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Case study

AURO – GraT Case Study

Introduction The following description contains a case study which was carried out during the development of the starting phase of the MEPSS methodology by GrAT. The goal was to have an early feedback on the usability of the MEPSS toolkit.

AURO is the leading company of natural paints. They have a high claim to their products and whole organisation with regard to sustainability, and to the final results in terms of function and perfection. As a part of a EU research project AURO developed a production technology to produce a natural paint using only water as thinner– with this technology they are the first und only producer who can fulfil the new EU decree for 2008 the EN 927. With this new technology AURO wants to

leave their usual niche market and the expensive distribution system via small specialised shops. The direct partner in the case study was the team of AURO Austria in Kleinglödnitz – a sister company of the German mother company producing most of the products for the Austrian and eastern Europe market. AURO Austria had an interest in investigation of new business concepts and possibilities for a given range of products. GrAT used this partnership for tool testing and improvement within the MEPSS project.

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How did the project start AURO provided the company background and could use the elaborated results, GrAT developed the methodology in a practical manner, used and visualised the methodical results.

The strategic goal of AURO case

Identify new businessopportunities:

Instead of selling only theproduct (paint)

+ technical and environmentalquality of the product (paints)

renewable resourcesesp. plant oil

- price compared with syntheticproducts (on base of 1 kg of product!)

Natural paint + service

The strategic goal of AURO case

Identify new businessopportunities:

Instead of selling only theproduct (paint)

+ technical and environmentalquality of the product (paints)

renewable resourcesesp. plant oil

- price compared with syntheticproducts (on base of 1 kg of product!)

Natural paint + service

Objectives of the partnership The strategic goal elaborated in cooperation with the management of the paint producer was to find new business opportunities to overcome disadvantages on the present market. PSS could potentially offer solutions to that situation by moving from mere paint production to a combined solution tailor made for customer demands.

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Processes tested and tools used The tools tested under this case study were focused on the first three phases of the modular MEPSS structure.

The MEPSS phase model

1. StrategicAnalysis

Understandingof the original

system.

Orienting the process

on sustainable

development

Gener

ating

of ide

as

bysc

enari

o desig

n

3. PSS IdeaDevelopment

How can theopportunitiessuccessfullybe utilised?

4. PSSDevelopment

5. Preparing forImplementation

Identificationof the mostsuccessful

design parameter.

Identification of steering

instruments.

Control of thesystem

behaviour.

2. Exploring Opportunities

Sustainability

Environmental

Social Econom

ic

Categories

Depletion of natural resources

Revenues

Labor practices & Decent work

Human rights; equality

Economic impacts on society

Costs

Dimensions

Damage to eco-systems (biodiversity)

Damage to human health

Investments

Toxic emissions

Acidifying emissions

CO2 emissions

Land use

Water use

Use of fossil fuel

Union rights

Health and safety

Employment

Child labour

Location of production

Sales

Investor relations

Marketing

Customer relations

Purchases

Aspects

The MEPSS phase model

1. StrategicAnalysis

Understandingof the original

system.

Orienting the process

on sustainable

development

Gener

ating

of ide

as

bysc

enari

o desig

n

3. PSS IdeaDevelopment

How can theopportunitiessuccessfullybe utilised?

4. PSSDevelopment

5. Preparing forImplementation

Identificationof the mostsuccessful

design parameter.

Identification of steering

instruments.

Control of thesystem

behaviour.

2. Exploring Opportunities

Sustainability

Environmental

Social Econom

ic

Categories

Depletion of natural resources

Revenues

Labor practices & Decent work

Human rights; equality

Economic impacts on society

Costs

Dimensions

Damage to eco-systems (biodiversity)

Damage to human health

Investments

Toxic emissions

Acidifying emissions

CO2 emissions

Land use

Water use

Use of fossil fuel

Union rights

Health and safety

Employment

Child labour

Location of production

Sales

Investor relations

Marketing

Customer relations

Purchases

Aspects

The case study development started from scratch therefore being a good indicator for usability of the tools in an early stage of the development process. The main question was how to concretise a vague vision by utilising the people-planet-profit approach, creating win-win situations, using local resources (materials, knowledge, peoples motivations, ...) based on the situation and culture of the company at stake and how to successfully prepare the design/assessment tasks in the following phases.

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Producing and selling more productsIdentify new marketsSolve legal or environmental or ethical problemsComeing near to the customer and his demandOptimise the use of a techniqueFocussing on core competencesUsing cascades in the life span of a product....

Different motives of actors

Producer of goods:

Provider

MEPSS Authors

Customer

Capital or cost reductionRisk reductionGuarantee for best techniqueGuarantee for actual modeUse added values....

Steps to sustainable developmentSteps to a more esthetics developmentSteps to more ethical businessMaking something new....

Create new businessCreate new marketsCreate higher values (and sell it...)Finding durable business fieldsCreate effectivity in resource using....

Flexible Start of Methodologysystem oriented user oriented

Producing and selling more productsIdentify new marketsSolve legal or environmental or ethical problemsComeing near to the customer and his demandOptimise the use of a techniqueFocussing on core competencesUsing cascades in the life span of a product....

