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AND THE MAIN FIELD OF STUDY INDUSTRIAL MANAGEMENT, SECOND CYCLE, 30 CREDITS

,

STOCKHOLM SWEDEN 2017

Electrifying Linear Motion

The role of cumulative advantages when market

closures are challenged

DANIEL ADELANDER

FILIP ELAM

KTH ROYAL INSTITUTE OF TECHNOLOGY

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Electrifying Linear Motion

The role of cumulative advantages when market closures are challenged

Daniel Adelander & Filip Elam

Master of Science Thesis INDEK 2017:11

KTH Industrial Engineering and Management

Industrial Management

SE-100 44 STOCKHOLM

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Elektrifiering av linjära rörelser

Kumulativa fördelars roll när marknadslåsningar utmanas

Daniel Adelander & Filip Elam

Examensarbete INDEK 2017:11

KTH Industriell teknik och management

Industriell ekonomi och organisation

SE-100 44 STOCKHOLM

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Master of Science Thesis INDEK 2017:11 Electrifying Linear Motion

The role of Cumulative Advantage when the closure is challenged Daniel Adelander & Filip Elam

Approved: Examiner: Supervisor:

(datum) Esmail Salehi-Sangari Henrik Uggla

Commissioner: Contact person:

-

-.

Abstract

There are product designs that win the allegiance of the market, whose designs competitors and innovators must adhere to if they hope to retain or achieve a significant market follow-ing. These designs can be described as the market closure; design solutions that should be taken as the point of departure for future development. In this study, we investigate the closure sur-rounding pneumatic- and hydraulic systems for creating linear motion, such as cylinders and its surrounding components. The market of linear motion is currently undergoing a shift towards electrification; enabling several advantages over- and potentially replacing traditional technolo-gies. However, many electrified versions of traditional technologies are still not mature enough to completely replace the current market closure.

As the closure is being challenged, how customers respond can be uncertain and how customer revenue is affected is unknown. Even though a supplier might retain its competitive advantage, such as lower costs or higher quality, it is not certain if their cumulative advantage will be re-tained. This means that it is uncertain if the accumulation of positive customer interactions through purchases with competitive advantages will remain impactful on supplier selection pro-cesses when the technology on which the interactions are based on is replaced.

In order to get insight into the experiences of customers, a qualitative study is conducted to provide us with detailed information on the subject. The interviews in this study are primarily aimed at understanding the customers’ perception of electrification and cumulative advantage. The results indicate that suppliers’ cumulative advantage can be affected negatively if electrifica-tion challenges the market closures. Moreover, we found that it seems most likely that the impact of cumulative advantage on supplier selection will be decreased. Thereby, this paper contributes to the area of cumulative advantage as previous studies have not considered how cumulative advantage is affected by market changes.

Keywords: Cumulative Advantage, Customer Loyalty, Electrification, Closure

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Examensarbete INDEK 2017:11 Elektrifiering av linjära rörelser

Kumulativa fördelars roll när marknadslåsningar utmanas Daniel Adelander & Filip Elam

Godkänt: Examinator: Handledare:

(datum) Esmail Salehi-Sangari Henrik Uggla

Uppdragsgivare: Kontaktperson:

-

-.

Sammanfattning

Det finns produktlösningar som vinner marknadens trohet, vars design konkurrenter och in-novatörer tvingas att följa om de vill behålla eller vinna en märkbar marknadsandel. Dessa de-signer kan beskrivas som marknadslåsningar, vilket betyder designlösningar som bör tas som startpunkt för framtida produktutvecklingar. I denna studie undersöker vi marknadslåsningen omkring pneumatik och hydraulik för att skapa linjära rörelser, såsom cylindrar och tillhörande utrustning. I marknaden för linjära rörelser pågår nu en övergång mot elektrifiering, vilket in-nebär fördelar över- och kan potentiellt ersätta traditionella teknologier. Men, många elektrifier-ade versioner av traditionella teknologier är inte tillräckligt mogna för att helt ersätta nuvarande marknadslåsningar.

När marknadslåsningar utmanas kan kundernas reaktioner bli osäkra och hur kundomsättning påverkas är okänt. Trots att en leverantör kanske behåller sina konkurrensfördelar, som lägre kostnader eller högre kvalité, så är det osäkert huruvida deras kumulativa fördelar kan behållas. Detta innebär att det är osäkert om ackumuleringen av positiva kundinteraktioner genom köp med konkurrensfördelar kommer fortsätta vara en viktig faktor för leverantörsval när teknolo-gierna som interaktionerna är baserade på ersätts.

För att få en insikt av kundernas upplevelser så utförs en kvalitativ studie för att ge oss detal-jerad information om ämnet. Intervjuerna utförda i denna studie är primärt ämnade att förstå kundernas uppfattning av elektrifiering och kumulativa fördelar.

Resultaten indikerar att leverantörers kumulativa fördelar kan påverkas negativt om elektrifier-ing utmanar marknadslåsnelektrifier-inganra. Dessutom verkar det mer sannolikt att kumulativa fördelar kommer ha minskad roll i leverantörsvalsprocesser. Därmed bidrar denna studie till området om kumulativa fördelar då föregående studier om kumulativa fördelar inte har studerat hur de påverkas av marknadsförändringar.

Nyckelord: Kumulativa Fördelar, Kundlojalitet, Elektrifiering, Marknadslåsningar

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Foreword and Acknowledgments

This report is our Master thesis and thus our final work in our degrees in Masters of Science and Engineering. This study was conducted at the department of Industrial Marketing at the Royal Institute of Technology, KTH in Stockholm, Sweden.

We want to thank our supervisor, Henrik Uggla, for his continuous support throughout this Master thesis. We also want to thank all participating interview companies for their willingness to get involved and showing interest in our work.

Daniel Adelander & Filip Elam Stockholm, May 2017

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Table of Contents

List of Figures. . . iv List of Tables. . . iv List of Abbreviations . . . v Glossary . . . v 1 Introduction . . . 1 1.1 Background . . . 1 1.2 Problem Formulation . . . 2

1.3 Purpose and Research Questions . . . 2

1.4 Theoretical Delimitation . . . 3 1.5 Empirical Delimitation. . . 3 1.6 Market Structure . . . 3 1.7 Industry 4.0 . . . 4 1.8 Report Structure . . . 5 2 Methodology . . . 7 2.1 Research Design . . . 7

2.2 Literature Review Methodology . . . 9

2.3 Interview Methodology . . . 9

2.4 Analyzing Qualitative Data . . . 10

2.5 Qualitative Approach . . . 11 2.6 Ethics of Methodology . . . 12 3 Literature Review . . . 13 3.1 Supplier Selection . . . 13 3.2 Customer Loyalty . . . 14 3.3 Competitive Advantage . . . 15

3.4 Cumulative Advantage and Habit. . . 16

3.5 Diffusion of Innovation . . . 18

3.6 Closure in Technological Development . . . 19

4 Empirical Findings . . . 25

4.1 Linear Motion Systems . . . 25

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4.3 OEM Perception of Electrification . . . 28

