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This article contributes to the emerging discipline of service science through an empirical investigation of value propositions as connections between service systems. The starting point for our research is that service science is an interdisciplinary approach to the study, design and implementation of service systems, a service system being considered a dynamic configuration of resources (people, technology, organisations and shared information) that create and deliver value between the provider and the customer through service (IfM and IBM 2008). Specifically, this article investigates value propositions in the context of equipment-based service systems. Our qualitative findings identify three value proposition cycles: Recovery, Availability and Outcome. In so doing, showing that providers offer three distinct propositions of value with three different primary transformations. This research contributes to theory in service systems by identifying value propositions as multiple, simultaneous and iterative connections between provider and customer systems.
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The Three Value Proposition Cycles of Equipment-Based Service
Smith L, Ng I and Maull R
This paper contributes to the emerging discipline of service science through an empirical
investigation of value propositions as connections between service systems. The starting
point for our research is that service science is an interdisciplinary approach to the study,
design, and implementation of service systems, a service system being considered a
dynamic configuration of resources (people, technology, organisations and shared
information) that create and deliver value between the provider and the customer through
service (IfM and IBM, 2008). Specifically, this paper investigates value propositions in
the context of equipment-based service systems. Our qualitative findings identify three
value proposition cycles; Recovery, Availability and Outcome. In so doing, showing that
provider’s offer three distinct propositions of value with three different primary
transformations. This research contributes to theory in service systems by identifying
value propositions as multiple, simultaneous and iterative connections between provider
and customer systems.
Key Words: Service Science; Systems; Value Proposition; Qualitative
Laura Smith, Doctoral Candidate, University of Exeter Business School, University of Exeter, UK. Tel:
+44 (0) 1392 263250, Email:
Irene Ng, Professor of Marketing Science, University of Exeter Business School, University of Exeter, UK.
Advanced Institute of Management Research (AIM) Services Fellow, Tel: +44 (0) 1392 263250, Email:
Roger Maull, Professor of Management Systems, University of Exeter Business School, University of
Exeter, UK. Tel: +44 (0) 1392 263250, Email:
Citation: Smith, Laura, Irene C L Ng and Roger Maull (2011) “The Three Value
Proposition Cycles of Equipment-Based Service”, Production, Planning and Control,
1. Introduction
The service sector now accounts for more than 75% of the economies of western
industrialised nations. This transformation of the world’s economy from traditional
sectors to service has bought about a change in the nature of the organisation.
Historically, research has supported the manufacturing sector (e.g. in engineering,
management, technology etc.) and as such has focused on the technology and techniques
that enable organisations in the manufacturing economy to function effectively and
productively. However, even traditional manufacturing companies now attribute more
than 50% of their revenues to service and it is becoming apparent that there is a lack of
research and knowledge in service. In particular, the technology, knowledge and
expertise required for an organisation to deliver service that may include intangible value
propositions which by definition are perishable by nature and heterogeneous in
characteristic is clearly deficient (Ng et al 2011a).
It is widely recognised that service research has not kept up with the demands of the
economy (Grönroos, 2001). In response, Chesbrough and Spohrer (2006) put forward the
‘Grand Challenge’ of service science, a common set of research problems meant to unite
multiple groups in a common cause set to re-balance research and knowledge with the
needs of the changing economy. What began as a ‘call to action’ has now become a
global initiative in service science or Service Science, Management, Engineering and
Design (SSMED) research. This emerging discipline advocates an interdisciplinary
approach to the study, design, and implementation of service systems. Whereby, a service
system is considered to be a dynamic configuration of resources (people, technology,
organisations and shared information) that create and deliver value between the provider
and the customer through service (IfM and IBM, 2008).
Extant literature in service science has provided researchers with a manifesto, a common
cause and a set of questions from which to base an integrative discipline focused on
service systems. One of the latest calls in service science comes from Ostrom et al (2010)
who, in an 18-month effort, put together a set of global, interdisciplinary research
priorities from academia and practice that is focused on the science of service. They
found that one of the key priorities for progressing service science research is knowledge
for measuring and optimising service value; specifically, how companies measure the
value of service and what factors can enhance service value. Six topic areas were
highlighted as being worthy of further research: Measuring the value and return on
investment from service; creating and enhancing tools for capturing the value-in-use for
services and communicating value to customers and throughout the provider; integrating
service value and the costs of service delivery into joint optimisation models; creating
and enhancing service standards and metrics that link to financial outcomes of the
provider; managing the sales and service channel portfolio to maximise value; integrating
the role of customers, employees, and technology for value optimisation. In essence,
calling for an investigation into how providers should approach the creation, delivery and
measurement of value between the provider and the customer through service, the very
fundamental nature of a service system.
As already noted a service system is defined as a dynamic configuration of people,
technology and organisations connected by value propositions and shared information.
To develop theory on service systems, research is required which investigates the nature
of the service system, how they arise and evolve, the relationship between systems and
the role of people, technology, value propositions, and shared information (Spohrer et al,
2007). Spohrer et al (2007) state that according to a 2003 report by the US National
Academy of Engineering, one of the ways academic researchers ought to begin to focus
on the needs of service businesses’ is by adapting and applying systems concepts and
methodologies. They go on to echo this sentiment for the development of service science
and its study of service systems. In investigating the role of systems concepts and
methodologies in theory development, Ng and Wild (2009) suggest that service research
has a history of interest in systems (e.g. Chase, 1978; Wemmerlov and Hyer, 1989) and
that the development of work in service science has renewed this interest (Demirkan and
Goul 2006, Qiu 2009, Spohrer et al. 2007). Consequently, a systems approach to
modeling and understanding service is becoming well established, (see Barile 2009;
Barile and Polese 2009; Golinelli 2010; Ng, 2011a, Ng et al, 2011b). Importantly,
Ng et al (2011a) propose that taking a systems approach to the study of service science
may increase the research community’s ability to develop a level of abstracted knowledge
that will allow for transferability of knowledge, replicability of design and scalability for
service knowledge across sectors.
Preceding Ostrom et al (2010) and under a similar motivation, IfM and IBM (2008) drew
upon the expertise and experience of leading academics and senior practitioners and
proposed that researchers should establish service system and value proposition as
foundational concepts. As a result of these latest calls in service science, a primary
motivation for this study is to explore value propositions in equipment based service
systems. With this in mind, and taking into consideration the need for a systems
approach, we draw upon the literature on value and systems thinking.
The study will be presented as follows; we first review the literature on customer value
creation with a particular focus on value creation in equipment based service systems.
This is followed by a review of systems thinking literature. In considering the service
science calls of Spohrer et al (2007), IFM and IBM (2008) and Ostrom et al (2010) and
through the exploration of the value and systems thinking literature, we identify two
research questions. First, what value is proposed by the provider systems when value is
considered endogenous? Second, when value is considered endogenous to the provider
system, what is the effect on the system? We then go on to describe the use of a
qualitative method to investigate these questions. An explanation of method is
subsequently followed by findings of the qualitative analysis and finally, we discuss the
implications of these findings for service systems thought and practice and how this
might be used to further research in service science.
