CAPTURING VALUE IN CONCEPTUAL PSS DESIGN

ISSN 1650-2140 ISBN: 978-91-7295-262-1

2013:09

2013:09

as case study, and to explore how to support a multi-disciplinary design team in making value-conscious decisions when dealing with new product-service offerings. The research approach has involved data collection through participation in, and facilitation of, productservice design workshops in the automotive industry. Also, it has involved follow-up meetings and interviews, as well as a review of literature on state-of-the-art methods in early conceptual design phases, which describes the advantages and disadvantages of the different frameworks. The primary finding of the study is that determination of the impact of different PSS design options on customer value becomes more challenging since new elements are introduced (e.g., new business models and services). The design team requires more holistic competences in order to more fully understand changing contexts; and new methods and tools are needed in order to establish a base to define, discuss and assess what “uncontested customer value” is, and link it to the different productservice elements of the system. Secondly, this thesis proposes a conceptual approach for value simulation and assessment of different design options, where the iterative use of personas and scenario generation is combined with value modeling and computer-based simulation techniques, enabling a quick “what-if ” analysis of the various options, facilitating the identification of promising combinations of product and service elements that provide higher customer value.

Massimo Panarotto

Manufacturing companies have traditionally focused their design and development activities on realizing technical and engineered aspects of physical artifacts based on performance requirements. The ever-changing business climate, with its increased pace during the past decades, has forced industries to continuously innovate their approach toward the development of new products. Pressured also by global competition, manufacturing companies need to reconsider the traditional concept of realizing value via goods production, and shift towards realizing value through product-service combinations. Companies have begun to recognize that gaining competitive advantage and expanding market shares is not achievable purely through continuous technical improvements. Rather, it is necessary to develop a closer relationship to the customer to gain a deeper understanding of expectations, needs, and perceived value. From a development perspective, the overarching problem within complex systems such as those in which cars, aircraft, and excavators are manufactured, or healthcare is provided, is that the focus on customer value is likely to become blurred since it is difficult to understand the impact a change in any single component in the overall system has on value, and to determine a new function’s impact on future scenarios. The main goals of this thesis are to provide an understanding of key challenges when considering the value different design alternatives provide in the conceptual phases of product development taking the automotive industry

Capturing Value in ConCeptual pSS DeSign

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Capturing Value in ConCeptual pSS DeSign perSpeCtiVeS f rom the automotiVe Supply Chain

Massimo Panarotto

Blekinge Institute of Technology Licentiate Dissertation Series No. 2013:09 School of Engineering

Capturing Value in Conceptual PSS Design Perspectives from the Automotive Supply Chain

Massimo Panarotto

Blekinge Institute of Technology licentiate dissertation series No 2013:09

Capturing Value in Conceptual PSS Design Perspectives from the Automotive Supply Chain

Massimo Panarotto

Licentiate Dissertation in Mechanical Engineering

School of Engineering Blekinge Institute of Technology SWEDEN

2013 Massimo Panarotto School of Engineering Publisher: Blekinge Institute of Technology, SE-371 79 Karlskrona, Sweden Printed by Printfabriken, Karlskrona, Sweden 2013 ISBN: 978-91-7295-262-1 ISSN 1650-2140 urn:nbn:se:bth-00563

Value is value only if value is valued. Overheard, somewhere.

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Acknowledgements The work presented in this thesis was carried out at the Department of Mechanical Engineering at Blekinge Institute of Technology (BTH). The work is a result of a research activity funded by VINNOVA (the Swedish governmental agency for research and development) and the project SÅ NÄTT. I would like to thank my funders and all the participants of the project that supported me during all my research activity. I would like to also thank my advisor, Professor Tobias Larsson, for supporting me with his experience and knowledge. I learned a lot during our discussions and just observing the way you talk, act, and work. I also want to thank my secondary advisor, Associate Professor Andreas Larsson, who gave me precious comments and help with his experience on Design Thinking. This thesis talks about models. My advisors represent to me the models of the professional I would like to become in the future. Many big thanks also go to Associate Professor Marco Bertoni, who helped me by reviewing the thesis and advising me on how research and a research process should be carry out. Many thanks also go to PhD Tony Thompson. His incredible capacity of system thinking gave me many insights. Many of the ideas contained in this thesis were actually born during our informal discussions. I also want to thank my colleagues at the Department of Mechanical Engineering, who supported and encouraged me. Special thanks go to Madelene Larsson for supporting each other and sharing thoughts and feelings as we wrote our Licentiate Thesis, almost simultaneously. I deeply thank also all my friends in Sweden and Italy for their love and esteem. And, last but not least, thanks and love to my family and parents, Antonio and Ornella, and my brother Federico. Thanks for the beautiful people you are.

Massimo

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Abstract Manufacturing companies have traditionally focused their design and development activities on realizing technical and engineered aspects of physical artifacts based on performance requirements. The ever-changing business climate, with its increased pace during the past decades, has forced industries to continuously innovate their approach toward the development of new products. Pressured also by global competition, manufacturing companies need to reconsider the traditional concept of realizing value via goods production, and shift towards realizing value through product-service combinations. Companies have begun to recognize that gaining competitive advantage and expanding market shares is not achievable purely through continuous technical improvements. Rather, it is necessary to develop a closer relationship to the customer to gain a deeper understanding of expectations, needs, and perceived value. From a development perspective, the overarching problem within complex systems such as those in which cars, aircraft, and excavators are manufactured, or healthcare is provided, is that the focus on customer value is likely to become blurred since it is difficult to understand the impact a change in any single component in the overall system has on value, and to determine a new function’s impact on future scenarios. The main goals of this thesis are to provide an understanding of key challenges when considering the value different design alternatives provide in the conceptual phases of product development taking the automotive industry as case study, and to explore how to support a multi-disciplinary design team in making value-conscious decisions when dealing with new product-service offerings. The research approach has involved data collection through participation in, and facilitation of, product-service design workshops in the automotive industry. Also, it has involved follow-up meetings and interviews, as well as a review of literature on state-of-the-art methods in early conceptual design phases, which describes the advantages and disadvantages of the different frameworks. The primary finding of the study is that determination of the impact of different PSS design options on customer value becomes more challenging since new elements are introduced (e.g., new business models and services). The design team requires more holistic competences in order to more fully understand changing contexts; and new methods and tools are needed in order to establish a base to define, discuss and assess what “uncontested customer value” is, and link it to the different product-service elements of the system. Secondly, this thesis proposes a conceptual approach for value simulation and assessment of different design options, where the iterative use of personas and scenario generation is combined with value modeling and computer-based simulation techniques, enabling a quick “what-if” analysis of the various options, facilitating the identification of promising combinations of product and service elements that provide higher customer value.

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Keywords Engineering Design, Product Development, Conceptual Design Phases, ProductService Systems, Business Model Innovation, Simulation Driven Design, Value Assessment.

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Thesis Disposition This thesis includes an introduction and the following three papers.

Paper A Panarotto, M., and T.C. Larsson, 2012. “Towards Value-Driven Simulation of Product-Service Systems: a Conceptual Scenario.” Proceedings of International Design Conference-Design. Dubrovnik, Croatia.

Paper B Panarotto, M., Å., Ericson, and T.C. Larsson. 2013 “Intangibles in design of PSS value propositions.” The Philosopher’s Stone for Sustainability. Springer Berlin Heidelberg 85-90. Tokyo, Japan.

Paper C Panarotto, M., T.C Larsson, and A. Larsson. 2013. “Enhancing supply chain collaboration in automotive industry by value driven simulation”. Submitted to the 19th Conference on Engineering Design (ICED13). Accepted for publication. Seoul, South Korea (Reviewer’s favorite – top 10%).

Note: Paper C is accepted for publication but it has not been published yet in the Conference proceedings by the time of writing. The paper will be therefore published in this thesis according to the temporary format for paper submission given by the Conference Committee.

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Related Work The following publications have not been included in this thesis. Panarotto, M., and P.Törlind. 2011. “Sustainability Innovation in Early Phases.” Proceedings of the 18th International Conference on Engineering Design (ICED11). Vol.5. Copenhagen, Denmark.

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Acronyms AHP B2B B2C BTH CE DRM ESI FAST PSS P2P OEM QFD SDD VOC VDD VE SDD

Analytic Hierarchy Process Business to Business Business to Consumer Blekinge Institute of Technology (Blekinge Tekniska Högskola) Concurrent Engineering Design Research Methodology Early Supplier Involvement Functional Analysis System Technique Product-Service systems Peer-to-peer car sharing Original Equipment Manufacturer Quality Function Deployment Simulation-Driven Design Voice of the customer Value Driven Design Value Engineering Simulation-Driven Design

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Table of Contents 1 Introduction ................................................................................................ 1 1.1 A changing business climate .................................................................................1 1.2 Problem statement and purpose of this work....................................................2 2 Research Approach ................................................................................... 5 2.1 Research framework...............................................................................................5 2.2 Research environment ...........................................................................................7 2.3 Methods ...................................................................................................................7 2.4 Research quality and validity .................................................................................9 3 State of the Art .......................................................................................... 11 3.1 Towards Product Service Systems .................................................................... 11 3.2 Conceptual design in new product development ........................................... 15 3.3 Value ...................................................................................................................... 17 3.4 Tools and methods to frame value ................................................................... 20 3.5 Models, simulations and prototypes ................................................................. 21 3.6 Value Driven Design........................................................................................... 22 3.7 Tradespace Exploration...................................................................................... 23 4 Summary of Appended Papers .................................................................27 4.1 Paper A.................................................................................................................. 27 4.2 Paper B .................................................................................................................. 27 4.3 Paper C .................................................................................................................. 28 5 Capturing value in conceptual PSS design .............................................. 31 5.1 Designing cars in an era of rapid change ......................................................... 32 5.2 Understanding contexts ...................................................................................... 35 5.3 Exploring new designs and business models through value simulation ..... 38 6 Conclusion and Future Work ...................................................................43 6.1 Future Work ......................................................................................................... 45 7 References ................................................................................................46 A: Towards Value-Driven Simulation of Product-Service Systems: a Conceptual Scenario.......................................................................................55 B: Intangibles in design of PSS value proposition ........................................67 C: Enhancing supply chain collaboration in automotive industry by value driven simulation ......................................................................................75

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1. Introduction

1 Introduction The introduction outlines the context within which this thesis has operated and describes the challenges which led to the problem statement. This section aims to answer the question: “Why was this work needed?” The use of examples within the manufacturing industry is intended to help the reader to develop a better understanding of the context of the research work.

1.1 A changing business climate The capacity of Swedish industry to remain competitive is facing important challenges. The recent bankruptcy of World-renowned Swedish companies (e.g., Saab Automobile AB) has led to many social problems such as employee lay-offs and the effects have inevitably cascaded down to its supply chain as well. In order to ensure long-term wealth and welfare (in its different facets) for its people, it is necessary for Sweden to maintain its capacity to innovate and rethink its industrial offerings and propositions on the market. The business climate has undoubtedly changed over the past two decades. Globalization, digitalization and increased competition are changing the face of the global market. Additionally, the increasing demand by customers for more functional, emotionally appealing, resource efficient, and environmentally sound products and services will contribute to even more changes ahead. This implies many changes for every Swedish company that wants to remain competitive and sustainable in future years. These companies will be “forced into” new forms of collaboration with other partners both in developed and developing countries. At the same time, development activities will shift from a focus on cost reduction to a focus on making the competition irrelevant delivering more value to customers, thereby creating new uncontested market space (Kim and Mauborgne 2005) . A strategy to only reduce costs no longer ensures competiveness, and product quality is now taken for granted by customers and no longer serves as a the only means for customer value. With the overarching goal to remain competitive in the global market while reducing their environmental and social impact, manufacturing companies have tried to continuously innovate their product portfolios as well as explore new types of business models (Tukker and Tischner 2006). This has led to an increased attention to develop radically innovative products as well as more holistic concepts, such as Total Offers, Functional Products, Integrated Product Service Engineering and Product-Service Systems (hereafter termed PSS in this thesis) (Meier, Roy, and Seliger 2010) (Baines et al. 2007) (Alonso-Rasgado, Thompson, and Elfstrom 2004). PSS has been defined as a “marketable set of products and services capable of jointly fulfilling a user’s need” (Goedkoop 1999). In the Business-to-Business (B2B) market, the TotalCare offering provided by Rolls Royce Aerospace presents an example of this shift towards PSS. The company provides a Total Care package on its aircraft engines where the customer

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Capturing Value in Conceptual PSS Design

buys the capability for the engines to deliver “power by the hour”, through a functional contract (Wong 2004). Rolls Royce takes responsibility for maintenance and offers new services including operational support and information management, among others. Revenues are generated by contracts for availability (Erkoyuncu et al. 2011). PSS is argued to increase customer value by providing more holistic solutions that better suit specific customer needs, as well as increasing emotional appeal (Cook, Bhamra, and Lemon 2006) (Tan et al. 2011). For manufacturers, PSS is claimed to provide strategic market opportunities (Rocchi 2005). At the same time, the service element is not so easy to copy, thus potentially protecting the firm from imitation (Meijkamp 1998). Thus the PSS concept shifts the definition of value provided to customers from the traditional domain of performance improvement (Mont and Plepys 2003) towards thinking in terms of the total solution the customer seeks (Alonso-Rasgado, Thompson, and Elfstrom 2004), including the customer’s own perception of emotions, knowledge, and experience. The development of a PSS implies new organizational and communicational challenges (Öhrwall Rönnbäck 2002). Product Planning and Marketing departments stretch their minds on finding new ways for providing customer value with the integration of new services or new business models, while Engineering Departments seek to understand which physical artifacts will be “the best” in such business eco-systems. Furthermore, these departments are collaborating with many other partners around the world. This increased complexity pressures companies to determine what has to be developed now. Decision-making and information gathering activities are very timeconsuming. Thus the capacity of companies to develop such complex systems can be in disarray with the pace of the industrial competition. Symptoms are project cost overruns and schedule delays, thus leading to an increased time-to-market. This calls for a need to explore and understand how the development process could be supported by new methods and tools that will increase capacity for making customer-value oriented decisions in the conceptual design stages.

1.2 Problem statement and purpose of this work This thesis has two main goals. The first is to provide an understanding of the challenges when considering the value different design alternatives provide in the conceptual phases of complex product development, taking the automotive industry as a case study. The second is to explore how to support a multidisciplinary design team to take value-oriented decisions when dealing with a development of a product-service offering. The problem domain of this thesis is the early design stages of complex systems such as cars, aircrafts, excavators, health-care systems.

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1. Introduction

The overarching problem being tackled in this thesis can be defined as follows: when developing complex systems the focus on customer value is likely to become blurred since it is difficult to evaluate the impact on value caused by changes in the single components on the overall system. It is also difficult to evaluate a new function’s impact on future scenarios. New ideas (such as PSS offerings) are then likely to be evaluated using the cost and risk assessment practices primarily adapted to incremental development, making it difficult for innovation efforts to measure up against traditional efficiency scores, since value gains are more difficult to grasp and capture.

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1. Introduction

2 Research Approach This section describes the research methodology adopted by the PhD candidate. It addresses how the research has been carried out, highlighting the main reasoning around the methodologies chosen by the author in his research activity.

2.1 Research framework Design Research Methodology (DRM) is a research framework introduced by Blessing and Chakrabarti (Blessing and Chakrabarti 2009) after observing the growing movement of research in design practices and education during the past two decades. The need for a theoretical framework specific for design research emerged to address three main issues derived from the observation: lack of overview of existing research, lack of use of results in practice, lack of scientific rigor. DRM addresses mainly the latter issue, with the belief that the improvement of the first two (and especially the use of the research results in practice) will be a normal consequence of more scientific rigor in design research. Figure 1 depicts the four stages of DRM, namely Research Clarification, Descriptive Study I, Prescriptive Study, and Descriptive Study II.

Figure 1: Design Research Methodology (DRM) (Recreated from Blessing and Chakrabarti 2009)

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During this thesis research, the phases of Research Clarification and Descriptive Study I were run iteratively in the first phase of the research activity. Data during the first two phases of DRM was gathered mainly through literature review and formal and informal meetings with the company partners. The author participated a total of ten design workshops within the research project over a two-year timespan. He was also directly responsible for facilitating three of the ten workshops around the topic of value. In the three workshops, specific exercises were designed with the aim of letting the teams of engineers work with Value Networks, Business Model Canvas and Quality Function Deployment. These exercises provided the author with a better understanding of the concepts of value consideration of different design concepts in relation to costs and risks, as well as the benefits and challenges of having an interdisciplinary design team that works collaboratively in the conceptual phase. These iterative phases helped the author to formulate the two research questions presented in 2.1.1. Subsequently the research moved into a more Prescriptive phase, from which the first concept of a value modeling and simulation approach able to link technical and business development gathered in a software application emerged. The author’s research process so far has progressed through the first three stages of the DRM framework, and has not yet moved into the Descriptive Study II phase. Work remains to be done to evaluate the value and the performances of the proposed approach. Figure 2 depicts the phases of the DRM framework to which each of the three appended papers relates.

Figure 2: Collocation of papers in the DRM

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2. Research Approach

2.1.1 Research Questions The author used the work with Design Research Methodology phases of Research Clarification and Descriptive Study 1 to help clarify a primary and secondary research question. The research questions are expressed below. 

What are the challenges of “designing for value” in the view of new business models, such as PSS offerings?



How can the exploration of value provided by different combinations of design and business model alternatives be supported?

2.2 Research environment The research has been performed within the framework of the VINNOVA project “SÅ NÄTT – collaboration as enabler for lightweight structures”. The overall aims of the project can be summarized as: 

Increase supply chain collaboration in the automotive industry to create new products and services that increase competitiveness.



Enable organizations to efficiently integrate research in innovation, technology (with a focus on light structures) into development of new solutions within an automotive supply chain.

The project has involved 39 academic and industrial partners, consisting of a Swedish car OEM (Original Equipment Manufacturer) and its partners, collaboratively working in a supply chain structure. This thesis has been performed during the conceptual phase of a specific work package of the project (named I2IFrom Idea to Innovation) and has focused on: 

Giving support with easy-to-use methods and tools that help to understand the needs and expectations of customers and stakeholders.



Capturing and modeling the needs in relation to product and service functions.



Running simulations of different scenarios in order to understand the implications of different design options from a Value/Cost perspective.

Additionally, involvement in two other projects in the health care sector (the VINNOVA Project “ExDin – more effective analysis within medical imaging using collaboration in a networking structure”) and the construction equipment industry has helped the author to understand differences, similarities and challenges across different sectors. It also helped him create and refine the approaches presented in this thesis, as well as envision future areas of application and further research.

