Notes for modularity in business services

Citation

Ulkuniemi, P. and Pekkarinen, S. (2011), "Notes for modularity in business services", Journal of Business & Industrial Marketing, Vol. 26 No. 5. https://doi.org/10.1108/jbim.2011.08026baa.001

Notes for modularity in business services

Article Type: Guest editorial From: Journal of Business & Industrial Marketing, Volume 26, Issue 5

The importance of business services has grown remarkably across many industries in recent years. Companies focus on their core business and outsource other parts of their operations in order to exploit the external resources of service providers. As a result, service providers are facing demanding markets and are being forced to put considerable effort into developing both their service offerings (Menor et al., 2002) and their own business processes. Modularity could be the solution to the issue of finding a balance between customisation (Lampel and Mintzberg, 1996) and the complexity of many business services.

The idea of modularity has been adopted from product manufacturing (Duray et al., 2000). Modularisation is a method of efficiently organising complex products, services, product-service systems and processes, and aids in managing knowledge structures. Therefore, modularisation enables new processes and product strategies that help firms to achieve a higher product variety, lower costs and a shorter time-to-market, as well as real-time responsiveness to individual consumer needs (Sanchez and Mahoney, 1996). The coordination of independent process modules requires that processes can be easily and quickly connected to each other. This, in turn, requires that the service specification has to be constructed with the customer and according to the customer’s needs. Using modular offerings in service development has two clear benefits:

1. 1.

   decomposition of the service’s overall structure (Simon, 1962); and

2. 2.

   interface specifications that define how the different service modules will interact within the service (Sanchez and Collins, 2001).

Similarly to Brusoni and Prencipe (2001), we see modularity as a necessary facilitator or enabler of service innovation in business-to-business contexts. Modularity is one of the key measures of managing complexity and of increasing product variety through modular and flexible component-based products, systems, and processes. However, as Anderson et al. (2006) argue, modularity has a bi-directional effect in managing complexity. On one hand, the use of modularity diminishes complexity, but, on the other hand, to a certain degree it also decreases the opportunity for customisation. Baldwin (2007) points out that that although modularisation can reduce transaction costs, it is not cost-free. There are implicit costs of making the service offering more visible and tradable – the costs of standardisation and coordination.

Modularisation can be used to create new service combinations in customer–provider interfaces together with the customer. Making the customer a co-producer of services offers flexibility to the service provider, but any changes in the roles of the parties to the relationship means changes will also be required to the methods of knowledge sharing in the inter-firm context. According to Spring and Araujo (2009), for example, modularity in designing offerings and processes will make services tradable and allow buyers to employ their part of the co-created value.

Modular service platforms enable service firms to make their service offerings more visible to the customers, so that the customers can better evaluate the service before and after the actual service process agreement, and, furthermore, extract the full benefit of the service they are buying. A prerequisite of modularity is low levels of essential coordination between the modules within a modular service architecture. However, in services, human touch-points with the customer are inevitable and require special attention in terms of managing information, as well as knowledge transfer and sharing (Payne et al., 2008). Service platforms and architectures are conceptual tools and models for understanding and designing the common structure of the firm’s offerings, markets, and processes by exploiting the commonalities within and between them. In addition, service platforms and architectures help to create leveraged variety in fulfilling heterogeneous customer needs.

In our original call for papers for this special issue, we sought papers that would address the various aspects of service modularity. The review process resulted in seven papers that offer multifaceted perspectives on the research on modularity in business services. These papers clearly illustrate the multidisciplinary nature of this research. As a theoretical background, the papers have adopted ideas from business as well as from more engineering-oriented streams of literature. To us, it is valuable to embrace this diversity and to enable the creation of a versatile new understanding of a topic that is still in its early stages of development. We were also happy to be able to include various different empirical contexts, including technical engineering services, technology intensive ubiquitous services, industrial services and logistics and software services. On the basis of the empirical studies conducted within the papers, it appears that modularity can be applied in a variety of service industries. What we still need, however, is empirical research on the more knowledge-intensive professional services.

The first paper of the issue is written by Anu Bask, Mervi Lipponen, Mervi Rajahonka and Markku Tinnilä, and is entitled “The framework for modularity and customization. A service perspective”. The paper proposes a framework for systematic analysis of modularity and customisation from the service perspective based on the modularity and customisation literature. The resulting four strategies “non-modular regular, modular regular, modular customized and non-modular customized strategies” are illustrated by examples from the automotive industry and from the service, process and production perspectives. The paper presents a framework that offers managers the opportunity of a systematic examination of modularity and customisation in service offerings, production and supplier networks and benchmarking with respect to competitors. The findings imply theoretically that the strategies related to the degrees of modularity and customisation, differ according to the business environments, in other words they may be employed as is appropriate to those environments, hence, the authors point out, there is no universal type of service modularity.

