Volvo ce total solution provider dirtgroup

total solution provider volvo ce

Marttiina Keituri

Johan Carlsson

HDK, University of Gothenburg Supervisor: Anna Rylander

Sara N채slund

Business & Design

2013 Spring Semester

Gabija Jankauskaite

Design, Strategy and Innovation

content Introduction 1 Conceptual framework Innovation 2 Strategy 4 Design 6

Synthesis: Design-driven strategy 11 Service Design 13 Volvo CE History 15 Strategy 16 Market 17 Internal resources 19 Value network 21 Business model 22 Volvo CE Case 24

Volvo CE’s Design-driven strategy 28

Volvo CE’s service design 29

A platform for services 30 Service sketch 33 Conclusions 34 References 35

Introduction The purpose of this paper is to formulate a design-driven strategy and to develop an integrated service for Volvo Construction Equipment. Both the strategy and service are aimed to correspond to the organizational changes and the new vision the company has committed to since January of 2012. This task also includes to come up with a way how Volvo CE can create value for its customers through this new strategy and the service.

In order to do this, we use a conceptual framework as a starting point for mapping out our strategy. The attempt is to define relevant concepts for creating this new strategy, and how they have been addressed before, concepts such as innovation, strategy, design, design thinking and service design. Formulating a new strategy also includes looking at the current situation of Volvo CE, including a research of the company history, their current vision and core values, the opportunities and challenges they might be facing, and the internal and external perspective on Volvo CE. In the core of our strategy and service integrated to it, is the notion of Volvo CE as a total solution provider. Our interpretation based on the research we have done is that Volvo CE in it’s current state acts more as a total product provider. Our strategy and service proposal is also based on

the observation that Volvo CE’s current customer journey is more of a purchase based journey. We primarily focused on the operation in Sweden, and in this context the touch points in this current customer journey can be seen as part the operations of the sales and service sector, which is operated by Swecon. Therefore the objective for our strategy and service became to find a way to connect Volvo CE more directly to the customers and also redefining what and who the customer is in this context. In addition it could include Volvo CE to have a new role between the different stakeholders or customers, in a position of a mediator providing both with their expertise and engaging them in co-creation of value.

The basis for the strategy and related service then became to make a more “total” customer journey. This involves making a value constellation of the stakeholders and consider the benefits and how Volvo CE could communicate their values to the stakeholder. Thus our attempt became to investigate whether this objective of becoming a total solution provider could be potentially achieved through more design-driven strategy and service that would ensure more direct link between Volvo CE and the customers. In addition how a relevant service could be a part of this type of strategy.

1

Conceptual framework Innovation

According to Dodgson, Gann & Salter (2008: 2), “innovation is the successful commercial exploitation of new ideas” and “the innovation process is the way firms marshall their resources to take advantage of scientific, technological, and market opportunities” (Dodgson, Gann & Salter 2008: 60). During the last half century there have been several different views upon how companies has looked upon generating innovations.

During this period innovations has also been seen as a source to competitive advantages, and accordingly been of importance for the development of strategies within the companies. Depending on how a company see upon its innovation process there are different managerial challenges and strategies to cope with the challenges.

Rothwell (1994) has identified five generations of innovation processes. The first generation was significant during the first two decades after the World War II, during this period there were large investments in the industries and the innovation process was considered as “research-push”. There was a belief that more investments in research and development (R&D) would end up in more innovations. After two decades, a new innovation process could be identified. This was because of the higher competition, which switched the focus from the company to the market, where companies responded to the market needs.

This innovation process is called “market-pull”, and the key to new innovations were more investments in marketing. Both the first and second innovation process describe a linear process which start either from the R&D or the market.

In the 70s, two oil crises hit the world economy and the companies were forced to better understand the innovation process. One or two factors could not explain the outcome, instead it was considered multi-factored. This, the thirdgeneration is called “coupling” and emphasize feedback going back and forth in this still rather linear understanding of the company, and there were a large focus on interdisciplinary teams.

The fourth-generation innovation process was identified during the early 80s. This process called collaborative is the first to take more stakeholders than the customers into consideration.

A typical example of this innovation process is the Japanese just-in-time system, which emphasized the importance of a close collaboration with the suppliers. This became a more integrated system where both internal and external stakeholders were considered important for the innovation process and the organization of companies went from a sequential departmental approach, seen in the earlier models, to a more flexible process.

(Dodgson et al. 2008; Rothwell 1994) Rothwell (1994) has also identified a fifth-generation innovation process, which is built upon processes of system integration and networking, with the aim to improve the speed, flexibility and efficiency of innovations. Rothwell (1994) also describe the fifth-generation innovation process as “lean innovation” and except strategic integration there is also a high focus on technical integration to access real time information. It is also

2

stated that the fifth-generation innovations process would have a large impact on the assembly industries. (Rothwell 1994) All innovation processes above are built upon each other in one way or another and they describe the increased complexity, that has developed in the market. More contemporary analyses of the innovation process describe an even more complicated system of networks. Chesbrough (2003) highlighted what Rothwell (1994) already described a decade earlier of the strategic importance of technological and strategic integration with the stakeholders. He argues that the lower barriers of entry put a higher pressure on the companies to innovate and a great source to these innovations can be found outside the company.

(Chesbrough 2003) Chesbrough (2003: 36) compare the two concepts open and closed innovation, where closed innovation reflect a more traditional approach where it was stated that “successful innovation requires control”, with a philosophy of the “virtuous cycle of innovation” which meant that innovations would lead to new innovations in case you could protect them and commercialise them effectively as an internal process in the company. However different factors has shattered the virtuous cycle and more and more firms go outside its borders, and this is called open innovation. This means that the boundary between the firm and its environment has become more blurred, and innovations are to a higher degree created in this

grey area. To only look at the company in a traditional way will restrict the firm’s opportunities. However, even though external activities are getting more and more important it is still important to remember the internal activities and effectively connect these two dimensions, through co-creation.

(Chesbrough 2003) However, “lean innovation” can to some extent be difficult to apply to more contemporary analyses of the innovation process.

Also Verganti (2006) highlights the blurred boundaries around the company as a source to innovation and the importance of clusters. Compared to open-innovation, Verganti (2006) also make a distinction to design-driven innovation in how these clusters are a more closed but on the other hand consists of a certain discourse which support innovations as well as the strong connections between the different actors. Compared to Rothwell’s (1994) “lean innovation” and effectiveness, Verganti (2006) also emphasize on meaning-making as a source to innovation.

This evolution of the understanding of innovations has created a more and more complex system for understanding how to create innovations and competitive advantages, where it currently is a higher focus on co-creation of value and innovation through multiple channels both internally in the company as well as in connection with external actors.

3

Strategy

Similarly to how the understanding of innovations has developed when companies have been forced to find new sources to competitive advantages in a more globalized and competitive world, the view of strategies has evolved as well. It is important to understand the historical development of the understanding of strategies and the company, since current beliefs are to a large extent based upon the historical interpretation of the firm.

Michael E. Porter’s (1998) seminal work during the early 80’s is today one of the most influential approaches to corporate strategy. Porter (1998) uses the industry as a starting point for analysis and describe it as the unit for competition, where there is a need for a unique competitive advantage to be a successful actor. To analyze the industry and corporate strategy Porter (1998) use two dimensions; industry structure (Five Forces) and positioning (generic strategies) within an industry. Both these dimensions are dynamic and change over time and they are interdependent in the guiding for strategies, a company can also either be reactive, and adapt to the changes, or proactive, and drive the changes in the industry. The fundamental assumption is that the strategy must be based upon deep understanding of the structure of the industry and at the heart of every strategy is the competitive advantage in a competitive environment.

