Article

The path to outcome delivery: Interplay of service market strategy and open business models

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Abstract

Firms in a variety of manufacturing sectors as well as the software industry have increasingly embraced services alongside their product portfolios in order to improve financial performance. Yet, the key question “How do service market strategy change and the accompanying business model change interact, and how does their interplay affect value creation?” remains open. Relying on twelve case studies of firms that have shifted towards providing highly advanced services (e.g. outcome-based contracts), theoretical propositions concerning the interplay of market strategy and business model on value creation are derived. The firms studied report two interdependent changes: first, they evolve the market strategy from provision of pure products to provision of services and then outcomes, in order to achieve a better fit with customer needs and to grow their service businesses. Second, they rely increasingly on partners and suppliers to provide new activities that are outside their competence base. This 'open business model' allows them to grow their new service businesses effectively and efficiently. At the same time, however, the shift to a service market strategy requires enhanced accountability to customers and increases the threat of penalties in the case of failure, while reliance on partners and suppliers leads to loss of control over the activity system and increases the threat of failure due to third party dependency. Thus, this paper finds that the success of firms that shift to services and outcomes hinges on their ability to balance the trade-off between increased value (i.e. growth, efficiency and effectiveness) and increased uncertainty associated with service market strategy/open business model interplay.

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... Frequently, a certain level of integration or cooperation within the value chain is required. Elaborating on Chesbrough's open innovation thesis, researchers are increasingly considering open business models in servitization (Visnjic et al., 2018) that allow innovation and effectiveness through leveraging the capabilities of other ecosystem agents (Chesbrough, 2007). ...
... Referring specifically to solutions, Brady et al. (2005) argue that the development of collaboration skills in identifying, evaluating, and managing long-term risks in supply streams is required. Moreover, among only three capabilities required for companies to shift to advanced services, Visnjic et al. (2018) include the ability to understand customer needs and to work with suppliers and partners. ...
... In contrast, some researchers have noted the greater difficulty of protecting service innovations due to the complexity of defining appropriation regimes of innovation results, the need to engage customers in design and/or implementation of innovations (because the relationship with customers is a fundamental aspect of service innovations) (Santamaría et al., 2012), and the greater risk of partner or supplier opportunism or failure to coordinate activities with them due to embracing an open business model (Visnjic et al., 2018). ...
Article
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Scholars, managers, and policy makers are increasingly interested in the potential of servitization to enhance the innovation capabilities for manufacturing companies, among others. Collaboration within the supply chain appears to play a relevant role in the transition to service provision because of its relational character. Combining these elements in the same model, this study sheds light on the relationship between innovation capabilities and integration levels, both internally and externally with customers and suppliers, considering the level of servitization in different firms. Using partial least squares structural equation modeling (PLS-SEM) on a sample of Basque manufacturing companies, this study reveals significant differences between manufacturing companies with low- and high-level services regarding the impact of customer integration on product innovation capability. The same result was not found for other supply chain dimensions—internal and supplier integration. These findings can be related to the prominent role of customer relationships and contacts in developing innovation capabilities in manufacturers’ services considered by some previous research. In addition, by analysing the different dimensions of supply chain integration separately, internal integration was found to be an enabler of external integration.
... For example, competitors may form alliances to collaborate (Bouncken & Kraus, 2013;Markovic et al., 2020), whereas business partners must engage in joint creation of value while simultaneously protecting their individual interestsnamely, value capture (Niesten & Stefan, 2019). Thus, understanding relational paradoxes is becoming an increasingly important topic as servitizing companies participate in complex inter-organizational settings to drive growth and competitiveness, such as ecosystems (Sklyar, Kowalkowski, Tronvoll, & Sörhammar, 2019;Vargo & Lusch, 2016), open business models (Visnjic, Neely, & Jovanovic, 2018), and outcome business models (Hou & Neely, 2018;Ng, Ding, & Yip, 2013). In particular, we argue that outcome-based service (OBS) relationships are a challenging context ripe for paradoxical situations to emerge due to their unique characteristics. ...
... We contribute to the literature on OBS relationships (Hypko, Tilebein, & Gleich, 2010b;Visnjic et al., 2018) and relational paradoxes (Håkansson & Ford, 2002;Lannon & Walsh, 2020) in several ways. First, we unveil insoluble relational tensions in OBS relationships and demonstrate how providers cope with them in order to secure continuity in the relationships. ...
... Recognized as the most advanced form of servitization (Grubic & Jennions, 2018;Ng et al., 2013;Visnjic et al., 2017), OBS offerings evidence the shift from a transactional relationship to a relational one between service providers and customers (Sjödin, Parida, & Kohtamäki, 2019). Engaging in an OBS relationship causes the operations and incentives of the contracting parties to intertwine (Visnjic et al., 2018) as the providers and customers realign their value creating and capturing mechanisms to reach the outcomes together . Despite the seemingly straightforward logic, OBS offerings have been found to be a challenging strategy due to numerous tensions. ...
Article
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By entering outcome-based service (OBS) relationships, industrial service providers and their customers realign their business interests to achieve mutually beneficial outcomes. The move towards OBS represents a shift from transactional to relational interaction between the providers and their customers. Thus, the changed relationship is bound to envelop paradoxes-circumstances that involve competing demands where making tradeoffs can often be impossible. The purpose of this study is to explore such relational paradoxes in OBS relationships and how providers cope with them. An explorative case study approach reveals that the relational paradoxes are related to control, knowledge, dependency, and complexity. Subsequently, we developed a COPE framework consisting of four provider coping strategies: commitment, openness, partnerships, and extrication. Building on the logic of knotted paradoxes, we introduce a quatrefoil knot in which the found relational paradoxes are enmeshed. Finally, we show how different paradoxical tensions become salient at different phases of the OBS relationship while being reinforced by the latent paradoxes at the time. For managers, we disclose relational tensions and their temporal interplay and suggest strategies to cope with them.
