Enacting product-service business models: the role of lean thinking

As competitively tendering for work is becoming increasingly difficult, and with profit margins reducing, UK construction companies are looking to differentiate their offering to clients. Safely delivering on time, within budget and to the required quality standard is no longer a differentiator in a market where clients are demanding increased value, building information modelling and life cycle provision. Construction companies are therefore looking to extend their activities into business consulting, financing and operational services, which will provide new sources of revenue in addition to their core production activities. This holistic service should provide solutions that meet their client s business needs, not just their building needs, ultimately resulting in long-standing relationships that over time yield a more predictable, long-term return. Over half of the top 20 UK construction companies, by turnover, have stated their intent to provide solutions to their clients - the case study organisation in which this research has been carried out is one of those companies. Part of a group of companies, the case study company, Shepherd Construction Ltd (SCL), has a vision to deliver integrated solutions to their clients, with the ultimate aim being that companies across the group can pool their expertise and deliver a service offering unique to the industry. Existing literature states the characteristics that integrated solutions providers need to possess, and proposes models for how an organisation needs to structure itself to deliver a service. However, the applicability of these models to SCL was unknown, and along with current literature on how to enact the transition pathway being vague, highlighted an area for investigation. Since the aim of integrated solutions provision is the delivery of a service to the client that adds value, it was proposed that lean thinking could provide a means of enacting the P-S transition: the starting point for lean thinking is value (Womack & Jones, 2003). Lean thinking principles (Womack & Jones, 2003) state that value needs to flow through the value stream the series of actions that transform inputs into the completed output raising the further proposition that flow is required through the stages of the integrated solutions lifecycle (the value stream) in order to successfully deliver all aspects of the client s value proposition, i.e. the desired solution. As a long established main-contractor, or product provider, SCL s challenge to transition from products-to-services was set against a backdrop of inconsistent performance and loss of continuity of service at crucial pinch-points in the delivery process. The action research carried out therefore sought to understand these problems and develop practices based on lean thinking that could be implemented in the company to enable consistent delivery of integrated solutions, i.e. enable the products-to-service transition, and in doing so provide the basis for the wider group vision. An abductive approach was taken to the research strategy; the experiences of the participants involved in the changes prompted by the action research process were used to inform the development of new theories and practices, and evaluate them once implemented. The methods used for collecting data and accounting for the experiences of people in the company included observation, both participant and non-participant, semi-structured interviews and analysis of company records. The research findings show that lean thinking has a role to play in enabling an organisation to transition from the provision of products to services. Standard processes and tools, based on lean thinking and developed through the action research framework, are shown to be the basis for consistent and repeatable performance within the phases of the integrated solutions lifecycle. Flow of information through and between phases of the lifecycle is then shown to be essential to ensuring the client s value proposition is realised and information is not lost during the transitions between lifecycle phases. The operational framework for service delivery , one of the practices developed, itself a form of standardised work, draws on lean thinking to provide a structured, yet flexible, means of developing a plan for service delivery that is focused on the client and ensuring the client s definition of value flows through the integrated solutions value stream and is therefore continually understood, and ultimately delivered, by the whole team as the project progresses. The practices developed through the research the standard company management system, operational framework for service delivery , service delivery plan and maturity assessment are shown to have improved consistency and company performance, and to have contributed to improved customer satisfaction (the ultimate aim of delivering a service) such that the company is starting to be perceived in the marketplace as an integrated solutions provider. This research also contributes to existing theory by evidencing that the transition pathway from products-to-services isn t as smooth as current literature portrays. In trying to implement current models in a construction setting, the products-to-service transition has been problematised and deficiencies in existing characteristics and models identified. Along with showing that lean thinking provides a theoretical framework for enacting the products-to-service transition, the hybrid model of the integrated solutions lifecycle developed, along with the maturity assessment, provide new theoretical insights, such as the need for feedback loops between all phases of the lifecycle