Servicification readiness: Determining the servicification readiness of product-centric companies

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INOM

EXAMENSARBETE INDUSTRIELL EKONOMI, AVANCERAD NIVÅ, 30 HP

STOCKHOLM SVERIGE 2018,

Servicification readiness

Determining the servicification readiness of product-centric companies

JAKOB FALL

KTH

SKOLAN FÖR INDUSTRIELL TEKNIK OCH MANAGEMENT

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Servicification readiness

Determining the servicification readiness of product-centric companies

By

Jakob Fall

Master of Science Thesis TRITA-ITM-EX 2018:638 KTH Industrial Engineering and Management

Industrial Management SE-100 44 STOCKHOLM

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Servicification readiness

Determining the servicification readiness of product-centric companies

Av

Jakob Fall

Master of Science Thesis TRITA-ITM-EX 2018:638 KTH Industrial Engineering and Management

Industrial Management SE-100 44 STOCKHOLM

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Master of Science Thesis TRITA-ITM-EX 2018:638

Servicification readiness; determining the servicification readiness of product-centric

companies

Jakob Fall

Approved

2018-09-05

Examiner

Matti Kaulio

Supervisor

Mats Engwall

Commissioner Contact person

Abstract

The purpose of the study is to determine what levels of servicification readiness that technology- and product-centric companies can expect if they decide to servitize. Servicification readiness is defined as how ready the organization is to manage and go thru the organizational transformation that follows from a decision to servitize. Low servicification readiness implies a significant discrepancy between the current organization and that required by servicification. High servicification readiness implies that the organization of the company is ready to accept the transformation to a servicification strategy without little or no change.

A literature study was conducted to construct a framework which described along which dimensions and how the organization changes as it servitize. A single-case study was performed at a technology- and product-centric company. Interviews, observations and surveys were methods use for data collection. The purpose of the case study was determining the current state of the organization within the dimensions identified from the literature study. This data was then analyzed and contrasted using the theoretical findings to understanding how much the organization must change. The differences identified were also analyzed to understand why readiness is high or low.

The results of the literature study indicated that organizations change along 6 dimensions as a companie servitize. The value proposition and how value is delivered change, the organizational structure is changed to accommodate new types of offerings, the organizations relationships to customers, partners and suppliers will also change as an organization servitize. Process and capabilities within especially knowledge management and information technology will change along with the characteristics of employees and the metrics and incentives used by the company. The culture will also change. The case study revealed that the servicification readiness of technology- and product-centric companies is generally low. A number of factors were also found to influence the level of servicification readiness including information biases, a tendency to coordinate rather than cooperate, that the product centric focus will result in service being undervalued and that the organization must develop the necessary capabilities and change to develop competitive services.

Keywords: Servicification, servicification readiness, organizational change, organizational compatibility

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Examensarbete TRITA-ITM-EX 2018:638

Servicification readiness; determining the servicification readiness of product-centric companies

Jakob Fall

Godkänt

2018-09-05

Examinator

Matti Kaulio

Handledare

Mats Engwall

Uppdragsgivare Kontaktperson

Sammanfattning

Syftet med denna studie är att fastställa vilken nivå av organisatorisk beredskap som teknik- och produktfokuserade bolag kan förvänta sig när de tjänstefierar. Tjänstefieringsberedskap definieras som hur redo organisationen är att klara av och gå igenom de organisatoriska förändringarna som krävs när företaget tjänstefierar. Låg tjänstefieringsberedskap innebär att organisationen har lite gemensamt med den organisation som krävs för att tjänstefieringstransformationen ska vara framgångsrik. Hög tjänstefieringberedskap innebär att organisationens beredskap i att hantera och anpassa sig till en tjänstefieringsstrategi är hög. Låg tjänstefieringsberedskap innebär istället att organisationen måste göra omfattande förändringar av sin organisation för att anpassa den till en tjänstefieringsstrategi.

En litteraturstudie genomfördes för att konstruera ett ramverk som beskriver både längs vilka dimensioner som förändring kommer ske men även hur denna förändring ser ut när ett företag tjänstefierar. En fall-studie genomfördes också hos ett teknik- och produkt fokuserat bolag. Intervjuer, observationer och enkäter användes för att samla data. Resultaten från fallstudien användes för att göra en nulägesanalys av företaget som studerades för att konstratera den mot den organisationen som krävs i en tjänstefierad organisation. Resultaten användes för att kartlägga och förstå vad organisationens nuvarande tjänstefieringsberedskap är inom de dimensioner som identifierades i litteraturstudien.

Litteraturstudie indikerade att organisatoriska förändringar främst sker längs 6 dimensioner när ett företag tjänstefierar. Värdeerbjudandet och hur detta värde leverars förändras, organisationens struktur förändras också för att tillåta leverans av nya typer av erbjudanden, företagets relationer till kunder, partners och leverantörer kommer också att förändras när företaget tjänstefieras. Företagets processer och kapacitet kommer också förändras, särskilt inom knowledge-management och IT. Vilka färdigheter anställda har måste också förändras tillsammans med de mätetal och incitament som används för att styra personalens dagliga arbete. Företagskulturen måste också förändras när företaget tjänstefieras.