... The process knowledge such technical skills, experience and product knowledge plays a vital role in implementation of pay-per-outcome BM [36], [38], [42]. As Grubic and Peppard [36] summarize the equipment status cannot always be defined alone from the data, but the process knowledge is needed in order to interpret it, especially when the equipment is complex. ...
... The risk is high in pay-per-outcome BM, where the company's revenue is dependable on the result of its equipment which is used by customer [42]. In some cases, introduced by Visnjic et al. (2018) the companies implementing pay-per-outcome BM, have faced huge losses due to failure of meeting promised availability for the equipment. ...
... The risk is high in pay-per-outcome BM, where the company's revenue is dependable on the result of its equipment which is used by customer [42]. In some cases, introduced by Visnjic et al. (2018) the companies implementing pay-per-outcome BM, have faced huge losses due to failure of meeting promised availability for the equipment. This highlights the vitality of understanding the environment and customer's processes for the companies to avoid promising too much. ...
Conference Paper
The overall purpose of this study is to understand how manufacturing companies have so far made use of and can make use of pay-per-X (PPX) busi- ness models (BMs) largely in capital product markets, and which mechanisms have helped them in the implementation. Through systematic literature approach this study analysed 14 research publications which exclusively focused on PPX business models. The differences between PPX business model patterns were studied from three perspective, namely criticality of product, need of process knowledge and complexity of the process and its output. We find out that the pay-per-outcome business model, is more prevalent for products which are criti- cal, needs extensive process knowledge and are rather complex. In contrarily, pay-per-output business model is more prevalent when these conditions are not met. However, none of these three factors prevents implementing other type of PPX business model but rather specific business model is more feasible when specific conditions are met. This paper contributes a much more in-depth quali- tative view on the patterns and related qualitative arguments for the useful appli- cation of PPX models in equipment manufacturing industries and helps to under- stand the differences between PPX business model types.
... The term "smart" refers to the connectivity elements embedded in the solutions, enabled by ports, protocols, and Internet of Things (IoT)-type of technologies (Allmendinger and Lombreglia, 2005;Porter and Heppelmann, 2015;Tian et al., 2021), whereas the term "solutions" refers to a bundle of products, services, and software (Shankar et al., 2009;Storbacka et al., 2013;Windahl and Lakemond, 2010). Development, sales, and deployment of such smart solutions require reconfiguration of organizational processes, structures, assets, and routines (Töytäri et al., 2018;Ulaga and Reinartz, 2011;Rabetino et al., 2018;Raddats et al., 2019;Vendrell-Herrero et al., 2020) while addressing underlying customer needs and productivity pressures (Cusumano et al., 2015;Rabetino et al., 2017;Reinartz and Ulaga, 2008;Visnjic et al., 2018). The present study focuses on the innovation processes, routines, and practices in developing smart solutions. ...
... Within focal companies, Töytäri et al. (2018) have found out that smart services require bridging both mindset and capability barriers. In practice, they need to obtain new (technical) capabilities and practices in data processing and solution design (Ardolino et al., 2017;Ulaga and Reinartz, 2011) to provide new types of smart solutions such as operations and maintenance (O&M) solutions (Huikkola et al., 2020), outcome-based contracts (OBCs); (see Korkeamäki and Kohtamäki, 2020), and performance-based agreements (Visnjic et al., 2018). ...
... Wärtsilä is a Finnish-based, international technology company developing and selling smart energy solutions for the marine and energy sectors. Wärtsilä has made a successful transition from selling pure technology to selling customer solutions (see Salonen and Jaakkola, 2015), including development and sales of operations and maintenance (O&M) solutions, performance-based contracts (Korkeamäki and Kohtamäki, 2020;Visnjic et al., 2018), and a wide array of services (e.g., lifecycle and digital services). Services accounted for 50% of the corporation's revenues in 2018. ...
Article
Full-text available
The present study scrutinizes how an incumbent solution provider executes smart solution development (SSD). We aim to contribute to digital servitization research, which primarily focuses on either product, service, or software development, thus overlooking the integrative aspect of SSD. We unfold the holistic SSD development process in a single case study through 23 manager interviews, observational data, and strategic document analysis. The study extends the product-service innovations (PSI) literature by 1) identifying a set of innovation routines, such as collaborative, customer-focused, and decision-making, 2) demonstrating innovation management processes and practices associated with those routines, and 3) highlighting the co-alignment of innovation processes, routines, and practices to achieve improved outcomes from SSD. The study translates the empirical work into a framework and a set of propositions to guide future research. For managers, the study provides a framework and a set of capability-enhancing practices for a benchmark.
... The process knowledge such technical skills, experience and product knowledge plays a vital role in implementation of pay-per-outcome BM [36], [38], [42]. As Grubic and Peppard [36] summarize the equipment status cannot always be defined alone from the data, but the process knowledge is needed in order to interpret it, especially when the equipment is complex. ...
... The risk is high in pay-per-outcome BM, where the company's revenue is dependable on the result of its equipment which is used by customer [42]. In some cases, introduced by Visnjic et al. [42] the companies implementing pay-per-outcome BM, have faced huge losses due to failure of meeting promised availability for the equipment. ...
... The risk is high in pay-per-outcome BM, where the company's revenue is dependable on the result of its equipment which is used by customer [42]. In some cases, introduced by Visnjic et al. [42] the companies implementing pay-per-outcome BM, have faced huge losses due to failure of meeting promised availability for the equipment. This highlights the vitality of understanding the environment and customer's processes for the companies to avoid promising too much. ...