2.3 Methods The approach adopted by the author can be classified within the areas of action research and case study research. Action research (Avison et al. 1999) is a qualitative research methodology which involves the direct participation of the 7


researcher and practitioners in the research process in order to mutually collaborate and exchange knowledge towards a positive impact in the “community of practice” (Wenger 1999) (McNiff 2002). In this research methodology, the researcher not only tries to observe the phenomena and derive a theory from the observations, but also tries to positively impact the phenomena itself, thus intentionally “affecting” and “contaminating” the case under observation. At the same time, the practitioner influences the theory by giving feedback on the approaches proposed by the researcher and setting up new areas for theoretical exploration based on the practitioners’ needs. Action research is also characterized by learning circles where the researcher tries to test his theory with practitioners, getting feedback on advantages and disadvantages of the proposed methods, modify them and try them again in an iterative loop (Avison et al. 1999). Another method that has been the backbone of the research work is Case Study Research (Yin 2008). Case Study Research is a qualitative research method that aims at examining contemporary real-life situations, and is argued to be particularly effective when the boundaries between the phenomenon and the context are not clearly evident. An important characteristic of this empirical inquiry method is the use of multiple sources of evidence to strengthen the research findings (Yin 2008). Case Study Research is founded on six steps: 

Determine and define the research questions



Select the cases and determine data gathering and analysis techniques



Prepare to collect the data



Collect data in the field



Evaluate and analyze the data



Prepare the report

2.3.1 Data Collection and analysis An extensive literature review has permitted the author to explore the research topic and especially to connect and be aware of the linkages between different research issues. The results of this literature review are mainly presented in Chapter 3, and are the foundation of the three papers presented. Interviews, observations and interactions with people have helped the author to gain a better understanding of the state of the practice in industry. The author has particularly followed three development teams during the research project. The teams were responsible for: the redesign of a car seat, the car cockpit and the door of the vehicle. These observations and interactions provided the general background for the ideas and arguments presented in the three papers presented, especially in paper C.

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2. Research Approach

The design workshops with product development professionals which were organized and lead by the author were intended to aid the design projects to be holistic and creative as requested by the Så Nätt project Leader. These workshops have, however, also been used by the author for observations and have been used as a foundation for further discussion with the project members.

2.4 Research quality and validity Evaluating and making evident the quality of design research is not an easy task. Transcripts of interviews and research meetings and workshops provide the essence of the research work, but do not reflect the essence of the research conclusions where the researcher interprets these sources through his own worldview and experience. Empirical observations, on the other side, are results of situations very difficult to repeat for the actors and contexts – the researchers, partners, products and projects – have changed over time. Another crucial problem of observations is that they do not present those characteristics of “tangibility” for which scientific research is inevitably asked. It is, in fact, difficult to reproduce design experiments in a controlled environment that lead exactly to the same results over and over again. The validity of design research then has to be ensured by the researcher’s self-awareness of how he has influenced the research process, and how mental models and frameworks have been explicitly shared with the research “testers”. Chapter 5 summarizes the research findings. The presentation of these sources of evidence is intended to give a hint of how scientific validity has been assured throughout the entire research process. To address concerns related to the solutions presented for addressing the identified problems, the author investigated the “workability” of the proposed solutions (thus how well the methods could work once established in a company environment) by having interactions with managers and development experts.

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3. State of the Art

3 State of the Art This section is intended to give a general overview of the theoretical framework that is at the backbone of the research present in this thesis.

3.1 Towards Product Service Systems From the perspective of manufacturing companies, PSS can be considered a “business model” where corporations offer a combined offering of products and services, hence moving away from their traditional focus mostly on product content (Mont 2000).

3.1.1 Business Model Innovation In the recent years there has been an explosion of articles and citations in public journals around the term “business model” (Stälher 2002). The booming of the ecommerce business in the 1990’s and, more recently, the explosion of Internet start-up companies (and the success of companies such as RyanAir and Spotify) has led researchers to study how new business models could be captured, designed and shared within an organization. Osterwalder (2004) considers the term “business model” as an abstract representation of the logic of the company. Osterwalder defines a business model as: A business model is a conceptual tool that contains a set of elements and their relationships and allows expressing a company’s logic of earning money. It is a description of the value a company offers to one or several segments of customers and the architecture of the firm and its network of partners for creating, marketing and delivering this value and relationship capital, in order to generate profitable and sustainable revenue streams. Today’s business climate is characterized by a high level of complexity and uncertainty. At the same time, innovation at the strategy level has to be cultivated in order to remain competitive. In his PhD dissertation, Osterwalder highlights also that there is a need for tools and ontologies in order to enable managers to understand, visualize, communicate and share and analyze exciting and new business models, stimulating new opportunities to create customer value. Additionally, successful and original business models can also be patented. Following the findings of the dissertation, Osterwalder and Pigneur created a tool to define a business model in a detailed way while still maintaining a compact and easy-to-use structure, named Business Model Canvas (Osterwalder and Pigneur 2010). They claim that a business model can be designed based on nine pre-defined building blocks that specify the way the business operates, and has to operate, in order to deliver value to customers and stakeholders. The tool has become very popular in recent years, especially in e-commerce and the new era of the start-up movement.

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3.1.2 Servitization “Servitization” is a term that appeared in literature in the recent years to symbolize the shift by manufacturing firms moving from seeking to offer highquality products to value-adding offerings. Servitization has been defined as the offering of integrated packages of products, services, support, self-service and knowledge to add value to the company’s core business (Vandermerwe and Rada 1989). This implies a mentality change in the way the corporation designs, offers and operates, moving from being a “good producer” to a “solution provider”, and requires a shift from mass consumption to an increased attention to the individual behavior and needs of the customer (Morelli 2002). PSS has been defined as a special case of servitization (Baines et al. 2007), where the functionality of a product is extended by including additional services, emphasizing the “sell of use” instead of a “sell of product”. Neely (2008) adds two new categories—integration-oriented PSS and serviceoriented PSS. Integration-oriented PSS results when firms seek to add services by going up- or down-stream and vertically integrating (e.g., consulting services, financial services, retail and distribution, transportation and trucking services and property and real estate services), whereas service-oriented PSS result when firms incorporate services into the product itself (e.g., systems and solutions).

3.1.3 Product-Service Systems definitions Tukker (2004) presents eight types of PSS, based upon how value is delivered to the customer. In product-oriented PSS the product (artifact) is sold. In recent years, some scholars have tried to classify the various types of PSS (Tukker and Tischner 2006) (Neely 2008), whereas other researchers have tried instead to identify what general characteristics might be that differentiate a PSS from a traditional product, and what the benefits can be of developing a business offering with a PSS focus (McAloone and Andreasen 2002) (Baines et al. 2007). Figure 3 presents Tukker’s definitions of PSS.

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3. State of the Art

Figure 3: Eight types of PSS, including main categories of PSS. Recreated from (Tukker 2004).

Cook (Cook, Bhamra, and Lemon 2006) provides a detailed definition of the three categories: 

Product-oriented PSS: The material ownership of the product is transferred to the customer and services are offered to ensure the “utility of the product”, such as warranties and maintenance.



Use-oriented PSS: The service provider retains the ownership of the material artifact and the customer pays for the use of the product over a period of time or units of service.



Result-oriented PSS: The service provider, as in use-oriented PSS, retains the ownership rights of the material artifact, but in this case the customer does not pay for the use of the product but rather buys an expected outcome. For example, instead of leasing a washing machine the customer can sign an agreement for receiving clean clothes through a washing service. (Cook, Bhamra, and Lemon 2006)

3.1.4 PSS in the Automotive industry In recent years businesses in the car market have begun exploring new ways of providing customer value, including new types of business models (such as functional provision, car renting, car sharing, carpooling and peer-to-peer car sharing) (Katzev 2003) (Hampshire and Gaites 2011). Table 1 provides a short description of some of the different types of new business models evolving in the car industry in recent years.

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Name

Description

Car sharing

A process through which a person rents a (Katzev 2003) vehicle on a temporary basis – usually per (Shaheen, Cohen, hour, per minute or per kilometre – from an and Chung 2009) operator that provides the service and is the proprietor of the cars rented.

Carpooling

An arrangement whereby several participants (Menting et al. or their children travel together in one 1991) vehicle, the participants sharing the costs and often taking turns to the driver.

Peer-to-peer A process through which a person either car sharing rents a vehicle from someone else, or (P2P) conversely, rents their own vehicle to someone else, usually by the hour or day, via a third-party operator that facilitates the exchange.

Reference

(Hampshire and Gaites 2011) (Lewis and Simmons 2012)

Table 1: Examples of new business models evolving in the car industry.

These new ways of providing functional transportation have been driven by various entities, including: car manufacturing companies (for example MercedesBenz with Car2Go, a car sharing subsidiary of the well-known German car manufacturer that provides car sharing services in Europe and North America); new companies that buy several car models from manufacturers, and own and maintain their own fleet of vehicles (the most famous at the time of writing is probably the U.S-based ZipCar); or entities spontaneously started by private car users as in the case of peer-to-peer car sharing (the most famous at the time of writing is the U.S-based Getaround). Importance of design choices to determine the success of a new business model. Example: General Motor’s OnStar System

In 2011 General Motors and the U.S.-based peer-to-peer car sharing platform RelayRides (www.relayrides.com) signed a partnership contract (New York Times wheels blog 2011). Car owners who subscribe to GM’s OnStar system will be able to rent their vehicles out to other drivers (Figure 4). GM’s OnStar system is an in-vehicle security system launched in 1996 that makes use of satellite-connected on-board services, but its capabilities have, until now, been used mostly to call for assistance in case of emergency. Under this new partnership, the peer-to-peer car sharers that subscribed to the platform can use the OnStar system to reserve a car and lock and unlock the door via a mobile app (Figure 4).

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3. State of the Art

General Motor’s OnStar system can offer an interesting example of how the value of a technology can change in view of a new business model. An add-on feature such as GM’s OnStar system developed in 1996 used for emergency calls (but which no longer provides so much value to today’s customers who usually are not in the situation of needing another satellite device for calling than their own mobile phones), becomes crucial in 2012 to determine the success of a new business model (such as peer-to-peer car sharing). And, as such, it opens up entirely new opportunities for a car manufacturing company such as General Motors to be a first-mover in the new market.

Figure 4: GM’ s OnStar System used in peer-to-peer car sharing context (from New York Times wheels blog 2001).

3.2 Conceptual design in new product development Every product or service we utilize in our daily lives has been designed at a certain moment by someone, often a group of people. Design can be defined as “conceiving and giving form to artifacts that solve problems” (Ulrich 2011). It is fair to say that the success of every solution (a product, a service, a health-care system, a law) lies highly in how well the solution has been “designed” and “conceptualized”. The design process can be classified into three main categories: conceptual design, detailed design and design production (Wang et al. 2002). Literature highlights the importance of the conceptual design phase, the earliest phase in the design process, to generate successful products while achieving cost-effectiveness during the design activity (Ishii 1995) (Al-Salka, Cartmell, and Hardy 1998)

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(Hollnagel 2003). During the conceptual design phase the potential for cost savings is 70% of the total product quality and cost, at which time the cost for every change made is very low (Barton, Love, and Taylor 2001) (Figure 5). The consequences of a poor design concept will be difficult or almost impossible to correct later in the process, since the cost for making changes will be extremely high (Qin 2000). A little bit more time spent on the early design will reduce the risk of future reworks, loss of quality and rejection of the product by customers.

Figure 5: Potential for Cost Savings in the conceptual design phase (Barton, Love, and Taylor 2001).

However, a successful conceptual design phase of a product or a service is difficult to accomplish. Information is often lacking, leaving the design team in the uncomfortable situation of having limited knowledge about the product at a time when they have more possibility to influence the design; often they establish a more developed knowledge in the later stages, by which time major decisions have been made and the capital has been committed (Johansson et al. 2011). This as been explained by Ullman who names it “the design process paradox”: “the more you learn about the product the less freedom you have to use what you know” (Ullman 2002). Thus a design concept is often difficult to capture, visualize and communicate among a design team, especially if the teams are co-located (Wang et al. 2002).

3.2.1 Conceptual design of PSS The conceptual design phase becomes even more critical when developing product-service systems. The more holistic nature of PSS implies profound changes in the business model as well as in how the physical artifacts have to be designed (McAloone and Andreasen 2004). The design team has to spend even more time in the early stages to understand these changes and to design accordingly in order to determine a successful business offering (Maussang, Zwolinski, and Brissaud 2009). Also, designers are required to

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3. State of the Art

be competent in new domains, such as the social construction of technological systems, and market-oriented and organizational domains (Morelli 2006). Additionally, designers are required to cooperate even more in the early design stages with other professionals and other important actors, such as marketing experts and customers (Matzen, Tan, and Andreasen 2005) (Thomas, Walter, and Loos 2008) (Tukker and Tischner 2006) (Roy and Cheruvu 2009). This increases the opportunity to gain a more holistic view of the solution, including for example social aspects, but can also contribute to barriers in communication due to different backgrounds and languages spoken by the different actors, thus increasing the risk of ineffective cooperation that could lead to inefficiency and re-works (Morelli 2003).

3.3 Value Lindstedt and Burenius define customer value with the following equation (adapted from Lindstedt and Burenius 2003): Customer Value 

Perceived customer benefits Use of customer resources

(1)

Where customer resources can be defined as money, time and effort. However, though very clear and useful from a theoretical perspective, it is argued that the definition needs to be made more concrete. Business is also argued to be all about customer value, or, more accurately, the organization’s ability to create unrivalled customer value. Some people have the natural ability of understanding and making value-oriented decisions. However, based on their experiences with product development processes in Swedish and International companies, Lindstedt and Burenius state (2003, 14): The capacity of a whole organization to make correct decisions demands more than good instincts of a few individuals. To succeed, the concept of customer value must be turned into a concrete, measurable element that can be put to practical use, thereby providing a guiding light in all aspects of work. Allee (2000) argues that the partners involved in a business (provider, supply chain, customers, etc.) exchange value according to three “currencies”:  



Goods, services and revenue. Knowledge: Exchanges of strategic information, planning knowledge, process knowledge, technical know-how, collaborative design, policy development, etc., that flow around and support the core product and service value chain. Intangibles: Exchanges of value and benefits that go beyond the actual service and that are not accounted for in traditional financial measures; such as sense of community, customer loyalty, image enhancement and cobranding opportunities.

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Allee also highlights that in the business there is always value provided and value returned between the actors. For example, when providing a service to a customer a company may get feedback about the service itself, thereby further enhancing the know-how about it. After years of studying customer satisfaction of products and services, Professor Noriaki Kano and his research group found that the product requirements that influence customer satisfaction can be classified according three categories (Kano et al. 1984): 

Must-be requirements: if these requirements are not fulfilled, the customer will be extremely dissatisfied. On the other hand, the fulfillment of these requirements will not improve the customer satisfaction of the product. It can be said that these requirements are taken “for granted” by the customers.



One-dimensional requirements (or performance): in this category of requirements, the level of satisfaction is directly proportional of the level of fulfillment. Usually, to this category belong technical requirements formally expressed by the customers.



Attractive requirements (or exciters): these requirements are the product criteria that will have the greatest influence on customer satisfaction. They are usually something unexpected by the customer. And, for these reasons, very difficult to grasp since the customers do not formally express them. One example might be to add a “mirroring” function in the smart-phone camera, hence giving the opportunity to users to check their hair or makeup in the morning. However, the unfullfilment of these requirements does not lead to customer dissatisfaction.

Figure 6: The Kano model (Zairi 1995).

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3. State of the Art

Figure 5 depicts the Kano model with the three categories described above. One characteristic that Kano highlights is also that “must-be” and “exciter” requirements are often “unspoken” by the customers. The first because the customer expects them (they take them for granted), the second because customers do not know yet that they want them. Thus these two kinds of requirements are the most difficult to meet in product development, and they require activities and skills that go beyond running customer interviews (such as using observation, rapid prototyping and testing). For the framework of Value Engineering (VE) (Miles 1964), value is principally considered as functional. In VE, value is defined as: Value 

Function Cost

(2)

Customer value can therefore be increased by either improving the function or reducing the cost. The purpose of the framework is to provide a technique in which the system’s output is optimized by crafting a mix of performance (or function), i.e., looking at ways to improve the main function, what “does the job”), and costs, i.e., looking at eliminating or reducing supporting functions or unwanted functions by the customer. Recent literature has moved beyond the consideration of functional value to highlighting the impact that emotions and feelings have on the customer’s perception of the “goodness” of a product or a service (Norman 2007). Customer value is, hence, highly affected by the customers’ perception of the self as well as related to past memories, and it is also affected by group dynamics (Andriessen, Tissen, and Tissen 2000). This sphere of customer value is referred to in some papers as Emotional Value (Tan et al. 2011) or Intangible Value (Daum 2003). Professor Donald Norman, revising what he himself stated in his bestseller The design of everyday things (Norman 2002), brings many examples to explain how customers value things or objects beyond the functional value the object provides. Potentially, Norman states, very “non-functional products” could contain much value for the stories they tell, or the memories they generate. One example he gives (placed on the cover of the book about emotional design) is the juicer designed by Alessi (Norman 2007). The juicer does not perform its function in an efficient way, but customers buy it to place it in the middle of the table, because they consider it intrinsically beautiful. Intangible values are considered to act as an over layer upon the value that the products or services provide (Steiner and Harmon 2009). Conceptual models to assess the intangible value exist (Steiner and Harmon 2009) although, due to the complexity of the subject, more research and operational frameworks are needed (Sullivan and McLean 2007). With its roots dating back at least two hundred years to a time when mathematicians were asked to give advice to members of the French court on how to gamble, Utility Theory (Fishburn 1970)(Fishburn 1982) offers applicable

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methods to model how a rational person behaves in the face of uncertainty. In Utility Theory, value for an individual is considered to be dependent on the person’s preferences for wealth and the amount of risk that the person is willing to take in the hopes of attainting a greater wealth. With ample applications in the field of finance and economics, Utility Theory is used in decision making processes where the value of an investment is modeled according to utility functions (Keeney 1993). Utility is considered as a dimensionless parameter that reflects the “perceived value under uncertainty” of a set of attributes. Attributes are key decision metrics that reflect how well an objective is reached. Utility is then the intangible personal goal that each individual strives to increase through the allocation of resources.