4.4 End-Consumer Perception of Electrification. . . 32

4.5 Drivers and Obstacles for Electrification . . . 36

4.6 OEM Perception of Cumulative Advantage . . . 38

4.7 End-Consumer Perception of Cumulative Advantage . . . 40

5 Analysis . . . 45 5.1 Market Closure . . . 45 5.2 Diffusion of Electrification . . . 46 5.3 Future of Closure . . . 47 5.4 Trajectories of Closure . . . 49 5.5 New Competition . . . 50 5.6 Cumulative Advantage. . . 52 6 Conclusion . . . 55 6.1 Review on Purpose . . . 55 6.2 Reflection on RQ1 . . . 55 6.3 Reflection on RQ2 . . . 57

6.4 Reflection on Main Research Question. . . 58

7 Discussion . . . 61

7.1 Opportunities for Customer Retention. . . 61

7.2 Leveraging Background . . . 62

7.3 Reflection on Qualitative Approach . . . 63

7.4 Contribution to Science. . . 63

7.5 Future Research . . . 64

Bibliography . . . 67 Appendix A . . . A Appendix B . . . B

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List of Figures

1.1 The sales structure of the market for linear motion . . . 4 1.2 Structure of this report. . . 6 2.1 Research Design . . . 8 3.1 The S-curve [gray],the Adoption curve and the chasm (Korhonen et al. 2013). . . . 19 5.1 Different trajectories of innovation. . . 49

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List of Tables

3.1 Dominant Design Definition and Alternatives Terminologies . . . 23 7.1 Interviewed Companies . . . A 7.2 Quotes and Translations . . . B

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List of Abbreviations

KTH . . . Kungliga Tekniska Högskolan . . . Royal Institute of Technology RQ . . . Research Question

B2B . . . Business to Business B2C . . . Business to Consumer

OEM . . . Original Equipment Manufacturer EPS . . . Extensive Problem Solving LPS . . . Limited Problem Solving RRB . . . Routinized Response Behavior LCC . . . Life-Cycle Cost

Glossary

Cumulative . . . Grown by accumulation of smaller parts. Closure . . . The market standard design or solution. Industry 4.0 . . . The development of interconnected

machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. machines-. with advanced digitalizationmachines-.

Pneumatic . . . Creating work, or motion, by pressurizing air. Hydraulic . . . Creating work, or motion, by pressurizing oil. Electric . . . Creating work, or motion, using electricity.

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1

Introduction

The aim of the introduction chapter to present the background, problem formulation and the purpose of th study. The purpose operationalized by formulating research questions and de-limitations. The structure of the studied market explained and the structure of th report presented.

1.1 Background

There are products designs that win the allegiance of the market, whose designs competitors and innovators must adhere to if they hope to retain or achieve a significant market following (Utter-back 1994). Hård and Knie (1995) refers to these designs as the market closure and describe them as solutions that should be taken as the point of departure for future development. However, when closures are formed competing solutions can become illegitimate and technological shifts can be hindered. There are many historical examples of when such technological closures have been challenged such as when Apple introduced the iPhone, rapidly rendering other phones insufficient or outdated (Cuthbertson et al. 2015), or the introduction of the digital camera re-moving the closure on photographic films.

In this study, we investigate the closure surrounding pneumatic- and hydraulic systems for cre-ating linear motion, such as cylinders and its surrounding components. This market is almost entirely a business to business, or B2B market, and will be treated as such in this study. In this market, a new alternative has arrived that might change the entire market structure: electronics. This trend is known in the industry as electrification and it has claimed benefits of being easier to control and measure at the same time as it uses significantly less power. However, in some situations electrification is not mature enough to replace hydraulic systems.

Electric systems also have the benefit of better enabling the next industrial revolution: ever since the beginning of industrialization, technological leaps have led to paradigm shifts which today are ex-post named ”industrial revolutions”. For example, the first industrial revolution refers to the mechanization of industry, and the third industrial revolution refers to the widespread digitalization. The combination of Internet technologies and future-oriented technologies in the field of ”smart” objects result in a new fundamental paradigm shift in the industrial production (Lasi et al. 2014). These smart objects, harnessing the capabilities of new technologies form the basis of the fourth industrial revolution, often referred to as ”Industry 4.0”; bringing a new level of digitalization to the modern industry, this will be introduced further in section 1.7.

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The industry’s reliance on hydraulic and pneumatic designs as the most common technologies is therefore currently being challenged by electric systems. However, the shift towards a more electric and advanced industry is happening gradually and not all components belonging to more traditional technologies can be replaced yet.

This means that the future of the market for linear motion is uncertain and the suppliers produc-ing these components risk losproduc-ing customers to technologies outside of their core competences. Thus, the advantage that these suppliers have gathered over the years, in this report known as cumulative advantages, might disappear.

1.2 Problem Formulation

The market of linear motion is currently undergoing a shift towards electrification; enabling several advantages over- and potentially replacing traditional technologies. However, many elec-trified versions of traditional technologies are still not mature enough to completely replace the current market closure, nevertheless they are gradually maturing and are expected to entirely replace many products in the future.

As the closure is being challenged, how customers respond can be uncertain and how customer revenue is affected is unknown. Even though a supplier might retain its competitive advantage, such as lower costs or higher quality, it is not certain if their cumulative advantage will be re-tained. This means that it is uncertain if the accumulation of positive customer interactions through purchases with competitive advantages will remain impactful on supplier selection pro-cesses when the technology on which the interactions are based on is replaced.

1.3 Purpose and Research Questions

To address this problem, the following purpose is formulated, which the research revolves around throughout the project.

We are exploring if the cumulative advantag of suppliers, with core competenc in the current market closure, will be affected if the market closure challenged.

To operationalize the purpose, the main research question is defined as following:

Main RQ Can electrification of industrial machinery affect suppliers’ cumulative advantag if the

closure on pneumatic- and hydraulic systems challenged or replaced?

To be able to answer the main research question, two research questions are defined that collec-tively aim to help answer the main research question. These research questions are as follows:

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RQ2 Can a supplier’s cumulative advantage in one product type be recognized or beneficial in

customer purchasing decisions in another product type, if the market closure challenged or removed?

1.4 Theoretical Delimitation

The theoretical delimitation of this paper is the study of cumulative advantage (Lafley and Mar-tin 2017) in the area of market closure (Hård and Knie 1993). In the area of market closure we include other works in similar areas, such as ”Dominant design” and ”Path dependency” in order to broaden the theoretical foundation in that area. In the area of cumulative advantage, we are including the area of ”Customer loyalty”, ”Customer habit” and ”Supplier selection”.

1.5 Empirical Delimitation

The empirical delimitation of this paper is suppliers and B2B customers of systems used to cre-ate linear motion in industrial machinery. Furthermore, we delimit this study to only considers customers located in Sweden, even though the industry of linear motion is heavily dependent on a few global suppliers. Both OEM (Original Equipment Manufacturers) and End-Consumer customers is considered to identify the different views of different customer types.