Chapter
Full-text available
The overall purpose of this study is to understand how manufacturing companies have so far made use of and can make use of pay-per-x (PPX) business models (BMs) largely in capital product markets, and which mechanisms have helped them in the implementation. Through systematic literature approach this study analysed 14 research publications which exclusively focused on PPX business models. The differences between PPX business model patterns were studied from three perspective, namely criticality of product, need of process knowledge and complexity of the process and its output. We find out that the pay-per-outcome business model, is more prevalent for products which are critical, needs extensive process knowledge and are rather complex. In contrarily, pay-per-output business model is more prevalent when these conditions are not met. However, none of these three factors prevents implementing other type of PPX business model but rather specific business model is more feasible when specific conditions are met. This paper contributes a much more in-depth qualitative view on the patterns and related qualitative arguments for the useful application of PPX models in equipment manufacturing industries and helps to understand the differences between PPX business model types.
... Erkoyuncu et al. (2009Erkoyuncu et al. ( , 2014 discussed the business challenges from the uncertainty in estimating long term contracts in the defence and aerospace industry perspective. Although several studies have highlighted the importance of uncertainty analysis in PSS, the challenge for the industry is to quantify the uncertainty to inform their decisions with respect to affordability and profitability of the service contracts (Erkoyuncu et al., 2009;Erkoyuncu et al., 2013;Durugbo and Erkoyuncu, 2016;Visnjic et al., 2018;Rodríguez et al., 2020). ...
... Bustinza et al. (2017) provided a framework for service implementation and transformation in manufacturing with a focus on digital technologies and outcome-based contracts. Additionally, Visnjic et al. (2018) presented an outcome delivery path for industries to overcome the risks of penalties in the case of failure to meet customers' requirement, while relying on third parties and suppliers. Their proposed approach supports industries to keep the balance between 'the increase in value' and 'uncertainty' associated with service market strategy. ...
... They found the aftermarket-oriented organisation, audit-oriented governance, relationship-oriented intelligence and lifecycle-oriented contracts as the crucial factors to mitigate uncertainty. Furthermore, Visnjic et al. (2018) argued that within a PSS contract, risks could be associated with both internal, and partners' activities. Accordingly, Hou and Neely (2018) categorised the risk factors in servitization as: complexity, dynamism, dependency, lack of capability, and alignment in PSS contracts. ...
Article
Product-service system (PSS) business models appraise the relationship between different stakeholders and focus on a partnership based on profit. Existing literature discusses servitization and the associated cost-benefit analysis (CBA) models mostly from the perspective of original equipment manufacturers. Additionally, CBA is typically conducted using top-down approaches and standard activity-based costing, with limited available data and without considering uncertainty. As a result, inadequate and under-priced contract decisions may be made. To address the problem, this paper extends the current literature by proposing a novel framework for quantifying uncertainty in cost and benefit estimates of PSS contracts. The framework offers a bottom-up costing approach using the agent-based simulation technique. The framework comprises a stochastic CBA model for PSS. It is developed by considering through-life cost and benefit of products and services with aggregate uncertainty in terms of service costs, service lead-times, and their occurrences. The framework has been tested successfully on a real-world case study with a bespoke service provider in the machine tool industry. The model is applied to include spare-parts and availability-based servitization contracts. The simulation results are validated by real- world measurements and expert knowledge. The results involve a comprehensive stochastic analyses of a through-life CBA under probabilistic uncertainty and provide the opportunity to quantify the uncertainty in PSS contract decisions. Moreover, the results highlight that servitization is more beneficial for bespoke service providers in long-term contracts, and for relatively new or retrofitted products. Further research works are required to apply the model on capability-based contracts.
... Hakanen et al., 2017;Aminoff and Hakanen, 2018;Gölgeci et al., 2021). Prior studies largely agree that successful servitization requires manufacturers to engage in open, joint action with partners to deliver advanced services to customers (Chesbrough, 2011;Randhawa et al., 2018;Visnjic et al., 2018;Kamalaldin et al., 2021). However, servitization in global markets means that a wide range of intermediary partners have to be managed -for example, distributors, technology providers, system integrators, and consultants (Randhawa et al., 2018) -to efficiently reach global customers and meet demands for local customization (Hakanen et al., 2017). ...
... More specifically, the literature argues that engaging in service networks affects the actor's boundary decisions concerning identity, competence, efficiency, and power (Salonen and Jaakkola, 2015). In the context of advanced services, the service network partner's role transmutes from a reactive role of service support to a proactive role of anticipating and preventing problems (Kowalkowski and Ulaga, 2017), with a consequent increase in accountability for delegated actions (Visnjic et al., 2018). On the other hand, the manufacturer's R&D unit may have to take on a new role in which it extensively delegates service activities to service network partners and other third parties (Linde et al., 2021b). ...
... The study distills four value co-creation challenges in the global provision of advanced services -in particular, challenges related to governance, risk management, service innovation, and service scaling. The governance challenges tend to be problematic given that actors may operate under different business models (Visnjic et al., 2018;Sjödin et al., 2020). Therefore, the manufacturer's R&D unit must closely align incentives in relation to advanced services with the goals of service network partners. ...
Article
Full-text available
This study investigates how global manufacturers offer advanced services, such as outcome-based contracts, to global customers. Offering advanced services requires companies to engage in and manage win-win collaborations with a diverse set of service network partners. However, there is currently a lack of insights into the value co-creation challenges faced by manufacturers' R&D units and their service network partners. Equally, there is a pressing need for roles to be properly aligned when offering advanced services in global markets. Based on 34 exploratory interviews with respondents from two manufacturers and their six globally dispersed front-end service network partners, this study identifies diverse co-creation challenges related to the provision of advanced services in global markets. The results show that complex collaborations of this nature often do not lead to win-win relationships but rather to less understood win-lose or lose-win scenarios. Our proposed framework unpacks how to manage value co-creation challenges and establish win-win relationships through role alignment. This study's findings show that the successful provision of advanced services requires manufacturers to play the role of global service orchestra-tors and service network partners to act as global service integrators. Thus, role alignment provides greater latitude to establish a joint sphere of value co-creation for back-end and front-end actors. We conclude by discussing this paper's theoretical and practical contributions to the emerging literature on servitization in global markets and global service networks.