3.4 Tools and methods to frame value Scenario-based design is a set of techniques where the use of a future system is concretely described in the early design processes (Rosson and Carroll 2009) . The main idea of the approach is to describe how people will use or perform specific activities in the future system, shifting the current design work from defining system operations to the essence of an interaction design. One of the main advantages of the approach is that it enables a rapid communication among different stakeholders. Secondly, it permits to reconcile concreteness and flexibility in early design. In fact, first scenarios can be concrete enough to specify what the tasks are that the design has to accomplish, but without committing to lower-level requirements specifying how the task will be accomplished. Another common tool used in product development is the Kano model described in section 3.3. Working with the Kano model can be extremely useful in early phases regarding value, for several reasons (Sauerwein et al. 1996). It permits prioritization of customer requirements focusing on spoken and unspoken requirements. It also allows designers to be creative in looking for new exciting product features while remembering the importance of features that the customer will not value but that will dissatisfy her if not fulfilled, avoiding the risk of focusing only in the exciting activity of designing the exciters. Another popular tool developed in recent years to capture customer value is the Business Model Canvas (Osterwalder and Pigneur 2010). One of the most important building blocks (placed at the center of the canvas) is called “value proposition” and contains the information of how value is offered to the customer, what customer problem the business tries to solve or what needs it tries to satisfy. Due to the importance of this building block, the authors have developed an additional canvas called Value Proposition Canvas in order to further explore the value proposition part of a business model, providing a specific template for that. This plug-in tool for the Business Model Canvas contains more specific sections about what jobs the customers are trying to get done, what the challenges the customer has before, during and after the job gets done and the benefits the

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3. State of the Art

customer expects, desires or would be surprised by. At the same time, the tool helps to discuss, test and pivot what products and services to develop, and how they might relieve customer pains and create gains for the customers. Within the domain of engineering design, Quality Function Deployment (QFD) (Yoji Akao 1994) (Clausing 1994) (Y. Akao 2004) is a common tool that links the voice of the customer (VOC) into product functions and design requirements. Customer needs are ranked in order of importance and then correlated to the functions that the product must satisfy. The technique yields charts and matrices and is developed to support product planners to keep the focus on the technical characteristics of a product or service from the viewpoints of customer, company or technologydevelopment needs. Originally developed using qualitative analyses, quantitative methods have also been explored throughout the years (Lai, Tan, and Xie 2007) (Khorshidi and Hejazi 2011). Also, QFD has been integrated into some applications using a fuzzy logic approach (Kwong and Bai 2002) (Chen, Fung, and Tang 2006). Due to the similarities and complements between the domains, integrations have been developed between QFD and the Kano Model (Shen, Tan, and Xie 2000) (Lai, Xie, and Tan 2004) (Tontini 2007) and QFD with Value Engineering (Cariaga, El-Diraby, and Osman 2007).

3.5 Models, simulations and prototypes The use of modeling and simulation techniques is well established in traditional mechanical engineering processes to efficiently analyze the physical behavior of a complex system, since the use of computers opens up to faster iteration loops and assessments (Sellgren 1999) (Wall 2007). Initiated mainly at the beginning of the 1990’s, the subject created a number of interesting industrial applications as well as entirely new research domains, mainly referred to as Simulation-Driven Design (SDD) (Glidden 1993). In the innovation engineering domain, Serious Play (Schrage 1999) brings realworld examples of how the world’s best organizations model, simulate and prototype in order to innovate. It is argued that the most important value of modeling and simulating activities does not reside in the results that these models or simulations generate, but rather in the discussion, arguments and consultations they generate and trigger. The main idea is that the prototypes that the organization creates reflect their perception of reality, as well the organization’s own internal assumptions about risk and reward. Additionally, what the company chooses not to model is equally important, since it might reveal internal taboos or assumptions which are unconsciously left out because they are the most threatening to their sense of themselves (Schrage 1999). The process of early modeling and simulating turns the innovation cycle inside out: instead of using the innovation process to come up with a finished prototype, modeling and simulating “quick and dirty” prototypes will lead the innovation process, building upon the existing prototypes, enabling the capacity of raising questions and generating new solutions and business models.

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3.6 Value Driven Design Value Driven Design (Collopy and Hollingsworth 2009) is a Systems Engineering strategy that supports multi-objective optimization in the design activity. The main objective of the approach is that engineers should select the best design from a value perspective, rather than the design that “merely” meets the requirements. In the framework there is no requirement set a priori, neither on a system level nor on a component level; instead, an objective function (also called the Value Model) is given to the design team that converts the set of design attributes into a score. The design team is then asked to develop the design that results in the higher score. In this way, every configuration is assessed based on the value that it provides to the system, and the team can either accept the product configuration or try to find a new configuration with additional improvements that result in a higher score (Figure 7). The main benefits stated by the developers of the approach are: it enables optimization, since the focus now is on finding the “best design”, where a higher score indicates that the design is best; it prevents design trade conflicts; and it avoids cost growth and performance erosion, since the approach enables a system optimization rather than a local optimization driven by the endeavor to meet requirements. The developers provide examples and case studies that support their statements.

Figure 7: The Value Driven Design framework (adapted from Collopy 2009).

An important part of the framework is the identification of the objective function, or the Value Model. Without this objective function, it is impossible to have a reference that states what the design configurations have to be evaluated against. Richardson et al. (Richardson, Penn, and Collopy 2010) discuss the nature of value models and their relationships with design attributes and design parameters.

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3. State of the Art

The value analysis of a system is conceptually separated into three different types: 

Design Space: the Design Space locates the system architecture by design variables that consist of engineering characteristics such as size, weight and displacement. The exploration of the design space can be done through the use of a design vector.



Static Value Space (or attribute space): the Static Value Space is composed of system attributes that are relevant to stakeholders. The conceptual separation of the Static Value Space and the Design Space is based on the idea that the inner environment of the design (“how” the design is done and “what” is designed) is primarily of interest to engineers. What stakeholders care about is the outer environment of the design, in short, “what the design has to communicate and deliver to the stakeholders”. For example, in the automotive industry, an ABS system can be engineered by modifying design variables such as maximum pump pressure, accuracy of the speed sensors, etc. But what the ABS system has to communicate to the outer environment is the regularity of the braking. Therefore developers may develop an attribute that quantifies this smoothness. The Static Value Space can therefore be explored using a vector of design attributes.



Dynamic Value Space: in the Dynamic Value Space systems are treated as dynamic entities that produce a probabilistic value over time. Furthermore, it treats the system and the system life as a random entity in which good or bad events occur with a probabilistic nature. As input, the Dynamic Value Modeling takes the architectures generated in the design space, and the value model taken from the Static Design Space, and introduces new elements that may occur in the system life cycle (such as an on-orbit degradation or launch time delays). The output of the Dynamic Value Space is a probabilistic distribution of value and cost for each system architecture.

3.7 Tradespace Exploration Tradespace exploration is a System Engineering strategy where the exploration of the design space in the early stages is emphasized over seeking the optimization of a premature design choice. The main motivation behind Tradespace exploration is that the premature reduction of the design space during product development can have risky cost ramifications because changes will become more difficult later in the design phases. Premature focus could also take away important and relevant information for the designer, preventing the realization of more valuable and robust systems that maximize the value for the stakeholders (Ross and Hastings 2005). Tradespace is defined as the space of possible design options. The main idea behind Tradespace exploration is that by using models and simulations, all the design options of a system can be evaluated by decision makers in terms of benefits

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and costs. The framework begins with a need identification analysis among experts, performed with the purpose of defining the key metrics to evaluate the “goodness” of a design option, in terms of attributes. Attributes are defined in Tradespace exploration as a decision-maker perceived metric that measures how well a decision maker defined objective is met (Ross and Hastings 2005). These attributes are then aggregated into a single metric using Utility Theory in order to capture the tradeoffs among attributes. The subsequent phase is to define the design vector composed of design variables that are independent parameters within the control of the designer. This creates the Tradespace, thus the space of the possible design solutions. Once the Tradespace has been defined, the analysts develop models and simulations to translate the design variables into attributes values. In this way, hundreds or thousands of design options can be evaluated by calculating the attribute values and thus the utility and cost values. All the possible architectures and design options can be represented in a plot in terms of utility and cost (Figure 8). Each point in the plot represents unique design options.

Figure 8: A typical Tradespace representation (Ross and Hastings 2005).

Representing the Tradespace in terms of Utility and costs can permit developers to evaluate the “best” designs through the use of the Pareto Frontier (represented as the red line in Figure 8), which identifies explicit benefit-costs (or value-costs) and trade-offs among design options. But the concept of Tradespace exploration goes beyond just identifying and analyzing the Pareto Frontier. A full Tradespace exploration analyzing even Pareto-dominated data points can give insights that enable a more “holistic” assessment of the architecture options. This can permit the evaluation of unarticulated sources of value not captured in the attribute set. One example is offered by system properties that are often categorized as “ilities” such as flexibility, sustainability, scalability, often desired in architectures. Research work in the Tradespace exploration community has been focused particularly around

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3. State of the Art

flexibility, meaning the capacity of the architecture to be robust to changed preferences during the development activity due to external factors. Comparing the shift among design options along an iso-cost band can give insights into how designs may be robust to these changes, or even to gain insights into the cost due to a later change in the architecture (Figure 9). The focus of this research is to find out how well design-dominated or more costly solutions can easily be “transitioned” into other design options if necessary, whereas solutions that lie in the Pareto Frontier may have the disadvantage of being “rigid” when faced with changes in preferences.

Figure 9: Analysis of the flexibility of an architecture using Tradespace exploration (Ross and Hastings 2005) .

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4. Summary of Appended Papers

4 Summary of Appended Papers 4.1

Paper A

Published As:

Panarotto, M., and T.C. Larsson, 2012. “Towards Value-Driven Simulation of Product-Service Systems: a Conceptual Scenario.” Proceedings of International Design Conference-Design. Dubrovnik, Croatia. Summary

Paper A presents a literature study aimed at clarifying the challenges that occur when considering the value of a PSS offering in a development process. The paper concludes that a more holistic view of what represents value for the company is needed in the early design stages, and envisions the need for a value simulation approach aimed to help designers to maintain focus on the value for the different stakeholders when developing a PSS. A conceptual scenario for a value simulation approach is described. The results of the paper is a discussion of the challenges a company occurs when considering the value in a PSS development context. Relation to thesis

The paper is a result of the first months of participation by the author in the research project, and is the result of preliminary ideas and prompts by the participants in the SÅ NÄTT project. These first months allowed the author to become familiar with the research environment and the project community. Author’s contribution

The author of this licentiate thesis was the main researcher responsible for the writing of Paper A, and has carried out most of the literature review, and lead the workshops with the students that gave the data necessary for the example presented. Tobias Larsson contributed with the initial problem statement of the paper (decision making processes in early phases of PSS development when considering value in contrast to costs and risks) and has supported the development of the paper with comments and feedback.

4.2

Paper B

Published As:

Panarotto, M., Å., Ericson, and T.C. Larsson. 2013 “Intangibles in design of PSS value propositions.” The Philosopher’s Stone for Sustainability. Springer Berlin Heidelberg 85-90. Tokyo, Japan.

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Summary

Paper B describes the sphere of intangible value in engineering design, exemplifying the need to consider customers’ emotions, experiences and knowledge when designing and evaluating a PSS value proposition. The paper presents a six-step approach aiming at the assessment of the intangible value of physical artifacts and service elements. The approach is presented using a conceptual example. The results of the paper is a discussion around the importance of the consideration of intangible values (such as knowledge, experience, emotions) in the early phases of a development process, and a six-level framework for the assessment of intangible values in the early phases of a PSS development. Relation to thesis

The author’s observations of the team responsible for the new design of car seats during the design sessions led to a focus on intangible values. The Så NÄTT project leader assigned the car seat as case study. During the study period, the need for improving the consideration of intangible values in a physical component, such as a car seat, has emerged. The author expanded the study to PSS and services with the analysis of the literature, helping clarifying the research questions. The author has also organized and leaded the workshops with students, which were part of the conceptual example presented to clarify the six-steps framework. Author’s contribution

The idea for the paper came originally from informal observing the car seat’s design team. The author has elaborated the paper and done most of the literature analysis. Åsa Ericson has contributed with references, discussions and comments and has written some parts of the paper. Tobias Larsson has helped with feedback and comments.

4.3 Paper C Published As:

Panarotto, M., T.C Larsson, and A. Larsson. 2013. “Enhancing supply chain collaboration in automotive industry by value driven simulation”. Submitted to the 19th Conference on Engineering Design (ICED13). Accepted for publication. Seoul, South Korea. Note: Paper C is accepted for publication but it has not been published yet in the Conference proceedings at the time of this writing. The paper is therefore published in this thesis according to the temporary format for paper submission given by the Conference Committee. Summary

Paper C describes the challenges that a collaborative OEM-suppliers design team faces when considering the value of design alternatives in the view of new business models. The paper concludes the first part discussing how it is difficult for a

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4. Summary of Appended Papers

designer to be fully aware of the value for each of the different stakeholders in the system due to lack of awareness and poor integration with departments working closely with customers, such as Marketing and Sales. The paper also describes a conceptual approach aiming at overcoming the underlined challenges at the preliminary design stages. The approach is described in terms of key elements, actors involved and activities performed. Relation to thesis

The paper is a result of the author’s interactions with the participants in the project. The author has followed the case study of the team responsible for the redesign of the car cockpit, but has also run semi-structured interviews with other participants in the project. This paper represented a milestone in the author’s effort to define a specific problem statement. The main problems identified are: the importance of designer-awareness of new business models, however, designers are not always aware of the models being considered; and there is a lack of integration with the professionals who work closely with customers, such as Marketing and Sales. Author’s contribution

The author ran the study and is the main researcher responsible for the ideas presented in the paper. The author also studied the literature that framed the theoretical considerations presented in the early chapters of the paper. Tobias Larsson contributed with experience and knowledge, while Andreas Larsson contributed with language revision and comments regarding style and structure of the paper.

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5. Capturing value in conceptual PSS design

5 Capturing value in conceptual PSS design After more than a hundred years, the car industry seems, in the last five years, to be passing through an era of turbulent change. The recent success of Tesla Motors’s Model S for example, beating the sales of major car manufacturers such as Mercedes, BMW and Audi in the market of sedan cars, represents a milestone in the shift (CNNMoney a). The fully-electric Model S is considered “the best car ever tested” by consumers (CNNMoney b). Tesla appears to be able to reconcile two categories that seemed incompatible only five years ago: electric vehicles and sports car lovers. How? “Simply”, by offering a good-looking car that feels great during the drive, a totally new business model that combines new ways of financing, additional services such as annual inspections and instant self-monitoring and, finally, the feeling for the driver of making an environmentally friendly choice. In a nutshell, delivering unrivalled customer value. Also, a technological revolution is currently going on in the automotive sector. Autonomous cars are expected to be operative on the market by 2040, while other predictions forecast that only 10 years separate us from the time in which we will be able to sit in a car that drives itself. The recent years have also manifested the booming of new ways of providing functional transportation with new business models, such as car sharing or peer-topeer car sharing. This has created new “unexpected” competitors on the market, such as car sharing companies (e.g., Zip Car). Furthermore, the very recent explosion of peer-to-peer car sharing platforms (the most famous right now being the U.S-based Getaround and RelayRides) has created the unexpected case of having private car users become competitors of car manufacturers and car dealers. Peer-to-peer car sharing start-ups now have investors backing them with the leverage of, for example, Google; and the growth in subscribers is expected to be steadily increasing. These new business models provide value allowing them to respond to the customer needs of mobility with lower costs (avoiding, for example, the cost of ownership) or providing added-value activities that were not previously thought to belong to the car segment (for example, earning money for car owners in the case of peer-to-peer car sharing). Giving this context, it does not seem so farfetched to imagine a future where we will be able to “order” a car with our smartphone, waiting for the car to pick us up at our doorstep, and enjoy new and exciting commodities never seen before in a vehicle while the car transports us to our desired destination. And at the end of the trip, paying just for the ride, or having the trip for free because we have chosen the option to see three series of advertisements during the travel. Car manufacturers and their suppliers are now striving to remain competitive in this turbulent market. Some car manufacturers are reacting to this changing climate

31


by, for example, starting spin-off companies themselves (as with the example of Mercedes with Car2Go) or by establishing partnerships with peer-to-peer car sharing platforms (such as the recent deal between General Motors and the peer-topeer platform RelayRides). Smart companies within the automotive sector are understanding that a product cannot compete with an entire business eco-system that provides unrivalled customer value, and they are allocating their development resources toward building such eco-systems around their cars, looking at the vehicle as one component of such a system. The question is, how can a car manufacturer and its suppliers increase the awareness of new technologies and business models that will constantly provide uncontested value for customers in five, ten and twenty years?

5.1

Designing cars in an era of rapid change

The development of a new car model is a long complex process that involves more than a thousand professionals and hundreds of different firms. A car is a complex system composed by about 30.000 parts, and the development is heavily structured, organized around a platform from which various models can be derived. The process generally takes 18 months in the design phase and up to five years for the manufacturing and release on the market. Cars are normally purchased by private people, and they are often perceived as means for status; they also have a great impact on the customers’ emotions, feelings and perceptions (Paper B). In addition, they are usually the most, or the second most, expensive possession that people own. In summary, there is a long and complex development process for an item that highly impacts the person’s perception of self in a rapidly changing era. This means that the cars bought by people today left the drawing tables before 2008, at the beginning of the explosion of social media, smart-phones and the recent economic crisis, to cite just a few events in the recent history. In order to efficiently and successfully develop a car model sold today, the designers should have considered all these factors long before these events actually started to manifest. With the purpose to improve the efficiency and effectiveness of the development process, Concurrent Engineering (CE) (Syan and Menon 1994) and Early Supplier Involvement (ESI) (LaBahn and Krapfel 2000) are adopted by car manufacturers. The involvement of suppliers in the early phases is considered to be the greatest innovation in the area of total quality management experienced by automotive industries in the 1990’s. This collaboration strives to create synergy with mutually exchanged deliverables and decisions between the OEM and the suppliers. In fact, the concurrent engineering principles turn the relationships with supplier to a form of co-development processes. The integration can vary from quasi-supplier integration (joint development efforts taking action only at certain times) to a full integration in the case of a very new product.

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In order to ensure an optimization of the design on the system level (vehicle), Systems Engineering (Schlager 1956) and Requirements Engineering (Kotonya and Sommerville 1998) are commonly adapted frameworks in the automotive industry. In the conceptual phase of a new car development, the vehicle is broken down into sub-systems (such as cockpit, chassis, door), which are then broken down into the components of the system. Figure 9 represents an instance of such decomposition.

Figure 9: Instance of a vehicle breakdown.

Starting from the identification of the customer’s needs, or the definition of the competitors’ position on the vehicle attributes a general list of technical requirements or goals (such as weight) is made by the project management team and allocated to the sub-systems of the vehicle. Subsequently the sub-system design teams define and cascade down the requirements for the components of the system. The compliance with the requirements is checked regularly with information gathering processes. A preliminary cost assessment is performed when the concept starts to assume a more detailed form.

