Transforming a company from being Product-centered to being Solution-centered

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Transforming a company from being

Product-centered to being Solution-centered

Master thesis

Business Administration – General Management (MSc BA 19)

University of Groningen

Author: Roelof Derickx (s2174642)

Location: Zeist

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Colophon

Project: Master thesis Phase: Final version

Word count (ch 1-5): 14591 (including tables)

Theme: Transforming to a solution selling company

Title: Transforming a company from being Product-centered to being Solution-centered

Author: Roelof Derickx

Student number: S2174642

Contact: rjfderickx@hotmail.com +31652013249

University: University of Groningen Faculty: Economics and Business

Study: MSc. Business Administration – General Management Supervisor: Prof. Dr. Peter Zwart

Location Zeist, the Netherlands

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Acknowledgements

I would like to thank the University of Groningen, especially the Professors of the Master of Science course for Business Administration, General Management for their engaging and challenging classes. Also, I appreciate the time and support from Andrew Coulsen, Roberto del Corno and Brian Miller from Dimension Data and the fact they were willing to participate in this research and allowed Dimension Data as a case-study.

Further a special thanks to my supervisor Professor Peter Zwart for his guidance, trust, patience and belief. It is an honor to be your very last student to graduate.

Without the course Program Director Professor Peter Smid his efforts to enable me to re-enter the study and arrange a 2nd_{supervisor, I would not have graduated. I truly appreciate your last-minute actions and} going beyond ‘normal’ procedure.

And I would like to use this opportunity to express my deep gratitude to my family, and especially to my wife, Carlijn, for her continuous and unconditional support and her patience, her reviewing and her love – I could not have written this thesis and completed this Master of Science without her, thank you my love. To the rest of my family: you are now allowed to ask about my study progress.

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Abstract

Purpose – To offer an analysis of literature of transforming companies from being product-centered to becoming solution-centered and comparing theory with practice through a case-study; to provide recommendations for future research.

Design/Methodology/Approach – A review of the relevant literature, both 20 contributions identified in a search of 10 academic journals as well as a range of other published work for the broader perspective, illustrated by real-world examples. The literature study is the captured in a conceptual model which has been compared with real-life practices through a case-study.

Findings – There is no unanimous and rigorous definition of customer solutions, but rather several often broad and generic descriptions; There is no evidence found to support that a transformation to being solution-centered leads to higher margins although the internal and external drivers for transformation are acknowledged through the case-study; Customization is an essential part of customer solutions but it is a double-edged sword that requires careful consideration; There is no research found on how a company should address the pace of transformation although this is an essential factor governing the required organizational changes as well as the risk-level the company exposes itself to. Implementing the required customer-centricity for selling and delivering customer solutions has significant impact on people and processes. Adopting customer solution-based processes can work disturbing for product-centered operations to which there is a level of dependency. Until, customer solutions revenue and profit can support the investment required for transforming the whole company, theory suggests the customer solution operations can best be run isolated with proprietary processes and people. This topic of change management approach related to profit contribution requires further research.

Research Limitations/Implications – One case-study has been done; three people have been interviewed.

Originality/Value – This structured review contributes to the literature on customer solutions, by testing theory through case-study it provides insights and suggestions for future studies.

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1. Introduction

In chapter one, the topic of this thesis will be introduced with a description of its context to underpin its relevance. This introduction will lead to the problem statement as the basis for the research in this thesis. A literature study follows, of which the findings will be compared with real-life practices through a case-study.

1.1. Moving from product-centered offerings to solution-centered offerings

Over the last several decades, leading-edge firms, as well as many business scholars and consultants, have advocated the need for re-focusing substantial firm activity, or transforming the entire firm orientation, from producing output, primarily manufactured goods, to a concern with service(s) (Davies, Brady, & Hobday, 2007; Gebauer & Fleisch, 2007). These initiatives can be found in both business-to-business (e.g. IBM, GE, Microsoft) and business-to-business-to-consumer enterprises (e.g. Lowe's, Kodak, Apple) and in some cases entire industries (e.g., software-as-a-service, airplane motors as a service).

This new subject has received growing attention (Matthyssens and Vandenbempt, 2008; Reinartz and Ulaga, 2008) due to the related strategic change companies make moving from product-centered offerings to solution-centered offerings. In an increasingly commoditized and transparent global

environment, it becomes harder and harder for many companies to maintain their profit margins selling traditional products and services. Established industry players are confronting the reality that product-based differentiation is more costly and difficult to maintain than ever before, and the resulting product differences are increasingly less meaningful. Value has, in effect, migrated downstream from suppliers toward customers and, in some cases, has been “competed” out of existence. Rather than continue to resist the inevitable, companies of all descriptions in diverse industries are looking for opportunities to develop higher margin “solutions” businesses (Slywotzky, 1996; Slywotzky and Morrison, 1998; Hax and Wilde, 1999; Sharma and Molloy, 1999; Wise and Baumgartner, 1999; Cornet et al., 2000; Sheperd and Ahmed, 2000; Bennet et al., 2001; Foote et al., 2001; Galbraith, 2002; Sandberg and Werr, 2003). Driven both by competition and by new customer demands, many product-based companies find themselves moving – willingly or unwillingly – from their traditional business models based on product sales towards models based on services, and thus needing to increase their focus on services, and on solutions that encompass both service and product areas (Gebauer et al., 2005; Oliva and Kallenberg, 2003; Kindström, 2010). The challenge to the supplier is to create an organization that can package and deliver solutions (Galbraith, 2002). According to one report, 63% of Fortune 100 firms offer solutions rather than just pre-developed goods or services (Day 2004; Sharma, Lucier, and Malloy 2002).

1.2. Returning elements

Many companies today are adopting strategies to package products and services into customer solutions. However, several well-managed companies are experiencing difficulty in transitioning from stand-alone product offerings to solution offerings. These difficulties stem directly from the

organizational challenge. Companies looking to grow in a commoditized marketplace, like to say that they offer customer solutions: strategic packages of products and services that are hard to copy and can command premium prices. But most companies aren’t set up to deliver solutions that customers truly value (Gulati, 2007). This change to offering solutions depends as much on organizational

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Page 8 of 53 Ulaga and Eggert (2006) demonstrate that product and price are less differentiating factors today. Service support and personal interaction, and to a lesser degree access to know-how, have become core differentiators in business relations. This reasoning builds on Vargo and Lusch's (2004) service-centered view of the firm in which core competences and services are translated into value propositions via co-creation processes with customers.