... DS constitutes a novel paradigm in manufacturing that differs from the manufacturing of products or the development of digital services that support a product (Chen et al. 2021;Tronvoll et al. 2020;Pirola et al. 2020). DS includes digitalisation of the manufacturer's entire service business model (Ritter and Pedersen 2020) and proposes an outcome provision where solution providers sell outcomes instead of services (Visnjic, Neely, and Jovanovic 2018). A critical feature of DS is to support customers in achieving their goals, instead of supporting the products themselves (Naik et al. 2020). ...
... Therefore, our study contributes to clarifying the importance of achieving IIoT-enabled DS for supporting operations at a facility by delivering the right material in the right quantities to the right location at the right time. Accordingly, the implications of presenting operational benefits of applying data models for multichannel communication are critical for establishing outcome provisions in IIoT-enabled DS (Visnjic, Neely, and Jovanovic 2018). This finding suggested that solution providers (e.g. ...
Article
Full-text available
Digital servitization (DS) enabled by the Industrial Internet of Things (IIoT) is essential for securing long-term competitiveness in manufacturing. The literature identifies the need for developing data models for multichannel communications across IIoT devices that fulfil the DS vision. This is crucial for avoiding isolated systems based on proprietary solutions and for promoting data sharing and interoperability across existing and future DS applications. Accordingly, this study proposes a data model for multichannel communication that facilitates IIoT-enabled DS for smart production logistics (SPL). We present three findings from a case study focussing on material handling in a manufacturing company. First, this study provides a model with four modelling profiles, including IIoT devices, databases, and services for multichannel communication. Second, it shows how the proposed modelling profiles transfer information across monitoring, control, optimisation, and autonomous decision services. Third, it presents the operational benefits of applying the proposed data models, including improvements in the delivery, makespan, and energy of material handling. These findings are essential for capturing, processing, and transferring information across products, services, and software databases in IIoT-enabled DS for SPL. They are relevant for manufacturing managers and academics and improve our understanding of IIoT-enabled DS's deployment for SPL in manufacturing.
... When impressive AR experiences are shared on social media, they can have a positive effect on electronic word-ofmouth (eWOM) practices and make other users want to find similar experiences to share within their networks (Seidman, 2013;Sung, 2021 (Scholz and Duffy, 2018;Sundar et al., 2019;Goebert, 2020) and the rise of research interest in mobile AR games like Pokémon Go (Anderson, 2016;Mäyrä, 2017;Rauschnabel et al., 2017; Apperley and Moore, 2019) that are similar to ARSMAGs, the latter topic has not yet become prominent in academic settings. Practitioners need to be able to understand what makes people play these gamified advertisements and how playful features in commercial contexts enhance the effectiveness of advertising (Anderson, 2010;Terlutter and Capella, 2013;Hamari and Keronen, 2017;McCaffrey, 2020) Value creation aims to increase value generation (Chesbrough et al., 2018;Dyer et al., 2018;Visnjic et al., 2018;Sjödin et al., 2020). Value, or the subjective consumer experience of interacting with and assessing brands or branded content, is an integral part of the consumer experience Gilmore, 1998, 2013;Gentile et al., 2007;Brakus et al., 2009;Pentina et al., 2011;Merrilees, consumer experience of social media advergames, research is essential on AR's value creation procedures and the variables affecting it. ...
... In more simple terms, Grönroos (2008, p. 303) presented value as " [being] or feel[ing] better off than before". Value creation is defined as the process of aiming to increase value generation (Chesbrough et al., 2018;Dyer et al., 2018;Visnjic et al., 2018;Sjödin et al., 2020). In this thesis, value is understood as the subjective experience of the consumer interacting with and assessing brands or branded content, and value creation the ongoing process of increasing the perceived value. ...
Thesis
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The gamification of society, increased ad-blocking practices, and technological leaps in mobile augmented reality (AR) have manifested themselves as an increased amount of augmented reality social media advergame (ARSMAG) campaigns being published. These advertisements utilize social media platforms’ gamification and AR features to provide consumers with increasingly immersive and engaging brand experiences. However, no research exists on ARSMAGs specifically, and the potential consumer value of AR in ARSMAGs has not been addressed in academic literature. It is imperative for practitioners and researchers to know which consumer experience variables affect AR’s value creation process. The aim of this thesis was to review existing AR, social media, and advergame knowledge and practices, and propose key variables to study AR’s value creation in ARSMAGs. The research was completed using a conceptual framework method. First, initial keywords were identified, and then the studies revealed by the search were assessed by their relevance to the topics of AR, social media, and advergames, in addition to consumer value creation, leaving 155 topic-relevant academic papers. According to conceptual framework guidelines, existing practical applications of these concepts were then reviewed, along with related online blog posts and other non-academic material. At this point, some data sources were discarded due to topic irrelevance. After that, key findings revealed by the review were categorized into a conceptual framework as variables under AR, social media, and advergame topics, and their definitions and relations to the AR value creation process in ARSMAGs were further elaborated on. Based on each variable category review findings, this thesis proposes that to study the process of AR value creation in ARSMAGs, researchers and practitioners should consider the AR experience variables esthetics, telepresence, satisfaction, novelty, and sensory interactions, social media variables shared social experience and electronic word-of-mouth (eWOM), and advergame variables flow, limited-capacity model of attention, and congruence. The main limitation of this research was the conceptual and interpretive format of the chosen methodology, conceptual framework. Quantitative methods would have produced more measurable results instead of interpretive findings and propositions. Other limitations were the subjective nature of the data gathering, analysis, and categorization related to the framework, as each researcher would interpret the findings differently based on their variable-related emphasis, study background, and interests. The final limitation was the concept of consumer perceived value, which is always subjective to the individual, and hard to measure. Practitioner benefits from this research are the AR value creation variables proposed in this thesis, as by understanding the AR value creation process, practitioners can create better ARSMAGs. The value of this thesis for researchers is the proposed conceptual framework to study AR value creation in ARSMAGs and the multitude of future research directions related to them. The originality and value of the entire thesis for the academic community is the initiation of research on ARSMAGs, the first definition of the term and concept of ARSMAGs, and the consequent added research knowledge to advergames, AR, social media, and value creation.
