CIRP Journal of Manufacturing Science and Technology 2 (2010) 136143

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CIRP Journal of Manufacturing Science and Technology

journal homepage: www.elsevier.com/locate/cirpj

How to design and offer services successfully

J.C. Aurich *, C. Mannweiler, E. Schweitzer
Institute for Manufacturing Technology and Production Systems, University of Kaiserslautern, Germany

A R T I C L E I N F O

A B S T R A C T

Article history: Available online 1 May 2010 Keywords: Product-service systems Service engineering

The growing demand for innovative services forces traditional product-oriented companies to perceive the potentials and strategic importance of services. Innovative services enable these companies to ensure their market positions and to achieve economical success. Due to this, it becomes necessary to systemize service design, development and management processes as well as to tightly integrate products and services. In this paper, methods and important elds of action regarding the systematization of services service engineering (SE) as well as the integration of products and services industrial product-service systems (PSS) are presented. 2010 CIRP.

1. Introduction Within the globalization and the merging of the international markets, the competitive environment for companies has been changed. Markets that used to be sluggish have transformed themselves and new players have come onto the market, which enhance a dynamic market behavior. Considering the causes for the increasing competition, the following factors apply in particular [1]:     Increased deregulation. Entry of new competitors. Increasing market saturation. Strategic overcapacity.

their competitiveness on the market. This development results in an extension of the service sector and could also be emphasized by the following trends:  Customer orientation through the product development.  Service oriented products.  Service share of the total value creation rises [4]. 2. Services 2.1. Denition of service In the research community, the denitions of service represent a wide range and up to now there is no generally accepted denition available. Finally the denitions can be divided into the following categories: enumerative, negative, institutional and constitutive denitions [3,57]. From a scientic point of view the constitutive denition is the most suitable. It denes service based on specic constitutive attributes [3,6]. Researchers dene different main characteristics concerning these attributes of services. In American literature there are four main characteristics that specify services. These characteristics are:  Intangibility: Services are predominantly performances of actions rather than objects that can be perceived using any of the physical senses.  Heterogeneity: Service products quality is subject to variability because services are delivered by people to people.  Simultaneity of production and consumption: Service products are typically produced and consumed at the same time-consumption cannot be separated from the means of production.

Due to these aspects, companies are necessarily forced to enhance their competitive position [2]. Concerning pure service companies (e.g. banks or public administrations) they have to be able to react on changed market requirements by adapting current services or develop new ones. The same applies to producing companies, which up to now focus on pure physical products. They have to offer physical products with added services, since innovative services are developing into a key unique selling point for production companies to set themselves apart from their competitors [1,3]. Because of the necessity for innovative services, service as well as production companies have to put their focus on services and service oriented products to keep up and/or increase

* Corresponding author at: Lehrstuhl fuer Fertigungstechnik und Betriebsorga nisation (FBK), Technische Universitat Kaiserslautern, Postfach 3049, 67653 Kaiserslautern, Germany. Tel.: +49 631 205 2617; fax: +49 631 205 3238. E-mail address: aurich@cpk.uni-kl.de (J.C. Aurich). 1755-5817/$ see front matter 2010 CIRP. doi:10.1016/j.cirpj.2010.03.002