Different academic journals have returning research articles on this topic. Returning topics in the articles that pose challenges of the transformation process are:

1. The solution (design) itself and whether the organization should choose a vertically integrated system seller offering or a system integrator offering;

2. The organizational design based on customer-centric business units;

3. Having a workforce with the required competencies for solution innovation, solution delivery and solution selling;

4. Creating and maintaining the right company culture;

5. The way performance of an employee is being incentivized, managed and measured. These topics will be addressed in the literature study in chapter 2.

There is evidence to suggest that it is not easy for suppliers to provide effective solutions that are also profitable. For example, a survey of 200 executives at Fortune 1000 firms, reports that about half of solution providers realize only modest benefits, and 25% lose money (Stanley and Wojcik 2005,

Johansson, Krishnamurthy, and Schlissberg 2003). Indeed, Day (2004) concludes that the complexities of developing solutions are difficult to master and even more difficult to copy.

1.3. Problem statement

Based on the demonstrated transformation that companies go through, or want to go through, to move from being product-centered to being solution-centered, there is a need to better understand what change is required within a company. And, if possible, to identify how it needs to change.

So, this study seeks to answer the question: “How does an organization need to change in order to transform the company from being product-centered to being solution-centered?”

1.4. Methodology

This research is exploratory with the aim of studying a complex context-bound contemporary process (Kowalkowski, 2009); the change for a company from being product-centered to being solution-centered. Based on this, a case study approach is seen to be an appropriate research strategy (Yin, 2003). The research is empirically grounded with an aim to discover emerging patterns and practices (Meredith, 1989). Through an iterative process, this research takes advantage of a systematic combining and matching of theory and empirical data, which can be regarded as an “abductive” approach to case research (Dubois and Gadde, 2002). Employing cases as illustration for a conceptual discussion is valuable, and Siggelkow (2007) argues that research involving case data overcomes a number of shortcomings of purely conceptual arguments.

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Page 9 of 53 Based on the retrieved information, an analysis will be done comparing the case data with the

conceptual model to look how the academic theory is applied in real-life. The differences between theory and actual company practices will be analyzed to provide an explanation for the differences and identify potential topics for further research. Similarities will be analyzed to confirm whether the theoretical basis is applicable.

1.5. Content

This thesis starts with an introduction of the problem and its context in chapter 1, which ends with the problem statement.

In chapter 2, the theoretical framework is given based on the research of academic articles which have been published in different journals. From this literature study, the conceptual model is developed that is used for researching the alignment between theory and practice.

Chapter 3, outlines the research design and case-study execution for this thesis. In chapter 4, the conclusions are presented of the case-study.

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2. Theoretical Framework

2.1. Introduction

This chapter will review what a customer solution is, and why companies are attracted to offer customer solutions. It will then offer a customer solution framework and analyze the organizational aspects of customer solutions by applying the 5-star model (strategy, Structure, Processes, Reward systems, People). The conceptual model extracted from the literature study will feature the elements that have been identified as being a prerequisite or important for creating a solution-centered organization.

2.2. What is a ‘customer solution’

Pioneering research on industrial marketing suggests that the origins of integrated solutions provision can be traced back to the early 1960s when firms began to adopt ‘systems selling’ strategies and organizations (Mattson, 1973; Hannaford, 1976; Page & Siemplenski, 1983; Dunn & Thomas, 1986). Systems selling is defined as the provision of products and services as integrated systems that provide solutions to customer's operational needs. According to Azimont, Cova, and Salle (1998), systems selling is now evolving beyond solving customers' operational problems to a more strategic form of marketing based on ‘solutions selling’. This involves providing strategic and consultative advice to help customers achieve strategic objectives such as the transformation of core business processes. Not every company has to sell solutions—many successful businesses offer products, services, or bundles of either or both— but companies intent on selling them must recognize that their economics, and thus their managerial imperatives, differ from those of product bundles. In the absence of such an understanding, vendors might invest in packaging a pseudo-solution that competitors can disaggregate and bid against. The crucial first step is therefore to understand what a solution is and how it differs from products or bundles of products.

2.2.1 What is a solution

In the broadest sense, a solution is a combination of products and services that creates value beyond the sum of its parts. In practice, solutions are usually born when a vendor can melt a certain level of expertise with proprietary intellectual property—a method, a product, or an amalgam of the two—to handle a problem for a customer or to help it complete a step in its business. More specifically, it is the level of customization and integration that sets solutions above products or services or bundles of products and services (see Figure 1).

Commercial integration of standard components doesn't take vendors past the simple bundling of products. But technical integration links the elements of the offer functionally—it makes the components of a given system interoperable—to create extra value: the parts snap together in beneficial ways, enabling vendors to charge a premium. A seller of call-center solutions, for example, might deliver an integrated call-receiving, -routing, -management, and -dispatch capability by combining communications equipment with server and storage hardware, application software, and training for service representatives. Yet, technical integration isn't the only way to offer solutions. Even

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Figure 1: Product or solution (Johansson, Krishnamurthy & Schlissberg, 2003)

2.2.2 What is a customer solution

When the term ‘customer solution’ is being used as in an offering a company wants to bring to the market, there are different interpretations of the term. In academic research, different definitions are used as well, explaining what ‘offering a customer solution’ represents. So, what is a customer solution? The predominant view in the literature is that a solution is a customized and integrated combination of goods and services for meeting a customer’s business need (e.g. Davies, Brady, and Hobday 2006; Sawhney 2006). Notably, there is little evidence to suggest that this view reflects or is informed by how customers think about solutions.

This is interesting because the purpose of a solution is to address customer’s business needs. If

customers viewed solutions differently, it would require that suppliers rethink what they sell to, develop for, and provide their customers. Review of literature (Foote et al. 2001; Galbraith 2002; Johansson, Krishnamurthy, and Schlissberg 2003; Brady, Davies, and Gann (2005); Sawhney (2006); Sawhney, Wolcott, and Arroniz (2006); Davies, Brady, and Hobday (2006) gives three commonalities across the definitions of a customer solution that appears in their academic and practitioner literature:

1. A solution involves a combination of goods and services;

2. The goods and services in a solution are designed (or modified or selected) to address a customer’s individual requirements; that is, they are customized;

3. Each good or service in a solution must “work with” other goods and services in the solution; that is, a solution consists of an integrated set of goods and services.

