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Strategy structure configurations in the service business

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Information about Strategy structure configurations in the service business
Business & Mgmt

Published on March 4, 2014

Author: hgebauer

Source: slideshare.net

Description

This presentation hightlights how manufacturing companies can align their service strategies with the organizational structures.
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Strategy-Structure Configurations in the Service Business of Manufacturing Companies University of Paderborn PD Dr. HeikoGebauer

Service business in manufacturing companies Transition line from products to services Importance of services for value contribution Performance-based Tailored solutions High Maintenance services Pay-per-use “Service paradox” Low Ad-hoc Service support Investments in the service business

Perspectives on avoiding the service paradox  Service-orientation of singledeterminants: (e.g. Eggert et al. 2011; Fang et al. 2008; Tuli et al. 2007, Oliva&Kallenberg 2003, Neu and Brown 2005, Auguste et al. 2004, Windahl and Lakemon, 2010) – Strategy – Corporate culture – Human resource management – Organizational structures  Coalescence among multiple strategic and organizational attributes (strategic fit) – Internal consistence among strategy and structure attributes (Bowen, Siehl& Schneider 1989) – Distinctive service capabilities vary across different types of hybrid offerings (Ulaga&Reinartz 2011) – Identify the reinforcing business model elements that drive configurational fit (Storbaka 2011)

Research proposition The success of service strategies depends upon the internal congruence between the service strategies and the organizational design factors

Selecting the most-suitable approach for assessing strategic fit Low Many (3) Fit as Profile Deviation Specifity in the functional form of the fit-based relationship (4) Fit as Gestalts (2) Fit as Mediation (5) Fit as Covariation (1) Fit as Moderation (6) Fit as Matching Few High Criterion-specific Source: Venkatrama, 1989, p. 425 Number of variables in the fit equation Criterion-free Choice of anchoring the specification of fitbased relationships

Selecting the most-suitable approach for assessing strategic fit Low Many (3) Fit as Profile Deviation (4) Fit as Gestalts Conceptualization • Recurring clusters of attributes (gestalts) Specifity in the functional form of the fit-based relationship (2) Fit as Mediation • Sets of internally consistent variables Number of configurations in the fit equation (5) Fit as Covariation Analytical issues • • Factor & cluster analysis • (1) Fit as Moderation Descriptive & predictive validity Sub-groups of low- and highperformer (6) Fit as Matching Few High Criterion-specific Source: Venkatrama, 1989, p. 425 Criterion-free Choice of anchoring the specification of fitbased relationships

Measure development  Service strategies – formative scale using types of service offerings:1 – Number of services (customer service, basic service for the installed base, maintenance services, R&D-oriented services, and operational services) – Broadness of services – Emphasis on services  Organizational design factors - reflective scales using three to five items2 – Service orientation of corporate values and employees’ behavior – Service orientation of personnel recruitment, personnel training, and personnel assessment/compensation – Organizational distinctiveness between product and service businesses &proximity to customers of the service organization 1 2 – Homburg et al. (2002) – Homburg et al. (2004), Oliva &Kallenberg (2003)

Data sample  Data collection was preceded by engaged scholarship  Written questionnaire, 202 firms were purposively contacted, with 195 positive responses (response rate of 96.5%)  Test for non-response bias  Information quality: average years of employment (mean=10.14; SD=4.87), knowledge about the service business (mean=2.72; SD=0.80) , and their work experience in the service organization (mean=2.23; SD=0.53)  Sample characteristics: e.g., industries, number of employees, company versus strategic business unit  Performance measures: The overall profitability (operating margins) is split into 55.4% of the participants achieving more than 5% in the past 3 years and 44.6% achieving less than 5% in the past 3 years

Results of both cluster analyses (1)  ANOVA Tests forbothclusteranalysis Factors F-test p-value Service strategies R&D services Basic services for the installed base Maintenance services Operational services 19.530 6.752 2.508 16.373 0.000 0.000 0.063 0.000 Arrangement of organizational design factors Service orientation of corporate values Service orientation of employees’ behavior Service orientation of personnel recruitment Service orientation of personnel training Service orientation of personnel assessment/ compensation Organizational distinctivness between product and service business Proximity to customers of the service organization 25.838 19.843 4.736 7.266 19.005 0.000 0.000 0.004 0.000 0.000 6.350 0.001 10.032 0.000

Results of both cluster analyses (2) - Cluster Means of Discriminating Variables Cluster 2 (n=77) Cluster 3 (n=34) Cluster 4 (n= 23) 0.92 0.14 0.11 0.07 0.43 0.89 0.12 0.13 0.21 0.31 0.90 0.12 0.41 0.51 0.14 0.88 Cluster 5 (n=98) Cluster 6 (n=56) Cluster 7 (n=20) Cluster 8 (n=21) 0.69 0.21 0.17 0.21 0.84 0.79 0.73 0.72 0.85 0.81 0.21 0.23 0.87 0.85 0.87 0.88 0.23 0.77 0.54 0.48 Organizational distinctiveness between product and service business 0.24 0.76 0.89 0.45 Proximity to customers of the service organization 0.56 0.69 0.93 0.77 Factors Basic services for the installed base Maintenance services Operational services R&D services Service orientation of corporate values Service orientation of employees’ behavior Service orientation of personnel recruitment Service orientation of personnel training Service orientation of personnel assessment/compensation Cluster 1 (n=61)

Measure validation  Service strategies – formative scales1 (a) Content specification, (b) Indicator specification, (c) Indicator collinearity, and (d) External validity  Organizational design factors – reflective scales (a) Exploratory factor analysis (Sphericity = 4456.334, significance level < 0.001, KaiserMeyer-Olkin = 0.87) (b) Seven interpretable organizational design factors (variance = 71.3%) (c) Communalities (0.63 to 0.86), Cronbach’s alpha (0.77 to 0.91) 1 – Diamantopoulos 2 – Hair et al. (2005) et al. (2001 and 2008)

Picturing matches and mismatches Clusters on arrangements of organizational design factors Cluster 5 (n=98) Cluster 6 (n=56) Cluster 7 (n=20) Cluster 4 (n=33) 15 Cluster 3 Strategycl (n=24) usters 9 Cluster 2 (n=77) Cluster 1 (n=61) 31 After sales service provider 40 Boldface - high-performance Italics - low performance 3 4 Outsourcing partner 3 Customer support service provider 31 4 8 10 Cluster 8 (n=21) Development partner 4 1 4 12 13 3

Strategy-structureconfigurations After-sales service provider Customer support service provider Outsourcing partner Development partner • Ensuring product functionality (fast reactions to product failures) • Dominance of services ensuring customers process efficiency • Operational services for takingover customer processes • Designing customer processes through co-creation of competencies 1 A 1 G F B 0 E 1 G C D A F B 0 E 1 G C D A F B 0 E G C D A F B 0 E C D

Anecdotal evidences on matches and mismatches Clusters on organizational design factors Cluster 5 Cluster 6 Cluster 7 Development partner Cluster 4 Strategy clusters Outsourcing partner Cluster 3 Customer support service provider Cluster 2 Cluster 1 Cluster 8 After sales service provider

Contributions Theoretical Implications Instead investigating the single determinants, insights into the role of strategic fit Bridging service strategies with specific configuration of organizational elements Managerial implications Guidance on implementing service strategy through organizational design Insights into separating and integrating service & product business Limitations & future research recommendations Bias due to purposive sampling – Replication is recommended Disadvantages of fit as gestalt (fit as moderation or fit as mediation)

Thank you very much! & Any questions?

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