Scholarly article on topic 'Systematization of IPS2 Diversification Potentials Using Product Lifecycle Data'

Systematization of IPS2 Diversification Potentials Using Product Lifecycle Data Academic research paper on "Economics and business"

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{"feedback management" / "product diversification" / PLM}

Abstract of research paper on Economics and business, author of scientific article — Michael Abramovici, Hoang Bao Dang, Jens Christian Göbel, Philipp Savarino

Abstract Feedback management systems retrieve information and assist the developing of new product generations. However not only product data like sensor data or maintenance reports but also activities surrounding a customer can lead to an identification of demands connected to the providers’ product. Therefore an approach is needed that extends existing feedback management systems as it creates added value for the customer as well as an expansion of benefits for the provider. This paper presents a morphology that defines and systemizes the necessary dependencies between an IPS2-provider and his customer in order to enable the IPS2-provider to offer value added services based on product diversification.

Academic research paper on topic "Systematization of IPS2 Diversification Potentials Using Product Lifecycle Data"

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ELSEVIER Procedia CIRP 47 (2016) 288 - 293

www.elsevier.com/looaie/procedia

Product-Service Systems across Life Cycle

"Systematization of IPS2 Diversification Potentials using Product Lifecycle

"Michael Abramovici, Hoang Bao Dang, Jens Christian Göbel, Philipp Savarino*"

Ruhr-Universität Bochum, Universitätsstraße 150, Bochum, Germany * Corresponding author. Tel.: +49 (0)234/32-28896; fax: +49 (0)234/32-14443. E-mail address: philipp.savarino@itm.rub.de

Abstract

Feedback management systems retrieve information and assist the developing of new product generations. However not only product data like sensor data or maintenance reports but also activities surrounding a customer can lead to an identification of demands connected to the providers' product. Therefore an approach is needed that extends existing feedback management systems as it creates added value for the customer as well as an expansion of benefits for the provider. This paper presents a morphology that defines and systemizes the necessary dependencies between an IPS2-provider and his customer in order to enable the IPS2-provider to offer value added services based on product diversification.

©2016PublishedbyElsevierB.V Thisisanopen access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

Peer-review under responsibility of the scientific committee of the 8th Product-Service Systems across Life Cycle Keywords: feedback management; product diversification; PLM

1. Motivation

Industrial Product Service Systems (IPS2) are defined as combinations of products and services with high customer life cycle orientation [1] and require the extension of value creation networks consisting of a manufacturer as well as suppliers and service partners [2].

To provide a certain value to the customer is a main goal of IPS2-providing companies. However the difficulty can be understood by a distinction between the life cycle perspectives of the IPS2-provider and the customer. As from the perspective of the IPS2-provider the product life cycle starts with product development, followed by product manufacturing, servicing and remanufacturing. On the other hand the customers' life cycle consists of the product purchase, usage and disposal. Considering the high customer life cycle orientation, the IPS2-provider is forced to design physical products optimized for manufacturability, servicing and remanufacturing in combination with non-physical services that support customers during product purchase, usage and disposal [3].

In order to be able to provide a certain value to the customer knowledge needs to be generated about correlations between product and service shares to fulfil the required needs and demands, as IPS2 are always individual solutions and boundaries between product and service can be blurry. This knowledge is essential for a successful integration of products and services whose dependencies tend to be very complex and not always known. The source of this knowledge is IPS2 life cycle data, especially from the customers' life cycle. The retrieval of the IPS2 product- and process data can be done with means of information technology and processed to knowledge in an appropriate form [4]. This feedback knowledge can be used in terms of optimizing existing product and service shares to fulfill needs and demands of the customer. However products and services usually only cater for a certain purpose. An expansion of benefits might be achieved by not only focusing on the activities surrounding a physical product or service but by focusing on the activities surrounding their customers. This can lead to new product development ideas or at least to a better understanding of the customers' needs. Apart from

2212-8271 © 2016 Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.Org/licenses/by-nc-nd/4.0/).

Peer-review under responsibility of the scientific committee of the 8th Product-Service Systems across Life Cycle doi: 10.1016/j.procir.2016.03.029

the value created by the IPS2-provider there are often activities before, during and after the use of the product whose demands are just as essential to the customer [5].

As an example from the agricultural industry harvesters are provided with sensors to detect the amount of crop and GPS-position of the machine. Apart from harvesting an IPS2-providing company also offers a seeding-plan for the coming year as it identifies spots with low amounts of crop. The company adds value to the customer by analyzing retrieved information from an existing IPS2, although the offered service does not affect the initial business solution. Therefore feedback data can be the basis for a company to either optimize existing products and services but also to expand benefits in terms of adding value to products and services that build up on the initially provided solution but is simultaneously of different subjection. As IPS2 include the providers' as well as the customers' life cycle perspective feedback data can be constantly exchanged and the value is constantly evaluated why IPS2 suit for further investigations.