5.1.1 Awareness for value innovation In this process, the “greatness” of the design options in a new car development is assessed mainly in terms of design performance, weight and cost (paper C). The compliance with customer value, however, is often perceived by designers to be assessed on performances that, in a few cases, have become “must-be” requirements, taking the Kano model as reference. Discussing how the set of these requirements (or attributes) can be sometimes too conservative to ensure long-term benefits to the company, the Engineering Body and Exterior Project Leader involved in the research project has pointed out:

Interview excerpt #1: “…[The car OEM] has the reputation of being the safest car in the world, but everybody is catching up, I think, that’s my feeling, everybody is catching up in the safety region and […] when everyone has the same stars people tend to look at other things and then you have to be ahead on something else like emissions, fuel consumptions, that kind of thing or whatever. I think that it can

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be dangerous to be in the old heritage of safety too long […] I think they have to put in innovations to get ahead on someone else, again. Your new strategy, where you want to be”. The ability of the team of engineers designing a specific component of the system to understand new trends and new ways of providing values to the customers are often left to the designers’ own capacity. The integration with professionals within the company who are in closer contact with customers and who are responsible for considering and design new business models (such as Marketing, Product Planning and Sales departments) does not seem very tight. Discussing how and by who new business models are considered in a car manufacturer, the R&D Manager involved in the research project spoke to this point:

Interview excerpt #2: “I would be surprised that these discussions are not taken somewhere by someone in the company. But I don’t know these people directly”. The problem with this is that cars and services deliver value to customers, but actually designers still develop components and assets. The collaboration between designers and the departments working closely with the customers is therefore important. A business model has been clarified in Chapter 3 as being a conceptual model describing the company’s logic of earning money. The business model can thus be considered as acting as a “super-system” over the car system, and providing value to the customers though new services, relationships and interactions with other individuals or objects during the customer’s journey (Figure 10). New business model designs are explored and designed by specific departments within the company (Product Planning and Vehicle Projects in the OEM participating in the project, as confirmed by a Senior Strategic Advisor Environment). The designer’s awareness of the impact that his design choices will have on future trends and business models are very important to ensure that uncontested and unrivalled customer value is constantly created and delivered to the customers. Designers’ awareness of this seems to be very low. Discussing engineers’ awareness of new trends and business models, and how the vehicle’s design can be adapted to fit these new trends, the Engineering Body and Exterior Project Leader has reported:

Interview excerpt #3: “I think there is very little awareness of that, to be honest. I think someone has to ask someone else what to do there; someone has to be first […] [The car OEM] we are also not first in the market with these things, maybe in the safety we are best for that, but the rest of the vehicle’s attributes we are fast followers so, I think awareness of trends in marketing, customer behavior etcetera, I think they are, especially amongst engineers, are very low”.

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Figure 10: Relationship between design components and the business model.

This lack of awareness can prevent the company’s innovation efforts to increase customer value in an era of rapid and turbulent competition, since the designer’s choices on a component level can determine the success of an entire future business model for the company.

5.2 Understanding contexts The empirical study suggests that it can be very difficult for engineers to know beforehand the different contexts (new business models, new services, new scenarios) the vehicle will be operating throughout. Without high integration with professionals responsible for developing new services around the vehicle, it is almost impossible for designers to know what the impact might be of their components on the overall system (the business model). For the sub-system design team it is then difficult to contribute to more innovative and radical solutions in the design of a new offering to the customers. The design activity will thus be focused on seeking compliance with the local technical requirements, therefore more radical solutions will be neglected because they do not fulfill the defined requirements. The problem is that a more radical solution on a component level could determine the potential success of an entirely new business model (Paper C), thus contributing to the long-term benefit for companies striving to find new ways of delighting their customers in highly competitive markets.

35


The risks of poor integration and communication between business model innovators and technical designers can be summarized as: 

Risk to “push” technological solutions not ready for the market. (Paper B)



Becoming a slow follower of competitors, or “unexpected” competitors (such as peer-to-peer start-up companies).



Increased lead-time due to re-works since the defined new design concept and the defined new business model are discovered to not “match” well later in the downstream process.



Failure of a newly introduced business model due to lack of technological solutions that fully express its potential to customers (Paper C).



Having a design for a car model that is not “resilient” to newly generated business models or future scenarios.



Overlooking potentially good solutions for newly generated business models.



Failure to document possible “good matches” between solutions and business models during conceptual design.



Risk that new business models or services are seen as a tacit “taboo” among the technical design team (e.g., the opportunity of remaining profitable manufacturing less cars), and thus never taken in consideration during the development process.

5.2.1 Matchmaking designs and business models The discussion above suggests a need to integrate the technical and cost information flow during the development of the vehicle’s subsystems with more qualitative information that permits developers to have a better understanding of the vehicle’s position on the customer journey, and to explore, assess and discuss the overall value that the design options have on different stakeholders. Furthermore, it will permit developers to relate the technical development to the efforts going on in parallel in other departments (such as Marketing, Product Planning or Soft Products) that are, at the same time, trying to increase value provided to the customers by innovation in the business model such as new services. In this way newly generated business options and newly generated designs can be defined, assessed and discussed constantly and in an iterative way, and this will allow a more holistic view of the overall value for different stakeholders (Figure 11). This will also permit developers to have a shared view of what the best combinations can be of products and services that might provide higher value for the stakeholders, and help them to avoid neglecting radically innovative concepts early in the development process due to a premature focus.

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Figure 11: Matchmaking new design alternatives and business models.

5.2.2 Collaborative Business and Technical Development New business models are designed, as well as new technologies, to increase the satisfaction of certain customer needs, but their introduction can however “contaminate” other customer needs. For example, peer-to-peer car sharing enables the customer to earn money with its own car (something impossible to do with only technology improvement), but it might negatively affect his need for security because with P2P he does not know who is currently using the car and he might be afraid the car will be stolen. Hence the business model could solve some problems while creating others. The early awareness of the new business models could help the designers to understand where new technological solutions are needed in order to permit a business model to be very successful (for example embedding a realtime positioning system in the car). This way of increasing collaboration between technology designers and business model innovators has been evaluated positively by the Body and Exterior Project Leader, who has concluded:

Interview excerpt #4: “I think that’s very wise, to do that. Because engineers are very good at looking at problems, and solving problems, […], where the business guys have problems which they can’t solve themselves, the collaboration is always good. […] Always look for what other areas are doing, and get opinion from so-called “non engineers” […] I think that would help a lot. […] if it doesn’t sell, prove it, and that goes for the engineers too. Maybe engineers think that nobody wants this but the business man can sell almost anything, I think it goes both ways.” This operation of “matching” new business models and new designs during the conceptual design might take the form of value attributes the different components are expected to deliver to the stakeholders. In this manner, the information given at

37


the decision gates will not only be based on the physical, technical and cost characteristics of the artifact under development, but also on the value the design alternative will provide to the entire solution the company is developing for the customers, that is, the business model (Paper C).

5.3 Exploring new designs and business models through value simulation An approach aimed at the exploration of the value of a design alternative in the view of new business models or scenarios is presented below. The model is based on the following main assumptions:  

Customer needs are solution-independent (Patnaik and Becker 1999). A business model, as well as a design, can increase the satisfaction of certain customer needs (or decrease certain types of costs) but it might undermine the satisfaction of others. This often requires a change in design.

The sources of evidence for the latter assumption can be derived from real-case evidence. For example, the success of self-mounting furniture chains lies in the business model. These chains have been able to satisfy the same customer need (having good-looking furniture) at a reduced cost that once consisted of fixed costs for personnel that had to mount the furniture at the customer’s place. The companies have thus eliminated these fixed costs, thereby transferring the task of mounting to the customers. However, this has required a change in design, since customers were not experts, nor did they not have time to spend mounting furniture all day. Thus the furniture includes pilot holes, instructions and a reduced number of screws and tools necessary to mount the various objects. Value is then calculated considering conceptually to what extent the system satisfies customer needs, which are considered to be a function of design solutions and business model features. Value   NEEDS (design, business model)

(3)

This value exploration model has been preliminary gathered in an Excel™ tool, but the intention for future work is to develop a software application using a Business Intelligence toolbox, once the method is refined. However, the modeling methodology can be conceptually described. Generic customer needs are collected in a persona window. The purpose of this tool is to maintain customer-focus and to record the reasons why certain needs were collected. These needs are intended to ideally encompass the Kano-model spectrum of needs, including must-be requirements, such as transportability, safety, security, comfort; performance requirements (such as availability) or new exciters such as profitability, intended as the opportunity for the customer to earn money.

38


The subsequent phase is to rate the importance of the customer needs, using techniques such as pairwise analysis or Analytical Hierarchy Process (Saaty 1990). The designs are then generalized according to value attributes, which are decision-making sensitive metrics indicating the generic “goodness” of the system. The same is intended for the business models, which contain both companydependent and external factors (such as level of technological infrastructure) that might affect how well customer needs will be satisfied.

Figure 12: Conceptual visualization of the value modeling technique.

These value attributes can thus be evaluated in relation to the customer needs using positive and negative correlation factor, in an approach similar to QFD (Figure 12). The picture is only meant to be demonstrative. The same procedure is intended for design attributes as well as business models. For example, shifting towards a peer-to-peer car sharing (thus increasing the relationships the customer will have with users who borrow the customer’s car) has a strong positive correlation with profitability, but it negatively affects the customer’s need for security, since the user will borrow the car(s) from people he does not know. This thus enhances the need for introducing some technological (or business model) innovations in order to increase the potentiality of the peer-to-peer solution. After the correlations between value attributes and customer needs have been established, the value of a single design component (such as a car dashboard) or a service component (such as call-center for receiving customer complaints) can be evaluated. This is done by setting the correlation factors against the value attributes 39


and value can then be calculated using weighting-summation methods or other modeling techniques developed as improvements to the QFD methodology (Woolley, Scanlan, and Eveson 2010) (a detailed description and application of these techniques will be soon published). Figure 13 presents an instance of the merit calculation of a car dashboard. The picture and the scores present on it are only meant to be demonstrative.

Figure 13: Caption of the design merit window.

Coupled with cost modeling techniques (intentionally left out of the scope of this thesis, they will be part of the future work described in the last chapter) the design alternatives can be plotted according their value and costs in a graph similar to the Tradespace exploration plots presented in Figure 8 in Chapter 3.

5.3.1 The value simulation process A possible scenario for how the value simulation process could be carried out in an industrial setting is presented in Paper C and is depicted in Figure 14. The value simulation process has been mapped along the Stage-Gate© model. The process is intended to have an information-based nature (thus basing the design decisions on facts and evidence) while opening the design space to look for holistic solutions and to generate value-oriented discussions throughout the design process.

40


The process starts with creative activities with customers, stakeholders and managers describing possible scenarios. In this phase, the use of Business model Canvases can be useful to conceptualize ideas and to share all this preliminary information in a “lightweight” fashion. In the subsequent phases, value attributes are defined by managers (which can thus create a common language on which decisions will be based). Two experts will then analyze the scenarios, one from the technical side (an engineer) and another from the business side (coming for example, from the marketing department). These two experts will act as “value managers” gathering value-sensitive information across the company and the value chain, and making sure that the value-oriented activity is carried out effectively. When information is gathered, the value models can be computed and the results can then be gathered generating a “value report” that will be presented at the decision gates, where the exploration is made and decisions are taken.

Figure 14: The value exploration process.

The necessity of having two experts responsible for gathering value-based information is mainly due to two reasons. First, it complements and balances the expertise of technical and business development, fundamental in a PSS context. Secondly, the dimensions of some companies do not permit the establishment of a professional figure who is solely responsible for the value activity, thus complementing two “part-time” (because they are involved in other projects as well) value experts could become necessary.

5.3.2 Robustness to business models and future scenarios An additional benefit of the value simulation process could also be the opportunity to evaluate the consequences of a new technology in the view of a future shift in the company’s business model or a future scenario. Modifying the scores of the business model attributes is possible by creating new scenarios and 41


then evaluating a new technology, thereby generating interesting “what-if” analyses in the view of a changing scenario due to changes in internal and external factors. Figure 15 represents a conceptual example of this analysis. For example, the value of a new technology – in this case autonomous cars (thus signifying an inevitable increase in cost) – might change if a new business model is introduced (for example, company-owned instead of customer-owned autonomous cars).

Figure 15: Robustness of a design alternative to future business models and scenarios.

By producing a variety of new scenarios using the business model attributes it could be then be possible to calculate a “robustness factor” that indicates the resilience of a new technology or design alternatives in new scenarios, thus justifying in the conceptual phases the inevitable increase in costs of a more radical solution compared to a less-radical. Another possible advantage of this analysis for a supplier could be the possibility of “reasoning” around the value of a more radical and costly design alternative in a component to the OEM, justifying the fact that the component will perform excellently in several possible scenarios the OEM will face in the future.

42

6. Conclusions and Future Work

6 Conclusion and Future Work Pressured by the ever-changing business climate due to globalization, digitalization and competition from new actors, manufacturing companies have begun to realize that providing unrivalled customer value is a crucial factor to ensure benefits in the long term. Assuring product quality is no longer enough to guarantee customer delight, as customers are steadily demanding more emotionally appealing and environmentally sound products and services. Companies are therefore rethinking their development activities from focusing predominantly on technical developments and cost competiveness toward building a business ecosystem composed of a combination of products and services able to regularly provide uncontested value to their customers in whatever context and situation. In this thesis, these total product-service packages have been classified around the concept of Product-Service Systems (PSS). The development of a PSS profoundly changes the way a company collaborates with partners and customers, the capabilities needed in order to make the design activity more effective and successful, and the methods and tools that will be used in the early phases of the development. With these premises, however, developing a PSS offering leaves the engineers responsible for the design of the physical artifacts with pressure and confusion. In fact, the PSS will ultimately deliver value to the customers, but designers must still develop physical components and assets. The challenge is then to understand what needs to be designed, hence deciding from among different design alternatives which ones will provide higher value to customers in view of these new business models, such as PSS offerings. In order to help designers overcome these challenges, this thesis has focused on understanding how customer value is evaluated, assessed and discussed, and how customer-value oriented decisions are made during the conceptual phases of product development. The thesis has also been focused in detail on the automotive supply chain, thus considering a long, complex and rather conservative environment in a rapidly changing business. The research has revealed in general the need for making the conceptual phases of the design activity more holistic and value-oriented, to avoid untimely constriction of the design space. The research activity has been based on a participatory action research approach of observing and interviewing engineers involved in the conceptual development of a new car model, with a focus on lightweight structures. Other information gathering activities have included leading and being responsible for design workshops with the company partners.

43


After the research work the following conclusions can be drawn: 1) The awareness by engineers of new business models or new business scenarios in development in other departments of the company (usually Marketing or Product Planning) is perceived to be low. The assessment of the value of a design alternative in view of a new business model is then often left to the developers’ own capacity. This can create the risky situation of having engineers who cannot fully express their innovation capabilities regarding radically innovative solutions due to premature focus during the development activity triggered by compliance with design requirements and target costs. Or, conversely, it can contribute to the risk of design re-works or failures on the market caused by a conflict between a new business model (such as a shift in the revenue model more by the service content) and inadequate technical solutions that support the new business eco-system. 2) There is a need for coupling the technical and cost information flow during the conceptual phases with more qualitative measures that permit developers to position the vehicle ideally along the customer journey, therefore allowing a better understanding of the value provided by a component to the different stakeholders. This qualitative information can provide useful insights to designers of the needs and expectations in the view of the total solution the customer seeks, as well as a better understanding of the impact of a new function on future scenarios. 3) The use of value modeling and simulation gathered in a software application is a possible enabler for the early exploration and matching of design and business models in the conceptual PSS development phases. These tools can act as a common arena where newly generated design alternatives and new business model ideas can be explored to identify the best combinations of products and services that better fulfill the stakeholders’ expectations. An approach aimed at value modeling and simulation in conceptual PSS development is proposed. This will permit developers to explore and discuss design alternatives and business models (intended as the logic by which a company provides value to customers) by the use of design and business attributes. These attributes will allow the design space exploration to be raised to a more holistic level, including key value metrics that are difficult to measure in a quantitative fashion. The approach is currently in testing using groups of students, in order to refine and modify relevant and critical aspects. Even though the approach has collected preliminary interest from specialists and managers among the company partners, many issues remain left on the researcher’s table. The development of a PSS requires collaboration among different companies. How to share data and models from different organizations while protecting company-sensitive information is still a subject under study. Another subject that needs further investigation is on how to update the models over time, and how often value-focused meetings should be held based on the models’ results, and what

44

6. Conclusions and Future Work

kind of professionals should be present in these meetings. Additionally, the idea of calculating an index capable of measuring and defining the robustness of a design in relation to new business models has been evaluated as promising but is in the need of further research. How to automatically calculate such a robustness factor from the values of the extensive attributes is currently a research focus.

6.1 Future Work The work described in this thesis is still in its conceptual stage and thus needs further effort in order to make the research consistent and to present clear and tangible results from a scientific standpoint. First, the study would benefit from an extension to other manufacturing industries that are moving toward PSS (e.g., aerospace or construction equipment) or more service-oriented companies (e.g., mobile network operators). This in-depth study would permit to generalize the research findings and to draw important conclusions among different sectors. The effects of the use of value modeling and design-business model exploration on decision-making is planned for Autumn 2013 with both Master students and product development experts. Another emerging area of interest is to evaluate the impact of value simulation and design exploration on organizational aspects, such as capacity for continuous improvement and customer value thinking among designers. Research work will be also dedicated to how to integrate qualitative and quantitative measures into the value models. At the moment, the value attributes have been treated in a qualitative fashion, but quantitative measures such as monetary benefits need to be turned into more concrete elements. In fact, a new business model can achieve monetary benefits such as reduced costs, or generate new revenue streams. The research will focus on how to quantify and model these benefits by teaming up with researchers working with cost modeling.

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Design:

Motives,

Means,

and

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Paper A

Towards Value-Driven Simulation of Product-Service Systems: a Conceptual Scenario

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Paper A is published as:

Panarotto, M., and T.C. Larsson, 2012. “Towards Value-Driven Simulation of Product-Service Systems: a Conceptual Scenario.” Proceedings of International Design Conference-Design.

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INTERNATIONAL DESIGN CONFERENCE - DESIGN 2012 Dubrovnik - Croatia, May 21 - 24, 2012.

TOWARDS VALUE DRIVEN SIMULATION OF PRODUCT-SERVICE SYSTEMS: A CONCEPTUAL SCENARIO Massimo Panarotto, Tobias C. Larsson Keywords: Value engineering, product-service systems, simulationdriven design

1. Introduction Since the development of mass consumption and traditional product-oriented business strategies as a means for society’s growth, the exchange of physical artefacts between a providing company and a receiving customer has for many years been a key mediator for customer value. The more products the company could sell, the more revenue was generated [Tan 2006]. In the last decade there has been increased interest and awareness among the research community, industry and policy makers on the potential of Product-Service Systems (PSS), or functional-oriented business models; especially in order to make a shift towards a sustainable society [Mont 2002]. By this type of business model, the emphasis is on the ‘sale of use’ rather than the ‘sale of product’, with the intent of leading to a dematerialization and life-cycle view of the entire production and use system, hence having possibilities to achieve sustainability goals. In literature review of opportunities and challenges of the PSS business model are available. Benefits from a producer perspective are; opportunities to deliver a higher value offer and to provide a more differentiated and customized offer, and from the customer side; the possibility to receive higher and ‘suited’ values at lower prices since the ownership is now on the producer’s hands. For society this approach increase the chance to provide benefits for people while reducing the environmental impact. Shifting from traditional business model to PSS requires new definitions of value [Tan et al. 2006] as well as new methodologies for taking it into account within product development. Furthermore, since its recent development and its characteristics of new paradigm as business model, it requires for a company new and increased innovation capabilities. The implications for design and development, when using a PSS frame, are; making the correct choice in the preliminary design phase impacts the entire product life cycle in an order of magnitude that could span from making the product being a success, to generating, instead, a total business failure [Browning 2002]. This statement gains more and more relevance when the product is characterized by a long life cycle, when the technology is highly capital-intensive and when later life-cycle modifications imply huge expenditures in terms of money and labour. In the effort of being competitive in the globalized market, a common and intuitive strategy for companies is to cut costs while increasing structure efficiency [Stahl 1997]. However, this approach does not always lead to success. Cost competition does not ensure long-term value added, because of the real risk of engaging in a cost-based competition against market followers [Lewitt 1966]. So far, what becomes a real target to any company who wants to lead, or keep on leading, the market, is to provide the highest value to the system in which the company is competing. This concept should be considered not only from the final product seller focusing on end user, but also by all those companies that are relevant business 57

partners in the supply chain. Collopy [Collopy 2009] stated that for a product to be successful it should maximize the value generated for the customer and for the system; how the profit is then divided between companies is instead decided by the market. The question that arises seems natural: how can a company re-define its consideration of value provided when meanwhile increasing its innovation capabilities in order to “jump into” the new paradigm, and how can the early design phases of PSS be treated?

