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CAN	
  MACHINE-­‐TO-­‐MACHINE	
  COMMUNICATIONS	
  BE	
  USED	
  TO	
  	
  
IMPROVE	
  CUSTOMER	
  EXPERIENCE	
  IN	
  A	
  SERVICE	
  ENVIRONMENT?	
  
	
  
Shaun West, Dominik Kujawski and Paolo Gaiardelli
	
  
ABSTRACT	
  
Purpose:	
  	
  
The	
  purpose	
  of	
  this	
  paper	
  is	
  to	
  identify	
  ways	
  in	
  which	
  Machine-­‐to-­‐Machine	
  (M2M)	
  communication	
  
can	
  be	
  used	
  by	
  product-­‐based	
  manufacturing	
  firms	
  to	
  deepen	
  and	
  broaden	
  the	
  service	
  aspects	
  of	
  
their	
  customer	
  value	
  proposition.	
  The	
  expectation	
  is	
  that	
  an	
  improved	
  customer	
  value	
  proposition	
  
leads	
  to	
  improved	
  customer	
  experience,	
  and	
  through	
  this	
  to	
  improved	
  customer	
  retention.	
  
	
  
Design/methodology/approach:	
  	
  
The	
  approach	
  taken	
  has	
  been	
  two-­‐fold:	
  
1.   a	
  literature	
  review	
  to	
  understand	
  what	
  is	
  available	
  in	
  a	
  B2B	
  environment;	
  
2.   obtaining	
  initial	
  feedback	
  from	
  surveys	
  and	
  interview	
  with	
  equipment	
  owners	
  and	
  operators,	
  
suppliers	
  of	
  condition	
  monitoring	
  systems	
  and	
  other	
  stakeholders	
  to	
  understand	
  the	
  
different	
  value	
  propositions.	
  
	
  
It	
  was	
  considered	
  important	
  to	
  widen	
  the	
  horizon	
  of	
  ‘condition	
  monitoring’	
  to	
  provide	
  as	
  many	
  
different	
  ways	
  to	
  improve	
  the	
  customer	
  experience	
  as	
  possible.	
  The	
  literature	
  review	
  was	
  
undertaken	
  based	
  on	
  the	
  broader	
  definition	
  of	
  condition	
  monitoring.	
  The	
  review	
  was	
  not	
  limited	
  to	
  
the	
  academic	
  press	
  but	
  expanded	
  to	
  include	
  trade	
  journals	
  and	
  websites.	
  The	
  M2M	
  impact	
  on	
  
human-­‐to-­‐human	
  interactions	
  was	
  also	
  considered.	
  	
  
	
  
Over	
  15	
  interviews	
  with	
  stakeholders	
  were	
  undertaken	
  so	
  that	
  their	
  perception	
  of	
  the	
  value	
  
proposition	
  could	
  be	
  understood.	
  All	
  were	
  from	
  the	
  B2B	
  environment	
  and	
  with	
  interests,	
  of	
  some	
  
form,	
  in	
  high-­‐value	
  equipment.	
  This	
  required	
  detailed	
  segmentation	
  based	
  on	
  how	
  data	
  was	
  
consumed	
  –	
  each	
  segment	
  had	
  different	
  outcomes	
  that	
  concerned	
  them.	
  	
  
	
  
Findings:	
  	
  
M2M	
  can	
  be	
  used	
  within	
  the	
  internet	
  of	
  things	
  to	
  improve	
  the	
  customer	
  experience.	
  However	
  there	
  
are	
  many	
  risks	
  and	
  negative	
  aspects	
  that	
  limit	
  the	
  possible	
  gains:	
  
•   the	
  ‘customer’	
  may	
  not	
  understand	
  what	
  they	
  actually	
  need;	
  
•   loss	
  of	
  personal	
  interactions	
  can	
  lead	
  to	
  a	
  perception	
  of	
  a	
  lower	
  level	
  of	
  value;	
  
•   clear	
  customer/use	
  segmentation	
  must	
  be	
  undertaken;	
  
•   each	
  customer	
  persona	
  must	
  have	
  a	
  clear	
  value	
  proposition;	
  	
  
•   there	
  must	
  be	
  transparency	
  in	
  the	
  data	
  collection;	
  
•   the	
  data	
  collected	
  must	
  be	
  used	
  openly	
  for	
  root-­‐cause-­‐analysis	
  rather	
  than	
  defensively	
  to	
  
protect	
  warranty	
  positions;	
  
•   the	
  data	
  can	
  be	
  used	
  to	
  support	
  new	
  product	
  and	
  service	
  development.	
  
	
  
Originality/value:	
  	
  
This	
  remains	
  a	
  new	
  area	
  for	
  development	
  for	
  many	
  manufacturing	
  firms	
  in	
  the	
  B2B	
  space.	
  The	
  
technology	
  is	
  proven	
  yet	
  there	
  are	
  numerous	
  firms	
  that	
  are	
  unable	
  to	
  monetise	
  the	
  monitoring	
  they	
  
undertake	
  for	
  their	
  customers.	
  The	
  value	
  of	
  this	
  paper	
  is	
  that	
  it	
  develops	
  a	
  process	
  to	
  support	
  the	
  
application	
  of	
  M2M	
  monitoring	
  by	
  identifying	
  key	
  tasks	
  to	
  help	
  firms	
  develop	
  an	
  effective	
  customer	
  
value	
  proposition.	
  
	
  
Keywords:	
  Servitization,	
  internet	
  of	
  things,	
  value	
  proposition,	
  customer	
  experience,	
  technology	
  
communication.	
  
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   2	
  
1   INTRODUCTION	
  	
  
For	
  many	
  years,	
  machine-­‐to-­‐machine	
  communication	
  has	
  been	
  growing	
  in	
  the	
  industrial	
  product	
  
market.	
  Today	
  the	
  terms	
  “Industry	
  4.0”	
  and	
  “Internet	
  of	
  Things”	
  are	
  terms	
  that	
  are	
  often	
  used.	
  The	
  
promise	
  of	
  the	
  technology	
  is	
  that	
  with	
  data	
  collected	
  from	
  the	
  equipment	
  and	
  machines	
  
communicating	
  directly	
  with	
  each	
  other	
  manufacturing	
  processes	
  will	
  become	
  more	
  efficient.	
  This	
  
has	
  already	
  been	
  seen	
  in	
  the	
  case	
  of	
  CAT’s	
  fleet	
  monitoring	
  system	
  (CAT,	
  2015);	
  a	
  fleet	
  monitoring	
  
solution	
  for	
  lorries	
  (Aston,	
  2015)	
  and	
  has	
  also	
  been	
  used	
  in	
  many	
  process	
  industries	
  successfully	
  
(OSISoft,	
  2015).	
  
	
  
The	
  data	
  collected	
  has	
  in	
  some	
  of	
  these	
  cases	
  been	
  used	
  to	
  deepen	
  and	
  broaden	
  the	
  service	
  aspects	
  
of	
  the	
  customer	
  value	
  proposition	
  delivered	
  by	
  these	
  firms.	
  The	
  firms	
  can	
  design	
  their	
  service	
  
delivery	
  systems	
  to	
  meet	
  the	
  outcomes	
  desired	
  by	
  their	
  customers	
  and	
  in	
  some	
  cases	
  then	
  to	
  
integrate	
  their	
  processes	
  into	
  the	
  processes	
  of	
  their	
  customers.	
  This,	
  according	
  to	
  Neely	
  (2008),	
  
increases	
  the	
  degree	
  of	
  customer	
  integration	
  and	
  leads	
  to	
  increased	
  customer	
  retention.	
  	
  
	
  
To	
  deliver	
  advanced	
  services	
  (Bains	
  et	
  al,	
  2011)	
  it	
  is	
  often	
  necessary	
  to	
  have	
  operational	
  and	
  
technical	
  data	
  from	
  the	
  equipment.	
  GE	
  Energy	
  Services	
  has	
  been	
  very	
  successful	
  with	
  this	
  with	
  its	
  
contractual	
  services	
  for	
  both	
  industrial	
  and	
  aero	
  gas	
  turbines;	
  Rolls	
  Royce	
  similarly.	
  In	
  both	
  cases,	
  the	
  
firms	
  can	
  move	
  to	
  an	
  hourly	
  fee	
  structure	
  as	
  they	
  have	
  operational	
  and	
  technical	
  data	
  on	
  the	
  
machines	
  for	
  which	
  they	
  are	
  providing	
  services.	
  Understanding	
  the	
  equipment	
  operation	
  and	
  
condition	
  means	
  that	
  they	
  can	
  drive	
  productivity	
  in	
  the	
  equipment,	
  typically	
  through	
  moving	
  to	
  
condition-­‐based	
  maintenance.	
  This	
  increases	
  their	
  customer's	
  equipment	
  availability	
  by	
  reducing	
  the	
  
need	
  for	
  equipment	
  inspections.	
  	
  
	
  
To	
  provide	
  a	
  move	
  to	
  risk-­‐based	
  maintenance	
  on	
  large	
  equipment	
  requires	
  significant	
  data	
  but	
  also	
  
requires	
  close	
  co-­‐operation	
  between	
  the	
  key	
  parties.	
  The	
  hypothesis	
  is	
  that	
  for	
  M2M	
  to	
  be	
  successful	
  
it	
  must	
  be	
  predicated	
  on	
  improved	
  customer	
  engagement,	
  which	
  is	
  based	
  on	
  effective	
  
communication.	
  This	
  means	
  that	
  the	
  data	
  collected	
  must	
  be	
  converted	
  to	
  information	
  that	
  generates	
  
discussion	
  and	
  action.	
  This	
  paper	
  will	
  examine	
  this	
  topic	
  through	
  a	
  literature	
  review,	
  survey	
  and	
  
interviews	
  and	
  make	
  recommendations	
  on	
  how	
  customer	
  integrations	
  can	
  be	
  improved	
  based	
  on	
  
M2M	
  communications.	
  
	
  
2   METHODOLOGY	
  
This	
  section	
  describes	
  the	
  methodology	
  applied	
  in	
  the	
  study;	
  it	
  is	
  broken	
  up	
  into	
  the	
  literature	
  review,	
  
the	
  survey	
  and	
  the	
  interviews.	
  
	
  
2.1   Literature	
  review	
  	
  
An	
  in	
  depth	
  literature	
  review	
  was	
  undertaken	
  to	
  assess	
  the	
  current	
  state-­‐of-­‐the-­‐art,	
  this	
  included	
  a	
  
review	
   of	
   both	
   academic	
   literature	
   and	
   published	
   examples	
   in	
   the	
   industrial	
   press.	
   To	
   keep	
   the	
  
relevance	
   of	
   literature,	
   the	
   research	
   and	
   analysis	
   was	
   continuously	
   carried	
   out	
   throughout	
   the	
  
research.	
  The	
  scope	
  of	
  the	
  literature	
  review	
  was:	
  
•   the	
  value	
  in	
  ecosystems;	
  
•   supply	
  chain	
  collaboration	
  creating	
  open	
  innovation;	
  	
  
•   customer	
  value;	
  	
  
•   sustainability	
  through	
  customer	
  engagement;	
  
•   decision	
  making	
  by	
  converting	
  data	
  into	
  information.	
  
	
  
2.2   Survey	
  
A	
  set	
  of	
  standard	
  questions	
  was	
  created	
  in	
  a	
  survey	
  tool	
  (SurveyMonkey)	
  and	
  distributed	
  to	
  
stakeholders	
  with	
  an	
  interest	
  in	
  industrial	
  equipment.	
  The	
  range	
  of	
  stakeholders	
  targeted	
  ranged	
  
across	
  asset	
  owners,	
  system	
  suppliers,	
  Original	
  Equipment	
  Manufacturers	
  (OEMs),	
  consultants	
  and	
  
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   3	
  
technology	
  investors.	
  The	
  survey	
  was	
  designed	
  to	
  be	
  completed	
  within	
  10-­‐15	
  minutes	
  to	
  help	
  with	
  
completion	
  rates.	
  The	
  survey	
  was	
  broken	
  up	
  into	
  the	
  following	
  sections:	
  
•   stakeholder	
  analysis	
  (eg,	
  type	
  of	
  business,	
  position	
  in	
  supply	
  chain);	
  
•   systems	
  today	
  (eg,	
  Do	
  they	
  help	
  you	
  achieve	
  the	
  outcomes	
  that	
  are	
  important	
  for	
  you?	
  What	
  
outcomes	
  are	
  you	
  expecting	
  from	
  the	
  equipment	
  monitoring	
  in	
  terms	
  of	
  operations,	
  
maintenance?);	
  
•   issues	
  associated	
  with	
  monitoring,	
  warranty,	
  and	
  equipment	
  operation;	
  
•   issues	
  associated	
  with	
  data	
  ownership	
  and	
  information	
  sharing;	
  
•   issues	
  associated	
  with	
  unplanned	
  downtime;	
  
•   an	
  understanding	
  of	
  the	
  gaps	
  between	
  what	
  stakeholders	
  expect	
  and	
  what	
  is	
  delivered	
  
today.	
  
	
  
Each	
  of	
  the	
  sections	
  included	
  an	
  open	
  question	
  allowing	
  direct	
  feedback.	
  The	
  questions	
  themselves	
  
were	
  quantitative	
  to	
  enable	
  analysis.	
  	
  
	
  
The	
  survey	
  was	
  distributed	
  to	
  the	
  target	
  stakeholders	
  using	
  direct	
  methods	
  (email)	
  and	
  indirectly	
  (via	
  
LinkedIn	
  topic	
  area	
  groups).	
  The	
  stakeholders	
  questioned	
  were	
  expected	
  to	
  have	
  a	
  general	
  interest	
  
or	
  specific	
  interest	
  in	
  machine-­‐to-­‐machine	
  communication	
  issues.	
  
	
  
2.3   Interviews	
  
Based	
  on	
  the	
  initial	
  analysis	
  of	
  the	
  survey	
  results,	
  an	
  agenda	
  for	
  the	
  follow	
  up	
  interviews	
  was	
  
created.	
  15	
  follow	
  up	
  interviews	
  were	
  undertaken	
  to	
  gain	
  a	
  more	
  detailed	
  insight	
  into	
  the	
  survey	
  
results.	
  Each	
  interview	
  was	
  scheduled	
  for	
  45	
  minutes	
  and	
  consisted	
  of	
  the	
  following	
  questions:	
  
•   What	
  are	
  the	
  best	
  customer	
  value	
  propositions	
  you	
  have	
  seen?	
  
•   What	
  are	
  the	
  negative	
  aspects	
  of	
  monitoring?	
  
•   Who	
  should	
  own	
  the	
  data?	
  
•   How	
  should	
  data	
  be	
  accessed	
  and	
  shared?	
  
•   Have	
  you	
  experience	
  of	
  spying	
  vs	
  transparency?	
  
•   How	
  does	
  smart	
  (remote)	
  monitoring	
  improve	
  customer/supplier	
  interactions?	
  
•   Does	
  it	
  improve	
  OEM/customer	
  contact?	
  
•   How	
  could	
  the	
  contact	
  be	
  improved	
  with	
  the	
  data	
  flows?	
  
•   Does	
  the	
  OEM	
  get	
  the	
  data	
  they	
  need	
  at	
  the	
  right	
  time?	
  How	
  do	
  2nd	
  tier	
  OMEs	
  get	
  data?	
  
•   How	
  does	
  the	
  OEM	
  use	
  the	
  data	
  to	
  improve	
  their	
  product?	
  (eg,	
  product	
  development	
  or	
  
existing	
  operations	
  or	
  maintenance?)	
  
•   What	
  do	
  you	
  learn	
  from	
  the	
  data,	
  what	
  is	
  the	
  most	
  surprising	
  aspect?	
  
•   Does	
  the	
  value	
  outweigh	
  the	
  cost?	
  
	
  
The	
  interview	
  data	
  was	
  then	
  grouped	
  into	
  common	
  themes	
  to	
  allow	
  for	
  analysis.	
  Key	
  lessons	
  were	
  
distilled	
  from	
  the	
  interviews	
  and	
  are	
  presented	
  in	
  this	
  paper.	
  
	
  
3   RESULTS	
  AND	
  DISCUSSION	
  	
  
This	
  section	
  lays	
  out	
  arguments	
  from	
  the	
  literature	
  and	
  then	
  moves	
  into	
  the	
  finding	
  based	
  on	
  the	
  
data	
  collected	
  and	
  closes	
  with	
  a	
  discussion.	
  
	
  
3.1   Literature	
  review	
  
In	
  their	
  shift	
  to	
  service	
  business,	
  manufacturers	
  firstly	
  focus	
  on	
  introducing	
  technologies	
  to	
  increase	
  
the	
  efficiency	
  of	
  their	
  service	
  operations	
  (Agnihothri	
  et	
  al,	
  2002;	
  Kowalkowski	
  and	
  Brehmer,	
  2008).	
  