2. Related Work

This section presents an overview of current research work and describes the distinction between the new approach and existing solutions.

2.1. Product diversification

Product diversification is one possible way on how to classify strategies with which an IPS2-provider can create further value for the customer given the feedback data from the customers' life cycle phase. As described in chapter one this can lead to further added value to a cooperation between an IPS2-provider and a customer as the generated product service system has a higher customer reference. However this knowledge can also be used in different IPS2 with different partners. Ansoff classified four possible growth strategies for enterprises (market penetration, product development, market development and diversification) in regard to new or existing products and markets. Figure 1 shows business growth regarding products and markets.

Existing Products New Products

Market Penetration Product Development

Market Development Diversification

Figure 1. Adapted from the Ansoff Matrix [6].

As for the diversification, which is described by entering new markets with new products, there are three possible types of strategies regarding an IPS2 [7]:

(1) Horizontal diversification can be considered as the introduction of new products that do not contribute to any of the existing products but still can be handled with existing know-how and experience in technology, finance and marketing.

(2) Vertical diversification can be described as an expansion of the production in depth, as for example concerning products with different kinds of quality or components, parts and materials where new know-how is needed.

(3) Lateral diversification means to move beyond the confines of the industry a certain company belongs, which clearly opens an endless range of possible ways to diversify. While horizontal and vertical diversification are restrictive or limited to a specific field of interest, lateral diversification is everything that exceeds these limits.

2.2. Management Approach for Feedback-Information

Feedback-Management in IPS2 has been subject to a lot of research lately. It allows a constant level of fulfilment of the customers' requests and demands and is therefore the key to value creation. Table 1 shows different approaches on feedback management in IPS2. They are classified regarding the related objects as well as the life cycle phase which is affected. Furthermore the goal and the input types are outlined, where the field data refers to e.g. product sensor data or service data.

Table 1. Feedback Management in IPS2

Method Object Life cycle phase Goal Input types

PUI FDA [8] industrial product design improved product field / service data

PSS KIM [9] industrial product design improved product service data

CIP PSS [10] capital goods design improved product and service field / service data

PSM [4] industrial product usage improved product reliability and forecasting service data

OOBN [11] mass products design improved product field / service data

Virtual Mainten ance [12] maintenance service usage improved product reliability and forecasting field data

VLCU [13] industrial product usage improved availability and forecasting field / service data

C-L PLM [14] smart product design improved product and service field / service data

The Product Use Information Feedback Design Assistant (PUI FDA) deals with industrial products that are modular, mass-customizable systems, based on standard components like bearings, spindles, belts, pumps or gearboxes. These standard components are subject to periodical design improvements based on the information of different product instances like incidents, operation parameters or resource consumption. Apart from that it considers information surrounding the IPS2 involving workspace information or neighbour influencing parts. It aims at improving new product generations and consists of four layers:

(1) The operative information layer considers heterogeneous operative source databases like condition monitoring, product operation, environmental, service or customer databases

(2) The data extraction and filtering layer extracts the relevant information from the operative databases to the product development

(3) The data harmonization/aggregation layer is the kernel of the PUI FDA, where extracted data from heterogeneous databases is transformed to match the developed data and knowledge models

(4) The final layer is the data analysis/diagnosis layer, where data searching and retrieval, compression and statistical distribution of different data values is done.

The PSS KIM describes a Product-Service-System Knowledge and Information Management framework based on data from the usage phase. It consists of a database of sensor data as well as a database for failure, maintenance & repair. Both lead into a customer central engineering database. This database is linked to the IPS2-providing computer integrated manufacturing system (CIMS) that manages various information about the product regarding design, simulations, information systems and manufacturing process control. The central engineering database communicates with a subset of the database where sub-suppliers of the IPS2-provider have access to share external data. This access is limited to their specific design information though.

Schweitzer and Aurich introduced a continuous improvement process (CIP) for IPS2 which aims at improving the following product generations as well as the service of capital goods. If a service technician is not able to solve a specific problem at site he searches for a solution in a database designed for the purpose of services. If the problem can't be solved a problem report is created which is processed by specialists at the branch. The identification of the problem is lead back into the IPS2-providing company and the product is redesigned in order to avoid that specific issue for the following generations. Meanwhile the solution database is updated, so that the technician will be able to solve the problem in the future at site.

The PSM approach deals with a Product-Service-Module, which acts as a library for the configuration of existing IPS2. This module contains knowledge about previous validation processes of IPS2 configurations concerning product and service shares. It is part of an assistance system that focuses

on the development of IPS2 and is responsible for the provision of feedback from the usage phase in order to optimize the IPS2.

The methods OOBN, Virtual Maintenance, VLCU and CL PLM are similar to the other ones described: They focus on field data to improve the existing IPS2 during the usage or the design phase.