2. Objectives The main objective of this paper is to discuss existing challenges when considering value in PSS conceptual design and the potentials of using a value simulation approach as a means to successfully deal with the wider design space that such a business model implies. Furthermore, a conceptual scenario based on a case is presented in order to strengthen the paper and provide a base for further development.

3. Research methodology The approach emerges from the analysis of real industrial problems together with theoretical studies on the corresponding phenomena. The initial problem statement has been defined in collaboration with a Swedish automotive manufacturer and its supply chain of some 30 partners. However, the research approach has been a literature review of current practices of value driven simulation in conceptual design, both in traditional product development and in PSS; and by workshops run with project teams, and students, that framed the example presented in this paper.

4. What is the problem: Value consideration in PSS development The highest possibility for the designer to improve artefacts in order to increase the business’s probabilities to success relies in the early phases of development. In an ideal scenario, companies should always select design concepts able to increase the added value for their customers and stakeholders. Being able to calculate a priori, in a transparent and repeatable way, the value of a given solution is, however, not a straightforward process. As stated by Anderson and Narus [Anderson and Narus 1998] remarkably few firms have the knowledge and capability to actually assess value and, by consequence, gain an equitable economic return for the value delivered to customers, and this especially becomes a problem in the preliminary design stages [Browning et al. 2002]. Lindstedt and Burenius [Lindstedt and Burenius 2006] argue that the creation of an unrivalled customer value leads to a business success. They define customer value as: Customer Value

Perceived benefits Total expenditure

(1)

The model proposed by the authors is divided into three processes. The project has to create value by (ibid.):  Maximizing the business opportunity (result: the contented sponsor)  Developing products with unrivalled customer value (result: the satisfied customer)  Deepening relationship and knowledge (result: the successful team) The same conclusion is drawn as well by Allee [Allee 2000], that argues that the partners involved in a business (provider, supply chain, customers etc.) exchanges value in three “currencies”:  Goods, services and revenue  Knowledge: Exchanges of strategic information, planning knowledge, process knowledge, technical know-how, collaborative design, policy development, etc., which flow around and support the core product and service value chain)

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

Intangibles: Exchanges of value and benefits that go beyond the actual service and that are not accounted for in traditional financial measures; such as sense of community, customer loyalty, image enhancement, co-branding opportunities

The author also highlights that in the business there is always value provided and value returned between the actors. For example, providing a service to a customer a company may get feedback about the service itself, so enhancing the know-how about it. Even though these can be considered as too general definitions from a practitioner perspective, they can be used as a base to discuss what kind of values a company needs to focus on; and what should be the main pillars that a corporation should be based upon. In order to clarify what is the main issue is when considering value in the design of a PSS solution, a little discussion about how products are developed in industry is necessary. Even if hybrids exists, the common framework for product development management is the Stage-Gate® process by Cooper [Cooper 2008]. In this framework the process is divided into Stages, where the product development team performs all the activities necessary to the development of the product; and the Gates, where the project is reviewed by decision makers that has to take decisions about if the project can go ahead, what is rejected, and what needs to be reworked. This paper is particularly focused on the preliminary phases, thus Stage-Gate 0, 1 and 2, when the preliminary ideas are discovered, sorted out and when at the end several product concepts are built upon. What usually happens is that decision makers, having detailed analysis in order to consider costs/risks of the concept but lacking of information about the benefits provided by the radical concept (such as customer loyalty, cost cutting opportunities in the future, brand image etcetera), often unintentionally “kill” the idea with the most potential for creating a unique selling point for the company, and to overtake the competitors in the challenge [Chesbrough 2003]. This since something newer passes the requirements analysis that matches the existing solution. Hence sub-optimizing existing solutions always have the upper hand on new solutions, because the evaluation criteria are set in such a way. This happens particularly when designing a Product-Service System solution, due to the relatively recent development of this type of business model, and lack of evaluation mechanisms for PSS. So there are highest risks nowadays for the PSS solution to be “killed” in the early decision gates, preferring more conservative but eventually less successful solutions. Isaksson et al. [Isaksson et al. 2009] argue that the innovative concept of PSS requires a higher integration of product aspects as well as service aspects in the design process, in the past designed independently between each other. The authors highlight also the need to involve more the customer into the design process, a global development with partners and suppliers as well as modelling and simulation of all the PSS aspects early in the design process. Moreover, the need for new methods and tools in order to model, simulate and communicate value in the early design stages is considered a key factor in order to design successful PSS solutions. After considering these aspects, can then be concluded that the problem is that the companies know already that they should provide higher value for the customer, and that they should consider value in a broader perspective in order to achieve benefits in a longer timespan, but that new methods and tools are needed in order to consider these long-term benefits.

5. Possible solution: Value Simulation approach The Value Driven Design (VDD) concept grew after almost 50-year research quest on Systems Engineering mainly around the Aereospace industry [Collopy 2009]. The main objective of the approach is that engineers should select the best design from a value perspective, rather than the design that “merely” meets the requirements. In the framework there is no requirement set a priori, neither on a system level nor on a component level, instead an objective function is given to the design team, which converts the set of design attributes into a score. The design team is then asked to develop the design that provides the higher score. The main benefits stated by the developers of the approach are: it enables optimization, since the focus now is on o find the “best design”, where a higher score indicates that the design is best; it prevents 59

Design Trade conflicts and it avoids cost growth and performance erosion, since the approach enables a system optimization rather than a local optimization driven by the strive of meeting requirements. Even though the approach is quite new in literature, interesting industrial cases have already been made. Curran [Curran 2010] presents a case when Value Driven Design is used in order to address the structural configuration for an aircraft fuselage panel. The work focuses on combining design parameters and operational value, such as direct operational costs and manufacturing costs. The case demonstrates the application of VDD in terms of an aircraft manufacturer’s profit. Another interesting approach is proposed by Bertoni et al. [Bertoni et al. 2011] The idea is mainly to use qualitative scores to assess the value of design components, in the specific case within the aerospace sector. The approach uses baseline values (value that a component at least needs to fulfil) and target values (highly ambitious values that the component might have). The idea is then to communicate value through color-coding integrated in the company’s CAD system. Even though the approach is very interesting, the authors highlight the need of quantitative “back-up” data for the value calculation in order to give reasoning when making trade-offs during the different decision gates. The preliminary analysis of current methodologies has shown that interesting approaches on value simulation and communication are available. Mainly they can be considered divided into three categories. For value simulation; approaches that try to model value using mathematical functions composed of partial differential equations and qualitative approaches in which the team has to define baseline values and target values, and when it is the team itself that decides the value of a certain concept based on its experience and knowledge. For value communication, the approach of using color-coding systems integrated into CAD models has been developed. However, these approaches are still in a development phase, and this paper’s authors consider that probably a combination of them will be the best solution in order to achieve good results in the current project.

6. Value modelling of Product-Service Systems In order to build a model for the assessment of value in early product development a preliminary classification of what constitutes value for a company is necessary. This section proposes a classification that has been made after an extensive literature analysis, and the description is followed by the references taken as base for the rationale. However, this framework is not intended to be an “operative” classification of value, since it is still too general. The company itself must decide what parameters might increase the value provided, according to its strategies, market, and competitive environment. Nevertheless, a preliminary and general classification of what constitutes value is necessary in order to provide a base for the discussion around the value provided by a Product-Service System offering. The proposed model is based on the equation (1) and the authors divided value into five dimensions (or “currencies”): two for the “denominator” side, and three for the “numerator”. Regarding the latter, the authors divided benefits following the “value model” proposed by Lindstedt and Burenius [Lindstedt and Burenius 2006], seeking what benefits are considered as value by the three main actors of a PSS project: the sponsor, the customer and the development team. This section has the purpose also to describe them more in detail, to give a rationale in order to explain the reasons for their inclusion in the model, and how a PSS can increase value along these dimensions. As will be argued in detail in the next paragraph, methodologies in order to considered costs, risk and revenue have been consolidated during the past years in both research and industry environments. Therefore, these will be treated briefly in this paper, citing only main reference methodologies developed in the area. Attention and discussion will instead be dedicated to the intangible value perceived by the customer and the knowledge gain achieved by the company, since a lack of research still exist and that will be the authors’ main future work. 6.1. Cost, risks and revenue evaluation The cost and revenue evaluation is probably the most well defined part of the equation (1). In industry many methods are broadly applied. Among the most used are the cash-flow analysis, the net present 60

value, adjust present value, and internal rate of return calculation, just to cite a few. All these tools are very useful and mainly these analyses are conducted by finance departments and cost managers. These methods have been rather consolidated over the past fifty years, and different methods have been developed in order to plot costs and revenues over the product’s lifetime. Among the most used, it is possible to cite the return map. Naturally, the risk associated to a product concept is an important factor that must be assessed during the preliminary design phase. Literature presents different methodologies in order to estimate risks in early product development. Bertoni et al. [Bertoni et al. 2011] summarizes the most used methodologies developed during the last decades, and can be used as a reference for a deeper investigation. 6.2. Intangible benefits perceived by the customer For intangible benefits are meant all those benefits the customer perceives as value but not strictly related to any intrinsic value or no material being. They are not easy to define and formulate. Some examples are customer loyalty, sense of community, brand image, co-branding opportunities. A Product Service System solution can in theory reach great opportunities for intangible value such as Customer loyalty. This type of business model can enhance a more trustworthy relationship between the customer and the provider. Steiner and Harmon [Steiner and Harmon 2009], highlight how increasing the customer’s perceived intangible value can positively affect the business’s level of success. The authors also divide the intangibles into three categories: Knowledge (related to the customer’s perception of the company and its products), Emotions and Experience. They provide also a good taxonomy on how these values can be divided in sub-categories. Even with a rather clear definition of what constitutes intangible value, the authors highlight the current lack of how intangibles can be considered in product development and positively evaluated by managers and decision makers. However, the paper divides customer value into three layers: Product layer, Service layer, and Intangibles layer. Even though this classification is quite common, in our opinion when considering the customer perception of a product it should be considered always from the intangibles’ perspective. This is true even in traditional product context, considered as merely tangible by many authors. Almost all the values perceived by the customer are intangibles. For instance, how much do we buy a watch just because it will tell us the time? Or do we buy it because we like its design or because we recognize its brand? 6.3. Knowledge gain For knowledge is meant all the exchanges of strategic information, planning knowledge, process knowledge, technical know-how, collaborative design, policy development, etc., within the company and between all the partners of the value chain involved in the product development process. [Allee 2000] This parameter is seldom considered, but extremely important in order to increase the knowledge “wallet” of the company to increase the possibility for cutting cost, gaining innovation capabilities etcetera. This is becoming extremely important in the recent years when the tendency is to integrate more and more first tier and second tier supplier into the product development process. This is particularly experienced by the authors in the current project that is developed in collaboration with some 30 companies, suppliers of a Swedish car manufacturer. In some cases, these suppliers do not have research & development department (due to the dimension of the company) so that they considered really an added value to gain knowledge by the development’s activity. The potentials for knowledge gains are especially high when designing a PSS. In fact, when changing the ownership from the customer to the Original Equipment Manufacturer (OEM) the latter is motivated to design a solution in a long-term perspective, having time to continuously improving the solution, and also having continuously feedback from the customer, due to the more trustworthy relationship between the partners. As well as the intangibles values perceived by the customer, also knowledge is a benefit still difficult to assess and evaluate in the early stages of the development process. 61

One interesting approach to deal with knowledge transfer in product development is the Knowledge Maturity scale proposed by Johansson [Johansson 2011] Even though the scale is indented to deal with the problem of how much the decision maker can “trust” the different design solutions proposed by the team, one interesting opportunity seems to integrate such a scale into the value simulation approach. In this way, the simulator can give a score on how much knowledge will be gained by the company with that particular concept (i.e if we include a “customer help us” feature to continuously improve our the software we offer to the customer).

7. Conceptual example: Value simulation into practice In order to provide an example on how Value Driven Simulation could become an approach when dealing with Product-Service System development, a conceptual case is presented. Although the authors have tried to be rather accurate in order to provide a good base for the discussion, the present example is based on gross assumptions, and it cannot be considered a representation of a real industrial case. The example has emerged from discussions and workshops with students and industrial partners in the automotive supply chain project. 7.1. Example presentation The example presented is based on a car sharing system. Let us consider the case of a car manufacturing company that wants to move from manufacturing and selling cars towards a car sharing system, in which the company manufactures the cars it needs and then it provides a “total system offering” being responsible of filling fuel, maintenance of the cars etcetera. (the slogan in Swedish is moving from “köp en bil”, buy a car; towards “köp en mil” buy a Swedish mile, 10 Km). With the students it has been decided to skip the part of customer identification, deciding a priori to take as customer target young middle-class Swedish singles or couples, with a possibility to spend for transportation by car less than 500 SEK (ca. 50 €) per month. 7.2. Preliminary Value model, main assumptions and data gathering The preliminary Value model follows the approach adopted by Curran et al. [Curran et al.2010] using a differential- additive valuation manner. As stated by the reference, it is more reasonable to relate the value of one design option to another, rather than trying to measure an absolute value. Furthermore, there is a need to normalize parameters that otherwise, because composed by different units of measure, will completely blow the result, making impossible any comparison between options. In the example the value levers that have been decided to incorporate are presented in equation (2) and consist of: profitability (revenue-costs) and customer experience.

.∑

.

.∑

. .

(2) Where the parameters , are the weights by which the design team decides to allocate more importance according to experience, competitive market etcetera. , are the different dimensions that composed the single value lever, also decided by the design team. The concept will be clearer throughout the example. ., . . are the weights given by the team to the overall value lever, in other words how much that value lever added value to the general system. For the sake of simplicity, it has been decided to place the two weights of 1. As previously stated, the value of every configuration is related to the value of a benchmark option, indicated in the equation with the subscript 0. As benchmark, the authors decided to adopt a Toyota Corolla used in a car sharing case in Sweden, which was possible to gather some data by Zhang [Zhang 2008]. Other data have been collected from the manufacturer’s website, and other data about car sharing system has been collected through websites using Car sharing companies in North America. Without going deeper into the calculation, Profitability has been valuated by the difference of revenue, Direct Operative Costs (only Fuel Cost), Cost manufacturing and Costs of Maintenance. Since this

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calculation has been considered correct out of the assumptions made, the value lever will therefore just one, and the weight will be considered 1 for the sake of simplicity. The Customer experience lever has been valuated according to five dimensions, taken after a Kano model analysis with the students and with the weights given empirically accordingly to the importance stated during the discussions.  Price/Km: the cheaper it is, the higher means for the customer, w=8;  Must-be requirement: warmth in the sitting system, w=1  Performance requirement: the bigger is the sitting area, more important is for the customer (considered as means for comfort), w=2;  Satisfaction requirement: the bigger is the baggage area, the better it is for the customer (since the students considered that one main use of car sharing might be transporting furniture or other equipment for the users), w=3;  Risk that the car brakes during one travel: the higher is the risk, the lower is the value added to the system, w=5; Regarding the latter, the risk has been grossly considered inverse proportional to the weight of the car, when the weight has been considered the main means for robustness. The higher is the weight of the car, longer will be the Mean Time Between Maintenance (MTBM). So, in other words, the lighter is the car the shorter will be MTBM (with of course an impact on Costs of maintenance), but also with a higher risk of making customer unhappy with a less robust car that eventually will break during the trip. MTBM has been one of the main assumptions by the authors. It has been considered merely depending linearly by the weight of the car, and calculated linearly from the MTBM and the weight of the benchmark car. The equation for the customer experience Value lever is then: .

.

/ /

8

5

3

2

1

7.3. Conceptual scenario: Value Driven Simulation Due to the dimension of the paper, it is not possible to clarify all the assumptions made in the model (that, once again, are many but accuracy lie outside to the scope of the example). The authors decided to maintain similar all the parameters between the benchmark concept and the options, and to change only four parameters: / ; length of the sitting system, length of the baggage, weight of the car. The timespan has been considered along 8 years, with the hypothetical case of one year of manufacturing all the cars that will then use along the timespan, with regular maintenance every MTBM. Table 1 presents the simulation of four different design options in terms of added value. Price/Km (€/Km) 0.35 0.2 0.5 0.22

s (mm)

b (mm)

Weight (kg)

dV

1200 1000 1100 800

1300 1200 1400 800

1500 1700 1800 1200

17.73 19.94 18.35 15.71

Table 1. Value simulation using four different configurations By the simulation it can be seen that providing a cheap but rather “robust” car (second row) is the best design option out of the four configurations taken into account (even though in the model important parameters such environmental impact, cost of resources has not been modelled). Another interesting reflection might be in the third case, if we provide a good customer experience, price eventually will not considered so important. Or opposite, in the fourth case, a cheap but “ugly-not functional” car (and not so robust, so with high risks that it will abandon us on the way) is not the best design choice either.

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It has also been simulated the value added to the system by modifying for instance / and , maintaining all the other parameters unchanged, using MATLAB. Figure 2 shows the results of the simulation. It is then possible to see area of interest in terms of value added to the system. Figure 1 presents the results of the simulation.

Figure 1. Value simulation depending on Price/Km and Weight By the simulation, the design team can highlight potentially good design options together with business considerations (i.e the area in the corner down to the right seems interesting by the simulator, but totally out of the customer target taken into focus) or technical requirements (the team can decide that it is impossible to provide a safe car under 1000 kg). For instance, the team might see that if they want to remain around 1800 Kg and with cheap price, then it is better to increase weight (and so robustness); that will maintain the company profitable but also will provide a better customer experience, since the risk of technical failure during the travel will be lower. With more complex models than the one presented on this paper will also be possible to show areas of local optimization between business parameters (such as price) and parameters depending on design (such as weight).