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2.2. Service production The life cycle of service consists of the service design and the service realization phases. This life cycle is also called service production [16,17]. Thereby, the realization process follows the design process [16,18,19] and the design process occurs before the interaction with the customer [20]. The service design comprises the planning and conception of the service itself, as well as the preparation of service realization [9,19,20]. The service planning pertains to the identication, denition and selection of services ideas [19]. During the service conception, the different components of the service idea are determined in detail. At least within the preparation of service realization the needed resources, e.g. qualication of service technicians, are prepared [19]. Hence, the result of the service design is the willingness and capability of the service provider to deliver services that customers demand. As mentioned above, the service realization phase follows the service design phase. Within the service realization, certain activities (process dimension) were carried out on or with the external factors by the service provider using certain resources (potential dimension). The aim of the activities is to generate the demanded result (result dimension). The elemental characteristic of service realization is the interaction with the customer [20]. During this interaction the customer perceives next to the result also the potential preparation of external factors and process dimension being involved in the realization [22,23]. 2.3. Potentials of service The importance of the service sector has grown over the last years. Therefore, the competitive environment for service as well as production companies has changed. Up to now, competitive advantages basically resulted from emphasizing cost, image or quality advantages. Because of the worldwide adjustment of service and product quality, the companies are no longer able to raise their prole simply by the old way [1,3]. Service companies are forced to offer new and continuously improved services in the marketplace, whereas production companies are forced to offer product accompanying services to remain one step ahead of their competitors and at the same time to meet the customers needs [1]. Hence, innovative services provide the companies with a means for differentiating their products from similar rival products as well as for exibly individualizing and enhancing them according to the demands resulting from the geographical or cultural backgrounds of their customers. Thus, new market potentials and higher prot margins become possible as well as a higher customer loyalty and customer feedback are feasible [24]. Today, companies provide many different services, mostly grown by time or developed ad hoc. This behavior leads to a multitude of service offers and thus often to an inefcient service design and realization. Depending on this issue, todays service management weaknesses can be described as follows:  Advantages because of positive correlation between physical products and services are not fully realized, because of the sequential development of both.  Service offerings often do not meet the customers requirements and therefore lead to a lower use for them and a lower willingness to pay for services.  A low degree of industrialization, e.g. lack of standardization, rationalization and automation, of accompanying services lowers competitiveness.  A lack of standardization prevents a global marketing in a value creation network with a continuous level of service quality.

Fig. 1. Differences between products and services (according to Ref. [21]).

 Perishability: Services must be consumed as they are provided. In general, they cannot be saved, stored, returned or carried forward for later use or sale [6,8,9]. Authors in British literature also base their denitions on the just mentioned characteristics, but they also introduce relations between them. So they specify at least intangibility/immateriality and the integration of customer as the two main characteristics [6]. Thereby, perishability could be derived from intangibility/immateriality and simultaneity and heterogeneity could be derived from the integration of customer. German authors also consider immateriality and integration of external factors as the main service characteristics. Based thereon, every other characteristic can be derived [3,6,911]. Depending on the kind of service, external factors can be human resources as well as objects usually a physical product of the customer. Fig. 1 exemplarily shows other characteristics for services and shows the typical differences between products and services. Further on, services can be described in a phase-oriented point of view. Thereby, three dimensions can be distinguished [6]:  Potential dimension: Describes the willingness and capability of the service provider to deliver the demand service. Therefore material as well as human and information resources have to be allocated.  Process dimension: Services are considered as processes between providing and demanding units. The service itself is performed on or with these demanding units, and therefore the external factors are integrated in the process.  Result dimension: The result of the service has certain physical and non-physical impacts for the external factors [1,3,11,12]. Avlonities et al. also characterize the three dimensions as variables of a new service development. The service realization can be considered as a transformation process where the potential dimension represents the who-component, the process dimensions the how-component and the result dimension the whatcomponent of this transformation (Fig. 2) [13]. Some authors (e.g. [1,14,15]) extend the three dimensions with a fourth one, the so-called market dimension. The consideration behind this was that modern development processes must always be guided by market requirements to offer services that meet the customers needs. Furthermore, because of the integration of external factors into the service realization processes, an orientation towards the customer is necessary. The market dimension is considered as a spanning dimension, which covers the three others [1,11,14,15].

Fig. 2. Service transformation process [11].

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Fig. 3. Structuring of SE [5].

Fig. 4. Specic model types [34].

To avoid these problems, a systematical customer-oriented service development process is necessary that enables companies to develop services, which meet the quality and efciency required by the market. 3. Service engineering 3.1. Denition Concerning the design and development of services, in the 1970s and 1980s of the last century terms like service design and service development appeared in Anglo-American literature [25]. These elementary contributions are mainly marketing driven and focused on the integration of customer, e.g. the customer contact approach by Chase [26,27]. Further methodically works on service are realized, e.g. by Shostack [28] as well as by researches of the MIT (Boston), who worked on holistic development approaches for services. In Germany there a methodically discussions on service started just since the 1990s and the term service engineering was coined [26,27,29]. So, service engineering (SE) represents a young discipline, whose signicance in academic and practical work grows continuously. The SE approach tries to adapt, e.g. traditional engineering approaches to the service sector [30]. Therefore, it is characterized through an interdisciplinary integration of expertise in the use of constructive methods from engineering, business, computers science, etc. [31]. SE can thus be dened as the systematic development and design of services using suitable models, methods and tools [32] as well as the management of service development process (Fig. 3) [5]. Summarizing, SE aims at intensifying, improving and automatizing a whole framework for service design and development as well as service realization [33]. 3.2. Service engineering models Models for SE dene a service development process by determining process steps. Thus, as a rst step they build up a