Fallstudien uppdagade att tjänstefieringsberedskapen i teknik- och produktfokuserade bolag generellt är låg. Ett antal faktorer som påverkar organisationens tjänstefieringberedskap identifierades också. Detta inkluderar bland annat informationsbias, en tendens att koordinera istället för att sammarbeta, att produktfokus resulterar i att organisationen undervärderar tjänsters värde och att organisationen måste förändras enligt ovan för att kunna utveckla konkurrenskraftiga tjänster.

Nyckelord: tjänstefiering, tjänstefieringsberedskap, organisationsförändring, organisatorisk kompabilitet

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Table of figures

Figure 1Product-service continuum ... 17

Figure 2: Dimensions of servicification change ... 21

Figure 3: Increasing integration and customer-provider overlapp ... 26

Figure 4: Edvardsson's model for relationships in servitzed context ... 27

Figure 5; Comparison of the departments of Tech AB. The dimensions are the level of strategic focus and closeness to customers. ... 36

Figure 6: Comparison of the departments of Tech AB. The dimensions are the level of strategic focus and closeness to customers ... 51

Figure 7: Front and back-office divide ... 51

Figure 8: Increasing integration and customer-provider overlapp ... 53

Figure 9: Information flow in tech AB. Size of arrow represent amount of information ... 56

Figure 10: Position of offering along the product-service continuum ... 63

Figure 11: Flow of requirments and goals in the organization ... 66

Figure 12: Illustration of difference of coordination and cooperation ... 68

Figure 13: Employee characteristics continuum ... 72

Figure 14: Produc-service strategy continuum ... 74

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Table of tables

Tabel 1, interviwees of the case study ... 11 Tabel 2: Value proposition of tech AB as described by interviewees ... 35 Tabel 3: Value proposition of tech AB as described by interview ... 49

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Acknowledgments

I would like to thank the case company and all of its employees for their welcoming attitude and the opportunity that they afforded me when giving me the opportunity of study their organization. I would especially like to thank my company supervisor for valuable input and enlightening discussions. Without them this thesis would not have been possible.

I would like to thank KTH and it staff for building a strong foundation which were a prerequisite for writing this essay

I would like to thank all the people of have read and given valuable input along with everyone that cheered on. I would also like to thank my opponent at KTH for valuable input.

Special thanks for always supporting and believing in me even when it was difficult:

Amelie Hurdelbrink Örjan Fall

Ann Fall Sara Fall

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1. Introduction

1.1 Background

The context in which companies operate is ever changing creating new challenges that companies must overcome. Reacting to change and reforming the organization to manage these change therefore becomes an intrinsic part of successfully running a business (Tushman & O Reilly, 1996). The effort to adapt will affect all aspects of the company's business and operations. The scope and severity of reforms that the company must undertake will vary. This in turn depends on how and what of the context that have changed (Tushman & O Reilly, 1996; Ng, et al., 2012). Two driver of contextual change are technology and markets (Schilling, 2013).

Technology will affect the contextual environment of a companie. This is particularly true for companies where technology is an integral part of their value proposition. The reason being that technology is not static. It will like the markets mature and change over time (Tushman & O Reilly, 1996; Schilling, 2013). The development of a technology can be divide into three phases. A R&D, growth and commercialization and lastly readiness and replacement phase (Schilling, 2013). The first phase is characterized by massive investment in R&D. The second phase is one of commercialization and performance enhancements. The main focus move from exploratory technology focused research towards pure product development (Schilling, 2013). The last major phase is that of readiness and replacement. The technology is at this time so refined that the physical limitations of the technology are beginning to set in. Performance enhancements are increasingly prevented by nature rather than investment or know how. A consequence is that performance gains from R&D efforts are ever decreasing (Schilling, 2013).

The changing nature of markets and technology is influencing technology- and product-centric companies. Technology-centricity is referring to the competitive strategy of the company. Technology is central when the company is building their competitive advantage. Technology-centric companies derive their competitiveness from mastering their core technology. Providing unrivaled performance makes up the bulk of their value proposition. Technology-centric companies have as a consequence built their success around offering high-performance and technical excellence, mastering a technology as no other.

Product-centric company’s core business is developing, manufacturing and selling material artefacts. (Ng, et al., 2012; Kallenberg & Rogelio, 2003). They provide little to no service connected to these products (Ng, et al., 2012; Kallenberg & Rogelio, 2003; Baines, et al., 2009). The relationship with their customers is transactional. The company develops and manufactures a product which they believe hold intrinsic value. This value is then exchange for money as ownership is transferred to the customer.

(Ng, et al., 2012). The relationship is very limited outside the actual purchase (Edvardsson, et al., 2008).