6. Conclusions and future work The paper discussed potentials and existing challenges of considering Value when designing a Product-Service System offering. The main problem has been identified on having new methods and tools that can help designers to consider every design option from a value perspective (possibly based on a longer timespan). Nowadays mainly revenue, costs and technical risks analysis are taken into consideration and boiled down into monetary terms in a rather short period. This often caused the “killing” of more radical ideas (that could potentially bring more benefits if seen in a longer time perspective) at the various decision gates during the project. So at the end, everybody talks about value, but actually money is what people look at in the end. The paper discussed how a Value simulation approach could provide benefits in terms of compared different design solutions from a Value perspective. With such an approach it is possible to take into consideration the value of aspects like intangibles perceived by the customer (provide the best customer experience as possible) or knowledge gained by the company during the business. An example has been presented in order to discuss how Value simulation can be effectively strength when dealing with the wider design space that the PSS development implies. Another main benefit is that

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such a tool will enable engineers to have at least “reasoning” in order to sponsor more radical concepts. Thirdly, the tool can enable optimization and increase innovation, since the team can look at why the model has low value in a certain lever, and starting to brainstorm possible solutions of how to increase it. However, the approach is still in its infancy and future work needs to be done. First of all, the weighting phase is crucial since it will profoundly affect the model. Further research will focus how the design team can place define weights in a qualitative but effective way, in order to take the major benefits from a “lightweight” qualitative approach and the simulation based on mathematical equations. Secondly, work has to address how intangibles and knowledge can affect monetary parameters, such as the price of the offerings or costs (making the intangibles tangible, so to say). This will require further research, but it has been seen as a great opportunity of making a step further in the topic, since the uncovered areas related to intangibles and knowledge are still many.

7. Acknowledgements The authors would like to acknowledge the financial support from VINNOVA through the Automotive Research Programme FFI, and the support of our collaborating company partners.

8. References Allee,V., “Reconfiguring the value network,” Journal of Business strategy, vol. 21, no. 4, pp. 36–39, 2000. Anderson, J.C.; Narus, J.A., “Business Marketing: Understand What Customer Value”, Harvard business review, 1998. Baines, T.S., at al., “State-of-the-art in product-service systems”,Proceedings of the Institution of Mechanical Engineers Part B Journal of Engineering Manufacture, Volume: 221, Issue: 10, Publisher: Prof Eng Publishing, 2007, Pages: 1543-1552 Bertoni, A., Isaksson, O., Bertoni, M., and Larsson, T., “Assessing the Value of Sub-System Technologies including Life Cycle Alternatives,” in Glocalized Solutions for Sustainability in Manufacturing, J. Hesselbach and C. Herrmann, Eds. Berlin, Heidelberg: Springer Berlin Heidelberg, 2011, pp. 669-674. Bertoni, M., Bertoni, A., Johansson, C.,. 2011. “Towards Assessing the Value of Aerospace Components: A Conceptual Scenario.” Proceedings of the 18th International Conference on Engineering Design (ICED11), Vol. 9: 226–235 Browning, T.R.; Deyst, J.J.; Eppinger, S.D., Whitney, D.E., “Adding value in product development by creating information and reducing risk”, IEEE Trans Eng Management, Vol. 49, Iss. 4, 2002, pp. 443–458. Collopy, P.; Hollingswort, P., “Value Driven Design”, in: Proceedings of 9th AIAA Aviation Technology, Integration, and Operations Conference, Hilton Head, South Carolina, 2009. Cooper, R., G., “Perspective: The Stage Gate® Idea to Launch Process—Update, What’s New, and NexGen Systems,” Journal of Product Innovation Management, vol. 25, no. 3, 2008, pp. 213-232. Chesbrough, H.W. 2003. Open Innovation: The New Imperative for Creating and Profiting from Technology. Harvard Business Press. Curran, R., “Value Driven Design and Operational Value.” In Encyclopedia of Aerospace Engineering. John Wiley & Sons, Ltd. 2010. Curran, R., T. Abu-Kias, MJF Repco, YLJ Sprengers, P. van der Zwet, and W. Beelearts. “A Value Operations Methodology for Value Driven Design: Medium Range Passenger Airliner Validation.” In Proceeding of the AIAA Annual Science Meeting, Orlando 2010, 2010.

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Isaksson, O., Larsson, T. C., Johansson, P., “Towards a Framework for developing Product/Service Systems,” in Functional Thinking for Value Creation, J. Hesselbach and C. Herrmann, Eds. Berlin, Heidelberg: Springer Berlin Heidelberg, 2011, pp. 44-49. Johansson, C., B. Hicks, A.C. Larsson, and M. Bertoni. “Knowledge Maturity as a Means to Support Decision Making During Product-service Systems Development Projects in the Aerospace Sector.” Project Management Journal 42, no. 2 (2011): 32–50. Lindstedt, P., Burenius, J., “The value model: how to master product development and create unrivalled customer value”, Nimba, 2003. Mont, O., “Drivers and barriers for shifting towards more service-oriented businesses: Analysis of the PSS field and contributions from Sweden”, The Journal of Sustainable Product Design 2: 89–103, 2002 Stahl, J.M.; Grigsby, D.W., “Strategic Management”, Blackwell Publishing, 1997. Steiner F., and Harmon, R., “The impact of intangible value on the design and marketing of new products and services: An exploratory approach,” in Portland International Conference on Management of Engineering & Technology, 2009. PICMET 2009, 2009, pp. 2066-2079. Tan, A., McAloone, T. C., and Andreasen, M.M., “What happens to integrated product development models with product/service-system approaches,” in Proceedings of the 6th Integrated Product Development Workshop, IPD2006, 2006, pp. 18–20. Zhang, X., “Cost Analysis of Car sharing in Stokholm”, 2008. Retrieved online 2012-03-16: www.statistics.du.se/essays/D08D_ZhangXu.pdf Massimo Panarotto PhD Candidate Blekinge Institute of Technology, Department of Mechanical Engineering Campus Gräsvik, SE- 371 79 Karlskrona, Sweden Phone: +46 (0) 455 385527 Cell: +46 (0) 73 4223699 E-mail: [email protected] Office: J3524 Tobias C. Larsson Professor Research director, Product Development Director, Center for Sustainable Product-Service System Innovation Blekinge Institute of Technology, Department of Mechanical Engineering Campus Gräsvik, SE- 371 79 Karlskrona, Sweden Phone: Int. +46 (0)455 385525 Cell: Int. +46 (0)70 5119416 E-mail: [email protected] Office: J63418

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Paper B

Intangibles in design of PSS value propositions

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Paper B is published as:

Panarotto, M., Å., Ericson, and T.C. Larsson. 2013 “Intangibles in design of PSS value propositions.” The Philosopher’s Stone for Sustainability. Springer Berlin Heidelberg 85-90.

68

Intangibles in design of PSS value propositions 1

1

2

1

M. Panarotto , Å. Ericson , T. C. Larsson Blekinge Institute of Technology, 371 79 Karlskrona, Sweden 2 Luleå University of Technology, 971 87 Luleå, Sweden Corresponding author: [email protected]

Abstract Product-service systems (PSS), or value propositions, are foreseen to bring about challenges in product development. Traditionally, engineers normally manage tangible elements in relation to products, and are lacking approaches to deal with the intangibles incorporated in PSS development. The purpose of the paper is to elaborate on and propose a framework for value assessment and a simulation approach. Conceptual examples are used to discuss the proposed framework, and a contribution of the paper is that it exemplifies the reasons why intangible value have to be addressed more directly in industry in general and in PSS in particular. Keywords: Intangible value, customer perceived value, conceptual design, early stages, PSS

1 INTRODUCTION In the recent decade, the interest by academia, industry and policy makers on the potential of Product-Service Systems (PSS) to provide successful business opportunities has increased, meanwhile making a leap towards sustainability [1]. By this type of business model, the emphasis is on the “sale of use” rather than the “sale of standalone artefacts”. This is intended to lead to dematerialization as well as a life-cycle view of the entire production and use system, hence having possibilities to achieve highly settled sustainability goals. Literature outlines benefits of PSS [2] [3] [4] [5]. For example, from a provider perspective, the opportunities to deliver higher value offerings and to provide more differentiated and customized solutions [3] as well as describing the opportunities for long-term relationship along with providing value offerings [4]. Since the ownership of the manufactured artefact, i.e. the product, remains with the provider, the customer can receive additional values based on more intangible elements. Such intangible values are commonly more suited to fulfil customers’ need of performance to support them reach their business goals, i.e., the manufacturer provides a total care solution [6]. For society and environment, PSS increase the possibilities to provide benefits for people while reducing environmental impact [1]. Providing a “total care” solution means for the corporation a possibility to increase the business opportunity by developing and maintaining a closer customer relationship in which providing added value is a core concept. Thus, the transaction with customers changes into co-production of value [7]. In such a changed business situation the incorporation of the wider perspective of value is necessary. That is, value cannot be directly translated in mere monetary terms, for example the benefits of working close to the customers to get access to networks cannot be easily translated into revenue. In a PSS situation possibility of co-branding and user co-creation cannot be underestimated [6]. When a corporation decides to extend their traditional selling of products towards PSS, the

CIRP IPS2 Conference 2012

decision by default includes a firm customer-oriented approach in early product development. Commonly, the outcome of the development process is settled in early stages [8] thus focusing on supporting the engineer activities in this phase also have the potential to support the extension towards PSS. The engineers’ insight into, for instance, emotions, customer experiences and knowledge about the brand become critical to meet user perceived value [9]. Accordingly, the success of PSS provision might be depending on the establishment of ways for engineers to identify and communicate intangibles in early design. The area of customer perceived value has gained attention within the research community, mainly from the customer relationship perspective [7] [10] or the area of total quality management [11]. The consideration for how PSS and intangible value could be integrated needs to be further addressed. Seemingly, there is an understanding among researchers that the attention on intangible value has to increase, but it is also concluded that the reports on perceived value based on design change is delimited [11]. Basically, the traditionally firms focus on products as the core value carrier could be a barrier for PSS. Thus, in the area of engineering design, understanding the basic aspects of intangibles could benefit the design of PSS value proposition. This paper takes a standpoint in engineering design and manufacturing industry in order to elaborate on intangible value. The purpose of the paper is to elaborate on and propose a framework for value assessment and simulation. Here, conceptual examples are used to discuss the strengths and weakness of the proposed framework. A contribution of the paper is that it exemplifies the reasons why intangibles have to be addressed in industry and in PSS in particular. 2 RESEARCH APPROACH The ideas reported in this paper are part of a research project in automotive industry. The car manufacturer along with 30 companies works in a supply chain

structure. The focus of the research project has been defined in collaboration with academia, but the core problem statement is a fact in the industry. Data for the build up of the proposed framework has been generated in the research project and in joint activities with the companies, but will not be accounted for in detail here. The theoretical frame of reference used in this paper has been chosen to address the research projects contents in general. The proposed framework presented here is part of an approach, which is going to be tested and evaluated in the forthcoming months as a pilot case of redesigning the seating system of the car. 3 INTANGIBLES – WHAT IT IS Webster’s New World Dictionary defines “intangibles” as: that cannot be touched, incorporeal, impalpable; that represents value but has no intrinsic value or material being; that cannot be easily defined, formulated or grasped. The concept of the Intangible Values and its benefits has been investigated in service context [12], but also the relation between Intangible Values and product elements as being widely investigated [13] [14]. Hence, Intangibles does not belong to only to service environment, but rather they create a “third layer” of perceived Customer Value, that is going to be sum up to the service layer and product layer. [9] Design for user experience (UX) [15]or customer centered experience design [16] are concepts developed mainly in on-line design context that try to focalize on maximizing the perceived Intangible Value, but everybody knows that even more product oriented companies that have been able to remain highly successful during the years is because they innovate they product and services around the user experience. 4

WHAT IS THE PROBLEM: CONSIDERATON OF PERCEIVED INTANGIBLE VALUES IN EARLY PSS DESIGN Lindstedt and Burenius [17] define customer value with the following equation:

Benefits Value = Total Expenditure

(1)

Total expenditure is explained as being expressed in money, time and effort. Further Lindstedt and Burenius [17] provide an interesting discussion on the developer’s dilemma of providing value. They conclude that if changes are too many, the development is likely to be too costly or take too much time. But, also, with too few design changes the customer may not see the differences from precedent offerings or the competitors’ counterparts. Typically, in the latter case, gains can be made with aggressive marketing strategies, but those effects disappear quickly [18]. Another conceptual model is suggested by the Blue Ocean strategy [19], where the ambidextrous task for companies are explained as: •

Reducing costs

•

Increasing customer value

Managing trade-offs between the two . The complexity becomes even more critical when the company bases its strategy on intangible values and aims to address emotions, user experience and how the user is affected by the experiences of others, to mention a few. •

The core problem arises due to the immaterial nature of value and that it can be perceived differently depending on whom is experiencing them. Put into the hands (and heads) of engineers they are unable to compare and make trade-offs between intangibles, in such a way that can be done for cost as an example. Though, companies are aware of the importance of intangible values. For instance, they are aware that providing a seat in the car with a cheap and “easy to manufacture” weaving (for example, with the fabric weaved on the seat with rivets) might negatively affect the comfort, thus user experience, but it becomes difficult to understand to what extend to compare and judge the trade-off regarding such costs and the perceived intangible value. It is basically being boiled down to the balancing act of perceived value vs cost of production. Steiner and Harmon provide an extensive exploratory study into the world of intangible values [9]. They categorize Intangible Values in three categories: 1. Knowledge – which is related to the customer’s perception of the company, its products and services 2. Experience – can make a product unique and valuable for the customers 3. Emotions – connected to the concepts of customer satisfaction and remembering Further, Steiner and Harmon [9] provide a taxonomy based on an extensive literature analysis in which the three categories are broken down into subcategories (among the others status, loyalty, emotions connected to memories). The approach using the taxonomy, as admitted by Steiner and Harmon, is still far from being operative, and they highlight the need of new methods and tools able to understand and measure Intangibles in the value creating process. To summarize, the gap between providing products and providing customer perceived value seems not to be that companies are unaware of the existence of intangibles or that intangible value are hard to classify. Rather the central dilemma for addressing intangible value in PSS development can be outlined as: •

A lack of methods and tools that consider customer perceived and intangible value

•

Methods that relate intangible value to the tangible elements are missing, for instance the relation of a good customer experience and the price of the offering.

•

Few approaches for acquiring customer data efficiently are applied, surveys takes time and thus are costly.

5

THE PROPOSED FRAMEWORK: PERCEIVED INTANGIBLE VALUE SIMULATION IN PSS CONCEPTUAL DESIGN The concept of Value Driven Design (VDD) grew after almost 50 years research on system engineering mainly in the aerospace sector [20]. The main goal of the approach is to find the design from a Value perspective, rather than a design that “just” meets the requirements. In the framework, no requirement is set a priori, but instead the team is asked to maximize an objective function that converts the different design attributes into a score. Literature unfolds the main benefits of VDD: it enables optimization from a system level, since the team focuses now to seek the “best design” instead of limit itself to find the design that meets only the requirements; it prevents design trade conflicts and it avoids cost growth and

performance erosion, since the solution has been optimized from a system level. Operative mathematical approaches use differential additive valuation manner [21], and cases, mainly within the aerospace industry are available. Other approaches try to instead use more qualitative methods [22], in which every value dimension is targeted with a baseline value (a value that the design must at least fulfil) and a target value (highly ambitious values). An interesting work that deserves to be mentioned has been done by Gautam and Singh [11], who propose a method of feature selection to maximize perceived customer value compared to change costs in form of development cost, tooling cost, variable cost and risks cost. Although very interesting, the approach is yet limited to incremental product development (hence not properly suited in a highly innovative context such a PSS conceptual design). 5.1 Framework for Intangible Value Simulation In this section, the proposed framework for perceived Intangible Value Simulation in PSS conceptual design is explained and clarified. A schematic view of the framework is presented in Figure 1. Step 1: Identify Value adding activities In this step the develop teams identifies who are the customers, and what are the activities they perform. For this scope, methods such as Scenario Based Design [23], with the use of personas can be very useful to understand the customer, possible differences due to different cultural context etcetera. To discover in detail the activities the customer or the product-service providers are involved before, during and after the relationship, tools such as Customer Journey Mapping [24] can be very useful. The outcome of this ideation phase is a list of different design options for every phase of the customer journey. Step 2: Functional decomposition of the scenarios Now the team is asked to decompose the identified options into product-service features and then subdivide every feature into sub-feature. Tools that suit these purposes are available; Kim et al. [25] describe the most useful in a Product-Service System concept.

Step 3: Correlating design features and Intangible Value At this step the team has to weight the different featuresub feature according perceived Intangible Value, such as emotions, knowledge, experience. To perform this task, the taxonomy proposed by Steiner and Harmon [9] is very detailed and with examples and can be used as a reference. The result of this step is a correlation matrix that relates all the feature and sub features to the different dimensions of the customer perceived Intangible Value. The scale presented in the approach and that has been used to evaluate intangible values in the example described in the next session is presented in table 1. Rating

Value Weight

Description

1-2

Dangerous

The customer perceives the feature as dangerous or extremely awkward

3-4

Negative

The feature has negative impact on the perceived intangible value

5-6

Insignificant

The customer perceives the impact as indifferent

7-8

Good

The feature has good impact on the intangible value

9-10

High

The feature provide high intangible value to the customer

Table 1: Scale for evaluating the intangibles Step 4: Calculating costs of change Here the team evaluates the costs of every change, both for the feature and every sub feature. The calculation can be made in a qualitative manner but naturally has to be based on calculations and rough estimation from previous products or experience. Costs can be of different types, for instance Gautam and Singh [11] include in Their model (which is though limited to incremental changes in traditional products) engineering cost, related to the complexity of the component and the level of change; the cost of tooling, depending on the tooling and the level of change; variable cost, related to the cost level, complexity of the change and volume of the changed part and risk cost. Other researches within Value Driven Design [21] consider Indirect Operating Costs (IOC), related to the costs that are not affected by using the product-service under consideration and Direct Operating Costs (DOC), which are related of the direct use of the product-service. Step 5: Simulation of Intangible Values and Costs At this step the correlation matrix and the costs matrix are merged with the customer journey map and the model simulates the different design parameters that constitutes the system. The result of every design concept is a scalar score. By the simulation, it is possible to change the instances of the different features, or to separate the dependency by one sub-feature to the main function, and to compare the different design options to the other by looking at the score. In this sense, the simulation is not a proper simulation in a mathematical sense (the objective is not to find iteratively the optimal solution), but rather is the designer that changes the different parameters that constitutes the PSS concept, and to compare the solutions from an Intangible Value perspective.

Figure 1: The proposed framework

Step 6: Result analysis and brainstorm about possible improvements As previously mentioned, the objective of the simulation is not to find the optimum (since the model is based on assumption and it might take long for complex systems), the team is asked to change itself the different design parameters as get as many scores from different PSS concepts as possible. By the scores, it is possible to see the different implications between the various aspects and to determine important direction by which based future brainstorming sessions to refine and improve the concept. The potential of the method will be further discuss after the presentation of the example at the end of the paper. 6

INTANGIBLE VALUE SIMULATION IN PRACTICE: EXAMPLE The presented example is based on a car sharing system. It has emerged from discussions during workshops with students and industrial partners, although it cannot be considered yet a representation of a real industrial case. The authors also struggled with the necessity to present a clear example contra posed to the space restriction of the paper, so the example is based on many assumptions. Let us consider the case of a car manufacturer that wants to move from a traditional business case based on manufacturing and selling cars towards a “total” offer in which the company is responsible of filling the fuel, maintenance of the cars etcetera. In the following section, the different steps described in the previous chapter are unfolded and explained.