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Page 12 of 53 the sum of the individual components”. Brady et al. (2005) are one of several users of the term

integrated solution, which they define as “bringing together of products and services in order to address a customer’s particular business or operational requirements”. This integration aspect of a solution is also pinpointed by authors who do not explicitly include it in their terminology. Some who do define this type of offering merely as a combination or bundle, rather than the integration of products and services into the kind of seamless offering in which, as Brax and Jonsson (2009) put it, the sum provides more value than the individual parts.

In sharp contrast to the view that is dominant in extant literature and among suppliers, most customers view a customized and integrated bundle of products as only a part of a solution and, even then, not the most frequently mentioned part; Tuli, Kohli and Bharadwaj (2007). The vast majority of customers point to four processes as essential parts of a solution:

1. Requirements definition;

2. Customization and integration of goods and/or services, and their; 3. Deployment, and;

4. Post-deployment support.

Consistent with the work of Vargo and Lusch (2004), customers view goods such as software and hardware as mere “appliances” for serving customers. In striking contrast, few suppliers mention three of the four processes as parts of a customer solution. Thus, there appears to be a significant difference between customers’ view of a solution and that of suppliers’ (as well as that reflected in the extant literature). Given that the purpose of a customer solution is to satisfy a customer’s business needs, it becomes useful to define a customer solution that is consistent with the views of customers.

As such, a customer solution is a set of customer-supplier relational processes comprising: (1) customer requirements definition, (2) customization and integration of goods and/or services and (3) their deployment, and (4) post-deployment customer support, all of which are aimed at meeting customers’

business needs (see Figure 2). The difference in the two perspectives could be the reason why many suppliers underemphasize relational processes that customers consider crucial, such as requirements definition and post-deployment support. Suppliers' inattention to these processes arguably results in lost sales opportunities, dissatisfied customers, and lower profitability. Solution providers could benefit from supplanting their product-centric view of solutions with a relational process view. It appears that product-centric companies start their change to becoming solution-centric based on their context, hence the difference in definition between the customer and the solution seller. Becoming successful, and more profitable, in addressing customer’s business needs, seems to require the capability to use the

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Page 13 of 53 customer as the starting point for the change program to become solution-centric. A customer solution thus can be created fully for a single customer but also use standard components with a level of customization and integration.

The solutions process is often described as starting with a customer problem (Sawhney, 2006). Among such problems is the integration of an increasing number of technologies, physical components, and services (Davies et al., 2006). The concerns from which solutions are built may, as Matthyssens and Vandenbempt (1998) observe, be articulated by customers with varying degrees of precision. Bonney and Williams (2009) argue that the process of selling customer solutions does not begin with “a customer’s specification of formal and discrete product requirements” but rather with investment of more time and effort on the provider’s part to identify the problem, before it can be addressed. The definition that is used in this research is: a customer solution is an ongoing, relational process of defining, meeting, and supporting customer’s evolving needs that is based on co-creation and has a defined performance as outcome.

2.3. The customer solutions framework

Customer solutions are individually unique and differ from one another due to their customization. In order to investigate the relationship between different types of solutions and their requirements for organizational design or the motives for companies to offer them, a higher abstraction level is required. By grouping the drivers of solutions (in 2.3.1), characteristics of solutions (in 2.3.2), the process of solutions (in 2.3.3) and the outcome of solutions (in 2.3.4), a high-level framework can be identified; the customer solution framework (in 2.3.5), that helps structure the different customer solutions to be able to categorize them.

2.3.1. Drivers of solutions

What are the driving forces that companies recognize and what is the motivation to go through a challenging change process to transform into being solution-centered? Research suggests one or more external or internal drivers. Table 1 summarizes those by academic source, extract and relates them to the driver of change.

Source Extract Driver

Shepherd and Ahmed (2000)

(a) Decreasing technology and product life-cycles, (b) tightening margins, and (c) increasing commoditization of product components

(a) ICT Development, external; (b) Higher growth & margins, internal

(c) Commoditization, external Hax and Wilde

(2001)

(a) Companies seek an intimate and deep customer understanding and relationship, and (b) to develop an integrated supply chain that links them with key suppliers and customers

(a) Potential to become strategic business partners, internal

(b) Capabilities, internal Stremersch et al.

(2001)

(a) Industrial firms increasingly demand “turnkey” solutions to problems

(a) Customer problems and demands, external

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Page 14 of 53 Miller et al. (2002) (a) Pressures from declining margins for

manufactured products, and (b) demands from powerful customers (c) wanting to outsource to focus on core competencies. The attractiveness of solutions (d) growth opportunities and profit margins. In short, a solutions surplus synthesizes a value

proposition that creates especially desirable outcomes for clients – with a (e) unique capability to deliver those outcomes

(a) Higher growth & margins, internal

(b) Customer problems and demands, external

(b) Untapped market, internal (c) Customer outsourcing, external

(d) Higher growth & margins, internal

(e) Capabilities, internal Davies (2004) (a) Strong East Asian competition in

high-volume manufacturing, (b) stagnating product demand, and a growing installed base of products. (c) Liberalization and privatization of former state-controlled sectors, such as telecoms and railways

(a) Commoditization, external (b) Higher growth and margins, internal

(c) Liberalization and deregulation, external Windahl et al.

(2004)

(a) Slow growth and declining margins, (b) changes in markets and customers, (c) IT-based technologies offering new

opportunities

(a) Higher growth and margins, internal

(b) Customer problems and demands, external

(c) ICT Development, external Windahl and

Lakemond (2006)

(a) Firms that have traditionally focused on selling products, spare parts, and services face difficulties with increasing competition and declining margins

(a) Commoditization, external (a) Higher growth and margins, internal

Matthyssens and Vandenbempt (2008)

(a) Commoditization erodes the competitive differentiation of companies and often leads to a profit squeeze

(a) Commoditization, external (a) Higher growth and margins, internal

Table 1: Views on the driving forces of solutions (Nordin and Kowalski, 2010)

By categorizing these research extracts, 5 groups of drivers can be identified representing ‘internal’ motives for companies to become more solution-centered. Further, 6 drivers can be identified as ‘external’ motives for companies to become more solution-centered. See table 2 for the internal and external drivers for change.

