Service Innovation and Value Chain Re-Engineering in Manufacturing Firms

Abstract

Service has become an important value-created and competitive instrument in manufacturing industries under the background of knowledge-economy and globalization of economics. It is manufacturers and their customers together in the interactive value-creating processes who create the service value, not manufacturers themselves in their factories. Contrarily to traditional manufacture stream, service value creation processes start with customers' satisfaction and their willing-to-paid value and trace back to arrange or organize the value activities again. In this paper, we delineate customers' value structure and manufacturers' service value activities, and then we discuss how the current manufacture value chain structures affect service value- creating processes. In order to capturing more service profit, manufactures must redesign their service value chain. It is composed of relative basic and auxiliary activities that interact and form a circle close chain. The most important tache in the transformation from traditional manufacture managing patterns to service management patterns is the joint of push and pull, which also is the connection of two different orientations activities. Manufacturing firms must link series of inside value activities into an organic integrated body and aim for servicizing. Finally, we set an example of service innovation and value stream re- engineering in a manufacturer of power generating equipment in China and expatiate how they create and appropriate serve value in the new value structure.