skip to primary navigationskip to content

Cambridge Service Alliance

developing new understanding and approaches to complex service systems

Studying at Cambridge

 

Effects of Social Capital on Risks Taken by Suppliers in Outcome-Based Contracts

PhD Research by Jingchen Hou.

On the journey of servitization, services provided are moving from basic services to advanced services where capabilities are delivered. In this circumstance, outcome-based contracts (OBC) are increasingly used. Two important issues in OBC are risk and relationship (social capital).

An outcome-based contract refers to an agreement between the supplier and the customer that the supplier gets paid based on the outcomes of total solutions or the outcomes of customer value in a continual use situation.

Two approaches to deliver outcome-based contracts are first, the supplier-customer binary approach and second, the alliance / joint venture approach.

JH Fig1 Supplier Binary Approach
Figure 1. Effects of social capital on risks of outcome-based contracts with a supplier-customer binary approach from the supplier's perspective

In the supplier-customer binary approach, two major risk categories are commercial risk regarding the contracting of OBC, and operational risk regarding the implementation of OBC. Eighteen risk factors in six categories are identified to be the influencing factors. Social capital can prevent and mitigate risks to a certain extent.

JH Fig1 alliance approach
Fig 2. Risk and social capital building blocks in outcome-based contracts with an alliance approach

In the alliance or joint venture approach, three major risk categories are commercial risk regarding the commercial solutions among partners, operational risk regarding the operations of the alliance, and social capital risk regarding the construction of social capital in the alliance. The three risks mutually influence each other.

JH Fig1 risk management process
Figure 3. A risk management process for outcome-based contracts

Outputs:

RSS Feed Latest news

Partner Workshop - Ecosystems for Digital Transformation

Aug 15, 2018

Dr Florian Urmetzer and the Alliance Visitor Dominik Moeslein conducted a three-day workshop with CEMEX managers

Mexican Forum for the Business Transformation

Aug 10, 2018

Veronica Martinez was invited as keynote speaker at the Mexican Forum for the Business Transformation.

Blockchain in Customer Service Management

Aug 09, 2018

Caterpillar Presentation of Blockchain Results: Feasibility and Cost Analysis

Through-life engineering services – Adding business value through a common framework – Guide

Jul 24, 2018

This Publicly Available Specification (PAS) offers guidance to leaders of the UK industry that may enable manufacturing and solution providers in all sectors to win business, gain market share, generate revenue, and earn profits from the application of through-life engineering services (TES).

July Paper

Jul 23, 2018

July Paper on 'Coopetition and Business Models' by Chander Velu

View all news

Upcoming events

Industry Day - 3 October 2018

Oct 03, 2018

Moller Centre, Cambridge

Shift to Services Executive Education Programme

Nov 07, 2018

IfM, Cambridge, UK

Ecosystems Strategy One Day Course

Nov 15, 2018

IfM, Cambridge

Upcoming events