Internal drivers External drivers

1. Untapped market ambitions 1. Commoditization 2. Higher growth and margins 2. Technical complexity 3. Capabilities (e.g., technical or international

connections)

3. ICT Development 4. Non-economic values (e.g., sustainability or

participating in solving a social problem)

4. Liberalization and deregulation 5. Potential to become strategic business

partners

5. Customer outsourcing

6. Customer problems and demands

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Page 15 of 53 A company can use multiple drivers, which will vary in its relevance and impact per driver per company. The company specific interpretation is based on their own market analysis and their available capability set. Identifying these driving forces helps companies in achieving their strategic goal(s) and anticipate market changes.

2.3.2. The characteristics of solutions

The subject-specific literature reveals the dominant characteristics of customer solutions. Although there is no single definition for a customer solution, there are 7 elements that apply to all customer solutions, see table 3.

# Characteristic Description

1 Customization The degree of adaptation of the solution’s components to the individual requirements of the customer.

2 Integration The degree of connectivity among those components that comprise the solution.

3 Range (Scale & Scope) The number of issues, functions or variables involved in the problem the solution is designed for.

4 Bundle Number of different solutions combined.

5 Proactive/Reactive Proactive solutions are tied to long-term goals and typically aimed at identification and exploitation of opportunities and in taking pre-emptory action against potential problems and threats. Reactive solutions are tied to short-term goals, are backward looking ant typically focus on solving problems that already occur.

6 Vertical/Horizontal Horizontal solutions are generic and apply across customer categories. Industry-specific solutions are referred to as vertical solutions.

7 Product/Business/Partnership The nature of the functional relationships among the issues, functions or variables involved in the problem.

Table 3: Characteristics of Customer solutions.

When a customer solution is characterized per each category in table 3, it is possible to define the organizational consequences. When a customer solution is 20% customized/80% standard, not

integrated and is horizontal, this could allow a company for organizing regional centralized delivery units for multiple customers and countries. These central delivery units take care of the 80% standard

services, which would allow for higher efficiencies than with using decentral delivery units in country, per customer.

2.3.3. The process of solutions

In academic articles there are several different processes given for developing customer solutions based on the characteristics of the customer problem.

2.3.3.1. Algorithmic and Heuristic process

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Page 16 of 53 Walsh, 2000). The (customer) solutions are comprehensible to the problem solver, with clear

connections between the nature of a problem and the decision choices available. Amabile (1983) identified an “algorithmic” sub-set of the well-structured problem, in which there is a known formula or path to the solution. An example from the real-world is, arguably, the standardized fixed-price,

materials-handling solutions provided by Toyota. Instead of buying their trucks and auxiliary services, an increasing number of customers opt for a rental solution in which Toyota guarantees levels of uptime for the equipment (Kowalkowski, 2008). Ill-structured problems, on the other hand, contain elements that are unknown, have multiple solutions or none at all, and therefore demand a significant degree of judgment in the problem-solving. The broader literature asserts that they will vary with respect to: the number of issues, functions or variables involved in the problem; the degree of connectivity among those components; the nature of the functional relationships among them; and their stability over time (Funke, 1991). A further consideration is how clearly, and how reliably components are represented (Jonassen, 2000). Problems also vary in terms of how they are communicated to problem solvers and perceived by them. Among other things, this depends on the prior problem-solving experience and familiarity of the problems solver with the problem (Hershey and Walsh, 2000). Amabile (1983) again identified and named a sub-set: “heuristic” problems, where there is no clear or easily identifiable path to the solution, meaning that educated guesses, trial-and-error and intuitive judgments based on experience are required to solve them. A real-life case example is the solutions provided by BAE for intelligent defense systems and others characterized by a high degree of technological uncertainty or novelty. The heuristic process by which such a problem is solved by a solutions provider, ranging from the more clear-cut to the more complex, will thus be strongly influenced by the nature of the problem.

2.3.3.2. Linear and Iterative process

Another distinction to be made is whether the process is linear, a rational and step-wise problem-solving sequence, or iterative and emergent, with a significant degree of interaction between the provider and recipient of the solution. Sawhney et al. (2006) are among those authors in the subject-specific

literature who describe the process as a relatively linear one, beginning with an analysis of a customer problem and ending with the identification of products and services (customer solution) that will be needed to solve the entire problem. Brady et al. (2005) emphasize, however, that this process should be preceded by informal discussions with existing or potential customers, so that the providers begin to understand their customers’ strategic needs and priorities. In other words, the responsibility for the outcome is shared and customers and providers work jointly to plan, implement and monitor the solution. This view is consistent with the assertion by Hershey and Walsh (2000), in the broader literature that the process works backwards from the provider of the solution thinking about the customer’s desired outcome to the necessary products or services (Brady et al., 2005). Other

contributors to the subject-specific literature emphasize, more or less explicitly, the iterative nature of a typical solutions process, with frequent interactions and more long-term relationships between

customers and providers, and a significant degree of trust (Tuli et al., 2007), representing this group, assert that customers frequently have a limited understanding of their own business needs, and cannot readily articulate them to a supplier. A more relational process is thus appropriate. Being a solutions provider is, they argue, about recognizing a customer’s broader requirements, including the implications of its internal operating processes, its labor situation and its business model.

2.3.3.3. Relational process

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Page 17 of 53 and Wilde, 2001; Stremersch et al., 2001; Brady et al., 2005). It is even argued by Tuli et al. (2007) that customer solutions should, by definition, be regarded as ongoing relational processes, while Hobday et al. (2005) discuss the intimate involvement of buyers in the innovation and integration processes leading up to the development of customer solutions. These characteristics are, however, probably more valid in the case of solutions connected to ill-structured problems and heuristic solutions than to those involving the well-structured and algorithmic alternatives. Furthermore, although the solutions process can usually be broken into distinct steps (Brady et al., 2005; Tuli et al., 2007), the activities within each phase need to be carried out in a more iterative manner if the solution involves a high degree of heuristic problem solving. The required depth and intensity of the customer relationship for generating successful customer solutions depends on the problem characteristics. The organizational design consequences depend on which problems the solution provider will address.

2.3.4. The outcomes of solutions

The process of creating and deploying solutions leads to certain outcomes (Nordin and Kowalkowski, 2010; Sawhney, 2006; Jonassen, 2000). This is either (1) a solved customer problem that was explicit and expressed (algorithmic) or more implicit and latent (heuristic), or (2) an improvement for the customer making its life easier of better, or (3) a generated economic, social or environmental value for the customer or supplier. When, for example, a supplier offers a solution to a charity for free, it may do so because it generates social value.