basis for developing a continuous service quality [11]. Models comprise a detailed documentation concerning process steps, structures and responsibilities and support the planning and control of service development projects [26]. Aiming at structuring development processes and reducing complexity, there are three specic model types (Fig. 4) available:  Linear or phase models.  Iterative models.  Prototyping models. The three model types can be characterized as follows:  The linear or phase model is characterized by a sequential series of steps. Each step has to be nished and thereby provides the input for the next step. Beyond this, the results of the steps are suited as milestones. Because of the sequential structure, this model should only be used for services with a low complexity degree.  The iterative model has a high exibility and therefore it is suitable for complex services. In each step there is the possibility to return to a former step. Hence, a stable process, which offers a high service complexity and quality, is reached.  The prototyping model develops a service within a short time to market. This is the major advantage comparing the time to market to the other models. Afterwards the inherent weakness of this solution is corrected through a continuous redesign. In general the service complexity is low [19,34]. Fig. 5 shows the principles and success criteria for SE models. Famous models are based on a specic view concerning the service development, e.g. quality of service or integration of customer. There are many contributions of different authors and the following three models are exemplarily characterized:  Edvardsson and Olssons model is focused on the service quality, which is dominated by the perception of the customer. Thereby, the integration of the customer is a crucial factor for service

Fig. 5. Models for SE (according to Ref. [19]).

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success. Further on, the in-house demands and wishes, especially the employees ones, affect the quality. They also see their model as a reference model, which is individual created in each case, because of the integration of customer during service realization.  Ramaswamy focuses on the importance of the customer and his demanded requirements. He wants to dene quantitative attributes for services to dene relations to the demanded requirements. Thereby, the main design characteristics for the service offerings can be derived.  Jaschinski addresses new service developments as well as optimization throughout reengineering of existing services. Thereby, the main focus also lies on the quality of services and the continuous improvement of services [34,35]. 3.3. Service engineering methods For executing these different steps, when developing services in a precise and efcient way, different methods are available. Thereby, methods can be understood as specic instructions or guidelines that determine actions leading to an aim [11]. Among others, choosing methods for service design and realization depends on the situation of the company, the complexity of service and the experience of using the methods by the employees [5]. In literature there is only a small number of specic methods supporting service design and realization. Most of them derive from engineering, business and computer science [9]. Some of these methods can partially be adapted and some have to be modied to be used in the service sector. Further on, there are methods especially conceived for the service sector, e.g. service blueprinting [5,9,36]. In different phases of the service production, different methods can be used, e.g. supporting service quality or service productivity. For example, customer surveys or feedback reports of service technicians are used to identify customer requirements during service planning. In addition, morphological boxes help to generate new service ideas [11,36]. Quality oriented methods, such as Quality Function Deployment (QFD) or Failure Mode and Effect Analyses (FMEA), allow translating requirements into service objects and aim at analyzing potential failures in the complex system. Therewith services could be offered in an adequate quality. Later on, for the preparation of service realization, methods describing the operative processes of the service supply, e.g. service blueprinting, are necessary [36,37]. Fig. 6 shows some methods and their application during the service development as well as the unused potentials as a result of a survey including companies that provide services as core or add-on products. These companies belong to different business sectors and vary in company size [25]. 3.4. Service engineering tools For supporting the application of methods, especially during development processes, different (software-) tools are used. Tools are means that help using methods in a concrete manner on a detailed level [9]. Tools provide functionalities, which support the development process in an efcient way [11]. In practice, above all project management-, modeling- and simulation-tools, such as ofce- or groupware-software, are applied. Up to now, there are no standard tools for developing services available [11]. The previous sections describe approaches for a systematic service production throughout different models, methods and tools. Although there are many research activities concerning SE, there is still a lack of general strategic and operational instruments supporting the service engineering in an appropriate manner [25]. To meet the changed competitiveness, adequate service offerings

Fig. 6. Methods and their application during the service development (according to Ref. [25]).

