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

Nils Thenent, Ettore Settanni, Glenn Parry, Y M Goh, Linda Newnes

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The ability to take action, in particular related to cost reductions in service systems, is strongly infl uenced by the understanding of decision-support tools such as cost estimates. A managerial perspective on cost estimation that neglects the essential characteristics of service systems may drive a locally optimal behavior, but creates tension or failure at the level of the overall system. Cost-cutting decisions that are based on a flawed understanding of the situation can lead to counterproductive outcomes. This paper presents 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 servitization systems.
Original languageEnglish
Pages (from-to)341-357
Number of pages16
JournalStrategic Change
Issue number5-6
Early online date19 Aug 2014
Publication statusPublished - Aug 2014


  • servitisation
  • cost


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