1.6 Market Structure

Most suppliers of products used for linear motion sell their products both to OEMs and directly to end-consumers. The OEMs purchase these products to sell as components in larger machin-ery, such as presses, tube bending machines and industrial automation machines, whereas end-consumers purchase these products directly for their own use. Often, an end-consumer pur-chases the linear motion system from an OEM and purpur-chases replacement parts, side compo-nents etc. from the original supplier. This means that in this market, there are three types of actors: suppliers, OEMs and end-consumers. The market structure and sales directions is illus-trated in figure 1.1.

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Figure 1.1: The sales structure of the market for linear motion

As suppliers are not always directly in contact with their end-consumers, the market structure might hinder the suppliers from seeing and adapting to market changes. Moreover, the possible disconnection between suppliers and end-consumers, if products are purchased through OEMs, could lead to suppliers being unaware of who their end-consumers are and have difficulties un-derstanding their exact needs. It also implies that it might be possible that OEMs have better understanding of the needs of the end-consumers than the suppliers.

1.7 Industry 4.0

The first industrial revolution was the first paradigm shift of industrialization; it was also the introduction of the mechanization of industry which started the transition from an agricultural society to an industrialized one. There have been three of these paradigm shifts, where the sec-ond one is the period where intensive use of electric energy began. The third is when digital-ization became widespread (Lasi et al. 2014), caused by the development of computers and in-ternet technologies etc. The fourth industrial revolution, called Industry 4.0 is a paradigm shift that is currently ongoing, where advanced digitalization is entering factories combining ”inter-net technologies and future oriented technologies in the field of ”smart” objects (machines and products)” (Lasi et al. 2014, p.1).

In this paradigm shift, sensors, machines, workpieces and IT systems will be connected. These connected systems can interact with one another using internet-based protocols and analyze data to predict failure, adapt to changes and configure themselves (Rüßmann et al. 2015). The vision of Industry 4.0 is that it will be possible to more easily gather and analyze data across machines

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to enable more efficient and more flexible processes to produce higher quality goods at reduced costs. Rüßmann et al. (2015) identifies several foundational technologies known as Industry 4.0, including:

• Big Data and Analytics, where large datasets can be used to optimize production quality, save energy and improve equipment service.

• Simulation, allowing operators to test and optimize the machine settings for the next product in line in the virtual world before the physical changeover.

• The Industrial Internet of Things (IoT), allowing field devices to communicate and inter-act both with one another and with centralized controllers.

• The Cloud, enabling greater data sharing across sites and company boundaries; allowing more data driven services for production systems.

• Horizontal and Vertical System Integration, linking departments, companies, suppliers and customers closer to become more cohesive.

Industry 4.0 is still an ambiguous concept and what the future of industries will look like is unknown. However, many organizations are approaching some of the concepts within Industry 4.0.

1.8 Report Structure

This report is structured as illustrated in figure 1.2. First, the problem formulation and the pur-pose of this study is introduced in chapter 1, followed by the methodology used to gather and analyze the empirical data studied which is discussed in chapter 2. Next, a literature review con-taining concepts and theories used in this report in chapter 3. After these introductory chapters, the gathered empirical data is presented in chapter 4. The empirical data is analyzed in chapter 5 and concluded in chapter 6. Lastly, we are discussing the results and implications of this study as well as its contribution to science in chapter 7.

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2

Methodology

In th chapter, the research design presented well the methodolo used when conducting the literature review, data collection and data analys . Furthermore, we are discussing the qualitative approach of the research method well the ethical principl we follow in th study.

2.1 Research Design

As the purpose of this study is to explore if the cumulative advantages of B2B suppliers are af-fected if electrification challenges the market closure, this study is researching two main areas corresponding with RQ1 and RQ2 respectively.

• First, we are exploring if electrification is a valid threat towards the closure on pneumatic-and hydraulic systems, by confirming the existence of the closure pneumatic-and exploring customer perception of electrification.

• Second, we are exploring if a supplier’s cumulative advantage in one technology can be beneficial in customer purchasing decisions in another.

The study follows the research design as illustrated in figure 2.1. We initiate the study by formu-lating the problem and defining the purpose this study adheres to. The purpose is then opera-tionalized by formulating a main research question and two research questions that collectively allows the main research question to be answered. The next phase of the study is the literature review phase, where we review previous work in related areas to build an understanding on the existing knowledge. The literature review is used as a basis, that together with the empirical data, will allow us conduct an analysis. The methodology used to conduct the literature review is de-scribed in section 2.2. After the literature review, we initiate the empirical data collection. Data is collected from three types of interviewees:

• Supplier interviews, which are aimed at gathering insight into the market and technologies available for linear motion.

• OEM interviews, which are aimed at understanding their experiences of cumulative ad-vantage and how it is affected by electrification.

• End-Consumer interviews, which have the same purpose as the OEM interviews but from the perspective of end-consumers.

The methodology used to conduct these interviews are described in section 2.3. The empirical data would also indicate if there were an information gap in the in literature review which would

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be corrected. The next phase is the analysis and conclusion phase, where we analyze the empirical data and draw conclusions on the research questions. The data analysis methodology is described in section 2.4. The last phase is the discussion phase, in which we reflect on the methodology used in this study as well as give suggestions on future research. This study is designed with an iterative approach, meaning that improvements and changes to all chapters are conducted during the research process. Furthermore, the writing process is conducted continuously through the study.

Figure 2.1: Research Design

In order to approach RQ1, a qualitative study with two suppliers as well as nine customers, in-cluding five OEMs and four end-consumers, is performed in order to find the customers percep-tion on how electrificapercep-tion is changing the market closure, as well as what alternatives to elec-trification exists. The gathered information is used to explore whether or not elecelec-trification can change the market situation enough to change suppliers’ cumulative advantages and customer loyalty. RQ2 is approached using the same qualitative interviews as for RQ1; however the focus of the interviews is on their perception of cumulative advantage, habit and customer loyalty, in order to find out how cumulative advantage, habit and customer loyalty might change if the market situations are altered. The main research question is approached using the information gathered from RQ1 and RQ2 together with the literature review.

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2.2 Literature Review Methodology

The literature review consists of secondary data sources that are relevant for the study objective. A secondary source refers to literature or data that has not been collected firsthand for the study (Blomqvist and Hallin 2015). The literature review is based on articles, books and academic jour-nals. The theory from the literature review is also used to structure the interviews better to ensure that the questions posed are relevant for gathering relevant information in order to address the purpose.

The main source used for finding literature is KTHB Primo; a search engine covering several external databases and the library catalog of KTH. The search engine Google Scholar is also used to search for articles, books and scientific journals in order to complement our main search engine to ensure that many different academic sources are taken into account.

The main keywords used when searching for relevant literature are: ”Closure”, ”Path

Depen-dency”, ”Dominant Design”, ”Lock-in”, ”Diffusion of Innovation” , ”Supplier Selection”, ”Com-petitive Advantage” and ”Cumulative Advantage”.

Keywords such as ”Closure” and ”Diffusion of Innovation” are used primarily for RQ1. Whereas

”Supplier Selection” and ”Cumulative Advantage” are used in order to approach RQ2. These

concepts are used to prepare relevant questions for the interviews and are also used for analyz-ing data and interview answers. These concepts are studied in order to gain insights into how challenging closures affect the current market standards.