The production process in every company is based upon multiple activities and competitive advantages grows out of how these activities are performed and organized. This process is what Porter (1998) calls the “Value Chain”, and it is in these activities, which the firm creates value for its customer. And it is

the strategy, which guides the firm in how to organize the value chain and conduct the different activities. However, it is not only about organizing the value chain in separate parts, the value chain is also considered as a system where activities have many linkages within the firm as well as outside the firm. (Porter 1998) During the mid 80’s a more resource-based view of the firm was developed (Wernerfelt 1984). This theory had much focus on the firms internal assets, defined as resources, and its importance for competitive advantages (Barney 1991; Wernerfelt 1984). The main idea was the importance of balancing the exploitation of existing resources with the development of new ones (Wernerfelt 1984: 180), and this will help the firm to strategically plan its internal resources. Also Prahalad & Hamel (1990) emphasize the importance of resources, and then specifically “core competencies”, and the management of these, as well as the diffusion of the core competencies within the firm to gain competitive advantages.

Even though actors outside the firm was mentioned as important factors by both Porter (1998) and Barney (1991), it was not until the mid 90’s the focus changed towards the organisation as a network of value creation (Normann & Ramirez 1993). Porter (1998) and Barney (1991) divided strategy in an internal and external part and took little notice about what happened in between these two dimensions when it came to value creation. The resource based view of the firm is also continuing on Porter’s (1998) work on the value chain, which is a rather linear interpretation of the firm (Barney 1991). There has, however, been a critique that the resource based view of the firm is incapable of giving future directions for the firm (Rylander & Peppard 2003).

4

A more contemporary view of strategy is value creation through value networks. Normann & Ramirez (1993: 65) defined strategy as “the way a company defines its business and links together the only two resources that really matter in today’s economy: knowledge and relationships”. This is a non-linear approach to value creation, compared to the definitions above, the value is created in all relationships in a company. The focus is on the value-creating system where value is co-created among the different actors, which also can be a source to innovation. In this system the firm act as a facilitator who mobilize and empower all the stakeholders. (Normann & Ramirez 1993) And even though there have been big changes in the focus upon what to look at, in and outside the firm, for the development of strategies, the main idea do to a large extent stay the same.

There has always been a focus on external opportunities and threats, and internal strengths and weaknesses, what have changed though is how these dimensions are perceived by the firm. And just like the understanding of the innovation process gets more complex so does the understanding of the firm. Just as Normann & Ramirez (1993) ideas about the company, where there is a larger focus upon what happens in between the firm and the external environment.

During the last decades an even more complex picture of strategy development has evolved. The faster development of most industries has created new needs for how to approach strategies that never ends but instead always evolve (Hargadon 2005). According to Hargadon (2005), it is a big difference between designing the thing right and designing the right thing, and emphasize on system thinking and the value network surrounding the product. In this way strategy would be about designing networks, where the network would be the

competitive advantage compared to earlier beliefs that the only focus would be on the core competences (Prahalad & Hamel 1990). This new model would correspond to what Verganti (2009: 12) talks about as the “interpreters in a collective research laboratory” as a source for innovation. Hargadon (2005) also emphasize on the importance of rewarding collaborations instead of collaboration through demand. There is also of importance to match new technology with new paradigms, and the difficulties of implementing new technologies in old systems. (Hargadon 2005; Normann & Ramirez 1993) Hargadon (2005) also criticize the traditional top-down interpretation of strategies, and argues that this approach will prevent the company to see the opportunities in a value network. He further argue that design principles are useful in driving three specific design practices; discovery, creating an understanding of the network, synthesis (sensemaking), bring together what was learned during the discovery process, and delivery, present the results from the synthesis, and this can then be an iterative way of learning. (Hargadon 2005) Lester, Piore & Malek (1998) do not focus on strategy, but management overall, when they discuss the importance of analytical and interpretive approaches to management, and they argue against using an engineering solution to a complex situation. Both approaches are of importance, but in different situations. The interpretive approach is in accordance with Verganti (2009) and Hargadon (2005), an open process compared to a project that needs to be closed in the analytical approach. An analytical approach would fit a slower changing industry or slower evolving product development, while the interpretive approach would fit more agile industries. What Lester et al. (1998) emphasize is a movement between synthesis

5

and analysis, where both are important, but where there is an importance of using them both on their own and combination depending on the situation.

Rylander & Peppard (2003) in their article on strategies within knowledge-intensive companies, argue that the traditional strategy models are not longer applicable to fast changing industries, however, there are also more traditional and slower changing industries were old theories are still useful, but this also lead to a need of rethinking the role of strategy. And they define it as; “the key role for strategy is providing a common vision of what the organization is to achieve, and a purpose or fundamental reason for being. It should also provide managers with a shared context for decision-making and to guide behaviors of all employees.” (Rylander & Peppard 2003: 321) The risk with an explicit strategy is that it would be incorrect and hurt the company in case the external environment change to the worse. In these situations are values and norms more useful to guide the employees. To make the strategy happen Rylander & Peppard (2003) points out the importance of the connection between the strategy and the resources, and they argue that; “Embodying strategy means mobilizing IC [intellectual capital] and physical resources to support and facilitate the construction of identity. This implies supporting behaviours and reflecting values rather than providing a set of directions.” (Rylander & Peppard 2003: 327) Kim & Mauborgne (2004) argue in their seminal article on blue ocean strategy against competing in too crowded markets. They

compare two different markets, red and blue oceans, where red oceans are currently existing markets and blue oceans are unknown markets, which not yet exist. There are two ways of finding blue oceans, either a company can invent a totally new industry or they can expand the former industry’s boundaries or reinvent the industry. Kim & Mauborgne (2004) also argue for a system-thinking view or holistic view of the company for finding blue oceans, and to questioning current value-network, and restructure the industry. Beuker (2011) also argue that service design would be a good ingredient for creating blue oceans.

Design

Design theory and the idea of design as a form of problem solving has dominated how design activity is seen and how methodology of it has been attempted to be established.

Before the 1960s the idea of the design process was seen as a linear one, starting with problem definition and ending in problem solution (Buchanan 1992). This type of methodology within design theory has since been called to question and broadened by various scholars.

The linear problem solving model still renders itself as very attractive since it is a product of logical reasoning. Yet according to design theorist Richard Buchanan, it has two distinct weaknesses. First, ”the actual sequence of design thinking and decision making is not a simple linear process”, and secondly, ”the problems addressed by designers do not, in actual practice, yield to any linear analysis and synthesis “ (Buchanan 1992: 15). The idea of design problems has thus been dealt with in a too simplistic fashion. However in the increasingly complex contexts and environments these problems together with the design process, have gradually

6

come to be considered the type of problems that do not necessarily need to be solved but rather understood. The role of the process thus comes to the forefront.

The roots of this type of new thinking are largely embedded in the work of Herbert Simon, who was among the first to analyze the theoretical importance of design, starting as early as the 1960s. Simon’s view is based on design as distinctly positivist and empiricist science. His interpretation of design was that it was the ”science of the artificial”. He characterized designers as ”creative problem solvers”, who work their way either around or over the obstacles they face (Simon 1969). What follows is that the complexity of the designers behavior is a reflection of the complexity of the situation and environment.

Thus understanding design is mostly about understanding these design problems. This overall framework of problemsolving in the design process established by Simon, still works the best only in more simple and clear situations.

The problem-solving paradigm within design theory was also influenced by the recognition of new kinds of more complex characterization of problems that emerged in the 1970s. In their article Dilemmas in a General Theory of Planning (1973), Rittel & Weber took further the idea of problem in the context of social planning. The attempt was also to find an alternative to the linear, step-by step model of the design process (Buchanan 1992). They addressed problems in planning that were considered ”wicked”. These problems were characterized as ones that were difficult or even impossible to solve due to requirements that are in constant flux. Thus what makes a problem wicked is conditions that are difficult to define or recognize.

The attempt of Rittel & Weber (1973) was not to solve these problems but to understand them better, since according to them, science is used to dealing with ”tame problems” and this approach is bound to fail in these new more complex conditions. The claim that ”in order to describe a wickedproblem in sufficient detail, one has to develop an exhaustive inventory of all conceivable solutions ahead of time” (Rittel & Weber 1973: 161). The formulation of a wicked problem is a problem in itself.

