Previously published as: International Journal of Service Industry Management
Online from: 1995
Subject Area: Industry and Public Sector Management
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|Title:||Adopting a service logic in manufacturing: Conceptual foundation and metrics for mutual value creation|
|Author(s):||Christian Grönroos, (CERS Centre for Relationship Marketing and Service Management, Hanken School of Economics, Helsinki, Finland), Pekka Helle, (CERS Centre for Relationship Marketing and Service Management, Hanken School of Economics, Helsinki, Finland)|
|Citation:||Christian Grönroos, Pekka Helle, (2010) "Adopting a service logic in manufacturing: Conceptual foundation and metrics for mutual value creation", Journal of Service Management, Vol. 21 Iss: 5, pp.564 - 590|
|Keywords:||Industrial relations, Manufacturing industries, Value added|
|Article type:||Research paper|
|DOI:||10.1108/09564231011079057 (Permanent URL)|
|Publisher:||Emerald Group Publishing Limited|
|Acknowledgements:||Authors' names are in alphabetical order. Christian Grönroos is responsible for the development of the first section of the article involving service logic, practice matching, value dimensions and antecedents, as well as customer and supplier value models. Pekka Helle is responsible for conceptualizing mutual value creation as a process of creating and sharing joint productivity gains, as well as for the development of the corresponding metrics and the empirical case illustration.|
Purpose – The purpose of this paper is to create a framework for measuring mutually created value in business relationships in the manufacturing sector, which also enables suppliers and customers to share this value between themselves.
Design/methodology/approach – The starting point is that manufacturing firms adopt a service perspective or logic for their entire business. The framework created includes a conceptual foundation for understanding the process of mutual value creation as well as theoretical basis and metrics for calculating mutually created value, joint productivity gains (JPGs) and value sharing. The framework for mutual value creation is created conceptually. The theoretical basis for the metrics used for the calculations and the development of the metrics are empirically grounded in a longitudinal case study.
Findings – By matching supplier and customer practices and thereby aligning corresponding processes, resources and competencies, suppliers can support their customers' business more effectively and thus enable the customers and also themselves to create incremental value which can be shared between the business partners. It is showed that the metrics for calculating JPGs and for sharing these gains in the form of additional value for the business partners, through a price mechanism, can be created and used.
Practical implications – Findings of the paper suggest an alternative way of creating value which is geared towards the demands of a service logic applied in business relationships. Productivity can be created jointly and not separately by the supplier and the customer, and an incremental value in the form of a JPG calculated and shared. To be able to do this, the business partners must have access to accounting data, and the customer and the supplier must be willing to open up their books and engage in mutual practice matching. This demands that a service logic is adopted for the entire manufacturing business, not separately for industrial service activities only, which is the traditional approach to studying service in manufacturing.
Originality/value – Traditionally, value is viewed as an outcome, not as a process of mutual value creation, the outcome of which can be calculated. Productivity as a joint concept and jointly created productivity gains enable firms to share the gains created through mutual value creation. In the literature so far, productivity and value creation have not been studied as mutual concepts. In addition, approaching the entire manufacturing business from a service logic point of view is also novel.
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