2.3.5. The solutions framework

Though the subject-specific literature reviewed, reports a great deal of research into the design and delivery of customer solutions offerings, it contains no rigorous and unanimous definition of “customer solutions”. Rather, the individual contributions offer a number of often quite broad and generic

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Figure 3: A solutions framework (Nordin and Kowalkowski, 2010).

2.4. Organization design

Product-centric companies have different strategies and therefor different processes, structures and cultures compared to solution-centric companies. Where product-centric company try to find as many uses and customers as possible for its product. In contrast, a customer-centric company tries to find as many products as possible for its customer, and it must integrate those products. From this basic strategic difference other different organizational features flow. Product-centric companies are

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Page 19 of 53 Product-Centric Company Solution-Centric Company

Goal Best product for customer Best solution for customer

Strategy Value creation

route

Cutting-edge products, useful features, new applications

Customizing for best total solution

Strategy Mental process Divergent thinking: How many

possible uses of this product?

Convergent thinking: What

combination of products is best for this customer?

Strategy Most important

customer

Most advanced customer Most profitable, loyal customer

Strategy Priority-setting

basis

Portfolio of products Portfolio of customers – customer profitability

Strategy Main offering Specific products Personalized packages of service,

support, education, consulting

Structure Organizational

concept

Product profit center, product reviews, product teams

Customer segments, customer teams, customer P&L’s

Structure Distribution of

power

Centralization of power based on line of business, authority at high vertical level

Decentralization of power based on market segmentation, authority at low vertical level

Processes Most important

process

New product development Customer relationship management

Processes Measures ▪ Number of new products

▪ Percentage of revenue from products less than two years old

▪ Market share

▪ Customer share of most valuable customers

▪ Customer satisfaction ▪ Lifetime value of a customer ▪ Customer retention

Rewards _Performance

level

Based on business unit performance

Based on company performance

Rewards Performance

indicators

Revenue and margin as KPI’s Customer satisfaction and business outcomes as KPI’s

People _Culture _{New product culture: open to new}

ideas, experimentation

Relationship management culture: searching for more customer needs to satisfy

People Approach to

personnel

Power to people who develop products

▪ Highest reward is working on next most challenging product ▪ Manage creative people

through challenges with a deadline

Power to people with in-depth knowledge of customer’s business

▪ Highest rewards to relationship managers who save the customer’s business

People Sales bias On the side of the seller in a

transaction

On the side of the buyer in a transaction

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2.4.1. Star model

The framework portrayed in figure 4, is called the Star Model framework for organization design, it is a foundation on which a company can base its design choices (Galbraith, 2002). The framework consists of a series of design policies that are controllable by management and can influence employee behavior. The policies are the tools with which management shape decisions and behaviors of their organizations effectively. In this model, design policies fall into five categories. The first is strategy, which determines direction. The second is structure, which determines the location of decision-making power. The third is processes, which have to do with the flow of information; they are the means of responding to

information technologies. The fourth is rewards and reward systems, which influence the motivation of people to perform and address organizational goals. The fifth category of the model is around policies relating to people (human resource policies), which influence and frequently define the employees’ mind-sets and skills.

1. Strategy = direction 2. Structure = power 3. Processes = information 4. Rewards = motivation 5. People = skillsets/mindsets

Per category, there are several design choices for solution-centric companies. These choices are reviewed in the paragraphs below.

2.4.1 Strategy

The company’s strategy specifies the goals and objectives to be achieved as well as the values and missions to be pursued; it sets out the basic direction of the company. The strategy specifically delineates the products or services to be provided, the markets to be served, and the value to be offered to the customer. It also specifies sources of competitive advantage. Traditionally, strategy is the first component of the star model to be addressed. It is important in the organization design process because it establishes the criteria for choosing among alternative organizational forms (Galbraith, Downey & Kates, 2002). Each organizational form enables some activities to be performed well, often at the expense of other activities. Choosing organizational alternatives inevitably involves making trade-offs. Strategy dictates which activities are most necessary, thereby providing the basis for making the best trade-offs in the organization design. For customer solutions there are different strategy paths that can be followed which will be explained below. The key success factors for transitioning and the

different dimensions within customer solutions strategy are identified as well.

Figure 4: Star model (Galbraith, 2002)

2.

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2.4.1.1. Different Solution strategy paths

Based on the conceptual underpinning of the competitive strategy literature specific for the IT market, we can identify two dimensions in which service-based value addition efforts can be mapped (see figure 5) when viewed from a customer perspective:

▪ The business process integration dimension (x-axis): a supplier seeks to add customer value by integrating a solution into the service value chain or business processes of the customer, for instance, by taking over specific administrative, engineering, financing and/or logistical tasks. The overall aim is mostly a (partial) outsourcing solution to reduce total cost-of-ownership or operation;

▪ The technical application integration dimension (y-axis): a supplier can add value by fine-tuning the technical solution to the specific needs of the customer. This is not the same as a

(traditional) product development strategy as it looks at the degree of integration in the customer's technical application. It refers to customized solutions with additional processing, programming, engineering, coupling of parts etc., in order to optimize the customer's technical process. In other words, the supplier tries to move up the customer's technical value chain. The business process dimension is the translation of the generic customer intimacy value proposition (Treacy and Wiersema, 1995); differentiation based on service innovation and customer bonding. The technical application integration is an extension of the traditional product leadership value proposition. Figure 5 summarizes the approaches. It indicates three strategies suppliers might pursue for (non-price-based) customer value addition efforts. Suppliers that seek to move up along the y-axis (path I); their value-added solution is based on thorough technical application knowledge. Suppliers mostly seek to move along the x-axis (path II). They try to gain more insight into the business processes of the customer and offer service concepts and outsourcing solutions for process management. In some instances, the ambition of companies or business units is to combine both axes simultaneously, e.g., by offering ‘plug & play’ or turnkey solutions (path III). This seems less feasible in the more highly commoditized mainstream market segments.