are needed. These services must provide a high service quality as well as high service productivity and therefore, instruments for an improved service design and realization are necessary. Focusing on traditional product-oriented companies, their industrial customers expect to be provided with complete solutions, consisting of both physical products and non-physical services. For offering these solutions, the existing engineering approaches must be extended and new approached must be generated [38]. These approaches have to consider design and realization phases that do not separate products and services, but treat the two elements simultaneously within an integrated manner [39]. Hence, concerning the increasing signicance of services as well as the structures of traditional product-oriented companies, they have to take the chance to develop services systematically and therewith increase prot margins and the customers use. 4. Product-service systems Because of the changed market environment and therefore the necessity to enhance competitive position and to offer comprehensive solutions, companies have to establish new business elds or extend their existing ones. In order to promote the arising challenges, a product-service system (PSS) provides a promising starting point. The idea of PSS originates in Europe, especially the Netherlands and Scandinavia, in the late 1990s [40]. The major goal of PSS was to reduce consumption through alternative schemes of product use as well as to increase overall resource productivity and dematerialization [37]. Thus, the policy aimed at sustainable economic growth in combination with reduced pressure on the environment [41]. The rst generally accepted denition of PSS was given in 1990 by Goedkoop et al. [41]. Since then, most contributors have broadly adapted this denition. A PSS is mostly considered as a Product(s) and service(s) combined in a system to deliver required user functionality in a way that reduces the impact on the environment. Usually, it is seen as a competitive proposition [42]. Therefore, a PSS offers the opportunity to

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decouple economic success from material consumption and hence reduce the environmental impact of economic activity [40]. Although, the signicance of PSS has steadily grown in the research communities over the last years, up to now there is now general accepted denition available. Baines et al. summarized the most popular denitions of PSS in their paper and tried to derive a denition. Thereby, a PSS can be understood as an integrated product and service offering, that delivers value in use [40]. According to the capital goods industry, PSS are made up of a complex product core dynamically enhanced along its life cycle by services [43]. Thereby, the products are the physical or tangible components that provide the technical functions to the customer, while the non-physical or intangible service components ensure or enhance, respectively, the availability of these functions [39]. To provide the customer with a comprehensive service support, service offerings can be distinguished in the following service types:  Technical services (e.g. maintenance) aim at enhancing the physical product core.  Qualifying services (e.g. operator trainings) aim at improving the qualication of the operator.  Process-oriented services (e.g. application improvement) aim at improving the production processes of the customer.  Logistical, information-providing and nancial services (e.g. spare part supply, product information and leasing) aim at supporting the customers company [44]. Concerning the increasing service signicance, the changed customer demands and therewith the challenges capital good companies have to face, specic methodologies and tools that can provide the companies with a business wide guide for the implementation of PSS are necessary [42]. In the research community two main approaches for PSS-solutions have been emphasized over the last years. On the one hand, the focus is laid on specic business models for PSS and on the other hand on models, methods and tools for life cycle-oriented design and realization of PSS. 4.1. Business models for PSS For using the potentials of services by offering PSS, new business models have to be developed and provided to customers of the capital good industry. These customers mainly change their core competences from, e.g. manufacturing products to just developing and distributing products, so that they are expected to be provided with specic PSS-business models [46]. Business models are simplied descriptions of the mechanisms, which

companies use to create value. It consists of three main components:  Value proposition: Denes, which benet the customer or another partner of the company achieve within the cooperation.  Architecture of value creation: Denes, which benet the company provides. Thereby involved internal and external units and necessary transformation process are described.  Benet model: Denes the mix of benet sources and kinds of benet. Further on, because of the interaction of internal, i.e. company units, and external, i.e. customer or other partners, coordination and communication mechanisms need to be considered by business models [47]. Concerning business models for PSS, a wide range of cooperation between customer and PSS-provider and therefore a wide range of business models arise. For this reason innovative and exible business models, which describe the design of the customerprovider relation as well as their bonds and their settlements are needed [48]. Three main categories of PSSbusiness models can be distinguished:  Function-/product-oriented model: Selling the product in a traditional manner, while additional services are included (e.g. maintenance, repair).  Use-/availability-oriented model: Selling the use or availability of a product that is not owned by the customer (e.g. leasing, sharing).  Result-oriented model: Selling a result or capability instead of a product (e.g. selling parts instead of the facility for manufacturing them) [40,48,49]. These models can be subdivided into several individual business models, where the models differentiate throughout the following criteria:  Ownership of the product (in this case of the manufacturing facility).  Operational personnel, maintenance personnel.  Location of the manufacturing facility, payment method.  Delivery of raw materials and supplies [33]. Fig. 7 presents a morphological box that shows the attributes of the model characteristics [45]. As described above, it becomes clear, that the success of a company is founded in its business model, which needs to be redesigned to align strategic and operational objectives in order to offer the PSS [50]. Therefore the traditional business model with its

