Customer Orientation in Industrial Service Innovation Deepening the Understanding on Customers , Needs , Involvement , and Value

Aalto University, P.O. Box 11000, FI-00076 Aalto www.aalto.fi Author Heidi M. E. Korhonen Name of the doctoral dissertation Customer Orientation in Industrial Service Innovation Publisher School of Science Unit Department of Industrial Engineering and Management Series Aalto University publication series DOCTORAL DISSERTATIONS 124/2016 Field of research Leadership and Knowledge Management Manuscript submitted 14 December 2015 Date of the defence 2 September 2016 Permission to publish granted (date) 6 June 2016 Language English Monograph Article dissertation (summary + original articles) Abstract Customer orientation is a business approach that emphasizes customer value and satisfaction of customer needs. As a general approach it is widely seen as beneficial for business and innovation. Yet there is a need to better understand it in the context of industrial service innovation. This dissertation is aimed at filling that research gap. The traditional view of innovation in the industrial context has emphasized technology and physical goods. Recently manufacturers' focus has shifted from goods to services, product-service systems and customer solutions. Simultaneously the discussion on user driven and open innovation has questioned the role of technology. The importance of customer orientation for manufacturers has grown as they have turned to service providers and as open innovation has gained ground in industry. At the same time industry has had challenges in becoming customer oriented and in innovating industrial services. This article dissertation based on four published studies employs abductive case research strategy. The empirical data has been collected from 31 manufacturing and technology companies in the B2B context: 16 in the supplier role and 15 in the customer role. Two of the published studies are multiple case studies, one is a single case study, and one is a theoretical study. The theoretical contributions are a novel framework of customer needs in the B2B context, an illustration of different innovation types through a single conception of innovation, and novel perspectives on utilizing open and closed innovation. The four studies together deepen the understanding on nested customers, business customers' needs, customer involvement and customer value. The dissertation examines customer orientation as an evolving concept that can be applied in various ways in different contexts. The managerial implications highlight transformation of industry that has manifested itself as servitization and that is foreseen to accelerate in the near future. It is suggested that a wider view than the customer-supplier interaction should be taken and that industrial service innovation should be seen as nested systems change. Then innovation not only encompasses products and services but wider ecosystems where humans and the society are essential actors and beneficiaries. Customers and other stakeholders are inherently involved in innovation. The new approach on customer orientation requires a focus on value co-creation at multiple systems levels and in multiple directions. It also requires management of co-development utilizing both open and closed innovation, and creation of favorable dynamics for interactive learning.Customer orientation is a business approach that emphasizes customer value and satisfaction of customer needs. As a general approach it is widely seen as beneficial for business and innovation. Yet there is a need to better understand it in the context of industrial service innovation. This dissertation is aimed at filling that research gap. The traditional view of innovation in the industrial context has emphasized technology and physical goods. Recently manufacturers' focus has shifted from goods to services, product-service systems and customer solutions. Simultaneously the discussion on user driven and open innovation has questioned the role of technology. The importance of customer orientation for manufacturers has grown as they have turned to service providers and as open innovation has gained ground in industry. At the same time industry has had challenges in becoming customer oriented and in innovating industrial services. This article dissertation based on four published studies employs abductive case research strategy. The empirical data has been collected from 31 manufacturing and technology companies in the B2B context: 16 in the supplier role and 15 in the customer role. Two of the published studies are multiple case studies, one is a single case study, and one is a theoretical study. The theoretical contributions are a novel framework of customer needs in the B2B context, an illustration of different innovation types through a single conception of innovation, and novel perspectives on utilizing open and closed innovation. The four studies together deepen the understanding on nested customers, business customers' needs, customer involvement and customer value. The dissertation examines customer orientation as an evolving concept that can be applied in various ways in different contexts. The managerial implications highlight transformation of industry that has manifested itself as servitization and that is foreseen to accelerate in the near future. It is suggested that a wider view than the customer-supplier interaction should be taken and that industrial service innovation should be seen as nested systems change. Then innovation not only encompasses products and services but wider ecosystems where humans and the society are essential actors and beneficiaries. Customers and other stakeholders are inherently involved in innovation. The new approach on customer orientation requires a focus on value co-creation at multiple systems levels and in multiple directions. It also requires management of co-development utilizing both open and closed innovation, and creation of favorable dynamics for interactive learning.