2. Value Creation in a Service System
As discussed, in the study of service science, value propositions are thought to provide
connections between service systems. In order to explore value propositions, we first look
to the value literature as a means by which to explore the concept of ‘value’. The creation
of value is often thought of as a fundamental cornerstone of the management discipline
(Albrecht, 1992; Alderson, 1957; Anderson and Narus, 1999; Doyle, 2000; Drucker,
1974; Woodruff, 1997). Moreover, it is often argued that it is the role of marketing to
assist the provider in the creation of value for its customers, value that is superior to its
competition (Tzokas and Saren, 1999: 53). Yet, within marketing and academic literature
in general, there is a lack of conceptual consensus on value and in particular, on customer
value. Divergent approaches and perspectives on value exist in many disciplines,
including economics, psychology, sociology, semiotics, finance, management strategy,
marketing and law (Payne and Holt, 2001; Wikstrom and Normann, 1994; de Chernatony
et al., 2000). Resulting in fragmented streams of thought and research on what value is
and how it is created. It is unsurprising then that providers often do not know how to
define the value they propose, or indeed how to measure it (Anderson and Narus, 1998).
As a consequence and particularly in the wake of service science, the study of customer
value is becoming significantly more important, both in research and in practice.
In the management literature, many authors have approached customer value as an
organisationally directed concept, in which the question of the value of a customer to the
provider is addressed. This dictates a focus not on the creation of value for the customer
but on the value outcome that can be derived from providing and delivering superior
customer value (Payne and Holt, 2001). As Payne and Holt (2001) argue, the major
potential weakness of this approach is that it considers customer value only from the
stance of how much value can be derived by a company from its customers; equally, the
value delivered by the company to the customers needs to be considered.
In this respect, numerous researchers have suggested ways in which to define value from
the customer’s point of view (e.g. Anderson et al., 1993; Christopher, 1982; De Rose,
1991; Ravald and Grönroos, 1996; Woodruff and Gardial, 1996; Zeithaml, 1988). In
searching for consistency amongst these definitions, Woodruff (1997) finds a number of
areas of consensus. First, there is consensus that customer value is inherent or created in
the use experience, which is sometimes referred to in earlier literature as the consumption
experience. Second, that customer value is something perceived by customers rather than
objectively determined by a seller, and finally, that perceptions of value typically involve
a trade-off between benefits received and what was sacrificed in order to realise those
benefits (e.g., price, effort, time). Folloing this review, Woodruff (1997) goes on to
propose a definition of customer value seen by many as one of the most comprehensive
as it captures the dynamic and context-dependent nature of how customers judge value,
the criteria they use to do so, and the relative importance they place on such criteria
(Parsuraman, 1997; Payne and Holt, 2001).
‘Customer value is a customer's perceived preference for and evaluation of those product
attributes, attribute performances, and consequences arising from use that facilitate (or
block) achieving the customer's goals and purposes in use situations.’ (Woodruff, 1997:
If we consider customer value in this way, and if providers seek superior competitive
through a superior value offering to its customers, providers must acknowledge two
things. First, that a provider can only propose a potential value to the customer. This is
because realised value is determined subjectively by the customer, realised in the use
experience and is an evaluation of the benefits received against the customers resources
invested to realise them. Therefore, it cannot be objectively determined or delivered by
the provider in isolation (Vargo and Lusch, 2004:2008). Second, to propose superior
value offerings, providers must consider the customers realisation of value in the use
experience. By setting the boundary of value as that which is merely a product or service
delivered by the provider misses the understanding of the contextual nature of value
within the customer’s space which could aid providers in the proposition of superior
value (Vargo and Lusch, 2004, 2008; Ng et al., 2009).
If a provider’s offering is predominantly tangible – for example a piece of equipment –
setting a boundary of value to exclude the customer context of use is arguably acceptable,
as the time required to adapt the value of equipment to fit within contextual use may not
be possible and any modification to the equipment can only be achieved in future design
(Ng, et. al. 2011c). If providers draw a boundary around customer value in this way,
customers must learn to use, maintain, repair, and adapt the equipment to their unique
needs, usage situation, and behaviours. However, providers often package equipment
with service support and therefore certain activities previously undertaken by the
customer, for example maintenance or spares forecasting, become part of the providers
responsibility. Therefore, customer use, needs, environment and behaviours are part of
the provider’s responsibility. In this situation, it is clear there is a need to draw a wider
boundary around what value is proposed by the provider. As a result, the traditional
notion of customer value as that which is exogenous to the provider system needs to
2.1 Value Creation in Equipment-Based Service
The provision of equipment has been an important aspect of the economy since the start
of the industrial era. Most notably, Adam Smith (1776) proposed that the wealth of
nations was built upon a country’s ability to produce an excess quantity of goods and
then export this excess to generate wealth. The political economy created by such a
fundamental philosophy has been the reason for the dominant view of goods as the basis
for value creation.
Over time, as equipment provision has became more complex and as competition has
heightened, providers have felt the pressure to add value, predominantly through the
provision of services. In light of this, research has shown that manufacturers now provide
services in the form of training, integration with clients’ capabilities, consultancy and
other services related to the provision of equipment (Ren, 2009). Furthermore, Chase and
Erikson, (1988) identify four roles for service within a manufacturing environment;
laboratory, consultant, showroom and dispatcher and their implications for customer
satisfaction and factory performance. In fact, for many manufacturers to remain viable,
research has shown that they may need to diversify into the provision of services (Neely,
2008). This provision has been commonly referred to as the servitization of
manufacturing. Servitization has been discussed widely, frequently through an
examination of the move by manufacturers to generate greater returns by providing
through life support for their products (Vandermerwe and Rada, 1988; Matthyssens and
Vandembempt, 1998; Anderson and Narus, 1995). The hazards and enablers to the
process of servitization have also been studied (Oliva and Kallenborg, 2003, Mills et al.,
2008). However, due to the established paradigm from the industrial era that production
of goods is the basis of wealth creation, much of the discussion and analysis of
engineering service has been through the lens of a traditional goods-based thinking,
“because manufacturing has been the dominant economic force of the last century, most
managers have been educated through experience and/or formal education to think about
strategic management in product-oriented terms. Unfortunately, a large part of this
experience is irrelevant to the management of many service businesses” (Thomas, 1978).
This raises the challenge for academics to question the assumptions upon which
conclusions are being drawn. The nature of value and its role in the delivery of
equipment-based service sits as one of its biggest challenges.