Operations of the company are designed to generate maximum intrinsic value for minimum cost (Kallenberg & Rogelio, 2003; Ng, et al., 2012; Vandermerwe & Rada, 1988). Automation, capacity balancing, utility maximization, standardization, centralized development and management are all tools that successful product centric organizations use. They are highly specialized and knowledgeable within their area. By specializing and streamlining they can provide products with incredibly value (Ng, et al., 2012). Technology-centric companies are defined, in this paper, as a sub-group of product-centric companies. Technology- and product-centric organizations are therefore product-centric companies which have based their competitive strategy around technical excellence.

These companies are common in developed countries. Many of them have for a long time used technical excellence as the basis of their competitive advantage. They have in-house R&D and sometimes manufacturing and have some have been developing the technology since its inception.

Examples of such Swedish companies were ABB, Scania, Atlas Copco, Ericsson and more. Companies

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which have as technology and the market matures sought to servitize by adding services to their offering to remain competitive.

Market and technology changes will sooner or later affect technology- and product-centric companies. There is for example a clear trend towards customer demanding more services. They expect more and companies as a result broaden their offer by adding services (Baines, et al., 2009; Tukker &

Tischner, 2006). Technology does also as mentioned above change over time. As the technology matures it becomes increasingly difficult for technology-centric organizations to keep their technological edge (Schilling, 2013). They come under pressure from competitors which are offering products with the same or similar performance for a much lower price. These competitors have based their competiveness in lowering the price and the technology-centric company is at a disadvantage due to their history of offering technological excellence and performance (Baines, et al., 2009; Kallenberg & Rogelio, 2003; Jovanovic, et al., 2016). Three alternative strategies have been suggested to handle this problem.

(1) One is developing new technologies to supplement and eventually replace the existing technological base. (2) The second solution is to reform the value proposition by integrate current products with services (Tongur & Engwall, 2014) and (3) the third being trying to compete by lowering price (Jovanovic, et al., 2016). The second solution has become increasingly popular and is often referred to as servicification of manufacturing (Vandermerwe & Rada, 1988; Tukker, 2004; Neely, 2008). It is not uncommon that technology- and product-centric companies when faced with the choice of either lowering prices, investing in new technology or pursuing a differentiation strategy via servicification decides to servitize (Jovanovic, et al., 2016).

Servicification strategy involves broadening the customer offering by supplementing products with services. These are combined and integrated to form bundles which are then offered to the company’s customers (Vandermerwe & Rada, 1988). It is more specifically the process of creating value by adding services to existing products on offer (Baines, et al., 2009). The purpose is to facilitate organizational adaption to a changing market environment (Adrofegari & Saccani, 2017) thru the strategic integration of service and products as a source of corporate profitability and competitive advantage (Martinez, et al., 2010). The goal is to create value-adding capabilities that are more distinct and easier to defend against competitors in low cost economies (Baines, et al., 2009).

Servicification readiness

Servicification readiness is a measure of how ready the organization is to manage and go thru the transformation that follows from a decision to servitize. Low servicification readiness implies that the changes necessary is greater and high readiness that the organization is from an organizational standpoint ready to accept a servicification strategy requiring little change.

1.2 Problematization

Technology- and product-centric companies are forced to change to stay competitive as markets and technologies develops and changes. Researchers have suggested that servitization is an efficient strategy to manage this adaptation to new conditions (Vandermerwe & Rada, 1988; Kallenberg & Rogelio, 2003).

A servicification transformation is however far from trouble free.

Servitization efforts necessitate radical and companywide changes (Vandermerwe & Rada, 1988;

Baines, et al., 2009; Kallenberg & Rogelio, 2003; Baines, et al., 2011; Tukker & Tischner, 2006). Areas where reform is necessary include; the company's value offering, the organizational structure, relationships, process and capabilities, employees and culture (Baines, et al., 2009; Baines, et al., 2011).

The changes within these areas are all extensive and do often come into conflict with how things are traditionally done in product-centric organizations (Kallenberg & Rogelio, 2003; Martinez, et al., 2010).

Well established organizations can also be incredible unmalleable (Tushman & O Reilly, 1996). The

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organizational inertia adds to the difficulty of change; there is not only a need to reform large portions of the organization, resistance against this change is also likely.

An increasing amount of companies are despite of this still considering adopting a servicification strategy. Companies such as Rolls Royce, Alstom, CAT, Xerox and others have shown that servicification can be a successful strategy (Ng, et al., 2012; Davies, et al., 2006; Jovanovic, et al., 2016).