This	
  requires	
  the	
  redesign	
  and	
  standardization	
  of	
  service	
  activities	
  (Kindström	
  and	
  Kowalkowski,	
  2009;	
  
Brax	
  and	
  Jonsson,	
  2009).	
  Then,	
  as	
  service	
  orientation	
  becomes	
  more	
  intense,	
  digital	
  technologies	
  are	
  
incrementally	
  leveraged	
  to	
  differentiate,	
  extend	
  and	
  complement	
  the	
  company’s	
  offer	
  (Kindström	
  and	
  
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   4	
  
Kowalkowski,	
   2009,	
   Belvedere	
   et	
   al,	
   2013).	
   This	
   can	
   be	
   the	
   case	
   of	
   remote	
   monitoring	
   systems,	
  
diagnostics	
  &	
  prognostics,	
  reporting	
  &	
  analytics	
  services	
  that	
  are	
  bundled	
  with	
  the	
  product	
  to	
  raise	
  the	
  
quality	
  of	
  customer	
  support	
  and	
  get	
  competitive	
  advantage.	
  However,	
  as	
  suggested	
  by	
  Harmon	
  et	
  al	
  
(2011)	
  firms	
  can	
  also	
  exploit	
  technologies	
  to	
  design	
  radically	
  new	
  solutions	
  and	
  create	
  discontinuous-­‐
breakthrough	
  innovation.	
  
	
  
In	
  use	
  oriented	
  service	
  offerings,	
  smart	
  services	
  are	
  focused	
  to	
  provide	
  any-­‐time-­‐anywhere	
  access	
  to	
  
the	
   specialised	
   resources	
   (products,	
   skills,	
   applied	
   knowledge),	
   in	
   either	
   individual	
   or	
   shared	
  
consumptions,	
  in	
  order	
  to	
  enable	
  the	
  value	
  creation	
  process	
  (eg,	
  customers	
  create	
  value-­‐in-­‐context).	
  
	
  
The	
  role	
  of	
  technology	
  as	
  an	
  enabler	
  of	
  servitization	
  is	
  recognised	
  by	
  many	
  authors	
  as	
  essential	
  
(Neely,	
  2008;	
  Storbacka,	
  2011).	
  In	
  particular,	
  both	
  Neely	
  (2008)	
  and	
  Bains	
  et	
  al	
  (2011)	
  confirm	
  that	
  it	
  
is	
  a	
  requirement	
  equipment	
  for	
  advanced	
  services	
  where	
  “pay-­‐per-­‐unit”	
  is	
  applied.	
  
	
  
The	
  convergence	
  of	
  data	
  availability	
  and	
  information	
  processing	
  technology	
  boosts	
  value	
  creation,	
  
because	
  technology	
  adoption	
  requires	
  a	
  redesign	
  and	
  a	
  standardization	
  of	
  operating	
  processes.	
  
Thanks	
  to	
  the	
  enabling	
  technology,	
  a	
  better	
  visibility	
  of	
  the	
  asset	
  in	
  use	
  (in	
  terms	
  of	
  operating	
  
conditions,	
  time	
  in	
  use,	
  and	
  location)	
  is	
  available.	
  This	
  allows	
  to	
  speed	
  up	
  service	
  activities,	
  improve	
  
equipment	
  design	
  and	
  operation	
  behaviour	
  and	
  reduce,	
  at	
  the	
  same	
  time,	
  service	
  delivery	
  costs	
  
(Lightfoot	
  et	
  al,	
  2011).	
  	
  
	
  
The	
  shift	
  from	
  “you	
  are	
  what	
  you	
  own”	
  to	
  “you	
  are	
  what	
  you	
  can	
  access”,	
  the	
  emergence	
  of	
  
collaborative	
  consumptions	
  (Botsman	
  and	
  Rogers,	
  2010),	
  internet	
  facilitated	
  sharing	
  (Agrain,	
  2012)	
  
and	
  access	
  based	
  economy	
  (Bardhi	
  and	
  Eckhardt,	
  2012),	
  as	
  well	
  as	
  a	
  market	
  getting	
  more	
  fluid,	
  
facilitating	
  connection	
  and	
  share	
  resources	
  (Chandler	
  and	
  Vargo,	
  2011),	
  supported	
  by	
  the	
  
improvement	
  of	
  product	
  reliability	
  and	
  availability,	
  enabled	
  by	
  mobile	
  devices	
  and	
  appliances	
  for	
  
employees	
  and	
  customers	
  of	
  service	
  division	
  (Fano	
  and	
  Gershman,	
  2002),	
  information	
  systems	
  that	
  
enable	
  field	
  operations	
  (Kowalkowski	
  et	
  al,	
  2014)	
  rather	
  than	
  condition	
  monitoring	
  systems	
  (Turunen	
  
and	
  Finne,	
  2004),	
  gives	
  the	
  opportunity	
  to	
  introduce	
  new	
  business	
  models.	
  These	
  are	
  characterised	
  
by	
  a	
  changed	
  notion	
  of	
  asset	
  ownership	
  and	
  management.	
  In	
  addition,	
  the	
  easy	
  access	
  to	
  real-­‐time	
  
information	
  provides	
  also	
  the	
  opportunity	
  to	
  develop	
  a	
  better	
  understanding	
  of	
  customer	
  
behaviours,	
  easing	
  the	
  development	
  of	
  smart	
  solutions,	
  that	
  are	
  “fundamentally	
  pre-­‐emptive	
  rather	
  
than	
  reactive”	
  (Allmendinger	
  and	
  Lombreglia,	
  2005,	
  p.2).	
  	
  
	
  
Finally,	
  technology	
  enables	
  comprehensive	
  vertical	
  and	
  horizontal	
  information	
  sharing	
  and	
  
coordination	
  in	
  all	
  directions	
  between	
  department,	
  divisions	
  and	
  network	
  partners	
  supporting	
  the	
  
implementation	
  of	
  the	
  product-­‐service	
  strategy	
  (Martinez	
  et	
  al,	
  2011;	
  Auramo	
  and	
  Ala-­‐Risku,	
  2005).	
  
A	
  large	
  amount	
  of	
  research	
  dealing	
  with	
  technology-­‐driven	
  service	
  innovation	
  in	
  service	
  business	
  has	
  
been	
  undertaken	
  to	
  understand	
  how	
  smart	
  service	
  initiatives	
  reframe	
  competitive	
  landscapes.	
  The	
  
literature	
  review	
  of	
  the	
  literature	
  on	
  this	
  topic	
  reveals	
  the	
  existence	
  of	
  different	
  perspectives	
  taken	
  
into	
  consideration	
  and	
  briefly	
  described	
  in	
  the	
  following.	
  
	
  
The	
  key	
  themes	
  of:	
  
•   value	
  is	
  in	
  the	
  ecosystem;	
  
•   supply	
  chain	
  collaboration	
  creating	
  open	
  innovation;	
  
•   customer	
  value;	
  	
  
•   sustainability	
  through	
  customer	
  engagement;	
  
•   systems	
  must	
  help	
  the	
  owner/operator	
  to	
  make	
  the	
  right	
  decisions,	
  technical	
  info	
  then	
  
supports	
  business	
  decision	
  making.	
  
	
  
will	
  now	
  be	
  developed	
  further	
  in	
  the	
  following	
  sections.	
  
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   5	
  
	
  
3.1.1   Value	
  is	
  in	
  the	
  ecosystem	
  	
  
According	
  to	
  Iansity	
  and	
  Levin	
  (2004)	
  the	
  metaphors	
  of	
  keystones	
  and	
  ecology	
  are	
  helpful	
  to	
  think	
  
about	
  the	
  business	
  environment	
  of	
  a	
  company.	
  Iansity	
  and	
  Levin	
  concluded	
  that	
  the	
  loose	
  networks	
  
of	
  suppliers,	
  distributors,	
  technology	
  providers	
  and	
  other	
  “components”	
  of	
  the	
  ecosystem	
  affect	
  and	
  
are	
  affected	
  by	
  the	
  creation	
  and	
  delivery	
  of	
  a	
  company’s	
  own	
  offerings.	
  Each	
  member	
  of	
  an	
  
ecosystem	
  shares	
  the	
  fate	
  of	
  the	
  whole	
  network	
  regardless	
  of	
  its	
  strength.	
  As	
  Clarysse,	
  et	
  al	
  (2014)	
  
affirmed	
  (as	
  cited	
  in	
  Zahra	
  and	
  Nambisian,	
  2012)	
  ecosystems	
  are	
  organized	
  as	
  complex	
  networks	
  of	
  
firms	
  whose	
  integrated	
  efforts	
  are	
  addressing	
  the	
  needs	
  of	
  the	
  end	
  customer	
  and	
  there	
  is	
  a	
  growing	
  
consensus	
  that	
  provide	
  companies	
  with	
  resources	
  and	
  information	
  to	
  navigate	
  in	
  constantly	
  changing	
  
compititive	
  environment.	
  Jacobides	
  and	
  MacDuffie	
  (2013)	
  said	
  that	
  the	
  hardest	
  companies	
  to	
  replace	
  
in	
  the	
  value	
  chain	
  are	
  the	
  integrators	
  of	
  system.	
  	
  
	
  
Iansity	
  and	
  Levin	
  (2004)	
  present	
  two	
  ingredients	
  that	
  are	
  part	
  of	
  success	
  within	
  the	
  business	
  
ecosystems.	
  First,	
  business	
  ecosystems	
  consist	
  of	
  a	
  large	
  number	
  of	
  loosely	
  interconnected	
  
participants	
  who	
  are	
  dependent	
  on	
  each	
  other	
  for	
  their	
  own	
  mutual	
  performance.	
  Every	
  of	
  the	
  
participants	
  has	
  its	
  core	
  competence	
  which	
  together	
  with	
  others	
  allow	
  to	
  constitute	
  value	
  while	
  
individual	
  efforts	
  have	
  no	
  value	
  outside	
  the	
  collective	
  effort.	
  The	
  second	
  vital	
  element	
  is	
  the	
  need	
  for	
  
a	
  “keystone”	
  company	
  that	
  ensures	
  each	
  member	
  of	
  the	
  ecosystem	
  remains	
  in	
  good	
  health.	
  Indeed,	
  
such	
  a	
  firm	
  must	
  develop	
  new	
  capabilities	
  as	
  partners	
  orchestration	
  and	
  management	
  of	
  network	
  
dynamics	
  (Kindström	
  and	
  Kowalkowski,	
  2014).	
  
	
  
As	
  Galateanu	
  and	
  Avasilcai	
  (2014)	
  concluded	
  that	
  the	
  value	
  co-­‐creation	
  in	
  business	
  ecosystems	
  can	
  
be	
  realized	
  by	
  establishing	
  different	
  types	
  of	
  relations	
  where	
  the	
  technological	
  changes	
  have	
  a	
  major	
  
impact	
  on	
  value	
  creation.	
  Indeed,	
  servitization	
  forces	
  changes	
  to	
  traditional	
  buyer	
  supplier	
  
relationships	
  (Bastl	
  et	
  al,	
  2012;	
  Saccani	
  et	
  al,	
  2014)	
  
	
  
The	
  new	
  trend	
  that	
  is	
  Industry	
  4.0	
  might	
  be	
  the	
  key	
  influencer	
  of	
  the	
  value	
  drivers	
  in	
  the	
  business	
  
ecosystem.	
  (Bechtold	
  et	
  al,	
  2014)	
  state	
  the	
  smart	
  services	
  and	
  smart	
  products	
  will	
  increase	
  the	
  scope	
  
of	
  manufacturers	
  value	
  creation	
  activities.	
  Especially	
  manufacturing	
  companies	
  based	
  in	
  high-­‐cost	
  
countries	
  need	
  to	
  leverage	
  this	
  opportunity	
  to	
  sustain	
  competetive	
  edge	
  and	
  drive	
  growth.	
  	
  
	
  
In	
  such	
  a	
  context,	
  as	
  stated	
  in	
  (Bechtold	
  et	
  al,	
  2014)	
  vertical	
  and	
  horizontal	
  integration	
  based	
  on	
  
digital	
  technologies	
  allows	
  companies	
  to	
  drive	
  value	
  through	
  transparency	
  and	
  process	
  automation.	
  
Connected	
  supply	
  chains	
  allow	
  identification	
  all	
  along	
  the	
  production	
  process,	
  which	
  enable	
  
manufacturers	
  to	
  be	
  more	
  responsive	
  to	
  change	
  requests.	
  Thus,	
  the	
  maximum	
  level	
  of	
  transparency	
  
can	
  be	
  established	
  over	
  the	
  whole	
  supply	
  chain.	
  This	
  will	
  form	
  a	
  centerpiece	
  for	
  operation	
  excellence	
  
in	
  any	
  Industry	
  4.0	
  strategy.	
  The	
  "Ecosystem:	
  people,	
  machines	
  and	
  software,”	
  (2015)	
  website	
  states	
  
that	
  the	
  Industry	
  4.0	
  ecosystem	
  consists	
  not	
  only	
  of	
  smart	
  factories	
  and	
  intelligent	
  products,	
  it	
  also	
  
includes	
  people.	
  It	
  is	
  a	
  question	
  of	
  allowing	
  people	
  to	
  perform	
  high	
  quality	
  and	
  creative	
  work	
  and	
  
provide	
  them	
  with	
  opportunity	
  to	
  achieve	
  a	
  work/life	
  balance	
  with	
  just	
  as	
  much	
  flexibility	
  as	
  the	
  
production	
  systems	
  of	
  the	
  future	
  that	
  people	
  will	
  control.	
  
	
  
3.1.2   Supply	
  chain	
  collaboration	
  creating	
  open	
  innovation	
  
According	
  to	
  Mathuramaytha	
  (2011)	
  today	
  almost	
  all	
  organization	
  are	
  in	
  the	
  process	
  of	
  adopting	
  the	
  
supply	
  chain	
  activities	
  and	
  make	
  them	
  competitive.	
  Collaboration	
  is	
  the	
  driving	
  force	
  behind	
  effective	
  
supply	
  chain	
  management	
  and	
  improves	
  performance.	
  It	
  may	
  share	
  large	
  investments,	
  pool	
  risks	
  and	
  
share	
  resources,	
  reasoning	
  growth	
  and	
  return	
  on	
  investment.	
  Both	
  intra-­‐firm	
  and	
  inter-­‐firm	
  
collaboration	
  is	
  crucial	
  for	
  servitization	
  (Neu	
  and	
  Brown	
  2005)	
  and	
  is	
  part	
  of	
  the	
  open	
  innovation	
  
paradigm	
  defined	
  by	
  Chesbrough	
  et	
  al	
  (2007).	
  
	
  
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   6	
  
As	
  stated	
  by	
  DeAngelis	
  (2014)	
  using	
  sensors	
  to	
  monitor	
  manufacturing	
  equipment	
  and	
  the	
  
environment	
  is	
  nothing	
  new,	
  but	
  using	
  those	
  sensors	
  to	
  communicate	
  with	
  other	
  equipment	
  and	
  
automatically	
  feed	
  data	
  is	
  one	
  of	
  the	
  newest	
  frontiers.	
  In	
  Figure	
  1,	
  there	
  is	
  presented	
  a	
  business	
  
scenario	
  that	
  shows	
  intelligent	
  communication	
  system	
  between	
  different	
  parts	
  of	
  the	
  value	
  chain	
  
within	
  Industry	
  4.0.	
  	
  
	
  
	
  
Figure	
  1	
   Typical	
  business	
  scenario	
  in	
  the	
  Internet	
  of	
  Things	
  (Schönthaler,	
  2015)	
  
Figure	
  1,	
  presents	
  communication	
  between	
  supplier,	
  carrier,	
  shipper,	
  producer	
  and	
  his	
  customer.	
  As	
  
stated	
  in	
  (Schönthaler,	
  2015)	
  this	
  digital	
  transformation	
  of	
  the	
  value	
  chain	
  provides	
  the	
  supplier	
  with	
  
insight	
  to	
  the	
  inventory	
  directly	
  on	
  the	
  shelf,	
  so	
  proactive	
  actions	
  are	
  possible.	
  From	
  this	
  new	
  way	
  of	
  
collaboration	
  arises.	
  According	
  to	
  Siebenmorgen	
  (2015)	
  a	
  fundamental	
  step	
  in	
  the	
  direction	
  of	
  
Industry	
  4.0	
  is	
  the	
  digital	
  modelling	
  of	
  the	
  value	
  chain,	
  where	
  a	
  large	
  number	
  of	
  users	
  networked	
  
through	
  cooperation	
  platform	
  benefit.	
  Siebenmorgen	
  underlines	
  that	
  the	
  trust	
  of	
  all	
  companies	
  
involved	
  must	
  be	
  gained,	
  otherwise	
  no	
  Industry	
  4.0	
  business	
  model	
  will	
  be	
  successful.	
  
	
  
Even	
  smart	
  services	
  initiatives	
  favour	
  new	
  forms	
  of	
  collaboration	
  and	
  cooperation,	
  in	
  certain	
  cases,	
  
rivals	
  are	
  asked	
  to	
  collaborate	
  (coopetition).	
  Indeed,	
  Smart	
  services	
  initiatives	
  are	
  likely	
  to	
  reshape	
  
the	
  competitive	
  landscape	
  and	
  change	
  the	
  traditional	
  industry	
  boundaries.	
  