Different motives of actors

Producer of goods:

Provider

MEPSS Authors

Customer

Capital or cost reductionRisk reductionGuarantee for best techniqueGuarantee for actual modeUse added values....

Steps to sustainable developmentSteps to a more esthetics developmentSteps to more ethical businessMaking something new....

Create new businessCreate new marketsCreate higher values (and sell it...)Finding durable business fieldsCreate effectivity in resource using....

Flexible Start of Methodologysystem oriented user oriented

A set of nine tools was used to start the PSS development process in the phase of strategic analysis. This set was completed by a range of tools from market and customer research which are also designed for use in an early stages of the process following the purpose to find new ideas.

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In detail the following processes were carried out: MEPSS process

Tools tested in AURO case study

Phase 1 Strategic Analysis

Step 1: Preparatory phase

Process 1 Getting prepared

Preparatory Company questionnaire

Process 2 Preliminary meeting – Decision node 1

Moderation tools, Market SWOT

Process 3 Project planning

Project management tools

Step 2: Stakeholder identification

Process 1 Definition of stakeholders

Stakeholder checklist, Stakeholder mapping

Process 2 Priorisation of stakeholders

Prioritise the key stakeholders

Step 3: Evaluation strategy

Process 1 Discussion of visions

Elaboration of visions and guiding models oriented on Sustainable Development, Theory of sustainable develoment, Exploring customer needs

Step 4: System Analysis workshop

Process 1 Workshop preparation Checklist for determination of variables Process 2 Performing System Analysis workshop

SWOT analysis, Moderation tools, Cross impact analysis, Value System Map, Interpretation of system behaviour

Step 5: Elaboration of results

Process 1 System Analysis results Value System Map, Interpretation of system behaviour, Development of scenarios and strategic options by variation of key variables

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Strategic Analysis - Preparatory Phase

Preparation The first step of the MEPSS methodology is rather a research step to get an overview of the situation and to identify a proper starting position for the PSS development. In our example on the one side the company, its history and profile needs to be taken into consideration.

Leading company in the natural paints market;According to a representative consumer interview AURO is the best known and best esteemed brand in the natural paints market

Market Position:

5,25 Mio. EUR (except AURO turnover of foreign sister companies)

Turnover 2001:

into all west european countries, North America, Asia;export share approx. 40%, growth rate export1997-2001: 15-20% p.a.

Export:

via ca. 700 ecologically specialized shops and craftsman's establishments as well as selected DIY outlets

Home Distribution:

Awarded - without exception - with the highest achievable test judgement in the leading german test magazines „Ökotest“and „Ökohaus“

Test Assessments:

100 products with focus on architectural paints and coatings (impregnations, laquers, stains, waxes, wall paints), in addition: home care products, adhesives, cleaning agents.

Range of Products:

55; 35 employees at the Braunschweig plantEmployees:

Braunschweig (Germany), Kleinglödnitz(Austria), Biel (Switzerland)

Production Plants:

1983 as private limited company; 1998: going public

Establishment AURO:

1972 Hermann Fischer & friends: Start of plant chemistry research1974 co-founding of the first plant chemistry manufacturer (Livos)

Background History:

Leading company in the natural paints market;According to a representative consumer interview AURO is the best known and best esteemed brand in the natural paints market

Market Position:

5,25 Mio. EUR (except AURO turnover of foreign sister companies)

Turnover 2001:

into all west european countries, North America, Asia;export share approx. 40%, growth rate export1997-2001: 15-20% p.a.

Export:

via ca. 700 ecologically specialized shops and craftsman's establishments as well as selected DIY outlets

Home Distribution:

Awarded - without exception - with the highest achievable test judgement in the leading german test magazines „Ökotest“and „Ökohaus“

Test Assessments:

100 products with focus on architectural paints and coatings (impregnations, laquers, stains, waxes, wall paints), in addition: home care products, adhesives, cleaning agents.

Range of Products:

55; 35 employees at the Braunschweig plantEmployees:

Braunschweig (Germany), Kleinglödnitz(Austria), Biel (Switzerland)

Production Plants:

1983 as private limited company; 1998: going public

Establishment AURO:

1972 Hermann Fischer & friends: Start of plant chemistry research1974 co-founding of the first plant chemistry manufacturer (Livos)

Background History:

Company profile AURO

Company profile AURO Taken from www.auro.de A second important part to be considered is the range of products produced and distributed by AURO:

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The AURO products at a glance

Aqua- water-thinnable, solvent-free -

PureSolid- solvent-free -

Powder products

- for self-mixing -

Miscellaneous

PaintsWoodstainOil and waxesPrimers

Oil and waxes

Oil, waxes and paints – containing solvents –Wall coatingsAdhesives, cleaning and care productsAWALAN (washing and cleaning products)Brushes

The AURO products at a glance

Aqua- water-thinnable, solvent-free -

PureSolid- solvent-free -

Powder products

- for self-mixing -

Miscellaneous

PaintsWoodstainOil and waxesPrimers

Oil and waxes

Oil, waxes and paints – containing solvents –Wall coatingsAdhesives, cleaning and care productsAWALAN (washing and cleaning products)Brushes

The AURO products at a glance Taken from www.auro.de

A third part of the research focused on the distribution structure and the market. In a preparatory team meeting a stakeholder map has been produced which shows all relevant actors in the system and the information flows between them (see picture on the right).