The idea of wicked problems in company strategy context has been more recently picked up by authors such as John C. Camillus (2008). In his article “Strategy as a Wicked Problem”, he uses Rittel’s & Weber’s 10 properties of wicked problems as his starting point in his attempt to “tame” these problems. He basically agrees with Rittel & Weber that these are problems without real solution, however he argues that they need to be recognised since they are relevant for the strategists and they are “ill-equipped” to deal with them. He argues that even though these problems are not to be solved they could be “tamed”. An interesting point that Camillus (2008) makes is that this type of a “problem involves many stakeholders with different values and priorities”, which is worth remembering while dealing with more collaborative strategy between different stakeholders and value networks.

The idea of wicked problems has been explored further, most notably by Richard Buchanan (1992). He picked up the wicked problem idea based on the writings of Rittel & Weber (1973) and formulated it further. Buchanan states that a linear model of design thinking relies on determinate problems, while wicked problems implies indeterminacy of design problems.

Buchanan calls into question the list of characteristics of

7

wicked problems defined by Rittel & Weber (1973), arguing that even with all their formulations the ”fundamental question” is left unanswered : ”Why are design problems indeterminate and therefore wicked?”(Buchanan 1992: 16.).

The failure to answer this question has left the wickedproblems approach in the position of being a mere description of ”social reality of designing”, and does not qualify as a well grounded theory according to Buchanan (1992).

Buchanan (1992: 16) attempts to address this wicked nature of design problems and what causes it. He claims they are wicked since design has no ”special subject matter”, but its on universal scope and can be applied to any area of human experience. However, what follows is that the designer comes up with ”a particular subject” out of these problems. Unlike in science subjects, in design there are no set rules, laws or structures to define these problem solving principles in particular subject matters.

Buchanan (1992: 9) also came up with four orders of design, to demonstrate ”how extensively design affects contemporary life”. These four orders are design as; symbolic and visual communication, as material objects, as activities and organized services, and as complex systems or environments. The fourth one has become particularly interesting in today’s standards, since according to Buchanan it reflects not only particular complex systems but also ”consciousness of the central idea, thought, or value that expresses the unity of any balanced and functioning whole” (Buchanan 1992: 10). According to Buchanan (2010: 12) system is ”the totality of all that is contained within it”, and it is thus impossible for us to see or understand completely. The only way to navigate through it is to come up with our ”personal pathway” and while doing

this we try to come up with organizing principles for it through representations. This model offers a broader view on design activities and practice, and leads towards the current idea on design thinking. This approach proposes increased design awareness directed towards the complex systems Buchanan talks about, which could be organizations and companies.

The roots of the focus on design thinking that has become a very powerful concept lately, are also based on these attempts to define design as a discipline in its own right (Cross 2010).

According to scholar Kees Dorst (2006: 6), ”the rational problem-solving paradigm has become a powerful tool for the modeling of design, inspiring and permeating a large part of design methodology”. However this problem-solving conceptual framework, embedded in scientific rationality is riddled with weaknesses as we have seen. Thus Dorst (2006) proposes that these weaknesses cannot really be solved within this ”rational problem-solving paradigm”. What follows is that even though research on design might remain process orientated, it has been argued by Dorst & Dijkhuis (1995) that it might be beneficial to pair the problem-solving paradigm with another merging paradigm; the interpretative approach based on reflection in action. This type of approach takes the focus from the more technological product focused aspects to the more human-centered and information focused approach.

In Designerly Ways of Knowing, Nigel Cross (2006) presents a broad overview of empirical studies of design activity and process. He then divides design cognition to span over three major areas: problem formulation, solution generation and process strategy, (meaning the way designers handle their way towards a good solution.) Cross’ (2006) idea of design cognition is still closely related to the design as a problem

8

solving paradigm. However Cross (2006) recognizes that there are differences in designers’ expertise and this influences how they approach their tasks.

In his article “Design Thinking as a Form of Intelligence”, Cross (2006) suggests that investigations into design activity and designer behavior to clarify and categorize the nature of design ability. He summarizes design thinking as comprising abilities of resolving ill-defined problems, solution-focused cognitive strategies, employing adductive or oppositional thinking and using non-verbal modeling media. This according to Cross is possessed by highly skilled designers but also to some extent by everyone.

Cross (2006) is essentially suggesting a blend of the old problem solving paradigm and the idea of a reflective practitioner, an approach put forward by Schön in 1987. The idea of the designer as a reflective practitioner challenged the view Herbert Simon (1969) had on design practice. What it implies is an interpretation of professional ability as reflective practice. In other words how professionals think in action, the kind of knowledge they possess. For Schön this was based on the assumption ”that competent practitioners usually know more than they can say”. Yet his actual empirical research was based on partial design activity only, focusing on an experienced tutor in a university architectural design studio.

However this idea of ”intuitive behavior in practical contexts of thinking and acting”, proved to be widely recognized by design practitioners and researchers and it laid the foundations for the more interpretive view on design (Cross 2006: 100).

One of the more recent proponents of this more interpretative approach to design, is Roberto Verganti (2009). His approach

is very similar to that of Krippendorff, based on the proposal of design as meaning creation. So the activity of design is about making sense of things. However, Verganti places his focus on meaning making to the context of design-driven innovation. This places designers in a different kind of role than what the other proponents of interpretative approach had in mind. Designers in this context are experts who instead of co-creating something with the customer, should come up with solutions to them. The idea is that these solutions propose new meanings to the market.

This creation of meanings includes not only the meaning of manufactured products, but ”mindsets, actions and meanings” surrounding them (Verganti 2008: 20). He then addresses the level of these potential innovation of meanings. Verganti concludes that ”a product adopts a design language and delivers a message that is in line with the current evolution of socio-cultural models”, this would be considered incremental (Verganti 2008: 12). In order for the innovation of meaning to be radical, the products language and message should reflect a reinterpretation of existing meanings assigned to it. When both novelty of meaning and the language of design is radical, Verganti (2009: 13) terms as ”design-driven innovation”.

Verganti (2009: 2) somewhat distances himself from the user-centered approach in the meaning making in the sense that he excludes their involvement from the design process.

According to him “the innovation process hardly starts from a close observation of user needs and requirements”. Instead rather than being guided by merely users needs, designdriven innovation is driven by the companies vision about the new product meanings. According to Verganti design-driven innovation thus doesn’t start from user’s insights, since they

9

cannot really help in anticipating radical changes in their product meanings. This according to Verganti (2009: 5), is the logical consequence of the fact that the “socio-cultural context in which they are currently immersed make them inclined to interpretations that are in line with what is happening today” .

Radical changes in meanings implies that there needs to be a radical change in socio-cultural models too, and this can only be understood by looking at this phenomena in long term and more broadly. Verganti concludes design-driven innovation is thus driven by the company vision about these potential breakthrough meanings that could come up one day. Thus it cannot be predicted solely by looking at user behavior in the current state of things. Instead of being rational problemsolvers or mere facilitators between users and the company, designers should engage in to the process as interpretative and propositional professionals.

Similar to Buchanan and his four orders of design, Krippendorff (2006: 6) describes how the focus of design has moved from material artifacts to more immaterial, such as services, identities, interfaces, networks and projects.

Design can thus be seen as having moved from being technology-centered, to human-centered - from being occupied with the functionality of products to designing “artificial worlds whose sole purpose is to make sense to us, remain useful, and enable us to feel at home with them” (Krippendorff 2006:39). According to Krippendorff design is to “make sense of things”.

This, he argues, is something everyone does daily. There is a difference however, between the everyday design and the design carried out by professionals, in that the professional

designs with the use of methods and with other people in mind (2006: 31). A designer should harbour the understanding of other’s understanding of things, something Krippendorff (2006: 65) calls a “second-order understanding”.