The success of others does however not guarantee the success of oneself. Research has identified several factors that can result in servicification failure. Large manufacturing companies has for instance not benefited from servicification (Neely, 2008). It has also been found that servicification is only successful given a certain context combined with particular types of products that play a specific role in the customers operations (Jovanovic, et al., 2016). Servicification is also relying on companies having the skills necessary change their organization accordingly ( (Baines & Lightfoot, 2013; Raddats & Burton, 2011; Lightfoot, et al., 2013; Bustinza, et al., 2017; Kallenberg & Rogelio, 2003; Martinez, et al., 2010;

Barnett, et al., 2013). Companies that are considering servicification as a diversification strategy should therefore carefully consider if it is even possible given their unique context and the market in which they are active. The largest challenge remains should they decide to servitize, to change the organization.

The problem is further expiated as there is presently no research describing what technology- and product-centric companies can expect should they decide to servitize. There is no account detailing how compatible the company’s organization is with the organizational requirements of successful servicification transformation. Considering the extent of the change it is clear that any decision to servitize should be preceded by a thorough analysis and quantification of the amount of change needed to the organization. Quantifying this could help companies determine if the possible benefits are enough to warrant a transformation knowing the amount of change needed. This will help to reduce any uncertainty regarding the transformation. It would be very problematic for a company that are seeking to servitize to not know how ready the organization is to accept a servicification strategy should they decided to pursue it. The company needs to know what their servicification readiness is and why.

1.3 Purpose

The purpose of the study is to determine what levels of organizational readiness that technology- and product-centric companies can expect if they decide to servitize and how that influences the transformation. The goal is to thru an in-depth single-case study determine the servicification readiness of a technology- and product-centric organization. The study does also seek to understand why the servicification readiness is at its current level by determining how the dynamics and properties of a product-centric organization will affect the company’s servicification readiness

1.4 Research question

 RQ.1 What is the servicification readiness of technology- and product-centric organizations?

 RQ.2 Why is servicification readiness at its current level in technology- and product-centric organizations?

1.5 Delimitations and limitations

The research questions limits the scope of the study. There are no attempts to understand servicification readiness in all types of organization. It is focused on technology- and product-centric organizations and their unique challenges. The scope is also limited by studying a single company. The dynamics of a possible corporate group is not taken into account. Further delimitations are the exclusion of marketing and corporate finance perspective. The study is also only concerned with investigating the organization, the market perspective and how that might affect the readiness is disregarded.

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The limitations of the study are the reliance on a single case study to generalize from. The study was also conducted by 1 individual for 6 months. This meant certain limitations in terms of resources and time which limited the scope and depth of the study. Care is however taken to reduce bias. An extensive literature study within the field of servicification is used to analyze and value the correctness of the findings and conclusions.

1.6 Ethics

The study was conducted at a company and as such there are two perspectives that need to be considered. The first is the protection of the company’s intellectual property and any material that might be sensitive if published. The second consideration is treating the employees that have participated and their data ethically and with respect.

Several actions were taken to ensure that the company was not damaged throughout the study or through the publication of this paper. The company name has been excluded from all written material used within the study. This also includes all other data that could be tied directly to the company. Details regarding future initiatives, investments, deals, strategy etc. was also censored. The company has been given the opportunity to review the paper before publication to give them the opportunity to address any confidentiality concerns.

The principles of Bell and Bryman (2007) were followed throughout the study. These principles includes; dignity, informed consent, privacy, confidentiality, anonymity, honesty, transparency to mention a few. All the participants of the study were informed prior to their participation. They were informed how their answers were to be used during analysis and in the final report. Also described were the purpose of the study and why they had been selected. They were also informed that they were to remain anonymous and that no personal information was to be written down. All the interviews were recorded after interviewees had given their consent and the recordings is to be deleted after the publication of this paper including any transcriptions. Care was also taken to exclude any views or opinions that could potentially damage the participants.

1.7 Expected Contribution

Servicification is a well-established field researchers have carefully investigated the phenomena both from a market and organizational perspective. There is research describing both challenges and success factors and what capabilities are needed within a multitude of different areas. There has also been research regarded how products and services should be designed and how servitized companies should manage their relationships. There is however very little done to holistically describe what is required by the organization and relates that to companies that are yet to servitize. This study aims to fill that gap. A theoretical framework is constructed that holistically describes which organizational changes are required as a companie servitize. A case study is conducted so that the desired state can be contrasted with that of a technology- and product-centric company. The result is a description of what sort of readiness such a company can expect and what needs to be done improve their readiness.

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2. Methodology

This chapter describes the methodology used for the duration of the thesis work. The research strategy and design is presented giving an overview of the study. This is followed by an in depth description of the data collection and analysis methods used.

The research presented in this thesis is qualitative in nature. The purpose is fulfilled thru a case study supported by a literature study. The purpose of the literature study was to thoroughly go through the current research within servitization. The findings were analyzed and synthesized to focus the research question and purpose. The results were used to design the case study and assist throughout the process.

The case study was designed to test current servitization strategies in a real world setting. The guiding principles by Bell and Bryman (2007) were used throughout the thesis work to ensure its ethicacy, see section 1.6 for more details.