	
  
3.1.3   Customer	
  value	
  
Anderson	
  et	
  al	
  (2006)	
  explains	
  the	
  importance	
  of	
  customer	
  value	
  that	
  they	
  value	
  forces	
  suppliers	
  to	
  
focus	
  on	
  what	
  their	
  offerings	
  are	
  really	
  worth	
  to	
  their	
  customers.	
  The	
  paper	
  described	
  a	
  systematic	
  
method	
  to	
  help	
  with	
  the	
  development	
  of	
  value	
  propositions	
  to	
  that	
  are	
  meaningful	
  to	
  their	
  target	
  
customers.	
  With	
  M2M	
  services	
  customer	
  value	
  must	
  continue	
  to	
  be	
  developed,	
  in	
  fact,	
  “smart	
  
services”	
  encapsulates	
  more	
  than	
  just	
  mere	
  technology.	
  This	
  concept	
  also	
  refers	
  to	
  a	
  more	
  
customercentric	
  view	
  and	
  strategy,	
  that	
  transform	
  that	
  technology	
  into	
  a	
  value	
  added	
  services	
  from	
  
the	
  customer’s	
  point	
  of	
  view	
  according	
  to	
  Reinartz	
  and	
  Ulaga	
  (2014).	
  According	
  to	
  (Osterwalder	
  and	
  
Pigneur,	
  2002)	
  value	
  is	
  created	
  through	
  use,	
  a	
  reduction	
  of	
  the	
  customer’s	
  risk	
  or	
  by	
  making	
  his	
  life	
  
easier	
  through	
  reduction	
  of	
  his	
  efforts.	
  Capturing	
  the	
  value	
  can	
  be	
  during	
  value	
  creation,	
  purchase,	
  
consumption,	
  its	
  renewal	
  ot	
  its	
  transfer.	
  The	
  value	
  and	
  price	
  level	
  can	
  be	
  compared	
  to	
  one	
  of	
  the	
  
companies	
  competitor’s.	
  To	
  deliver	
  the	
  right	
  value	
  the	
  target	
  customer	
  needs	
  to	
  be	
  defined,	
  the	
  
means	
  to	
  reach	
  and	
  communicate	
  with	
  him,	
  as	
  well	
  as	
  the	
  relational	
  strategy	
  to	
  establish	
  with	
  
customer.	
  Campbell	
  et	
  al	
  (2011)	
  state	
  that	
  “advances	
  in	
  technology,	
  especially	
  information	
  
technology,	
  and	
  widespread	
  use	
  of	
  the	
  Internet,	
  can	
  be	
  viewed	
  as	
  a	
  catalyst	
  that	
  facilitates	
  the	
  shift	
  
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   7	
  
in	
  the	
  traditional	
  service	
  boundary	
  between	
  provider	
  and	
  customer	
  towards	
  either	
  self-­‐service	
  or	
  
super	
  service”.	
  	
  
	
  
However,	
  while	
  services	
  supporting	
  the	
  products	
  (SSP)	
  can	
  be	
  easily	
  standardized	
  to	
  offer	
  a	
  “digital	
  
version”,	
  services	
  supporting	
  the	
  customers	
  (SSC)	
  always	
  show	
  a	
  big	
  deal	
  of	
  variety	
  due	
  to	
  people	
  
interactions	
  and	
  customer-­‐specific	
  situations.	
  Thereby,	
  it	
  is	
  said	
  that	
  “technology	
  may	
  not	
  be	
  
appropriate	
  in	
  the	
  context	
  of	
  an	
  SSC	
  business	
  orientation	
  given	
  that	
  these	
  services	
  are	
  directed	
  at	
  the	
  
client	
  and	
  customized	
  rather	
  than	
  to	
  the	
  product	
  and	
  standardized”	
  (Antioco	
  et	
  al,	
  2008,	
  p.	
  351).	
  
	
  
3.1.4   Sustainability	
  through	
  customer	
  engagement	
  
As	
  well	
  as	
  Park	
  et	
  al	
  (2012)	
  suggest,	
  digital	
  technologies	
  integrate	
  and	
  combine	
  product	
  and	
  services	
  
in	
  different	
  ways,	
  to	
  deliver	
  a	
  product-­‐service	
  systems	
  that	
  brings	
  also	
  social	
  and	
  environmental	
  
benefits	
  Tukker	
  (2004	
  and	
  2013).	
  
	
  
Most	
  marketers	
  think	
  that	
  interacting	
  as	
  much	
  as	
  possible	
  with	
  customer	
  will	
  allow	
  them	
  to	
  build	
  
strong	
  relationships	
  with	
  the	
  customer	
  (Freeman	
  et	
  al,	
  2012).	
  Not	
  all	
  of	
  the	
  customers	
  want	
  to	
  have	
  
relationship	
  with	
  the	
  brand;	
  it	
  is	
  essential	
  to	
  determine	
  different	
  expectations	
  in	
  different	
  target	
  
groups.	
  Also,	
  interaction	
  do	
  not	
  build	
  relationships	
  -­‐	
  shared	
  values	
  build	
  them.	
  The	
  shared	
  value	
  is	
  a	
  
belief	
  that	
  both	
  brand	
  and	
  consumer	
  have	
  about	
  a	
  brand’s	
  higher	
  purpose	
  and	
  philosophy.	
  The	
  more	
  
interaction	
  is	
  not	
  always	
  better,	
  instead	
  of	
  continuous	
  demanding	
  of	
  customer	
  attention	
  try	
  to	
  
reduce	
  the	
  cognitive	
  overload	
  consumers	
  feel	
  for	
  the	
  brand	
  (Freeman	
  et	
  al,	
  2012).	
  
	
  
As	
  stated	
  in	
  Bloem	
  (2014)	
  the	
  best	
  example	
  of	
  engagement	
  are	
  applications	
  that	
  are	
  directly	
  related	
  
to	
  interaction	
  with	
  blue-­‐collar	
  members	
  of	
  staff	
  or	
  end	
  users,	
  through	
  measuring	
  and	
  regulating,	
  
maintenance	
  and	
  software	
  upgrades.	
  For	
  example,	
  Philips	
  allow	
  consumers	
  to	
  operate	
  lamps	
  as	
  they	
  
wish	
  and	
  in	
  this	
  way	
  get	
  data	
  to	
  implement	
  their	
  tasks	
  much	
  more	
  efficiently.	
  This	
  allows	
  Philips	
  to	
  
be	
  connected	
  with	
  the	
  customer	
  24/7,	
  expand	
  user	
  experience	
  through	
  improved	
  human-­‐machine	
  
interaction	
  and	
  products	
  are	
  a	
  part	
  of	
  the	
  end-­‐to-­‐end	
  ecosystem.	
  Figure	
  2	
  presents	
  sustainable	
  
customer	
  engagement	
  model	
  that	
  can	
  be	
  achieved	
  when	
  company	
  makes	
  the	
  relationship	
  with	
  the	
  
customer	
  visible,	
  tangible,	
  empowering	
  and	
  emotional	
  through	
  all	
  phases	
  of	
  product	
  and	
  service	
  
consumption.	
  
	
  
Deloitte	
  (2014)	
  report	
  presents	
  sustainability	
  as	
  both	
  a	
  valuable	
  risk-­‐management	
  tool	
  and	
  long-­‐term	
  
contribution	
  to	
  the	
  bottom	
  line.	
  Sustainability	
  as	
  a	
  value	
  proposition	
  is	
  still	
  waiting	
  to	
  be	
  
implemented	
  in	
  many	
  corporate	
  strategies	
  and	
  that	
  is	
  for	
  potential	
  leveraging	
  customer	
  
engagement.	
  It	
  allows	
  to	
  increase	
  customer	
  loyalty,	
  advocacy	
  and	
  repeat	
  conversions.	
  A	
  potentially	
  
engaged	
  customer	
  generates	
  significant	
  premiums	
  in	
  terms	
  of	
  money,	
  profitability,	
  and	
  revenue	
  and	
  
relationship	
  growth,	
  for	
  the	
  following	
  reasons:	
  
•   transparency	
  engagement	
  framework	
  refers	
  to	
  efforts	
  where	
  business	
  effectively	
  informs	
  the	
  
consumers	
  of	
  the	
  sustainability	
  performance	
  of	
  a	
  specific	
  product.	
  	
  
•   the	
  partnership	
  engagement	
  refers	
  to	
  improving	
  sustainability	
  by	
  inviting	
  customers	
  to	
  
participate	
  actively	
  in	
  partnership	
  with	
  the	
  third-­‐party	
  organization.	
  	
  
•   the	
  life	
  cycle	
  engagement	
  is	
  when	
  business	
  strives	
  to	
  engage	
  customers	
  in	
  parts	
  of	
  the	
  entire	
  
life	
  cycle	
  of	
  a	
  specific	
  product.	
  	
  
•   the	
  collaborative	
  engagement	
  platform	
  refers	
  to	
  business	
  applying	
  modern	
  network	
  
technology	
  to	
  create	
  with	
  customers	
  shared	
  value.	
  	
  
	
  
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   8	
  
	
  
•   Figure	
  2	
   Sustainable	
  Customer	
  Engagement	
  by	
  (Deloitte,	
  2014)	
  
	
  
3.1.5   Systems	
  must	
  help	
  the	
  owner/operator	
  to	
  make	
  the	
  right	
  decisions,	
  technical	
  data	
  then	
  
supports	
  business	
  decision	
  making	
  
McAfee	
  and	
  Brynjolfsson	
  (2012)	
  state	
  that	
  managerial	
  decisions	
  are	
  greater	
  than	
  technical	
  challenges	
  
starting	
  with	
  the	
  role	
  of	
  the	
  senior	
  executive	
  team.	
  The	
  most	
  critical	
  aspect	
  of	
  big	
  data	
  is	
  the	
  impact	
  
on	
  how	
  decisions	
  are	
  made	
  and	
  by	
  whom.	
  A	
  successful	
  and	
  effective	
  company	
  puts	
  information	
  and	
  
the	
  relevant	
  decision	
  right	
  in	
  the	
  same	
  location.	
  Expertise	
  is	
  not	
  often	
  where	
  it	
  used	
  to	
  be	
  due	
  to	
  
create	
  and	
  transferred	
  information.	
  Maximization	
  of	
  a	
  cross-­‐functional	
  cooperation	
  allows	
  the	
  right	
  
usage	
  of	
  data.	
  The	
  idea	
  of	
  the	
  right	
  decision-­‐making	
  process	
  lies	
  in	
  delivery	
  the	
  right	
  data	
  to	
  people	
  
who	
  understand	
  the	
  problems	
  and	
  who	
  have	
  problem-­‐solving	
  techniques	
  to	
  effectively	
  use	
  them.	
  
Rowley	
  (2007),	
  uses	
  the	
  DIKW-­‐hierarchy	
  (Figure	
  3)	
  as	
  a	
  model	
  to	
  allow	
  data	
  to	
  be	
  translated	
  into	
  
information,	
  knowledge	
  and	
  eventually	
  wisdom.	
  Only	
  with	
  information	
  can	
  management	
  actions	
  be	
  
taken.	
  
	
  
	
  
Figure	
  3	
   Translation	
  of	
  data	
  into	
  information	
  to	
  support	
  business	
  decision	
  making	
  
	
  
3.2   Survey	
  and	
  interview	
  results	
  
The	
  survey	
  population	
  was	
  32,	
  from	
  which	
  interviews	
  were	
  conducted	
  with	
  15	
  stakeholders	
  
representing	
  a	
  range	
  of	
  industry	
  players:	
  
•   20%	
  were	
  OEMs	
  with	
  24%	
  being	
  engaged	
  in	
  OEM	
  services;	
  
•   20%	
  were	
  equipment	
  operators	
  with	
  41%	
  being	
  involved	
  in	
  equipment	
  maintenance	
  
services;	
  
•   20%	
  of	
  those	
  who	
  responded	
  were	
  asset	
  owners,	
  a	
  further	
  7%	
  were	
  pure	
  financial	
  investors;	
  
•   30%	
  provided	
  consulting	
  services.	
  
	
  
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   9	
  
The	
  total	
  numbers	
  add	
  up	
  to	
  more	
  than	
  100%	
  as	
  many	
  of	
  the	
  firms	
  were	
  engaged	
  in	
  more	
  than	
  one	
  
activity.	
  This	
  confirms	
  that	
  the	
  population	
  that	
  responded	
  provided	
  a	
  wide	
  view	
  of	
  the	
  stakeholders	
  
in	
  the	
  equipment	
  value	
  chain.	
  	
  
	
  
The	
  supply	
  chain	
  analysis	
  confirmed	
  that	
  both	
  equipment	
  and	
  service	
  sales	
  were	
  made	
  directly	
  to	
  the	
  
end	
  user	
  and	
  indirectly	
  via	
  a	
  contractor.	
  This	
  is	
  common	
  in	
  many	
  industrial	
  equipment	
  markets	
  
(Rosenbloom,2007)	
  where	
  new	
  equipment	
  sales	
  follow	
  a	
  different	
  channel	
  to	
  service	
  sales	
  and	
  the	
  
channel	
  develops	
  on	
  the	
  phase	
  of	
  the	
  project.	
  
	
  
When	
  asked	
  about	
  the	
  types	
  of	
  systems	
  respondents	
  were	
  using	
  and	
  how	
  successful	
  these	
  were	
  in	
  
supporting	
  their	
  achievements,	
  the	
  two	
  least	
  reliable	
  systems	
  were	
  acoustic	
  (11%	
  response	
  rate)	
  and	
  
video/photo	
  analysis	
  (11%	
  response	
  rate).	
  Interestingly	
  there	
  was	
  a	
  contradiction	
  in	
  that	
  photo/video	
  
analysis	
  was	
  one	
  of	
  the	
  most	
  valuable	
  fault	
  finding	
  tools,	
  reflecting	
  that	
  it	
  is	
  used	
  largely	
  in	
  an	
  
interactive	
  way	
  during	
  planned	
  (62%)	
  and	
  unplanned	
  (42%)	
  inspections.	
  Acoustic	
  emission	
  analysis	
  
was	
  found	
  not	
  to	
  support	
  outcomes	
  successfully	
  yet	
  was	
  often	
  (50%)	
  used	
  in	
  fault-­‐finding.	
  The	
  most	
  
positive	
  outcomes	
  were	
  found	
  to	
  be	
  from	
  the	
  operational	
  data	
  (28%)	
  and	
  vibration	
  analysis	
  (26%).	
  
Vibration	
  analysis	
  was	
  often	
  (53%)	
  used	
  in	
  fault-­‐finding,	
  whereas	
  operational	
  data	
  was	
  not	
  used	
  as	
  
frequently	
  in	
  fault-­‐finding	
  (33%).	
  Both	
  methods	
  scored	
  highly	
  in	
  remote	
  and	
  continual	
  measurement	
  
(>42%	
  of	
  respondents).	
  Performance	
  data,	
  something	
  that	
  combines	
  many	
  data	
  feeds,	
  supported	
  
outcomes	
  23%	
  of	
  the	
  time	
  and	
  was	
  used	
  to	
  support	
  fault-­‐finding	
  with	
  an	
  expectation	
  for	
  the	
  data	
  to	
  
be	
  collected	
  continually	
  (50%).	
  
	
  
3.2.1   Operations	
  and	
  maintenance	
  considerations	
  
Operations	
  and	
  maintenance	
  have	
  a	
  major	
  impact	
  on	
  the	
  outcome	
  of	
  any	
  operation.	
  For	
  this	
  reason,	
  
there	
  were	
  a	
  group	
  of	
  questions	
  around	
  these	
  topics	
  and	
  how	
  monitoring	
  can	
  assist	
  the	
  asset	
  owner	
  
to	
  achieve	
  their	
  desired	
  outcomes.	
  
	
  	
  
Warranty	
  fulfilment	
  is	
  closely	
  associated	
  with	
  the	
  new	
  installation	
  of	
  equipment.	
  This	
  can	
  be,	
  as	
  has	
  
been	
  discussed,	
  a	
  direct	
  sale	
  to	
  the	
  asset	
  owner	
  or	
  indirect.	
  Nevertheless,	
  the	
  OEM	
  has	
  warranty	
  and	
  
performance	
  obligations	
  and	
  there	
  are	
  also	
  operation	
  and	
  maintenance	
  requirements.	
  For	
  warranty	
  
and	
  equipment	
  operation,	
  within	
  all	
  responses	
  equal	
  value	
  was	
  given	
  to	
  (80-­‐75%):	
  
•   ensuring	
  the	
  equipment	
  is	
  operated	
  and	
  maintained	
  correctly;	
  
•   feedback	
  on	
  how	
  equipment	
  is	
  actually	
  used;	
  
•   detailed	
  understanding	
  of	
  equipment	
  life	
  consumption;	
  
•   improving	
  plant	
  performance.	
  
	
  
There	
  are	
  outcomes	
  from	
  monitoring	
  the	
  normal	
  operation	
  of	
  the	
  equipment,	
  the	
  three	
  most	
  
important	
  were:	
  	
  
•   increased	
  use	
  of	
  proactive	
  maintenance	
  (89%	
  important/very	
  important);	
  
•   improved	
  equipment	
  efficiency	
  (88%);	
  
•   stable	
  operation	
  of	
  the	
  plant	
  (73%).	
  	
  
	
  
These	
  points	
  are	
  associated	
  with	
  getting	
  more	
  out	
  of	
  the	
  equipment	
  and	
  reducing	
  the	
  costs,	
  which	
  
leads	
  to	
  a	
  lower	
  per	
  unit	
  cost	
  of	
  production.	
  	
