modularity perspective on service business research perspective... · • service modularity can be...

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Modularity Perspective on Service Business Research

Saara Pekkarinen

ModSeC project 2008-2010 – logistics and

professional services

ModuServ Project 2011-2013 – industrial and KiBS

Starting context 2011 – health services

ModSeC Project Objectives 2008-2010 http://www.taloustieteet.oulu.fi/index.php?486

• To understand and clarify the customers' needs and role in B2B

logistics and professional service co-creation;

• To clarify the service providers' role in outsourcing relationships;

• To examine the nature and efficiency of the market structures

and organizational solutions for modular service implementation;

• To describe applicable future business models in modular

service business.


http://www.taloustieteet.oulu.fi/index.php?486

ModSeC – Work Package 1

Managerial implications

• By using modularity in service production, the service provider

can increase the value perceived by the customer (Figure 2).

• Service modularity can be seen as a tool for developing services

internally in a service company, i.e. a method for improving

managers´ thinking when they try to achieve efficiency in

service production.

• In modular service organization it is essential to develop means

of sharing knowledge between the organizational units and

experts.

• The research on modular services will give the companies an

understanding of the benefits of standardized and modularized

services and the role of customer interface herein.


Figure 2 from Rahikka, E., Ulkuniemi, P. and Pekkarinen, S. (2011) Developing the value perception of the business customer through service modularitye in Journal of Business & Industrial Marketing, 26/5, 357-367.


Ulkuniemi & Pekkarinen (2011) Creating value for the business service buyer through modularity, Int. J. Services and Operations Management, 8(2), 127-141

“Modularity in designing offerings and processes will make

services tradable” (Spring and Araujo, 2008) - to allow for buyers

to employ their part of the co-created value.

From the managerial perspective important to understand how service

modularity is connected to the buyer-perceived value.

Making internal processes of service firms more effective, another

underlying goal of service modularity is to support mass

customization.

However, the customers‟ perspective and experience have not yet

been thoroughly explored.


Managerial implications of WP3


• Dividing an organization´s processes into a number of

distinct modular activities and sub-processes makes the

total operation easier to conceptualize and handle.

• Modularity enhances opportunities to combine

processes and activities and identify new boundaries for

business opportunities within business networks.

• The customer has an active role in specification of

service needs and co-developing the solution that

enables the efficient and effective combination of service

modules, processes and actors for co-creation of value

(Exhibit 3.1 in ModSeC www-pages).

http://www.maigbe.fi/file.php?480

Modular-based approach advantages – Mason, Juga, Pekkarinen & Eyers, 2010, LRN Conference paper


operations of any organization.

• Simplicity – From the manager‟s perspective splitting an organization‟s processes into a number of distinct modular based

activities helps to make the total operation easier to conceptualize and handle. Anderson et al. (2006) place emphasis on

modularity as a key issue to manage complexity, especially where a high degree of customization is required.

• Support Standard Enhancement - Business processes within a defined module can be focused upon and standardized for

seeking cost, flexibility and effectiveness benefits. The modular based approach can also fit well within a continuous improvement

culture where efforts are focused upon reducing variability and uncertainty. To further support this, performance benchmarking of

comparable modules becomes easier to undertake.

• Support Service Enhancement – As process modularity enables the splitting of the process into standardized sub-processes,

combining these standard processes with customized processes can fulfill heterogeneous customer needs (Pekkarinen &

Ulkuniemi, 2008; Bask et al., 2010).

• Easier Outsourcing - Modular processes allow easier outsourcing of process capabilities (Davenport, 2005), e.g. outsource

logistics to LSPs. Ulkuniemi and Pekkarinen (2011) argue that modularization of service elements, especially the service process,

can help the buyer to specify the object of the exchange better, to evaluate co-creation efforts and to identify total, including non-

monetary, costs of the service.

• Enhance Opportunities to Combine Processes/Activities - Baldwin (2007) argues that modularization of a production system

creates new module boundaries (interfaces) for new exchange opportunities between the different actors within business

networks.

