The presentation inspires to think about the past, present, and future of products, services, and solutions. It shows examples of companies making a leap into the solution business. It also illustrates the status of the existing research and describes future research opportunities. It's a mix of academic insights and practical implications.

1. Products, Services, and Solutions -
Past, Present, and Future
The Spring Servitization Conference 2014
Transformation: Drivers, Processes and Results
Heiko Gebauer
Business Innovation, Swiss Federal Institute of Aquatic Research
(eawag)
Center of Service Research, Karlstad University, Sweden
Aston, May 12-14

2. If services & solutions become more important, companies
must understand the rules

3. PAST

4. Services and solutions are nothing new ...
IBM 601 Multiplying Punch Caterpillar Tractor Company

5. Ted Levitt
(Harvard Business Review 1960)
“ … People don’t want to buy a
quarter-inch drill. They want a
quarter-inch hole… ”

6. Hilti„s strategic leap towards the solution business
Products Services Solutions
Fleet management
solutions (e.g. fee for
administering the fleet)
Quality & innovation (e.g.,
drilling, demolition, cutting,
sanding and screw
fastening systems)
Consumables (e.g.,
anchoring & installation)
Repair
Maintenance
Financial services
Theft-insurance
Destroy customer
value!
Add customer value, but
what customers do they
attract? Delivery
Maintenance
Repair
Replace
Purchase

7. Evolution of the research domain highlights two (three)
different phases
0
20
40
60
80
100
120
140
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Phase 1: Minor topic (until 1999)
Phase 2: Rapidly emerging research
domain (2000 to 2013)
Number of contributions1
Years
1 - REF("Managing the transition from products to services") OR TITLE-ABS-KEY("Product service systems") OR TITLE-ABS-KEY("System supplier") OR TITLE-ABS-KEY("Industrial services") OR TITLE-ABS-
KEY("Transition from products to services") OR TITLE-ABS-KEY("Service business development") OR TITLE-ABS-KEY("Solution provider") OR REF("A framework for analyzing customer service orientations in
manufacturing") OR REF("Restructuring towards a service orientation: the strategic challenges") OR REF("Go downstream: the new imperative in manufacturing") OR TITLE-ABS-KEY("Servitization") OR TITLE-
ABS-KEY("The role of soft factors in implementing a service-oriented strategy in industrial marketing companies") OR REF("Service strategies within the manufacturing sector: benefits,costs and partnership") OR
TITLE-ABS-KEY("After sales service") AND DOCTYPE(ar OR re) AND SUBJAREA(mult OR arts OR busi OR deci OR econ OR psyc OR soci) AND PUBYEAR > 1987 AND PUBYEAR < 2014
Phase 3: Maturity and stagnation in the
domain (2011 to 2013)

8. PRESENT

9. Product Services Solutions
Value
proposition
Industries
Strategic
focus
“We sell and
ensure high-
quality products“
“We improve
product efficiency
and effectiveness“
“We make the
customer more
successful”
We optimize your
shipping costs
We decrease the
handling costs for C-
parts
We prevent break-
down of ship motors
We improve your
logistic efficiency
Evolution from products to solutions

10. Evolution from products to solutions
Product Services Solutions
Strategic
focus
Investments
Dominated by
products
Service paradox
Dominated by
services
Value
contribution

11. Airbus‟ long way from the traditional product to
value-added services and solutions
Revenues in Billion (Euro)
• 7400 airplanes in operation
• Service revenues reach about 1.5
billion Euro (4% of total revenue)
• Deliveries increased from 305 to 612
Supply chain
Leasing
firms
Flight operators
Aircraft manufacturers
Component suppliers
Maintenance
Inte-
grated
• General Electric (50%)
• Lufthansa Technik (+5% p.a., 60%
external)
• Boeing (15%)
0
10
20
30
40
2003 2004 ... 2011 2012
Product revenue Service revenue
10.4% revenue growth p.a.
10.2% more deliveries p.a.
20% more service revenue

12. Five reasons why you should learn the rule for providing
services and solutions …
Complexity Product Services Solutions
Competitors Few Many Fuzzy
Offerings Homogenous Heterogeneous Individualistic
Geography Similar Localized Customized
Demand Sales forecast (un)predictable Customer forecast
Scope 1 to 3 1 to 15 1 to 15 X 3rd party
Adapted form Cohen et al. (2006)

13. Forecasting customers as „mutualism“

14. Adapted from Sawhney, 2004, Fischer, Gebauer, Guanjie, Gregory and Fleisch(2010)
Primary customer
activities
Where do business opportunities occur?
Supplementary
customer activities
SalesPre-Sales After-sales
Reconfiguration
Extension
How do
business
opportunities
occur?)
How to approach business opportunities through
services and solutions?

15. How to approach business opportunities through
services and solutions?
Adapted from Sawhney, 2004, Fischer, Gebauer, Guanjie, Gregory and Fleisch(2010)
Reconfiguration
Extension
How do
business
opportunities
occur?)
Primary customer
activities
Where do business opportunities occur?
Supplementary
customer activities
SalesPre-Sales After-sales
Exploration
Exploitation

16. Exploitation
Example – Bosch Packaging
Fischer, Gebauer, Ren, Gregory & Fleisch, (2010)
Exploitation
Parameter Exploitation
Example
Organizational
change
Incremental
Capabilities Operational capabilities
Value constellation
Improving existing value
constellation
Value contribution
Long-term, continuous
increase in service revenue
(15 to 30% in 10 years)

17. FUTURE

18. Parameter Exploration
Example
Organizational
adaptation
Radical
Capabilities Dynamic capabilities
Value constellation
Creation of a new value
constellation
Value contribution
Short-term, significant
increase in service revenue
Exploration of uncontested markets
Example - Hilti
Exploration
Fischer, Gebauer, Ren, Gregory & Fleisch, 2010

19. Service differentiation moderates the
customer centricity and innovativeness
Complexity of
customer
needs
Customer
centricity
Innovativeness
Business
performance
H3 (+)
Service
differentiation
H4 (+)
H2 (+) H1 (+)
H5 (-) H6 (+) H7 (-) H8 (+)
Based on Gebauer, Gustafsson, and Witell (2011)

20. Complexity of
customer needs
Customer
centricity
H3 (+)
H2 (+)H1 (+)
H5 (-) H6 (+)H7 (-)
H4 (+)
Innovativeness
Service
differentiation
H8 (+)
Business
performance
Service differentiation
Impact of
innovativeness on
business performance
Based on Gebauer, Gustafsson, and Witell (2011)
Service differentiation shows „a getting
stuck in the middle“ phenomenon

21. “Internet of everything” accelerates the evolution
from products to solutions
Product Services Solutions
Strategic
focus
Investments
Service paradox
Dominated by
products
Dominated by
services
Value
contribution

22. “Problematization” of present research leads to four future
research opportunities
Assumptions Observations Research opportunities
Service growth as an
“organic growth”
strategy
Internal service revenue
growth is only 50%
Merger Acquisitions
Focus on traditional
manufacturing
companies in mature
markets
Services and Solutions
relevant for many
industries
New empirical fields:
Industries Geography
Toward value-added
services and solutions
as a one way street
Multiple positions along
the product, service, and
solutions continuum
Combining different
business models or
reverse servitization
Organizational change
process
Lack of management
theories
Theory-building: Dynamic
capabilities, resource-based
view, knowledge-based
theory of the firm and so on

23. Thank you very much