Solution Business: Building a Platform for Organic Growth

148 Pages·2014·4.09 MB·English

by  Kaj Storbacka, Risto Pennanen (auth.)

Management for Professionals
Kaj Storbacka
Risto Pennanen
Solution
Business
Building a Platform
for Organic Growth
Management for Professionals
Forfurthervolumes:
http://www.springer.com/series/10101
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Kaj Storbacka (cid:129) Risto Pennanen
Solution Business
Building a Platform
for Organic Growth
KajStorbacka RistoPennanen
MarketingDepartment TalentVectiaLtd.
UniversityofAucklandBusinessSchool Espoo
Auckland Finland
NewZealand
ISSN2192-8096 ISSN2192-810X(electronic)
ISBN978-3-319-03975-6 ISBN978-3-319-03976-3(eBook)
DOI10.1007/978-3-319-03976-3
SpringerChamHeidelbergNewYorkDordrechtLondon
LibraryofCongressControlNumber:2014931769
#SpringerInternationalPublishingSwitzerland2014
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Foreword
Morethanever,organicgrowthishighontheagendasofchiefexecutiveofficers.It
is also largely known and accepted that growing the share of wallet at existing
customersgives—allthingsbeingequal—ahigherreturnoninvestmentthanmany
otherinvestmentsforgrowth.Wallet-sharegrowthatexistingcustomersgoeswell
beyond selling products orreaching new geographical markets through globaliza-
tion. In the long term, growthessentially depends on customer-driven innovation.
Recentresearchbyacademics,expertsandbusinesspractitionersindicatesthat,in
mostcases,customer-drivenorganicgrowthcomesfromcustomer-specificservices
andintegratedcustomersolutions.UntilthepublicationofKajStorbackaandRisto
Pennanen’sbook,therewasnocomprehensiveliteratureoncustomersolutionsasa
business.ItisamplyclearthatSolutionBusiness:BuildingaPlatformforOrganic
Growthfillsabigholeinaverythorough,professionalmanner.
Thisbooknotonlygivesaholisticviewofsolutionbusinessbutalsofocuseson
the key element of success: capabilities. As the authors efficiently demonstrate,
sales and industrial capabilities are crucial for optimizing premium pricing and
minimizing the costs and risks inherent to solution business. Customization often
leads to increased costs and lower margins while simultaneously making price
premiums difficult to obtain. Storbacka and Pennanen address this matter in con-
siderable analytical detail, showing that through sales and industrialization
capabilities, we can achieve price premiums and reduce costs, respectively. They
explain very effectively the critical stages and milestones—developing solutions,
creatingdemand,sellingsolutionsanddeliveringsolutions.Inthelastsectionofthe
book,theyfocusonpracticaltoolsthatallowcompaniestoassesstheirperformance
when developing solutions, making money with solutions and evaluating the
organization’scapabilitiestosellanddeliverintegratedcustomersolutions.
Integrated customer solutions are a game-changer for most companies. As the
book’s many solid examples establish, this process often involves a profound
change in business models, management systems and metrics, as indicated in the
followingexamples:
• “Isellthecostofmileage,notjetengines.”
• “Isellenergymanagement(i.e.,lowerelectricitybills),notpowerstations.”
• “Isellriskmanagement,notautoinsurance.”
• “Isellpeople-flowmanagement,notelevatorsandescalators.”
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viii Foreword
Skillsandcompetencies,bothindividualandinstitutional,playthebiggestrole
in determining success or failure when managing a profitable customer solution
business. I praise Storbacka and Pennanen for their reference book on this topic.
ReadingSolutionBusinessandapplyingitsmethodologiesandprinciplesisamust
for business enterprises and CEOs who put organic growth at the top of their
agendas.
Chicago, IL, USA BernardQuancard
Preface
Movingintosolutionbusinessisadifficulttaskforanyfirm.Manystrugglewithor
fail in the transformation. Our interest in exploring the reasons for failure and
success in solution business led to us undertaking a long-term research effort
involvingmorethan20majorfirmsoperatinginternationally.Thefindingsofthis
researchshowthatsolutionbusinessisadistinctbusinessmodelandnotaproduct
category. Hence, our aim in producing this book has been to document, describe,
and discuss the transformation from product business to solution business by
comprehensively categorizing the key capabilities that firms need to invest in if
theywishtobecomesuccessfulsellersanddeliverersofsolutions.
Selling Solutions Is Not the Problem—Efficient Delivery Is
Many of our conversations with the firms that participated in our research work
startedwiththeseorganizationsclaimingthattheyfoundsolutionsellingproblem-
atic. However, we invariably observed that selling is not the biggest challenge.
Instead, the problem typically relates to missing industrialization capabilities or a
totallackofwhatwecallsolutionplatformcapabilities.Essentially,thekeyissueis
firms’inabilitytocreaterepeatabilityandscalabilityinsolutionbusiness.
Mostfirmsentersolutionbusinessthroughsales,butfailtotransformanyother
oftheirfunctions.Whilesuchfirmscancreatemuchnewvalueforcustomers,they
tend to simultaneously produce an untenable cost structure due to the increased
divergence and uncontrolled complexity of processes related to both the sale and
deliveryofsolutions.
Success in solution business starts by accepting that solution business is a
separate business model not simply another product category or an extension of
the existing product business. Solution business models are systemic and require
firmsto‘tweak’manyareasoftheirbusinessmodelconcurrently.Inthisbook,we
identify and organize the areas that firms need to focus on into three sets of
capabilities and practices—commercialization, industrialization, and solution
platforms.
1. Commercialization refers to a firm’s ability to understand customers’ value-
creating processes, to create solutions that enable improved value creation for
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