2.3 Interview Methodology

In order to get insight into the experiences of customers, a qualitative study is conducted to pro-vide detailed information on the subject, as according to Collis and Hussey (2013), qualitative data is appropriate when collecting primary research data. They describe qualitative data as nor-mally only being understandable in its own context, but being highly valid if conducted with an interpretivist methodology.

The interviews in this study are primarily aimed at understanding the customer perception of electrification and cumulative advantage. As the interview subjects can have different needs, ex-periences and knowledge, that are difficult to foresee before an interview; we use semi-structured interviews. Semi-structured interviews have the ability to uncover more information than struc-tured interviews can (Qu and Dumay 2011). This study follows the guidelines for semi-strucstruc-tured interviews from Edwards and Holland (2013). Before the interviews, a guide of questions and subjects that are supposed to be covered during the interview is created. These questions and subjects are ordered to keep control of the interviews, but are designed to allow for new topics and trajectories when interesting and relevant subjects are brought up by the interviewees.

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Ac-cording to Collis and Hussey (2013), this allows the interviewer to gather more detailed knowl-edge.

The study begins with conversations with sales managers of the interviewed suppliers, aimed at gathering insight into the market and the technologies used for linear motion as well as electri-fication and their perception of market trends and closures. Next, customers are approached via email and phone calls, and interviews are booked at the customers’ preferred times to allow the interviews to be as time consuming as they need to be, following a semi-structured approach. The interviewed company, the interviewed subject’s role at its company and what type of busi-ness the interviewed company is operating in is listed in Appendix A. Interviews are conducted with nine customers; whereof five are OEMs and four are end-consumers. A request was made by one supplier to be anonymous and to have all customers anonymous as well in this study, thus suppliers are named ”Supplier” followed a number notation, OEMs are named ”OEM” followed by a number notation to be differentiated and end-consumers also follow the same system of notations; referred to as ”End consumer” in this report.

All interviews except the interviews conducted with Supplier 1 are recorded using a mobile phone and the interviewers take notes during the interviews. Afterwards, all interviews are transcribed to allow easy access to the empirical information and quotations. In this report, quotes are writ-ten in italics to distinguish between the interviewed subjects’ formulations and our opinions. As all interviews are conducted in Swedish, all original Swedish quotes and English translations are listed in Appendix B.

2.4 Analyzing Qualitative Data

The purpose of performing a qualitative data analysis is to identify similarities, and dissimilari-ties, between interview subjects to find patterns (Blomqvist and Hallin 2015). This is conducted following a comparative research approach, where different interview subjects’ experiences are analyzed and discussed.

The qualitative data analysis methodology used in this report follows the four key elements of qualitative data analysis presented by Morse (1994).

1. Comprehend, the setting and the topic of the study needs to be understood to start the re-search. This is approached by formulating research questions beforehand and conducting a semi-structured interview to understand the context each customer operates in. 2. Synthesize, the collected data is to be sorted to form new patterns.

3. Theorize, alternate explanations is tested to explain the data.

4. Re-contextualize, the data should be generalized to allow for conclusions to be made the results to be placed in a context.

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Flick (2013) argues that forcing qualitative data to fit an hypothesis can harm the quality of the re-search. In this study negative cases and discrepant data is reviewed to test the hypothesis properly in order to improve the reliability of the study.

2.5 Qualitative Approach

In this section we are discussing the qualitative approach we use in this study in terms of valid-ity and reliabilvalid-ity. Validvalid-ity in terms of assessing academic work refers to how well the research is studying the correct thing (Blomqvist and Hallin 2015). During our research we consider two separate types of validity. The first type is construct validity, which entails establishing ”correct operational measures for the concepts being studied” (Yin 2003, p. 34). The second type is exter-nal validity, which instead refers to the ”domain of which a study can be generalized” (Yin 2003, p. 34).

We consider construct validity in the data collection phase by first considering what we are study-ing and relatstudy-ing it to the objective of our study. In the data collection phase, we use multiple sources of evidence, a concept known as triangulation (Collis and Hussey 2013), which provide us with a higher validity (Collis and Hussey 2013). Furthermore, we establish a chain of evidence, which also raises the validity (Yin 2003). In the composition phase, construct validity is ensured by having key informants, such as handlers and opponents, read the drafts of this report (Yin 2003). In terms of external validity, or generalizability, as we are only studying electrification in the market for linear motion, we argue that the study can be generalized within that context however, not in all contexts where electrification is challenging market closures.

Whereas validity means studying the right thing, reliability entails studying it in the correct way. Having high validity pre-requisites having high reliability, however having high reliability does not guarantee high validity (Blomqvist and Hallin 2015). Yin (2003) writes that the reliability of a case study is increased by having a case study protocol, as one prerequisite for allowing other investigators to repeat an earlier case study is to document the procedures followed in the earlier case. This is accomplished by having an extensive methodology chapter in this report; making the work more repeatable.

Following the interview subjects request for anonymity can affect the reliability of the study (Merriam 1998). As the names and identities are hidden, sub-sequent studies may find different results depending on their sample, which decreases reliability.

According to Patel and Davidson (2003) the reliability of the interviews can be improved by having two people present for each interview, where one person is the interviewer and the other is the observer. After the interview, they will compare their notes and insights from the interview to confirm that everything is interpreted the same way. This approach is used in the study to

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increase the reliability of the interviews. The interviews are also recorded and transcribed to make them available for later use and quotation, which increases reliability (Patel and Davidson 2003).

2.6 Ethics of Methodology

When conducting research, we follow the ethical code of conduct from the Swedish Research Council, called the Swedish Research Council’s principles of ethical research for the human-ities and social science, which are the most commonly followed ethical principles in Sweden (Blomqvist and Hallin 2015).

The four described principles are:

• The information requirement, the people being studied have to be informed about the purpose of the study. All interviews begin with us stating the research purpose to inform the subjects of our intentions.

• The consent requirement, the studied people have to agree to be studied. When conduction our research, all subjects is asked to consent to being studied, cited and involved. • The confidentiality requirement, the gathered material from the investigation has to be

treated with confidentiality. In this paper, all interviewed subjects and companies are treated anonymously.

• The good use requirement, the gathered material must only be used for the purpose stated when collecting the material.

Additional to these ethical principles, we aim to remain impartial throughout our research and to clarify the origin of all information used in this paper in order to distinguish between infor-mation from literature, interviews or our own reasoning.

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3

Literature Review

In order to approach the purpose of th paper, and to gather relevant information regarding the research questions posed, an extensive literature review conducted and presented in th chapter. The literature review allows to build on previo knowledge related to the subject of th paper. Theori , concepts and models are critically reviewed in order to preserve their ambiguity and impartiality. The theory divided into three are , first we explore the area of supplier selection, incorporating customer loyalty, competitive advantage and cumulative advantage, secondly we explore the area of diffusion of innovation and lastly we explore the area of market closure.

