 15 times higher
Product portfolio
Largely homogeneous
Always heterogeneous
Adapted from Cohen et al. 2006

5. Continuous extension of the service
offerings – Bosch Packaging
Selling products
• Core product
• „Own“ service
products
• Provide services
for own products
• Parts
• Field service
• Modernization
Providing productrelated services
• Bundle basic
services
• Bundle & optimize
services to full
packaging
• Service level
agreements
• Extended
warranty
• Parts & labour
package
• Service for other
products
• Conduct services
for competitor
products
Offering solutions
• Outsourcing services
• Provide full
functionality &
responsibility for
complete lines
• Product unrelated
services
• Leverage to other
services such as
• Logistics
provider
• IT support

6. BOSCH PACKAGING extends the share of
service revenue in total revenue
Total
revenue
Market share in service
market
Service revenue
Customer
45%
34%
66%
25%
30%
22%
Field Service
55%
Spare Parts
23%
Modernization
Revenue of
machines and
products
Third party
suppliers
Quelle: R. Hänggi, 2006

7. Leverage your unique skills for extending the
service business
Leveraging of competencies
Examples
Using it for innovative services
FESTO Didactic’s personell
development services
Leveraging
TRUMPF’s services (SYNCHRO)
on production optimization
TOYOTA’s services on lean
production practices
Unique competencies and
skills
PORSCHE engineering services
on automobile development

8. Identifying strategic paths through visualizing
service opportunities
Reconfiguration
How do service
opportunities
appear?)
Pre-Sales
Sales
After-sales
Extension
Primary customer
activities
Supplementary customer
activities
Where do service opportunities appear?
Adapted from Sawhney, 2004

9. Exploitation or exploration: How to
approach the service opportunities?
Exploration
Reconfiguration
How do service
opportunities
appear?)
•Radical improvement
Pre-Sales
Sales
After-sales
•New value constellation
•Dynamic
capabilities
Exploitation
Extension
•Incremental improvements
•Value-adding to existing value constellation
•Development of operational capabilities
Primary customer
activities
Supplementary
customer activities
Where do service opportunities appear?
Adapted from Sawhney, 2004, Fischer, Gebauer, Guanjie, Gregory and Fleisch. (forthcoming 2010)

10. Exploitation or exploration: How to
approach the service opportunities?
Exploration
Reconfiguration
How do service
opportunities
appear?)
•Radical improvement
Pre-Sales
Sales
After-sales
•New value constellation
•Dynamic
capabilities
Exploitation
Extension
•Incremental improvements
•Value-adding to existing value constellation
•Development of operational capabilities
Primary customer
activities
Supplementary
customer activities
Where do service opportunities appear?
Adapted from Sawhney, 2004, Fischer, Gebauer, Guanjie, Gregory and Fleisch. (forthcoming 2010)

11. Exploitation and the corresponding service
strategies
Development
partner
After-sales
service provider
Customer support
service provider
Outsourcing
partner
Service focus
Source: Gebauer, Fischer and Fleisch (2010)

12. Operational capabilities for implementing the
service strategies
Service orientation in the operational capabilities¹
A – abstract value of services, B – role understanding, C – personnel recruiting, D –
training, E – compensation, F – distinction product and service organization, G –proximity
to customers
Development partners
A
1
G
B
Customer support
After-sales
0.5
service providers
service providers
0
A
A
F
C
1
1
G
B
G
B
0.5
0.5
E
D
Outsourcing partners
0
0
F
C
F
C
A
1
E
D
E
D
G
B
0.5
F
Legend (0 – low, 1 – high – cluster means)¹
0
E
C
D
Source: Gebauer, Gustafsson, Edvardsson and Witell (2010), Neu and Brown (2005 and 2008)

13. Exploitation or exploration: How to
approach the service opportunities?
Exploration
Reconfiguration
How do service
opportunities
appear?)
•Radical improvement
Pre-Sales
Sales
After-sales
•New value constellation
•Dynamic
capabilities
Exploitation
Extension
•Incremental improvements
•Value-adding to existing value constellation
•Development of operational capabilities
Primary customer
activities
Supplementary
customer activities
Where do service opportunities appear?
Adapted from Sawhney, 2004, Fischer, Gebauer, Guanjie, Gregory and Fleisch. (forthcoming 2010)

14. Service innovation process
Extension of service offering
Training of fire brigades on
fire-fighting in tunnels
Maintenance
Repair service
Mobile gas measuring devices
Stationary gas measurement
Compressed air breathing
equipment
Service Innovation Process
Development phase
Creating service
ideas
Preliminary service
concept
Business Plan
Introduction to the
market
Activities
Idea generation
Idea selection
Concept description
Concept evaluation
Concept selection
Description of
the Business Plan
Market test
Introduction