The use of equipment to realise value is often carried out by the customer away from the
provider that originally manufactured it. Thus, manufacturers of equipment may be
misled into thinking that value is merely the tangible offering and the responsibility of the
provider ends at production or when ownership of the product has been transferred. This
would be to consider value-in-use as exogenous to the provider system. In order to make
value endogenous to the provider system, providers would need to consider value-in-use
as a complete offering of the equipment-in-use, within the customer’s space, to achieve
the customer’s goal (see Woodruff, 1997). This means that the provider’s responsibilities
would need to include the customer and moreover the customer’s capability to use the
equipment in such a way as to facilitate the achievement of desired outcomes or goals. A
traditional goods-centric mindset with boundaries of where ‘production’ ends may imply
that the provider is only responsible for the delivery of ‘service activities’. Such a
mindset results in a lack of motivation to truly understand how customers realise value in
collaboration with the provider, potentially resulting in poor outcomes and poor
propositions of value.
3. Value Delivery in a Service System
The consideration of ‘where production ends’, is a boundary question. The consideration
of the boundary ie the distinction of a system from its environment lies at the heart of
systems thinking (Weinberg, 1975; Checkland, 1981; Van Gigch, 1987). We can usefully
distinguish between two types of systems, closed systems which have no interaction with
their environment and open systems where ‘things’ such as material, people, and
information are transacted across the systems boundary.
In the context of service science, Maglio et al (2006) suggest that service systems range
in scale from professional reputation systems of a single kind of knowledge worker, to
work systems composed of multiple types of worker, to enterprise systems (for example,
businesses), to industrial systems, to national systems, and ultimately to the global
service systems. However, at each of these levels of scale, or abstraction, service systems
are considered to be open. This is because they interact with the environment and indeed
with other systems (for example the customer’s system) through shared information and
value propositions.
In this research we are considering the systems in use as an enterprise level open system.
Katz and Kahn (1966) in their consideration of open systems describe an enterprise
system, as consisting of five subsystems:
1. Production/Technical: “the major type of work that gets done”, the
organisational ‘purpose’,
2. Maintenance: socialisation of new members, training, preserving the system,
rewards, aspects of the support processes,
3. Supportive: transactions with external agencies,
4. Adaptive: the research and planning activity e.g. market research, long-range
planning, etc.
5. Managerial: control, coordinate and direct subsystems, develop policies -- use
both regulatory mechanisms (feedback) and authority structures decision making
and implementation.
Whilst this framework is useful at providing a basic structure for organisational analysis
it doesn’t provide a dynamic view of the organisation as an enterprise e.g. what are the
interactions amongst the sub-systems and how is the organisation managed and
controlled according to a purpose.
Perhaps the most intellectually robust and universally applicable of systems models is
that proposed in Checkland, Warmington and Wilson’s (1983) general systems
framework for viewing the enterprise as a system (see Figure 1). In this model they
develop the concept of an ‘Integrated Production System’ which transforms inputs into
outputs, whilst explicitly recognising the applicability of the concept to service as well as
manufacturing contexts. Unlike Katz and Kahn’s (1966) model, Checkland et al (1983)
explore interactions amongst the sub-systems. To illustrate the enterprise model shown in
figure 1 below, T is the primary task and transforms inputs into outputs, P is the planning
system, S is the support system, C is the enterprise wide control system and L is a linkage
system to the external world and includes such activities as marketing, R&D etc. Each of
the sub-systems has its own local control system, depicted inside a smaller circle, also
labelled C. Checkland et al (1983) claim that an organisation can be organised in many
ways but they must embody this basic systems model. In this model it could be argued
that potential value in the provider system is proposed by the transformation ‘T’ and is
communicated by ‘L’ the link to the environment, or in other words, to the customer.
[Figure 1 near here]
Although there are similarities to Katz and Kahn’s framework, Checkland’s is more
dynamic in recognising the importance of the control system and the linkages between
the sub-systems and this model is further developed into a depiction of the management
control system (Figure 2 below).
[Figure 2 near here]
4. Research Questions
This research brings together the two concepts of customer value and systems thinking to
explore what value propositions are offered to the customer by the provider system,
specifically within equipment-based service. In so doing, the research questions build on
the work of Spohrer et al (2007), IFM and IBM (2008) and Ostrom et al (2010) who call
for a greater understanding of value propositions and service systems for the development
of theory in service science. We have therefore developed the following research
1. What is the value proposed by the provider system when customer value is
considered as endogenous?
2. When value is considered as endogenous, what is the effect of value propositions
on the provider system?
5. Methodology
A qualitative method was used to derive insights into the value proposed by equipment-
based service offerings. The purpose was to discover regularities in the potential value
proposed by the equipment based service providers. Specifically, the research sought to
identify (and categorise) valued elements of the equipment based service offering and
explore their connections, internally to the provider system and externally with the
customer. Under this motivation, a qualitative grounded theory approach is deemed
appropriate (Miles and Huberman, 1994). Due to the notion that the value proposition is a
connection between systems, namely between the provider system and its customer
community or target market, the unit of analysis is the connection between the provider
and customer system’s or in other words, the interaction. In order to investigate this
connection or interaction we collect qualitative data from both systems on the unit of
analysis, the value proposition. Accordingly, we collect qualitative data from the provider
and from the customer. In order to control for context specific factors and bound the case,
the data was collected from three large multinational organizations who all supply service
support for large, high-value, low-volume equipment within the defence industry. Service
revenue represents a high proportion of the annual turnover, at least 50%, in all three
organisations and therefore all propose comparable product-service offerings.
In terms of the type of data collected, qualitative research is often characterised by the
use of multiple methods, often referred to as triangulation. As suggested by Dooley
(2001) we use qualitative interviews, analysis of texts and documents, and recordings and
transcriptions of interviews. The logic behind using multiple methods is to secure an in-
depth understanding of the phenomenon in question.
Data were gathered through in-depth interviews with provider employees and customers,
The selection of key informants is critical to the process of identifying and describing the
value proposition. First, 24 employees involved in the delivery of equipment-based
services were selected, primarily from asset/equipment management and customer-facing
support roles (see table 4), these roles were felt to encapsulate the ‘T’ and the ‘L’ in
figure 1 and therefore were considered to have the strongest influence on the potential
value proposed and communicated by the provider system. 21 customers of equipment-
based service were also selected, notably from a variety of roles within the customer
community including equipment operators, who represent users of the equipment,
purchasing managers who procure equipment and operations managers who will
influence procurement and strategic use of the equipment. Such individuals are best
placed to provide insight into the perceived value proposed by the provider system’s
offerings. A total of 45 in-depth interviews with employees and customers from three
equipment-based service providers were conducted. An analysis of the participant roles is
provided below in table 4, from this table it is evident that individuals interviewed span
the potential hierarchy of an organisation and encompass director, management and
delivery level roles from both provider and customer systems.