2.1 Research strategy

The focus of the study is limited to include mostly contemporary events. The history of the organizations is only taken into account to better understand why present actions were taken. As the study was concerned with understanding the phenomena in a real world setting there were no need for behavioral control over the subjects. Lastly the purpose is to understand the phenomena holistically. In more detail it involved understanding what the servicification readiness is and then how the organization and its dynamics could explain why servicification readiness is at its current level.

The research strategy was selected with the above in mind. Several strategies were considered and researched before selection. Based on the results of the research a case study approach where selected.

A case study is particularly suitable to answer how and why research questions (Yin, 2009; Voss, et al., 2002; Eisenhardt & Graebner, 2007). It is also suitable when studying contemporary events and where no behavioral control is required. Other characteristics of case studies qualify it for selection. It is suitable when wanting to fully understand a phenomenon in its natural setting and context (Voss, et al., 2002). A case study is also a suitable method for descriptive studies (Yin, 2009).

2.2 Research design

After the research strategy where selected the next step was to decide on a research design. An initial step is to decide if a single or multiple-case design is appropriate. Multiple-case studies are generally better in terms of possibilities to generalize. It is however cumbersome and requires much time and resources. Single-case studies are more appropriate where the theory describing the phenomena is well- established (Yin, 2009). It will result in a more in-depth understanding of the phenomena in a real world setting if applied correctly (Voss, et al., 2002). A single-case study is appropriate taking into account that servicification research is in the general case well established and that the purpose is to understand it in a real-world setting. Lastly there are also time and resource constraints that need to be taken into account.

A single-case study approach where therefore selected. There are two alternative approaches when designing a single-case study; holistic or embedded case studies (Yin, 2009). Holistic studies focuses on one unit of analysis. Embedded case studies focuses on several hierarchically arranged units of analysis.

An embedded approach where selected. It was deemed necessary to include several units of analysis if one where to fully understand the servicification readiness and how the organization of the technology- and product-centric organization will affect the level of servicification readiness. The units of analysis in this case are the company, departments and individuals. Worth noting is that individuals in this case are referring to skills, processes, methods and values that individual employees use in day-to-day operations.

Not their personality, beliefs or motivations.

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The process of the study where selected after the strategy and general design where put in place.

There are several models available describing the process of case studies. Eisenhardt (1989) presents an 8 stage model whereas Collis (2014) outlines 5 steps. These models where combined resulting in the process presented below:

1. Defining research question 2. Case selection (see 2.2)

3. Preliminary investigations and instrument selection (see 2.3) a. Literature study (see 2.3.1)

b. Synthesis of literature and instrument selection (see 2.3.2) 4. Data collection (2.4)

5. Data analysis (2.5)

6. Relating data to theory (2.6)

7. Report writing. This will be done iteratively following the methods outlined in Blomkvist and Hallin (2015)

2.2.1 Case selection

When selecting what company to study it is important to identify a number of suitable companies first.

The company is then selected from this selection. It is also important to further focus the selection when an organization has been selected. This by deciding what within the organization that are to be studied.

The selection of companies should be selected with the purpose of identifying supporting or contrasting evidence (Eisenhardt & Graebner, 2007; Voss, et al., 2002).

Servitization is described as a strategy which allows companies in mainly high-cost countries to increase competitiveness. The belief is that movement towards servitization is a strategy that creates value by developing capabilities that are both more distinctive and sustainable compared to pure product offerings. It is also makes the replication of one’s offering more difficult (Baines, et al., 2009). This in turn will make it easier to defend against competition based in lower cost countries, companies that compete with price and those with greater resources (Baines, et al., 2009). Companies have however been slow to adopt the methods despite its alleged usefulness as a strategy to strengthen competitiveness.

This is attributed to the transition from product-centric to servitized as being difficult for already well- established product-centric companies (Tukker & Tischner, 2006). One Explanation is organizational inertia. Others include that the reforms necessary is in stark contrast to what is considered appropriate from the current operational and strategic standpoint of the company (Martinez, et al., 2010).

Case selection

The facts laid out above where taken into account when selecting a group of companies and a case. Two possible approaches were considered when selecting the. These where selecting a company that has either are in the middle of or has completed their transformations or companies that are yet to servitize.

Servitized or servitizing companies allow one to investigate what in the transition where difficult and why they succeeded. The other allows one to understand what the readiness is and why that is the case. The alternatives of studying companies which are yet to servitize were selected. This as previous research has mainly focused on companies that are in the middle of or have completed their transformation.

Focusing on companies which are yet to servitize would therefore expand the field and generate new and interesting insights.

Further criteria’s were developed after it was decided to focus on companies with low readiness.

