Solution Business: Building a Platform for Organic Growth PDF
Preview Solution Business: Building a Platform for Organic Growth
Management for Professionals Kaj Storbacka Risto Pennanen Solution Business Building a Platform for Organic Growth Management for Professionals Forfurthervolumes: http://www.springer.com/series/10101 ThiSisaFMBlankPage Kaj Storbacka (cid:129) Risto Pennanen Solution Business Building a Platform for Organic Growth KajStorbacka RistoPennanen MarketingDepartment TalentVectiaLtd. UniversityofAucklandBusinessSchool Espoo Auckland Finland NewZealand ISSN2192-8096 ISSN2192-810X(electronic) ISBN978-3-319-03975-6 ISBN978-3-319-03976-3(eBook) DOI10.1007/978-3-319-03976-3 SpringerChamHeidelbergNewYorkDordrechtLondon LibraryofCongressControlNumber:2014931769 #SpringerInternationalPublishingSwitzerland2014 Thisworkissubjecttocopyright.AllrightsarereservedbythePublisher,whetherthewholeorpart of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation,broadcasting,reproductiononmicrofilmsorinanyotherphysicalway,andtransmissionor informationstorageandretrieval,electronicadaptation,computersoftware,orbysimilarordissimilar methodologynowknownorhereafterdeveloped.Exemptedfromthislegalreservationarebriefexcerpts inconnectionwithreviewsorscholarlyanalysisormaterialsuppliedspecificallyforthepurposeofbeing enteredandexecutedonacomputersystem,forexclusiveusebythepurchaserofthework.Duplication ofthispublicationorpartsthereofispermittedonlyundertheprovisionsoftheCopyrightLawofthe Publisher’s location, in its current version, and permission for use must always be obtained from Springer.PermissionsforusemaybeobtainedthroughRightsLinkattheCopyrightClearanceCenter. ViolationsareliabletoprosecutionundertherespectiveCopyrightLaw. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publicationdoesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexempt fromtherelevantprotectivelawsandregulationsandthereforefreeforgeneraluse. While the advice and information in this book are believed to be true and accurate at the date of publication,neithertheauthorsnortheeditorsnorthepublishercanacceptanylegalresponsibilityfor anyerrorsoromissionsthatmaybemade.Thepublishermakesnowarranty,expressorimplied,with respecttothematerialcontainedherein. Printedonacid-freepaper SpringerispartofSpringerScience+BusinessMedia(www.springer.com) The two most engaging powers of an author are to make new things familiar, familiar things new. WilliamMakepeaceThackeray 1811–1863 ThiSisaFMBlankPage Foreword Morethanever,organicgrowthishighontheagendasofchiefexecutiveofficers.It is also largely known and accepted that growing the share of wallet at existing customersgives—allthingsbeingequal—ahigherreturnoninvestmentthanmany otherinvestmentsforgrowth.Wallet-sharegrowthatexistingcustomersgoeswell beyond selling products orreaching new geographical markets through globaliza- tion. In the long term, growthessentially depends on customer-driven innovation. Recentresearchbyacademics,expertsandbusinesspractitionersindicatesthat,in mostcases,customer-drivenorganicgrowthcomesfromcustomer-specificservices andintegratedcustomersolutions.UntilthepublicationofKajStorbackaandRisto Pennanen’sbook,therewasnocomprehensiveliteratureoncustomersolutionsasa business.ItisamplyclearthatSolutionBusiness:BuildingaPlatformforOrganic Growthfillsabigholeinaverythorough,professionalmanner. Thisbooknotonlygivesaholisticviewofsolutionbusinessbutalsofocuseson the key element of success: capabilities. As the authors efficiently demonstrate, sales and industrial capabilities are crucial for optimizing premium pricing and minimizing the costs and risks inherent to solution business. Customization often leads to increased costs and lower margins while simultaneously making price premiums difficult to obtain. Storbacka and Pennanen address this matter in con- siderable analytical detail, showing that through sales and industrialization capabilities, we can achieve price premiums and reduce costs, respectively. They explain very effectively the critical stages and milestones—developing solutions, creatingdemand,sellingsolutionsanddeliveringsolutions.Inthelastsectionofthe book,theyfocusonpracticaltoolsthatallowcompaniestoassesstheirperformance when developing solutions, making money with solutions and evaluating the organization’scapabilitiestosellanddeliverintegratedcustomersolutions. Integrated customer solutions are a game-changer for most companies. As the book’s many solid examples establish, this process often involves a profound change in business models, management systems and metrics, as indicated in the followingexamples: • “Isellthecostofmileage,notjetengines.” • “Isellenergymanagement(i.e.,lowerelectricitybills),notpowerstations.” • “Isellriskmanagement,notautoinsurance.” • “Isellpeople-flowmanagement,notelevatorsandescalators.” vii viii Foreword Skillsandcompetencies,bothindividualandinstitutional,playthebiggestrole in determining success or failure when managing a profitable customer solution business. I praise Storbacka and Pennanen for their reference book on this topic. ReadingSolutionBusinessandapplyingitsmethodologiesandprinciplesisamust for business enterprises and CEOs who put organic growth at the top of their agendas. Chicago, IL, USA BernardQuancard Preface Movingintosolutionbusinessisadifficulttaskforanyfirm.Manystrugglewithor fail in the transformation. Our interest in exploring the reasons for failure and success in solution business led to us undertaking a long-term research effort involvingmorethan20majorfirmsoperatinginternationally.Thefindingsofthis researchshowthatsolutionbusinessisadistinctbusinessmodelandnotaproduct category. Hence, our aim in producing this book has been to document, describe, and discuss the transformation from product business to solution business by comprehensively categorizing the key capabilities that firms need to invest in if theywishtobecomesuccessfulsellersanddeliverersofsolutions. Selling Solutions Is Not the Problem—Efficient Delivery Is Many of our conversations with the firms that participated in our research work startedwiththeseorganizationsclaimingthattheyfoundsolutionsellingproblem- atic. However, we invariably observed that selling is not the biggest challenge. Instead, the problem typically relates to missing industrialization capabilities or a totallackofwhatwecallsolutionplatformcapabilities.Essentially,thekeyissueis firms’inabilitytocreaterepeatabilityandscalabilityinsolutionbusiness. Mostfirmsentersolutionbusinessthroughsales,butfailtotransformanyother oftheirfunctions.Whilesuchfirmscancreatemuchnewvalueforcustomers,they tend to simultaneously produce an untenable cost structure due to the increased divergence and uncontrolled complexity of processes related to both the sale and deliveryofsolutions. Success in solution business starts by accepting that solution business is a separate business model not simply another product category or an extension of the existing product business. Solution business models are systemic and require firmsto‘tweak’manyareasoftheirbusinessmodelconcurrently.Inthisbook,we identify and organize the areas that firms need to focus on into three sets of capabilities and practices—commercialization, industrialization, and solution platforms. 1. Commercialization refers to a firm’s ability to understand customers’ value- creating processes, to create solutions that enable improved value creation for ix
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