Fig. 7. Morphological box: characteristics of business models (according to Ref. [45]).

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four sub-models, based on the approach of Muller-Stewens and Lechner, has to be extended by a fth sub-model [51]. So, the ve sub-models are:  Value proposition model denes which products and services are offered to which customers and how a differentiation over the competitors can be achieved.  Marketing model is closely related to the denition of services to be rendered. It provides activities to identify and address the market requirements.  Benet model species what is sold and which services are put down to the customers account. An important aspect within this sub-model is price policy and the pricing itself.  Production model describes, in which way the products and services are generated by the own or an external company. Therefore, it is essential to examine the creation of value throughout the enterprise as a whole.  Service delivery model links the PSS-providers value proposition model to the customers production model and therewith closes the gap between the two different parties involved in a PSS offer [50]. Nevertheless, a successful PSS-business model, which achieves a high benet for both customers and companies has to consider all ve sub-models and their relations [50]. Further on, business models are customer individual solutions and therefore have to be checked in each case on their suitability. Moreover as mentioned above, new business models need a strategic and operational adjustment for both internal and external processes [46]. Summarizing, the PSS-business models allow companies to create new sources of added value and competitiveness, since they fulll customers needs in an integrated and customized way. Hence, they allow customer to concentrate on core activities, they build unique relationships with customers, they enhance customers loyalty and they can probably innovate faster since they follow their customer needs better [49]. Nevertheless, in the future there is still a need of methods, concepts and tools for life cycle-oriented business models that go beyond the use phase and are able to support a high benet for all parties involved in Ref. [52]. 4.2. Towards PSS life cycle management 4.3.1. Life cycle phase-oriented methods The increasing global competition and the necessity to offer new better value by combining products and services within PSS, results in internal and external complexity of companies structures and processes. Thereby, a successful offering and realization of PSS extends the companies involvement and responsibility of products throughout their entire life cycle, although the product is already with the customer. This means that companies have to shift their focus from designing and selling products only, to support and accompany their usage and end-of-life [53,54]. So, they have to take care about life cycle phases that are usually outside the traditional  Life cycle engineering (LCE) comprises a multitude of functionand target-oriented rules and methods for life cycle-oriented product planning and design. Service planning and design are usually not considered therein.  Life time management (LTM) aims at enhancing the life cycle performance of products by means of services. In absence of systematic life cycle-oriented service planning and design, LTM frequently remains focused on single life cycle events (e.g. product failures).

Fig. 8. Companys point of view of product life cycle (according to Ref. [60]).

buyerseller relationship, such as take back, recovery of products and materials, reuse and refurbishment as well as remanufacturing [55]. Contrary to other business models, the life cycle management (LCM) of PSS focuses on the design and realization of required user functionalities over the whole product life cycle. LCM can be dened as a business approach for managing and optimizing a companys products throughout its life cycle, including a consistent set of models, methods and IT-tools for managing product data, engineering processes and requirements along the life cycle [56,57]. Therewith, LCM enables the manufacturer to overcome the interfaces between the different life cycle phases design, manufacturing, usage and end-of-life [58]. It optimizes the interactions of product design, manufacturing and life cycle activities. With LCM the manufacturers aim at supporting the customer in using the physical product in an effective, economic and resource-saving way [59]. Concerning the life cycle of a PSS from the companys point of view, it starts with the design phase, followed by the realization phase. It ends with the remanufacturing or end-of-life phase (Fig. 8) [60]. In order to maximize product performance as well as to promote the implementation of PSS in practice, LCM can be taken as a promising starting point. 4.3. Product-oriented LCM Current product-oriented LCM concepts distinguish between life cycle phase-oriented and spanning methods (Fig. 9). Their main ideas and decits can be summarized as follows [59].

