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Cutting cost in service systems: Are you running with scissors?

Thenent, Nils; Settanni, Ettore; Parry, Glenn; Goh, Yee M; Newnes, Linda

Authors

Nils Thenent

Ettore Settanni

Glenn Parry Glenn.Parry@uwe.ac.uk
Academic Associate Lecturer - BAM

Yee M Goh

Linda Newnes



Abstract

A rigorous link between the domains of cost estimation, systems theory and accident investigation reveals fundamental epistemological limitations of commonly employed cost models when dealing with the characteristics of systems, particularly service systems, which may hinder the ability to take appropriate action for cost reductions.
Key points:
1. The ability to take action, in particular related to cost reductions in service systems, is strongly influenced by the understanding (epistemological assumptions) underlying a decision-support tool, in this case a cost estimate.
2. There is a conflict in the underlying epistemological assumptions about what is and can be known in such a socio-technical system as a service system.
3. A managerial perspective of cost estimation which neglects the essential characteristics of service systems may drive behaviour which is locally optimised but creates tension or failure at the system level.
4. Cost cutting decisions that are based on a flawed understanding of the situation can lead to counter-intuitive outcomes for organisations; hence practical guidance is needed to help managers consciously consider the underlying epistemological assumptions in a given situation.

Journal Article Type Article
Publication Date Aug 19, 2014
Journal Strategic Change: Briefings in Entrepreneurial Finance
Print ISSN 1099-1697
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 23
Issue 5-6
Pages 341-357
APA6 Citation Thenent, N., Settanni, E., Parry, G., Goh, Y. M., & Newnes, L. (2014). Cutting cost in service systems: Are you running with scissors?. Strategic Change, 23(5-6), 341-357. https://doi.org/10.1002/jsc.1981
DOI https://doi.org/10.1002/jsc.1981
Keywords servititization, cost modelling, complex service, aerospace
Publisher URL http://dx.doi.org/10.1002/jsc.1981
Related Public URLs http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-1697
Additional Information Additional Information : First published online 19 August 2014. This is the pre-peer reviewed version of the following article: Thenent, N., Settanni, E., Parry, G., Goh, Y. M. and Newnes, L. (2014) Cutting cost in service systems: Are you running with scissors? Strategic Change: Briefings in Entrepreneurial Finance, 23 (5-6). pp. 341-357. ISSN 1099-1697, which has been published in final form at http://dx.doi.org/10.1002/jsc.1981.

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