Towards service modularity - service and business model development

The proportion of services in the economy is increasing. One of the unresolved challenges is how to reach a balance between efficiency in service production and fulfillment of customers’ diversified needs – in other words, a balance between efficiency and effectiveness. This research focuses on a concept that has been used for decades to tackle this challenge in the context of physical products and their manufacturing. This concept is modularity. The research literature on modularity applied to services is still scarce. This research aims at theory building and studies the applicability of modularity principles in the service context, particularly related to logistics services. The aim is to strengthen our understanding about whether and how modularity can be applied in the service context, to clarify the essence and meaning of service-related modularity, and to study whether the development of efficient and effective services and service business models can be promoted with the help of modularity. The thesis consists of an introduction and six research papers. The research methodology includes literature reviews and case studies in the logistics industry. The empirical part of this research shows that logistics service providers (LSPs) are familiar with the concept of modularity, but using the concept in practice is not always easy. Moreover, as a theoretical concept, service modularity is not easy to define. The research on product modularity has often divided modularity into product, process and organizational perspectives. Services have many of the same characteristics as processes, and therefore service modularity is more complex than product modularity and, as a concept, it is closer to process modularity than to product modularity. It is possible to avoid some of the theoretical and practical difficulties, if the core concept of modularity is clearly detached from adjacent concepts. Therefore, this research studies the relationship between modularity and customization, and presents a matrix framework separating these concepts. This thesis discusses the applicability of the modularity concept to the service context and offers definitions of service-related modularity. The frameworks developed clarify the relationship between modularity and related concepts, and help to analyze services, service processes and organization (i.e. service business models) related to modularity. The business model concept is used to build a holistic framework combining modularity concerning service products, processes and organizational issues. This research offers new views on some of the basic principles, as well as practical examples of using modularity in the service context. In the future, the use of modularity principles to create different kinds of efficiently produced services, meeting diversified customer needs in a variety of service industries, will open up a wide range of further research opportunities.