In the second paper, entitled “Providing a method for composing modular B2B services”, Stephan Klingner and Martin Böttcher research how service modules should be described and structured so that reuse, customer-specific configuration and the creation of service catalogues is adequately supported. The paper presents a clear technical elaboration of how to identify, describe and configure service modules in a way that also brings business advantages. The paper addresses a method for composing, decomposing and specifying service modules and includes a graphic representation of the structure of, and the interdependencies between, service modules that are both logical and temporal. The method presented contributes to the existing research on service modularity by providing a method for careful description of service structuring and configuration.

The third paper is written by Chris Raddats, and is entitled “Aligning industrial services with strategies and sources of market differentiation”. The paper investigates how product-centric businesses (PCBs), operating in a business-to-business environment, develop industrial services to align with their services strategies and sources of market differentiation. The study includes a multi-case study from the UK on industrial companies for whom services are an important market differentiator. The paper proposes three main sources of differentiation of the companies in the product-centric business:

1. 1.

   linked to their own products (e.g. “physical” resources) applying a service engagement strategy;

2. 2.

   relationships with other OEMs (“relational” resources) leading to extension of services; and

3. 3.

   relationships with customers (“relational” resources) lead to service penetration and when a firm’s sources of differentiation are its relationships with customers and other OEMs it could lead to a services transformation strategy.

The fourth paper, “QFD-based modular logistics service design”, by Yong Lin and Saara Pekkarinen, focuses on applying the quality function deployment concept included in the house of quality tool into the design of a modular logistics service platform to better understand and transform customer requirements into the design of the service and to ensure the appropriate service quality for the customer. The paper proposes a three-layer (service, process, task) modular service platform that enables providing and managing the service variety in a third-party logistics company. The framework presented in the paper contributes to academic research on how to integrate quality issues into service design. The paper also argues that the modularity logic is helpful in the establishment of a cost-efficient and flexible service platform and the development of new logistics services. With the proposed framework and tools, it is also possible to extend the research results to other business services, such as industrial and professional services.

The fifth paper by Emmi Rahikka, Pauliina Ulkuniemi and Saara Pekkarinen, entitled “Developing the value perception of the business of the business customer through service modularity” addresses how modularity of service can influence the customer value perception, by drawing together the existing research on service modularity and customer-perceived value. Service modularity is conceptualised as including three elements:

1. 1.

   service modules;

2. 2.

   modularity in processes; and

3. 3.

   modularity in the organisation.

The proposed framework is presented through a case study of a large provider of professional services in the fields of construction, engineering, procurement and project management and its customers. The case study is employed to elaborate upon the findings of the theoretical part of the study. The paper sheds light on the complex issue of a customer’s perception of the value created through service modularity. Based on the research, modularity in the offering, the processes or in the organisation has an influence on the customer’s value perception, but is subject to several challenges.

The sixth paper is written by Ada Scupola and Hanne Westh Nicolajsen, and is entitled “Investigating issues and challenges for customer involvement in business services innovation”. The paper investigates how customers may contribute to radical innovation in consultancy services and what conditions determine customer involvement. The study includes a qualitative case study of successful customer involvement in the development of radical service innovations in a leading Scandinavian engineering consultancy. The study provides us with new and detailed insights into how customers are involved at varying levels of intensity and how the most active customers demonstrate both considerable expertise and a personal engagement in radical service innovation. Although not explicitly addressing service modularity, the study contributes to our understanding of the way the customer is involved in the service processes in a particular industry that can be described as having an inherently high level of modular elements in its ways of doing business. Engineering and construction management services include many regulations, standard processes and other elements that create modularity in the services.

In the seventh paper, entitled “A network perspective on a business model for emerging technology-based services”, Teea Palo and Jaana Tähtinen focus on a very new service setting and aim to explore the business model within that context. The paper provides a concept of a networked business model that emphasises the different actors, their roles in the net, the value exchanges and activities between the actors, as well as the technology-based, ubiquitous service itself. This particular industry setting is very interesting in terms of service modularity research too, as technology-based services are often composed of different technologies and components similar to modular services composed of modules. The study includes an empirical part conducted using Delphi and scenario techniques. As a result, the paper provides us with a framework describing the core elements of a networked business model, and shows how it can be applied in developing business model scenarios for technology-based services.

We are of course very grateful to the reviewers who gave their time to comment on the papers. Their criticisms, suggestions and evaluations regarding the papers have improved their quality and prompted many new research ideas for the future too.

Reviewers

• •

  Saara Brax, Aalto University School of Science;

• •

  Tilo Böhmann, International Business School of Service Management in Hamburg;

• •

  Kristiina Heinonen, Hanken School of Economics;

• •

  Nina Helander, Tampere University of Technology;

• •

  Elina Jaakkola, Turku School of Economics;

• •

  Jouni Juntunen, Oulu Business School, University of Oulu;

• •

  Hanna Komulainen, Oulu Business School, University of Oulu;

• •

  Christian Kowalkowski, Linköping University;

• •

  Robert Mason, Cardiff Business School, UK; and

• •

  Kaj Storbacka, Hanken School of Economics.

Pauliina Ulkuniemi, Saara Pekkarinen