3.1 Supplier Selection

According to Verma and Pullman (1998), customers select their suppliers based on the relative importance of different attributes. In the literature, several different attributes are identified. For instance, Dickson (1996) identified the three attributes quality, cost and delivery performance as the most important criteria for vendor selection. Which of these three criteria are the most impor-tant are argued differently by different sources. Whereas Verma and Pullman (1998) found that the most important attributes are cost and delivery performance, a review of 74 articles found that the most important criteria is quality (Weber et al. 1991). Nevertheless, customers select sup-pliers by evaluating the possible supsup-pliers to identify the ones that best suit their own needs. However, even though initial supplier selection are based on these attributes, over time the sup-plier and customer develop a relationship which might overcome the importance of these at-tributes. Wathne et al. (2001) argues that relationship history matters in the supplier selection process, giving an advantage to incumbent suppliers. There are extensive theoretical literature regarding customer relationship management, CRM, such as Kumar (2010), Brown and Coop-ers (1999) and Chen and Popovich (2003). However, within the context of this thesis recognizing supplier to customer relationships as drivers for supplier selection is sufficient.

There are three stages of developing consumer behavior of supplier selection towards a new product class (Howard 1977).

1. Concept formation, 2. concept attainment, and 3. concept utilization.

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In the first stage, the customer needs to find information on the new product class by learning the choice criteria and discriminating between the relevant brands. This results in the ”awareness set” of relevant suppliers. As in this stage, the customer have little information the problem is on the customers side, this is known as Extensive Problem Solving or EPS (Howard 1977). In the second phase, product class information is stored from the first phase and brand concepts are being formed. Here, the choice criteria lies on the brands instead of the products. As in this stage the customers have some information but not enough, it is called Limited Problem Solving or LPS. In the last phase, sufficient product class- and brand information is stored from the previ-ous phase, leading to Routinized Response Behavior or RRB (Kaas 1982). Purchasing products through routinized response behavior is the same as habitual suppliers selection, which will be discussed further in section 3.4.

In summary, initially suppliers are selected through the relative importance of attributes such as quality, cost and delivery performance. Over time, the supplier and customer builds a relation-ship which becomes an attribute that only incumbent suppliers have, giving them an advantage towards new suppliers. Through information gathering, the customer develops a routinized sup-plier selection process and its purchasing behavior becomes habitual.

3.2 Customer Loyalty

The previously explored reasons for supplier selections have been centered around the products and services, such as quality, cost and delivery performance, and the supplier with their relation-ship management. However, managing the relationrelation-ship between the supplier and customer is not only conducted on the supplier side. Whereas the supplier might maintain the relationship through continuously good quality and delivery performance or other important attributes, the customer can maintain the relationship through loyalty.

Customer loyalty refers to the strength of the relationship between the customer’s attitude and repeat patronage (Dick and Basu 1994). In other words, customers exhibit loyalty through their purchasing behavior but also through their attitude towards the supplier (Rowley and Dawes 1999). Although the behavioral and attitudinal aspects of loyalty is thoroughly explored in the theoretical literature by for instance Dick and Basu (1994), we will not delve into them as it is outside of the scope for this thesis.

There are two main types of customer loyalty relationships that is depending on the supplier situation (Keiningham et al. 2005).

1. Monogamous loyalty and 2. polygamous loyalty.

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Monogamous loyalty entails full loyalty towards a single supplier whereas polygamous loyalty means loyalty towards a set of supplier.

A customer is monogamously loyal if they exclusively purchase their products from a single sup-plier. However, this type of loyalty is rare. Most customers purchase products from a set of sev-eral suppliers, although they might not necessarily be equally loyal. Keiningham et al. (2005), and Dowling and Uncles (1997) argue that loyalty can be viewed as a customer’s probability of choos-ing a particular brand for their product purchase. For instance, a customer might be 80% likely to choose Brand A, 10% likely to choose Brand B and 10% likely to choose Brand C. In this case, the customer is most loyal towards Brand A. However collectively, the customer is 100% loyal towards the set of Brand A, B and C. Dowling and Uncles (1997) also argue that ”’polygamous loyalty’ is a better description of actual consumer behavior than either brand switching (a con-scious once-and-for-all change of allegiance to another brand) (...) or promiscuity (the butterfly tendency to flit from brand to brand without any fixed allegiance)”(p.74).

It is worth noting that, although most literature refers to customer loyalty in the business to consumer (B2C) context, customer loyalty is present in the B2B context as well. However, trying to understand and build customer loyalty in B2B markets is very challenging (Russo et al. 2016). There are several models that attempts to, but this study will not delve into these models are outside of the scope of this thesis.

3.3 Competitive Advantage

In this and the following section, we will explore the literature regarding two types of advantage a seller can have over its competitors. The first type of advantage, competitive advantage, is the advantage from having a competitive edge on ones rivals. This can be because of the supplier being superior to its rivals in the supplier attributes discussed in section 3.1 or it can be for any other reason that the supplier might be found advantageous by its resources. This assumes that there are heterogeneity in the resources among the competing firms (Barney 1991). Peteraf (1993) argues that ”one might describe productive factors in use as having intrinsically differential levels of ’efficiency’. Some are superior to others. Firms endowed with such resources are able to pro-duce more economically and/or better satisfy customer wants. Heterogeneity implies that firms of varying capabilities are able to compete in the marketplace and, at least, break-even.”(p.180). Porter (1985) identified three ways in which an organization can gain a competitive advantage over its competitors, cost advantage, differentiation advantage and focus advantage. A strategy based on cost advantage is where the organization produces the same quality at a lower cost. A differentiation advantage strategy is where the organization produces product or services that are different from the competitors in attractive ways. A focus advantage strategy is where the organization focuses its efforts on a few target customers instead of everyone.

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However, Hunt and Morgan (1995) argues that this classical view of competitive advantage is insufficient in explaining the diversity in size, scope and profitability in the industries and thus argues for the theory of comparative advantage. Instead of the competitive market situation pe-rusing the lowest cost advantage, rivals are in a constant struggle to gain a comparative advantage in its all potential attributes. Having comparative advantages in its attributes can give an orga-nization a competitive advantage in its marketplace position. In the end, competitive advantage are build on three main types of advantages;

1. Comparative advantages, where the supplier in comparison to its competitors in some regard is superior. For instance, it can be that the supplier delivers higher quality products or having lower costs.

2. Differentiation advantages, where the supplier by virtue of being different from its com-petitors in some regard can be viewed as superior. It can be driven by having more ad-vanced technology or having patents unavailable from its competitors.

3. Focus advantages, where organizations focuses its efforts on a few customers instead of all potential customers.

A supplier is not required to only build products or services with only one of these advantages in mind. A product might for one customer be regarded as superior because of lower cost than competitors, comparative advantage, but for another customer the same product might be re-garded as superior because the different technologies used in it, differentiation advantage. For instance, in the case of a supplier of pneumatic cylinder compared to a supplier of hydraulic cylinders, the hydraulic cylinders might have a comparative advantage caused by the larger forces it can produce but the pneumatic cylinders might have a differential advantage from not having the risk of leaking oil.