  
	
  
When	
  asked	
  about	
  the	
  maintenance	
  outcomes	
  that	
  were	
  important	
  the	
  three	
  most	
  important	
  were:	
  
•   a	
  desire	
  to	
  move	
  to	
  condition	
  (or	
  risk)	
  based	
  maintenance	
  (78%);	
  
•   to	
  undertake	
  targeted/opportunity	
  maintenance	
  (75%);	
  
•   to	
  drive	
  down	
  the	
  cost	
  of	
  maintenance	
  (74%).	
  	
  
	
  
These	
  points	
  are	
  associated	
  with	
  the	
  desired	
  outcome	
  of	
  a	
  lower	
  total	
  cost	
  of	
  ownership.	
  
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   10	
  
	
  
What	
  outcomes	
  are	
  expected	
  in	
  terms	
  of	
  supporting	
  unplanned	
  downtimes?	
  The	
  most	
  important	
  
aspects	
  here	
  were:	
  
•   to	
  support	
  opportunity-­‐based	
  maintenance	
  (77%);	
  
•   to	
  improve	
  problem	
  solving	
  (74%);	
  
•   to	
  allow	
  safe	
  operation	
  when	
  equipment	
  is	
  damaged	
  (69%).	
  
	
  
These	
  points	
  are	
  associated	
  with	
  minimising	
  lost	
  production	
  associated	
  with	
  unplanned	
  downtimes.	
  	
  
	
  
3.2.2   Data	
  sharing	
  and	
  ownership	
  
The	
  consensus	
  view	
  was	
  that	
  the	
  data	
  should	
  be	
  owned	
  by	
  the	
  equipment	
  owner	
  but	
  shared	
  within	
  
the	
  ecosystem.	
  The	
  interviews	
  highlighted	
  this	
  to	
  be	
  a	
  very	
  emotional	
  issue	
  for	
  the	
  equipment	
  
owners	
  as	
  they	
  considered	
  that	
  the	
  data	
  (technical,	
  operational	
  and	
  commercial)	
  was	
  commercially	
  
sensitive.	
  In	
  interviews,	
  they	
  were	
  also	
  concerned	
  that	
  the	
  data	
  should	
  be	
  shared	
  and	
  used	
  within	
  
the	
  ecosystem,	
  provided	
  they	
  understood	
  the	
  purposes	
  for	
  which	
  it	
  was	
  being	
  used.	
  In	
  details	
  the	
  
three	
  most	
  important	
  aspects	
  were:	
  
•   Information/output/reporting	
  from	
  the	
  system	
  needs	
  customizing	
  (80%).	
  
•   The	
  data	
  is	
  commercially	
  sensitive	
  (66%).	
  
•   The	
  equipment	
  owner	
  should	
  own	
  the	
  data	
  (60%).	
  
	
  
Interview	
  responses	
  confirmed	
  the	
  ownership	
  of	
  data	
  was	
  an	
  important	
  issue.	
  Several	
  of	
  the	
  
interviewees	
  stated	
  clearly	
  that	
  the	
  data	
  had	
  commercial	
  value	
  and	
  that	
  ownership	
  must	
  be	
  vested	
  
with	
  the	
  equipment	
  owner	
  and	
  not	
  the	
  OEM.	
  Further	
  views	
  here	
  suggested	
  that	
  the	
  firm	
  doing	
  the	
  
measuring	
  should	
  own	
  the	
  data	
  and	
  another	
  said	
  it	
  depends	
  on	
  who	
  takes	
  the	
  risk.	
  	
  
	
  
In	
  contrast	
  to	
  the	
  data	
  ownership	
  question,	
  there	
  was	
  general	
  agreement	
  from	
  the	
  interviewees	
  that	
  
faster,	
  better	
  and	
  cheaper	
  solutions	
  could	
  be	
  generated	
  by	
  the	
  ecosystem	
  when	
  the	
  technical,	
  
operation	
  and	
  commercial	
  data	
  were	
  shared.	
  The	
  use	
  of	
  data	
  and	
  the	
  anonymity	
  of	
  data	
  remained	
  
key	
  concerns.	
  
	
  
3.2.3   Descriptions	
  of	
  customer	
  value	
  propositions	
  and	
  value	
  for	
  money	
  
The	
  utilities	
  and	
  OandG	
  firms	
  provided	
  some	
  of	
  the	
  most	
  attractive	
  examples	
  of	
  customer	
  value	
  
propositions,	
  typical	
  themes	
  being:	
  
•   maintenance	
  –	
  maintenance	
  cost	
  out,	
  moves	
  to	
  risk-­‐based	
  maintenance;	
  
•   advanced	
  services	
  –	
  underpinned	
  by	
  monitoring,	
  we	
  could	
  de-­‐risk	
  our	
  service	
  contracts;	
  
•   operations	
  –	
  data	
  showed	
  that	
  the	
  OEM	
  damaged	
  the	
  equipment	
  during	
  commissioning;	
  
operational	
  technical	
  data	
  helps	
  increase	
  speed	
  of	
  troubleshooting;	
  value	
  comes	
  from	
  a	
  
holistic	
  view;	
  we	
  use	
  the	
  combined	
  data	
  for	
  our	
  business	
  reporting	
  and	
  optimization.	
  
	
  
When	
  asked	
  in	
  the	
  survey	
  if	
  the	
  monitoring	
  system	
  that	
  was	
  used	
  supported	
  the	
  desired	
  outcomes:	
  
only	
  in	
  33%	
  of	
  the	
  responses	
  did	
  the	
  system	
  provide	
  all	
  of	
  the	
  data	
  that	
  was	
  required.	
  This	
  clearly	
  
shows	
  that	
  there	
  the	
  value	
  propositions	
  are	
  not	
  matching	
  the	
  expectations.	
  Yet	
  owner/operators	
  
were	
  providing	
  examples	
  of	
  positive	
  value	
  propositions	
  and	
  had	
  a	
  desire	
  to	
  continue	
  using	
  and	
  
developing	
  the	
  technology.	
  	
  
	
  
3.2.4   Negative	
  aspects	
  of	
  monitoring	
  
There	
  were	
  a	
  number	
  of	
  negative	
  aspects	
  that	
  were	
  in	
  contradiction	
  to	
  each	
  other.	
  This	
  suggests	
  a	
  
weak	
  fit	
  between	
  today's	
  problem	
  and	
  solution	
  and	
  that	
  therefore	
  a	
  clear	
  value	
  proposition	
  has	
  not	
  
yet	
  been	
  identified.	
  This	
  was	
  typically	
  found	
  when	
  the	
  OEM	
  chose	
  a	
  marketing	
  “push”	
  to	
  sell	
  the	
  
technology,	
  with	
  the	
  owner/operator	
  considering	
  that	
  the	
  technology	
  was	
  being	
  forced	
  upon	
  them.	
  	
  
	
  
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   11	
  
Data	
  overload	
  was	
  clearly	
  a	
  problem	
  for	
  some	
  and	
  related	
  to	
  the	
  integration	
  of	
  the	
  systems	
  and	
  the	
  
relevance	
  of	
  the	
  data	
  presented.	
  Questioning	
  on	
  these	
  issues,	
  there	
  was	
  a	
  preference	
  for	
  one	
  
management-­‐level	
  system	
  that	
  could	
  present	
  the	
  data	
  in	
  a	
  more	
  relevant	
  way	
  for	
  those	
  consuming	
  
the	
  data.	
  	
  
	
  
Base-­‐level	
  concerns	
  about	
  fault	
  reporting,	
  data	
  security	
  and	
  a	
  reporting/controlling	
  vs	
  transparent	
  
approach	
  were	
  described	
  and	
  discussed	
  separately.	
  Here	
  there	
  were	
  concerns	
  from	
  equipment	
  
owners/operators	
  about	
  the	
  OEM	
  spying	
  on	
  them,	
  yet	
  there	
  was	
  also	
  an	
  expectation	
  of	
  pro-­‐active	
  
OEM	
  support.	
  The	
  OEMs	
  also	
  had	
  a	
  concern	
  that	
  owner/operators	
  did	
  not	
  want	
  to	
  “expose	
  their	
  
stupidity”.	
  A	
  Liquefied	
  Natural	
  Gas	
  (LNG)	
  plant	
  Operations	
  and	
  Maintenance	
  (O&M)	
  team	
  member	
  
said	
  they	
  “Need	
  to	
  know	
  what	
  is	
  needed	
  by	
  whom	
  and	
  why”.	
  
	
  
3.2.5   Improving	
  customer/supplier	
  interactions	
  and	
  the	
  sharing	
  of	
  data	
  
The	
  consensus	
  view	
  from	
  the	
  interviews	
  was	
  that	
  sharing	
  data	
  should	
  improve	
  customer/supplier	
  
interactions.	
  How	
  to	
  do	
  this	
  is	
  part	
  of	
  the	
  value	
  proposition;	
  however,	
  the	
  findings	
  were	
  that:	
  
•   it	
  should	
  be	
  proactive	
  so	
  that	
  the	
  OEM	
  can	
  be	
  ready	
  to	
  help	
  with	
  trouble	
  shooting	
  or	
  spares;	
  	
  
•   information	
  must	
  flow	
  in	
  both	
  directions,	
  allowing	
  one	
  set	
  of	
  data	
  to	
  be	
  used	
  to	
  help	
  improve	
  
the	
  quality	
  of	
  trouble	
  shooting;	
  
•   joint	
  problem	
  solving	
  helps	
  to	
  mature	
  the	
  relationships	
  and	
  encourages	
  more	
  interactions	
  at	
  
different	
  levels;	
  
•   sharing	
  of	
  resources	
  helps	
  to	
  drive	
  out	
  cost	
  yet	
  risks	
  deskilling	
  staff.	
  
	
  
One	
  OEM	
  respondent	
  went	
  as	
  far	
  as	
  saying	
  that	
  “…you	
  should	
  work	
  'open	
  book'	
  with	
  the	
  data…”.	
  	
  
	
  
The	
  move	
  to	
  outcome-­‐based	
  solutions	
  with	
  an	
  alignment	
  of	
  objectives	
  creates	
  value	
  in	
  some	
  cases.	
  
Embedding/sharing	
  of	
  resources	
  was	
  viewed	
  positively	
  by	
  a	
  number	
  of	
  the	
  interviewees.	
  There	
  is	
  an	
  
effort	
  required	
  by	
  all	
  parties	
  to	
  learn	
  to	
  work	
  closely	
  together,	
  and	
  focusing	
  on	
  high-­‐level	
  goals	
  (e.g.	
  
total	
  cost	
  of	
  ownership)	
  rather	
  than	
  transaction	
  cost	
  was	
  a	
  key	
  lesson.	
  
	
  
Sitting	
  together	
  in	
  this	
  way	
  and	
  understanding	
  the	
  equipment	
  owner’s	
  business	
  objectives	
  was	
  
considered	
  important	
  by	
  many	
  respondents.	
  Getting	
  people	
  to	
  do	
  this	
  requires	
  effort	
  and	
  maturity.	
  
The	
  OEMs	
  working	
  in	
  joint	
  data	
  analysis	
  centres	
  with	
  the	
  owner/operator	
  considered	
  this	
  a	
  good	
  
approach	
  as	
  it	
  could	
  assist	
  the	
  combining	
  of	
  technical	
  and	
  commercial	
  reporting,	
  helping	
  all	
  parties	
  to	
  
focus	
  on	
  improving	
  operations	
  or	
  as	
  one	
  interviewee	
  said	
  “finding	
  ways	
  to	
  use	
  customer	
  waste	
  to	
  
generate	
  value”.	
  	
  
	
  
The	
  consensus	
  view	
  was	
  that	
  second	
  tier	
  OEMs,	
  unless	
  suppliers	
  of	
  critical	
  plant	
  items,	
  had	
  a	
  tough	
  
time	
  getting	
  access	
  to	
  the	
  data	
  they	
  need	
  when	
  they	
  need	
  it.	
  Here	
  the	
  system	
  integrator	
  was	
  
considered	
  a	
  key	
  party	
  in	
  the	
  ecosystem	
  to	
  support	
  access;	
  however	
  a	
  number	
  of	
  respondents	
  
mentioned	
  that	
  warranty	
  and	
  other	
  contractual	
  issues	
  may	
  create	
  barriers.	
  
	
  
3.2.6   Product	
  improvement	
  
The	
  use	
  of	
  the	
  data	
  collected	
  to	
  improve	
  the	
  product	
  was	
  considered	
  important	
  in	
  the	
  interviews.	
  An	
  
investor	
  said	
  that	
  it	
  was	
  a	
  “must”,	
  the	
  owner/operators	
  said	
  that	
  the	
  OEMs	
  were	
  too	
  slow	
  to	
  
integrate	
  what	
  they	
  learned	
  into	
  new	
  product	
  development	
  or	
  service	
  upgrades.	
  GE	
  was	
  considered	
  
as	
  an	
  OEM	
  that	
  took	
  what	
  they	
  learned	
  from	
  monitoring	
  and	
  integrated	
  it	
  into	
  both	
  service	
  upgrades	
  
and	
  new	
  products.	
  The	
  data	
  should	
  also	
  be	
  used	
  to	
  support	
  changes	
  to	
  operations	
  and	
  maintenance	
  
(e.g.	
  longer	
  intervals	
  between	
  maintenance)	
  based	
  on	
  both	
  the	
  technical	
  and	
  operational	
  data.	
  The	
  
only	
  way	
  this	
  can	
  be	
  done	
  is	
  through	
  closer	
  working	
  with	
  the	
  stakeholders	
  within	
  the	
  ecosystem.	
  
	
  
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   12	
  
3.2.7   Lessons	
  from	
  the	
  interviews	
  from	
  the	
  use	
  of	
  monitoring	
  technologies	
  
In	
  balance,	
  the	
  interviewees	
  said	
  that	
  there	
  was	
  value	
  from	
  using	
  monitoring	
  systems	
  and	
  that	
  the	
  
ecosystem	
  created	
  more	
  value	
  than	
  individual	
  parties	
  were	
  able	
  to	
  do.	
  This	
  means	
  that	
  there	
  must	
  
be	
  significant	
  integrations	
  at	
  a	
  personal	
  level	
  within	
  the	
  ecosystem	
  to	
  allow	
  this	
  co-­‐creation	
  to	
  take	
  
place.	
  On	
  an	
  interpersonal	
  level,	
  a	
  number	
  of	
  the	
  interviewees	
  stated,	
  “once	
  the	
  parties	
  start	
  
working	
  together	
  you	
  start	
  to	
  get	
  more	
  trust”.	
  	
  
	
  
A	
  number	
  also	
  commented	
  that	
  the	
  monitoring	
  solution	
  “ran	
  the	
  risk	
  of	
  being	
  taken	
  for	
  granted”,	
  in	
  
which	
  case	
  may	
  lose	
  it	
  importance	
  in	
  the	
  view	
  of	
  the	
  owner/operator.	
  This	
  was	
  because	
  the	
  system	
  
tended	
  to	
  focus	
  on	
  risk	
  mitigation	
  meaning	
  that	
  a	
  failure	
  was	
  prevented.	
  Other	
  findings	
  from	
  the	
  
interviews	
  were:	
  
•   Low	
  cost	
  sensors	
  (video)	
  have	
  enough	
  on-­‐board	
  computing	
  power	
  (investor);	
  
•   Our	
  flash	
  dryer	
  was	
  having	
  problems:	
  it	
  was	
  found	
  before	
  it	
  caused	
  problems	
  (utility);	
  
•   Once	
  you	
  start	
  working	
  together	
  you	
  start	
  to	
  get	
  more	
  trust	
  (LNG);	
  
•   GE	
  medial	
  have	
  a	
  super	
  value	
  proposition	
  for	
  their	
  equipment	
  in	
  hospitals	
  (OEM);	
  
•   Must	
  work	
  around	
  the	
  business	
  solution	
  and	
  then	
  the	
  technical	
  solution	
  can	
  be	
  found	
  
(system	
  integrator);	
  
•   Solution	
  comes	
  best	
  from	
  co-­‐creation	
  around	
  the	
  ecosystem	
  (consultant);	
  
•   The	
  customer	
  can	
  pull	
  you	
  out	
  of	
  the	
  problem	
  (consultant);	
  
•   A	
  modern	
  train	
  can	
  have	
  10M	
  data	
  points	
  per	
  trip	
  –	
  must	
  be	
  provided	
  in	
  an	
  understandable	
  
form	
  (consultant).	
  
	
  
3.2.8   Overview	
  of	
  the	
  survey	
  and	
  interview	
  results	
  
In	
  summary,	
  the	
  main	
  findings	
  of	
  the	
  survey	
  and	
  the	
  interviews	
  were	
  segmented	
  into	
  two	
  themes,	
  
customer	
  relationships	
  and	
  underlying	
  considerations,	
  listed	
  in	
  Table	
  1.	
  	