He reasons that the artifact, material or immaterial, “must make sense to most, ideally to all who have a stake on them” (2006: 26). The fact that the buyer is not always the user, illustrates one reason for this. Instead of focusing on a stereotypical user, an average that exists no more than a family with 2.3 children, a designer should consider a diversity of stakeholders, who each have their own interests and agendas. Each of them also create their own meaning of the artifact, through their interaction with it. (Krippendorff 2006: 63) The meanings of artifacts is also created in context, in relation to other artifacts. Krippendorff describes this with the metaphor of an ecology (2006: 194), referring to Boulding (1978, see Krippendorff 2006: 200) and his theories on ways artifacts may interact with each other: in mutual cooperation, the artifacts support each other, e.g. cars and roads; in mutual competition, two artifacts compete, e.g. public transportation and private cars; dominant-cooperative, when an artifact depends on the existence of another, increasing its appeal, e.g. online photo-printing services on digital cameras; parasitism, when an artifact thrive on another, without increasing the appeal, e.g. spam and Email services; and dominantcompetitive, where an artifact builds on another, to compete with a third. Krippendorff concludes that if a designer is aware of this ecology, their designs are more likely to survive (2006: 202).

10

Synthesis: Design-driven strategy Krippendorff (2006: 25) agrees with and refers to Simon in that design is aiming at changing existing situations into preferred ones. He stresses the fact that designers are not performing the change, only suggesting a way to do it. To Krippendorff, the method of design is to “search the present for available paths to desirable futures” (2006: 29).

Since the meaning of an artifact is created by the stakeholders, the design of it is merely a proposal - designers “cannot build meanings into artifacts”. In order to convey a successful design, stakeholders should be invited and involved in designing the artifact (Krippendorff 2006: 230).

A traditional way designers may understand stakeholders, is interviews. Krippendorff (2006: 223) discourage the use of surveys and structured interviews, with the argument that they through standardized questions and answers limit the expression of the interviewees. Instead, he pushes for unstructured interviews, where questions are only roughly outlined and the interviewee is more free to steer the conversation towards his or her interests. Questions regarding problems the interviewee had with artifacts is especially informative, since these, says Krippendorff (2006: 224), are “stories of the discrepancy of users’ meanings and designers’ meanings”.

Above we have tried to conceptualize the three different concepts; innovation, strategy and design. However, these three can not easily be summarized and described in a simple model. Nor is it an easy task to bring them together to describe a synthesis of them all. Nevertheless from the conceptualisation we draw some conclusions about what the concept of design-driven strategy could entail.

In the heart of it seems to be these notions of increasingly complex markets and socio-cultural environment and problems that cannot be necessarily solved. The more linear way of thinking and approaching both strategy and design is not completely irrelevant, yet this complexity of our current environment makes it nearly impossible to create a functioning strategy in relying on only this type of approach.

So instead of relying on merely a deep understanding of the structure of the industry, strategy planning should perhaps move towards more holistic understanding of the prevailing circumstances and the relations to the stakeholders. This could thus also involve adopting the understanding from the notions articulated in design methodology, such as accepting that problems are too complex to be solved, but instead they require this more holistic understanding of the whole.

Instead of just the strengths and weaknesses of a company, this type of strategy would also take into account the core values of the company and how they could be presented

11

more directly to the customers and in other ways, beyond their product offering. For instance by considering potential value constellations and how to design a network including services and interaction that creates value for the stakeholders.

This could also offer the company to act more as a mediator between different stakeholders and engage them into cocreation of value. Seeing strategy as a common vision, based on the understanding of both external and internal factors, could support the value creation process. As a value based strategy it also has a greater chance of longevity than just setting goals to achieve, without taking into account the possibility that the external environment can, and most likely will, change. These same premises apply to attempts to achieve enduring and meaningful design, as concluded by Krippendorff it “must make sense to most, ideally to all who have a stake on them”.

In order to create a strategy, a company must then not only focus on gaining competitive advantage, but also on understanding the potential value constellations and process of meaning making. By incorporating some degrees of “design awareness” or ways of thinking, a company could gain more insight to the aims and needs of their stakeholders and how to make meaning for them. For these purposes, for example Krippendorff’s notion of “second-order understanding” might be beneficial. In this context it would entail that instead of only the designer having “the understanding of other’s understanding of things”, a company should have understanding of how for example the customer understands them and interprets their values and offerings.

or user to depart from. A company should bear this in mind while aiming for understanding their customers better, since there also might be a difference between the customer who buys the product and the end user and they all create their own meaning of the product or service they are offered, through interactions with it. Designers or strategists cannot forge or build this meaning in their offerings. This relates to Verganti’s notion that meanings cannot be predicted solely by intense study into user behavior in the current setting, since they are affected by the current socio-cultural context, to the extent that they cannot envision radical changes in these meanings. Meaning is in the end defined or interpreted by these stakeholders, but design-driven innovation can support these in form of a company strategy that offers a unified vision about these potential new meanings. A new understanding of meaning might give rise to new value networks and new markets - blue oceans, as described by Kim & Mauborgne.

Thus design-driven strategy would include understanding of value building and meaning making through use of services and products in designed networks, which could be done by creating an understanding of the prevailing circumstances and how they affect the company and their stakeholders.

This entails the company acknowledging and accepting the complex and wicked conditions and problems and making their own “personal pathway through it” (Buchanan 1992).

What follows is that since individual stakeholders might have different interpretations, there really is no average customer

12

Service design According to the sdn Manifesto, developed by Service Design Network (2013: 1-2); “Services are the most significant part of all modern economies and the pillars of their social systems. The service economy is experiencing the most dynamic social, cultural and economic changes. Innovating, re-designing and managing services represent a competitive advantage for modern businesses and public sector organisations.

Service Design is the answer to these changes. It is an emerging discipline and an existing body of knowledge, which can dramatically improve the productivity and quality of services. [...]

Service Design aims to create services that are useful, usable, desirable, efficient & effective.

Service Design is a human-centred approach that focuses on customer experience and the quality of service encounter as the key value for success.

Service Design is a holistic approach, which considers in an integrated way strategic, system, process and touchpoint design decisions.

Service Design is a systematic and iterative process that integrates user-oriented, team-based interdisciplinary approaches and methods, in ever-learning cycles.”

One of Kimbell’s (2011: 42) findings is that services are “approached as socio-material configurations that are relational and temporal as value is constituted in practice” by designers. This is something which can be connected to the different network theories presented in current strategy literature. According to Normann & Ramirez (1993) value is created through different value constellations, within these value networks the value is co-created between the different actors in the network.

The approach where the designers see services both as social and material is also in accordance to what has been written about service-dominant logic (S-D logic) (Vargo & Lusch 2004).

In a matrix, Kimbell (2011:45) tries to explain the different approaches to conceptualizing service design. The approach, which she emphasize, is built upon the concept of design as enquiry and a S-D logic which she calls “designing for services”. With the concept “designing for services” Kimbell (2011: 49) wants to make “clear that the purpose of the designers’ enquiry is to create and develop proposals for new kinds of value relation within a socio-material world”.

Wetter-Edman(2011) identifies five characteristics of service design practice. These are; interdisciplinary, visualizations and prototyping, participation/user-centered, transformation and value creation. Service design is interdisciplinary in its foundation ,with methods and tools coming from several different fields. Within service design several different tools and methods are used to visualize and prototype. The intangible nature of services creates a high demand on visualization in both the process of developing and realizing a service to make it more tangible and prototyping is a tool for receiving fast feedback.

Service design is to a high degree user-centered, with much focus on co-creation. And service design is also transformative in

13

the sense that it implies behavioral and organizational change.

And finally, Wetter-Edman (2011) support Vargo & Lusch (2004) and Kimbell (2011) in their view of co-creation of value.

