Service Dominant Logic –how to systematize service

businessCase: Siili Solutions plc

Seppo Kuula Erkka Niemi Harri HaapasaloUniversity of Oulu Aalto University University of Oulu

RESER 2015 – Innovative Services in the 21st Century 10.-11.9.2015

1. Introduction 2. Literature3. Methodology4. Discussion5. Conclusion

Content

Doctoral candidate at University of Oulu. Chief Executive Officer at Siili Solutions.

PhD candidate, Information Systems Science at Aalto University. Chief

Development Officer at Siili Solutions.

Professor and the Head of Industrial Engineering and Management

at the University of Oulu.

Research team

Seppo KuulaUniversity of Oulu

Erkka NiemiAalto University

Harri HaapasaloUniversity of Oulu

The main aim of our research is to describe cornerstones for systematizing co-creational service dominant business logic.

Value co-creation requires a change in the dominant business logic from ‘making, selling and servicing’ to ‘listening, customizing and co-creating’.

Because customer is always seen as a value creator, value co-creation can be also seen as Pull System, which is an integral part of Lean Thinking and Lean management.

We review literature to find out what are the approaches behind service dominant logic and value co-creation in service marketing, how the value stream optimization based on Lean – philosophy was aligned with the other encountering theories, and then are creating the encountering framework for systematically utilizing the service dominant logic in business-to-business environment.

Introduction

3. Literature

Vargo & Lusch were presenting SDL framework 2004, exploring it through in details 2008. 2014 they were presenting original foundation points in four axioms:

1. Axiom 1 was underlining FP1; Service is the fundamental basis of exchange. Service is always exchanged to service (operant resources).

2. Axiom 2 was underlining FP6; The customer is always a co-creator of the value (interactive value creation process).

3. Axiom 3 was underlining FP9; All economic and social actors are resource integrators. Value creation is network of networks.

4. Axiom 4 was underlining FP10; Value is always uniquely determined by beneficiary; value is experiential and conceptual.

Service Dominant Logic

Lean thinking is having its roots in Toyota Production System (Ohno, 1988). Lean thinking was studied, explained and popularized by Womack & Jones 1996, and later explained in more details by Liker (2004).

Principles of Lean thinking are (Womack; Jones, 1996):

I) identify value (value is defined by beneficiary, pull-direction)II) map value stream (seamless resource integration with customer)III)create flow (cross-functionality, culture)IV)establish pull (co-creation with customer)V) seek perfection (iterative development)

Lean Thinking

Payne et al. (2008) developed a conceptual framework for understanding and managing value co-creation between customer and supplier.

Bitner et.al. (2008) were creating Service Blueprint concept where encountering was divided to three subdomains; onstage, backstage and Support.

Framework for value co-creation

Payne, A.; Storbacka, K.; Frow, P. (2008): Managing the Co-Creation of Value. Journal of the Academy of Marketing Science 36, 1, pp. 83–96

In our empirical research we will use the Payne et al. (2008) framework for data gathering and analysis regarding the customer encounters of the case organization.

However, during the research period we ended up adding elements from three other frameworks (Bitner et al., 2008: Cova et al., 2002: and Ries, 2011) and propose an improved version in this paper.

Lean SDl Encountering Process

Kuula, Niemi, Haapasalo (2015): ” Service Dominant Logic –how to systematize service business”, RESER 2015

3. Methodology

ENVIRONMENT KNOWLEDGE BASE

DESIGN RESEARCHBusiness needs

• Strategic offering development

• Two customer cases of the primary case organization

Develop / Build• Lean SDL

encountering process

Justify / Evaluate• Experimental

business logic and encountering process development

Foundations• SD logic• Lean Thinking• Value co-creation

Methodologies• Design science• Interpretive case

study

ASSESS

REFINE

Business needs

Applicableknowledg

e

Relevance Rigor

Business contributionCompetitive advantage

Scientific ContributionEmpirical implementation of value co-creation framework

Research Approach

Picture adapted from Sami Laine (2015), Aalto University

2011 2016Sein, M.; Henfridsson, O.; Purao, S.; Rossi, M.; Lindgren, R. (2011): Action Design Research, 35, 1, pp. 37-56.

Longitudinal interpretive case study as a part of Action Design Research (ADR)

This research started in Finland in 2011 when a professional service company was looking for a unique competitive advantage and the first author was inspired by theories of SDL and Lean Thinking. The involved researchers are members of the management team in the case organization. The outside researcher together with involved researchers supported with scientific theories. We continued the interpretation of the data throughout the project, but decided to “step back and examine the interpretations of fellow participants” (Walsham, 2006) in June 2015 and to publish the findings.We aimed at analyzing and describing interpretations about encountering process rather than finding causal relationships (Gregor, 2006).

ADR stages: data collection & analysis

Sein, M.; Henfridsson, O.; Purao, S.; Rossi, M.; Lindgren, R. (2011): Action Design Research, 35, 1, pp. 37-56.

• Siili Solutions Plc (the case organization in this research) is a publicly traded management consulting and technology integrator company employing several hundreds experts in Europe.

• Finance corporation (Case 1) is one of the leadings in the Finnish financial sector, employing several thousands employees around of the country. Case conducted 2012-2015.

• Insurance company (Case 2) is one of Finland's most respected wealth manage-ment and insurance services provider, having hundreds of thousands private customers and tens of thousands corporate customers. Case conducted 2012-2015.

Case Organizations

4. Discussion

Cross-organizational value co-creation

Business, Technology and Excellence organizations are getting together in service related decision making, and therefore it is important to understand how the relationship can be leveraged and strengthened.

In service co-creation the Supplier processes are seen as a value steam.

Core competences are the value particles, and suppliers’ efficiency can be measured with value density (level of competency), and value stream density (optimizing utilization rate of value creating actions) based on Lean thinking.

Kuula, Niemi, Haapasalo (2015): ” Service Dominant Logic –how to systematize service business”, RESER 2015

5. Conclusion

• We conducted Action Design Research in a professional service environment in 2011-2015.

• In this article we introduced Lean SDL Encountering Process as well as Cross Organizational value co-creation approach.

• We offer a broadened view to Service dominant logic, some of the latest Service marketing studies, and Lean thinking.

• Moreover, we connect these together for being able to explore value definition, value stream, and especially Encounter between the supplier and customer in service innovation, creation and delivery.

Conclusion

Porkkalankatu 24 00180 Helsinki Finland

Tietotie 290460 Oulu Finland

Ohlauer Str. 4310999 Berlin Germany

ul. Sw. Antoniego 2/4 50-073 Wrocław Poland

www.siili.com