First picture of stakeholders and their relations

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Preliminary meeting – Decision node 1 This second process was started with a meeting in which the MEPSS experts and the management discussed the further steps of the project and agreed on a project plan. To gain an overview of the current situation, the main aspects were mapped by using a Market SWOT Analysis (strengths, week-ness, opportuni-ties and threats).

Opportunities

Threats

Weaknesses

Strengths

Market SWOT

- No impact on health in paint application

- Durability of the painted coating- Attractive to customers with

high environmental awareness - Nice smell- Natural, understandable product

- Perceived high price- Perceived difficulties in proper

paint application- Environmental image makes it

unattractive for large public, distrust on quality

- Very small market penetration- Difficulty to reach new market

segments

- Health regulation for professional painters is becoming more severe

- Disposal regulation for (professional and other) painters becomes stricter

- Wish of professionals and consumers to handle disposal correctly, and not have to worry about waste disposal

- Aggravated VOC regulation

- Synthetic paint is improving environmental performance

- Synthetic paint is far more accessible for large public and professional painters

- Environmental performance of the product as a unique selling point becomes less important

Opportunities

Threats

Weaknesses

Strengths

Market SWOT

- No impact on health in paint application

- Durability of the painted coating- Attractive to customers with

high environmental awareness - Nice smell- Natural, understandable product

- Perceived high price- Perceived difficulties in proper

paint application- Environmental image makes it

unattractive for large public, distrust on quality

- Very small market penetration- Difficulty to reach new market

segments

- Health regulation for professional painters is becoming more severe

- Disposal regulation for (professional and other) painters becomes stricter

- Wish of professionals and consumers to handle disposal correctly, and not have to worry about waste disposal

- Aggravated VOC regulation

- Synthetic paint is improving environmental performance

- Synthetic paint is far more accessible for large public and professional painters

- Environmental performance of the product as a unique selling point becomes less important

The strategies derived from this collection are shown in the following figure.

e.g. emphasise life cycle costs, offer contracting

solutions

Opportunities Threats

e.g. stress compliance potential of the product

e.g. stress additional (environmental) benefits in customer communication

Strengths

Weak-nesses

e.g. stress reduced life cycle costs compared to

conventional product, explore new distribution

channels

no healtheffects

durability

...

perceivedhigh price

small mar-ket share...

stric

ter

heal

thre

gula

tion

stric

ter

disp

osal

regu

latio

n

aggr

egat

ed

VO

Cre

gula

tion

... impr

oved

en

viro

n-m

enta

l per

-fo

rman

ce

of s

ynth

etic

pa

int

acce

ssib

i-lit

yof

syn

-th

etic

pain

t

...

Strategies derived from Market SWOT

Confront!Explicit!

Search! Avoid!

e.g. emphasise life cycle costs, offer contracting

solutions

Opportunities Threats

e.g. stress compliance potential of the product

e.g. stress additional (environmental) benefits in customer communication

Strengths

Weak-nesses

e.g. stress reduced life cycle costs compared to

conventional product, explore new distribution

channels

no healtheffects

durability

...

perceivedhigh price

small mar-ket share...

stric

ter

heal

thre

gula

tion

stric

ter

disp

osal

regu

latio

n

aggr

egat

ed

VO

Cre

gula

tion

... impr

oved

en

viro

n-m

enta

l per

-fo

rman

ce

of s

ynth

etic

pa

int

acce

ssib

i-lit

yof

syn

-th

etic

pain

t

...

Strategies derived from Market SWOT

Confront!Explicit!

Search! Avoid!

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This table reveals that a number of responses can be envisaged. For instance the basic strategy “Using strengths to take opportunities” suggests to stress the compliance potential of natural paints in the external communication. If the company seeks to “overcome weaknes-ses” the offering of contracting solutions may be a benifical option. The result of this process was a common understanding of the present situation, a vision of possible search directions (first ideas) and agreements on times, resources, team members and other management issues of the whole development project. It was agreed to continue with a System Analysis workshop involving a wide range of stakeholders.

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Strategic Analysis – Stakeholder Identification As a preparation for the System Analysis workshop the team elaborated in internal meetings and interviews a list of stakeholders to participate. For these topics the tools “stakeholder mapping” and “stakeholder prioritisation matrix” proved to be useful. The results are depicted in the following two pictures.