Fig. 9. Life cycle phase-oriented and spanning methods (according to Ref. [60]).

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 Product cycle management (PCM) is targeted on closed loop systems for material and information ow. Insufcient contact between manufacturers and their industrial customers, resulting from discontinuous LTM hampers the establishment of PCM. 4.3.2. Life cycle spanning methods  Life cycle information and knowledge management tools provide powerful means for consistent product data and information management. However, information gathered during the product servicing is only seldom included therein.  For evaluating the overall economic and ecologic effects of products, life cycle costing (LCC) and life cycle assessment (LCA) can be applied. Though they can also be used for assessing specic product benets of individual customers, the necessary life cycle information is often not gathered systematically or not available. Life cycle-oriented process management aims at standardizing and controlling the interfaces between the product planning, design and realization processes, carried out along the life cycle [58]. This does usually not include either service design or realization processes [43]. 4.4. PSS oriented LCM In the research community some proposals of a framework for LCM in the context of PSS already exists. Following approaches are presented and described exemplarily. Known as the Braunschweig Framework of Total Life Cycle Management, a systematic and life cycle-oriented framework for a life cycle phases comprehensive point of view on products and the corresponding processes was established [54]. In a comparable way, Aurich et al. present in its paper a concept for PSS-LCM that considers customer-oriented planning, integrated PSS-development, knowledge based PSS control and life cycle-oriented process management. With this concept companies are able to shift from a traditional product manufacturer to a full-service-provider. For this, suitable methods and tools for each life cycle phase were established [43]. Further on, approaches aiming at specic life cycle phases are already available. For example, Lindahl et al. present a methodological approach for creating integrated product and service offerings within the so-called integrated products and service engineering (IPSE) during the planning and development phase. The aim with IPSE is, to generate and optimize offerings with a combination of products and services that satisfy an identied customer need, and at the same time increase the competitiveness of suppliers. Although IPSE provides methods for the production phase, it also incorporates the use and end-of-life treatment phase [61]. Aurich et al. presents an approach for a continuous improvement of PSS during the PSS-realization. Therein, the design of the organizational and operational structure of the creation network as well as the continuous product and customer feedback are described [62]. The approach of Sadek provides designer with means to generate customer-oriented PSS-solutions in the early phase of PSS-development. Therein a heterogenous modelling of the physical and non-physical PSS-components by the use of a function, object and process-oriented view is possible [35]. Similar to the PSS-business model topic within the means of PSS-LCM there is still a lot of research work to do. One of the main and partly most difcult goals is to extend the existing approaches with service aspects. Thereby the narrow perspective of some approaches, e.g. an ecological perspective, can be enhanced to a more comprehensive one. Beyond this, the integration of means for

PSS-LCM approaches with already existing organizational solution has to be forced. Further on, different life cycle phase-oriented and spanning methods must be analyzed and evaluated concerning their complement possibilities. 5. Conclusions and outlook The presented paper shows that the success and competiveness, especially in capital goods industry, today mainly depends on the offered services. Hence, services provide the companies on the one hand with means for differentiating their products from technical similar rival products and on the other hand with means for individualizing their products concerning the different demands of their customers. Therewith higher prot margins become possible. For offering services in a competitive way a systematic engineering, similar to the engineering of physical products, is necessary. This paper presented the approach of service engineering (SE) and its different models, methods and tools. Further on, the approach of product-service systems (PSS) is described, because customers of the capital goods industry expect to be provided with complete solutions, consisting of both physical products and nonphysical services. For offering PSS the companies have to fulll a change, which could be realized in to different ways: developing specic business models or offering life cycle-oriented PSS. Therefore, the two different ways are described in this paper. Just now, in difcult economic times, services offer companies the possibility to new business areas and perhaps help them to absorb turnover or even lower the losses. Another important aspect in todays political and global economic discussions is the environmental impact of industries and their products. By considering the beginning of the PSS approach and its aims to reduce consumption through alternative schemes of product use as well as to increase overall productivity and dematerialization PSS offer the opportunity to lower the pollution and damage of the environment in a signicant way. So, future research activities have to consider these ecological aspects and should concentrate on developing eco- or green-PSS. References
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