All these approaches have in common that they retrieve feedback data but concentrate only on improving existing physical products or services. They integrate only knowledge from the usage phase referring to malfunctions or product data and focus on improving existing products and services, so that all approaches can be categorized as horizontal diversification. To add further value to the customer in terms of creating new solutions or reconfiguration of products and services vertical or lateral diversification can exploit new business potential on the structures of an existing IPS2 [7,15]. The described approaches are already able to retrieve feedback from the usage phase and some of them even detect environmental information surrounding a certain product. Nevertheless they lack of further knowledge about surrounding activities that needs to be involved into the feedback process in order to fulfil further demands and needs of the customer which can help an IPS2-providing company to develop a long-term successful business strategy. This paper aims to describe the formal relationship between an IPS2-providing company and the customer which can be the base for a future growth strategy such as diversification.

3. Basic Requirements

In order to consider all the described aspects of the diversification process the morphology has to meet the following basic requirements:

Consideration of dependencies between the involved IPS2-Partners

The partnership between the involved IPS2-actors has to be analyzed under several characteristics. Most importantly the business model of the IPS2 influences the relationship and therefore the possibility of the IPS2-provider to collect additional knowledge about the customers' activities. Further the achievable value as well as risks and information exchange have to be considered.

Extended Data Retrieval during the IPS2-Providers Life Cycle

Horizontal diversification considers new products and services that can be established with the existing knowledge of a company regarding technology, finance and marketing. To exploit further potential regarding vertical or lateral diversification an external source of knowledge needs to be implemented into the IPS2-providers' life cycle. New knowledge can be won through new innovations, competitive solutions or know-how from suppliers. This knowledge needs to be integrated into the design phase in

order to either reconfigure existing products and services or to generate new solutions.

Extended Data Retrieval during the Customers' Life Cycle

Most of the approaches introduced in chapter 2.2 focus on feedback data of the product in terms of product sensor data or maintenance reports. These include typical revolutions per minutes or temperatures for specific parts. More important are however environmental information that might lead to conclusions about the activities surrounding a physical product or service and are not product related, as for example the humidity of the soil or the outside temperature. These information about the activities surrounding the customer needs to be retrieved in order to find ties to existing solutions that can be extended to add value.

Acceptance

If the feedback data in combination with external knowledge is used to generate new solutions with new products and markets it is evident, that the new strategy is supported by the staff and customer. Only if there's an acceptance concerning the pursuit of expansions of benefits and adding value the diversification can be successful.

4. A morphology of the diversification potential in IPS2

In order to be able to describe the dependencies for the extension of an IPS2 regarding AnsofFs vertical or lateral diversification strategy the use of a morphology is suitable. Referring to the business model morphology for IPS2 introduced by M. Rese et al. [16] a model for the diversification potential was drawn according to characteristics that affect the given matter (Table 2).

4.1. The Morphology Architecture

The central characteristic is the architecture of the business model. Horizontal diversification can take place in a provider-driven business model, where the provider takes the responsibility for the development of products and services. The diversification process can only be executed within the confines of the know-how of the provider.

Transaction-based business models already involve the customer to some extent. The provider gets an idea about the activities surrounding the customer and can include those into his own product development process.

On the other hand collaboration-intense models describe a high degree of collaboration between the provider and the customer. Due to the intense partnership and high coordination effort the provider gets a detailed insight into the customers' environment and can adjust his product portfolio regarding the needs and demands of the customer.

The value has to be considered from the perspective of the customer as well as from the provider. The customer benefits from the initial point as the provider fulfills the needs and demands within a given IPS2. Nevertheless the

more interaction between the customer and the provider is performed the higher the possibility for the customer to be granted added value through products and services developed by the provider according to the higher amount of information. The providers' value generation starts with the core benefit alone, which is provided by the initial IPS2. Further collaboration can lead to an expansion of benefits though, if activities can be identified that add value to the customer.

The risk distribution is equally spread among the two partners. The providers' market risk is increasing with the potential benefit. New products and services that have to be developed might come with a change in the business strategy and involve external partners. Further a change of the industry a company has been working in contains risks not only in terms of the market risks but also from the working staff. However the possibility to raise the benefit is high if the needs of the customer have been identified. The customers' value can increase though if he intensifies the cooperation with the provider. This however involves the disclosure of processes and data that might be of value for the customer. This underlines the necessity of a trustful partnership between all the parties involved.

