Innovation to China:
A Swedish company network
develops for the Chinese market
Tomohiko Sakao, Professor
[email protected]
Department of Management and Engineering (IEI)
Linköping University
1
Agenda
1. A case of Swedish network entering Chinese market
2. Integrated solution (Product/Service System; PSS or
Integrated
g
Product Service Offering;
g; IPSO)) and
technology based innovation
3. Practical implication
2
LIAN - Management of Innovation in
Business Driven Networks
Gunilla Ölundh Sandström (KTH); Project Leader
Anna Öhrwall Rönnbäck (LiU)
( )
Jenny Janhager (KTH)
Tomohiko Sakao (LiU)
Settings of the case
P
Legend
S
P : Product
: Solutions
S : Service
: Firm in a network
: Env. tech.
S
P
P
: Customer
P
S
P
S
P
S
S
P
P
S
S
S
P
P
Solutions demonstrated
Customer
needs
Emerging market
The project, Management of Innovation Process for Business Driven Networks, was funded by VINNOVA (The Swedish Governmental Agency for Innovation Systems).
Technology and offering
Company 3
Supplier hardware
Operates facilities
in China
Inventor
Patent
Company
p y1
Company 1
Project leader
Patent owner
Process knowledge
Idea
exchange
g
individual
Company 2
Close
collaboration in
development
The actors
deliver to a
shared
enterprise
Total solution
Company 2
Supplier of the ”heart”
heart
Process knowledge
g
Clear boundaries in technology
Company 3 experienced in Chinese
market
The project, Management of Innovation Process for Business Driven Networks, was funded by VINNOVA (The Swedish Governmental Agency for Innovation Systems).
Business relations in network
Local partner knows the market
Mr X
Joint Venture
Company 2
Company 1
Company 2
Feralco
Company 1
Inventor
Company 1
Company 3
Inventor
Proje
ect China
a
Company 1
Venture
Capital
Company 3
Formalizing
collaboration
Customer link
Legal aspects for new
company formation
Local agent in
China
Knowledge for new market
Risk capital funding
Comp
pany in
China
a
Company 2
The project, Management of Innovation Process for Business Driven Networks, was funded by VINNOVA (The Swedish Governmental Agency for Innovation Systems).
Network’s influence on entering
emerging market
• Enhanced knowledge
g about e.g.
g laws and business
rules
– environmental laws
– draft contracts and agreements
• Specified market knowledge
– and customer contacts
• Previous experience of EM
• Additional relations and contacts
– at e.g. governmental level
– prolonged relations
The project, Management of Innovation Process for Business Driven Networks, was funded by VINNOVA (The Swedish Governmental Agency for Innovation Systems).
Payment model
Value
based on
product
Pure product
sales
l
Product
ProductOriented
service
UseOriented
service
IPSO
ResultOriented
service
Value
based on
service
Pure service
sales
l
Modified from2004)
Tischner och Verkuijl (2002)
• “Result-oriented” service (Tukker
– Activity management
e.g. office cleaning
– Pay per service unit
e.g. copiers
– Functional result
e.g. delivering a specified
‘pleasant climate’
• High level of responsibility
on the provider
The project, Management of Innovation Process for Business Driven Networks, was funded by VINNOVA (The Swedish Governmental Agency for Innovation Systems).
Benefits and risks of providing
integrated solution
Benefits
Risks
1.
Better control of life cycle
A.
2.
Getting in-service
knowledge
Offering
1. Product malfunction
2. Failure in service delivery
3. Failure in integration
3.
Keeping IPR within the
provider
B.
4.
Shortening time to market
Customer
1. Misunderstanding
2. Lack of commitment
5.
Closer commitment
C Business environment
C.
1. Change of regulation
The project, Management of Innovation Process for Business Driven Networks, was funded by VINNOVA (The Swedish Governmental Agency for Innovation Systems).
Relations with customer and p
product
Getting customer info
Provider
Control of
PLC (B1)
Control of value chain (B5)
Getting
in-service
info (B2)
Getting
know-how
(B3)
Product
(RA)
Customer
C
t
(RB)
Customer’s
C
t
’
involvement
uncertainty
Information flow
Control/ commitment
The project, Management of Innovation Process for Business Driven Networks, was funded by VINNOVA (The Swedish Governmental Agency for Innovation Systems).
Agenda
1. A case of Swedish network entering Chinese market
2. Integrated solution (Product/Service System; PSS or
Integrated
g
Product Service Offering;
g; IPSO)) and
technology based innovation
3. Practical implication
11
Service by manufacturer
•
What is happening in manufacturers?
–
–
–
•
Offerings
Off
i
include
i l d products
d t andd services.
i
More improvement potential in services.
Effective integration of products and
services often not implemented.
implemented
Why service by a manufacturer?
–
–
Service (inspection
(inspection, maintenance
maintenance, repair
repair,
upgrade, overhaul, take-back, and
consultation, etc.) is important today.
Service can be killer content, profit centre,
measure to control of product, etc.
12
Fi
Firms
offering
ff i bboth
th products
d t andd services
i
(N
(Neely
l 2007)
From product to service – is it easy?
• Real success with service strategies
p
in manufacturingg companies:
Only 21%
[[S. S. Baveja,
j J. Gilbert, D. Ledingham:
g
From Products to Services:
Why It’s Not So Simple, Harvard management update, 2004.]
13
What are needed for service by manufacturer?
[W. Ulaga, W. J. Reinartz, Journal of Marketing, 2011.]
14
Various ways to realize integrated solutions
[G. Lay, M. Schroeter, S. Biege, 2009]
15
Practical implications
1. Various types of offerings / partners
 Select an appropriate one (e.g. product
ownership, who does maintenance) depending on
the market needs.
2 Benefits / risks of integrated solutions
2.
 Find a best option – information / control
3. Developing
p g integrated
g
solutions differ from
developing physical products
 Develop a core product and business model in
parallel.
parallel
16
Thank you for your attention
attention.
17