Stickdorn (2011) does not try to conceptualize service design, instead he identify five principles, which characterize service design thinking; user-centered, co-creative, sequencing, evidencing and holistic. In service design the customer is in focus and where you have to depart, and the service must be experienced through the customers eyes and with the customers language in order to understand the situation and context. Service design is also co-creative, and this do not stop at co-creation between the customer and the firm, but between all stakeholders. The designer function as a facilitator for the co-creation and generation and evaluation of ideas among the different stakeholders. Every service can also be seen in three separate stages; pre-service, actual service and post-service, which can be seen as a sequence of interrelated actions. Services are intangible, but there are tangible evidences as a result of the service, which both can enhance and degrade it. And lastly, it is important to consider the whole environment of the service.

A service never take place in a vacuum, and it is important to look at the context for several different customers as well as stakeholders. It is important that the whole company have a coherent organization. (Stickdorn 2011) As there are no wrong or right tools for working with services, we combined three tools which we found the most useful for communicating our case.

What if?

“What if...� is generally used to explore wide- ranging changes rather than specific service experience situation. This often means presenting people with a challenging question on how their service would be affected by changes taking place at the

technological, societal or cultural level. Questions can be used to prepare companies for the wide range of changes likely to occur over the next few decades. Looking at how well a service could adapt to the potential problems of the future, helps focus attention on what it is doing right - and what could be done better - today. (Stickdorn & Schneider 2011: 182-183)

Customer Journey

Essentially hypothetical stories, created with sufficient detail to meaningfully explore a particular aspect of a service offering.

Problematic areas of a current service offering might be developed into scenarios in order to brainstorm solutions; prototype scenarios examine potential problems new service ideas might encounter. Scenarios are able to help review, analyse, and understand the driving factors that ultimately define a service experience. (Stickdorn & Schneider 2011: 184-185)

Scenario

Narrative techniques can effectively show how new service innovations affect all departments within a service provider.

Telling a story makes service proposition more compelling.

Insights and ideas divorced from context in which they were generated often lose their resonance as they filter through an organisation. When situated within effective and accessible narratives, by contrast, they are able to maintain their relevance, even when presented to people unfamiliar with how the project was conducted. Indeed, presenting the project itself in a narrative context allows people to follow much more closely the processes, which can help companies re-orientate their business and organisation around service design principles.

(Stickdorn & Schneider 2011: 202-203)

14

strategy

Design

volvo ce

500 bc “Art of War”

1832 Johan Theofron Munktell starts his workshop in Eskilstuna

1853 Munktells manufactures Sweden’s first locomotive

1893 Bolinders builds Sweden’s first combustion engine (Weyland’s patent)

1910 Taylorism.

Rationalism in the workplace.

1913

1913

Ford assembly line

Munktells produces Sweden’s first tractor

Volvo CE HIStory

Volvo Construction Equipment is one of the oldest companies working in the field of construction machinery and they are a big part of Swedish industrial history. They started with a machine shop in Eskilstuna, Sweden. The idea of Volvo Construction Equipment as an industrial company was based on quality, innovation and technical expertise.The company’s long history includes numerous mergers and acquisitions. The history of the company also includes a very wide product portfolio, starting from the humble beginnings with simple tools to more modern equipment such as wheel loaders, excavators and pavers.

The products, spare parts and services are available in more than 125 countries. These products are mainly used for construction, road construction and maintenance, and in the refuse, mining and forestry industries. The main customers are single contractors, fleet owners, site dependent producers and rentals. These customer groups represent 80 percent of the company’s total sales.

The company states that the product renewal has been more rapid during the past few years. Besides the actual products the customer offering includes services such as financing, leasing and used equipment sales. Volvo CE also has a rental initiative Volvo Rents, that according to them has been developing favorably and it is the fastest growing segment of the indus-

strategy

Design

volvo ce

1930 1932 Matsushita announces the true mission of the company “This is how we can banish poverty, bring happiness to people’s lives and make this world into a paradise.”

1950-1960 The strategic management discipline originated

Stockholm exhibition

1932 Bolinder’s and Munktell’s companies merge to form BolinderMunktell

1950 Volvo buys Bolinder-Munktell

1943

Customer journey initiative

1960

1985

1985

Michael Porter value chain in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance

Alessi introduced 909ę kettle. It represented a meeting of great design and mass production

In 2007 Volvo engaged in a joint venture with SDLG (Shandong Lingong Construction Machinery Co) in China. Volvo CE currently owns 70% of SDLG, which is a major Chinese construction machinery manufacturer. The company has a significant distribution and service network in China. They are developing and manufacturing similar construction equipment as Volvo CE.

Strategy

Design Research Unit founded in Britain

Herbert Simon Designer - creative probelm solvers

try. Volvo CE currently has approximately 135 rental outlets.

The current manufacturing facilities are in Sweden, Germany, France, Poland, the US, Canada, Brazil, Korea and China.

1966 Volvo BM launches the world’s first series manufactured articulated hauler

1985 The VME Group is formed

The customer journey that Volvo CE has now is more orientated on the purchasing process. It is divided pre-purchase (awareness and contact), purchase (sales and delivery) and post-purchase activities (product usage, service, customer complaints and relations). The segments which they consider to be more unclear for the design department are sales delivery, customer complaints /relations. Thus the purchase actions themselves are not really fully defined and a major part of the post-purchase activities remains that way too. This could be due to the fact that these activities especially sales, delivery and service are provided by companies other than Volvo CE itself, such as Swecon in Sweden and in the Baltic region of Europe.

strategy

Design

1990 Peter Senge idea of organizations as dynamical systems in a state of continuous adaptation and improvement

Richard Buchanan “Design extensively affects contemporary life”

1993

1993

Norman and Ramirez article on Value constelation is published HBR

1992

Development of Social consciousness in design

volvo ce

1995 VME becomes a fully owned Volvo company and changes name to Volvo Construction Equipment

1998 The new 30 ton wheel loader Volvo L220D impressed with its productivity and low fuel consumption

1998 Mozilla - open source

2004 Chan Kim and Renée Mauborgne The Blue Ocean Strategy

2004

The term “Web 2.0” is coined

by Tim O’Reilly, to describe the increase of interactive websites and user-created contents.

2004

Service Design Network was initiated

2003 Production of Volvo’s skid steer loader begins in Asheville

2005 EC700B – an excavator in the 70-ton class – is launched by Volvo

Market

The global construction industry was hit severely during the financial crisis in 2008 and this trend continued over 2009. This was something which also had a significant impact on Volvo CE, with decreasing sales. However, in 2010 this trend changed and the construction industry recovered, and 2011 it continued to increase. In 2011 the market increased by 25 percent from the year before. The market is predicted to do well up until 2016. A significant shift during last years has been the increase of sales in Asia, which today is the world’s largest market for construction machines, even though in 2011 the European and American market increased their share. There has also been a significant change where Chinese producers no longer grow in the same pace, as in couple of years ago. The BRIC-countries are also predicted to become an even more important market within the construction equipment industry.

The buyers in the market, which also can be seen within Volvo CE, are usually medium or larger size businesses. These larger actors are important customers to all brands within the industry, and losing one of these customers would significantly affect the firm. The market is also characterized by low switching costs and a low level of differentiation. Similarly to the buyers, the suppliers power are moderate, there are low switching costs for raw material, however the prices for these materials has increased during the last years. The more advanced technology, which are included in the input, the higher the switching costs become, but today, many companies use strategies for integrating these actors in the production process.

strategy

Design

volvo ce

2006

2006

2006

Muhammad Yunus together with the Grameen Bank, are awarded the Nobel Peace Prize for their new business model on micro finance for economic and social development.

One Laptop per Child

With an integrated electric-diesel hybrid concept, Volvo shows how to save energy and the environment

2006 Office of Social Innovation and Civic Participation is established in the US

2011 Porter and Kramer’s article on Shared Value in HBR

2007 2007 The Apple iPhone is launched

2012 Design for Growth& Prosperity published by the European Commission

The world’s first full-suspension articulated hauler is launched by Volvo Acquisition of Chinese Lingong and Ingersoll Rand road construction Volvo launches the L350F, a new 50-ton wheel loader

There is relatively low likelihood for new entries in the construction industry among the larger companies. Firms such as Volvo CE, Caterpillar and Komatsu have large economies of scale and it would require large investments for a new actor to enter this market. The market position where there could be new entries are in smaller segments, such as regional or national markets or highly differentiated machines. There are also no real substitute for the products which these firms produce today, the only substitute for buying equipment from these producers are to go to the second-hand market.