Table 2. Morphology for Product Diversification in IPS2

CHARACTER- HORIZONTAL VERTICAL/LATERAL

RISTICS DIVERSIFICATION DIVERSIFICATION

business model architec- provider-driven transaction-driven collaboration-

ture models models intense models

customer value IPS2

<u fulfilment of needs and demands added value

> provider value core benefit alone expansion of benefits

Ö o provider risk market t _______ risk ___________

-O 'S % M benefit

customer risk market t _____— risk ------------"

collaboration involved partners provider supplier customer

required information internal product-related information supplier-related information product-usage information

external technical customer service supplier-related information customer-environmental information

H subject product/service value added services

property rights ownership provider supplier customer

This leads to the collaboration aspect. As seen from the horizontal diversification perspective limited knowledge is only handled inside the providing company. If however knowledge from suppliers can be involved in the product or service development new incentives can lead to a higher degree of product diversification. Yet the highest amount can be reached if the customer is involved.

Connected to the collaboration aspect is the flow of information that can be split up into internal and external. Those information are the basis for diversification as they make up the main difference in order to determine the possible degree of diversification. Product-related information as CAD-data can be characterized as internal information and help to develop new products upon existing knowledge. If a provider can integrate knowledge from a supplier through a close partnership for example new information is directed into the company. If the provider is able to extract knowledge from the usage phase he can refer in his development process for new products and services to possible errors or defects. This can lead to a generation of higher value for the customer as products can be reconfigured according to the specific needs of the customer.

External information that does not involve new knowledge and can't lead to vertical or lateral diversification can be technical customer service for example. The customer only complain about a certain malfunction of the product or service but exceeding information is not exchanged. External knowledge can be retrieved through suppliers who are employed by the provider to execute maintenance services though. On the one hand defects are documented but also possible solutions to improve products and services can be detected. If the customer also is willing to monitor the environment of the product the provider can draw conclusions about activities that surround the customer and can be connected with the existing product and service. The development of new solutions upon that base can create a greater value to the customer.

The components the diversification aims at can be subdivided into two parts. Product and Service result from horizontal diversification as they are limited by the existing knowledge of the IPS2-provider. The enhancement from vertical or lateral diversification however is value added services which can be derived from the initial IPS2 and lead to higher value for the customer and higher benefit for the provider.

Lastly it can be referred to the property rights in terms of ownership in order to address differences between the possibility to diversify products and services horizontally or vertically respectively laterally. If the customer is the owner of the product the provider won't be able to retrieve any additional information about the usage phase or the surrounding environment of the customer. If the supplier however executes services, as explained in the external information section, new knowledge can influence the development processes of the provider. If the provider remains the owner of the product and the partnership relies on availability, it will be possible to retrieve information

about surrounding activities as influences on the product at site can be detected.

4.2. Relevant Interdependences in IPS'2 for Product Diversification

Referring to the example of the agriculture industry given in chapter one the morphology can be used to describe the relevant aspects that lead to the offering of the seeding-plan. Table 3 shows the relevant parts of the morphology applied in this IPS2 example.

The relationship between the harvest machine provider and the customer can be assumed as trustful and collaboration-intense, as the customer allows the provider to collect specific data like GPS and the amount of collected crops. This is the basis to be able to provide additional products and services. Given the basic idea the relationship can be characterized as an IPS2 as the machine provider owns the machine and looks after its availability in terms of maintenance service. The value created by the provider to create a seeding-plan exceeds however the initial IPS2 that started with the customers wish to be provided with a harvest machine. Therefore the IPS2-provider can offer an added value and expands his own benefits. It is possible however, that a supplier is involved who contributes know-how about GPS-technology and information can therefore be retrieved partially by the suppliers at the customer's site. Nevertheless product-usage information has to be collected as well as customer-environmental information in terms of activities related to the customer, such as seeding his fields. From this knowledge the idea for the seeding-plan derives which can be described as a value added service upon the initial IPS2.

Table 3. Relevant Aspects of the morphology in the example.

CHARACTER-RISTICS HORIZONTAL DIVERSIFICATION VERTICAL/LATERAL DIVERSIFICATION

business model architecture provider-driven models transaction-driven models collaboration-intense models

customer value IPS2

<u 3 fulfilment of needs and demands added value

CO > provider value core benefit alone expansion of benefits

collaboration involved partners provider supplier customer

a •o .2 internal product-related information supplier-related information product-usage information

g-y Sjj

external technical customer service supplier-related information customer-environmental information

components subject product/service value added services

5. Conclusion and Future Work

This paper reviewed the different approaches on feedback management in IPS2. It became apparent that the information retrieval is only used to develop new products and services on the basis of internal knowledge although the inclusion of external knowledge can lead to a higher value for the customer and higher benefit for the provider. The description of requirements lead to the architecture of a morphology that distinguished between different aspects in an IPS2 that contributes either to horizontal or vertical/lateral diversification of the IPS2-providers product portfolio. An agricultural industry example was transferred onto the morphology. It was shown that relevant aspects were considered to enable a company to successfully diversify its product portfolio which can lead to an expansion of benefits and a long-term successful business.

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