  
	
  
Interview	
  results	
  suggest	
  that	
  the	
  best	
  solutions	
  provided	
  information	
  to	
  allow	
  people	
  to	
  make	
  the	
  
decisions,	
  rather	
  than	
  the	
  machines	
  taking	
  their	
  own	
  decisions	
  based	
  on	
  pure	
  technical	
  data.	
  A	
  
process	
  in	
  Section	
  3.3	
  below	
  provides	
  one	
  possible	
  framework	
  to	
  help	
  OEMs	
  to	
  help	
  integrate	
  
customer	
  experience	
  into	
  the	
  development	
  and	
  operation	
  of	
  machine-­‐to-­‐machine	
  systems.	
  	
  
	
  
Table	
  1	
   Main	
  issues	
  that	
  can	
  drive	
  customer	
  relationships	
  and	
  underlying	
  considerations,	
  
identified	
  from	
  the	
  interviews	
  	
  
Customer	
  relationships	
   Underlying	
  considerations	
  
•   The	
  ‘customer’	
  may	
  not	
  be	
  able	
  to	
  describe	
  
clearly	
  what	
  they	
  need,	
  yet	
  many	
  are	
  able	
  to	
  
describe	
  the	
  outcomes	
  they	
  are	
  trying	
  to	
  
achieve;	
  
•   Clear	
  customer/use	
  segmentation	
  must	
  be	
  
undertaken	
  based	
  on	
  position	
  in	
  supply	
  
chain/ecosystem	
  and	
  the	
  outcomes	
  they	
  are	
  
seeking;	
  
•   Each	
  customer	
  persona	
  must	
  have	
  a	
  clear	
  
value	
  proposition,	
  it	
  is	
  no	
  long	
  sufficient	
  to	
  
have	
  one	
  value	
  proposition	
  for	
  ‘customers’;	
  
•   Loss	
  of	
  personal	
  interactions	
  can	
  lead	
  to	
  a	
  
perception	
  of	
  a	
  lower	
  level	
  of	
  value	
  as	
  
customers	
  take	
  the	
  service	
  as	
  the	
  new	
  norm.	
  
•   There	
  must	
  be	
  transparency	
  in	
  the	
  data	
  
collection	
  and	
  as	
  GE	
  say,	
  a	
  ‘single	
  point	
  of	
  
truth’,	
  this	
  means	
  that	
  every	
  party	
  in	
  the	
  
ecosystem	
  should	
  use	
  the	
  same	
  data	
  source;	
  
•   The	
  data	
  collected	
  must	
  be	
  used	
  openly	
  for	
  
root-­‐cause-­‐analysis	
  rather	
  than	
  defensively	
  
to	
  protect	
  warranty	
  positions,	
  this	
  requires	
  
trust	
  between	
  the	
  players	
  in	
  the	
  ecosystem;	
  
•   There	
  are	
  internal	
  consumers	
  of	
  the	
  data	
  
collected	
  and	
  this	
  can	
  support	
  new	
  product	
  
and	
  service	
  development,	
  so	
  the	
  data	
  
(technical	
  and	
  operational)	
  must	
  flow	
  down	
  
to	
  them.	
  
	
  
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   13	
  
3.3   Process	
  description	
  	
  
Using	
  the	
  results	
  of	
  the	
  survey	
  and	
  the	
  interviews	
  and	
  integrating	
  these	
  with	
  the	
  best	
  practices	
  
identified	
  in	
  the	
  literature,	
  the	
  authors	
  have	
  designed	
  a	
  process	
  to	
  assist	
  industrial	
  firms	
  to	
  
understand	
  better	
  the	
  complexities	
  of	
  how	
  to	
  integrate	
  these	
  new	
  technologies	
  into	
  their	
  existing	
  
offerings	
  to	
  provide	
  the	
  customer	
  with	
  the	
  value	
  that	
  they	
  are	
  expecting.	
  This	
  is	
  not	
  a	
  simple	
  task	
  as	
  
every	
  OEM	
  exists	
  in	
  a	
  different	
  position	
  in	
  their	
  particular	
  ecosystem	
  and	
  this	
  makes	
  it	
  more	
  critical	
  
that	
  the	
  OEM	
  comprehends	
  the	
  ecosystem,	
  so	
  that	
  they	
  can	
  understand	
  how	
  and	
  where	
  the	
  know-­‐
how	
  exists.	
  A	
  proposed	
  process	
  is	
  shown	
  in	
  Figure	
  4;	
  this	
  is	
  developed	
  further	
  below.	
  
	
  
	
  
Figure	
  4	
   Proposed	
  process	
  description	
  to	
  assist	
  OEMS	
  to	
  develop	
  a	
  customer	
  value	
  proposition	
  
for	
  M2M	
  communications	
  
	
  
3.3.1   Where	
  do	
  you	
  sit	
  in	
  the	
  ecosystem	
  and	
  who	
  bring	
  what	
  value?	
  
The	
  purpose	
  of	
  this	
  element	
  is	
  to	
  provide	
  context	
  for	
  the	
  OEM	
  so	
  that	
  they	
  understand	
  where	
  they	
  
sit	
  within	
  the	
  ecosystem.	
  They	
  can	
  then	
  understand	
  who	
  and	
  what	
  they	
  can	
  influence.	
  More	
  
importantly	
  when	
  it	
  comes	
  to	
  joint	
  problem	
  solving,	
  they	
  can	
  then	
  identify	
  the	
  parties	
  who	
  may	
  be	
  
able	
  to	
  support	
  them	
  to	
  create	
  a	
  solution	
  for	
  the	
  owner/operator	
  of	
  the	
  equipment.	
  This	
  is	
  an	
  open	
  
innovation	
  paradigm	
  (Chesbrough	
  et	
  al,	
  2007)	
  in	
  that	
  the	
  solution	
  is	
  developed	
  with	
  the	
  help	
  of	
  
external	
  partners.	
  
	
  
3.3.2   Do	
  you	
  understand	
  your	
  customer's	
  gains	
  and	
  pains?	
  
Within	
  Service	
  Design	
  (Tripp,	
  et	
  al,	
  2013)	
  empathy	
  mapping	
  is	
  an	
  important	
  activity	
  to	
  gain	
  a	
  fuller	
  
understanding	
  of	
  your	
  customer.	
  Here	
  it	
  has	
  been	
  seen	
  that	
  many	
  OEMs	
  have	
  complex	
  supply	
  chains	
  
and	
  ecosystems	
  and	
  therefore	
  understanding	
  key	
  stakeholders	
  becomes	
  increasingly	
  important.	
  
Users	
  outside	
  the	
  key	
  target	
  group	
  of	
  the	
  system	
  may	
  have	
  an	
  interest	
  in	
  the	
  information	
  that	
  the	
  
data	
  from	
  such	
  systems	
  represents.	
  Consumption	
  of	
  the	
  information	
  must	
  (Rowley,	
  2007)	
  be	
  in	
  a	
  
form	
  that	
  creates	
  action;	
  this	
  means	
  that	
  the	
  data	
  must	
  be	
  transformed	
  into	
  information	
  relevant	
  to	
  
the	
  person	
  consuming	
  it.	
  
	
  
3.3.3   Do	
  you	
  understand	
  the	
  customer’s	
  outcomes	
  and	
  their	
  influencers?	
  
How	
  easy	
  is	
  it	
  for	
  the	
  OEM	
  to	
  understand	
  the	
  outcomes	
  that	
  the	
  customer	
  is	
  expecting?	
  This	
  may	
  
explain	
  why	
  so	
  many	
  of	
  the	
  respondents	
  were	
  only	
  partially	
  happy	
  with	
  remote	
  monitoring.	
  The	
  
outcomes	
  or	
  goals	
  that	
  the	
  owner	
  is	
  seeking	
  must	
  be	
  translated	
  into	
  a	
  form	
  that	
  is	
  relevant	
  and	
  
controllable	
  within	
  the	
  environment	
  of	
  the	
  monitoring	
  (Bostsman	
  and	
  Rogers,	
  2010).	
  The	
  
relationship	
  between	
  the	
  technical	
  issues	
  and	
  the	
  commercial	
  implications	
  are	
  a	
  key	
  demand	
  from	
  
the	
  owner/operators	
  of	
  the	
  equipment.	
  
	
  
3.3.4   Can	
  you	
  clearly	
  describe	
  the	
  customer	
  value	
  proposition?	
  
The	
  owner/operators	
  that	
  were	
  interviewed	
  were	
  better	
  able	
  to	
  describe	
  the	
  customer	
  value	
  
propositions	
  they	
  were	
  expecting	
  than	
  were	
  OEMs.	
  Marketing	
  theory	
  says	
  that	
  the	
  seller	
  must	
  be	
  
able	
  to	
  describe	
  the	
  value	
  proposition	
  and	
  Osterwald	
  (2002)	
  has	
  provided	
  a	
  format	
  to	
  assist	
  OEMs	
  to	
  
Where	
  do	
  you	
  
sit	
  in	
  the	
  
ecosystem	
  and	
  
who	
  brings	
  
what	
  value?
Do	
  you	
  
understand	
  
your	
  customer's	
  
gains	
  and	
  
pains?
Do	
  you	
  
understand	
  the	
  
customer's	
  
outcomes	
  and	
  
their	
  
influencers?
Can	
  you	
  clearly	
  
describe	
  the	
  
customer	
  value	
  
proposition?
Can	
  you	
  
describe	
  clearly	
  
where	
  the	
  
customer’s	
  
value	
  accrues?
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   14	
  
do	
  so.	
  Nevertheless,	
  the	
  clearest	
  descriptions	
  of	
  customer	
  value	
  propositions	
  were	
  from	
  the	
  
owner/operators.	
  This	
  suggests	
  that	
  customer	
  pull	
  will	
  bring	
  the	
  technology	
  to	
  the	
  market.	
  
	
  
3.3.5   Can	
  you	
  describe	
  clearly	
  where	
  the	
  customer’s	
  value	
  accrues?	
  
As	
  with	
  the	
  point	
  on	
  describing	
  customer	
  value	
  propositions,	
  this	
  is	
  very	
  important.	
  It	
  is	
  specific	
  to	
  
the	
  different	
  stakeholders	
  and	
  was	
  again	
  best	
  described	
  by	
  the	
  owner/operators.	
  
	
  
4   CONCLUSIONS	
  
The	
  survey	
  and	
  interview	
  data	
  were	
  generally	
  in	
  agreement	
  with	
  the	
  literature:	
  the	
  owner/operators	
  
were	
  looking	
  for	
  support	
  with	
  new	
  M2M	
  solutions	
  that	
  would	
  increase	
  the	
  interactions	
  between	
  the	
  
key	
  stakeholders.	
  The	
  expectation	
  was	
  that	
  joint	
  problem	
  solving	
  would	
  increase	
  the	
  speed	
  of	
  
problem	
  resolution,	
  reduce	
  costs	
  and	
  create	
  better	
  solutions.	
  This	
  is	
  in	
  agreement	
  with	
  the	
  open	
  
innovation	
  concept	
  of	
  Chasebrough	
  et	
  al	
  (2007)	
  and	
  Doblin	
  (2015)	
  who	
  recommend	
  increased	
  
customer	
  engagement	
  in	
  innovation.	
  This	
  is	
  also	
  supported	
  by	
  Freeman	
  et	
  al,	
  2012	
  and	
  Deliotte	
  
(2014)	
  where	
  the	
  customer	
  experience	
  and	
  shared	
  values	
  were	
  considered	
  as	
  a	
  key	
  sustainability	
  
aspect.	
  
	
  
The	
  degree	
  of	
  customer	
  engagement	
  must	
  increase	
  in	
  order	
  for	
  M2M	
  systems	
  to	
  deliver	
  the	
  
customer	
  value	
  propositions	
  they	
  offer.	
  Loss	
  of	
  personal	
  interactions	
  can	
  lead	
  to	
  a	
  perceived	
  lower	
  
level	
  of	
  value.	
  Engagement	
  should	
  be	
  on	
  a	
  more	
  individual	
  basis,	
  where	
  each	
  customer	
  persona	
  must	
  
have	
  a	
  clear	
  value	
  proposition.	
  Customers	
  of	
  data	
  include	
  all	
  of	
  the	
  active	
  players	
  in	
  the	
  ecosystem,	
  
so	
  an	
  understanding	
  of	
  what	
  each	
  customer	
  requires	
  needs	
  to	
  be	
  actively	
  made.	
  This	
  is	
  particularly	
  
true	
  in	
  an	
  environment	
  where	
  the	
  customer	
  may	
  not	
  understand	
  what	
  they	
  actually	
  need.	
  
Consumers	
  of	
  the	
  data	
  could	
  be	
  in	
  OEM	
  product	
  development	
  as	
  well	
  as	
  other	
  suppliers	
  in	
  the	
  
ecosystem.	
  
	
  
Data	
  itself	
  has	
  a	
  value,	
  and	
  many	
  stakeholders	
  should	
  be	
  able	
  to	
  access	
  the	
  data.	
  There	
  should	
  be	
  
transparency	
  in	
  the	
  collection	
  and	
  future	
  uses	
  of	
  the	
  data.	
  The	
  best	
  relationships	
  were	
  developed	
  
from	
  data	
  that	
  was	
  transformed	
  into	
  information	
  and	
  used	
  collaboratively	
  for	
  root-­‐cause-­‐analysis,	
  
rather	
  than	
  defensively	
  to	
  protect	
  warranty	
  positions.	
  The	
  data	
  should	
  include	
  the	
  operational	
  data	
  
as	
  well	
  as	
  the	
  technical	
  data	
  from	
  the	
  machines.	
  
	
  
5   RECOMMENDATIONS	
  
To	
  address	
  the	
  conclusions,	
  the	
  authors	
  have	
  some	
  recommendations	
  that	
  any	
  firm	
  that	
  is	
  creating	
  
an	
  M2M	
  solution	
  for	
  its	
  customers	
  should	
  consider	
  during	
  the	
  development	
  of	
  the	
  customer	
  value	
  
proposition:	
  
•   identify	
  who	
  are	
  your	
  customers	
  in	
  the	
  ecosystem	
  and	
  understand	
  the	
  outcomes	
  they	
  value;	
  
•   segment	
  your	
  customers	
  in	
  terms	
  of	
  the	
  outcomes	
  they	
  are	
  seeking	
  and	
  create	
  for	
  each	
  a	
  
persona	
  with	
  a	
  clear	
  value	
  proposition	
  with	
  clear	
  identification	
  of	
  where	
  value	
  is	
  created;	
  
•   find	
  ways	
  to	
  engage	
  with	
  the	
  customer,	
  as	
  experience	
  is	
  important	
  in	
  creating	
  sustainability	
  
and	
  the	
  loss	
  of	
  personal	
  interactions	
  can	
  lead	
  to	
  a	
  perception	
  of	
  a	
  lower	
  level	
  of	
  value;	
  
•   wherever	
  possible,	
  the	
  data	
  collected	
  must	
  be	
  used	
  openly	
  for	
  root-­‐cause-­‐analysis	
  rather	
  
than	
  defensively	
  to	
  protect	
  warranty	
  positions;	
  
•   remain	
  open	
  and	
  transparent	
  with	
  data	
  collection	
  and	
  the	
  use	
  of	
  the	
  data;	
  
•   there	
  are	
  internal	
  consumers	
  of	
  the	
  data	
  that	
  is	
  collected	
  and	
  this	
  can	
  support	
  new	
  product	
  
and	
  service	
  development.	
  
	
  
West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   15	
  
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West, Kujawski and Gaiardelli
4th	
  International	
  Conference	
  on	
  Business	
  Servitization	
  (ICBS	
  2015)	
  
November	
  19-­‐20,	
  2015,	
  Universidad	
  Rey	
  Juan	
  Carlos,	
  Madrid,	
  Spain	
   16	
  
Clarysse,	
  B.,	
  Wright,	
  M.,	
  Bruneel,	
  J.,	
  &	
  Mahajan,	
  A.	
  (2014).	
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  value	
  in	
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  Crossing	
  the	
  
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   business	
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   43(7),	
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  M.	
  (2014).	
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  impact	
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  of	
  
manufacturers.	
  European	
  Management	
  Journal,	
  32(4),	
  603-­‐615.	
  
	
  
	
  
ACKNOWLEDGMENTS	
  
The	
  authors	
  would	
  like	
  to	
  thank	
  the	
  Lucerne	
  University	
  of	
  Applied	
  Sciences	
  and	
  Arts	
  and	
  the	
  
university	
  of	
  Bergamo.	
  