Definition of stakeholders

AUROAustria

Management

Employees

AURO Germany

Public authorities

Ecological networks

Technicalexpert

Districtmanager

Regionalprovider

Dealer

Privatecustomer

Businesscustomer

Public sector

Competitor

Stakeholder map AURO case study

AUROAustria

Management

Employees

AURO Germany

Public authorities

Ecological networks

Technicalexpert

Districtmanager

Regionalprovider

Dealer

Privatecustomer

Businesscustomer

Public sector

Competitor

Stakeholder map AURO case study

Prioritisation of stakeholders

interest

high

medium

low

low medium high

AURO Germany

Competitors

Employees

District manager

Publicsector

DealerPrivate customer

Businesscustomer

Technicalmanagement

Ecologicalnetworks

Management

Publicauthorities

interest

high

medium

low

low medium high

AURO Germany

Competitors

Employees

District manager

Publicsector

DealerPrivate customer

Businesscustomer

Technicalmanagement

Ecologicalnetworks

Management

Publicauthorities

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Strategic Analysis – Evaluation Strategy This step of PSS development is normally used to match and discuss different visions of the involved stakeholders and finally to identify appropriate indicators for measuring sustainability issues. As the guiding model of AURO and its whole value chain is clearly oriented on sustainable development, in this stage only processes were tested that are also useful for idea generation towards new PSS options.

Definition of visions The company´s vision AURO Natural Paints are manufactured according to the principles of "Gentle Chemistry". A considerable part of the production does not take place inside the factory, but in the midst of the environment, i.e. inside of living plants. This is the place where natural synthesis processes happen, powered by solar energy ("photosynthesis"), leading to an overwhelming wealth of precious natural substances. Such renewable raw material is taken by AURO, ennobled by simple, surveyable techniques, with low energy input and without hazardous waste. Natural Paints from such manufacturing processes are parts of perfectly closed material cycles, leaving no persistent remains in our environment. There are many positive arguments for ecologically consistent Natural Paints: natural, renewable raw material, ingredients fully declared, leading to high quality of life with a healthy room climate. The ecological balance sheet of our products makes them in fact less expensive than many conventional paints. AURO Natural Paints are available for many application fields inside and outside. 20 years of practical experience, thousands of satisfied customers and brandnew neutral certificates prove: Natural Paints can be technically even better than many conventional paints made from non-renewable synthetic resins! Source: www.auro.de

The vision of sustainable development – at a system level At this level of abstract thinking three so called “orientors” are crucial for possible development directions towards a more sustainable system:

1. the increase of variety, 2. the increase of relation density and 3. the increase of system dynamics.

All three “orientors” provide potential new ideas and action fields for creating PSS:

1. The increase of variety leads to system thinking (the customer is part of the system) and to customized solutions for every customer respectively every customer’s demands. From a company’s point of view one has to produce and deal with “customized-solutions in mass production” – the first symbolic keynote for new PSS.

Example, Auro surface service: “Our goal is to preserve surfaces with optimised technology” 2. The increase of relation density leads to a system with very close-mashed nets. This

means closing cycles in terms of organization, responsibility and interrelations; taking into account regional aspects of supply and demand, benefiting from “weekly markets” rather than the “world market” – the second symbolic keynote for new PSS.

Example, Auro surface service: A Service-Card leads to closed loops of responsibility

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from sides of the producer. 3. An increase of system dynamics leads to strategies according to the motto “more for

less” by stimulating existing forces and motivations within the system. You have to deal with the given resources of the system – intelligence, creativity, motivation, politics, materials, energy, etc. This motto “more for less” is the third keynote for new PSS.

Example, Auro surface service: Introducing a Service-Card for buildings is a way of monitoring the quality of a building, which could be favourable also for the evaluation procedure necessary for receiving public funds. Therefore the authorities may be interested in supporting corresponding initiatives.

Exploring customer needs To support these processes use was made of the tool called need and function analysis. It consists of

- Definition of the market - Improvement and understanding of needs and how to fulfil them - Optimising the method of need fulfilment

At first a market definition was elaborated and visualised. In the center of the illustration the main functionalities of the given products are indicated. Essential characteristics that could define possible new PSS ideas are put in contrast with their respective alternatives.

Decoration and maintenanceof wooden house parts and

furniture

Branded

Niche marketPaint & service

Households &house painters

Natural paint

Brush application

Brandless

Mass market

Sprayapplication

Synthetic paint

Pureservice

Industrial use

Market definition AURO case study

Decoration and maintenanceof wooden house parts and

furniture

Branded

Niche marketPaint & service

Households &house painters

Natural paint

Brush application

Brandless

Mass market

Sprayapplication

Synthetic paint

Pureservice

Industrial use

Market definition AURO case study

Market definition AURO case

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In a second step a means and chain analysis was carried out. This links the product attributes and the customer demands and values. The result is depicted in the next figure providing a suitable image for reflecting the current offer.