Several guiding principles were considered. These included compatibility with available resources;

offices within reasonable driving distance, access to all relevant departments and Swedish or English speaking staff. Technology- and product-centric companies with hardware focus were the focus as it was hypothesized that the contrast compared to servitized companies would be the biggest. Selecting companies which based their competitiveness in technical excellence within an industry where

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technology is quickly maturing where also of interest. These criteria should result in a selection of companies where servitization could be a good solution for future competitiveness but where the necessary changes are difficult to implement. This resulted in the following list of criteria:

 Company based in or close to Stockholm and it suburbs

 High level of vertical integration with major departments at swedish site

 Swedish and/or English as company languages

 An openness and good access to the organization and its systems

 Innovation and technology intensive business

 Majority of hardware based products in product portfolio

 30+ years old

 One of or the market leader within their industry/segment

 Well established and traditionally product-centric.

Several organizations were identified using the criteria above. Only two were interested enough to agree to a meeting. Literature also suggests that a company should be selected at random from this population (Voss, et al., 2002). This was not possible in this case as only one could accommodate. The company selected matched all the criteria.

The next step after selecting a company is to decide what within the company that should be studied. This selection should be directly connected to the research question and purpose of the study (Voss, et al., 2002). The 3 units of analysis served as the first delimitation. The literature study and research question were then used to decide in more detail what should be studied. For more details on selection see data collection section below (section 2.4).

2.3 Preliminary investigation 2.3.1 Literature study

The literature study where structured in accordance with the methods described by Xiao and Watson (2017). There are 3 ways of searching for literature; Electronic database, forward search and backward search. Several electronic databases should be used to maximize coverage (Xiao & Watson, 2017). KTH Primo and Google Scholar where used in this case. Search words used included; “servicification”,

“servicification strategy”, “product service system”, “service centered logic”, “servicification of manufacturing”.

The search results were then screened for inclusion. The first step was reading the titles of the articles returned to determine if the where relevant. If an articles relevancy were uncertain they were included rather than discarded. The next step was to assess relevance using the abstract. The relevant papers were then read to assess their quality (Xiao & Watson, 2017). All the relevant findings were summarized in a document in preparation for analysis and synthesis.

The literature study had two phases as suggested by Xiao and Watson (2017). An initial literature study was conducted at the outset of the study. The purpose was to get a feel for the field and the results were used to formulate the initial research question. This overview was also used to develop the criteria used when selecting which companies to study. The second phase were more structured and spanned the entire time of the study. The literature search was more intensive in the beginning. This as the purpose was to build a theoretical foundation that could be used for the reminder of the study. The goal of this phase should be to support the empirical study and sharpen the research question (Yin, 2009;

Xiao & Watson, 2017). This was achieved by using the literature study and empirical findings interchangeably. This as empirical data and theory must be used together if any meaningful contributions to the field are to be made (Van Maanen, et al., 2007). This was achieved by adjusting the

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data collection according to the finding of the literature study and letting the data steer and focus the search for relevant previous research (see section 2.3.2 for more details).

Forward and backward search was also used extensively during the study (Webster & Watson, 2002). This was however limited to articles which were considered of central importance to the studied.

The where sources which themes laid the groundwork for the coming analysis. Sources that served the purpose of clarifying, adding context or filling gaps where therefore not used for forward and backward passes.

2.3.2 Synthesis of literature and tool selection

A theoretical framework is important to define the delimitations of the study and also help to motivate these (Long & Godfrey, 2004). The role being to guide data collection and selection of the methods used to collect said data. A clear connection with theory also make it possible to test and validate the findings of the study (Eisenhardt, 1989). Voss, et.al. (2002) argues that a framework should always be constructed to provide the research with structure.

A framework was constructed following the recommendations above. The framework was constructed iteratively refining it as new sources were found and incorporated. The framework was constructed in accordance with the methods described by Xiao & Watson (2017) and Webster &

Watson (2002). Sources deemed to have sufficient quality thru the process above (section 2.3.1) were analyzed. The goal was to identify descriptive themes and patterns. These were used to identify themes thru thematic analysis. The sharpness of the themes were improved throughout the study as new literature were added. The major themes, from now on called dimensions for clarity, have however remained constant.

The framework was then used when selecting tools to use during the data collection. The selection was structured around the dimensions of the framework. The dimensions were considered one by one. All were related to the research questions by adapting the research questions to the specific dimensions thru sub questions. The different units of analysis where also taken into account when selecting methods in accordance with Webster & Watson (2002). Several methods were selected. This is prudent where the variables are many and data points are relatively few. Several methods make it possible to triangulate and strengthen the conclusions made despite the sparsity of the data (Yin, 2009).

2.4 Data collection

Several methods were used to collect data for triangulation purposes. The methods are presented and described below.

2.4.1 Orientational seminars

A number of introductory and orienting seminars where hosted at the onset of the study. The purpose was to present the ideas of the researcher and understand the needs and expectations of the organization being studied. The goal was to find alignment between these interests.

Introductory seminar

An introductory seminar was hosted in early December. The idea was pitched to a company representative. The company also described their expectations and possible limitations to the level access that would be granted. The discussion centered around how the studied could be carried out not what it would be about. The research question was not formulated or altered by the company for the duration of the study.

