Schools of Thought in Service Modularity

Being an interdisciplinary research field (Campagnolo and Camuffo 2010), service modularity has attracted numerous researchers with different contextual backgrounds (e.g., service science, marketing, and IS), different underlying interpretation of service (e.g., good-dominant logic, service-dominant logic), and different domains of operation (e.g., health services, logistic services) (Brax et al. 2017).

While being beneficial for its recognition in practice and contribution to the overall modular system theory (Schilling 2000), this has resulted in a particularly large interpretation space for service scholars.

Due to the researchers’ differences in their interpretation of the fundamental elements (such as ‘service’,

‘decomposition’, or ‘module building’), as well as the underlying principles (such as the required level of customer involvement), the terminology and opinions on service modularity are diverging rapidly. In fact, there already exist numerous controversial perspectives in service modularity literature that either oppose each other (e.g., static vs. dynamic module orientation (Voss and Hsuan 2009) within the underlying service architecture), or artificially define additional subthemes within the field of service modularity that apply only in a specific context (Bask et al. 2010). Therefore, although scholars have provided valuable insights on the service modularity concept, such as a typology of modular service designs (Tuunanen et al. 2012) or an overview of the effects of service modularity (Dörbecker and Böhmann 2013), there is still a lack of comprehensiveness with respect to the implication of these perspectives for business strategy. In order to clarify the seeming confusion, a comprehensive overview of possible research dimensions on service modularity, along with the related research characteristics within these dimensions is needed.

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Using a hermeneutic approach for the literature review (Boell and Cecez-Kecmanovic 2014) 23 relevant publications on service modularity were identified. The core of such a hermeneutic approach is that the typical steps of a literature review ‘search and acquisition’ and ‘analysis and interpretation’ are executed iteratively as two major hermeneutic circles (for further details of the methodology, see P1). This was particularly useful in P1, since a fundamental understanding of service modularity had to be first established, thereby allowing more focused subsequent iterations. Similarly, the derivation of the seven dimensions and the classification of the identified publications into these dimensions, together with the subsequent grouping of these dimensions required continuous adjustments. In total, the literature review resulted in seven research dimensions (bold bullet pointed items) with a total of 15 characteristics (shown by cursive emphasis).

x Roots of modularity. One particular understanding of modularity and the associated terminology can be traced back to the research fields from which the respective scholars of service modularity originally came. While the concept of complexity reduction via module building has been discussed in numerous fields (Frandsen 2017), two disciplines can be identified as most dominant and most cited: manufacturing and information systems (including software engineering). The former has successfully applied modularity to product design and operationalized it into the concept of mass customization (Pine 1993), passing over the idea of decomposition of the integral system to service modularity. The latter emphasized the importance of loose coupling and information flow between the modules, evolving into concepts like object-oriented programming or software-oriented architecture (Hirschheim et al. 2010). With only six of the identified 22 articles published in traditional service and marketing journals (and still explicitly drawing on insights and terminology from the above-mentioned disciplines), the source of modularity is an important dimension to consider when examining service modularity from a holistic perspective.

x Service understanding. Another key dimension is the basic understanding of the interrelation between service modularity and modularity in products. In particular, a modularized service portfolio and its effects have been discussed both in the service context and manufacturing context, each emphasizing the service or product dominance respectively (Bask et al. 2010a; Pekkarinen and Ulkuniemi 2008). With a uniformly accepted definition of service modularity still missing (Carlborg and Kindström 2014), the line between modularity in products and modularity in services remains blurred. In this regard, examining the recent changes in service understanding, two research streams influencing the product-service interplay can be distinguished. The first one is located in the classic good-dominant logic (GD-logic), where services are viewed more as an add-on to products (Lusch et al. 2007). Thus, the GD-logic distinguishes between modularity in products and modularity in services in a distinctive and synchronized fashion. In contrast, the opposing perspective assigns service modularity a dominating role, so that product requirements are derived from modularized services as the SD-logic suggests (Smyth 2014; Vargo Lusch 2004) and not vice versa. Although only two of the identified publications explicitly base their research in the SD-logic (Tuunanen et al. 2012; Tuunanen and Cassab 2011), the affiliation of the remaining ones (or at least the tendency) was possible to determine by using characteristics from established literature (Vargo and Lusch 2004, 2008).

x Operational level. The ambivalence of service modularity stems, in part, from its purpose, as it can be deployed both for operative and strategic purposes (Böhmann et al. 2003; Geum et al. 2012). On the one hand, scholars are concerned that the concept is subject to various organizational limitations (Böhmann et al. 2003; Cheng and Shiu 2016), while others regard the services themselves as a business logic (Grönroos and Ravald 2011). In this regard, service modularity can either act within the boundaries of the business logic or may be used to actively transform it. This fundamental differentiation is particularly crucial as it seems to be closely intertwined with other dimensions, such as the overall motivation for introducing a modular service architecture. In particular, scholars

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who emphasize the operational role of service modularity tend to highlight expected efficiency gains in a particular operation (e.g., level of customer involvement and traceability in the service design), while the ones promoting the strategic nature of the concept often concentrate on the optimal trade-off between positive and possible negative effects (Cabigiosu et al. 2015; Carlborg and Kindström 2014).

x Actor spheres. Due to the service characteristics mentioned earlier, the design and provision of services involves a close collaboration between the provider and the customer (Grönroos 2011), which is particularly important in the context of KIBS. The efficiency of this collaboration predetermines the ease of the service provision and the overall service experience, both of which can be influenced by changing the degree of customization and standardization (Tuunanen et al.