•

Help-desk: the impact on experience can be low (the customer has to go to the help-desk to pick up the keys), but he impact on the emotions towards the brand can be higher than a web-site since the customer has a face-to-face relationship with the company’s staff.

•

Pay in advance vs. pay after the service, pay in advance has negative affect on the customer knowledge about the company, since it might perceive low trustworthiness by the company towards him or her.

•

Drive by wire: the drive by wire can have positive impact on the brand knowledge (the company might be labelled as high-tech and high-profile), but dangerous impact on experience, since she/he can perceive it still too dangerous compared to mechanical devices. This is related to past memories on using previous cars.

6.1 Identify Customer Needs and activities For the sake of simplicity it has been decided to take as customer group only young Swedish singles or couples, with a possibility to spend less than 500 SEK, ca. 50 Euro per month for transportation. It has also been decided to focus the Customer Journey Map into six phases: searching/booking, reminder, car arrival/collection, first touch, driving, leave the car. Some possible design options for every phase have been listed out, hence creating different possible scenarios. 6.2 Functional decomposition of the scenarios The functional decomposition has been done using a binary relationship, indicating with 1 if the two features (defined here in a broad term as physical artefact or moments in the Customer Journey Map) are related to each other or with 0 if the parts have no relationship with each other. 6.3 Correlating design feature and Intangible Values The different design feature has being weighted in a qualitative manner using the scale presented in table 1 and using the taxonomy presented by Steiner and Halmon [9], that categorize Intangible Values according to knowledge, experience, emotions. Actually the taxonomy further subdivides the three categories into sub categories, but for the sake of simplicity it has been decided to valuate the feature in a broader sense using only the three categories listed above. The correlation matrix between features and Intangible Values is presented in table 2. The table is partly extrapolated by the design workshops done with students and the industrial partners. Some example on how the weights has been given is listed below: •

Website: the customer feels great impact with the knowledge of the service of the company, and also to get the opportunity to know experience by other users.

Table 2: Correlation matrix between feature and Intangible Values 6.4 Calculation cost of change The costs are calculated for every feature and sub feature, and are based on previous data about product or service or given in a qualitative way. The result of the session is a correlation matrix between features and costs of change, and it will be used to calculate the cost of change for the different selected design options using the preliminary model that will be explained in the next session. 6.5 Simulation of Intangible Values and Costs using model After obtained the functional decomposition matrix, the correlation matrix, the correlation between features/ intangible values and the cost matrix for every feature and sub feature, the value for the company is simulated though a model. The model is yet at the early stages, but the main idea behind it can be outlined. The Value for the company, is defined as following:

Value =

Perceived Intangible Value Cost of Change

(2)

The value for every design option is thus calculated in the model as following:

N

N

N

∑ P ⋅ (K + Exp + Emo ) + ∑∑(K i

V=

i

i

i

1

1 N

N

1

Where

i

1

+ Exp ij + Emo ij ) ⋅ Pi Pj

1 N

∑ P ⋅ C + ∑∑ C i

ij

ij

(3)

⋅ Pi Pj

!

Pi assumes only a binary number 1 or 0

Ki

depending if the feature is selected or not. With

is

meant the Knowledge lever of the Intangible Value related to the selected, Exp i is the value related to the user experience, and

Emo i is the Emotional lever of the

selected feature. The multiplication

Pi Pj

is intended to

deal with the functional decomposition matrix, so that the multiplication becomes 1 if the sub feature j is part of i or 0 otherwise. The cost part is calculated according the same rule, for simplicity has been consider in the equation to have only one value, but naturally costs are of different nature and their calculation will be investigated in the research future. 6.6 Result analysis and brainstorm about possible solutions After the simulation, the team can obtain a table with the different solutions (with different selected features) evaluated from a Value perspective, where perceived Intangible Value has been core part of the evaluation. An instance of such table is presented in table 3, even though it has to be considered just demonstrative. OPTION

FEAT.1

FEAT.2

FEAT.3

OP1

Web-site

Pay in advance

GPS

3.5

OP2

Drive by wire

Pay at the end

Tablet

3.8

OP3

Wipes-rain sensors

Proximity key on the phone

Company helpdesk

5.7

OP4

Personalized brand on keysdashboard

Key

Internet on car

7.7

improvements need to be done. In line with the increased research on intangibles and PSS in the engineering design field, attention from the service development area on engineering specific activities in early stages could likely progress industrial practice of PSS design. Such – collaborative research efforts are thus suggested. The paper has tried first to unfold the sphere of the Intangible Value, clarifying what they are that they are not related only to the service development, but to product attributes as well. For instance, do we buy a watch just because it tells us the hour? Or because we also recognize its brand? Secondly, it brought the intangible value discussion into PSS conceptual design phase, stating that companies are aware of the intangibles and the benefits of providing a better customer experience, but that actually the discussion goes away when it is nearly impossible to relate Intangible Values to “tangible ones”, such as costs. Hence, the need for new method and tools shows evidence. A new framework to assess intangible value in early PSS development has been presented. The purpose is to assess the intangible value three dimensions of Knowledge, Experience and Emotion. In the framework the values are then evaluated with the cost of change, and it makes a base for further development and improving sessions. The framework is still in the preliminary stages, and it currently under development in the authors’ universities in collaboration with industrial partners.

VALUE 8 [1] [2]

[3]

Table 3. Sample of results after the simulation The PSS development team is now able to compare different options from a Value perspective. The results of the simulation will require naturally to be approved by decision makers, but Engineers can use the results as a base for reasoning around the choice of one solution that seem more costly but that will gain Intangible Values such as brand acknowledgment, word-of-mouth etcetera. It can also prevent the risk of “pushing” new high tech features that are not probably ready for the market, because still “rooted” on experience of past memories (for instance, still many people feel unsecure when using an electrical handbrake in the cars of latest generation, and would prefer the mechanical device. The approach can also used as a base for brainstorming workshops, when looking at solutions that have similar value the team can be asked to force itself to brainstorm on how to improve one solution and make it win. 7

CONCLUDING REMARKS AND FUTURE RESEARCH The framework presented here is the first step in a research effort aiming for a model that can be implemented in industry, but, of course, further

[4]

[5]

[6]

[7]

[8] [9]

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[18] R. McAdam and D. Leonard, “Reengineering based inquiry into innovation in the front end of new product and service development processes,” International Journal of Product Development, vol. 1, no. 1, pp. 66–91, 2004. [19] W. C. Kim and R. Mauborgne, Blue ocean strategy: How to create uncontested market space and make competition irrelevant. Harvard Business Press, 2005. [20] P. Collopy and P. Hollingsworth, Value Driven Design. American Institute of Aeronautics and Astronautics, 1801 Alexander Bell Dr., Suite 500 Reston VA 20191-4344 USA,, 2009. [21] R. Curran, T. Abu-Kias, M. Repco, Y. Sprengers, P. van der Zwet, and W. Beelearts, “A value operations methodology for value driven design: medium range passenger airliner validation,” in Proceeding of the AIAA Annual Science Meeting, Orlando 2010, 2010. [22] M. Bertoni, A. Bertoni, and C. Johansson, “TOWARDS ASSESSING THE VALUE OF AEROSPACE COMPONENTS: A CONCEPTUAL SCENARIO,” Proceedings of the 18th International Conference on Engineering Design (ICED11), Vol. 9, pp. 226–235, 2011. [23] K. Yanagida, Y. Ueda, K. Go, K. Takahashi, S. Hayakawa, and K. Yamazaki, “Structured scenariobased design method,” Human Centered Design, pp. 374–380, 2009. [24] S. Nenonen, H. Rasila, J. Matti, and S. Karna, “Customer Journey–a method to investigate user experience,” in Proceedings of the Euro FM Conference Manchester, 2008, pp. 54–63. [25] Y. S. Kim, S. W. Lee, J. H. Lee, D. M. Han, and H. K. Lee, “DESIGN SUPPORT TOOLS FOR PRODUCT-SERVICE SYSTEMS,” in Proceedings of the 18th International Conference on Engineering Design (ICED11), Vol. 1, 2011, pp. 288–298.

Paper C

Enhancing supply chain collaboration in automotive industry by value driven simulation

75

Paper C is published as:

Panarotto, M., T.C Larsson, and A. Larsson. 2013. “Enhancing supply chain collaboration in automotive industry by value driven simulation”. Submitted to the 19th Conference on Engineering Design (ICED13). Accepted for publication, Seoul, South Korea (Reviewer’s favorite – top 10%).

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INTERNATIONAL CONFERENCE ON ENGINEERING DESIGN, ICED13 19-22 AUGUST 2013, SUNGKYUNKWAN UNIVERSITY, SEOUL, KOREA

ENHANCING SUPPLY CHAIN COLLABORATION IN AUTOMOTIVE INDUSTRY BY VALUE DRIVEN SIMULATION Massimo PANAROTTO (1), Tobias C. LARSSON (1), Andreas LARSSON (2) 1: Blekinge Institute of Technology, Sweden; 2: Lund University, Sweden ABSTRACT This paper presents a computer-based approach for conceptual design that aims to enhance collaborative supply chain development in the automotive sector when dealing with product-service development or radical innovations. The focus of the research has been to design a simulation approach that will enable designers and managers to simulate and evaluate the value of different design options for the different stakeholders involved in the development process and to have insights about the implications between business model innovation and the engineered aspects of the solutions early in the conceptual phase. The approach is presented using a case study within the current project, after following a team responsible for the car cockpit. Four possible scenario have been simulated and evaluated using a commercial simulation software. The main advantage of the proposed approach is to enhance the awareness among designers and managers of the value of different design options, and allow them to explore further how business and design aspects profoundly affect each other, in order to support early decision-making in the design process. Keywords: value engineering, simulation driven design, product-service systems Contact: Massimo Panarotto Blekinge Institute of Technology Mechanical Engineering Karlskrona 371 32 Sweden [email protected]

ICED13/323

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1 INTRODUCTION Manufacturing companies have traditionally focused their design and development activities on realizing technical and engineering aspects of physical artefacts. The changed business climate due to increased competition on the global market have forced these companies to continuously innovate their product portfolios as well as exploring new type of business models (Tukker and Tischner, 2006). This has led to an increased attention of creating radical innovative product concepts as well as initiatives as Total Offers, Functional Products, Product-Service Systems and Integrated Product Service Engineering, hereafter named as PSS in this paper (Meier et al., 2010) (Baines et al., 2007) (AlonsoRasgado et al., 2004). The automotive industry is experiencing this changing context. Car manufacturers and their suppliers have in recent years explored new ways of providing customer value, including new types of business models (such as functional provision, car renting, car sharing, car pooling) (Katzev, 2003). The market has evolved rapidly, largely driven by the consumers’ needs to make a more sustainable choice for their transportation habits as well as increased requests for well-being (Botsman and Rogers, 2010) besides the classic feature improvements. New actors are currently taking market shares that traditionally belonged to car manufacturers and dealers, such as car sharing platforms (Shaheen et al., 2009). Peer-to-peer car sharing represents a recent phenomenon in the arena (Hampshire and Gaites, 2011). Customers are spontaneously experimenting with new business models using the car as a platform, a process though which a person either rents a vehicle from someone else, or conversely, rents their own vehicle to someone else, usually by the hour or day, via a third-party operator that facilitates the exchange (Lewis and Simmons, 2012). Some car manufacturers are reacting to this evolving situation, introducing new services in order to exploit the opportunities offered by the new market. Recent examples include the partnership between General Motors and a US based peer-to-peer car sharing platform. Car owners who subscribe to GM’s OnStar system will be able to rent their vehicles out to other drivers. GM’s OnStar system makes use of satellite-connected on-board services, but its capabilities have up till now been used mostly to call for assistance in case of emergency. Under this new partnership, the peer-to-peer sharers that subscribed to the platform can use the OnStar system to reserve a car and lock and unlock the door via a mobile app. From the standpoint of a car Original Equipment Manufacturer (OEM) and its suppliers collaboratively working on the development of new models and technologies, it is extremely important to gain a better understanding of the consequences of their design decisions on the overall system (e.g. the customer journey), the value for the different stakeholders or a new function’s impact on future scenarios. In this context, the satisfaction of the design requirements does no longer assure that the design will create an “uncontested customer value”, and thus there is a need to integrate the design requirements with more qualitative measures that link the product features to the stakeholders’ needs and expectations, and increase the ability of the design team to make design decisions taking into consideration future trends as well as new business models. The main objective of this paper is to provide an understanding of the challenges that a design team faces when dealing with the consideration of the value contribution of different design alternatives in the conceptual phases. Special emphasis has been given to the consideration of the impacts on customer and the supply chain value provided by a design option in relation to new business models, and how technical design and business model design mutually affect each other. The paper also describes a conceptual approach aiming at overcoming the underlined challenges at the preliminary design stages. The approach is described in terms of key elements, actors involved and activities performed. 2 RESEARCH APPROACH The work reported in this paper is part of a research project within the automotive industry. A Swedish car manufacturer works along with 30 companies works in a supply chain structure. The aim of the project is to explore new opportunities for the automotive industry for 2021, both in terms of hardware and new business models; hence the PSS context is relevant. The authors have observed and participated in a total of nine design workshops within the project in an 18 month timespan, being responsible directly for two workshops on the topic of value creation. 2

During these workshops and follow-up meetings the authors have collected data by informal dialogues, which contributed to frame the core problem statement and subsequently the approach presented in this paper. A case study approach (Yin, 2008) has been chosen to empirically identify the challenges when dealing with value assessment in conceptual design and the consideration of the design’s implications on future scenarios. A design team responsible for the design of the cockpit has been followed closely during a four-month period, and the case reported in the paper is mainly focused on the development of new technologies for a car’s dashboard. The findings of the study have been iteratively discussed and refined together with the project participants, and the vision for the value simulation approach has been developed and verified in collaboration with the project members. 3 ASSESSING VALUE IN THE CONCEPTUAL DESIGN PHASE A new car’s development is guided by project management practices (Midler, 1995), usually with several gates where specific decisions have to be made, and with strict timelines to adhere to. This model is often referred to as a Stage-Gate® process (Cooper, 2011), commonly used to drive the development process from idea to product launch. The elements of the model are the stages, where information-gathering activities are condensed in project deliverables and gates, where the information is assessed and decisions are made. Empirical studies in the aerospace industry (Johansson et al., 2011), an industry with complex and long development projects, which have similarities with the automotive industry, have shown that value-related information is usually not reported at gates in a clear manner, thus vale-conscious decisions are difficult because of lacking documentation to support the design choice. 3.1 What is value? Today the “greatness” of a design solution in the development in a new car model is mainly expressed as technical performances and cost. One of the participants in the project has described: “what you present is usually geometrical specifications, technical functions and costs”. Furthermore, knowing what is going to be expected by the decision makers early set the mindset for the design team on what is expected to be outcome. “You already know the set, so you prepare yourself. You know you have to put numbers on how much it weighs, and how much it costs”. In literature there are many definitions on what constitutes value, and what value a design team should consider in their decision-making process. Lindstedt and Burenius define customer value with the following expression (Lindstedt and Burenius, 2003): Customer Value =

Perceived customer benefits Use of customer resources

(1)

Where customer resources can be interpreted as money, time and effort. However very clear from a theoretical perspective, the definition needs to be turned into a more concrete and operational state. Business is also said to be all about customer value, or actually the organizations ability to create unrivalled customer value. Some people have the ability of understanding and making value-oriented decision, by experience, instinct, or training. However, based on their experiences with product development processes in Swedish and International companies, Lindstedt and Burenius state (p.14) “The capacity of a whole organization to make correct decision demands more than good instincts of a few individuals. To succeed, the concept of customer value must be turned into a concrete, measurable element that can be put to practical use, thereby providing a guiding light in all aspects of work”. The concept of Value Driven Design (VDD) is a Systems Engineering strategy that has been developed in the recent years mainly in the aerospace sector (Collopy and Hollingsworth, 2009). The main goal of the approach is to find the design through a value analysis, rather than a design that “just” meets the requirements. In the framework, no requirement is set a priori, but instead the team is asked to maximize an objective function that converts the different design attributes into a value score. Literature unfolds the main benefits of VDD, stating that the framework would help to achieve system optimization and to reduce cost erosion (Curran, 2010).

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VDD (Richardson et al., 2010) assigns numerical scores to an objective function (Value model) so that if an alternative is better than one other receives a higher score. The attributes of the system (Value attributes) describe what the design has to deliver to the relevant stakeholders (defined as the outer environment of the design), whereas the design parameters of the system (Design attributes) are primarily of interest for engineers and describe the inner environment of the design. In complex system characterized by a long lifecycle, value is dependent by the tangible components of the system (e.g. the vehicle) and dynamic operational context (e.g. the customer journey). Value is then considered as the capability of maintaining and improving the functions in the presence of change (Ross et al., 2008). Tradespace exploration (Ross et al., 2004) considers customers in the relation to the customer process context. In sectors such as the car market value is often considered intangible and highly related to the customers’ perception of the self as well as related to past memories and it is highly affected by group dynamics (Norman, 2007) (Andriessen et al., 2000) (Daum, 2003). Conceptual models to assess the intangible value exist (Steiner and Harmon, 2009), even though the complexity of the subject is in need of more research (Sullivan and McLean, 2007). 3.2 Models, simulations, prototypes The use of modeling and simulation techniques is well established in traditional mechanical engineering processes to efficiently analyze the physical behavior of a complex system, since the use of computers opens up to faster iteration loops and assessment (Sellgren, 1999). In the innovation engineering domain, “Serious play” (Schrage, 1999) brings real-world examples of how the World’s best organizations model, simulate and prototype in order to innovate. It is argued that the most important value of modeling and simulating activities does not reside in the results that these models or simulations generate, but rather in the discussion, arguments, consultations they generate and trigger. The main idea is that the prototypes that the organization creates reflect their perception of reality, as well as the organization’s own internal assumptions about risk and reward. Additionally, what the company choose not to model is equally important, since it might reveal internal taboos or assumptions unconsciously left out because they are the most threatening to their sense of themselves (Schrage, 1999). The process of early modeling and simulating turns the innovation cycle inside out: instead of using the innovation process to come up with a finished prototype, modeling and simulating “quick and dirty” prototypes will lead the innovation process, building upon the existing prototypes, enabling the capacity of raising questions and to generate new solutions and business models. Literature highlights and suggests the importance of modelling and simulating the current and future state of a company, in order to avoid negative impacts of early design decision too late in the product development process (Barton et al., 2001) (Nergård et al., 2009). The whole idea is to setup and run simulations of a product-service system’s performance (in all aspects, i.e. economic, ecologic, social, technical, intangible etc.) early in the design cycle and base design decisions on the simulation outcomes. This Simulation Driven Design approach (Bylund et al., 2004) is in contrast to using simulation towards the end of the design cycle, prior to prototype and testing or even just prior to design release, to validate and verify performance of the system. Hence, there are great possibilities to drive, rather than merely verify, innovative design concepts. Business Process Modeling (BPM) (Scheer, 2000) is a Systems Engineering methodology that has the purpose of representing processes within an enterprise, in order to improve process efficiency and quality. Modeling and simulation in BPM allows pre-execution of “what-if” analysis (Laguna and Marklund, 2005) (Tumay, 1995), with the purpose to seek for an optimization of the process. 4 SCENARIO EXAMPLE: VALUE SIMULATION OF A CAR DASHBOARD In the conceptual phase of a new car development, the vehicle is broken down in sub-systems (such as cockpit, chassis, door), broken down into the components of the system, following techniques commonly used in Systems Engineering (Schlager, 1956) practices. Figure 1 presents an instance of such decomposition, and the position of the dashboard in the breakdown can be visualized. Furthermore, the OEM and its suppliers that are involved in the design of the cockpit are involved in different markets, and the stakeholders that influence their business, and the stakeholders they refer and are interested to might be different. The car market is a highly evolving industry, where the OEM primarily acts in Business to Consumer (B2C) markets. The car provides value along a customer journey where the customer has complex 4

interactions with other individuals, organizations, services or physical artifacts that are within or without the control domain of the OEM. Customer attributes value on they customer journeys not only on the performance features of the car but also on emotional and conditional feelings. The B2C markets are characterized by rapid changes over time, and in some cases customers spontaneously start new business models using the car as a platform, as in the case of peer-to-peer car sharing.