TerminalValue

InstrumentalValue

Psycho-socialConsequences

FunctionalConsequences

AbstractAttributes

Concreteattributes

Happiness

Self respect

Social acceptance

Good conscience

Trust

Personalexpression

Careful Engagement,belonging

Makedurable

Renew,change,restyle

Aesthetic,function,colour

HealthyLonglasting

Clean(-able)

Deco-ration

X NaturalNicesmell

Modeof use

Expensiveper kg,

not per m²

Colourspectrum

Product specificationnatural paint

Hierarchical value map AURO case study

TerminalValue

InstrumentalValue

Psycho-socialConsequences

FunctionalConsequences

AbstractAttributes

Concreteattributes

Happiness

Self respect

Social acceptance

Good conscience

Trust

Personalexpression

Careful Engagement,belonging

Makedurable

Renew,change,restyle

Aesthetic,function,colour

HealthyLonglasting

Clean(-able)

Deco-ration

X NaturalNicesmell

Modeof use

Expensiveper kg,

not per m²

Colourspectrum

Product specificationnatural paint

Hierarchical value map AURO case study

Hierarchical value map AURO case The third format of exploring customer needs is the needs and function analysis. A set of questions (see worksheet 17, MEPSS handbook) helps to identify all functions, needs, meanings and connotations fulfilled by the current product (or possible new PSS offer), in the present case these are the AURO natural paints.

Functional benefitsDecoration,Making wood durableRenewing or restylingHome interior, walls,Window frames,Aesthetic function,Make cleanable),Change/apply colour

Economic functions:Sales ware,Professional working material,A cost factor that mayreduce costs

Psychosocial benefits:Expression of personal style,Make a new house of your own,Leisure/hobby,Labour satisfaction,Aesthetic appreciation

Users and end users:Consumers do-it-selves, environm. concerned, educated, high income.Few SME prof painters working inniche market of ideology concernedconsumers, not for profit institutions(hospitals, schools) and SME`s.

Why natural paint?Personal expression (style)Care for own direct environment/health,Personal social engagement(environmental care),Natural outlook,Healthy way of painting, Nice smell,Feels like cleaning,Good consistence

Decoration and maintenance of surfaces with natural paint:

Optimising the quality of applying the paint

Right outlook and colour: colour advice

Courses in paintapplication

Hierarchical value map AURO case study

Functional benefitsDecoration,Making wood durableRenewing or restylingHome interior, walls,Window frames,Aesthetic function,Make cleanable),Change/apply colour

Economic functions:Sales ware,Professional working material,A cost factor that mayreduce costs

Psychosocial benefits:Expression of personal style,Make a new house of your own,Leisure/hobby,Labour satisfaction,Aesthetic appreciation

Users and end users:Consumers do-it-selves, environm. concerned, educated, high income.Few SME prof painters working inniche market of ideology concernedconsumers, not for profit institutions(hospitals, schools) and SME`s.

Why natural paint?Personal expression (style)Care for own direct environment/health,Personal social engagement(environmental care),Natural outlook,Healthy way of painting, Nice smell,Feels like cleaning,Good consistence

Decoration and maintenance of surfaces with natural paint:

Optimising the quality of applying the paint

Right outlook and colour: colour advice

Courses in paintapplication

Hierarchical value map AURO case study

Need analysis AURO case

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In case of natural paints the need and function analysis made clear which products and services new PSS could substitute (all kinds of paint for walls and paint for wooden house parts and could fulfil the functions of house maintenance and house refurbishing). And it made clear which functional and psychosocial benefits could be optimised. These are: `conservation’, `right outlook of the house’, and `personal expression of environmental care.’ This led to various PSS ideas, such as courses in natural paint application for hobbyists and professionals, colour advice and maintenance contracts. The results were generated by making the following associations:

• Conservation - make wood/walls cleanable, clean, equally coloured, long lasting paint, → best, professional application of paint → maintenance services and contracts + courses in natural paint application for professional painters

• right colour/outlook → colour advice • expression of personal style and sense of involvement→ courses in paint application

for consumers + paint disposal service.

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Strategic Analysis – System Analysis Workshop The System Analysis workshop is the central activity of the first phase. It has to define the common language between all different participating stakeholders, it has to create a model of reality that can be discussed and handled in a one-day-workshop. Furthermore it has to provide motivation changing processes on several operative levels.

Preparing System Analysis workshop For the preparation of the System Analysis workshop the following structure for the work- and information flow has been used in order to enable an effective process.

involved action input output tools

Moderation toolsVisualizationNavigation through

modular structureStakeholder mapping

System analysis

workshop

ModeratorManagement2-3 MEPSSstakeholder

Stakeholder map

Business dataMacro-, meso-trends

Business cultureIdea generators

Assessmenttools

Evaluation criteriaAssessment criteriaSystem simulation

MEPSSexpertsDesign

Crit 1Wcase

Crit 3Gcase

Crit 2Wcase

Crit 4Gcase

Scenario/ new ideas Scenario tools

prep

arat

ion

System organisation mapScenario story boardPlatform motivation map

Design tools

Preparation system analysis workshop

involved action input output tools

Moderation toolsVisualizationNavigation through

modular structureStakeholder mapping

System analysis

workshop

ModeratorManagement2-3 MEPSSstakeholder

Stakeholder map

Business dataMacro-, meso-trends

Business cultureIdea generators

Assessmenttools

Evaluation criteriaAssessment criteriaSystem simulation

MEPSSexpertsDesign

Crit 1Wcase

Crit 3Gcase

Crit 2Wcase

Crit 4Gcase

Scenario/ new ideas Scenario tools

prep

arat

ion

System organisation mapScenario story boardPlatform motivation map

Design tools

Preparation system analysis workshop

Preparation of System Analysis workshop The results of the preparation phase provided a good overview of the company and its market, a list of participants for the workshop and some initial ideas about possible result of the workshop. Moreover presentations about MEPSS, case studies and about the application of the System Analysis method have been prepared. Supporting documents and formats were used during the workshop.