2012). As such, existing literature on service modularity can be further divided, based on the focus group that will reap the most rewards. In particular, publications focusing on the provider role highlight the potential internal efficiency improvements (e.g., cost reduction, shorter time-to-market), via the use of service modularity, while maintaining the current customer experience (de Blok et al. 2010a; Corsten et al. 2007). In contrast, other scholars see the main value of service modularity in the ability to actively improve the current service experience and the value perception of the customer, thus better positioning the provider in the marketplace (Bask et al. 2010).

x Module orientation. The nature of services and their (at least partial) dependence on the underlying physical medium necessitates an examination of service modules from both the product and process perspective simultaneously (Bask et al. 2010a). For this reason, existing service architectures are usually based on combinations of multiple description layers for service modules (Bohmann et al.

2003). On the one hand, the static description layer contains product-specific information (such as performance metrics, price, and related resources) that plays a vital role in the module production (de Blok et al. 2010a). On the other hand, an explanation of the functionality of the module in the service architecture calls for a more dynamic perspective, typically described through a process or functional layer (Bohmann et al. 2003; Voss and Hsuan 2009). This combination of multiple description layers often builds a basis for modularization methods, which promote a simultaneous modularization of PSS (Boucher et al. 2016; Buchmann 2016).

x Scientific contribution. A further dimension for segmenting existing literature on service modularity is the intended academic contribution, with a total of three possible characteristics.

Motivated by the overall immaturity of the research stream, the first group of scholars aimed to provide useful definitions of the underlying terms and principles of service modularity (Pekkarinen and Ulkuniemi 2008), together with a demarcation from its product counterpart (Bask et al. 2010a).

In contrast, the second group of researchers focused on assessing or measuring the extent, to which a given service architecture reflects the underlying principles of service modularity, such as the level of granularity or reuse of service modules (Böhmann and Loser 2005; Kazemi et al. 2011). Finally, the articles of the third group provided guidance on how to transform a given (monolithic) service portfolio into a modularized one and how to use it for the subsequent service provision or new service design (Böttcher and Klingner 2011; Geum et al. 2012).

x Motivation for service modularity. The final dimension for structuring existing literature on service modularity is the fundamental differentiation between its positive effects and the trade-off balance. While the majority of existing publications unconditionally highlight only the benefits associated with a modular architecture (see Dörbecker et al. (2013) for a detailed literature review on that topic), just a handful of publications emphasize the need to achieve a certain balance between different effects. For instance, this includes the classic trade-off between meeting customer requirements while improving internal cost efficiency, although currently this trade-off has not yet been quantified (Brusoni et al. 2007; Tuunanen et al. 2012). Further (briefly) mentioned trade-offs include the monetary perspective, in terms of the value against the initial investments (Brusoni et

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al. 2007) or the ability to achieve service innovation despite using standardized modules (Ernst 2005), all of which take a more careful position towards the universal use of service modularity.

The presented seven dimensions are a useful aid for structuring and analyzing existing research on service modularity. However, in order to identify the major research streams, it is important to trace the causal relationship between these dimensions (Dey 2003). An additional iteration of the hermeneutic circle of ‘analysis and interpretation’ denoted that operational level and service understanding are, in fact, dominating dimensions, with the remaining dimensions are either the resulting implications (e.g., module orientation and motivation for deployment determine the operational level) or are to be regarded as meta-level (scientific contribution). Therefore, the identified seven dimensions can be simplified into a 2x2 matrix, thus creating four schools of thought in service modularity (Figure 9).

Figure 9: Schools of Thought in Service Modularity

There are three key elements in Figure 9: service, product, and business model. The manner in which the concept of modularity is applied to these elements, as well as to their respective interaction builds the basis for the four schools of thought. For instance, examining the operational level, the concept of modularity can be applied solely to product and/or service design (Schools 1 and 3) or be used to transform the business model of the provider (Schools 2 and 4), as the dashed lines (i.e., affected elements) illustrate. Similarly, the relationship between products and services differs based on the service understanding, either viewing them as complements (two identical dashed bars in Schools 1 and 2) or with service as an all-encompassing logic (dashed bar for product inside a service bar in Schools 3 and 4), in which products act merely as a medium for service delivery (Vargo and Lusch 2004). Table 5 gives a short overview of the derived schools of thought, along with their academic and practical implications.

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Key aspects Academic implications Practical implications

Traditional

x All elements can be altered independently of each other

x Service has a dominant role thus establishing the

x Examine the role of the supplier and his processes

x Assess the degree of modularity of existing services and provide

Table 5: Schools of Thought in Service Modularity with their Implications

The derived four schools of thought have a dual research contribution (Webster and Watson 2002). The academic value can be found in the structuring of existing literature, based on the two main dimensions (see P1 for a detailed classification of the publications), together with the identification of distinct research streams for (future) service modularity researchers. With respect to the practical use, the schools aim to provide initial guidance for service providers regarding the envisioned scope of their modularization initiative, in particular, their service understanding and which part of the company they intend to modularize (i.e., the continuum between a single service and a complete business model).