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Page 22 of 53 Companies which aim to create additional non-price-based value might benefit from an incremental change approach to also permit internal alignment. There are a considerable number of options available to create customer solutions, but the migration path to realize these options seems to imply achieving both external and internal alignment. In this way, the findings correspond to those of Windahl and Lakemond (2006) who also noticed that developing integrated customer solutions requires both internal coordination among business units and more intense external cooperation with other actors in the wider business network such as customers, suppliers of adjacent products and research institutes. A new business logic of customer-centric and service-based value generation must be built when product-centered companies want to become solution-centered companies. Following an incremental change approach along figure 5 creates time for this internal alignment and learning process. This finding is in line with prior studies from Johansson and Olhager (2004) who introduce the concept of alignment between service offering and service process, and Gebauer and Friedli (2005) who identify four key success factors a company needs in order to facilitate the transition from products to services:

1. “Value-added managerial service awareness” must be built; 2. Managerial roles must be redefined;

3. Employees should not fall into the service-for-free trap;

4. The companies should have a clearer understanding of their role as service provider instead of product seller.

The category examples in table 4, show extremes opposites of product- and solution-centricity. Not every solution provider will require this extreme organizational form. How customer-centric the solutions organization needs to become will depend on the type of solutions strategy that is chosen. Different solutions strategies will result in different degrees of customer-centricity. There are four dimensions within the customer solutions strategy that appear to make a difference to the organizational form. These dimensions are:

(a) the type of solution;

(b) the scale and scope of solutions;

(c) the degree of integration of products constituting a solution (see figure 3); (d) the percentage of total revenue deriving from solutions.

ad (a) There are two main types of solutions, horizontal and vertical. Horizontal solutions are generic and apply across customer categories. For example, Oracle Corporation delivers a human resources portal solution. This portal can be used for the human resources function across all industries. IBM, on the other hand, delivers industry-specific solutions. For example, e-Agency is a solution to put the agency network of an insurance company on the Internet. These industry-specific solutions are referred to as vertical solutions. Clearly, the vertical solutions require a more customer-centric organizational unit than do the horizontal solutions.

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Page 23 of 53 may also require financing. This CAD solution comprises many more products, software and services in addition to several hardware products. At the extreme end of scale and scope, a Bank Trading Room department could order state of the art trading floors for 10,000 traders at six worldwide sites. This solution requires hardware, software, and services for computers, telecom, financing and training. Large turnkey projects such as these are an extreme challenge to the organization and require a high customer-centric approach. With larger scales and scopes of the customer solutions that are being offered, comes a higher requirement for coordination and communication and a higher level of conflict between business unit interests and solutions unit interests.

ad (c) A third dimension is the degree of integration between the components that comprise a customer solution. Little integration is needed between products supplied by agriculture firms to farmers. The firms try to bundle seeds, herbicides, insecticides and consulting. However, the farmer can easily buy each as a stand-alone product from a different supplier. An example of larger scale but also limited integration can be found at ServiceMaster. They try to provide as many simple services as possible. They provide one-stop shopping for security, catering, janitorial, parking lot management, building maintenance and many other similar services. But each is a relatively independent service that could be provided by an independent service company. A more integrated offering is the set of solutions from computer companies. All components must operate in an integrated manner. So, components in the information technology industry must be able to operate with other components. By following standards, they give the customer the choice of mixing and matching different components. At the extreme are integral customer solutions where the components are unique and are designed specifically to work together. Johnson Controls, for example, designs and manufactures interiors for Toyota. Each Toyota model has a unique interior comprised of unique parts. These parts cannot be used on a Chrysler interior. The significance of the integration dimension for the organization, is the coordination that is required. The organization reflects the solution. The more interdependent the components, the more interdependent the organizational units responsible for those components. The combination of scale and scope with integration determine the coordination requirements and the organizational features to provide the coordination.

ad (d) The last strategic dimension is the percentage of total revenues that comes from customer solutions. If, like Motorola, solutions contribute 10% or less, the firm can simply add a solutions unit whose task is to integrate the firm’s products into solutions. When the percentage gets higher, like at IBM, the company has sufficient volume to specialize the solutions units that serve different customer segments. Instead of one solutions unit, IBM has about twelve units, each specializing in a customer segment.

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2.4.2. Structure

The structure of the organization determines the placement of power and authority in the organization. Structure policies fall into four areas:

1. Specialization; refers to the type and numbers of job specialties used in performing the work; 2. Shape; refers to the number of people constituting the departments (that is, the span of

control) at each level of the structure. Large numbers of people in each department create flat organization structures with few levels;

3. Distribution of power; in its vertical dimension, refers to the classic issues of centralization or decentralization. In its lateral dimension, it refers to the movement of power to the department dealing directly with the issues critical to its mission;

4. Departmentalization. Departmentalization is the basis for forming departments or business-units at each level of the structure. The standard dimensions on which departments are formed are functions, products, workflow processes, markets, customers and geography. Matrix structures are ones where two or more dimensions report to the same leader at the same level.

2.4.2.1. Specialization

When offering customer solutions with a high level of customization and integration, this requires a high number of specialist roles per customer. Although the specialist skills and knowledge are likely to be relevant for more than one customer (solution) within a certain market vertical, other market verticals require different specialist skills and knowledge. Therefore, the number of market verticals that a customer-centric company targets and the number of customers per vertical, drives the number of specialist roles required in the customer facing organizational units (sales, marketing, services). Specialist resources can be scarcer than more common roles and capabilities. Consequently, customer-centric companies structure teams of specialists in such a way that they can be utilized in as much customer solutions deployments as possible.

2.4.2.2. Shape

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2.4.2.3. Distribution of power

Product offering companies package functions and features to create value in a product. Investing in research and development to create new innovative products is a method to sustain or improve the packaged value for future offerings. The company’s R&D activities are typically centralized for efficiency reasons. This set-up stimulates centralization of power as the marketing function will need to work close with the R&D department to share the expected future customer requirements and to maximize the value offered by the current products to fund new investments in R&D. With the product representing the majority of the value offered by the company, this allows for, and maybe even stimulates, the centralization of power in the top levels of the company.

Solution offering companies start the process of producing the solution by agreeing on the requirements for the solution with the customer. Part of the solution consists out of services which are created and consumed at the same time by and sometimes with the customer. This set-up stimulates

decentralization of power as decisions on features, functions, pricing and risk acceptance need to be taken per customer by a team that can assess the situation well enough to make the best possible decision. With the customer knowledge of the company, employees and their competencies represent the majority of the value offered by the company, this allows for, and maybe even stimulates, the decentralization of power to the lower levels of the company delegating corresponding profit & loss responsibility and goals.

The need for active leadership has been mentioned. The addition of customer-centric units to the product-centric units causes a natural power conflict through the different levels within the organization over power location. If not legitimized and resolved, this conflict can easily lead to an internal focus and a loss of competitiveness. The primary means for managing and resolving conflicts between the product- and customer-focused units is through management processes. These processes permit a top-down element to be added – not substituted – to the bottom-up element present in business unit

organizations. The biggest change for leaders is usually the shift away from a one-on-one style. In the product organization, the CEO and her or his management team relate to one business unit at a time. In the solution organization the front-back structure and the spreadsheet planning process assume a more interactive problem-solving process with multiple product and customer unit managers. Many leaders are unable to manage these tension-filled processes. If a management team cannot lead through these processes, it is advised to stay with small scale and scope solutions. Solutions strategy is a team sport and a conflict resolving sport.

