The standardization-customization paradox

“Standardization may go too far, resulting in decreased innovative capability. Then again, standardization to the right extent promotes productivity, efficiency and customer-perceived quality.” (Chief Executive Officer, Finnish Consulting Group) Moving on from strategic management to be managerial perspective in new service development, the main problem that the interviewees stated was the standardization-customization paradox. Many larger firms were more standardization-oriented, but all firms of types and sizes agreed that standardization is essential for efficiency and productivity. In short, the problem proposed by the interviewees was that customers appreciate tailored services that have a unique feel to them, but as far as management is concerned, the service delivery process should be standardized in order to provide quality and delivery performance. At the same time, an overkill of formalized processes was seen to result in hindered innovative capability, so there was a need to find the right balance. Not surprisingly, technologically oriented firms were more standardized in their technology development areas, but were having the same issues as the neo-PSFs in their professional services. Hence, it can be argued that all managers of all firms that were responsible for services had the same problem. As stated by one of the interviewees:

“It’s poisonous to bring out too many processes for knowledge workers. However, it is impossible to manage service delivery without a standardized set of procedures. We

need to look for that common ground that allows space for creative thinking and innovation, but that is underlined by generalized processes.” (Service Portfolio

Director, Fountain Park)

The main idea that the interviewees stated as a solution to the standardization-customization paradox was the service concept. They argued that a concept is a clear understanding on what is delivered and what the delivery should consist of, creating a ways of managing the efforts of knowledge workers but maintain a tailored experience to the customer. Furthermore, it was perceived that using concepts and internal processes do not only help to manage new services and current portfolios, but to give proof on quality in business-to-business sales. Concepts varied in different firms, as technologically oriented firms usually had technology-driven service concepts that were based on technological know-how, and professional service firms had concepts that were more marketing oriented. Despite this contradiction, concepts were seen as valuable tools for managers and practitioners.

As stated before, concepts were seen to work as tools for management and to provide clues of quality for customers. However, service concepts were also seen as ways of capturing tacit knowledge since such concepts work as ways of transforming the expert knowledge of innovative employees that have created new services to

organizational knowledge in the form of information. Furthermore, the interviewees also argued that concepts worked as ways of managing knowledge in general, as new services needed to be explicitly conceptualized and usually explained to a wider audience. Herewith a conclusion can be made: concepts were seen as a method of formalizing the intangible and providing a ways of managing expert knowledge and transforming it to an organizational level. The interviewees stated concepts as essential through a number of ways:

“We have succeeded in duplicating knowledge, as it is matter of constant knowledge sharing through a set of concepts and best practices. We can multiply expert knowledge,

in a way.” (Principal Consultant, Rongo)

“A standardized concept helps to remove the individualization of expertise and we are in the process of decreasing the amount of this individualization even more.” (Chief

Executive Officer, Finnish Consulting Group)

“A concept does not need to be easy or straightforward, but without one it is difficult to run business.” (Vice President, Global Intelligence Alliance)

“A standardized concept is good for management and for the company, as long as it does not hinder tailored customer experiences.” (Consultant Director, SWOT

Consulting)

Given that concepts are essential for managing new services, the focus now turns to the problem of building tailored customer experiences and value without losing the efficiency and productivity impacts given by a standardized process. The interviewees stated that tailored services and tailored experiences are what customers want from a knowledge-based service, since the need is always unique. It was commonly understood that customer requirements are not standard and that any service is always different from the other. Of course, the technology-driven companies usually had a certain technology that is not unique, but services were used to tailor it to unique customer solutions. However, the interviewees argued that finding the right level of standardization and thus finding the right concepts lies in experience, without question.

The interviewees stated that experience, as a phenomenon, is about finding the common ways of working that seem to build up concepts that customers see as valuable. The interviewees argued that concepts are a result of evolution, something that is done by delivering a certain new service to different customers and then finding the factors that seem to stay intact and pointing out the factors that need room for change. There was some division between interviewees in this respect, since some of the interviewees in neo-PSFs stated that there is few things in common with different service deliveries whereas technologically driven, larger companies saw that there is a lot that stays the same and that can be transformed to standard operating procedures and best practices. In general, the interviewees were unanimous that a service concept is done through

iteration, iterating from standardized to customized until the right concept is found.

Figure 18 illustrates this standardization-customization paradox and the ways of finding the “right concept” as stated by the interviewees and interpreted by the researcher.

Figure 18: Standardization-customization -paradox and the service concept evolution.

The interviewees argued that the area of standardization is much related to the point of finding best practices, i.e. ways that seem to provide value for customers within a certain context. For new service developers, this means that innovation should always strive to locate such standardized ways of working, providing efficiency and maintaining customer-perceived customization. As an implication, new service development should be based on trial and error, so that ideas are systematically tested in order to find working concepts or practices. The interviewees suggested that a long service development process without iteration was too rigid and overwhelming for a knowledge-intensive firm. One of the larger companies did however have management practices that were somewhat bureaucratic and time consuming, but they also saw that a more rapid development process methodology would have its place.

The interviewees continued that finding these standard practices also promotes workforce productivity as long as there is no overkill of formalization. This was perceived as essential for management, in both smaller and larger companies. The interviewees also argued that concepts and standardized processes work well when they are not managed to an extent that hinders innovation (referring to the overkill-factor before). There was a consensus that common procedures and best practices are required for new service development to be successful, but the innovation itself,

The area of standardization The area of customization Idea of the service

First concept

Second concept version, first customer

Third concept version, reflection from first customer

Fourth concept version, second customer

Working concept

Iteration

taking the first step towards a new concept was seen as more of a work of art than science. As noted by one of the interviewees:

“Efficiency and being competitive in the long run does require standardization to the right level. But then again, innovative people tend to be quite artistic, and you have to

leave them room to create.” (Vice President, Global Intelligence Alliance) All of the companies, both neo-PSFs and technology developers, did understand that knowledge workers need room to innovate and to create – suggesting that managerial practices should not be so normative that would decrease the innovative capability of the firm. However, as suggested before in the strategic management –chapter, the interviewees felt that innovation should be controlled and managed, not just left to chance.