	
  
AUTHOR	
  CONTACT	
  DETAILS	
  
Dr	
  Shaun	
  West	
  
Lectuere	
  for	
  Product	
  and	
  Service	
  Innovation	
  
Wirtschaftsingenieurwesen	
  |	
  innovation,	
  	
  
Lucerne	
  University	
  of	
  Applied	
  Sciences	
  and	
  
Arts,	
  Switzerland	
  
Email:	
  shaun.west@hslu.ch	
  
Phone:	
  +41	
  79	
  770	
  5986	
  
Paolo	
  Gaiardelli	
  
Assistant	
  Professor	
  
Department	
  of	
  Engineering	
  	
  
University	
  of	
  Bergamo	
  
Email:	
  paolo.gaiardelli@unibg.it	
  
Phone:	
  +39	
  035	
  2052385	
  
	
  
	
  
Dominik	
  Kujawski	
  
Student,	
  Masters	
  in	
  Science	
  and	
  Engineering	
  	
  
Luzern	
  University	
  of	
  Applied	
  Science	
  and	
  Art	
  
Email:	
  shaun.west@hslu.ch	
  
	
  
	
  

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M2M Communications Improve Customer Experience

  • 1. CAN  MACHINE-­‐TO-­‐MACHINE  COMMUNICATIONS  BE  USED  TO     IMPROVE  CUSTOMER  EXPERIENCE  IN  A  SERVICE  ENVIRONMENT?     Shaun West, Dominik Kujawski and Paolo Gaiardelli   ABSTRACT   Purpose:     The  purpose  of  this  paper  is  to  identify  ways  in  which  Machine-­‐to-­‐Machine  (M2M)  communication   can  be  used  by  product-­‐based  manufacturing  firms  to  deepen  and  broaden  the  service  aspects  of   their  customer  value  proposition.  The  expectation  is  that  an  improved  customer  value  proposition   leads  to  improved  customer  experience,  and  through  this  to  improved  customer  retention.     Design/methodology/approach:     The  approach  taken  has  been  two-­‐fold:   1.   a  literature  review  to  understand  what  is  available  in  a  B2B  environment;   2.   obtaining  initial  feedback  from  surveys  and  interview  with  equipment  owners  and  operators,   suppliers  of  condition  monitoring  systems  and  other  stakeholders  to  understand  the   different  value  propositions.     It  was  considered  important  to  widen  the  horizon  of  ‘condition  monitoring’  to  provide  as  many   different  ways  to  improve  the  customer  experience  as  possible.  The  literature  review  was   undertaken  based  on  the  broader  definition  of  condition  monitoring.  The  review  was  not  limited  to   the  academic  press  but  expanded  to  include  trade  journals  and  websites.  The  M2M  impact  on   human-­‐to-­‐human  interactions  was  also  considered.       Over  15  interviews  with  stakeholders  were  undertaken  so  that  their  perception  of  the  value   proposition  could  be  understood.  All  were  from  the  B2B  environment  and  with  interests,  of  some   form,  in  high-­‐value  equipment.  This  required  detailed  segmentation  based  on  how  data  was   consumed  –  each  segment  had  different  outcomes  that  concerned  them.       Findings:     M2M  can  be  used  within  the  internet  of  things  to  improve  the  customer  experience.  However  there   are  many  risks  and  negative  aspects  that  limit  the  possible  gains:   •   the  ‘customer’  may  not  understand  what  they  actually  need;   •   loss  of  personal  interactions  can  lead  to  a  perception  of  a  lower  level  of  value;   •   clear  customer/use  segmentation  must  be  undertaken;   •   each  customer  persona  must  have  a  clear  value  proposition;     •   there  must  be  transparency  in  the  data  collection;   •   the  data  collected  must  be  used  openly  for  root-­‐cause-­‐analysis  rather  than  defensively  to   protect  warranty  positions;   •   the  data  can  be  used  to  support  new  product  and  service  development.     Originality/value:     This  remains  a  new  area  for  development  for  many  manufacturing  firms  in  the  B2B  space.  The   technology  is  proven  yet  there  are  numerous  firms  that  are  unable  to  monetise  the  monitoring  they   undertake  for  their  customers.  The  value  of  this  paper  is  that  it  develops  a  process  to  support  the   application  of  M2M  monitoring  by  identifying  key  tasks  to  help  firms  develop  an  effective  customer   value  proposition.     Keywords:  Servitization,  internet  of  things,  value  proposition,  customer  experience,  technology   communication.  
  • 2. West, Kujawski and Gaiardelli 4th  International  Conference  on  Business  Servitization  (ICBS  2015)   November  19-­‐20,  2015,  Universidad  Rey  Juan  Carlos,  Madrid,  Spain   2   1   INTRODUCTION     For  many  years,  machine-­‐to-­‐machine  communication  has  been  growing  in  the  industrial  product   market.  Today  the  terms  “Industry  4.0”  and  “Internet  of  Things”  are  terms  that  are  often  used.  The   promise  of  the  technology  is  that  with  data  collected  from  the  equipment  and  machines   communicating  directly  with  each  other  manufacturing  processes  will  become  more  efficient.  This   has  already  been  seen  in  the  case  of  CAT’s  fleet  monitoring  system  (CAT,  2015);  a  fleet  monitoring   solution  for  lorries  (Aston,  2015)  and  has  also  been  used  in  many  process  industries  successfully   (OSISoft,  2015).     The  data  collected  has  in  some  of  these  cases  been  used  to  deepen  and  broaden  the  service  aspects   of  the  customer  value  proposition  delivered  by  these  firms.  The  firms  can  design  their  service   delivery  systems  to  meet  the  outcomes  desired  by  their  customers  and  in  some  cases  then  to   integrate  their  processes  into  the  processes  of  their  customers.  This,  according  to  Neely  (2008),   increases  the  degree  of  customer  integration  and  leads  to  increased  customer  retention.       To  deliver  advanced  services  (Bains  et  al,  2011)  it  is  often  necessary  to  have  operational  and   technical  data  from  the  equipment.  GE  Energy  Services  has  been  very  successful  with  this  with  its   contractual  services  for  both  industrial  and  aero  gas  turbines;  Rolls  Royce  similarly.  In  both  cases,  the   firms  can  move  to  an  hourly  fee  structure  as  they  have  operational  and  technical  data  on  the   machines  for  which  they  are  providing  services.  Understanding  the  equipment  operation  and   condition  means  that  they  can  drive  productivity  in  the  equipment,  typically  through  moving  to   condition-­‐based  maintenance.  This  increases  their  customer's  equipment  availability  by  reducing  the   need  for  equipment  inspections.       To  provide  a  move  to  risk-­‐based  maintenance  on  large  equipment  requires  significant  data  but  also   requires  close  co-­‐operation  between  the  key  parties.  The  hypothesis  is  that  for  M2M  to  be  successful   it  must  be  predicated  on  improved  customer  engagement,  which  is  based  on  effective   communication.  This  means  that  the  data  collected  must  be  converted  to  information  that  generates   discussion  and  action.  This  paper  will  examine  this  topic  through  a  literature  review,  survey  and   interviews  and  make  recommendations  on  how  customer  integrations  can  be  improved  based  on   M2M  communications.     2   METHODOLOGY   This  section  describes  the  methodology  applied  in  the  study;  it  is  broken  up  into  the  literature  review,   the  survey  and  the  interviews.     2.1   Literature  review     An  in  depth  literature  review  was  undertaken  to  assess  the  current  state-­‐of-­‐the-­‐art,  this  included  a   review   of   both   academic   literature   and   published   examples   in   the   industrial   press.   To   keep   the   relevance   of   literature,   the   research   and   analysis   was   continuously   carried   out   throughout   the   research.  The  scope  of  the  literature  review  was:   •   the  value  in  ecosystems;   •   supply  chain  collaboration  creating  open  innovation;     •   customer  value;     •   sustainability  through  customer  engagement;   •   decision  making  by  converting  data  into  information.     2.2   Survey   A  set  of  standard  questions  was  created  in  a  survey  tool  (SurveyMonkey)  and  distributed  to   stakeholders  with  an  interest  in  industrial  equipment.  The  range  of  stakeholders  targeted  ranged   across  asset  owners,  system  suppliers,  Original  Equipment  Manufacturers  (OEMs),  consultants  and  
  • 3. West, Kujawski and Gaiardelli 4th  International  Conference  on  Business  Servitization  (ICBS  2015)   November  19-­‐20,  2015,  Universidad  Rey  Juan  Carlos,  Madrid,  Spain   3   technology  investors.  The  survey  was  designed  to  be  completed  within  10-­‐15  minutes  to  help  with   completion  rates.  The  survey  was  broken  up  into  the  following  sections:   •   stakeholder  analysis  (eg,  type  of  business,  position  in  supply  chain);   •   systems  today  (eg,  Do  they  help  you  achieve  the  outcomes  that  are  important  for  you?  What   outcomes  are  you  expecting  from  the  equipment  monitoring  in  terms  of  operations,   maintenance?);   •   issues  associated  with  monitoring,  warranty,  and  equipment  operation;   •   issues  associated  with  data  ownership  and  information  sharing;   •   issues  associated  with  unplanned  downtime;   •   an  understanding  of  the  gaps  between  what  stakeholders  expect  and  what  is  delivered   today.     Each  of  the  sections  included  an  open  question  allowing  direct  feedback.  The  questions  themselves   were  quantitative  to  enable  analysis.       The  survey  was  distributed  to  the  target  stakeholders  using  direct  methods  (email)  and  indirectly  (via   LinkedIn  topic  area  groups).  The  stakeholders  questioned  were  expected  to  have  a  general  interest   or  specific  interest  in  machine-­‐to-­‐machine  communication  issues.     2.3   Interviews   Based  on  the  initial  analysis  of  the  survey  results,  an  agenda  for  the  follow  up  interviews  was   created.  15  follow  up  interviews  were  undertaken  to  gain  a  more  detailed  insight  into  the  survey   results.  Each  interview  was  scheduled  for  45  minutes  and  consisted  of  the  following  questions:   •   What  are  the  best  customer  value  propositions  you  have  seen?   •   What  are  the  negative  aspects  of  monitoring?   •   Who  should  own  the  data?   •   How  should  data  be  accessed  and  shared?   •   Have  you  experience  of  spying  vs  transparency?   •   How  does  smart  (remote)  monitoring  improve  customer/supplier  interactions?   •   Does  it  improve  OEM/customer  contact?   •   How  could  the  contact  be  improved  with  the  data  flows?   •   Does  the  OEM  get  the  data  they  need  at  the  right  time?  How  do  2nd  tier  OMEs  get  data?   •   How  does  the  OEM  use  the  data  to  improve  their  product?  (eg,  product  development  or   existing  operations  or  maintenance?)   •   What  do  you  learn  from  the  data,  what  is  the  most  surprising  aspect?   •   Does  the  value  outweigh  the  cost?     The  interview  data  was  then  grouped  into  common  themes  to  allow  for  analysis.  Key  lessons  were   distilled  from  the  interviews  and  are  presented  in  this  paper.     3   RESULTS  AND  DISCUSSION     This  section  lays  out  arguments  from  the  literature  and  then  moves  into  the  finding  based  on  the   data  collected  and  closes  with  a  discussion.     3.1   Literature  review   In  their  shift  to  service  business,  manufacturers  firstly  focus  on  introducing  technologies  to  increase   the  efficiency  of  their  service  operations  (Agnihothri  et  al,  2002;  Kowalkowski  and  Brehmer,  2008).   This  requires  the  redesign  and  standardization  of  service  activities  (Kindström  and  Kowalkowski,  2009;   Brax  and  Jonsson,  2009).  Then,  as  service  orientation  becomes  more  intense,  digital  technologies  are   incrementally  leveraged  to  differentiate,  extend  and  complement  the  company’s  offer  (Kindström  and  
  • 4. West, Kujawski and Gaiardelli 4th  International  Conference  on  Business  Servitization  (ICBS  2015)   November  19-­‐20,  2015,  Universidad  Rey  Juan  Carlos,  Madrid,  Spain   4   Kowalkowski,   2009,   Belvedere   et   al,   2013).   This   can   be   the   case   of   remote   monitoring   systems,   diagnostics  &  prognostics,  reporting  &  analytics  services  that  are  bundled  with  the  product  to  raise  the   quality  of  customer  support  and  get  competitive  advantage.  However,  as  suggested  by  Harmon  et  al   (2011)  firms  can  also  exploit  technologies  to  design  radically  new  solutions  and  create  discontinuous-­‐ breakthrough  innovation.     In  use  oriented  service  offerings,  smart  services  are  focused  to  provide  any-­‐time-­‐anywhere  access  to   the   specialised   resources   (products,   skills,   applied   knowledge),   in   either   individual   or   shared   consumptions,  in  order  to  enable  the  value  creation  process  (eg,  customers  create  value-­‐in-­‐context).     The  role  of  technology  as  an  enabler  of  servitization  is  recognised  by  many  authors  as  essential   (Neely,  2008;  Storbacka,  2011).  In  particular,  both  Neely  (2008)  and  Bains  et  al  (2011)  confirm  that  it   is  a  requirement  equipment  for  advanced  services  where  “pay-­‐per-­‐unit”  is  applied.     The  convergence  of  data  availability  and  information  processing  technology  boosts  value  creation,   because  technology  adoption  requires  a  redesign  and  a  standardization  of  operating  processes.   Thanks  to  the  enabling  technology,  a  better  visibility  of  the  asset  in  use  (in  terms  of  operating   conditions,  time  in  use,  and  location)  is  available.  This  allows  to  speed  up  service  activities,  improve   equipment  design  and  operation  behaviour  and  reduce,  at  the  same  time,  service  delivery  costs   (Lightfoot  et  al,  2011).       The  shift  from  “you  are  what  you  own”  to  “you  are  what  you  can  access”,  the  emergence  of   collaborative  consumptions  (Botsman  and  Rogers,  2010),  internet  facilitated  sharing  (Agrain,  2012)   and  access  based  economy  (Bardhi  and  Eckhardt,  2012),  as  well  as  a  market  getting  more  fluid,   facilitating  connection  and  share  resources  (Chandler  and  Vargo,  2011),  supported  by  the   improvement  of  product  reliability  and  availability,  enabled  by  mobile  devices  and  appliances  for   employees  and  customers  of  service  division  (Fano  and  Gershman,  2002),  information  systems  that   enable  field  operations  (Kowalkowski  et  al,  2014)  rather  than  condition  monitoring  systems  (Turunen   and  Finne,  2004),  gives  the  opportunity  to  introduce  new  business  models.  These  are  characterised   by  a  changed  notion  of  asset  ownership  and  management.  In  addition,  the  easy  access  to  real-­‐time   information  provides  also  the  opportunity  to  develop  a  better  understanding  of  customer   behaviours,  easing  the  development  of  smart  solutions,  that  are  “fundamentally  pre-­‐emptive  rather   than  reactive”  (Allmendinger  and  Lombreglia,  2005,  p.2).       Finally,  technology  enables  comprehensive  vertical  and  horizontal  information  sharing  and   coordination  in  all  directions  between  department,  divisions  and  network  partners  supporting  the   implementation  of  the  product-­‐service  strategy  (Martinez  et  al,  2011;  Auramo  and  Ala-­‐Risku,  2005).   A  large  amount  of  research  dealing  with  technology-­‐driven  service  innovation  in  service  business  has   been  undertaken  to  understand  how  smart  service  initiatives  reframe  competitive  landscapes.  The   literature  review  of  the  literature  on  this  topic  reveals  the  existence  of  different  perspectives  taken   into  consideration  and  briefly  described  in  the  following.     The  key  themes  of:   •   value  is  in  the  ecosystem;   •   supply  chain  collaboration  creating  open  innovation;   •   customer  value;     •   sustainability  through  customer  engagement;   •   systems  must  help  the  owner/operator  to  make  the  right  decisions,  technical  info  then   supports  business  decision  making.     will  now  be  developed  further  in  the  following  sections.  
