Outcome-based business models are an opportunity for growth at ABB
ABB commissioned a customized student business project from Aalto University on outcome-based business models. Outcome-based business models are a form of business operations that exchanges money for a certain outcome (e.g., lighting, motion, electricity). This project was carried out by Rein Järmut (Strategic Management), Anh Bui (IDBM), and Iiris Nupponen (ISM) between September and December of 2023.
ABB is a global electrification, motion, and automation company with significant operations in Finland. With the help of ABB’s Service Leader Miikka Aho, the team set out to explore the ins and outs of outcome-based models via academic research and interviews. The ultimate goal for the project aimed to understand and explain outcome-based business models, and then apply the theory to ABB’s operations to comprehend the feasibility and practicality of such a model in this specific context.
Best practices and challenges in OBBM development
During the 2.5-month project, the students did a benchmarking analysis of companies that have adopted outcome-based business models to be able to understand the best practices and key challenges of the new business model development.
‘We found interesting insights from the analysis such as how important customer relationships are in OBBM development. Since customers are key to business success, we deep-dived into the company´s current customer base through customer data analysis to understand customer behavior better and find the most potential target customers for the outcome-based services. Making the analysis was very intriguing since ABB is a global company offering a wide range of services to companies operating in many different services. In that way, we got a chance to develop our understanding of the features of various industries’, says Iiris Nupponen.
Based on benchmarking, customer analysis, internal interviews, and academic research the student team came up with the guidelines for outcome-based business model development. Their base for the business model development was the famous business model canvas where they were focused on the value creation, value delivery, and value capture at a general level. For each value element, they gave suggestions for ABB, on how they can develop their business to be able to move towards outcome-based services without forgetting the possible risks.
A unique learning opportunity
The students say that the project allowed them to dive into the topic of OBBM and its role in shaping the position of manufacturing businesses, on a global scale. The work process evolves from identifying the problems, understanding internal issues, to seeking inspiration based on external benchmarking and academic literature.
‘Throughout the course of the project, we got to work with different stakeholders, both internally and externally, and apply different aspects of business knowledge and hard skills such as data analysis, interviewing, and benchmarking. By working closely with ABB, we could gain first-hand industry insights as well as knowledge regarding corporate practicalities, which could be deemed useful for our future career development. Besides, working in a team of talented business students with different backgrounds and knowledge allowed us to learn from each other’s way of working and hone our skills in different aspects of business. Overall, the project was a unique learning experience that marked a highlight in our academic journey,’ Anh Bui says.
Throughout the project, the project team got valuable academic guidance from the school. The supervisor of the project, Professor Markku Kuula says that he is particularly pleased with the contribution of the student group to this project.
‘In a relatively short time, the team was able to achieve the goals set for the project and present its research results in a clear data-driven manner both in the report submitted to ABB and in an oral presentation to responsible persons at ABB. My satisfaction is increased by the fact that at the end of the project, one team member will continue working at ABB within the framework of her master's thesis, and another team member agreed on a summer job.’
In the end, the project developed the academic and professional skills of the project team, while delivering valuable research data and outcomes for the customer, ABB. The project was also considered a valuable contribution to ABB's business: ‘For ABB Motion Service, the value lies in the thorough examination of the subject through diverse viewpoints and the fresh discussion of external perspectives,’ says Miikka Aho from ABB.