[Table 1 near here]
The interviews were conducted over a period of 2 years, between the years of 2008 and
2010. The interviews lasted approximately 1–2 hours. Each interview was audio-taped
and verbatim transcribed. Analyses of the verbatim interview transcripts followed a
grounded theory approach (Strauss and Corbin, 1990). In addition, the trustworthiness of
the present research findings was assessed by applying the techniques of triangulation
and informant feedback (Miles and Huberman, 1994). First, the data was categorised by
three researchers. Initially, into open codes which broke down the qualitative data into
discrete elements of the providers offering, namely the service attributes. Followed by
axial coding, in which categorisation was centred on distilling open codes in to generic
sets of categories which were crucial in describing the phenomenon (see Strauss and
Corbin, 1990). The researchers’ brief was to code and categorise for the purpose of
theory building and knowledge transferability. At this stage, the results of all three
researchers were compared to identify those areas where there was disagreement. All
three researchers consistently identified three categories of value proposition. However,
differences existed in terms of (1) the labeling and (2) the categorisation of service
attributes within these categories. To resolve any inconsistency in labeling and the correct
assignment of service attributes to the three value proposition categories, the researchers
conducted a participant workshop to gather informant feedback. The study’s
methodology and findings were presented during a workshop with four interviewees.
Participants received a description of the results and were asked to comment on how well
the results reflected their experience and practices and whether they would recommend
any changes. Only a few changes in labeling of value proposition categories and
classification of service attributes were made after this final step.
6. Findings
6.1 Findings: What is the value proposed by the provider system when customer value
is considered as endogenous?
Traditionally, equipment manufacturers have viewed their value offering as
predominantly tangible, as a piece of equipment. Accordingly, the piece of equipment is
offered to the market for customers to realise their own value, within the context of their
own system. Drawing the provider boundary in this way ensures the provider system
remains viable. However, equipment is very rarely packaged without service and support;
in fact many equipment providers now attribute over 50% of their revenues to service.
The result of this is that the customer’s activities, and indeed the context within which the
equipment is being used to achieve the customer’s own goals, are being drawn within the
provider’s system boundary. As a result, customer value is becoming endogenous to the
provider delivery system. When customer value is considered in this way, a customer’s
realisation of value that will enable them to achieve their own goals; in other words, the
customer value system becomes an important factor of consideration in delivery.
Customer value is often equated to means-end theory, which posits that customers
acquire and use products or services to accomplish favourable ends or goals (Khalfia,
2004). Research on means-end theory in marketing can be traced back to work in
consumer research (Rokeach, 1973; Gutman, 1982; Peter and Olson, 1987; Wilkie, 1994;
de Chernatony et al., 2000). Whereas academics such as Gutman (1982) sought to
understand buying behavior and decision-making of consumers in the purchase situation
through a means-end chain (Payne and Holt, 2001). Means, in this sense, are products or
services, and ends are personal values considered important to consumers; means-end
theory therefore seeks to explain how an individual’s choice of a product or service
enables them to achieve their desired end states (Khalfia, 2004). The means-end chain
has been shown to be equally applicable to organisational customers operating in a
business-to-business market (Lapierre et al, 2008).
The seminal means-end model is Woodruff’s (1997) Customer Value Hierarchy Model.
According to Woodruff's (1997) definition, attributes, consequences and goals, or end-
states, are three distinct levels of abstraction which combine to form the hierarchy model
of value (Lapierre et al., 2008), as shown in Figure 3. Woodruff’s (1997) hierarchy model
is a means-end model since attributes and consequences represent "means" of attaining
certain ends targeted by the customer. Attributes in this model are product, service or
supplier characteristics that the customer values and wants to find in the offering
(Woodruff and Flint, 2003). Essentially, the customer wants attributes that in a particular
use situation, brings consequences that are consistent with the goals and purposes he or
she pursues (Lapierre et al., 2008). In this sense, attributes are valued because the
consequences associated with owning or using them is valued. A consequence is desired
if it produces a benefit or minimises a sacrifice (Gutman, 1982; Lindgreen and Wynstra,
2005; Lapierre et al., 2008). A consequence is desired, too, because it helps to achieve a
goal or end-state consistent with the customer's values (Gutman, 1982; Rokeach, 1973).
[Figure 3 near here]
Three cycles of value creation in equipment-based service delivery emerged from axial
coding of the interviews conducted (Fig. 4). In this section, these value proposition cycles
are discussed; in particular focusing on where in the customer value model the three
cycles propose to support the co-creation of customer value.
[Figure 4 near here]
6.1.1 The Recovery Value Proposition Cycle
The traditional support model for equipment usually encapsulates three separate
contracts: a repairs contract, a spares contract and a post-design services contract
(Hockley et al, 2010). The recovery value proposition cycle attributes found in this study
follow the traditional support model. The service attributes were identified in the process
of open coding and are shown in Table 1.
Through further analysis, these recovery cycle attributes are found to propose a value at
the point of asset failure. As a result, this value proposition cycle is delivering to the
bottom level of the customer value hierarchy. The provider is acting on individual assets
to recover them to operable status and to minimise disruption which could cause
undesirable consequences in the customers use experience. The potential value therefore
resides in the provider’s ability to recover quickly to a operable state. The following
passage from an interview with a Programme Manager illustrates this point:
‘What they want from us, undoubtedly, is a quicker service on the repair and
overhaul and a more accurate spares delivery to enable their planning to work
better. So that clouds a lot of their issues because that means if they can’t output
their (assets) as they would like them, they can’t (use) their (equipment) etc.’
The potential value of fast recovery, is found to be due to the impact of the downtime on
the customer’s ability to use the equipment, the subsequent consequences of which are a
risk to the customer’s ability to achieve operational goals. It is notable, however, that any
recovery is dealt with within the provider system and a operable asset is returned back to
the customer for use and the realisation of the value of the asset outside of the provider
system. This point is demonstrated in an interview with a Call Centre Manager on the
nature of incoming issues:
‘When we get those requests, we get a lot in on the basis of the (equipment) are
(inoperable). So they’re in a critical position. “Can you turn this around in a
very short time frame?” When we do that, the response you get is, is very, very
positive ... … because, you know, without that piece of advice they can’t (use)
the (asset). So it becomes critical to, to their (operational) success, as it were.’
[Table 2 near here]
6.1.2 The Availability Value Proposition Cycle
Hockley et al (2010) propose a reasonably simple definition for the delivery of equipment
availability which they adapted from various standards (British Standards Institution
1991 and Defence Standard 00-49):
‘The probability that the system or equipment used under stated conditions will be
in an operable and committable state at any given time’ (Hockley, 2009).
This raises a few important concepts; first, equipment provision under stated conditions,
therefore requiring a provider to define the function and the environment in which the
equipment is being used. Second, the word operable implies that the equipment can be
committed to an operation and start its intended use successfully (Hockley et al, 2010).
Therefore, availability proposes a different value to traditional support identified above
baecuase function and environment are considered endogenous to the provider system.