Navigational seminars

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2 navigational seminars were hosted at the company during the time that the literature study was conducted. These centered on practical issues connected with the data collection phase. Methods were discussed including how much access would be granted. The progress of the literature study was also presented. This so that the company contact could use its organizational insights to advice who and which departments would be of interest during the data collection phase.

2.4.2 Interviews

Interviews are a very common tool for case studies (Yin, 2009; Voss, et al., 2002; Eisenhardt &

Graebner, 2007; Blomkvist & Hallin, 2015). This was also the case for this study which relies heavily on interview data. The interviews were mainly formal but also ethnographic (Arsel, 2017). The ethnographic interviews were conducted to take advantage when opportunity presented itself. The results of the ethnographic interviews were recorded in the field notes and thoughts of the researcher.

20 formal interviews were conducted in the months of April-May. All interviews were conducted on site at the offices of Tech AB. They lasted between 42-62 minutes and were semi-structured. All the interviews were recorded as all participants expressed their consent. The researcher is the only one with access to both notes and audio recordings, all of which will be erased after the report is published. Notes were also taken during the interview. The notes were complemented with thoughts of the interviewer after the interview was terminated. The notes served as the basis for the data analysis.

The audio recording was used to clarify if there were any uncertainties. Not transcribing and coding the transcriptions were due to time constraints.

The interview itself followed the three steps outlined by Arsel (2017). First the research and interviewee was presented. The interviewee was then verbally asked to consent after the interviewee had described how the data would be used and processed. The interview then commenced following the interview protocol. Probing was used, asking follow up questions when deemed interesting or necessary (Arsel, 2017). A little small talk was allowed before the interview to build rapport and improve trust.

Interview protocol

An interview protocol is an important tool to focus interviews and keep it on point. Interview questions serve the role of connecting the theoretical basis of the study with the empirical data. This is achieved by basing the interview question on the research questions of the study (Arsel, 2017). One can consider it an act of translation; adapting theoretical and abstract research questions to the context and vocabulary of the interviewee and his environment. This was achieved by using the theoretical framework constructed prior to this phase. The dimensions were used and the data needed within each category were identified. The researcher then considered what kind of question that could be used to capture said data. Understanding what metrics that were actually used were for example translated in to the question:

“What have you done at the end of the year for your boss to give you a pat on the back?”.

An interview protocol does not need to be fixed but should be allowed to evolve and adapt (Arsel, 2017). This was the case for this interview. Questions were changed were it was deemed necessary. One section was the same for all interviews and one was adapted to the specific role and purpose of that interview. The units of analysis were also taken into account. Questions were constructed to answer questions regarding the organization, departments but also individuals within the organization.

Interviewee selection

Arsel (2017) notes that interviewees are rarely selected at random. They are instead selected to fit some criteria or because they are deemed to have insights relevant to the study. This was the principle use when selecting interviewees. The theoretical framework was used much in the same manner as when

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constructing the interview protocol. The dimensions were used to asses who within the organization were the most likely to have the information needed. On-site observation, the organizational chart and the company contact were used to identify the correct set of people. Managers and product managers were mostly the focus (see table 1); this due to their role in strategy selection, long-term planning, definition of new products and what angles to pursue in the future. These are all important to understand particularly why the servicification readiness is what it is. The assessment was that operational considerations and what the current level of servicification readiness is could be understood thru observation and

ethnographic interviews. The operational side of things was however touched upon to some degree during the interviews. It was therefore not deemed as necessary to interview employees with a more operational role.

2.4.3 Observation

Observations forms an important part of the data used in the study. The observations were made from January-June 2018. The company gave full access and much of the work was done on location at their offices. The observations made can be divided into two main dimensions; exploratory and descriptive.

The data was gathered in several ways listed below:

 Observing meetings

 Observing employees at work

 Checking whiteboards and project process board

 Looking thru presentations

 Going thru the intranet and participating in town hall meetings

 Studying the management system

 Other sources including posters, notes, signs, and more

 Informal conversations with employees

Exploratory

Exploratory observations were mostly made at the outset of the study. The purpose of the observations was to better understand the organization. Questions which were answered included understanding the

Tabel 1, interviwees of the case study

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role of the departments, the hierarchy in place, how reporting was done, what strategies are in place, which metrics are used, products and service are they providing to customers and more. The findings were only to a degree written down and were mostly committed to memory. Pieces of information deemed relevant to answer the research question were written down as parts of the field notes. The methods used are the ones listed above.

Targeted

Observations were also used as a tool to double check and broaden understanding. Important areas where identified thru the interviews and observations were then used to gather more data within these areas. The same methods were used as for the exploratory observations but the purpose was narrower and more targeted. An example would be a claim that processes were indeed in place for information gathering. This was further investigated by looking thru the management system, process charts and informally talking to ones named in the process. Conclusion made were noted and used in analysis and discussion.