... Servitization in material and component supplier companies can affect several collaborating partners in the construction projects. In the servitization research literature this change has been elaborated as the manufacturing companies extending products with services (Vandermerwe and Rada, 1988), moving downstream in their value-added chains (Wise and Baumgartner, 1999), increasing complexity of their market offerings (Oliva and Kallenberg, 2003), and shifting from products to performance-based operations (Baines et al. 2007) or more open business models (Visnjic et al., 2018). ...
... The customer interactions and insight on the suppliercustomer processes can open up new opportunities to develop the solution further. For example, when the manufacturing companies explore b2b service operations, introducing services necessitates organizational changes, but it can also lead to more profound strategic reorientation of activities to service and new partnership modes, or even more open business models (Visnjic et al., 2018). Understanding on how service orientation evolves in product-oriented firms has changed over the years. ...
Article
Full-text available
Wood-based solutions are promoted for sustainable construction. In parallel, technological applications are expected to heighten construction and built environment to a new level of energy and resource efficiency, and enhance the environmental as well as human health and wellbeing impacts by smart bundling of products and services. Policies call for a profound system change in construction. Such shift necessitates technological and non-technological innovations as well as new conceptualizations. This research elaborates an analytic framework to discuss system change in the complex product systems of construction. Wood-based solutions are assessed vis-à-vis other sustainable construction projects to detect service innovation as new outputs, inputs, and processes in the markets, and consider the system change potential in evolving product-service systems (PSS). Analyses of eight projects and altogether 89 companies in Finland indicate that while wood-based solutions aim at industrial efficiency in the established construction processes, parallel sustainable construction projects and the contributing companies exemplify more versatile service innovations. The industrial efficiency unfolding from the sustainable construction niches and the company operations in the markets illustrates evolving PSS. The data exemplifies how the increasing integration leads into dismantling of operations and new configurations of tasks, and the increasing standardization due to fine-granule modularity and customization leads to increasing diversification of operations. Alternative scenarios should be explored to assess the systemic changes and their impacts on clean technology solutions.
... Servitization, also known as "service infusion" (Kowalkowski et al., 2017a), is mainly focused on the addition of services to manufacturers' core product offerings to create additional customer value Vandermerwe and Rada, 1988). The competitive advantage of companies today increasingly stems from enhancing product-service innovation (PSI) Rabetino et al., 2018), and as companies change their market strategy from providing products to services, they often rely on others to help innovate their offerings (Polova and Thomas, 2020) and even take over certain activities (Visnjic et al., 2018). The simultaneous acceleration of Industry 4.0 and servitization in 2020 during the COVID-19 crisis has created an unprecedented opportunity for manufacturers to adapt to new business models of quickly translating customer needs into specific products and service (Paiola and Gebauer, 2020;Zambetti et al., 2020) and redesigning the way offerings are delivered (Seetharaman, 2020). ...
... This approach reflects a platform-deepening strategy as it allows manufacturers to continuously expand and maximize the positive impact of digital platforms on their production and transaction processes. Visnjic et al. (2018) also hinted at such a deepening strategy: as companies progress along the servitization path, the need to collaborate on a larger scale with partners and suppliers also increases, thereby expanding business opportunities. In so doing, a deepening strategy generates direct network effects. ...
Article
Full-text available
Digitization is receiving a lot of interest in recent servitization research, but the use of platform-based Industry 4.0 technologies to boost product-service innovation (PSI) is less covered. This study aims to explore how companies successfully leverage platforms for servitization in an Industry 4.0 context. Building on theories of PSI, platform leverage and business model adaptation (BMA), we use longitudinal and interpretive research methods to conduct an exploratory study of the servitization pathways of four Chinese textile and apparel manufacturing companies. Results reveal companies' roadmaps in undertaking digital and smart servitization strategies enabled by platform leveraging, and show the implementation approaches for related BMA. Further analysis identifies platform-based servitization destinations and pathway dynamics. This study constructs a theoretical basis and a typology for explaining platform-based servitization.
... For decades, the shift from product-centric to service-centric business models has been an important market strategy for manufacturing firms (Visnjic et al., 2018;Chiarini et al., 2020;Kohtamäki et al., 2020). In this process, companies move away from standalone products towards results-or performance-based all-in-one solutions such as maintenance contracts or operating services (Windahl and Lakemond, 2010;Parida et al., 2014;Kowalkowski et al., 2015;Huikkola and Kohtamäki, 2018;Visnjic et al., 2018). ...
... For decades, the shift from product-centric to service-centric business models has been an important market strategy for manufacturing firms (Visnjic et al., 2018;Chiarini et al., 2020;Kohtamäki et al., 2020). In this process, companies move away from standalone products towards results-or performance-based all-in-one solutions such as maintenance contracts or operating services (Windahl and Lakemond, 2010;Parida et al., 2014;Kowalkowski et al., 2015;Huikkola and Kohtamäki, 2018;Visnjic et al., 2018). To describe this phenomenon, Vandermerwe and Rada established the term 'servitization' in 1988, and it has since attracted increasing interest from companies and researchers . ...