The most significant factor of the construction equipment market is the high level of rivalry. The four largest competitors in the construction machines are; Caterpillar (19.4%), Komatsu (12%), Volvo CE (5.5%) and Hitachi (5.5%), who together have just over 40 percent of the market. The ten companies with the largest market share represent 65 percent of the market. The industry is to a high degree dependent on the development of its customers financial situation. And currently, when the market is recovering there is less competition since the market is increasing again. The rivalry can also be seen in the differentiation of products, as well as, brand reputation.

Internal resources Volvo CE’s product offerings to the firms customers are first and foremost the core products i.e. the machines they sell.

Except these they are also providing the customers with after market products, extended product offerings and service offerings. Volvo CE’s core products are divided into 13 different product groups and according to Volvo they are offering a full product line. These 13 different product groups are divided into three larger groups; compact construction equipment, heavy construction equipment and road machinery. By a full product line they mean that they can offer their customers all those products needed for a specific construction business.

And except offering core products, which could be everything from wheel loaders to pavers to demolition equipment, they also mention services such as CareTrack, which is a telematic machine surveillance service, finance and maintenance. Within Volvo CE there is today not only an expertise on a wide variety of construction machines, there is also an expertise on what this imply, e.g. moving earth, building roads, demolition etc. To only use this expertise to build and construct better machines, would be to limit Volvo CE’s possibilities. And thinking beyond this is what has developed into systems such as CareTrack.

As has already been mentioned in the description of Volvo CE’s history, the company hasn’t grown organically, but through a number of acquisitions during the company’s 180 year long history. Through these acquisitions Volvo CE has been able to provide their customers a full product line. However, the

last stage to create a joint venture together with the Chinese company SDLG has given Volvo CE the opportunity to enter a whole new market. Volvo CE, now own two strong brands; Volvo and SGLG, which will complement each other, broader the company’s customer base and create technology synergies. The joint venture with SDLG is strategically important to Volvo CE to establish their position in the developing world and especially the BRIC-countries. The rivalry in the industry is getting more and more fierce and Volvo CE’s traditional position with premium machines and high quality is no longer enough to reach new attractive customer segments in especially the developing world and the BRIC-countries.

The firm has today above 14 000 employees, who work at different sites all over the world. Volvo CE has R&D facilities in Sweden, Germany, the US, France, Poland, China, Korea and India. In all these countries plus Mexico, Brazil and Russia they also have production.

Volvo CE were able to survive the 2009 crisis in the construction equipment industry, where sales decreased dramatically.

In 2010 and 2011 Volvo CE was again doing well and where net sales has doubled since 2009 and the operating margin was over 10 percent both in 2010 and 2011.

In 2008 Volvo CE went through a series of organizational changes to improve efficiency and increase speed of execution and enhance agility. The next phase of the structural change, which was put in place 2012, was to integrate Volvo CE’s centralized customer support structure (CST) to the other functions within the company. This is aimed to improve ”cus-

19

tomer orientation, enhance focus on soft offerings and further increase speed of execution by eliminating overlaps with the regional, technology and operations functions�.

The internationalization of Volvo CE is getting more important to reach their objective to grow as a company. In 2011 the firm sold 88 000 machines in total of which almost half was sold in Asia. And Volvo CE’s market share in China was 12 percent compared to 5.5 percent globally. Large investments are also made in both BRIC-countries as well as in the US to reduce the currency exposure of the firm.

To adapt to the current more complex and changing market dynamics Volvo CE’s sales organization was divided in in regions comprising of Europe, Americas, Asia Pacific, China and Europe/Middle East/ Africa. The main reason to this new structuring according to Volvo CE is that it will allow smoother management within these zones and focus on the markets that need to be developed and improve efficiency. This organizational change is also in accordance with the strategic objective of Volvo CE; growth and efficiency.

20

Value network Maskinentreprenörerna is an organization for construction equipment entrepreneurs. It offers information, advice, education for their members and monitors the industry’s interests when it comes to policies.

Maskinleverantörerna is the Swedish trade association for suppliers of construction equipment.

Competitors of Volvo CE is for example Caterpillar, Komatsu and Hitachi.

SDLG is a Chinese producer of Construction Equipment, owned by Volvo Group.

Swecon is the dealer of Volvo Construction Equipment in Sweden, the Baltic countries and parts of Germany. The company is owned by Lantmännen, which in turn is a group jointly owned by 35 000 Swedish farmers. The idea of Lantmännen is to contribute to the profitability and increase the returns for these farmers.

21

Business model Mission “By creating value for our customers, we create value for our shareholders. We use our expertise to create transport-related products and services of superior quality, safety and environmental care for demanding customers in selected segments.

We work with energy, passion and respect for the individual.”

Vision

“The Volvo Group’s vision is to be valued as the world’s leading supplier of commercial transport solutions.”

Core values

Volvo CE has a unified organization, under one process model, fully aligned across all sites around the world, to ensure the same company values are carried out no matter in which part of the world they operate. Thus all the Volvo CE sites truly commit to company’s core values, quality, safety and environmental care. The company has a worldwide certification on these values standards and as Volvo CE president Pat Olney phrases it; “Our global certification, covering all three ISO standards, sends out a clear message that Volvo CE is a well aligned organization worldwide and takes its core values seriously”… ”It gives us a benchmark from which the entire company can consistently improve upon.”

From Volvo CE’s core values, quality is established as the first one and it basically means focusing on the needs of the customer. Customer satisfaction is pursued through prioritizing reliability and attention to details. The company states that a concrete example of this has been the CareTrack telematics system. Since 2010, this system has been fitted to ”most” machines as a standard and it helps the owners ” to increase machine productivity, fuel efficiency and security, and gives equipment managers more control over their fleets”.

Another core value is safety and Volvo states that they have continuous investments ”on developing new methods of safe operation, as well as new technologies to improve machine safety”. The third value they list is environmental care which Volvo CE pursues through innovative solutions, emissions reductions and alternative fuels.

Quality: Volvo is committed to being number one in customer satisfaction by prioritizing reliability, focusing on customer needs, and paying attention to details.

Safety: Our goal is to reduce the risk of accidents, improve safety and the work environment for the operators of our vehicles and equipment.

Environmental care: We strive for a holistic view, continuous improvement, technical development and efficient resource utilization.

”Quality, Safety & Environmental Care – part of Volvo Construction Equipment’s DNA”

22

Volvo CE strategic objective 2013-15 The current Volvo CE strategy is based on the starting point which includes that following observations; the company has a broad and competitive product portfolio, aligned distributions channels, dual brands, premium and value technology and production and a leading position in the Chinese market. These factors enables Volvo CE to explore following opportunities; grow their share in emerging markets, grow SDLG’s global share, aftermarket growth for both brands. Volvo CE’s current strategy is also based upon earlier strategy that was carried out during 2010 to 2012, “Fit for the Future”. Already in this strategy it was possible see Volvo CE’s objective of reaching more markets through adapting their products to local needs.

Volvo early identified the emerging market as a potential market for their machines but they had to go away from their “one machine fits all” approach and the reputation of only making premium machines.

In practice, these opportunities a sought to be realized through focusing on emerging markets by developing Volvo branded products for them. This is to be done in accordance with the Volvo Group quality delivery cost features targets and with more focus on design to cost and time to market. One aim is also to increase the efficiency of product portfolio development.

ing the different segments with the right products (Basic, Value,Premium). Both brands have a strong image and one goal is to implement CAST (Common Architecture and Shared Technology) scheme globally to them. For example in exchange for western technology to SDLG, Volvo CE gets low cost solutions from them.