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System Analysis workshop The System Analysis method contains four steps as indicated in the following figure:

Classification of variables (AURO)

1.2.

3.

4.

5.

6.

7.

8. 9.

10.

11.

12.

13.

14.

15.

16.

17.

18.19.

20.

21.

10

20

30

40

10 20 30 40Passive Sum

Act

ive

Su

m

Neutral

reactivebuffer

active critical

1. Outputindicators

total output, quantitymarket share

extent of utilisation/capacityshare of productproduct groups

......

Definitionof variables

Cross impactAnalysis

Systembehaviour

Value System Map

Structure of the adapted system analysis

Classification of variables (AURO)

1.2.

3.

4.

5.

6.

7.

8. 9.

10.

11.

12.

13.

14.

15.

16.

17.

18.19.

20.

21.

10

20

30

40

10 20 30 40Passive Sum

Act

ive

Su

m

Neutral

reactivebuffer

active critical

1. Outputindicators

total output, quantitymarket share

extent of utilisation/capacityshare of productproduct groups

......

Definitionof variables

Cross impactAnalysis

Systembehaviour

Value System Map

Structure of the adapted system analysis

Structure of the System Analysis Definition of variables In the first step a set of variables describing the system in question was elaborated. For this purpose a checklist has been developed covering the product life cycle at technological, organisational and cultural level. The figure below shows the overview of this checklist and the detailed structure for a selected variable (communication between manufacturer, dealer, supplier). In the AURO case study a number of 21 variables proved to be relevant for the system description.

Leve

l of d

escr

iptio

n

cultu

ral

orga

nisa

tiona

lte

chni

cal

internal external

Production Product Function Service Use Reg. aspects /Infrastructure

Output

Energy and resourceefficiency

Productioncosts

Soundness ofcompany

Paymentemployees

Job quality

Motivationemployees

Internalcommunication

Structure of Suppliers, trends

Sustainableconstruction Variability

of products

Function orientation

Structureof costs

Trends intechnique

development

Sustainablemanagement Development

of market

Transparent information and

promotion

Well beeing,security,health

Availabilityof the product

Operatingcosts

Service,maintenance

Quality ofproducts

Individualadaptationpossibilities

Environmentalaspects during use

Positive imageof the product

CorporateDesign

Scope of action for the user

Branchdevelopment(business)customer

Developmentinfrastructure

Applicabilityof the product

Communication betweenmanufacturer, dealer, supplier

Contribution to sustainable solutions in the specific branch

Healthyeconomicsituation

Self-confidentcustomer

Capability of innovationin company

Diversity of skills,products and processes

•compatibility problems (soft and hardware)•transportation problems •trade barriers

•amount, type and links of organizational levels •decentralised decision structure vs. international entwinements •mutual confidence and communication •appropriate size production facilities •reasonable transportation logistics

External influencesIndicators

This variable asks for the indicators of good communication and relations in the value chain across the companies borders.

Description

Communication between manufacturer, dealer and supplier

Variable name

Communication betweenmanufacturer, dealer, supplier

Preparation system analysis workshop

Leve

l of d

escr

iptio

n

cultu

ral

orga

nisa

tiona

lte

chni

cal

internal external

Production Product Function Service Use Reg. aspects /Infrastructure

Output

Energy and resourceefficiency

Productioncosts

Soundness ofcompany

Paymentemployees

Job quality

Motivationemployees

Internalcommunication

Structure of Suppliers, trends

Sustainableconstruction Variability

of products

Function orientation

Structureof costs

Trends intechnique

development

Sustainablemanagement Development

of market

Transparent information and

promotion

Well beeing,security,health

Availabilityof the product

Operatingcosts

Service,maintenance

Quality ofproducts

Individualadaptationpossibilities

Environmentalaspects during use

Positive imageof the product

CorporateDesign

Scope of action for the user

Branchdevelopment(business)customer

Developmentinfrastructure

Applicabilityof the product

Communication betweenmanufacturer, dealer, supplier

Contribution to sustainable solutions in the specific branch

Healthyeconomicsituation

Self-confidentcustomer

Capability of innovationin company

Diversity of skills,products and processes

•compatibility problems (soft and hardware)•transportation problems •trade barriers

•amount, type and links of organizational levels •decentralised decision structure vs. international entwinements •mutual confidence and communication •appropriate size production facilities •reasonable transportation logistics

External influencesIndicators

This variable asks for the indicators of good communication and relations in the value chain across the companies borders.