In summary, Worren et al. (2002) define a modular organizational structure as a composition of autonomous, loosely coupled

organizational units which benefit an organization through enhancing both flexibility and cost efficiency. For business service

providers productivity can be enhanced, Sako (2006) argues, by standardizing and consolidating processes and moving into

higher-value-adding activities when their client firms unbundle corporate functions or vertically dis-integrate”. LSPs are clearly an

example of a service provider so it would appear that modularity could be utilized by them as a way of reducing the costs of

differentiation, enhance their operational effectiveness, enable innovation and provide a useful vehicle for working in partnership

with partners both vertically and horizontally within their business networks.

This is interesting to research from an academic as well as a practical perspective. Campangolo and Camuffo (2009) see there is

a gap in the research concerning modularity in organizational design as both definitions and measures of modularity are

ambiguous and the findings controversial. Interesting topics for future research include the relationship between modularity and

outsourcing (Starr, 2010), a concept „modular production network‟ (Sturgeon, 2002 in software industry, Hoogeweegen et al.,

1999 in air cargo industry) and identifying which drivers may guide the modularization of the organizational structure.

• Simplicity – Splitting an organization‟s processes into a number of distinct

modular based activities helps to make the total operation easier to

conceptualize and handle.

• Support Standard Enhancement - Business processes within a defined module

can be focused upon and standardized for seeking cost, flexibility and

effectiveness benefits. The modular based approach can also fit well within a

continuous improvement culture where efforts are focused upon reducing

variability and uncertainty.

• Support Service Enhancement – Modularity enables the splitting of the process

into standardized sub-processes and combining them with customized

processes which can fulfill heterogeneous customer needs

• Easier Outsourcing - Modular processes allow easier outsourcing of process

capabilities

• Enhance Opportunities to Combine Processes/Activities – Modularization of a

(service) production system creates new module boundaries for new exchange

opportunities between the different actors within business network

Modularity (modularization) is interesting research

avenue both from academic and business practice

perspectives. • Campangolo and Camuffo (2009) - a gap in the research concerning

modularity in organizational design as both definitions and measures

of modularity are ambiguous and the findings controversial.

• Miraglia (2010) – modularity and integratedness as coexisting

properties of the complex systems

• Interesting topics for future research include e.g.

• Modularity in business model and ecosystem contexts

• Relationship between modularity and outsourcing

• A concept „modular production network‟ in different types of

services


What ModuServ is about? http://moduserv.drupal.oulu.fi/

The purpose of this research project is to describe,

analyze and evaluate how value is co-created in

business services through modularity in collaborative

business networks.

The research project conducted by Department of Marketing,

Oulu Business School, University of Oulu and Technical

Research Centre of Finland VTT financed by Tekes Serve

program 2011-2013.


http://moduserv.drupal.oulu.fi/

Themes and Work Packages

We aim to enhance our company

partners in developing their service

business from three perspectives:

• Customer as a co-creator of

value in service design,

development and production

(Value Co-Creation)

• Managing network for

providing service solutions

(Collaborative Networks)

• Modularity as strategic and

operational issue in service

business

(Service Modularity)



Oulu Business School

VTT

WP1 Collaborative Value-Creation in Business

Service Networks

WP2 Modular Business Networks with

Scalable Services

WP3 Modularity in Value Co-Creation

WP4 Dissemination and Exploitation

WP

5 P

roje

ct m

anagem

ent

Kiinteistö-

huolto

Jurvelin

PCS-

Engineering

Pöyry

Finland

Cardiff Business School

Hull University Logistics Institute

Linköping University /IEI

Sirris, Belgium

Lancaster University

Georgia State University

University of Jaume and

University of Valencia Spain

Modularity Issues within ModuServ project

Aims in WP 2

•The general purpose to explore the

characteristics and processes of the

business services within networks.

•A special attention on capabilities

required for developing horizontal

collaborative relationships

•Especially modularity enhancing

collaboration within the organizations

and in the boundaries between the

organizations streamlined to the

whole process of value co-creation.

Aims in WP3

•Exploring the processes through

which modular services could

enhance value co-creation for service

providers and customers.

•Conceptual development into the on-

going discussion concerning value

co-creation eg related to importance

of knowledge sharing and utilization

capabilities.


Thank you!

saara.pekkarinen(at)oulu.fi

pauliina.ulkuniemi(at)oulu.fi

jari.juga(at)oulu.fi


modularity perspective on service business research perspective... · • service modularity can be...

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