Open coding found a number of attributes, shown in Table 2, which deliver to
availability. Further axial coding found that in contrast to the recovery cycle attributes,
where the use of equipment to achieve benefits is conducted by the customer away from
the provider that manufactured it, the availability value proposition cycle attributes
support equipment-in-use. Therefore, supporting assets within the context of the customer
environment. A Customer Account Manager articulates the notion of equipment-in-use
when discussing the difference between traditional contracting models, like repairs-only
contracts, and the way in which asset management strategies (the availability attributes)
have changed practice:
‘You can control the quality of (the asset) as it leaves the factory gates, you
couldn’t control the quality of it as it was in service. So, to an extent, we’ve
actually got more control now than we previously had because when you’re in the
situation when you deliver a product… it goes into the customer’s organisation
and the gates swing shut and we’re not allowed in, the quality of that product in
operation is, or was to an extent, dependent on the customer’s maintenance and
management of it.’
Supporting equipment-in-use means that the provider’s transformation process includes
the customer and the customer’s capability to use the equipment, within ‘the customer
gates’. Take for example, the attribute ‘Equipment Life Management Planning’;
Equipment/Asset Manager are providing asset life advice for a customer’s equipment in
order to maximise the potential usage:
‘The most difficult balance of all is knowing when to pull things from service.
Every component in the (asset) starts deteriorating from the first second it operates
and it will continue to deteriorate until the point comes at which they fail. If you
allow them to fail, they do damage to other parts of the (asset) and they do damage
to the customer... So you don’t want that to happen. So you want to pull things out
of service and replace them or repair them before they fail… However, in order to
get the best value for the customer, you want them to stay in service for as long as
possible because this component, whatever it is, cost a lot of money. If you remove
it a year … before it needs to be … it’s cost the customer that year and it’s a
constant balance between the best value to the customer without allowing a failure
to happen which will have greater consequences.’
These asset management practices, shown here as availability attributes, are not just
maximising potential usage but are taking into consideration the use of the equipment:
‘We try to throw our (Asset) Management effort into it. So we go to see the
customers and … the first thing you try to do is you try and stop the (assets) getting
rejected quite as quickly … So we try and give some alleviation to let them keep
(operating), basically You can also work on things like doing spares
provisioning conferences. So where some of them are not ordering early enough
you try and go see them… You can also do some technical aspects as well. So not
just extension of limits, but you can look at certain specific (operations) they might
be (undertaking) etc.’
In summary, the availability value proposition cycle attributes propose potential value
through the maximising availability of equipment for use. In order to do this the cycle
takes account of stated conditions and therefore, the availability value proposition cycle
is supporting equipment-in-use and directly impacts on consequence-based satisfaction in
the customer value hierarchy by ensuring availability and influencing desirable
consequences in use.
[Table 3 near here]
6.1.3 The Outcome Value Proposition Cycle
In addition to proposing recovery and availability value, analysis also found that outcome
value proposition cycle attributes go beyond availability to facilitate interoperable use of
the provider’s assets with other equipment, ultimately supporting the customer in the
achievement of their own goals through improved capability. Therefore, the use of
equipment to achieve benefits here is conducted by the customer in coordination with the
provider that manufactured it. As a consequence, this cycle of attributes treats value-in-
use within the context of the customer’s environment as endogenous. This represents a
complete offering of the equipment-in-use, within the customer’s space. Thus, the
provider system is recognising and incorporating the customer’s need for their equipment
use to deliver to an operational goal. This is illustrated in the passage below, taken from
an interview with a provider Customer Account Manager:
‘The intention (is) that what the (provider) delivers is either zero failure in terms of
(operational) outcome or minimising the impact on (operational) outcome. And
that’s a consequence of having the best products at delivery and the best service,
such that you manage the volatility.’
In another example a customer Operations/Programme Manager explains the role of the
equipment-based service provider in delivering capability towards operable outcomes:
‘The end goal in this particular environment is to keep the (equipment in use) with
the right capability so that the (equipment operator) can do what the (organisation)
wants it to do. So that’s the end, whether it’s a good end or a bad end goal that’s
what we are here for.’
The outcome value proposition cycle as a result proposes to support a customer’s
capability to achieve a desirable outcome, and is therefore creating goal-based
satisfaction at the very highest level of the customer value hierarchy.
[Table 4 near here]
In summary, the findings show three distinct abstractions of value proposed by the
provider system. First, a recovery value offered by minimising disruption; second, an
availability value offered by maximising potential use and lastly, outcome value offered
by supporting capability to better achieve desired outcomes.
6.2 Findings: When value is considered as endogenous, what is the effect of value
propositions on the provider system?
In addition to identifying three distinct value propositions in equipment based service,
our data identifies a number of effects on the provider system caused by there
propositions. First, each value proposition has a different primary transformation (see
table 5). Second, the three value propositions, while distinct in their proposition of
potential value, are often acted upon by the provider system simultaneously. Lastly,
delivery to the three value propositions is an interactive process between the provider
system and the customer. Each of these findings is discussed in more detail below.
6.2.1 Primary Transformations Across the Value Propositions
The concept of primary transformation is found in the operations management literature
and dictates that processes have one dominant transformation. That transformation could
be an information processing operation, a material processing operation or a customer
processing operation (Slack, 2004). Qualitative analysis of the data on value propositions
found that each of the three propositions of value has a different primary transformation.
