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

February 2019 Webinar - Business Ecosystems Mapping

Feb 12, 2019

In this webinar, Florian presents the Alliance January 2019 paper on Business Ecosystems Mapping.

January 2019 Paper

Jan 21, 2019

January 2019 paper on 'Using Business Ecosystems Mapping to Generate new Competitive Value Propositions'

Webinar 14 January

Jan 16, 2019

In this webinar, Tim Pearce discusses his paper on Bayesian Neural Network Ensembles

December 2018 Paper

Dec 19, 2018

December 2018 Paper on 'Bayesian Neural Network Ensembles'

Webinar 10 December 2018

Dec 14, 2018

Webinar on Service Business Model Innovation: The Digital Twin Technology by Veronica Martinez, Audrey Ouyang, Andy Neely, Caroline Burstall and Dav Bisessar

View all news

Upcoming events

Shift to Services Executive Education Programme

May 14, 2019

IfM, Cambridge, UK

Upcoming events