Article
Full-text available
Driven by pressures for sustainable development and disruptions such as the COVID-19 pandemic, manufacturing companies in the 21st century are affected by two intertwined trends: Industry 4.0 and servitization. Digital servitization, which represents the transition from providing products to offering smart product-service systems, is currently seen as a black box by companies confronting them with major challenges. Current literature has not yet investigated which capabilities are required for the development and provision of smart PSSs. To address this gap, an exploratory multiple case study was performed using semi-structured interviews with 18 representatives of four manufacturing companies and six representatives of companies in a supporting role. A socio-technical systems perspective was adopted to cover the interconnectedness and complementarity of internal and external elements relevant for providing a smart PSS. The study identified 46 capabilities of digital servitization to offer and perform smart PSSs and systemically classified these within the dimensions of the socio-technical systems theory, thus providing companies with numerous insights into successful digital servitization. The results contribute to the practical and academic understanding of digital servitization by outlining capabilities to offer and perform smart PSSs and providing support for the use of socio-technical systems theory to frame these capabilities systematically.
... By infusing products with services, manufacturers integrate service logic from design to shipment Oliva, Gebauer, and Brann 2012). The life-cycle integration promotes a spill-over effect (Rabetino et al. 2015), i.e. service sales and product sales are reciprocal (Hemilä and Vilko 2015;Kastalli and Van Looy 2013;Visnjic et al. 2017;Visnjic, Neely, and Jovanovic 2018). ...
... If the marketing channels are not readily interchangeable between servitized markets and conventional product markets, business distribution on the target markets can be rigid and thereby incur the loss of profit opportunity (Adrodegari et al. 2018;Hakanen, Helander, and Valkokari 2017;Lee, Yoo, and Kim 2016). Additionally, proper price models, cost analysis, and risk assessment reduce the risk of misallocating funds and promote organisational responses to customers' needs (Indounas 2015;Johnson and Mena 2008;Samarrokhi et al. 2014;Sjödin, Parida, and Kohtamäki 2019;Visnjic, Neely, and Jovanovic 2018). ...
Article
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Servitization refers to the phenomenon in which manufacturers increasingly focus on services in tandem with the sale of their products. Despite the growing scholarly awareness of servitization, systematic reviews are lacking to clarify how its value can be created through different relevant factors. Based on a conceptual framework, this study fills the gap by examining 213 empirical research papers published between 2005 and 2019. Descriptive and thematic analyses on servitization are presented for its definitions, prerequisites, performances, and intermediate factors of the value creation in servitization. Findings and research streams are synthesised in a causal graph and a mechanism matrix to offer suggestions and research directions for future practitioners and researchers. The results have specified key factors from different levels, such as firm attributes, operations, networking, and the environment, each of which functions in the link of the formation and value creation of servitization. The results further revealed that the existing literature has emphasised the absolute benefits of servitization and predominantly investigated intermediate factors of its value creation. This study offers literature-based insights to enrich the theory-building of servitization and to develop insightful instruments for practitioners.
... Innovations (radical or incremental in nature) in elemental business activities are considered as business model innovations (Bucherer et al., 2012;Osterwalder & Pigneur, 2010). Across industries, organizations face challenges such as identification of innovation source, internal coordination issues, the cost to associated benefit tradeoff, conflict and stakeholder management etc., while transiting towards business model innovation (Chesbrough, 2010;Karakaya et al., 2016;Visnjic et al., 2018). Given such exploratory insights, the BM perspective when implemented in an omnichannel retail context can unravel exceedingly useful and practical insights. ...
... ngside, the research has used the BM perspective (Baden-Fuller & Morgan, 2010;Foss & Saebi, 2017;Osterwalder & Pigneur, 2010) to explore BMI activities serving as sources of value proposition, value creation & delivery and value realization due to the proliferation of digitalization in retail (Chesbrough & Rosenbloom, 2002;Osterwalder et al., 2005;Visnjic et. al 2018). ...
Article
The purpose of the study is to elucidate linkage of Omnichannel retail business model with innovation and technological advancements. The study is exploratory and qualitative in nature, based on primary and secondary data sources collected from varied retail sectors such as fashion, furniture, eyecare and electronics . The study has used Business Model Canvass (BMC) as a tool for strategic analysis. The study presents findings about business model and strategies in Omnichannel context from Indian retailers. The findings of the study posits four main dimensions resultant of digitalization and technological advancements in Omnichannel retail, namely Omnichannel Intensity, Organizational Structure Integration, Operations and Supply Chain Management Innovation, Data Analytics and Intelligence. Cross-channel Integration and Data Analytics & Intelligence have been found to be contributing enormously towards the strategic growth of Omnichannel retailers, thus emerging as the prominent managerial implications of the study.
... More specifically, for manufacturers, a large part of the technological setup and digital knowledge may lie outside their organizational boundaries, which contributes to greater dependency on the surrounding digital ecosystem (Björkdahl, 2020;Hanelt et al., 2020). For instance, external modules may come from traditional suppliers and distributers to start-ups and tech-giants (Hanelt et al., 2020;Visnjic et al., 2018). As a result, it is difficult for manufacturers to fully control the platform architecture (Eisenmann, 2008). ...
Article
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Industrial manufacturers increasingly develop digital platforms in the business-to-business (B2B) context. This emergent form of digital platforms requires a profound yet little understood holistic perspective that encompasses the co-evolution of platform architecture, platform services, and platform governance. To address this research gap, our study examines multiple platform sponsors from an industrial manufacturing context. The study demarcates three platform archetypes: product platform, supply chain platform, and platform ecosystem. We argue that each platform archetype involves a gradual development of platform architecture, platform services , and platform governance, which mirror each other. We also find that each platform archetype is characterized by a specific innovation mechanism that contributes to the platform service discovery and expands the platform value. Our study extends the co-evolution perspective of platform ecosystem literature and digital servitization literature.
... The labels of "value creation", "value proposition" and "product-market strategy" were used almost interchangeably to group the same constructs, so we used the term "value proposition" as a better suit for our data structure (Zott and Amit, 2008;Zott et al., 2011). "Value delivery", "value delivery system" and "activity system" were also used interchangeably, so we opted for "value delivery system" (Kam-Chuen Yung and Ting-Hong Chan, 2003;Oh and Teo, 2010;Visnjic et al., 2018). Finally, among "value capture mechanism", "sources of value" and "value drivers", we opted for "value capture mechanism" (Amit and Zott, 2001;Visnjic et al., 2017;O'Kane et al., 2020). ...