2.4.2.4. Departmentalization/Business-units

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Page 26 of 53 possible by treating the standard components in the customer solution as products and allowing for customization and integration work for the remaining components by customer-centric departments (Foote, Galbraith, Hope, & Miller, 2001; Galbraith, 2002). These authors describe how large vertically-integrated manufacturers including IBM and Oracle Corporation have reorganized for solutions provision. In a shift away from traditional structures, product units are being reorganized to become back-end providers of standardized and replicable components that are combined into solutions provided by newly-formed customer-facing units. These front-end units are based on temporary projects which are continuously formed, combined, and disbanded around each customer's need for a solution.

2.4.3. Processes

Information and decision-making processes cut across the organization’s structure; management processes are both vertical and horizontal. Vertical processes allocate the scarce resources of funds and talent. Vertical processes are usually business planning and budgeting processes. Horizontal–also known as lateral–processes, are designed around the workflow, such as new product development or the entry and fulfillment of a customer order. In the following paragraphs the initial processes of developing solutions (2.4.3.1.), selling (2.4.3.2.) and marketing solutions (2.4.3.3.) will be reviewed.

2.4.3.1. Solutions development process

Similar to product-centered companies that use new product development processes, solution-centered companies use new solution development processes to produce customer solutions. From literature study it can be concluded that customer solutions combine: products, services, customization, integration. In paragraph 2.3.3. it is explained how customer requirements can be identified. As the customization and integration are customer specific, these components follow the process of bespoke development work that is offered on time & material basis. Producing the correct solution offer for these components is dependent on the company having people with the right capabilities available (i.e. Service Architect, Solution Architect, Enterprise Architect, Sales). Producing the correct solution offer for the services component requires the company to create a new process that produces (new) services, the New Services Development process (NSD). For transforming from product-centered to solution-centered this process is critical.

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Page 27 of 53 constant customer interaction that can be represented by a circle consisting of four stages; (1) Market Sensing, (2) Offering Development, (3) Sales and (4) Delivery. The framework is circular, which implies that companies must go through the stages continuously and not become complacent after completing one revolution. Furthermore, after each stage, companies should reﬂect upon the previous phases and review experience of the process (both success and failure) to learn how to improve NSD (Bessant and Davies, 2007). As Grönroos (2008) points out, potential customers’ voiced needs should not always be used as guidance for solution design, but rather, a focus on customer practices means that customer solutions should be based on knowledge that goes beyond expressed needs and conventional market research. This research outcome is consistent with Bonney and Williams (2009) that the process of selling customer solutions begins with investment of time and effort on the provider’s part to identify the problem.

2.4.3.2. Sales process

Since suppliers' specialized skills and knowledge will become more important to customers, salespeople will become education agents where they once were persuasion agents (Sheth and Sharma, 2008). Salespeople's knowledge of customers and solutions will become a source of competitive advantage. Interaction is therefore one of the distinguishing factors of solution offerings (Johne and Storey, 1998). The consequence of this is that companies developing customer solutions must develop their customer relationships, which in this sense, makes solution delivery, and new solution development a more complex process with a greater focus on relationship longevity, compared to product development (where R&D activities can take several years).

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Page 28 of 53 Based on customer solutions emphasis, sales processes, customers, and technology drivers, Sheth and Sharma (2008) expect a bipolar shift of the traditional product focused sales force:

1. They expect an increase in sales automation in that some traditional sales force functions will be automated;

2. They expect an increase in customer-focused sales force and an increase in global account management teams. This shift will lead to a decrease in the product-focused sales force. Moving to that solution-centered view of exchange means a move away from the exchange of tangible goods and toward the exchange of intangibles, specialized skills, and knowledge, and processes. Some of these customer solutions can now be delivered more accurately and less expensively through the Internet reducing the need for human intervention and leading to increased sales automation. In addition, a service dominant logic requires a better understanding of customers. This should lead to a rise in sales force that has a better understanding of customer needs. Two such sales forces are customer-focused sales force (for small and medium-sized customers/businesses) and global account teams (for large customers). The rise of customer-focused sales force will inevitably lead to a decrease in product-focused sales force. Many companies that succeed in moving from selling products to selling solutions replace up to three-quarters of their sales reps and often recruit high-level executives from the industry they are targeting (Johansson, Krishnamurthy & Schlissberg, 2003). They typically structure account teams around a customer relationship owner supported by industry experts and technical specialists, target relatively small pools of customers with similar business needs and try to focus more on senior executives who have fiscal responsibility for business units and less on the buyers or technical managers whom product sellers usually approach. Having completed the sale, top performers track not only their revenues but also the business value they deliver and the reactions of their customers.

2.4.3.3. Marketing process

It seems that customers find more difficulty in appreciating the value they can gain from intangible solutions, especially when the solutions are new, and where both supplier and buyer lack experience of solution quality and provision (see e.g. Mittal, 1999) – and this complexity increases further as the actual relationship itself becomes a value parameter (Ulaga and Eggert, 2006). Understanding and treating the customer as a co-producer also is one of the premises underlying the concept of customer integration developed in business to business marketing (Frauendorf, Kähm & Kleinaltenkamp, 2007; Jacob, 2006). Vargo and Lusch suggest thinking of value in terms of operant resources, that is, intangible, dynamic resources that can create value. In business marketing, research has shifted in recent years from investigating value embedded in products to understanding value creation in relationships (Payne & Holt, 1999; Ulaga & Eggert, 2006), and researchers have moved from investigating dyadic relationships to investigating interaction in business networks (Achrol, 1997; Anderson, Håkansson & Johanson, 1994; Axelsson & Easton, 1992). Companies will need to develop their ability to promote and explain advanced service-intensive value propositions. The value of these new customer solution offerings differs from that of traditional product offerings, and will often demand completely new, and more creative, promotional techniques and customer education strategies (Payne et al., 2008).

