AURO Case Study

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AURO – GraT Case Study

Introduction

The following description contains a case study which was carried out during the development of the starting phase of the MEPSS methodology by GrAT. The goal was to have an early feedback on the usability of the MEPSS toolkit.

AURO is the leading company of natural paints. They have a high claim to their products and whole organisation with regard to sustainability, and to the final results in terms of function and perfection.

As a part of a EU research project AURO developed a production technology to produce a natural paint using only water as thinner– with this technology they are the first und only producer who can fulfil the new EU decree for 2008 the EN 927. With this new technology AURO wants to leave their usual niche market and the expensive distribution system via small specialised shops.

The direct partner in the case study was the team of AURO Austria in Kleinglödnitz – a sister company of the German mother company producing most of the products for the Austrian and eastern Europe market.

AURO Austria had an interest in investigation of new business concepts and possibilities for a given range of products. GrAT used this partnership for tool testing and improvement within the MEPSS project.

How did the project start

AURO provided the company background and could use the elaborated results, GrAT developed the methodology in a practical manner, used and visualised the methodical results.

Objectives of the partnership

The strategic goal elaborated in cooperation with the management of the paint producer was to find new business opportunities to overcome disadvantages on the present market.

PSS could potentially offer solutions to that situation by moving from mere paint production to a combined solution tailor made for customer demands.


Processes tested and tools used

The tools tested under this case study were focused on the first three phases of the modular MEPSS structure.

The case study development started from scratch therefore being a good indicator for usability of the tools in an early stage of the development process.

The main question was how to concretise a vague vision by utilising the people-planet-profit approach, creating win-win situations, using local resources (materials, knowledge, peoples motivations, ...) based on the situation and culture of the company at stake and how to successfully prepare the design/assessment tasks in the following phases.

A set of nine tools was used to start the PSS development process in the phase of strategic analysis. This set was completed by a range of tools from market and customer research which are also designed for use in an early stages of the process following the purpose to find new ideas.


In detail the following processes were carried out:

MEPSS process

Tools tested in AURO case study

Phase 1 Strategic Analysis

Step 1: Preparatory phase

Process 1 Getting prepared

Preparatory Company questionnaire

Process 2 Preliminary meeting – Decision node 1

Moderation tools, Market SWOT

Process 3 Project planning

Project management tools

Step 2: Stakeholder identification

Process 1 Definition of stakeholders

Stakeholder checklist, Stakeholder mapping

Process 2 Priorisation of stakeholders

Prioritise the key stakeholders

Step 3: Evaluation strategy

Process 1 Discussion of visions

Elaboration of visions and guiding models oriented on Sustainable Development, Theory of sustainable develoment, Exploring customer needs

Step 4: System Analysis workshop

Process 1 Workshop preparation

Checklist for determination of variables

Process 2 Performing System Analysis

workshop

SWOT analysis, Moderation tools, Cross impact analysis, Value System Map, Interpretation of system behaviour

Step 5: Elaboration of results

Process 1 System Analysis results

Value System Map, Interpretation of system behaviour, Development of scenarios and strategic options by variation of key variables


Strategic Analysis - Preparatory Phase

Preparation

The first step of the MEPSS methodology is rather a research step to get an overview of the situation and to identify a proper starting position for the PSS development.

In our example on the one side the company, its history and profile needs to be taken into consideration.

Company profile AURO

Taken from www.auro.de

A second important part to be considered is the range of products produced and distributed by AURO:

The AURO products at a glance

Taken from www.auro.de

A third part of the research focused on the distribution structure and the market.

In a preparatory team meeting a stakeholder map has been produced which shows all relevant actors in the system and the information flows between them (see picture on the right).

First picture of stakeholders and their relations
Preliminary meeting – Decision node 1

This second process was started with a meeting in which the MEPSS experts and the management discussed the further steps of the project and agreed on a project plan. To gain an overview of the current situation, the main aspects were mapped by using a Market SWOT Analysis (strengths, week-ness, opportuni-ties and threats).

The strategies derived from this collection are shown in the following figure.

This table reveals that a number of responses can be envisaged. For instance the basic strategy “Using strengths to take opportunities” suggests to stress the compliance potential of natural paints in the external communication. If the company seeks to “overcome weaknes-ses” the offering of contracting solutions may be a benifical option.

The result of this process was a common understanding of the present situation, a vision of possible search directions (first ideas) and agreements on times, resources, team members and other management issues of the whole development project.

It was agreed to continue with a System Analysis workshop involving a wide range of stakeholders.


Strategic Analysis – Stakeholder Identification


As a preparation for the System Analysis workshop the team elaborated in internal meetings and interviews a list of stakeholders to participate. For these topics the tools “stakeholder mapping” and “stakeholder prioritisation matrix” proved to be useful. The results are depicted in the following two pictures.