3.4 Cumulative Advantage and Habit

Lafley and Martin (2017) argue that competitive advantage is not sufficient in finding which sellers succeed. They propose that customers choose sellers by habit, in conjunction with com-petitive advantage, and thus suppliers should have a comcom-petitive strategy that endorses habitual customer behavior. They argue that the problem with the conventional wisdom on competi-tive advantage is that it implicitly assumes that customer behave through conscious logic, and thus the goal should be to have a strategy that responds to that logic. The second type of advan-tage, cumulative advanadvan-tage, is the advantage built by the cumulative purchases and interactions between the supplier and customer that increases the probability of a customer selecting a spe-cific supplier, strengthening its market position. As humans and businesses are based on habit,

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they explain, organizations can take advantage of their past interactions and build a good rela-tionship with the customers by building cumulative advantage purposefully by interacting with the customers with a fitting value proposition. Lafley and Martin (2017) defines cumulative ad-vantage ”as the layer that a company builds on its initial competitive adad-vantage by making its product or service an ever more instinctively comfortable choice for the customer”(para. 20). However, in her counterargument, Gunther McGrath (2017) points out that ”consumer habits can be powerful aids to sustaining a competitive advantage (...) .But habits, like other elements of the environment, can change”(para. 5).

In previous studies, habit has been verified as a prediction of customer behavior (Ouellette and Wood 1998), (Trafimow 2000). Aarts et al. (1998) argues that most habitual behavior arises and proceed efficiently, without effort and unconsciously. This implies that even without a strategy for cumulative advantage, unconscious build-up of habit can lead to a supplier having a cumu-lative advantage. Gefen (2003) defines habit as what an individual usually does when there is a behavioral preference in the present which leads to the continuation of the same type of be-havior in the future. When a bebe-havior becomes a habit, it becomes automatic and is carried out unconsciously (Ouellette and Wood 1998).

Another way to view cumulative advantage is by the Matthew Effect, coined by Merton et al. (1968), which initially explained why established researchers get more recognition for their sci-entific contributions. The Matthew Effect is defined as ”the accruing of greater increments of recognition for particular scientific contributions to scientists of considerable repute and the withholding of such recognition from scientist who have not yet made their mark” (Merton et al. 1968, p.58). However, the underlying situation of agents with more recognition growing faster than those without, is directly applicable to the situation of cumulative advantage.

On a market level, as a supplier’s competitive advantage gains recognition in the market, a grow-ing number of customers will purchase from that supplier. The supplier’s market will thus grow and their competitive advantage will be recognized by a growing number of customers. On an individual level, initially a supplier might be chosen for their competitive advantage. When the customer repeats its purchase the supplier will have a slightly larger probability of being chosen because of the previous interaction (assuming the interaction was perceived positively), leading to an advantageous market position. This means that over time, the probability of choosing a specific suppliers is increasing through the accumulation of repeated purchases.

In this study, cumulative advantage will consider the advantage from repeated interactions with the same customer, the individual level. This means that from one customer’s point of view, they initially choose a supplier for their competitive advantage, comparative or differential, and their attributes, but through accumulation of interactions, customers start selecting suppliers by their cumulative advantage, which can build supplier relationships leading to customer loyalty and habit.

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3.5 Diffusion of Innovation

When a new product or innovation is introduced to its market, the process of diffusion begins. In the theoretical literature this is area is called ”Diffusion of Innovation” and was initially studied by Rogers (1995). He describes diffusion as ”the process by which an innovation is communicated through certain channels over time among the members of a social system.”(p.5). This is the definition of diffusion that we embrace in this report. However, he argues that it is a special type of communication in which the messages are concerned with new ideas. In a social system, diffusion is a social change where the structures of the social systems are changing (Rogers 1995). A social system, can be the system surrounding a product; such as its customer base, suppliers, retailers etc. For instance, when a new product is introduced to a market it will diffuse into the social system; changing how customers purchase products, how suppliers produce them, and the competitive situation in the market. Another definition of diffusion is, as argued by Fichman (2000), the process by which a technology spreads across a population of organizations. Diffusion as a function of the number of adopters over time follows a curve resembling an S-shape (Rogers 1995), which can be seen in figure 3.1. The S-curve illustrates how products are diffused into the market over time, with a slow pace in the early phases and then rapidly increas-ing in diffusion rate until it is adopted by the majority and then the pace slows down. Further-more, Robertson (1967) argues that diffusion rate increases as adoption rate increases by stating that ”the proportion of firms already using an innovation would increase the rate of adoption, in other words, that competitive pressures would create a ’bandwagon’ effect” (p.16). However, not all products successfully diffuse into its market. If a product fails to become adopted, e.g. by new technology taking its place, the S-curve will be ended.

Rogers (1995) also identifies five customer groups of varying behavior from the S-curve depend-ing on their adoption behaviors; creatdepend-ing the adoption curve.

• The first group is the innovators, this group is risk-taking and play an important role in initiating the diffusion process.

• The second group is the early adopters, who is considered to have the highest degree of opinion leadership in most social systems, they reduce the uncertainties of new products by adopting it and spreading their evaluations through the social system.

• The third group is the early majority, they listen to the early adopters opinion and adopt a product before the average customer.

• The fourth group is the late majority, consisting of more skeptical and cautious members of a social system, they do not adopt a product until the majority of the social system has done so.

• The last group is the laggards, which are the last to adopt an innovation, they are reluctant to adopt new innovations unless they have been tested by the majority.

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In figure 3.1, the adoption curve is illustrated showing the percentage of the groups in most social systems.

Different adopter groups have different expectations (Moore 2009): ”The early majority ask for practical benefits and easy-to-use services, therefore, the innovation cannot be presented to them in the same way as for the early adopters, who seek fresh solutions. The late majority and laggards, who are the last ones to adopt the innovation, are even more skeptical than the early majority. An innovation must be convincing and bring economic benefits, while the common norms must favor innovation before they are willing to adopt it” (Korhonen et al. 2013, p.84). The different expectations between the early adopters and the early majority creates what Moore (2009) defines as the chasm. The chasm is the space that separates the innovation from the mainstream market, in some cases the innovation can become stuck in niche markets and other times it can become forgotten. If a innovation crosses the chasm and becomes accepted by the early majority, the S-curve will continue. The chasm is illustrated in figure 3.1.

Figure 3.1: The S-curve [gray],the Adoption curve and the chasm (Korhonen et al. 2013).

3.6 Closure in Technological Development

Dominant design (Abernathy and Utterback 1978), path dependency (David 1985), closure (Hård and Knie 1993) and lock-in (Arthur 1989), are all different terms used in the literature to explain internal resistance to technological and institutional development caused by historical events

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(Blomkvist and Emanuel 2009). However, Abernathy and Utterback (1978) argue that despite being resistances towards change and development, which can be considered a hindrance to tech-nological growth, it allows for redistribution of innovation to new areas, which can be beneficial for technological growth.

