Hybrid products in logistics – part 1
Hybrid products in logistics – part 2
Hybrid products in logistics – part 4
When solving customer problems, providers move between two poles: full standardization and individualized “tailor-made services”. Due to competition strategy, it is even necessary to appropriately link standardization and individualized solutions in specific proportions, depending on buyer preferences, which requires analyzing many combinations of services in relation to processes, as well as possible results to be achieved.
Application aspects of hybrid products
The problem of offering hybrid products as an element increasing the competitiveness of industrial enterprises, especially in the international dimension, is raised in countries with a high share of industrial production in exports. For example, the Federal Ministry of Education and Research came to the aid of German companies (Germany, as is well known, is, alongside China, the world’s largest exporter), which launched and funded a significant three-year venture (a project implemented in the period 06.2006 – 08.2009) under the name “Business transformation for the needs of creating hybrid value networks”, in which the Fraunhofer Institute plays a leading role. The main goal of these activities is primarily a better understanding of this new type of services and the processes associated with their creation, in order to be able to shape them optimally, which means the possibility of strategic positioning and ensuring the competitive ability of exporter companies. For the purposes of the project, an expanded definition of the problem was adopted, according to which we are dealing with hybrid value creation when, in the course of integrating a product with services, not only is the product and service offer reshaped, but also value chains are reorganized and new forms of creating this value are developed. Extending a pure service offer to an offer of hybrid products leads to a further strengthening of the service sector within value chains. Business services (such as IT consulting, advisory and financial services) not only participate in every phase of value creation but constitute an inseparable component of value chains.
The venture supported by the Federal Ministry of Education and Research focuses primarily on the interrelationships between new organizational forms, new business models, new social models, and new forms of value creation. The project goals were defined for four different levels;
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for the structure level: development of new organizational and business models that will ensure a high degree of flexibility and adaptability in the value creation process,
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for the process level: development of concepts for shaping and modeling processes in relation to hybrid value creation processes,
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for the cooperation level: development of concepts and solutions aimed at transforming business relationships between parties in value networks – from transactional to relational,
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for the work level: preparation of instruments for measuring and presenting the individual contribution of service work to value creation in value networks.
The implementation of a new service-based business model is associated with high risk for both parties to the transaction, even though it also creates opportunities to differentiate from competitors, a chance for stronger ties with customers, and the activation of new development and revenue potential. Before implementation, however, several important issues must be organized so that the model can provide benefits to both parties to a similar degree. Areas requiring agreement are certainly:
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process management (the provider and the customer must jointly analyze processes to define the service needed and beneficial for the customer),
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life cycle management (taking into account the product life cycle is a condition for the proper construction of products and the proper estimation of costs and revenues),
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product adaptation (it is not about optimal product sales, but about its optimal operation; durability, ease of use, flexibility of equipment, and the possibility of reuse are gaining importance),
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proper cost determination (this is a difficult element, requiring the transfer of part of the operational risk to the customer),
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principles of pricing for the service (one must move in the range between the provider’s cost coverage amount [margin] and the possible level of cost savings for the customer),
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adjustment and optimization activities (the longer the offer is accepted on the market and the more buyers it finds, the more it can be adapted to customer expectations and improve the financial result, which is an effect of scale and learning),
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preparation and execution of the service performance contract (the promise to perform a service often requires detailed arrangements regarding issues related to risk, in particular the possibility of calculating it).
The article comes from the magazine “Logistyka” 4/2011.