15. Address hidden customer needs
Extension of service offering
Fleet Management for Hilti tools, i.e.
• One agreement for many Hilti tools
• Additional services, esp. repairs and
leasing
No consumables, e.g.
Hidden Customer Needs
Incremental improvements and shortterm advantages
Obvious
customer needs
• Battery packs, battery chargers
• Insert tools
• Fire stop, anchors, struts, pipe-rings, etc.
„Hidden“ customer
needs
Sustainable competitive advantages

16. 1. Understanding the customer processes …
Customer process:
Construction operations
Contracting
Purchase
Delivery
Training
Use / Operate
Maintenance
Locate

17. … with all its complexity
Owner / Architect
General
Contractor
Bank
Customer process:
Construction operations
Contracting
Purchase
Supplier small &
standard parts
Delivery
Supplier building
materials
Training
Supplier
heavy equipment
Use / Operate
Supplier
construction tools
Maintenance
Construction
logistics
Locate

18. 2. Absorbing the complexity into own service
innovations
Customer process:
Construction operations
Contracting
Purchase
Hilti
Delivery
Training
Use / Operate
Maintenance
Locate

19. 3. Orchestrating complexity in combination
with suppliers
Customer process:
Construction operations
Owner / Architect
Contracting
General
Contractor
Purchase
Bank
Supplier small &
standard parts
Hilti
Delivery
Supplier building
materials
Training
Supplier
heavy equipment
Use / Operate
Supplier
construction tools
Maintenance
Construction
logistics
Locate

20. Achievements
• Margin: price sensibility decreases dramatically; no upfront
investment; schedule; admin work reduction
• Customer retention: unbelievable; pay for hole, not for tool
• Cross selling: spare parts, other tools
• Imitation barrier: process and IT know-how – lists competitors on
web to watch them dying
• Customer intimacy: here is the real value
Net sales
(million SFr)
Asia/Pacific
North America
Latin America
Europe/Africa
Source: Hilti

21. Conclusion
Service business is much more complex than the traditional product business.
Nevertheless, companies continuously try to achieve service growth
Strategic paths for service business
Service opportunities arise around primary and supplementary customer
activities as well as extension and reconfiguration of customer activities
Service opportunities can be either exploited or used to explore new value
constellations
Exploitation creates strategic paths around after-sales service and customer
support service providers as well as development and outsourcing partners
Service innovations
Exploitation is about identify ideas based on existing and obvious customer
need
Exploration is about understanding customer’s complexity

22. Agenda
Session 1: Adding value though service innovation
Introduction
8:00-8:10
Session 1: Adding value through
service innovation
•Presentation on organic growth in
service business
8:10-8:40
•Group work on service innovations
8:40-9:10
•Selected presentations of service
innovations
Coffee break
9:10-10:00
10:00-10:30

23. 1. Understanding the customer processes …
Customer process:
Wearing black socks
Search
Purchase
Replenish
Put on
and wear
(Hand) wash
Emergency
purchase
Wear colorful
socks
Dispose

24. … with all its complexity
Department
store
Bank
Customer process:
Wearing black socks
Search
Manufacturer
Purchase
Replenish
Distributor
Put on
and wear
Laundry
(Hand) wash
Hotel
Emergency
purchase
Airport
Wear colorful
socks
Clothes
donation
Dispose

25. 2. Absorbing the complexity into own service
innovations
Customer process:
Wearing black socks
Search
Purchase
Replenish
Blacksocks
Put on
and wear
Wash
Emergency
purchase
Wear colorful
socks
Dispose

26. 3. Orchestrating complexity in combination with
suppliers
Customer process:
Wearing black socks
Department
store
Search
Bank
Purchase
Replenish
Manufacturer
Distributor
Blacksocks
Put on
and wear
Laundry
Wash
Hotel
Emergency
purchase
Airport
Wear colorful
socks
Clothes
donation
Dispose

27. Achievements
•
•
•
•
Margin: 98 CHF for 9 pairs of black socks; cash-in at day 1
Customer retention: unbelievable
Cross selling: underwear
Imitation barrier: process and IT know-how – lists competitors on
web to watch them dying
• Customer intimacy: here is the real value
Source: Courtesy of Samy Liechty

28. Task assignments
1. Specify the customer processes and activities
2. Elaborate the complexity of the customer processes
3. Create ideas in how to deal and absorb the complexity into service
innovations

29. Agenda
Session 1: Adding value though service innovation
Introduction
8:00-8:10
Session 1: Adding value through
service innovation
•Presentation on organic growth in
service business
8:10-8:40
•Group work on service innovations
8:40-9:10
•Selected presentations of service
innovations
Coffee break
9:10-10:00
10:00-10:30