The concept of dominant design was first introduced by Utterback and Abernathy (1975), where they define the dominant design as the design that wins allegiance with the marketplace; resulting in competitors being forced to follow that design in order to remain competitive. When a prod-uct has become the dominant design of its market, the amount of produced units following that design is increased, allowing innovation to be targeted at improving manufacturing, marketing and distribution of those products (Abernathy and Utterback 1978). Additionally the emergence of a dominant design causes a decrease in the amount of competing organizations in the mar-ket (Utterback 1994). However, in contrast, when the dominant design is challenged or if the product innovation diverges into several competing solutions, the amount of competing orga-nizations increase. This means that the strategies orgaorga-nizations use when competing are based on the existence of an established dominant design. Without a dominant design, organizations compete to create it so that they can take a strong position in the market, following a differ-entiation advantage strategy. With a dominant design, organizations compete to improve the dominant design to be better than the competition, following a comparative advantage strategy. According to Utterback (1994) the emergence of a dominant design is the result of the interplay between technical choices and market choices. Although it is tempting to believe, he argues, that the dominant design follows a predetermined path that is not how it works in reality. Instead, the dominant design is the successful evolution of a technology, where throughout its evolution several attempts would have been made to alter the evolution of the product but have failed. Utterback (1994) analyses the evolution of several dominant designs. For instance, he mentions the evolution of typewriters: beginning with the Scholes typewriter from 1868, the evolution of the market diverged into two separate trajectories based on different traits that would compete to become the dominant design. These trajectories continued down their own paths of techno-logical development, until one of the trajectories won the allegiance of the market. When one trajectory had won the allegiance, the other trajectory was discontinued.

Dominant design is comparable to how David (1985) describes path dependency as how a stan-dard that is first to market can potentially become entrenched as a de-facto stanstan-dard despite not necessarily being the superior standard. Comparing to how Utterback (1994) describes the tra-jectories of technological evolution, path dependency is the force on technological development to follow the established trajectories. Path dependency means that a series of allocative processes converges to form a ”path” that a product development has followed. Any deviation to this path will have difficulties being accepted by the market. David (1985) uses the example of typewriter key layouts, QWERTY is the universal standard despite the existence of other key layouts, such as

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DVORAK that can be argued to be superior to QWERTY (Rogers 1995), simply because it was first to standardize the market. Arthur (1989) describes lock-in as an effect of path-dependencies, or alternatively, that path-dependency is created by lock-ins in the market. Lock-ins are standards that ”corners the market” of early adopters, with the other technologies being locked out. Another concept is closure, which was coined by Hård and Knie (1993). In the theoretical litera-ture it is a concept closely related to that of dominant design. When a solution wins the markets allegiance, becoming the dominant design, its features come to define what is legitimate, meaning that the solution which the closure forms around becomes the market standard and the other solutions become illegitimate or wrong. By studying the automobile market, Hård and Knie (1993) describe how the diesel engine managed to break the closure on gasoline engines and gain acceptance of automobile companies. After several unsuccessful attempts to enter the market, in 1970 the Clean Air Act was introduced which rapidly increased oil prices, which in turn caused the introduction of the Corporate Average Fuel Economy standards of 1975 that forced automo-bile manufacturers to substantially decrease fuel consumption. At the same time, diesel engines gained more public attention for releasing less pollution and having lower fuel consumption to a relatively low diesel fuel cost. However, the increased public attention was not the only reason that diesel engines managed to break the closure on gasoline engines. Automobile companies also worked with increasing the similarities of the diesel engine to the gasoline engine, by allow-ing it to be manufactured on the same manufacturallow-ing line. Hård and Knie (1993) argue that in order for new innovations to succeed in a market with present closures;

1. innovation cannot be too radical,

2. the functions of the innovation needs to be recognizable, and

3. the innovation have to fit into the existing technological support network and engineering knowledge.

To summarize, path dependency is the force on technological development to follow a trajectory caused by market decisions over time, such as the force on computer designs to follow the QW-ERTY keyboard layout. Lock-ins are the smaller market decisions that shape the trajectory of path dependency, such as the placement of charging port on mobile phone to be on the bottom of the phone. Dominant designs are the designs with the marketplaces allegiance and closures are what the market comes to define as legitimate solutions, rendering competing solutions as wrong.

Currently, there is rich theoretical literature in the area of the build-up of concepts surrounding closure such as Arthur (1989) and Hård and Knie (1993) as well as strategies to survive in markets where closure is occurring such as Christensen et al. (1998). However, we find that there is a lack

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of research into what happens when the barriers to exit get low enough to remove the closure in the market.

Although all of these terms have different meaning, it can be difficult to determine if any part of a products design is caused by lock-ins, path dependency, dominant designs or closures, without studying the history of the product development. Thus, in this study we mostly use the term ”closure” or ”market closure” when discussing industry standardization caused from historical events. In table 3.1, formal definitions of these terms is provided.

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Table 3.1: Dominant Design Definition and Alternatives Terminologies Authors Term Definition

Utterback (1994) Dominant Design ”The dominant design in a product category is the one that wins the allegiance of the mar-ketplace, it is the one that competitors and in-novators must adhere to if they hope to com-mand significant market following. A domi-nant design is a product in a product category that gains general acceptance as the standard on technical features that other market play-ers must follow if they wish to acquire signif-icant market share.”(p.24)

David (2001) Path Dependency ”Path-dependence, (...), refers to a dynamic property of allocative processes. It may be de-fined either with regard to the relationship between the process dynamics and the out-come(s) to which it converges, or the limiting probability distribution of the stochastic pro-cess under consideration.”(p.18)

Arthur (1989) Lock-in ”When two or more increasing-return tech-nologies ’compete’ then, for a ’market’ of po-tential adopters, insignificant events may by chance give one of them an initial advantage in adoptions. This technology may then im-prove more than the others, so it may appeal to a wider proportion of potential adopters. It may therefore become further adopted and further improved.”(p.116)

Hård and Knie (1995) Closure ”As soon as closure established itself, how-ever, the ’winning’ solution and the features it incorporates come to define what attributes are going to be regarded as legitimate. It be-comes a convention that this solution should be taken as the point of departure for subse-quent developments. Maybe it could be said that the solution around which closure has been achieved receives an interpretative ad-vantage. By definition, non-conventional so-lutions become suspect, strange, and maybe even stupid.”(p.139)

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4

Empirical Findings

In th chapter, the empirical findings from th study presented. The information gathered from interviews conducted with representativ from the Suppliers, OEMs and End-consumers. First, an introduction to linear motion systems presented. Next, the empirical information gath-ered from customer interviews will be presented regarding their perception of electrification, loyalty and their relationships with their suppliers.

4.1 Linear Motion Systems

The empirical data from this section and section 4.2 is based on the interviews conducted with Supplier 1 and Supplier 2. Both suppliers produces equipment for linear motion, however their core competences are in different technologies. Whereas Supplier 1 focuses mainly on hydraulic systems, Supplier 2 is focused on pneumatic systems. However, both suppliers have entered the market of electric systems.

According to the sales manager at Supplier 1, in the manufacturing industry, electrification is affecting several types of machines, components and equipment, among which is the cylinder. The cylinder has a history of primarily being pneumatic or hydraulic and now, electric alterna-tives are becoming increasingly competitive. However, he adds, many typical characteristics of the electrification of cylinders also apply to other product types.

When discussing different types of linear motion systems with the sales manager at Supplier 1 and the regional manager at Supplier 2, they describes the existence of four types of cylinders, or cylinder systems.

