Sales model change of industrial service production line: A case study on the prerequisites and design of a capacity-based sales model

Abstract

Sales models play crucial role in business success, as they describe the value-delivering processes to customers and profit-making of companies. In service business, where the customer expectations might be complicated and competition is time-based, the meaning of successfully implemented sales model is extremely significant. Even though service business is growing rapidly, the sales model change in service business is not widely discussed before. On the contrary, general business model changes in organizations are well researched.

This study reviews the process of changing the sales model from lead time based to capacity-based and examines how to formulate a suitable sales model in the context of industrial service business. The thesis aims to examine sales model change in industrial service companies so the lead time commitments would be based on available capacity.

The thesis was implemented as a qualitative case study, starting with a literature review to form a comprehensive understanding of the topic studied. Based on literature review, interview questions were formed, as the main data collecting method was semi-structured interviews of the stakeholders. In addition to that, documentary research was implemented to expand the description of current situation, needs, and restrictions for the change. The analysis process then consisted of thematic analysis and synthesis of themes to create frameworks for planning sales model change and formulating a sales model.

The study reveals that sales model changes take place in organizations due to either external market requirements or internal development needs. The prerequisites for sales model change include organizational capabilities to identify affecting factors, challenges, goals, and negative consequences of change and how to take them into account in sales model. One key finding was that the service companies lack much visibility in their supply chains and internal communication routes, which hinders their operations, so it is a crucial part of sales model structure. Besides sales model change, the implementation of capacity management was also a crucial factor when planning a sales model change. It was found that by reserving capacity for express orders and maintaining sufficient buffer capacity, customer expectations are better met. Eventually, customer preferences and company’s capability to respond to them determine whether the sales model change was successful or not.

The findings also provide a framework for sales model formulation based on available capacity. It was found that the formulation process includes couple major decisions points. Main finding was that the sales model should facilitate the information exchange in different interfaces between relevant stakeholders to ensure smooth operations. To consider the external drives for sales model change, the sales model should customize its solutions to fit each customer segment, according to lead time tolerance. In addition to sales model formulation, the linkage between utilized information systems was emphasized in the findings, as they enhance cross-functional visibility and sufficient capacity planning.

Further on, the thesis contributes to the growing amount of servitization literature by providing clear framework on how to take available capacity into account in the lead time promises in the context of repair service business and how to integrate those into sales model. Future study topics include assessing the performance of created sales models and analyzing the development of customer relationships in each contract type.