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There is no cut-and-dried model for a company’s development into a service business

26.05.2010


The literature available on organisations and management provides better support for the improvement of current business operations than the development of new ones. Corporate literature largely describes the end results of the change, not the path taken to reach those results. Researchers in VTT Technical Research Centre of Finland, Aalto University School of Economics, and University of Helsinki followed the change of over ten companies from a product- and production-focused approach towards a service business over a three-year period. The result is a unique publication that also depicts how the companies floundered in the process of renovating their operations towards service business. The main thread of renovation and management comprises interaction with both the company’s own staff and its customers and network partners.

Service development is one of the means of gaining a competitive advantage. It allows a company to better meet its customers’ needs. A technology company’s transition into a service business requires identifying the developmental stages towards service business. It also requires developing a new kind of a joint learning method, involving the customers and network partners in the development of the services. During the transition towards a service business, companies must open up to their customers, and be able to utilise the know-how of their partners in service production.

As it changes into a service company, each company must act according to its own initial situation, and find its own development path. The companies must be aware of both their current and target business model. Similarly, the companies must evaluate their organisation and management policies, and their requirements for change. This is essential, as the current production-focused and product-focused management models hinder the transition towards a service business.

It is important that resources shared by the entire organisation are created, maintained and developed for identifying and testing the continuously changing service goal during the transition. It is also important to dare to try and if necessary fail. The companies must learn to see failure as an essential part of finding the right direction and methodology.

A new kind of leadership is necessary for building a service business. Its core characteristics are interactivity and the enablement of interaction within the company, with the customers, and in extensive networks. Changing organisational and management practices towards new interactivity is slow.

In the early stages of the transition, the main challenge faced by the companies is how to help their management and employees to step out of their comfort zone, i.e., to begin searching for new business proactively before operations hit a crisis. This means that the requirement for change must be realised, the weaknesses in old-style operations identified, a new operational principle found, and the operations modified correspondingly.

In reality, the change progresses through detours, retracing of steps, and repeating the same stages. During this development, it is essential that the need for a change, and the feasibility and sensibility of the new direction are proven to the staff.

Publication

Raimo Hyötyläinen and Maaria Nuutinen (editors) Mahdollisuuksien kenttä. Palveluliiketoiminta ja vuorovaikutteinen johtaminen. The Federation of Finnish Technology Industries 2010. The book introduces the field of service business management, and the role of management in the companies’ transition towards a service business. The book is part of a research project on the interactive organisation and management of service business operations, co-ordinated by VTT. New, in-depth knowledge on the organisation and management models of service business, and change in the service culture, was created during the project. The analysis and examination are based on a three-year co-operation with over ten companies.


Additional information

Maaria Nuutinen
Senior Research Scientist
+358 40 550 8615

Raimo Hyötyläinen
Research Professor
+358 40 558 5625

Iiro Salkari
Technology Manager
+358 40 525 4771

 

 

Additional information

Maaria Nuutinen
Senior Research Scientist
+358 40 550 8615

Raimo Hyötyläinen
Research Professor
+358 40 558 5625

Iiro Salkari
Technology Manager
+358 40 525 4771