Figure 1. Instance of the breakdown of a vehicle

Suppliers develop products together with the OEM but are at the same time actively involved in other B2C or B2B (Business to Business) markets. In some cases, they are interested to use the component or the technology they are developing as a platform to increase sales in markets that do not belong to the automotive industry. The Value Network (Allee, 2000) is thus complex and different stakeholders are involved. Figure 2 shows an instance of the Value Network taking for the sake of simplicity the case that the OEM and two suppliers are involved actively in the actual design of the dashboard in the conceptual phase. The Value Network comprises other seven stakeholders, and the interests are different between the different companies. For example, the first and the second supplier would like to open business opportunities with construction equipment companies with the new technologies that will be enabled in the dashboard (e.g. Augmented Reality). New groundbreaking features are expected to be present in the cars of tomorrow. Many of these technologies are competing with each other and it is very difficult to predict which will be the winner. Cars are expected to have autonomous drive, to turn electric and to communicate with other vehicles in the surrounding infrastructure and hence acting as a safety means. Cars will also be able to track our use habits in order to automatically customize the interior and exterior based on our preferences. Given this context, it becomes challenging for the design team responsible for the design of the cockpit to understand how the design of a component (such as the dashboard) could contribute to the highest value in five or ten years in the automotive or construction equipment industry. It is even more difficult to understand the impact of the components in relation to new business models. Revisiting the example provided in the introduction, an add-on feature such as GM’s On Star system used for emergency calls becomes now crucial to determine the success of a new business model (such as peerto-peer car sharing) and then open up entirely new opportunity for the car company to be a firs-mover in the new market. For a design team designing new technologies and features for the dashboard becomes less intuitive to position the component in the overall system, and considering the stakeholders’ needs in the view of new business models. For example, in a traditional business model a touchscreen and Augmented Reality might provide customer delight and thus the great value. The combination of the dashboard with a system of sensors and software that is able to mine data and give information about the state of the car (state of maintenance etcetera) displayed trough the dashboard might help the user to lend the cars to other people and to attract “skeptic car borrowers” (people that would like to borrow the car but are afraid of not knowing how the car has been used). Conversely, in a traditional business the user might not perceive the information so valuable, since she knows the state of the car and how it is has

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been used, since she is the only user of the car. Thus the software might be perceived only as costs and an unwanted function.

Figure 2. Value Network and stakeholders involved in the development of a car dashboard

Considering the complexity and the challenges involved in the design decisions, it appears clear that considering value-oriented issues becomes challenging for an Engineering design team. Collaboration in conceptual phases with other professionals working closer to customers (such as Marketing and sales) is often lacking (Damian, 2007). The importance of this cooperation has been pointed out by one of the participants in the project: “without sales and marketing and such, it is very difficult to get important feedback into the project from potential customers”. Commercialization aspects of a new technology are perceived to be taken too late in the downstream process. The considerations of these issues in the early stages are difficult, since Engineers usually do not have enough competence in those domains, or the competences and documentation requested to Engineers are expected to be too broad that at the end they become very difficult to manage within the project timeframe. Another participant in the project has pointed out on this regard: “at the end, it becomes more paper work and Powerpoint than Engineering”. Hence, the value consideration for the different stakeholders is often left to the individual’s own capability to make the right decisions. Additionally, time to dedicate to customer-value related activities and thoughts is often scarce, and one of the crucial factors is considered to be the ability of the project team to trust the work in an open way, and increase the degree of freedom. These reflections suggest a need for an approach that integrates traditional design requirements with more qualitative dimensions being able to assist a design team in taking more value-oriented decision in the conceptual design phases. The authors have developed a conceptual scenario using the development of a car dashboard as a case study. Figure 3 shows the actors involved in the project, the series of activities and the documentation needed in the scenario. The phases can be considered to be mapped alongside the activities usually performed in the Stage-Gate ® process (Cooper, 2011).

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Figure 3. Scenario phases

3.1 Scenario generation/personas The scenario begins with creative workshop within the design team. These workshops assume the form of multi-disciplinary work where designers are integrated with professionals (called “Business model Innovators” in the scenario), coming from other departments, such as marketing and sales. Tools and methods used in this phases are Scenario-Based Design (Carroll, 2010), Kano Model (Kano et al., 1984) or Business Model Canvas (Osterwalder and Pigneur, 2010). The objective of this work is to identify possible customers, their real needs and expectations and possible actors involved in the process. The objective of this phase is also to have a general and shared view of what can be possible both from the business and technical side. The teams are encouraged to work with a high degree of freedom. The phase ends with a generic description of the possible scenarios; the teams can share the canvas and the personas in an easy way (though the use of games displayed with a smartphone app, for example) and have this generic information tangible in the walls of their offices. In 2nd phase two experts; one Business expert and one Technical expert are assigned as responsible for the value assessment process, and their purpose is to mutually collaborate making sure that the process is performed, while supporting each other, showing what is possible from the two different sides. 3.2 Define Value models and attributes Value models for the different personas are then defined based on generic needs related that the customer has along her/his journey. A list of eight of this needs for the car buyer can be performance, driveability, safety, durability, security, reliability, customer image, profitability. The need profitability is consider one “exciter” for the car buyer in the scenario, considered a young customer with the willingness of earning money with the car. The project leader together with the Business and Technical expert list also the current cost drivers that the customer has along his journey: Fuel, insurance, depreciation, financing charges, maintenance and reparation. Different needs are more important than others, thus the team has to assign weights on needs and on costs, based on their impacts on customers. The project leader and the managers can then define a list of Value Attributes, both for the designers and the Business Model Innovators. Value Attributes are generic life-cycle oriented parameters applicable to products and business of different kinds. The team of managers has also to assign weights on the different Value Attributes based on their ability to satisfy the customer’s needs.

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3.3 Gathering Information/Knowledge In this phase, The Business and the Technical experts jointly start to gather value-related information from stakeholders and other relevant sources for the Value Analysis. This information cannot be considered only based on cost and sales information, but has to contain prevision trends (such as the estimation of peer-to-peer users in 2020), or customer acceptance based on customer surveys or direct feedback. Technical information about new technologies is fundamental, as well as information about new regulation in terms of emissions. This information is very dispersed along the supply chain, and trust and cooperation between the different partners in needed. In the automotive industry, is very important that the OEM supports and drives the process, since usually is the main stakeholder and usually is also the actor with the highest resource capability in the Value chain. If information is difficult to gather because of privacy, security and IPR issues the two experts can ask for a qualitative feedback based on given set criteria. Where needed, Business Process Modeling simulations are performed, and the Business expert can request the aid of the Business Innovators that had participated in the scenario generation phase. 3.4 Computing Value models The project leader, the Business model expert and the Technical expert assist the design team of assessing the value contribution of the different design alternatives comparing the different scenarios generated in the idea generation phase. The output of the value analysis is given in form of scalar from 1 to 9, which tells the degree to which the design moves itself to a baseline score (considered to be related projects characterized by incremental improvement) and the target score (considered to be customers “feel free to dream” expectations expressed during the feedback moments or based on longterm forecasts). This way of considering and computing value has been studied, tested and implemented in recent studies within the aerospace industry (Bertoni, 2012). The value analysis is then given to the designers and suggestions for future improvements (as well as appreciations for highly value-oriented designs) are discussed and defined. 3.4 Value reporting and analysis at the gate The value contribution of the components in relations to the different scenarios is then collected in a Value Report, which summarizes the most relevant information for the decision makers, and the degree of confidence of the data collected. The report is then enclosed to the common technical deliverables and forwarded to the management team, who will analyze them in the gate meeting. In this phase, the project team will review the material and discuss together with the project team and the two experts who acted as Value analysts about the value contribution of the different options, and additional analysis is requested if needed. Eventually the gate is opened and the expectations for the next gate are communicated to the project manager and resources are allocated. 5 CONCLUSIONS AND FUTURE WORK Supply chain collaboration and involvement in the preliminary stages of the design of a new car model is very important in order to achieve a better and more effective way of working. However, in a rapidly changing environment such as today’s automotive industry, it is very difficult for a design team to consider the impact of their design choices on the value for the different stakeholders, as well as to consider the design’s value in relation to future scenario and business models. Compliance to technical and cost requirements are the main deliverables requested to engineers at decision gate meetings, and it is also difficult to map, discuss and consider the contribution of the design to the value for the complex constellation of stakeholders. Cooperation with other professional working closely to customers, such as marketing and sales, is often scarce at these stages, and the time to dedicate to value-related activities is considered limited. This calls for an approach that puts more qualitative measures alongside the technical requirements, in order to give a better understanding and awareness to the designer of the impact of their design decisions on the overall system, as well as the value for different stakeholders and in future scenarios. This paper has presented an approach aiming at overcoming the underlined challenges. A conceptual scenario has been described pointing out the key elements and actors involved. The main idea of the 8

scenario is that the assessment of the design in relation to future scenario and business models is driven by gathering value-related information during the stage activities, and the activities are coordinated by the synergic work of a Technical expert and Business expert. Future work will be to test the approach in real case application, and to integrate the approach with more quantitative data. ACKNOWLEDGMENTS The authors would like to acknowledge the financial support from VINNOVA through the Automotive Research Programme FFI and the project “Så Nätt”, and the support of our collaborating company partners. REFERENCES Allee, V., 2000. Reconfiguring the value network. J. Bus. Strategy 21, 36–39. Alonso-Rasgado, T., Thompson, G., Elfstrom, B.O., 2004. The design of functional (total care) products. J. Eng. Des. 15, 515–540. Andriessen, D., Tissen, R., Tissen, R.J., 2000. Weightless wealth: Find your real value in a future of intangible assets. Financial Times/Prentice Hall. Baines, T.S., Lightfoot, H.W., Evans, S., Neely, A., Greenough, R., Peppard, J., Roy, R., Shehab, E., Braganza, A., Tiwari, A., others, 2007. State-of-the-art in product-service systems. Proc. Inst. Mech. Eng. Part B J. Eng. Manuf. 221, 1543–1552. Barnes, T.A., Pashby, I.R., Gibbons, A.M., 2006. Managing collaborative R&D projects development of a practical management tool. Int. J. Proj. Manag. 24, 395–404. Barton, J.A., Love, D.M., Taylor, G.D., 2001. Design determines 70% of cost? A review of implications for design evaluation. J. Eng. Des. 12, 47–58. Bertoni, A., 2012. Value assessment capabilities in early PSS development a study in the aerospace industry. Botsman, R., Rogers, R., 2010. What’s mine is yours: The rise of collaborative consumption. HarperCollins e-books. Bylund, N., Isaksson, O., Kalhori, V., Larsson, T., 2004. Enhanced engineering design practice using knowledge enabled engineering with simulation methods, in: Proceedings of the International Design Conference, Dubrovnik, 18–21 May. Carroll, J.M., 2010. Scenario-based design. Int. Encycl. Ergon. Hum. Factors -3 Vol. Set 198. Collopy, P., Hollingsworth, P., 2009. Value Driven Design. American Institute of Aeronautics and Astronautics, 1801 Alexander Bell Dr., Suite 500 Reston VA 20191-4344 USA,. Cooper, R.G., 2011. Winning at new products. Basic Books. Curran, R., 2010. Value-Driven Design and Operational Value. Encycl. Aerosp. Eng. Damian, D., 2007. Stakeholders in global requirements engineering: Lessons learned from practice. Softw. Ieee 24, 21–27. Daum, J.H., 2003. Intangible assets and value creation. Wiley. Hampshire, R.C., Gaites, C., 2011. Peer-to-Peer Carsharing. Transp. Res. Rec. J. Transp. Res. Board 2217, 119–126. Johansson, C., Hicks, B., Larsson, A.C., Bertoni, M., 2011. Knowledge maturity as a means to support decision making during product-service systems development projects in the aerospace sector. Proj. Manag. J. 42, 32–50. Kano, N., Seraku, N., Takahashi, F., Tsuji, S., 1984. Attractive quality and must-be quality. J. Jpn. Soc. Qual. Control 14, 39–48. Katzev, R., 2003. Car sharing: A new approach to urban transportation problems. Anal. Soc. Issues Public Policy 3, 65–86. Laguna, M., Marklund, J., 2005. Business process modeling, simulation, and design. Pearson/Prentice Hall. Lewis, A., Simmons, M., 2012. P2P Carsharing Service Design: Informing User Experience Development. Thesis submitted for completion of Master in Sustainable Product-Service System Innovation, School of Engineering, Blekinge Institute of Technology, Karlskrona, Sweden. http://p2pcarsharing. us. com/wp-content/uploads/2012/08/P2P-Carsharing-Service-Design-LewisSimmons. pdf (Zugegriffen 10.

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Lindstedt, P., Burenius, J., 2003. The value model: how to master product development and create unrivalled customer value. Nimba. Meier, H., Roy, R., Seliger, G., 2010. Industrial Product-Service Systems–IPS2. Cirp Ann.-Manuf. Technol. 59, 607–627. Midler, C., 1995. “Projectification” of the firm: The Renault case. Scand. J. Manag. 11, 363–375. Nergård, H., Sandberg, M., Larsson, T., 2009. Towards life-cycle awareness in decision support tools for engineering design, in: Proceedings of International Conference on Engineering Design, Stanford, USA. Norman, D.A., 2007. Emotional design: Why we love (or hate) everyday things. Basic Books (AZ). Osterwalder, A., Pigneur, Y., 2010. Business model generation–a handbook for visionaires, game changers, and challengers. New York: Wiley. Ross, A.M., Hastings, D.E., Warmkessel, J.M., Diller, N.P., 2004. Multi-attribute tradespace exploration as front end for effective space system design. J. Spacecr. Rockets 41, 20–28. Ross, A.M., Rhodes, D.H., Hastings, D.E., 2008. Defining changeability: Reconciling flexibility, adaptability, scalability, modifiability, and robustness for maintaining system lifecycle value. Syst. Eng. 11, 246–262. Scheer, A.W., 2000. ARIS: business process modeling. Springer. Schlager, K.J., 1956. Systems engineering-key to modern development. Ire Trans. Eng. Manag. EM-3, 64–66. Schrage, M., 1999. Serious play: How the world’s best companies simulate to innovate. Harvard Business Press. Sellgren, U., 1999. Simulation-driven design: motives, means, and opportunities. KTH. Shaheen, S.A., Cohen, A.P., Chung, M.S., 2009. North American Carsharing. Transp. Res. Rec. J. Transp. Res. Board 2110, 35–44. Steiner, F., Harmon, R., 2009. The impact of intangible value on the design and marketing of new products and services: An exploratory approach, in: Management of Engineering & Technology, 2009. PICMET 2009. Portland International Conference On. pp. 2066–2079. Sullivan, P.H., McLean, R., 2007. The confusing task of measuring intangible value. Intellect. Asset Manag. 23, 36–41. Tukker, A., Tischner, U., 2006. New business for old Europe. J. Clean. Prod. 2. Yin, R.K., 2008. Case study research: Design and methods. SAGE Publications, Incorporated.

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ISSN 1650-2140 ISBN: 978-91-7295-262-1

2013:09

2013:09

as case study, and to explore how to support a multi-disciplinary design team in making value-conscious decisions when dealing with new product-service offerings. The research approach has involved data collection through participation in, and facilitation of, productservice design workshops in the automotive industry. Also, it has involved follow-up meetings and interviews, as well as a review of literature on state-of-the-art methods in early conceptual design phases, which describes the advantages and disadvantages of the different frameworks. The primary finding of the study is that determination of the impact of different PSS design options on customer value becomes more challenging since new elements are introduced (e.g., new business models and services). The design team requires more holistic competences in order to more fully understand changing contexts; and new methods and tools are needed in order to establish a base to define, discuss and assess what “uncontested customer value” is, and link it to the different productservice elements of the system. Secondly, this thesis proposes a conceptual approach for value simulation and assessment of different design options, where the iterative use of personas and scenario generation is combined with value modeling and computer-based simulation techniques, enabling a quick “what-if ” analysis of the various options, facilitating the identification of promising combinations of product and service elements that provide higher customer value.

Massimo Panarotto

Manufacturing companies have traditionally focused their design and development activities on realizing technical and engineered aspects of physical artifacts based on performance requirements. The ever-changing business climate, with its increased pace during the past decades, has forced industries to continuously innovate their approach toward the development of new products. Pressured also by global competition, manufacturing companies need to reconsider the traditional concept of realizing value via goods production, and shift towards realizing value through product-service combinations. Companies have begun to recognize that gaining competitive advantage and expanding market shares is not achievable purely through continuous technical improvements. Rather, it is necessary to develop a closer relationship to the customer to gain a deeper understanding of expectations, needs, and perceived value. From a development perspective, the overarching problem within complex systems such as those in which cars, aircraft, and excavators are manufactured, or healthcare is provided, is that the focus on customer value is likely to become blurred since it is difficult to understand the impact a change in any single component in the overall system has on value, and to determine a new function’s impact on future scenarios. The main goals of this thesis are to provide an understanding of key challenges when considering the value different design alternatives provide in the conceptual phases of product development taking the automotive industry

Capturing Value in ConCeptual pSS DeSign

aBStraCt

Capturing Value in ConCeptual pSS DeSign perSpeCtiVeS f rom the automotiVe Supply Chain

Massimo Panarotto

Blekinge Institute of Technology Licentiate Dissertation Series No. 2013:09 School of Engineering