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Page 29 of 53 relational components like co-creation, relationship management, trust, capability perception are not addressed as these theories are product centric. To create a feasible marketing strategy for customer solutions Professor Bob Lauterborn (James L. Knight Professor of Advertising at the University of North Carolina's School of Journalism, Chapel Hill) developed the 4C’s framework; 1) Customer solution, 2) Cost to the customer, 3) Convenience, 4) Communication. This framework is being applied by customer-centric organizations.

1) Customer solution – why will the customer solution solve a problem or why will it serve a need. Using the Unique Selling Points (USP’s) can be valuable at this point if they are applied from the customer perspective.

2) Cost to the customer – not just the price but the total cost of procuring the solution from the customer’s perspective. This may include the amount of time it costs to procure or produce the solution; the travel costs it requires. Also, this covers cost to the customer beyond direct financial implications, such as whether the solution is build up out of components that address corporate social responsibility or are circular, having a neutral environmental impact.

3) Convenience – how easy is it for the customer to consume the solution. Within solution design this is being addressed through designing customer journeys, creating experiences, optimizing ease of use.

4) Communication – instead of pushing promotions, communication is a two-way process in which the customer expects a personal approach, where there is room for dialogue and co-creation. The customer then again helps promotions by, for example, with personal reviews on the solution value.

By using the 4C’s, a marketing department can generate a customer-centric marketing mix transforming the marketing efforts from being product-centric to being fit for customer solutions (Lombardi, 2010; Manafzadeh and Ramezani, 2016).

2.4.4. Reward systems

The purpose of the reward system is to align the goals of the employee with the goals of the organization. It provides motivation and incentive for the completion of the strategic direction. The organization’s reward system defines policies regulating salaries, promotions, bonuses, profit sharing, stock options, and so forth. A great deal of change is taking place in this area, particularly as it supports the lateral processes. Companies are now implementing pay-for-skill salary practices like the S.E. Dreyfus model, along with team bonuses or gain/sharing systems. There is also the burgeoning practice of offering non-monetary rewards such as recognition or challenging assignments. The Star Model suggests that the reward system must be congruent with the structure and processes to influence the strategic direction. Reward systems are effective only when they form a consistent package in

combination with the other design choices. The difficulty of companies that offer customer solutions is that the larger the scale of a solution, the more complicated is the measurement of product business unit performance. Accountability is also more complicated. The pricing process leads to a more

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Page 30 of 53 In addition, the larger the sale, the less frequent the sales. These fewer, larger transactions necessitate the redesign of sales compensation packages with less commission income and more salary.

2.4.4.1. Rewards and people

Realigning and designing new reward systems to match increased solution driven performance is thus a key strategic issue (primarily for top management), and one that will also act as a strong internal symbol of the new solution-based business model and help establish solutions as vital part of the company. As established above, solution-centric companies will experience tensions between product and customer units, require more intra-firm collaboration, need temporary teams to be formed and dismantled whilst being on the customer side of the transaction. To design a reward system on individual level that rewards individual performance is ineffective. The main reasons are that the individual employee has substantial dependencies on others (either team members or other teams) and that it will allow the employee to focus on personal performance where the solution-centric company requires collaboration, information sharing and trust. Therefore, most solution-centric companies work with reward systems that are based on overall company performance and customer satisfaction. These types of reward systems help Human Resources with attracting the right talent as more stable and predictable reward systems that allow the salesperson to be on the customer side and be rewarded for taking that position will be attractive for value driven employees and not be attractive for employees that seek transaction-based reward systems.

2.4.5. People

This area governs the human resource policies of recruiting, selection, rotation, training, and

development. Human resource policies – in the appropriate combinations – produce the talent required by the strategy and structure of the organization, generating the skills and mind-sets necessary to implement the chosen direction. Like the policy choices in the other areas, these policies work best when they are consistent with the other connecting design areas. Human resource policies also build the organizational capabilities to execute the strategic directions. Flexible organizations require flexible people. Cross-functional teams require people who are generalists and who can cooperate with each other. Matrix organizations need people who can manage conflict and influence without authority. Human resource policies simultaneously develop people and organizational capabilities.

2.4.5.1. Sales people

The large-scale solutions create a new demand for talent for account managers and project managers. The larger the scale, the higher in the customer organization the purchase decision will be made. This feature requires a more senior, sophisticated account manager. Also, there is a greater need for team-selling and for account managers to be team leaders. And finally, the larger and longer the project to capture and deliver the solution, the greater the need for sophisticated project management skills and project managers.

2.4.5.2. Financial people

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Page 31 of 53 broken into its product components and each is assigned and scheduled for a product division. But the assignment of revenue to the product units usually becomes an issue. When a solution is created, it usually contains an estimated price and prices for all the components. But when an actual order is won, the solution price may be different than planned to win the order. Then the allocation of revenue and pricing of components becomes an issue again. The issue arises on every sale that has a solutions price change. Pricing, therefore, is a major policy issue for solutions providers. They usually have pricing committees or pricing centers. For example, at IBM the finance department is active in pricing and has models based on its experience for pricing decisions and allocation of revenue. To make the decision in a timely manner and resolve disputes, the finance people make the final decision at IBM. So, the

fulfillment process requires a computational change which breaks orders for solutions into orders for products and a pricing decision process for determining revenue for solutions and products.

2.4.5.3. People culture

At least half the work of promoting cross-silo, customer-focused cooperation lies in the “softer” aspects of culture, including values and the way the company communicates them through images, symbols, and stories. Touting service accomplishments instead of, or at least in addition to, product

accomplishments through company lore can begin to shift people’s mind-sets. To support a shifting power landscape, firms must also embrace new metrics and incentives. The product-focused metrics most companies rely on—revenues, growth, and margins—don’t reward cross-silo cooperation or customer centricity. Sales commissions in some organizations encourage managers to bring in new customers rather than nurture existing relationships, for example.

Developing new revenue mechanisms based on customer operations and profitability – becomes

increasingly important if the supplier is to derive long-term sustainable advantage from service provision (Kindström, 2010). At the same time, this is one of the most difficult tasks, since it challenges the core of the product-based business model (which may well include giving services away for free in order to stimulate product sales): accepting and implementing such changes will probably involve cultural change within the organization. As such change will also have direct implications for customers and their costs, it will entail an education effort that is properly related to the customer. Managers should probably address this aspect rather early in the shift towards an increased solutions orientation, since cultural change typically takes time (Mathieu, 2001) and will often involve organization-wide adjustments (Lytle and Timmerman, 2006). If it also involves changes for the customer, the need to give it adequate time becomes even more pronounced.

Transforming a company from being Product-centered to being Solution-centered