Description

Communication between manufacturer, dealer and supplier

Variable name

Communication betweenmanufacturer, dealer, supplier

Preparation system analysis workshop

Variables checklist

- 17 -

Cross Impact Matrix

AURO case study 1 2 3 4 5 6 7 8 9 10 11

Out

put

Sou

ndne

ss o

f com

pany

M

otiv

atio

n/In

tern

al

com

mun

icat

ion

Com

mun

icat

ion

prod

./sup

plie

r

Str

uctu

re o

f sup

plye

rs

Div

ersi

ty o

f ski

lls, p

rodu

cts

Tren

ds in

tech

niqu

e de

velo

pmen

t

Qua

lity

of p

rodu

cts

Ser

vice

/mai

nten

ance

Tra

nspa

rent

info

rmat

ion

Dev

elop

men

t of m

arke

t

1. Output x 3 1 1 0 0 1 0 1 0 0 2. Soundness of company 2 x 2 1 0 1 0 0 2 0 0 3. Motivation/Internal communication 0 0 x 2 0 1 1 2 1 1 0 4. Communication prod./supplier 0 1 1 x 2 2 2 2 3 1 0 5. Structure of supplyers 0 1 0 2 x 1 0 1 2 1 0 6. Diversity of skills, products 0 2 1 1 2 x 1 0 1 0 1 7. Trends in technology development 1 1 1 1 0 1 x 1 1 1 3 8. Quality of products 3 1 1 2 0 0 2 x 3 1 2 9. Service/maintenance 2 2 1 1 2 1 1 2 x 1 2 10. Transparent information 0 0 1 3 0 0 2 2 3 x 1 11. Development of market 2 2 1 2 1 2 2 2 3 1 x 12. Well beeing/health 0 0 1 2 0 1 2 0 1 2 2 13. Production costs 3 3 1 1 1 0 2 1 1 0 1 14. Operating costs 3 3 1 3 2 2 2 1 1 0 3 15. Scope of action for user 1 1 0 1 2 2 0 1 1 1 1 16. Positive Image 3 2 1 3 1 1 2 0 1 0 2 17. Availability/applicability 2 1 0 2 1 1 1 1 2 0 2 18. Development infrastructure 2 1 1 2 2 2 2 1 2 2 3 19. Branch development 2 1 1 2 2 2 3 0 1 2 2 20. Innovation orientation 0 0 2 2 1 1 2 3 3 1 2 21. Public authorities 0 0 0 1 1 0 2 0 1 2 1

Cross impact analysis In the next step interrelations between the variables have been calculated by using the so called cross impact analysis. This tool helps to identify the potential effect of every variable on each other. “If I change variable X, would the effect at variable Y be zero, middle or high (0 – 3 points)?” This question was applied to all selected variables in parallel group discussions. The results recorded in the matrix as shown below the sum is called “Active- sum” for the rows and “Passive sum” for the columns.

1 Output

2 Energy & resource efficiency

3 Production costs

4 Soundness ofCompany

5 Payment Employees

6 Job quality

1O

utpu

t

2

Ene

rgy

and

res.

effi

cien

cy

3

Pro

duct

ion

cost

s

4

Sou

ndne

ss o

fC

ompa

ny

5

Pay

men

t E

mpl

oyee

s

6

Job

qual

ity

Impact of on

0 1 2 3

low high Act

ive-

sum

Passive-sum

Cross impact matrix

1 Output

2 Energy & resource efficiency

3 Production costs

4 Soundness ofCompany

5 Payment Employees

6 Job quality

1O

utpu

t

2

Ene

rgy

and

res.

effi

cien

cy

3

Pro

duct

ion

cost

s

4

Sou

ndne

ss o

fC

ompa

ny

5

Pay

men

t E

mpl

oyee

s

6

Job

qual

ity

Impact of on

0 1 2 3

low high Act

ive-

sum

Passive-sum

Cross impact matrix

Cross impact matrix AURO Case During this group discussions the participants learn to look at their system from different points of view which has a remarkably positive effect on creating possible new business ideas. System behaviour Based on the outcome of the cross impact analysis the variables can be classified according to their influence on the system using the calculated Active and Passive sum. The format is separated into different zones. The variables in this zones show typical characteristics.

- 18 -

1.2.

3.

4.

5.6.

7.

8. 9.

10.

11.

12.

13.

14.

15.

16.

17.

18.19.

20.

21.

10

20

30

40

10 20 30 40

Passive Sum

Act

ive

Su

m

Neutral

reactivebuffer

active critical

Classification of variables AURO case study

1.2.

3.

4.

5.6.

7.

8. 9.

10.

11.

12.

13.

14.

15.

16.

17.

18.19.

20.

21.