Article
Purpose The authors seek to understand the process of digital servitization as a shift of manufacturing companies from the provision of standard products and services to smart solutions. Specifically, the authors focus on changes in the business model (i.e. the value proposition, the value delivery system and the value capture mechanism) for digital servitization. Design/methodology/approach The authors examine a Chinese air conditioner manufacturer, Gree, who became the global leader with their smart solutions. These solutions included performance-based contracts underpinned by artificial intelligence (AI)-powered air conditioners that automatically adjust to environmental changes and are capable of remote monitoring and servicing thanks to its Internet of things (IoT) technology. Findings To successfully offer smart solution value propositions, a manufacturer needs an ecosystem value delivery system composed of suppliers, distributors, partners and customers. Once the ecosystem relationships are well aligned, the manufacturer gains value with multiple value capture mechanisms (i.e. efficiency, accountability, shared customer value and novelty). To arrive at this point, a manufacturer has to pass through different stages that are characterized by both discontinuous and continuous interplay between business models and digital technologies. At the beginning of each stage, new value propositions and value delivery systems are first discontinuously created and then enabled with digital technology. As a result, new value capture mechanisms are activated. Meanwhile, the elements of the existing business model are continuously improved. Research limitations/implications By combining process-perspective and business-model lenses, the authors offer nuanced insights into how digital servitization unfolds. Practical implications Executives can obtain insights into the business model elements, they need to change over the course of digital servitization and how to manage the process. Originality/value A longitudinal case study of a traditional manufacturer that has achieved stellar success through digital servitization business models development.
... More specifically, for manufacturers, a large part of the technological setup and digital knowledge may lie outside their organizational boundaries, which contributes to greater dependency on the surrounding digital ecosystem (Björkdahl, 2020;Hanelt et al., 2020). For instance, external modules may come from traditional suppliers and distributers to start-ups and tech-giants (Hanelt et al., 2020;Visnjic et al., 2018). As a result, it is difficult for manufacturers to fully control the platform architecture (Eisenmann, 2008). ...
Preprint
Full-text available
Industrial manufacturers increasingly develop digital platforms in the business-to-business (B2B) context. This emergent form of digital platforms requires a profound yet little understood holistic perspective that encompasses the co-evolution of platform architecture, platform services, and platform governance. To address this research gap, our study examines multiple platform sponsors from an industrial manufacturing context. The study demarcates three platform archetypes: product platform, supply chain platform, and platform ecosystem. We argue that each platform archetype involves a gradual development of platform architecture, platform services, and platform governance, which mirror each other. We also find that each platform archetype is characterized by a specific innovation mechanism that contributes to the platform service discovery and expands the platform value. Our study extends the co-evolution perspective of platform ecosystem literature and digital servitization literature.
... Today, the 'digital wave' based on technologies to collect, transmit and process data supports 'digital servitization', which is the 'deployment of digital technologies to support the transformation from a product-centric to a service-centric business model' (BM) (Tronvoll et al. 2020, 1;Ardolino et al. 2018;Coreynen, Matthyssens, and Van Bockhaven 2017). To recoup investments in digitalization, manufacturers need to offer new services (Kohtamäki et al. 2020;Visnjic, Neely, and Jovanovic 2018). Notably, 'smart services' for business-to-business (B2B) markets enable pre-emptive action based on field information using connected devices, software and data analysis (Allmendinger and Lombreglia 2005). ...
Article
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Western European manufacturers’ difficulties in earning revenue from industrial services in Pacific Asia have been linked to cultural values. Yet, ways of creating and capturing value from smart services in the region remain unexplored. Against this backdrop, this research seeks to (1) uncover how cultural values influence smart service revenue models, and (2) derive revenue model configurations enabling value capture. To do so, the authors study six Western European manufacturers commercializing smart services in Pacific Asia. The results indicate that indirect and freemium revenue models may achieve fit with the cultural values identified.
... (Cusumano, et al., 2015;Visnjic, et al., 2019) (Mahut, et al., 2017(Mahut, et al., ) S tory,et al., 2017Oliva & Kallenberg, 2003;Cusumano,et al., 2015;Kowalkowski,et al.,) .( (Kowalkowski, et al., 2017;Visnjic, et al., 2018) ( ) ...
Article
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Along the change of world economic vision to service-based economy, service innovation is considered as a significant factor in achieving and maintaining firm’s competitive advantage. In this situation, manufacturing firms are also required to adopt a strategy to develop services to their portfolio and consider service innovation (in addition to product innovation). The main challenge of manufacturing firms involved in shifting from "product orientation" to "product and service orientation", is management of dynamic capabilities for creating service innovation. Dynamic capabilities facilitate the transformation and renewal of firms’ current processes and enable all types of innovation to create a better fit with the environment. The purpose of this study is to identify microfoundations of dynamic capabilities in service innovation and explanation the interactions between these microfoundations in an Iranian manufacturing firm (SAIPA Automotive Company). Therefore, 14 microfoundations were identified in three dynamic capability categories through deep literature reviewing. Then, the opinion of the academic and executive experts was collected using a questionnaire about the necessity and importance of each microfoundations in service innovation. Based on the opinion of the executives, the intensity and interconnectivity between these microfoundations in the context of SAIPA Automotive Company as a manufacturing firm were studied through FUZZY DEMATEL technique
... Although transition studies on the product-service continuum are extensive (cf. Kowalkowski et al., 2015;Visnjic et al., 2018), the DS literature lacks a three-dimensional PSSw space to theorize the transitional trajectories (cf. Kohtam€ aki et al., 2019b). ...