Volvo CE had three overall watchwords to guide the nine strategic directions for 2013-15, and these are; Growth • Profitably grow SDLG business globally • Develop Volvo branded products for emerging markets • Deploy CAST globally Efficiency • Significantly increase customer solutions revenues • Increase gross margin per machine • Increase product portfolio development efficiency • Significantly increase dealer & supply chain capability • Increase share and profitability of road products Leadership • Develop, recognize and promote excellent leadership

The focus of the overall strategy is really on the development and improvement of both Volvo CE and SDLG brands, and make sure they have different brand positions to reach as many customers as possible. This involves address-

23

VOLVO CE case The main issue we came across while researching Volvo CE and looking at the touch points was that after production (where Volvo CE is the main or only actor) is that in Sweden and the Baltics, there is always a middleman, performing the sales and after-sales services. This can be problematic, since the values Volvo CE is communicating might become distorted. Swecon has a strong connection to Volvo CE, sharing website, typeface and other attributes, and customers see them as an integral company - however, they are not the same and they have different strategies/goals/plans.

It may well be that distributing the Volvo construction equipment through Swecon in Sweden is a very well thought through financial decision, since it saves Volvo CE a lot of money and effort (not owning service centers with technicians and specialists). Even though, it can be a threat for Volvo CE to not really have a direct connection to the customer, by, as mentioned, weakening the communication of their values and maybe even changing the meaning of Volvo CE products.

Also, the sales of the machines are very much dependant on the individual Swecon salesmen and their ability to build relationships with prospective customers. Most of the touchpoints customers have with Volvo CE are made through Swecon. And there is a lot of untapped potential in this collaboration. While researching Swecon we expected to see much more co-operation between them.

24

Volvo say: “Volvo has unmatched expertise designing power systems that move the world” and they focus on machines We say: “volvo could EMpower stakeholders to move the world” and focus on actions

25

Looking at the Volvo Customer Journey (pre-purchase, purchase, post-purchase), we get the picture of the customer simply as a buyer. That is, the most important interaction between Volvo and the customer, appears to be the purchase, not the co-creation of value.

Redefining the customer and building a closer relationship can be a way for Volvo to create a deeper understanding of their customers’ businesses in order to discover new service opportunities,as well as developing their current.

From the interview with Swecon’s salesman Lars we found out that after producing the basic machines, Volvo CE does not offer much for it’s customers. Basic machines are adjusted to client’s needs by Swecon and Swecon is the one who carries through all the services over the lifecycle of the product or even life of the client’s company.

We got the impression that Lars really cares about his customers. Since he has been working as a salesman at Swecon for 12 years, he has developed a close personal relationship with his clients and his main goal is not to persuade the customer to buy more, but to make sure that they make the right decisions. This is important in order to build a trusting relationship.

It is also in Swecon’s best interest that the customer makes the best choice according to his company’s needs and financial situation, since a satisfied and successful customer will stay a customer. This is relevant to Volvo CE too.

In his practice Lars has seen examples of people buying machines with much more add-ons than they need to successfully operate their business. Lars mentioned that although we are talking about B2B business and construction equipment (which

26

misleadingly can be seen as just a tool to get things done and not much else), there is a lot of emotion involved in buying a new machine.

We can see from these observations that Swecon has really close relations and personal dialog with their customers. Volvo CE is present only as the producer of the machines, and the machines themselves are the exclusive topic of discussion.

While talking to Lars we became aware that there is no direct communication between the Swecon salesmen and Volvo CE, even though the salesmen can be regarded as the main messenger of the Volvo CE values. The salesmen are also very aware of what is happening with the Volvo CE customers and their business, and through the years they have collected a lot of knowledge which would be very useful for Volvo CE. Lars told us that they are, consequently, being consulted by Volvo CE on topics such as “what does the customer prefer?�. However, this message travels through numerous intermediaries before reaching for example the design or product development department at Volvo CE. This is also something that could be improved by a closer, more direct relationship between Volvo CE and the customer.

27

Volvo CE’s design-driven strategy The starting point of our strategy is Volvo CE’s objective to be a total solution provider.

The more linear approach to the matter such as strategy or design process methodology has proven to be too simplistic in most cases when it comes to the overall socio-cultural and economic conditions we face today. It is then important that Volvo CE would also engage in a strategy that aims not to find solutions in this complexity, but find a way of understanding and navigating through it. This could be achieved through being more directly involved with the customer, rather than just being seen as the provider of construction equipment.

Instead of basing this on what they believe that the customer wants or needs, they should try to achieve a more holistic understanding of the current conditions and how they play into the way customers understand and see Volvo CE. To become a “total solution provider”, Volvo CE needs to be aware of their customer’s understanding of the company (i.e. have a second-order understanding) and that it at present might be “machine provider”. A reason for this is that Swecon (in Sweden) handles the sales and provides the financial services, as well as the technical services. Swecon acts as the middleman.

Volvo CE does not create the meaning of it’s brand or it’s offers, their customers do. This is why it is important to strengthen the relationship between Volvo CE and their customers.

Not only is the meaning of Volvo CE determined by the customers, but also by other stakeholders, such as Swecon.

The same goes for the value, this is co-created among the different stakeholders, mapped out in a value network. In formulating the strategy, it is thus important to consider and understand the socio-economic conditions and the stakeholders. The aim of this type of approach, rather than just gaining competitive advantage, is to ensure a common vision shared by the company and its stakeholders.

For Volvo CE this could be conveyed through their core values and to have them present not only in their brand and product offerings, but in their interaction and involvement with the network of stakeholders. The advantage of conveying values in this sense is the fact that they are a more solid base for a strategy since they are constant. In contrast a strategy that sets its sights towards a defined goal runs the risk of forgetting the influence that the external environment can exert on this goal.

28

Hence the Volvo CE values communicated more directly to the customer and other stakeholders could ensure more stable understanding and relationship with them. By striving for more holistic understanding of both the stakeholders and the external environment and complex and changing conditions, Volvo CE would have a more durable strategy that ensures more direct interaction and involvement with their customers.

Volvo CE’s service design As a departure point to the service we want to suggest for Volvo CE, which also is in coherence with the design-driven strategy which we have suggested for the firm, we would like to dismiss the customer journey we were presented in class for this case. This customer journey probably does have a lot of advantages, but we consider it to be a purchase journey, where we get an insight into the purchasing process of the customer instead of the actual behavior of the customer. This would be a limitation in the former customer journey.

We would instead like to redefine the customer, where the focus no longer is a linear purchase process, but instead a nonlinear business process for a contractor. (We have chosen to limit our example to a contactor - for a rental agency such as RamiRent or Cramo this process would look different.) By redefining how Volvo CE views its products, which include the whole business process for its customers and their stakeholders, more opportunities opens up to where Volvo CE can become a better partner and provide new services. What is

important to us is not that the contractor buys a Volvo CE machine, but the fact that the contractor do business with a Volvo CE machine.

If we depart from Stickdorn’s (2011) definition of a customer journey of a service, it is divided in three parts; pre-service, actual service and post service. So what happens in these three stages for a contractor in the services they provide their customers? To map this sequence, a simple linear customer journey would not be sufficient. Instead we have chosen to show a hypothetical value network at a specific point of time, where Volvo CE can support different actors and not only the customer to improve the market. To further limit our scenario we have decided to look into the procurement process of a construction site. This process might have little to do with the actual Volvo CE machines, however, it is one of the most important stages for the contractor who use Volvo CE machines in their business, as well as, it is an important stage for the property owner.

So what can Volvo CE provide these actors with at this process? We will below not offer a total service solution for a specific need, instead we will provide a framework or a kind of platform for a further investigation on how to develop Volvo CE’s service offerings, not only in the perspective of the customer but also other stakeholders. Through a number of scenarios, we will present how Volvo CE can have a closer contact with its stakeholders and accordingly become its customers closest partner as a total solution provider.

29

A platform for services Let’s talk a little about the future.

Sweden, Göteborg. The building boom in Göteborg is really happening. A new bridge and a tunnel is being built, linking the city together, a train tunnel is being constructed under the city, better infrastructure for bicycles and pedestrians is created. Several residential areas are popping up, new projects are in development.

