Matching value propositions with varied customer needs: The role of service modularity

• Published date: 01 January 2018
• Author: Eija‐Liisa Heikka,Juliana Hsuan,Thomas Frandsen
• Date: 01 January 2018
• DOI: http://doi.org/10.1002/kpm.1556

CASE STUDY

Matching value propositions with varied customer needs: The

role of service modularity

Eija‐Liisa Heikka

1

|Thomas Frandsen

2

|Juliana Hsuan

2

1

Department of Marketing, Management and

International Business, University of Oulu

Business School, Oulu, Finland

2

Department of Operations Management,

Copenhagen Business School, Frederiksberg,

Denmark

Correspondence

Eija‐Liisa Heikka, Department of Marketing,

Management and International Business,

University of Oulu Business School, PO Box

4600, 90014 Oulu, Finland.

Email: eija‐liisa.heikka@oulu.fi

Organizations seek to manage varied customer segments using varied value propositions. The

ability of a knowledge‐intensive business service (KIBS) provider to formulate value propositions

into attractive offerings to varied customers becomes a competitive advantage. In this specific

business based on often highly abstract service offerings, this requires the provider to have a

clear overview of its knowledge and resources and how these can be configured to obtain the

desired customization of services. Hence, the purpose of this paper is to investigate how a KIBS

provider can match value propositions with varied customer needs utilizing service modularity. To

accomplish this purpose, a qualitative multiple case study is organized around 5 projects allowing

within‐case and cross‐case comparisons. Our findings describe how through the configuration of

knowledge and resources a sustainable competitive advantage is created through creating the

right kind of value propositions for varied customers with the help of modularity. Understanding

gained through this research helps KIBS organizations in their efforts to increase organizational

effectiveness through modular services.

1|INTRODUCTION

Recent decades have seen tremendous developments in technology,

which have resulted in changes in competitive dynamics and the role

of knowledge creation in society. Knowledge‐intensive business

services (KIBS) especially have contributed to the growth in value

added and in employment (European Commission, 2014). KIBS refer

to organizations that rely strongly on professional knowledge or exper-

tise related to a specific discipline or a functional domain (Den Hertog,

2000), including traditional professional services and technology‐based

services. In addition to their direct economic impact, KIBS shape

competitiveness of organizations and are a key to innovation and

economic development (Zenker, Muller, & Hollanders, 2015). Based

on their ability to bring together knowledge and resources to address

complex challenges, KIBS providers face unique opportunities for

facilitating value creation through advanced services. On the other

hand, there are challenges too; KIBS typically have a high level of

process complexity, that is, a high degree of interaction and interde-

pendence between the operational capabilities required to deliver a

service (Coltman & Devinney, 2013), a challenge, which is solvable

with help of modularity.

A central aspect of the value creation of KIBS revolves around

their ability to formulate value propositions (VPs) tailored to customer

requirements (Frow & Payne, 2011). The ability of a KIBS provider to

formulate and articulate VPs to customers becomes a competitive

advantage. This requires the provider to have a clear overview of its

own knowledge base and resources, and how these can be configured

to obtain the desired customization of services, where modularity has a

key role.

VPs generally include claims about benefits and savings to the

customer, and if the supplier does not demonstrate its claims, the

customer will likely dismiss it as marketing puffery. Under pressure

to keep operating costs down and knowing that customers are often

price sensitive, many service providers are expending great effort

to formulate convincing VPs to help their customers to understand

the superior value of their offerings (Anderson, Narus, & Van

Rossum, 2006).

The ability to tailor service offerings according to individual

customer needs and deliver these efficiently is particularly challenging

for organizations delivering KIBS (Aarikka‐Stenroos & Jaakkola, 2012).

In order to address this challenge, the principles of modularity play an

important role in allowing effective delivery of customized services to

customers (Storbacka, Windahl, Nenonen, & Salonen, 2013). Managing

interfaces and configuring knowledge and resources within organiza-

tions facilitate the creation of the right kind of VPs for different

customers. Service providers seek to manage different customer

segments by using different VPs (Kowalkowski, 2011), and modularity

can help in these efforts.

Although “VP”has become a popular term in business markets,

there is no agreement on what makes a VP persuasive (Anderson

Received: 19 September 2017 Accepted: 22 December 2017

DOI: 10.1002/kpm.1556

64 Copyright © 2018 John Wiley & Sons, Ltd. Knowl Process Manag. 2018;25:64–73.wileyonlinelibrary.com/journal/kpm