  • 5. West, Kujawski and Gaiardelli 4th  International  Conference  on  Business  Servitization  (ICBS  2015)   November  19-­‐20,  2015,  Universidad  Rey  Juan  Carlos,  Madrid,  Spain   5     3.1.1   Value  is  in  the  ecosystem     According  to  Iansity  and  Levin  (2004)  the  metaphors  of  keystones  and  ecology  are  helpful  to  think   about  the  business  environment  of  a  company.  Iansity  and  Levin  concluded  that  the  loose  networks   of  suppliers,  distributors,  technology  providers  and  other  “components”  of  the  ecosystem  affect  and   are  affected  by  the  creation  and  delivery  of  a  company’s  own  offerings.  Each  member  of  an   ecosystem  shares  the  fate  of  the  whole  network  regardless  of  its  strength.  As  Clarysse,  et  al  (2014)   affirmed  (as  cited  in  Zahra  and  Nambisian,  2012)  ecosystems  are  organized  as  complex  networks  of   firms  whose  integrated  efforts  are  addressing  the  needs  of  the  end  customer  and  there  is  a  growing   consensus  that  provide  companies  with  resources  and  information  to  navigate  in  constantly  changing   compititive  environment.  Jacobides  and  MacDuffie  (2013)  said  that  the  hardest  companies  to  replace   in  the  value  chain  are  the  integrators  of  system.       Iansity  and  Levin  (2004)  present  two  ingredients  that  are  part  of  success  within  the  business   ecosystems.  First,  business  ecosystems  consist  of  a  large  number  of  loosely  interconnected   participants  who  are  dependent  on  each  other  for  their  own  mutual  performance.  Every  of  the   participants  has  its  core  competence  which  together  with  others  allow  to  constitute  value  while   individual  efforts  have  no  value  outside  the  collective  effort.  The  second  vital  element  is  the  need  for   a  “keystone”  company  that  ensures  each  member  of  the  ecosystem  remains  in  good  health.  Indeed,   such  a  firm  must  develop  new  capabilities  as  partners  orchestration  and  management  of  network   dynamics  (Kindström  and  Kowalkowski,  2014).     As  Galateanu  and  Avasilcai  (2014)  concluded  that  the  value  co-­‐creation  in  business  ecosystems  can   be  realized  by  establishing  different  types  of  relations  where  the  technological  changes  have  a  major   impact  on  value  creation.  Indeed,  servitization  forces  changes  to  traditional  buyer  supplier   relationships  (Bastl  et  al,  2012;  Saccani  et  al,  2014)     The  new  trend  that  is  Industry  4.0  might  be  the  key  influencer  of  the  value  drivers  in  the  business   ecosystem.  (Bechtold  et  al,  2014)  state  the  smart  services  and  smart  products  will  increase  the  scope   of  manufacturers  value  creation  activities.  Especially  manufacturing  companies  based  in  high-­‐cost   countries  need  to  leverage  this  opportunity  to  sustain  competetive  edge  and  drive  growth.       In  such  a  context,  as  stated  in  (Bechtold  et  al,  2014)  vertical  and  horizontal  integration  based  on   digital  technologies  allows  companies  to  drive  value  through  transparency  and  process  automation.   Connected  supply  chains  allow  identification  all  along  the  production  process,  which  enable   manufacturers  to  be  more  responsive  to  change  requests.  Thus,  the  maximum  level  of  transparency   can  be  established  over  the  whole  supply  chain.  This  will  form  a  centerpiece  for  operation  excellence   in  any  Industry  4.0  strategy.  The  "Ecosystem:  people,  machines  and  software,”  (2015)  website  states   that  the  Industry  4.0  ecosystem  consists  not  only  of  smart  factories  and  intelligent  products,  it  also   includes  people.  It  is  a  question  of  allowing  people  to  perform  high  quality  and  creative  work  and   provide  them  with  opportunity  to  achieve  a  work/life  balance  with  just  as  much  flexibility  as  the   production  systems  of  the  future  that  people  will  control.     3.1.2   Supply  chain  collaboration  creating  open  innovation   According  to  Mathuramaytha  (2011)  today  almost  all  organization  are  in  the  process  of  adopting  the   supply  chain  activities  and  make  them  competitive.  Collaboration  is  the  driving  force  behind  effective   supply  chain  management  and  improves  performance.  It  may  share  large  investments,  pool  risks  and   share  resources,  reasoning  growth  and  return  on  investment.  Both  intra-­‐firm  and  inter-­‐firm   collaboration  is  crucial  for  servitization  (Neu  and  Brown  2005)  and  is  part  of  the  open  innovation   paradigm  defined  by  Chesbrough  et  al  (2007).    
  • 6. West, Kujawski and Gaiardelli 4th  International  Conference  on  Business  Servitization  (ICBS  2015)   November  19-­‐20,  2015,  Universidad  Rey  Juan  Carlos,  Madrid,  Spain   6   As  stated  by  DeAngelis  (2014)  using  sensors  to  monitor  manufacturing  equipment  and  the   environment  is  nothing  new,  but  using  those  sensors  to  communicate  with  other  equipment  and   automatically  feed  data  is  one  of  the  newest  frontiers.  In  Figure  1,  there  is  presented  a  business   scenario  that  shows  intelligent  communication  system  between  different  parts  of  the  value  chain   within  Industry  4.0.         Figure  1   Typical  business  scenario  in  the  Internet  of  Things  (Schönthaler,  2015)   Figure  1,  presents  communication  between  supplier,  carrier,  shipper,  producer  and  his  customer.  As   stated  in  (Schönthaler,  2015)  this  digital  transformation  of  the  value  chain  provides  the  supplier  with   insight  to  the  inventory  directly  on  the  shelf,  so  proactive  actions  are  possible.  From  this  new  way  of   collaboration  arises.  According  to  Siebenmorgen  (2015)  a  fundamental  step  in  the  direction  of   Industry  4.0  is  the  digital  modelling  of  the  value  chain,  where  a  large  number  of  users  networked   through  cooperation  platform  benefit.  Siebenmorgen  underlines  that  the  trust  of  all  companies   involved  must  be  gained,  otherwise  no  Industry  4.0  business  model  will  be  successful.     Even  smart  services  initiatives  favour  new  forms  of  collaboration  and  cooperation,  in  certain  cases,   rivals  are  asked  to  collaborate  (coopetition).  Indeed,  Smart  services  initiatives  are  likely  to  reshape   the  competitive  landscape  and  change  the  traditional  industry  boundaries.     3.1.3   Customer  value   Anderson  et  al  (2006)  explains  the  importance  of  customer  value  that  they  value  forces  suppliers  to   focus  on  what  their  offerings  are  really  worth  to  their  customers.  The  paper  described  a  systematic   method  to  help  with  the  development  of  value  propositions  to  that  are  meaningful  to  their  target   customers.  With  M2M  services  customer  value  must  continue  to  be  developed,  in  fact,  “smart   services”  encapsulates  more  than  just  mere  technology.  This  concept  also  refers  to  a  more   customercentric  view  and  strategy,  that  transform  that  technology  into  a  value  added  services  from   the  customer’s  point  of  view  according  to  Reinartz  and  Ulaga  (2014).  According  to  (Osterwalder  and   Pigneur,  2002)  value  is  created  through  use,  a  reduction  of  the  customer’s  risk  or  by  making  his  life   easier  through  reduction  of  his  efforts.  Capturing  the  value  can  be  during  value  creation,  purchase,   consumption,  its  renewal  ot  its  transfer.  The  value  and  price  level  can  be  compared  to  one  of  the   companies  competitor’s.  To  deliver  the  right  value  the  target  customer  needs  to  be  defined,  the   means  to  reach  and  communicate  with  him,  as  well  as  the  relational  strategy  to  establish  with   customer.  Campbell  et  al  (2011)  state  that  “advances  in  technology,  especially  information   technology,  and  widespread  use  of  the  Internet,  can  be  viewed  as  a  catalyst  that  facilitates  the  shift  
  • 7. West, Kujawski and Gaiardelli 4th  International  Conference  on  Business  Servitization  (ICBS  2015)   November  19-­‐20,  2015,  Universidad  Rey  Juan  Carlos,  Madrid,  Spain   7   in  the  traditional  service  boundary  between  provider  and  customer  towards  either  self-­‐service  or   super  service”.       However,  while  services  supporting  the  products  (SSP)  can  be  easily  standardized  to  offer  a  “digital   version”,  services  supporting  the  customers  (SSC)  always  show  a  big  deal  of  variety  due  to  people   interactions  and  customer-­‐specific  situations.  Thereby,  it  is  said  that  “technology  may  not  be   appropriate  in  the  context  of  an  SSC  business  orientation  given  that  these  services  are  directed  at  the   client  and  customized  rather  than  to  the  product  and  standardized”  (Antioco  et  al,  2008,  p.  351).     3.1.4   Sustainability  through  customer  engagement   As  well  as  Park  et  al  (2012)  suggest,  digital  technologies  integrate  and  combine  product  and  services   in  different  ways,  to  deliver  a  product-­‐service  systems  that  brings  also  social  and  environmental   benefits  Tukker  (2004  and  2013).     Most  marketers  think  that  interacting  as  much  as  possible  with  customer  will  allow  them  to  build   strong  relationships  with  the  customer  (Freeman  et  al,  2012).  Not  all  of  the  customers  want  to  have   relationship  with  the  brand;  it  is  essential  to  determine  different  expectations  in  different  target   groups.  Also,  interaction  do  not  build  relationships  -­‐  shared  values  build  them.  The  shared  value  is  a   belief  that  both  brand  and  consumer  have  about  a  brand’s  higher  purpose  and  philosophy.  The  more   interaction  is  not  always  better,  instead  of  continuous  demanding  of  customer  attention  try  to   reduce  the  cognitive  overload  consumers  feel  for  the  brand  (Freeman  et  al,  2012).     As  stated  in  Bloem  (2014)  the  best  example  of  engagement  are  applications  that  are  directly  related   to  interaction  with  blue-­‐collar  members  of  staff  or  end  users,  through  measuring  and  regulating,   maintenance  and  software  upgrades.  For  example,  Philips  allow  consumers  to  operate  lamps  as  they   wish  and  in  this  way  get  data  to  implement  their  tasks  much  more  efficiently.  This  allows  Philips  to   be  connected  with  the  customer  24/7,  expand  user  experience  through  improved  human-­‐machine   interaction  and  products  are  a  part  of  the  end-­‐to-­‐end  ecosystem.  Figure  2  presents  sustainable   customer  engagement  model  that  can  be  achieved  when  company  makes  the  relationship  with  the   customer  visible,  tangible,  empowering  and  emotional  through  all  phases  of  product  and  service   consumption.     Deloitte  (2014)  report  presents  sustainability  as  both  a  valuable  risk-­‐management  tool  and  long-­‐term   contribution  to  the  bottom  line.  Sustainability  as  a  value  proposition  is  still  waiting  to  be   implemented  in  many  corporate  strategies  and  that  is  for  potential  leveraging  customer   engagement.  It  allows  to  increase  customer  loyalty,  advocacy  and  repeat  conversions.  A  potentially   engaged  customer  generates  significant  premiums  in  terms  of  money,  profitability,  and  revenue  and   relationship  growth,  for  the  following  reasons:   •   transparency  engagement  framework  refers  to  efforts  where  business  effectively  informs  the   consumers  of  the  sustainability  performance  of  a  specific  product.     •   the  partnership  engagement  refers  to  improving  sustainability  by  inviting  customers  to   participate  actively  in  partnership  with  the  third-­‐party  organization.     •   the  life  cycle  engagement  is  when  business  strives  to  engage  customers  in  parts  of  the  entire   life  cycle  of  a  specific  product.     •   the  collaborative  engagement  platform  refers  to  business  applying  modern  network   technology  to  create  with  customers  shared  value.      
  • 8. West, Kujawski and Gaiardelli 4th  International  Conference  on  Business  Servitization  (ICBS  2015)   November  19-­‐20,  2015,  Universidad  Rey  Juan  Carlos,  Madrid,  Spain   8     •   Figure  2   Sustainable  Customer  Engagement  by  (Deloitte,  2014)     3.1.5   Systems  must  help  the  owner/operator  to  make  the  right  decisions,  technical  data  then   supports  business  decision  making   McAfee  and  Brynjolfsson  (2012)  state  that  managerial  decisions  are  greater  than  technical  challenges   starting  with  the  role  of  the  senior  executive  team.  The  most  critical  aspect  of  big  data  is  the  impact   on  how  decisions  are  made  and  by  whom.  A  successful  and  effective  company  puts  information  and   the  relevant  decision  right  in  the  same  location.  Expertise  is  not  often  where  it  used  to  be  due  to   create  and  transferred  information.  Maximization  of  a  cross-­‐functional  cooperation  allows  the  right   usage  of  data.  The  idea  of  the  right  decision-­‐making  process  lies  in  delivery  the  right  data  to  people   who  understand  the  problems  and  who  have  problem-­‐solving  techniques  to  effectively  use  them.   Rowley  (2007),  uses  the  DIKW-­‐hierarchy  (Figure  3)  as  a  model  to  allow  data  to  be  translated  into   information,  knowledge  and  eventually  wisdom.  Only  with  information  can  management  actions  be   taken.       Figure  3   Translation  of  data  into  information  to  support  business  decision  making     3.2   Survey  and  interview  results   The  survey  population  was  32,  from  which  interviews  were  conducted  with  15  stakeholders   representing  a  range  of  industry  players:   •   20%  were  OEMs  with  24%  being  engaged  in  OEM  services;   •   20%  were  equipment  operators  with  41%  being  involved  in  equipment  maintenance   services;   •   20%  of  those  who  responded  were  asset  owners,  a  further  7%  were  pure  financial  investors;   •   30%  provided  consulting  services.    
  • 9. West, Kujawski and Gaiardelli 4th  International  Conference  on  Business  Servitization  (ICBS  2015)   November  19-­‐20,  2015,  Universidad  Rey  Juan  Carlos,  Madrid,  Spain   9   The  total  numbers  add  up  to  more  than  100%  as  many  of  the  firms  were  engaged  in  more  than  one   activity.  This  confirms  that  the  population  that  responded  provided  a  wide  view  of  the  stakeholders   in  the  equipment  value  chain.       The  supply  chain  analysis  confirmed  that  both  equipment  and  service  sales  were  made  directly  to  the   end  user  and  indirectly  via  a  contractor.  This  is  common  in  many  industrial  equipment  markets   (Rosenbloom,2007)  where  new  equipment  sales  follow  a  different  channel  to  service  sales  and  the   channel  develops  on  the  phase  of  the  project.     When  asked  about  the  types  of  systems  respondents  were  using  and  how  successful  these  were  in   supporting  their  achievements,  the  two  least  reliable  systems  were  acoustic  (11%  response  rate)  and   video/photo  analysis  (11%  response  rate).  Interestingly  there  was  a  contradiction  in  that  photo/video   analysis  was  one  of  the  most  valuable  fault  finding  tools,  reflecting  that  it  is  used  largely  in  an   interactive  way  during  planned  (62%)  and  unplanned  (42%)  inspections.  Acoustic  emission  analysis   was  found  not  to  support  outcomes  successfully  yet  was  often  (50%)  used  in  fault-­‐finding.  The  most   positive  outcomes  were  found  to  be  from  the  operational  data  (28%)  and  vibration  analysis  (26%).   Vibration  analysis  was  often  (53%)  used  in  fault-­‐finding,  whereas  operational  data  was  not  used  as   frequently  in  fault-­‐finding  (33%).  Both  methods  scored  highly  in  remote  and  continual  measurement   (>42%  of  respondents).  Performance  data,  something  that  combines  many  data  feeds,  supported   outcomes  23%  of  the  time  and  was  used  to  support  fault-­‐finding  with  an  expectation  for  the  data  to   be  collected  continually  (50%).     3.2.1   Operations  and  maintenance  considerations   Operations  and  maintenance  have  a  major  impact  on  the  outcome  of  any  operation.  For  this  reason,   there  were  a  group  of  questions  around  these  topics  and  how  monitoring  can  assist  the  asset  owner   to  achieve  their  desired  outcomes.       Warranty  fulfilment  is  closely  associated  with  the  new  installation  of  equipment.  This  can  be,  as  has   been  discussed,  a  direct  sale  to  the  asset  owner  or  indirect.  Nevertheless,  the  OEM  has  warranty  and   performance  obligations  and  there  are  also  operation  and  maintenance  requirements.  For  warranty   and  equipment  operation,  within  all  responses  equal  value  was  given  to  (80-­‐75%):   •   ensuring  the  equipment  is  operated  and  maintained  correctly;   •   feedback  on  how  equipment  is  actually  used;   •   detailed  understanding  of  equipment  life  consumption;   •   improving  plant  performance.     There  are  outcomes  from  monitoring  the  normal  operation  of  the  equipment,  the  three  most   important  were:     •   increased  use  of  proactive  maintenance  (89%  important/very  important);   •   improved  equipment  efficiency  (88%);   •   stable  operation  of  the  plant  (73%).       These  points  are  associated  with  getting  more  out  of  the  equipment  and  reducing  the  costs,  which   leads  to  a  lower  per  unit  cost  of  production.       When  asked  about  the  maintenance  outcomes  that  were  important  the  three  most  important  were:   •   a  desire  to  move  to  condition  (or  risk)  based  maintenance  (78%);   •   to  undertake  targeted/opportunity  maintenance  (75%);   •   to  drive  down  the  cost  of  maintenance  (74%).       These  points  are  associated  with  the  desired  outcome  of  a  lower  total  cost  of  ownership.  