10

20

30

40

10 20 30 40

Passive Sum

Act

ive

Su

m

Neutral

reactivebuffer

active critical

Classification of variables AURO case study

Active variables allow effective changes in the system and thus have the potential to re-stabilize it in the new state. They are of major interest for the design process of PSS. In our case the variables 14 (Operating costs) and 18 (development infrastructure) can be found in the active zone – these variables form the basis for further elaboration in the scenario development phase. Critical variables have to be handled with caution because they have big potential for changing processes, but they can easily get out of control, or destabilize the system. The variables 9 (service/maintenance), 11 (development of market), 16 (positive image), 19 (branch development) and 20 (innovation orientation) are in the critical zone. Variables in the reactive zone represent important indicators but have no steering potential. Only variable 4 (communication prod./supplier) fits in this area and could be used as indicator for the reaction of the whole system. Variables in the buffer zone have a limited potential to effect the system. Value System Map In the next step the Value System Map has been elaborated. Independent from the cross impact analysis all variables have been listed and their dynamic interrelations identified. A first version was developed during a workshop discussion, the final one was developed during a team meeting.

activ

e

buffer reac

tive

Passive-sum

Active-sum

0 PS max

AS max

0

neutral

critical

Classification of variables – system behaviour

activ

e

buffer reac

tive

Passive-sum

Active-sum

0 PS max

AS max

0

neutral

critical

Classification of variables – system behaviour

- 19 -

Value System Map AURO case Interpretation of the AURO Value System Map (yellow marked variables are the critical ones according to the cross impact analysis, the active ones are marked in grey; the coloured arrows mark different types of feedback cycles): The Value System Map provides information about the dynamic system behaviour. For the analysed system it is remarkable that the feedback cycles are quite long (see the orange and blue cycles in the picture below) this in general indicates a slowly reacting systems - changing processes will take some time. Positive feedback cycles are dominating in the system. The only negative feedback cycle is linked with variable 14 (operating costs): this variable therefore plays an important role in stabilising the system.

- 20 -

9Service

maintenance

5Structure of sup-plier / Distribution

14Operating costs

15Scope of action

for user

4Communicationprod./supplier

3Motivation / Internal

communication

10Transparentinformation

3Motivation / Internal

communication

2Soundnessof company

1Output

8Quality ofproducts

16Positive Image

Partial cycles of value system map AURO case study

9Service

maintenance

5Structure of sup-plier / Distribution

14Operating costs

15Scope of action

for user

4Communicationprod./supplier

3Motivation / Internal

communication

10Transparentinformation

3Motivation / Internal

communication

2Soundnessof company

1Output

8Quality ofproducts

16Positive Image

Partial cycles of value system map AURO case study

Three partial cycles of Value System Map AURO case Positive cycles (marked in grey), see picture at the left) lead to mutual amplification and therefore instability on the long term. Negative feedback cycles (like the orange one, see picture on the left) are the stabilising elements of a system.

System Analysis results of the AURO case The summarised results of the System Analysis are:

• A common language to see the companies system from a new point of view • A description of the companies system and its possibilities and restrictions by

concentrating on the relations between the variables. • A map showing the system behaviour like a genetic reservoir of the system. • Two identified variables with high steering effects for the whole system as a basic for

scenario development. • Critical variables helping to avoid traps in the further development. • One variable with a high potential for a good and independent system indicator. • A number of tentative ideas making the “radical changing options” thinkable and

possible.

- 21 -

Exploring Opportunities – Preparing Scenario Workshop This chapter should links the Analysis with the creative process of generation and visualisation of new PSS possibilities.

Strategic options for scenarios Based on the identified active variables four different scenarios have been developed like shown in the next illustration.

Strategic options for scenarios AURO case study

1. „Contract basedsurface maintenance“

3. „Ready madeproduct“

„professional“customer

„all in one“ offer

cheap,quick

long-term,reasonable

14. O

pera

ting

cost

s2. „External

profit centre“

4. „Mobile team“

18. Development infrastructure

Strategic options for scenarios AURO case study

1. „Contract basedsurface maintenance“

3. „Ready madeproduct“

„professional“customer

„all in one“ offer

cheap,quick

long-term,reasonable

14. O

pera

ting

cost

s2. „External

profit centre“

4. „Mobile team“

18. Development infrastructure

In an open creative process using e.g. brainstorming and other creative techniques, ideas have been developed according to the given format.

The Service Card Idea proved to be the most promising scenario for being elaborated in the next steps.

Detailing strategic options AURO case studyDetailing strategic options AURO case study

- 22 -

A first system map AURO case study

Local painter

Regional Dealer

Auro Austria Paint company

Privatecustomer

Start

Publicauthorities

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A first system map AURO case study

Local painter

Regional Dealer

Auro Austria Paint company

Privatecustomer

Start

Publicauthorities

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Simplified Stakeholder System Map for the Service Card Idea

Conclusion Product Service Systems offer a promising strategy to overcome the unfavourable junction between increasing value creation and rising resource consumption. The key success factor for sustainable PSS offers is a direct satisfaction of clients needs. Surprising new business perspectives can be derived by shifting the commercial focus from selling products to providing solutions for a given problem. To enable PSS to remarkably contribute to sustainable development a systematic design and a strong foundation of background knowledge is needed that allows predictable success stories. Based on a general description of the system, System Analysis provides such an information basis. The Tools are relatively easy to apply and do not ask a lot of effort from the side of the involved business stakeholders. Although the answers and interpretation results are not always clear-cut they thus provide good evidence for development options and possible measures throughout the next phases of a systematic PSS development. Furthermore with rising interpretation experience it will be possible to optimise the development process by identifying the most critical issues (that need detailed investigation) already in an early stage of PSS development.