1. Pneumatic systems, which creates linear motion through pressurization of air as a power transmission medium.

2. Hydraulic systems, which operates similar to pneumatic cylinders but use oil as a power transmission medium.

3. Electric systems, which creates linear motion though running an electric motor on a screw-or belt drive system.

4. Hybrid systems, which creates linear motion following the same systems as electric sys-tems, but can produce higher forces by offloading the forces onto a pneumatic- or hy-draulic system. However, this technology is unknown amongst most customers.

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Pneumatic systems are cheap to use, manage and produce but are unable to produce forces equiv-alent to what the other linear motion systems can. However, as stated by the regional manager at Supplier 2:

”If we look at pneumatic components, they are often cheaper to buy and can withstand more vio-lence [in comparison to electric systems], for instance in the saw mill industry and heavy industri where they are not gently, they are very forgiving. If you had a force that hit the cylinder, the cylinder would compensate a bit it would feather back.”

He adds that in contrast to hydraulic systems, if there is a leakage, pneumatic systems does not produce any mess as the power transmission medium is only air.

Nevertheless, according to the sales manager at Supplier 1, pneumatic systems are only applicable when force requirements are low. Supplier 1 has previously abandoned pneumatic cylinders in favor of electric systems which are increasingly competitive in the same market. He argues that for low force applications, pneumatic- and electric systems are most commonly the technologies used.

Pneumatic- and hydraulic systems, the sales manager of Supplier 1 argues, are the main tech-nologies used and purchased in this industry. Additionally he argues that hydraulic systems are currently the only linear motion systems that can be used in very high force situations. He states that:

”There no real competition to hydraulic cylinders in high force situations. An electric cylinder simply unable to produce anywhere near the amount of force, that a hydraulic cylinder can produce effortlessly.”

However, he adds that hybrid systems if they use oil as a power transmission medium are also able to produce the same forces as hydraulic systems.

Electric systems are becoming more and more competitive as the force they can produce is in-creasing and prices as starting to slowly decline. Currently, according to the sales manager at Supplier 1, electric systems are not competitive with hydraulic systems when forces are very large. Nevertheless, according the regional manager at Supplier 2, electric systems that can produce forces in the range of pneumatic systems already exist, however at a considerably higher price in the upper force range. According to both the sales manager at Supplier 1 and the regional man-ager at Supplier 2, Industry 4.0 is a major factor in the future development of the market for linear motion and electric systems have the advantage in this regard.

When asked about the future of the market for linear motion the sales manager of Supplier 1 says:

”There no doubt that the electric cylinder will become the standard some time in ten to twenty years. Nevertheless, currently there are situations where electric cylinders are not sufficient. How-ever, when forc are extreme, it not certain.”

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He explains that when the forces that electric systems are able to produce get into the range of the hydraulic systems, most customers are likely going to be interested in them. Nevertheless, there are situations where the electric systems are the only type that can be used. For instance, in food processing the cylinders cannot be hydraulic as there is a low risk of oil-leakage which is unacceptable in food processing.

When the regional manager of Supplier 2 is asked about the future of the market, he replies:

”In the long run, I believe the electric systems will expand. However, there are so many advantag with pneumatics in different environments which mak it hard for electric systems to replace it. I think that there will be a lot more machin where electric- and pneumatic components are combined. We can already see that market growing.”

4.2 High Force Systems

In high force applications, where pneumatic systems are not applicable, the customer can choose between hydraulic-, electric- and hybrid systems. In this section, we will present the empirical information from Supplier 1 regarding the differences between these systems.

A hydraulic cylinder, more accurately called an electro-hydraulic cylinder operates similarly to how an electric cylinder or electro-mechanical cylinder operates. Both have an electric motor that generates power; however the power transmission is different. Hydraulic cylinders use the gener-ated power to pressurize a hose filled with oil which in turn pressurize the piston in the cylinder and creates a forward motion. An electric cylinder uses the rotation of the electric engine instead to steer the piston on a screw- or belt drive system. According to the sales manager at Supplier 1, these different power transmission methods means that hydraulic and electric cylinders are affected by different forces and wear down differently. He states:

”Where an electric cylinder h to follow mechanical laws, such material mechanics, exhaus-tion and internal forc , a hydraulic cylinder do not.”

Because of this, hydraulic cylinders can withstand and in turn produce much higher forces than electric cylinders.

However, the accuracy of an electric cylinder, the sales manager at Supplier 1 argues, is better as it can reliably track the position from the amount of rotations on the screw- or belt drive system whereas the oil in a hydraulic cylinder can be compressed, or leak, which reduces its accuracy. Additionally, the possibilities of positional tracking of the cylinder and synchronization between two or more cylinders are possible to a greater degree using electric cylinders.

The method of controlling the force of the pistons is also different between electric cylinders and hydraulic cylinders. The sales manager at Supplier 1 explains:

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”Both electric and hydraulic cylinders are using an electric motor to generate power. However, controlling the power of a hydraulic cylinder works by breaking a motor that running on full power, which reduc the efficiency of the cylinder; using more power. An electric cylinder on the other hand, controls the power of the motor which leads to a higher efficiency; using less power.”

He explains that there is a clear trend towards electric cylinders:

”The trend clear, the bar for electric cylinders rising and they are becoming more and more competitive.”

Despite the current expansion of electric cylinders, the technology is not new to the market. However, he states that:

”Electric cylinders with similar mounting methods to the hydraulic cylinders which at the same time can handle forc close to larger cylinders are new to market.”

He believes that the reason for the delayed expansion of electric cylinder technology is caused by energy efficiency historically not being as important as it is becoming now. Additionally, he argues, education preserving hydraulic systems has decreased as customers are becoming more interested in reducing their electricity usage.

When discussion hybrid cylinders, the sales manager claims that a hybrid system used the power transmission system of electric systems and thus have the extended capabilities of electric systems, such as the higher accuracy of positional tracking as well as the more efficient control mecha-nisms, using less energy. However, when larger forces are required, a hydraulic system can of-fload the force from the screw- or belt drive system so that it can position itself without breaking from the internal forces it would otherwise experience. Nevertheless, hybrid systems are more expensive than hydraulic systems and currently they are mostly unknown in the market. The market has traditionally favored hydraulic cylinders leading to a decrease in resources put on innovation in electric cylinders. However, the resources put into development of electric cylin-ders are increasing due to market moving towards Industry 4.0, in which electric cylincylin-ders are beneficial.

4.3 OEM Perception of Electrification

When conducting interviews with OEM customers and End-consumers it is apparent that the trend of electrification as well as its benefits are not necessarily recognized by customers in the same way as the suppliers. In this section the empirical findings regarding OEM customers’ per-ception of electrification are presented.

OEM 1, a producer of tube bending machines, has been heavily involved with electrification in the last 15 years, the CTO explains:

Figure

Figure 1.1: The sales structure of the market for linear motion
Figure 1.2: Structure of this report
Figure 2.1: Research Design
Figure 3.1: The S-curve [gray],the Adoption curve and the chasm (Korhonen et al. 2013).
+7

References

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