The market is recovering, people get jobs and everything seems great.

The city-planning office has many new projects to handle. The contractor Lars wants to get his hands on machines for a good price, have experienced operators and start working as soon as possible. He also has an idea to expand his business. An architecture company has been working on a project for a long time and it is now soon to be implemented.

The largely increased demand for construction equipment, makes all Volvo CE’s investments in optimizing production pay off. The sales through Swecon are increasing, making the salesmen work to their full capacity. Because of the increased number of machines and more intense work they perform, the demand for repairs and technical service is growing. Some of the reputation and future sales of Volvo CE machines are now depending on the Swecon service department - will they fix the machines in timely fashion?

But what if Volvo CE would not just provide contractors with the material equipment they need to operate their business, but would become their partner in construction?

Instead of being construction equipment provider Volvo CE, becomes a total solution provider with a broad scope of services.

This opens up for new markets.

30

Customer solution according to volvo ce

31

total solution provider

value creation with different actors

32

Service sketch

The city-planning office is working with a project and are looking for a contractor. In order to hire the best contractor for the task, it is important to have more information about the technological specifications that will have to be handled by the contractor.

Volvo CE, as experts on moving dirt are able to provide the city-planning office with useful information for deciding upon the scope of the project and the specification for the contractors.

They will also be able to help with input concerning logistics and optimization of the flow of machines at the construction site.

Stefan is a salesman at Swecon.

He and his colleagues have very close communication with the customers. In a couple of months, his fellow salesman Stig, will retire.

The Volvo CE customer database helps him to get an overview of the customer’s machine park and type of business they are operating, it also helps to make recommendations of what he thinks is the best buy for them. He can also see his colleagues’ customers, which makes it easier to take over after Stig.

The database is a resource for Volvo CE too. Here they can read about issues customers have with their machines and recommendations or requests they might have. Volvo CE can also use the database as a directory for recommending contractors.

The database also includes caretrack information.

Lars is a small contractor, he has 6 machines (not all of them Volvo CE) and 4 operators. He has ideas about expanding his business and he knows that Volvo CE has strong environmental care and work safety values/ideas. Lars believes that these ideas would help him to grow a successful business in the future.

Lars called Volvo CE to arrange a meeting because he wants to bring his company to the next level and he feels that he lacks knowledge in the field of environmental and safety issues.

Volvo CE can offer him an education and Lars can later present himself as a Volvo certified constructor, something that warrants for safety, quality and environmental care. Volvo CE can also help him optimize his business.

A young swedish architecture agency has been working on a very important and complex green project. They are afraid that once they hand it in to the client they will lose the control of how it is going to be implemented/build. They feel that to build their latest project they need a really experienced construction team and it is also important for them that environmental ideas would be carried through the entirety of the project.

They contacted Volvo CE to consult with them about a possible contractor fit for this kind of job. And they would like to brainstorm with Volvo CE some ideas for different approaches for building this project.

33

Conclusion

34

References Barney, J. 1991. Firm resources and sustained competitive advantage. Journal of management, 17(1): 99-120.

Beuker, R. 2011. Strategic management: Why corporations do what they do. In M. Stickdorn & J. Schneier (Editors), This is service design thinking: Basics - Tools - Cases: 94-101. Hoboken: John Wiley & Sons, Inc.

Dorst, K. 2006. Design problems and design paradoxes. Design Issues, 22(3): 4-17.

Hargadon, A. 2005. Leading with vision: The design of new ventures. Design Management Review, 16(1): 33-39.

Kim, W.C., & Mauborgne, R. 2004. Blue ocean strategy. Harvard Business Review, 82(10): 76-84.

Kimbell, L. 2011. Designing for service as one way of designing services. International Journal of Design, 5(2): 41-52.

Buchanan, R. 1992. Wicked problems in design thinking. Design Issues, 8(2): 5-21.

Krippendorff, K. 2006. The semantic turn: a new foundation for design. Boca Raton: Taylor & Francis Group.

Buchanan, R. 2001. Design Research and the New Learning.

Design Issues, 17(4): 3-23.

Lester, R.K., Piore, M.J., & Malek, K.M. 1998. Interpretive management: What general managers can learn from design. Harvard Business Review, 76(2): 86-96.

Chesbrough, H.W. 2003. The era of open innovation. MIT Sloan Management Review, 44(3): 35-41.

Cross, N. 2010. “Design Thinking as a Form of Intelligence.�

Proceedings of the 8th Design Thinking Research Symposium (DTRS8) Sydney, October 19-20, 99-105.

MarketLine. 2012. Marketline industry profile: Global construction & farm machinery & heavy trucks. London: MarketLine.

Normann, R., & Ramirez, R. 1993. From value chain to value constellation: Designing interactive strategy. Harvard Business Review, 71(4): 65-77.

Dodgson, M., Gann, D., & Salter, A. 2008. The management of technological innovation: Strategy and practice. Oxford: Oxford University Press.

Prahalad, C.K., & Hamel, G. 1990. The core competence of the corporation. Harvard Business Review, 68(3): 79-91.

Dorst, K., & Dijkhuis, J. 1995. Comparing paradigms for describing design activity. Design Studies, 16(2): 261-274.

Porter, M.E. 1998. The competitive advantage of nations. New York: Palgrave.

35

Rothwell, R. 1994. Towards the fifth-generation innovation process. International Marketing Review, 11(1): 7-31.

Verganti, R. 2009. Design-driven innovation: Changing the rules of competition by radically innovating what things mean.

Boston: Harvard Business Press.

Rylander, A., & Peppard, J. 2003. From implementing strategy to embodying strategy: Linking strategy identity and intellectual capital. Journal of Intellectual Capital, 4(3): 316-331.

Vargo, S.l., & Lusch, R.F. 1994. Evolving to a new dominant logic for marketing. Journal of Marketing, 68(1): 1-17.

Service Design Network. 2013. sdn Manifesto. http://www. service-design-network.org/system/files/sdn%20Manifesto.pdf.

Accessed 20130210.

Volvo CE. 2013a. About Volvo Construction Equipment. http:// www.volvoce.com/CONSTRUCTIONEQUIPMENT/CORPORATE/ EN-GB/ABOUTUS/Pages/about_us.aspx Accessed 20130214

Schรถn, D. 1983. The Reflective Practitioner: How professionals think in action. New York, NY: Basic Books.

Volvo CE. 2013b. Quick facts about Volvo CE. http://www.volvoce.com/constructionequipment/corporate/en-gb/AboutUs/ quick_facts/Pages/quick_facts.aspx Accessed 20130214

Simon, H. 1969. The Sciences of the Artificial. Cambridge, MA: MIT Press.

Sleight, C. 2012. News report: Equipment top 50. International construction. April: 13-17.

Stickdorn, M. 2011. 5 principles of service design thinking: A dynamic language for a dynamic approach. In M. Stickdorn & J. Schneier (Editors), This is service design thinking: Basics Tools - Cases: 34-45. Hoboken: John Wiley & Sons, Inc. Verganti, R. 2006. Innovating through design. Harvard Business Review, 84(12): 114-122.

Verganti, R. (2008). Design, meanings, and radical innovation: A Metamodel and a Research Agenda. Journal of Production and Innovation Management, 25(5): 436-456.

Volvo CE. 2013c. Volvo - the partner to trust. http://www.volvoce.com/constructionequipment/corporate/en-gb/AboutUs/ history/Pages/introduction.aspx Accessed 20130214 Volvo CE News. 2010. Implementing the new strategy: A common way of working. http://www.se10.com/WhatWeDoFiles/ VolvoCEInternalMagazine.pdf. Accessed 20130215.

Wernerfelt, B. 1984. A resource-based view of the firm. Strategic Management Journal, 5: 171-180.

Wetter-Edman, K. 2011. Service design: A conceptualization of an emerging practice. Licentiate thesis, University of Gothenburg.

36