  • 10. West, Kujawski and Gaiardelli 4th  International  Conference  on  Business  Servitization  (ICBS  2015)   November  19-­‐20,  2015,  Universidad  Rey  Juan  Carlos,  Madrid,  Spain   10     What  outcomes  are  expected  in  terms  of  supporting  unplanned  downtimes?  The  most  important   aspects  here  were:   •   to  support  opportunity-­‐based  maintenance  (77%);   •   to  improve  problem  solving  (74%);   •   to  allow  safe  operation  when  equipment  is  damaged  (69%).     These  points  are  associated  with  minimising  lost  production  associated  with  unplanned  downtimes.       3.2.2   Data  sharing  and  ownership   The  consensus  view  was  that  the  data  should  be  owned  by  the  equipment  owner  but  shared  within   the  ecosystem.  The  interviews  highlighted  this  to  be  a  very  emotional  issue  for  the  equipment   owners  as  they  considered  that  the  data  (technical,  operational  and  commercial)  was  commercially   sensitive.  In  interviews,  they  were  also  concerned  that  the  data  should  be  shared  and  used  within   the  ecosystem,  provided  they  understood  the  purposes  for  which  it  was  being  used.  In  details  the   three  most  important  aspects  were:   •   Information/output/reporting  from  the  system  needs  customizing  (80%).   •   The  data  is  commercially  sensitive  (66%).   •   The  equipment  owner  should  own  the  data  (60%).     Interview  responses  confirmed  the  ownership  of  data  was  an  important  issue.  Several  of  the   interviewees  stated  clearly  that  the  data  had  commercial  value  and  that  ownership  must  be  vested   with  the  equipment  owner  and  not  the  OEM.  Further  views  here  suggested  that  the  firm  doing  the   measuring  should  own  the  data  and  another  said  it  depends  on  who  takes  the  risk.       In  contrast  to  the  data  ownership  question,  there  was  general  agreement  from  the  interviewees  that   faster,  better  and  cheaper  solutions  could  be  generated  by  the  ecosystem  when  the  technical,   operation  and  commercial  data  were  shared.  The  use  of  data  and  the  anonymity  of  data  remained   key  concerns.     3.2.3   Descriptions  of  customer  value  propositions  and  value  for  money   The  utilities  and  OandG  firms  provided  some  of  the  most  attractive  examples  of  customer  value   propositions,  typical  themes  being:   •   maintenance  –  maintenance  cost  out,  moves  to  risk-­‐based  maintenance;   •   advanced  services  –  underpinned  by  monitoring,  we  could  de-­‐risk  our  service  contracts;   •   operations  –  data  showed  that  the  OEM  damaged  the  equipment  during  commissioning;   operational  technical  data  helps  increase  speed  of  troubleshooting;  value  comes  from  a   holistic  view;  we  use  the  combined  data  for  our  business  reporting  and  optimization.     When  asked  in  the  survey  if  the  monitoring  system  that  was  used  supported  the  desired  outcomes:   only  in  33%  of  the  responses  did  the  system  provide  all  of  the  data  that  was  required.  This  clearly   shows  that  there  the  value  propositions  are  not  matching  the  expectations.  Yet  owner/operators   were  providing  examples  of  positive  value  propositions  and  had  a  desire  to  continue  using  and   developing  the  technology.       3.2.4   Negative  aspects  of  monitoring   There  were  a  number  of  negative  aspects  that  were  in  contradiction  to  each  other.  This  suggests  a   weak  fit  between  today's  problem  and  solution  and  that  therefore  a  clear  value  proposition  has  not   yet  been  identified.  This  was  typically  found  when  the  OEM  chose  a  marketing  “push”  to  sell  the   technology,  with  the  owner/operator  considering  that  the  technology  was  being  forced  upon  them.      
  • 11. West, Kujawski and Gaiardelli 4th  International  Conference  on  Business  Servitization  (ICBS  2015)   November  19-­‐20,  2015,  Universidad  Rey  Juan  Carlos,  Madrid,  Spain   11   Data  overload  was  clearly  a  problem  for  some  and  related  to  the  integration  of  the  systems  and  the   relevance  of  the  data  presented.  Questioning  on  these  issues,  there  was  a  preference  for  one   management-­‐level  system  that  could  present  the  data  in  a  more  relevant  way  for  those  consuming   the  data.       Base-­‐level  concerns  about  fault  reporting,  data  security  and  a  reporting/controlling  vs  transparent   approach  were  described  and  discussed  separately.  Here  there  were  concerns  from  equipment   owners/operators  about  the  OEM  spying  on  them,  yet  there  was  also  an  expectation  of  pro-­‐active   OEM  support.  The  OEMs  also  had  a  concern  that  owner/operators  did  not  want  to  “expose  their   stupidity”.  A  Liquefied  Natural  Gas  (LNG)  plant  Operations  and  Maintenance  (O&M)  team  member   said  they  “Need  to  know  what  is  needed  by  whom  and  why”.     3.2.5   Improving  customer/supplier  interactions  and  the  sharing  of  data   The  consensus  view  from  the  interviews  was  that  sharing  data  should  improve  customer/supplier   interactions.  How  to  do  this  is  part  of  the  value  proposition;  however,  the  findings  were  that:   •   it  should  be  proactive  so  that  the  OEM  can  be  ready  to  help  with  trouble  shooting  or  spares;     •   information  must  flow  in  both  directions,  allowing  one  set  of  data  to  be  used  to  help  improve   the  quality  of  trouble  shooting;   •   joint  problem  solving  helps  to  mature  the  relationships  and  encourages  more  interactions  at   different  levels;   •   sharing  of  resources  helps  to  drive  out  cost  yet  risks  deskilling  staff.     One  OEM  respondent  went  as  far  as  saying  that  “…you  should  work  'open  book'  with  the  data…”.       The  move  to  outcome-­‐based  solutions  with  an  alignment  of  objectives  creates  value  in  some  cases.   Embedding/sharing  of  resources  was  viewed  positively  by  a  number  of  the  interviewees.  There  is  an   effort  required  by  all  parties  to  learn  to  work  closely  together,  and  focusing  on  high-­‐level  goals  (e.g.   total  cost  of  ownership)  rather  than  transaction  cost  was  a  key  lesson.     Sitting  together  in  this  way  and  understanding  the  equipment  owner’s  business  objectives  was   considered  important  by  many  respondents.  Getting  people  to  do  this  requires  effort  and  maturity.   The  OEMs  working  in  joint  data  analysis  centres  with  the  owner/operator  considered  this  a  good   approach  as  it  could  assist  the  combining  of  technical  and  commercial  reporting,  helping  all  parties  to   focus  on  improving  operations  or  as  one  interviewee  said  “finding  ways  to  use  customer  waste  to   generate  value”.       The  consensus  view  was  that  second  tier  OEMs,  unless  suppliers  of  critical  plant  items,  had  a  tough   time  getting  access  to  the  data  they  need  when  they  need  it.  Here  the  system  integrator  was   considered  a  key  party  in  the  ecosystem  to  support  access;  however  a  number  of  respondents   mentioned  that  warranty  and  other  contractual  issues  may  create  barriers.     3.2.6   Product  improvement   The  use  of  the  data  collected  to  improve  the  product  was  considered  important  in  the  interviews.  An   investor  said  that  it  was  a  “must”,  the  owner/operators  said  that  the  OEMs  were  too  slow  to   integrate  what  they  learned  into  new  product  development  or  service  upgrades.  GE  was  considered   as  an  OEM  that  took  what  they  learned  from  monitoring  and  integrated  it  into  both  service  upgrades   and  new  products.  The  data  should  also  be  used  to  support  changes  to  operations  and  maintenance   (e.g.  longer  intervals  between  maintenance)  based  on  both  the  technical  and  operational  data.  The   only  way  this  can  be  done  is  through  closer  working  with  the  stakeholders  within  the  ecosystem.    
  • 12. West, Kujawski and Gaiardelli 4th  International  Conference  on  Business  Servitization  (ICBS  2015)   November  19-­‐20,  2015,  Universidad  Rey  Juan  Carlos,  Madrid,  Spain   12   3.2.7   Lessons  from  the  interviews  from  the  use  of  monitoring  technologies   In  balance,  the  interviewees  said  that  there  was  value  from  using  monitoring  systems  and  that  the   ecosystem  created  more  value  than  individual  parties  were  able  to  do.  This  means  that  there  must   be  significant  integrations  at  a  personal  level  within  the  ecosystem  to  allow  this  co-­‐creation  to  take   place.  On  an  interpersonal  level,  a  number  of  the  interviewees  stated,  “once  the  parties  start   working  together  you  start  to  get  more  trust”.       A  number  also  commented  that  the  monitoring  solution  “ran  the  risk  of  being  taken  for  granted”,  in   which  case  may  lose  it  importance  in  the  view  of  the  owner/operator.  This  was  because  the  system   tended  to  focus  on  risk  mitigation  meaning  that  a  failure  was  prevented.  Other  findings  from  the   interviews  were:   •   Low  cost  sensors  (video)  have  enough  on-­‐board  computing  power  (investor);   •   Our  flash  dryer  was  having  problems:  it  was  found  before  it  caused  problems  (utility);   •   Once  you  start  working  together  you  start  to  get  more  trust  (LNG);   •   GE  medial  have  a  super  value  proposition  for  their  equipment  in  hospitals  (OEM);   •   Must  work  around  the  business  solution  and  then  the  technical  solution  can  be  found   (system  integrator);   •   Solution  comes  best  from  co-­‐creation  around  the  ecosystem  (consultant);   •   The  customer  can  pull  you  out  of  the  problem  (consultant);   •   A  modern  train  can  have  10M  data  points  per  trip  –  must  be  provided  in  an  understandable   form  (consultant).     3.2.8   Overview  of  the  survey  and  interview  results   In  summary,  the  main  findings  of  the  survey  and  the  interviews  were  segmented  into  two  themes,   customer  relationships  and  underlying  considerations,  listed  in  Table  1.       Interview  results  suggest  that  the  best  solutions  provided  information  to  allow  people  to  make  the   decisions,  rather  than  the  machines  taking  their  own  decisions  based  on  pure  technical  data.  A   process  in  Section  3.3  below  provides  one  possible  framework  to  help  OEMs  to  help  integrate   customer  experience  into  the  development  and  operation  of  machine-­‐to-­‐machine  systems.       Table  1   Main  issues  that  can  drive  customer  relationships  and  underlying  considerations,   identified  from  the  interviews     Customer  relationships   Underlying  considerations   •   The  ‘customer’  may  not  be  able  to  describe   clearly  what  they  need,  yet  many  are  able  to   describe  the  outcomes  they  are  trying  to   achieve;   •   Clear  customer/use  segmentation  must  be   undertaken  based  on  position  in  supply   chain/ecosystem  and  the  outcomes  they  are   seeking;   •   Each  customer  persona  must  have  a  clear   value  proposition,  it  is  no  long  sufficient  to   have  one  value  proposition  for  ‘customers’;   •   Loss  of  personal  interactions  can  lead  to  a   perception  of  a  lower  level  of  value  as   customers  take  the  service  as  the  new  norm.   •   There  must  be  transparency  in  the  data   collection  and  as  GE  say,  a  ‘single  point  of   truth’,  this  means  that  every  party  in  the   ecosystem  should  use  the  same  data  source;   •   The  data  collected  must  be  used  openly  for   root-­‐cause-­‐analysis  rather  than  defensively   to  protect  warranty  positions,  this  requires   trust  between  the  players  in  the  ecosystem;   •   There  are  internal  consumers  of  the  data   collected  and  this  can  support  new  product   and  service  development,  so  the  data   (technical  and  operational)  must  flow  down   to  them.    
  • 13. West, Kujawski and Gaiardelli 4th  International  Conference  on  Business  Servitization  (ICBS  2015)   November  19-­‐20,  2015,  Universidad  Rey  Juan  Carlos,  Madrid,  Spain   13   3.3   Process  description     Using  the  results  of  the  survey  and  the  interviews  and  integrating  these  with  the  best  practices   identified  in  the  literature,  the  authors  have  designed  a  process  to  assist  industrial  firms  to   understand  better  the  complexities  of  how  to  integrate  these  new  technologies  into  their  existing   offerings  to  provide  the  customer  with  the  value  that  they  are  expecting.  This  is  not  a  simple  task  as   every  OEM  exists  in  a  different  position  in  their  particular  ecosystem  and  this  makes  it  more  critical   that  the  OEM  comprehends  the  ecosystem,  so  that  they  can  understand  how  and  where  the  know-­‐ how  exists.  A  proposed  process  is  shown  in  Figure  4;  this  is  developed  further  below.       Figure  4   Proposed  process  description  to  assist  OEMS  to  develop  a  customer  value  proposition   for  M2M  communications     3.3.1   Where  do  you  sit  in  the  ecosystem  and  who  bring  what  value?   The  purpose  of  this  element  is  to  provide  context  for  the  OEM  so  that  they  understand  where  they   sit  within  the  ecosystem.  They  can  then  understand  who  and  what  they  can  influence.  More   importantly  when  it  comes  to  joint  problem  solving,  they  can  then  identify  the  parties  who  may  be   able  to  support  them  to  create  a  solution  for  the  owner/operator  of  the  equipment.  This  is  an  open   innovation  paradigm  (Chesbrough  et  al,  2007)  in  that  the  solution  is  developed  with  the  help  of   external  partners.     3.3.2   Do  you  understand  your  customer's  gains  and  pains?   Within  Service  Design  (Tripp,  et  al,  2013)  empathy  mapping  is  an  important  activity  to  gain  a  fuller   understanding  of  your  customer.  Here  it  has  been  seen  that  many  OEMs  have  complex  supply  chains   and  ecosystems  and  therefore  understanding  key  stakeholders  becomes  increasingly  important.   Users  outside  the  key  target  group  of  the  system  may  have  an  interest  in  the  information  that  the   data  from  such  systems  represents.  Consumption  of  the  information  must  (Rowley,  2007)  be  in  a   form  that  creates  action;  this  means  that  the  data  must  be  transformed  into  information  relevant  to   the  person  consuming  it.     3.3.3   Do  you  understand  the  customer’s  outcomes  and  their  influencers?   How  easy  is  it  for  the  OEM  to  understand  the  outcomes  that  the  customer  is  expecting?  This  may   explain  why  so  many  of  the  respondents  were  only  partially  happy  with  remote  monitoring.  The   outcomes  or  goals  that  the  owner  is  seeking  must  be  translated  into  a  form  that  is  relevant  and   controllable  within  the  environment  of  the  monitoring  (Bostsman  and  Rogers,  2010).  The   relationship  between  the  technical  issues  and  the  commercial  implications  are  a  key  demand  from   the  owner/operators  of  the  equipment.     3.3.4   Can  you  clearly  describe  the  customer  value  proposition?   The  owner/operators  that  were  interviewed  were  better  able  to  describe  the  customer  value   propositions  they  were  expecting  than  were  OEMs.  Marketing  theory  says  that  the  seller  must  be   able  to  describe  the  value  proposition  and  Osterwald  (2002)  has  provided  a  format  to  assist  OEMs  to   Where  do  you   sit  in  the   ecosystem  and   who  brings   what  value? Do  you   understand   your  customer's   gains  and   pains? Do  you   understand  the   customer's   outcomes  and   their   influencers? Can  you  clearly   describe  the   customer  value   proposition? Can  you   describe  clearly   where  the   customer’s   value  accrues?
  • 14. West, Kujawski and Gaiardelli 4th  International  Conference  on  Business  Servitization  (ICBS  2015)   November  19-­‐20,  2015,  Universidad  Rey  Juan  Carlos,  Madrid,  Spain   14   do  so.  Nevertheless,  the  clearest  descriptions  of  customer  value  propositions  were  from  the   owner/operators.  This  suggests  that  customer  pull  will  bring  the  technology  to  the  market.     3.3.5   Can  you  describe  clearly  where  the  customer’s  value  accrues?   As  with  the  point  on  describing  customer  value  propositions,  this  is  very  important.  It  is  specific  to   the  different  stakeholders  and  was  again  best  described  by  the  owner/operators.     4   CONCLUSIONS   The  survey  and  interview  data  were  generally  in  agreement  with  the  literature:  the  owner/operators   were  looking  for  support  with  new  M2M  solutions  that  would  increase  the  interactions  between  the   key  stakeholders.  The  expectation  was  that  joint  problem  solving  would  increase  the  speed  of   problem  resolution,  reduce  costs  and  create  better  solutions.  This  is  in  agreement  with  the  open   innovation  concept  of  Chasebrough  et  al  (2007)  and  Doblin  (2015)  who  recommend  increased   customer  engagement  in  innovation.  This  is  also  supported  by  Freeman  et  al,  2012  and  Deliotte   (2014)  where  the  customer  experience  and  shared  values  were  considered  as  a  key  sustainability   aspect.     The  degree  of  customer  engagement  must  increase  in  order  for  M2M  systems  to  deliver  the   customer  value  propositions  they  offer.  Loss  of  personal  interactions  can  lead  to  a  perceived  lower   level  of  value.  Engagement  should  be  on  a  more  individual  basis,  where  each  customer  persona  must   have  a  clear  value  proposition.  Customers  of  data  include  all  of  the  active  players  in  the  ecosystem,   so  an  understanding  of  what  each  customer  requires  needs  to  be  actively  made.  This  is  particularly   true  in  an  environment  where  the  customer  may  not  understand  what  they  actually  need.   Consumers  of  the  data  could  be  in  OEM  product  development  as  well  as  other  suppliers  in  the   ecosystem.     Data  itself  has  a  value,  and  many  stakeholders  should  be  able  to  access  the  data.  There  should  be   transparency  in  the  collection  and  future  uses  of  the  data.  The  best  relationships  were  developed   from  data  that  was  transformed  into  information  and  used  collaboratively  for  root-­‐cause-­‐analysis,   rather  than  defensively  to  protect  warranty  positions.  The  data  should  include  the  operational  data   as  well  as  the  technical  data  from  the  machines.     5   RECOMMENDATIONS   To  address  the  conclusions,  the  authors  have  some  recommendations  that  any  firm  that  is  creating   an  M2M  solution  for  its  customers  should  consider  during  the  development  of  the  customer  value   proposition:   •   identify  who  are  your  customers  in  the  ecosystem  and  understand  the  outcomes  they  value;   •   segment  your  customers  in  terms  of  the  outcomes  they  are  seeking  and  create  for  each  a   persona  with  a  clear  value  proposition  with  clear  identification  of  where  value  is  created;   •   find  ways  to  engage  with  the  customer,  as  experience  is  important  in  creating  sustainability   and  the  loss  of  personal  interactions  can  lead  to  a  perception  of  a  lower  level  of  value;   •   wherever  possible,  the  data  collected  must  be  used  openly  for  root-­‐cause-­‐analysis  rather   than  defensively  to  protect  warranty  positions;   •   remain  open  and  transparent  with  data  collection  and  the  use  of  the  data;   •   there  are  internal  consumers  of  the  data  that  is  collected  and  this  can  support  new  product   and  service  development.    
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