Definition of stakeholders

Prioritisation of stakeholders


Strategic Analysis – Evaluation Strategy

This step of PSS development is normally used to match and discuss different visions of the involved stakeholders and finally to identify appropriate indicators for measuring sustainability issues.

As the guiding model of AURO and its whole value chain is clearly oriented on sustainable development, in this stage only processes were tested that are also useful for idea generation towards new PSS options.

Definition of visions

The company´s vision

AURO Natural Paints are manufactured according to the principles of "Gentle Chemistry".
A considerable part of the production does not take place inside the factory, but in the midst of the environment, i.e. inside of living plants. This is the place where natural synthesis processes happen, powered by solar energy ("photosynthesis"), leading to an overwhelming wealth of precious natural substances. Such renewable raw material is taken by AURO, ennobled by simple, surveyable techniques, with low energy input and without hazardous waste. Natural Paints from such manufacturing processes are parts of perfectly closed material cycles, leaving no persistent remains in our environment.

There are many positive arguments for ecologically consistent Natural Paints: natural, renewable raw material, ingredients fully declared, leading to high quality of life with a healthy room climate. The ecological balance sheet of our products makes them in fact less expensive than many conventional paints. AURO Natural Paints are available for many application fields inside and outside. 20 years of practical experience, thousands of satisfied customers and brandnew neutral certificates prove: Natural Paints can be technically even better than many conventional paints made from non-renewable synthetic resins!

Source: www.auro.de

The vision of sustainable development – at a system level

At this level of abstract thinking three so called “orientors” are crucial for possible development directions towards a more sustainable system:

  1. the increase of variety,
  2. the increase of relation density and
  3. the increase of system dynamics.

All three “orientors” provide potential new ideas and action fields for creating PSS:

  1. The increase of variety leads to system thinking (the customer is part of the system) and to customized solutions for every customer respectively every customer’s demands. From a company’s point of view one has to produce and deal with “customized-solutions in mass production” – the first symbolic keynote for new PSS.

Example, Auro surface service: “Our goal is to preserve surfaces with optimised technology”

  1. The increase of relation density leads to a system with very close-mashed nets. This means closing cycles in terms of organization, responsibility and interrelations; taking into account regional aspects of supply and demand, benefiting from “weekly markets” rather than the “world market” – the second symbolic keynote for new PSS.

Example, Auro surface service: A Service-Card leads to closed loops of responsibility from sides of the producer.

  1. An increase of system dynamics leads to strategies according to the motto “more for less” by stimulating existing forces and motivations within the system. You have to deal with the given resources of the system – intelligence, creativity, motivation, politics, materials, energy, etc. This motto “more for less” is the third keynote for new PSS.

Example, Auro surface service: Introducing a Service-Card for buildings is a way of monitoring the quality of a building, which could be favourable also for the evaluation procedure necessary for receiving public funds. Therefore the authorities may be interested in supporting corresponding initiatives.

Exploring customer needs

To support these processes use was made of the tool called need and function analysis.

It consists of

- Definition of the market

- Improvement and understanding of needs and how to fulfil them

- Optimising the method of need fulfilment

At first a market definition was elaborated and visualised. In the center of the illustration the main functionalities of the given products are indicated. Essential characteristics that could define possible new PSS ideas are put in contrast with their respective alternatives.

Market definition AURO case


In a second step a means and chain analysis was carried out. This links the product attributes and the customer demands and values. The result is depicted in the next figure providing a suitable image for reflecting the current offer.

Hierarchical value map AURO case

The third format of exploring customer needs is the needs and function analysis. A set of questions (see worksheet 17, MEPSS handbook) helps to identify all functions, needs, meanings and connotations fulfilled by the current product (or possible new PSS offer), in the present case these are the AURO natural paints.

Need analysis AURO case

In case of natural paints the need and function analysis made clear which products and services new PSS could substitute (all kinds of paint for walls and paint for wooden house parts and could fulfil the functions of house maintenance and house refurbishing). And it made clear which functional and psychosocial benefits could be optimised. These are: `conservation’, `right outlook of the house’, and `personal expression of environmental care.’

This led to various PSS ideas, such as courses in natural paint application for hobbyists and professionals, colour advice and maintenance contracts. The results were generated by making the following associations:


Strategic Analysis – System Analysis Workshop

The System Analysis workshop is the central activity of the first phase. It has to define the common language between all different participating stakeholders, it has to create a model of reality that can be discussed and handled in a one-day-workshop. Furthermore it has to provide motivation changing processes on several operative levels.

Preparing System Analysis workshop

For the preparation of the System Analysis workshop the following structure for the work- and information flow has been used in order to enable an effective process.