2.4.4 Survey

A small survey was conducted in May 2018. The survey was sent to all employees at the Swedish site using the survey software Questback. The employees were contacted by email containing a link and a short description of the purpose of the survey. It was clearly expressed that participation was completely voluntary. All answers were anonymous and this was clearly expressed in both the email and in the survey itself. The survey was given in both Swedish and English. 120 people replied to the survey giving a reply rate of around 30%.

2.5 Data analysis

This section describes how the empirical data was analyzed throughout the study. Other parts of the analysis such as building the theoretical framework, analyzing findings from the pre-study etc is described above.

The data gathered where analyzed in accordance to the methods described by Collis (2014). They refer to it as a general analytical procedure. They also argue that one should not wait with the analysis of data.

Doing this allows insights to further data collection and to fill holes in the data (Voss, et al., 2002). This general analytical procedure consists of three steps (Collis, 2014):

1. Reducing the data

2. Organize and display the data using diagram, matrices and similar. Codify and connect.

3. Draw conclusions and verify findings

A similar method is described by Flick (2014). The data should first be reduced. The reduction is driven by the purpose expressed in the research questions. The research questions are used to determine what is relevant and should be included in the future analysis. The reduced data is then classified, categorized and reorganized. Charts, diagrams, table and similar are useful tools during this process. The result is then compared to the literature. Input from both was used when analyzing the data.

Reducing the data

Data reduction was achieved in two ways. The research question and purpose was however used on both occasions. The first set of data reduction was achieved by focusing the data collection. One way was using the theoretical framework to determine what was relevant. Secondly, since the data analysis was done in parallel with data collection, the data collected early was used later to focus and increase the relevance of the data collected.

The data was also reduced when analyzing the data found. The interview notes and recordings, field notes, documents and other material was processed using the theoretical framework (constructed

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using the research question). If data was deemed not relevant given the constraints of the framework it was discarded. Borderline cases were kept to be assessed when all the data had been collected.

Structuring and categorizing:

The data was again categorized using the framework as a basis. All the reduced data points were categorized by assessing the fit with the dimensions of the framework. The most appropriate category was selected. If it matched several dimensions it was included in all of them.

The dimensions were then analyzed on by one. Thematic analysis was used using the literature study and the framework as a basis to identify themes within the data (Blomkvits and Hallin 2015). Ones themes had been identified they were given a working title and a short summary describing the theme.

Color coding, codes and tables were used extensively during the analysis. First when categorizing were each category were given their own color and category number. These were then used to arrange the data into the dimensions of the framework. Color codes were used a second time when identifying themes within the data. The entire set of data points was reviewed. This review resulted in several preliminary themes which were developed by considering the data and literature. The themes were moderately influenced by the theory and kept rather general to account for the single case study approach. The hope being that it would ensure good analytical generalization. These themes, or pseudo- hypothesis, were tested by color coding all the data points that supported the theme with their colors respectively. This gave an overview of how much the different themes had. The strong were kept and the weak disregarded. This process was repeated several times to identify the strongest themes.

2.6 Relating data to theory

An important and last step of the analysis was to relate the themes identified to previous research (Collis, 2014). The purpose of this exercise is to see whether the results of the previous analysis agrees or disagrees with current theory (Yin, 2009). This was done by going thru the themes identified one by one and. One point that Van Maanen, et al. (2007) brings up is that in times of disagreement between data and theory one must decide which one to trust. These instances were handled one by one. To determine what to believe both the context of the specific case company and strength of the data were taken into account. The conclusion made is presented in the discussion (see chapter 6. Discusion).

2.7 The case-company

The company studied will go under the pseudonym Tech AB. Tech AB is a multinational company with presence all over the world. They are headquartered in the USA. The Swedish subsidiary employees around 400 people and have its offices outside Stockholm. Almost all departments are represented at the Swedish site only excluding marketing. The organization in Sweden have high levels of autonomy and is in most but name a company in its own right.

The Swedish organization was founded around 60 years ago and has had its offices in Stockholm for all of that time. The company was purchased by the cooperation that it is now part of in the 1990s.

The company has a yearly revenue of approximately 1,3 billion SEK.

The Swedish site is developing and manufacturing high end and high tech products for a range of different markets and applications. All products are however based around the same core technology. A technology that the company has been developing since the company was founded. The company was founded to commercialize the technology that they are still using today. The company therefore has a long history of being technology and product-centric. The company has been both market and a technology leader since the company was founded.

The Swedish site is developing the cooperation’s premium and midrange products which are also manufactured at the site in Sweden. Cheaper products are manufactured in a factory in Estonia; it is managed by the Swedish site however.

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Servicification readiness: Determining the servicification readiness of product-centric companies

Servicification readiness

Determining the servicification readiness of product-centric companies

JAKOB FALL

Servicification readiness

By

Jakob Fall

Servicification readiness

Av

Jakob Fall

Abstract

Sammanfattning

Table of contents

Table of figures

Table of tables

Acknowledgments

1. Introduction

2. Methodology