Take for example the recovery value proposition cycle, as discussed, this value
proposition is concerned with how the provider manages asset failures. As such, the
primary transformation is primarily a material processing operation. The input to which
is a broken or damaged part and the output is an operable piece of equipment. This is
evident in the passage below taken from a Programme Manager, a circumstance is
described in which a part is called in as damaged, sent back from to the provider, repaired
and returned repaired to the customer:
‘Say they’ve spotted a couple of nicks on one of the blades and basically the part
has passed the limits contained in the manual… It’s then sent back, gets inspected,
we repair it and give it back to him’
In contrast, the availability proposition cycle is primarily an information processing
operation. Value is proposed through the maximisation of equipment availability, rather
than value in the minimising of any disruption of asset downtime. Increasing the
availability of equipment is a challenging task. A critical input to which comes from
understanding the equipment usage. To illustrate we refer to a passage taken from an
interview with a Programme Manager, which discusses what is required in order to draw
up a spares programme:
‘I’d have to know what they’re doing with it, how many hours they’re running with
it and what their plans are for it longer-term and also some records of the history of
each of the (assets). So, once I’ve got that, then I can draw off a plan’
The outcome value proposition cycle is a completely different order of challenge and is
primarily a customer processing operation. The concern here moves to capability rather
than simply availability. In this event, the provider is now integrated with the customer
system and provides continuous and ongoing advice on the best use of the asset as the
environmental state changes. In order to do this a provider may transform customer,
information and material to improve an outcome but primarily it transforms customer’s
actions and capabilities. A specific example of this type of practice is the offering of help
and advice to customers on how best to configure their equipment dependent on the
operational requirement a customer had. This was often provided through operating
programmes which demonstrate how using certain assets, with certain availability in a
given combination, would allow capability for a certain operational requirement:
‘Using this (customer data and information on operational requirement) you can
say “right, the operable assets – I could take that module, that module, that module
and build an (asset) good for 200 (operable) hours and send it to (X operating
condition). It probably will get to 200 hours but not much further’
6.2.2 Simultaneity of Delivery
Evidence showed that not only does each proposition have a different primary
transformation but that these propositions are often enacted simultaneously. For example,
a customer discusses the potential extent to which they treat the customer system as
‘It’s really a question of how far those extend into the customer’s organisation. It
begins with the acquisition of material, all the way through, potentially, to
managing the customer’s fleet of equipment for them and the point at which you
stop varies between customers and even within customers, it varies between
products because, for instance, it’s a lot easier for a customer to agree to outsource
the training (equipment) than it is for them to outsource their (operational
equipment). So even with those (customers) that have gone further down the route
of industrialising the support, there will still be a difference between product lines
as to how far they are prepared to go and you can understand why that should be’
6.2.3 Value Propositions as Cyclical Interactions
The three value propositions are described here as cycles, this reflects the nature of
interaction observed between the provider system and the customer. The findings show
that the value of equipment-based service is not an output of traditional delivery
mechanisms where the customer is a passive recipient to delivery processes. Instead,
value emerges from a cycle of iterative processes between the customer and the provider,
with resources contributed by both parties. In this sense, the flow of the connection
between the provider and the customer is bi-directional, creating feedback loops between
the two systems. The availability and outcome value proposition cycles in particular have
feedback loops with the environment because the proposition is realised (co-created) over
a series of dependent interactions. In the recovery cycle this is less so because a piece of
equipment fails, it is fixed generally exists in an independent interaction.
The following passage taken from an interview with an Operation’s Manager from the
customer system demonstrates the ‘multi-state’ environment in delivering a capability to
achieve customer outcomes, it shows how the provider created operating programmes
daily adapting them in quantity, time and weather according to the customers system.
‘We completed a contract for the maintenance and most of the (equipment) facilities to
be owned over to a contractor… the (operating) programme was created on the day the
(use) happened or the day before... So the (operators) or the trainers were making
decisions about how many (assets) they wanted, at what time of day… they were
flexible enough to offset against such things as bad weather’
In summary, these findings indicate that the notion of value and its achievement is
different across all three value proposition cycles. This is illustrated in table 5 below.
The cycles represent three distinct connections between the two systems, which interact.
[Table 5 near here]
7. Discussion
The customer value hierarchy and means-end theory assumes that the provider merely
offers product specifications or service activity attributes in a value proposition to the
customer, and that the customer learns preferences for those attributes based on their
experience of how these perform in use, in their own environment, using their own
resources. However, this study finds that when the customer’s value is endogenous in the
provider system, the company’s proposition directly influences customer use and end
states through the co-creation of desired consequences and capabilities to achieve
outcomes. Previous studies have not looked at where the provider system interacts with
the customer value hierarchy; they have only looked at the customer in isolation. More
concretely, when value is considered as endogenous the move into co-creating customer
goals or ‘end-states’ has an impact on the provider’s system and it’s transformation
operation’s. If providers propose and contract onavailability or capability the use of
customer resources to achieve higher level, more result-oriented end-states is
undoubtedly necessary. This of course increases risk to the provider, as there is less
control of the achievement of this type of outcome. As such, our study contributes to the
understanding of value propositions as an interdependent connection between two
systems through the discovery of three value proposition cycles combining and
integrating their resources in the use of equipment towards excellent outcomes.
Furthermore, the findings of the study suggest that the notion of value and its
achievement is different across all three value proposition cycles. In the recovery value
proposition cycle, the provider’s role starts at the point of equipment failure. This means
that at the starting point of achieving value, the customer is already in a negative position.
The highest level of success in such a value proposition cycle, even if the equipment is
recovered within seconds, is already a negative outcome i.e. a disruption. The provider’s
ability within this value proposition cycle is to ensure that the disruption is minimised. In
the availability value proposition cycle, achieving value is focused around ensuring
equipment availability. This implies that the best outcome, i.e. at 100% availability, is an
absence of failure. The outcome to the customer is status quo. There is no positive impact
to the customer’s goals and operations, merely an absence of disruption. In the outcome
value proposition cycle, achieving value is focused around contribution of the equipment
towards better outcomes for the customer, optimised across other equipment and
resources within the customer space, so that the customer is assisted to achieve their
goals more efficiently and effectively. This clearly has a positive outcome (assuming the
advice given is useful) to the customer, and success in the achievement of this value
proposition cycle is a positive impact on achieving customer goals.
From an operations perspective, the material transformation is the core value proposed by
a provider. This would equate with Checkland et al’s ‘T’ in the enterprise model (see
figure 1). However, our findings also indicate the importance of information and people
transformation to achieve value . Whilst Checkland et al recognise that the transformation
would depend upon the weltanschauung, or outlook, of the observer and that this might
change over time, his model is based on a single primary task and the instructions for the
development of a root definition are based on primary task analysis. Our results show that
the organisations in our study have multiple primary tasks, in that they are providing
multiple value cycles simultaneously and that the organisation must manage the tension
between these multiple perspectives.
This notion of a primary task has permeated into operations management, which
considers processes as having one dominant transformation; either information
processing operations, material processing operations or customer processing operations
(Slack, 2004). This research has identified that equipment manufacturers may have all
three transformations taking place simultaneously. That is, the repair cycle has material
as its dominant transformation, the availability cycle has information as its dominant
transformation, and the outcome value proposition cycle transforms the customer's
actions and behaviours. This indicates a much more complex system with the interaction
of information processing, customer processing and material processing needing to be
synchronised. In terms of Checkland’s management control system (see figure 2), our
data indicates that the feedback mechanisms for each transformation exist in different
cycles. For example, managing the recovery cycle often requires immediate action and is
primarily a single transaction (e.g. when aircraft are unusable this can be within 24 hrs).
In contrast, the availability and outcome cycles take place over a much longer timeframe
and are co-created over multiple transactions between the provider and the customer.
This would be easier to manage if each of the recovery, availability and outcome cycles
were independent but given the simultaneity of cycles for individual customers this is
This interplay of the feedback mechanisms between the provider and the customer
system’s for each of the cycles has implications for Checkland’s model. The enterprise
model now has three transformations that need to be integrated within one planning
system and one enterprise wide control system. This may go some way to explaining the
inherent challenges organisations face in transitioning from manufacturing to service.