Preparation of System Analysis workshop

The results of the preparation phase provided a good overview of the company and its market, a list of participants for the workshop and some initial ideas about possible result of the workshop. Moreover presentations about MEPSS, case studies and about the application of the System Analysis method have been prepared. Supporting documents and formats were used during the workshop.

System Analysis workshop

The System Analysis method contains four steps as indicated in the following figure:

Structure of the System Analysis

Definition of variables

In the first step a set of variables describing the system in question was elaborated. For this purpose a checklist has been developed covering the product life cycle at technological, organisational and cultural level.

The figure below shows the overview of this checklist and the detailed structure for a selected variable (communication between manufacturer, dealer, supplier). In the AURO case study a number of 21 variables proved to be relevant for the system description.

Variables checklist

Cross impact analysis

In the next step interrelations between the variables have been calculated by using the so called cross impact analysis. This tool helps to identify the potential effect of every variable on each other. “If I change variable X, would the effect at variable Y be zero, middle or high (0 – 3 points)?” This question was applied to all selected variables in parallel group discussions. The results recorded in the matrix as shown below the sum is called “Active- sum” for the rows and “Passive sum” for the columns.

Cross impact matrix AURO Case

During this group discussions the participants learn to look at their system from different points of view which has a remarkably positive effect on creating possible new business ideas.

System behaviour

Based on the outcome of the cross impact analysis the variables can be classified according to their influence on the system using the calculated Active and Passive sum. The format is separated into different zones. The variables in this zones show typical characteristics.

Active variables allow effective changes in the system and thus have the potential to re-stabilize it in the new state. They are of major interest for the design process of PSS. In our case the variables 14 (Operating costs) and 18 (development infrastructure) can be found in the active zone – these variables form the basis for further elaboration in the scenario development phase.

Critical variables have to be handled with caution because they have big potential for changing processes, but they can easily get out of control, or destabilize the system. The variables 9 (service/maintenance), 11 (development of market), 16 (positive image), 19 (branch development) and 20 (innovation orientation) are in the critical zone.

Variables in the reactive zone represent important indicators but have no steering potential. Only variable 4 (communication prod./supplier) fits in this area and could be used as indicator for the reaction of the whole system. Variables in the buffer zone have a limited potential to effect the system.

Value System Map

In the next step the Value System Map has been elaborated. Independent from the cross impact analysis all variables have been listed and their dynamic interrelations identified. A first version was developed during a workshop discussion, the final one was developed during a team meeting.

Value System Map AURO case

Interpretation of the AURO Value System Map (yellow marked variables are the critical ones according to the cross impact analysis, the active ones are marked in grey; the coloured arrows mark different types of feedback cycles):

The Value System Map provides information about the dynamic system behaviour. For the analysed system it is remarkable that the feedback cycles are quite long (see the orange and blue cycles in the picture below) this in general indicates a slowly reacting systems - changing processes will take some time.

Positive feedback cycles are dominating in the system. The only negative feedback cycle is linked with variable 14 (operating costs): this variable therefore plays an important role in stabilising the system.

Three partial cycles of Value System Map AURO case

Positive cycles (marked in grey), see picture at the left) lead to mutual amplification and therefore instability on the long term.

Negative feedback cycles (like the orange one, see picture on the left) are the stabilising elements of a system.

System Analysis results of the AURO case

The summarised results of the System Analysis are:


Exploring Opportunities – Preparing Scenario Workshop

This chapter should links the Analysis with the creative process of generation and visualisation of new PSS possibilities.

Strategic options for scenarios

Based on the identified active variables four different scenarios have been developed like shown in the next illustration.

In an open creative process using e.g. brainstorming and other creative techniques, ideas have been developed according to the given format.

The Service Card Idea proved to be the most promising scenario for being elaborated in the next steps.

Simplified Stakeholder System Map for the Service Card Idea

Conclusion

Product Service Systems offer a promising strategy to overcome the unfavourable junction between increasing value creation and rising resource consumption. The key success factor for sustainable PSS offers is a direct satisfaction of clients needs. Surprising new business perspectives can be derived by shifting the commercial focus from selling products to providing solutions for a given problem.

To enable PSS to remarkably contribute to sustainable development a systematic design and a strong foundation of background knowledge is needed that allows predictable success stories. Based on a general description of the system, System Analysis provides such an information basis. The Tools are relatively easy to apply and do not ask a lot of effort from the side of the involved business stakeholders.

Although the answers and interpretation results are not always clear-cut they thus provide good evidence for development options and possible measures throughout the next phases of a systematic PSS development. Furthermore with rising interpretation experience it will be possible to optimise the development process by identifying the most critical issues (that need detailed investigation) already in an early stage of PSS development.