Neely (2008) drew on data from over 10,000 providers in 23 different countries has
shown that although providers see an increase in revenue from servitization they also see
generate considerably lower profits, which in the long term my threaten their
survivability and proposed this may in part be caused by a fundamental change in value
Our research has also provided evidence of a key missing sub-system interconnection in
Checkland et al’s (1983) enterprise model that is between the linkage sub-system (L) and
the transformation (T). We have provided evidence that the external link from the
customer has a direct link with the transformation, ‘T’. ‘T’ offers a value proposition to
the environment and particularly in the case of the availability and outcome cycles the
external environment is constantly feeding information back and modifying the
transformation e.g. on equipment usage. This is a far more dynamic interplay than was
described in the original depiction. Our data also provides evidences of the importance
of this relationship, particularly in the availability and outcome cycles where the linkage
to the customer is paramount in meeting the customer’s outcomes.
Overall, we suggest that Checkland’s enterprise model should play a significant role in
the development of the service science community. Theoretical abstraction based on this
model allows for transferability, replicability and scalability (Ng et al, 2011a). We
consider that Checkland’s model meets these requirements and can be applied to any
service environment, what remains to be considered is the developing of theory and
managerial guidelines for highly complex environments that have a multiplicity of
transformations and the implications for planning and control in complex systems eg
those circumstances where the customer’s outcomes are constantly changing and
feedback mechanisms operate on different time scales.
Our study also contributes to the understanding of engineering capability, particularly
around requirement analysis in systems engineering as well as customer inputs and
variety. Requirement analysis involves activities that determine the needs or conditions to
meet new products, taking into account conflicting requirements or user specifications. In
a traditional approach, the customer, if asked for specification, would implicitly assume
its most common states of use and the requirement analysis would be specified around
such declarations. This puts the risk of changing use-states squarely on the customer
since rigidities have been built into the design of the product to match the predetermined
states. This also makes the product less agile in its use across states, but is acceptable in
the traditional ‘value’ sense because it is what the customer wanted. When value is
considered as endogenous, i.e. when the provider is delivering to outcomes, customers do
not predetermine states. Instead, both the provider and the customer may wish to consider
all states of use and every use state is probabilistic. The nature of customer inputs and the
need to attend to variety of use become a joint activity with different set of processes
linking the providers. The task for both the provider and the customer is to optimise the
configuration of resources – both tangible and intangible – towards achieving outcomes
across all states, in a partnered environment.
8. Managerial Implications
As equipment provision becomes more complex, providers have found the need to
educate customers on the use of the equipment and create a better fit between the design
of the equipment and customer usage. However, our study has highlighted the additional
issue of customers’ context of use would inevitably lead to situations of very high
variety. The delivery to such a high variety of contextual use poses a major challenge to
providers when they seek to ‘add value’ to their equipment through outcome and
availability value (Ng et. al., 2011c). Does ‘added value’ imply better fit to the customer
system to achieve better outcomes, taking over some of the customer processes to achieve
the same outcomes? Or does it imply being able to tailor the provider’s processes to
support the delivery of outcomes across different states?
As discussed earlier, our study shows that if value is to be considered endogenous to a
provider’s delivery system, the provider has to factor in the customer’s use of equipment.
The challenge to the provider is that it now has to ensure that the equipment is able to
achieve the customer’s own goals which would require greater dependency on the
customer and its resources (Ng, Williams and Neely, 2009). In essence, a provider that
takes value as endogenous to the delivery system has to have the capability to manage the
customer, an area over which the provider may or may not have much control. A recent
paper by Ng et al (2010) suggests that this capability to co-create value is essential to
competitive advantage. Consequently, the provider has to be empowered to think about
its own capability as that which includes aspects of the customers’ materials, information
and people. The alignment of the two systems in co-creating value is paramount (Ng,
Nudurupati and Tasker, 2010). Further research could build on value proposition
interactions to investigate the concept of value co-creation between the provider and the
customer system.
It is worthwhile noting that the value investigated here is functional value, and not the
emotional value that could be perceived by the customer (cf. Mullens and William,
2004). Future research could also address the emotional value of customer experience
that could emerge from the interactions within the three value proposition cycles.
9. Conclusion
Spohrer et al’s (2007) article on the steps towards a science of service systems stated that
in order to develop theory in service science, research should explore the relationship
between systems and the role of value propositions. As literature and momentum around
service science has grown, research communities such as Ostrom et al (2010) and IfM
and IBM (2008) have drawn upon the expertise and experience of leading academics and
senior practitioners to highlight research priorities for service science. As a consequence,
it has been proposed that researchers should develop the foundational concepts of service
system and value proposition. In order to make these investigations, Spohrer et al (2007),
Ng and Wild (2009) and Ng et al (2011a), go further to say researchers should consider a
systems approach. In particular, Ng et al (2011a) propose that taking a systems approach
may increase the research community’s ability to develop a level of abstracted knowledge
that will allow for transferability of knowledge, replicability of design and scalability for
service knowledge across sectors. This paper contributes to service science through an
empirical investigation of the value propositions that connect equipment based service
providers with their customer. Moreover, we do so using a systems thinking approach.
Our findings show three distinct abstractions of value proposed by the provider system.
First, a recovery value offered by minimising disruption; second, an availability value
offered by maximising potential use and lastly, outcome value offered by supporting
capability to better achieve desired outcomes. This is an important insight for equipment
based service. It is important to note of course that value propositions will vary by
context. However, the findings also pose insight for service science and the study of
service systems. Namely, value propositions between provider and customer service
system’s are found to be multiple, simultaneous and iterative. Thus, there will be inherent
effects for both provider and customer systems.
Future work in equipment based service should build on these propositions to explore
their effectiveness, efficiency and sustainability for service system management (Spohrer
et al, 2007). In particular, research should explore the effect of the different value
propositions on the two service systems and how value is co-created between the two. In
terms of the provider system, investigation of the ‘T’ and ‘L’ main subsystem link (see
figure 1) may hold important insights for operations management.
The achievement of excellent outcomes, as opposed to excellent equipment, is through
the contribution of resources provided by both the provider and the customer. The theory
on manufacturing systems, processes and knowledge commonly excludes customer
resources in delivering a manufactured good, and we propose that it is a necessity in
order to extract the value inherent in the equipment. This approach may need to be
adapted, and the access to and integration with a customer’s system, it’s processes,
information and knowledge are proposed as a necessity for the delivery of high quality
Our study suggests that the three value proposition cycles are an iso-morphism of how
manufacturers’ value propositions are evolving. They begin with a traditional
understanding where the product is the equipment and service is the recovery of
equipment failure, essentially the recovery value proposition cycle. They then evolve to
a situation commonly found now where service is to prevent product failure and therefore
surrounding the product with other support activities towards that end, essentially the
availability value proposition cycle. Finally, we suggest that in the future these
manufacturers will operate in an environment where there is a blurring of boundaries
between product and service. This will be reflected in an integrated amorphous complex
service system aimed towards achieving customer outcomes with equipment, technology
and activities in co-creation with the customer, where the customers themselves are
resource providers and integrators.
While delivering to outcomes brings about risks and is challenging to the provider (see
Ng and Nudurupati, 2010), it can potentially bring about significant contribution to the
sustainability agenda as the longer machines are kept working and equipment is kept
operational, the less there is the need for production and consumption of new equipment,
cutting carbon emissions overall (cf. Mullens and William, 2004). However, such a
capability drives the need for research in marketing, OB/HRM, strategy and operations
management to be brought to bear on the management and delivery of complex service
systems in terms of the configuration of people, physical assets and processes, as well as
in the design of the enterprise tasked to achieve it. Compartmentalising the knowledge
into individual disciplines may have been useful for the manufacturing and production of
goods, where many processes are linear and with low intervention of the customer, but
would be less useful in the delivery of complex service systems towards achieving
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Table 1 Analysis of interview participants
Provider Participant Analysis Customer Participant Analysis
Roles of Participant Number of
participants Roles of Participant Number of
Director 2 Director 3
Head of Services 4 Business Manager 4
General Manager 1 Operations/Project
Customer Support Centre
1 Technical Manager 1
Supply Chain Manager 3 Supply
Programme Director 1 Equipment Operative 2
Programme Manager 4 Customer Executive 3
Programme Executive 1
Customer Executive 4
Equipment/Fleet Manager 3
Total 24 Total 21
Table 2 Recovery Value Proposition Cycle Attributes
Attributes Attribute Definitions
Technical Query
Response Speed
How quickly it takes the provider to respond to a technical query
raised by a customer and acknowledge it as an item that requires
Technical Query
Resolution Speed
The time taken to resolve a technical query raised by a customer
Technical Variance The issuing of a technical variance to the original design
specification of a part or a repair process to allow for continued
use or repair, enabling a quicker return to operable status of an
Asset Repair The return to operable status of an asset for use by the customer.
Table 3 Availability Value Proposition Cycle Attributes
Asset Maintenance Performing scheduled or preventative maintenance on assets.
Spares Provision
A service to forecast the usage of parts for a particular
customer’s equipment to allow for timely provision of the
necessary spares.
Facilities Planning &
Provision of advice and design skills for customer required
Equipment Life
Provision of equipment life advice in order to maximise the
otential use at minimum cost.
Availability Forecasting
and Planning
Advisory service to ensure optimised and/or specified equipment
availability at minimum cost.
Equipment Obsolescence
Management Support
Obsolescence monitoring and assessment service to manage
otential supply chain hazards and help mitigate disruption to a
customers operation.
Working Asset Level
Advisory service on the number of spare assets needed in order
to support specified equipment availability month to month.
Asset Use/Maintenance
Advisory service on how best to use and not use an asset and
how to maintain it to achieve the optimal asset output.
Table 4 Outcome Value Proposition Cycle Attributes
Optimal configuration
for the use of total
Help and advice on how best to optimise configuration of
equipment dependent on the operational requirement a customer
may have
e.g. - these assets, with this availability, in this combination to
allow capability for X
Optimal configuration
advice for outcome
Help and advice on how best to configure equipment (to be used
with other equipment) to achieve better outcomes
e.g. - these assets, with this availability, in this combination with
other equipment to achieve a capability (that could be variable in
nature) in an optimized manner
Table 5 Summary of findings on value proposition cycles of equipment based service
Recovery Value
Proposition Cycle Availability Value
Proposition Cycle Outcome Value
Proposition Cycle
Value Proposed Minimum disruption
when equipment fails
availability of
Better capability to
achieve outcomes
Transformation Material Information Customer
Figure 1 Enterprise Model (Adapted from Checkland et al., 1983)
main subsystem links
control links
links to environment
Figure 2 Management Control System (Checkland et al., 1983)
Figure 3 Customer Value Hierarchy Model (Woodruff, 1997. P. 142)
Figure 4 Three Value Proposition Cycles of Equipment Based Service
... In the context of outcome-based services, servitised offerings bring opportunities to learn from the interaction with the customer about their specific needs and operation context, which could be used as feedback to improve the advanced service offering (Grubic 2018). Outcome-based value propositions for equipment are in-fact primarily customer-processing operations which revolve around the customers' operational requirements (Smith, Ng, and Maull 2012). ...
... Tacit knowledge of customer's processes needs to be developed to clarify expected performance and define performance indicators for the service (Sj€ odin et al. 2020), and it is a necessity to extract the value inherent in the equipment in equipment-based services (Smith, Ng, and Maull 2012). These are key elements for the operationalisation of the concept of value-in-use for customers in manufacturing industry settings. ...
... The value-in-use derived by the equipment performance needs to be considered within the PSS offering. This brings challenges to product manufacturers, as they are used to consider value in the tangible offering (i.e. the equipment) rather than as endogenous of its offering and service delivery system (Smith, Ng, and Maull 2012). Indeed, setting requirements for PSS offerings, including requirement elicitation, (i.e. ...
Industrial services are increasingly becoming more relational and customer-oriented, due to manufacturers’ adoption of servitisation approaches and product service system offerings. Challenges remain regarding the effective design and delivery of these new offerings, and the understanding of their actual value for both providers and customers. This work focuses on one specific type of product service systems in the context of manufacturing equipment: result-oriented or performance-based services, which aim at delivering an outcome rather than selling the equipment to the customer. A proposal of a value-driven method for their design that engages the customer in the process is presented. This new method has been applied to a real industrial life setting through an application case, involving the service provider and its customer, and targeting manufacturing equipment within customers’ plant. Results indicate the effectiveness of this prescriptive approach. Reported benefits from participants refer to its flexibility, adaptability and applicability for different types of equipment, as well as its potential to help providing a modular service portfolio adequate to equipment specific context and requirements.
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... For example, Shaw and Jones (2005) summarized the schools of marketing thought, considering V&L04 to be a key contribution to marketing just one year after its publication. Similarly, Smith et al. (2012) acknowledged the role of V&L04 in introducing value proposition and the concept of superior value proposed to customers, while Leroi-Werelds et al. (2017) investigated the most suitable methods for referring to consequences for users and mirrored their focus on the benefits and sacrifices in V&L04's definition of value-in-use. A more thorough approach to describing the contribution of V&L04 was proposed by Gummesson and Gr€ onroos (2012) in their article on the Nordic School perspective. ...
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... The identification of these dependencies within IoT-enabled servitization adds to other studies that specifically focus on the bundling of different technologies to enable servitization, (Ardolino et al. 2015) or the bundling of different service offerings (Smith et al. ,2012;Baines et al., 2014). However, our study establishes the IoT-based affordance dependency as a key framework that describes IoT-enabled servitization. ...
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... The identification of these dependencies within IoT-enabled servitization adds to other studies that specifically focus on the bundling of different technologies to enable servitization, (Ardolino et al. 2015) or the bundling of different service offerings (Smith et al. ,2012;Baines et al., 2014). However, our study establishes the IoT-based affordance dependency as a key framework that describes IoT-enabled servitization. ...
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