Article
Purpose This study shows various pathways manufacturers can take when embarking on digital servitization (DS) journeys. It builds on the DS and modularity literature to map the strategic trajectories of product–service–software (PSSw) configurations. Design/methodology/approach The study is exploratory and based on the inductive theory building method. The empirical data were gathered through a workshop with focus groups of 15 servitization manufacturers (with 22 respondents), an on-site workshop (in-depth case study), semi-structured interviews, observations and document study of archival data. Findings The DS trajectories are idiosyncratic and dependent on design architectures of PSSw modules, balancing choices between standardization and innovation. The adoption of software systems depends on the maturity of the industry-specific digital ecosystem. Decomposition and integration of PSSw modules facilitate DS transition through business model modularity. Seven testable propositions are presented. Research limitations/implications With the small sample size from different industries and one in-depth case study, generalizing the findings was not possible. Practical implications The mapping exercise is powerful when top management from different functional departments can participate together to share their expertise and achieve consensus. It logs the “states” that the manufacturer undergoes over time. Originality/value The Digital Servitization Cube serves as a conceptual framework for manufacturers to systematically map and categorize their current and future PSSw strategies. It bridges the cross-disciplinary theoretical discussion in DS.
... In traditional services based on time and materials (Roels et al., 2010), in which the industrial customer pays after the agreed activities are performed, there are no contractual incentives for the provider to keep the systems operating and maintained in a sustainable way since breakdowns actually feed into the profitable spare parts and repair business (Ng et al., 2013, p. 733). In the OBS relationship, the business models of the provider and the customer become closely intertwined (Visnjic et al., 2018). That is, higher customer gains will entail higher provider gains-a premise that will induce the provider to engage in activities that improve efficiency (Sumo et al., 2016(Sumo et al., , p. 1486. ...
Article
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Because research on outcome-based service offerings (OBS) is very case study oriented, we lack empirical knowledge of OBS provider profitability in general. Drawing upon an unbalanced panel dataset (n = 1566, N = 14,756), we found that an average OBS provider manufacturer has a 4.40-percentage-point higher gross margin than an average non-OBS manufacturer. In addition, we found that large OBS providers generate lower profits. Since OBS offerings are complex and highly customized, scaling them is a challenge that requires investments in digital technologies and solution modularity. Thus, we tested the moderating role of R&D investments on the scale-profitability relationship and found that for OBS firms, R&D investments moderate the negative relationship between scale and profitability. For managers, these results highlight the profit potential of OBS but also that large OBS providers in particular must be prepared to invest in digital servitization to ensure profitability.
... Changes brought about by Industry 4.0 as solutions introduced in the framework of Industry 4.0 (platforms, intelligent products, smart product-service systems) are by definition positioned across existing organizational boundaries and within ecosystems, thereby challenging the boundaries of firm's business models (Agostini & Filippini, 2019;Frank et al., 2019;Kohtamäki, Parida, Oghazi, Gebauer, & Baines, 2019;Visnjic, Neely, & Jovanovic, 2018). Therefore, a broad approach to organization research and systems thinking is needed in order to identify boundary-spanning transactions between a firm and partners, customers and suppliers-collectively named company's ecosystem or network (L. ...
Article
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Purpose: Industry 4.0, the integrated digital process world in production, is an under researched area. Especially for the wine industry, 4.0 theoretical base up to date is weak, impeding further digital transformation of the wine industry. Some basic-level digital capabilities exist in most of the researched business models, which is why further digital transformation requires strategic redefining of business models in order to further transform the whole industry. Design/methodology/approach: A qualitative research approach based on the concept of business model innovation (BMI) has been deployed in order to identify business models and consensus building between industry´s stakeholders. Semistructured interviews delivered primary data. Findings: The diversity of existing business models in the wine industry as well regarding BMI is confirmed, where each one occupies a specific place in the innovation ecosystem for Industry 4.0. Research limitations/implications: This qualitative research is exploratory and directed toward theory building. The findings confirm the importance of environmental scanning and market sensing for convergent technologies as well as the need to develop core value proposition. Practical implications: This study has important implications for companies and their capabilities inside wine industry 4.0, while its main practical value being a systematical organization of weak signals to support small entrepreneurs’ transition to digitalization and Industry 4.0 Originality/value: The paper nourishes the theory on innovation trajectories for Industry 4.0 by including previously unidentified BMIs and a convergence–divergence continuum on the example of wine Industry 4.0.
... Third, the study of servitization antecedents and challenges seems to be evergreen. Fourth, outcome-based contracts' relational aspects are warming (Korkeamäki & Kohtamäki, 2020;Sjödin, Parida, Jovanovic, & Visnjic, 2020;Visnjic, Jovanovic, Neely, & Engwall, 2017;Visnjic, Neely, & Jovanovic, 2018). This type of offering may become vital in emerging issues in adjacent disciplines and even at the heart of the PSS literature, such as the circular economy. ...
Article
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The servitization domain consists of over three decades of multi-disciplinary research on service activities in industrial contexts. Servitization literature combines different research streams that share a set of critical concepts. Existing meta-analytical studies have organized information content of sub-streams, homogenized theoretical propositions, and concepts to discover shared patterns, and identified an implicit meta-narrative. This study reverses the meta-analysis direction to deconstruct the servitization body of knowledge using the dynamic topic modeling (DTM) methodology to analyze 550 research articles. DTM enables complex forms of content analysis that combine quantitative and qualitative analysis. The analysis demonstrates how these streams have informed the development of the servitization domain and shaped the collective construction of this body of knowledge. The contributions of this study are threefold. First, the study increases understanding of the conceptual dynamics and thematic trends within the servitization research domain and the nuances between the sub-streams. The study offers some strategies for the future development of the field, facilitating the renewal of the servitization-related research agenda. Second, it illustrates the role of DTM as an alternative tool for conducting a literature review. Finally, it supports the development of a common language for the servitization field, thereby reducing the entry barriers for new contributors and favoring the knowledge transfer to professionals.
... Manufacturing and service industries are more intertwined than ever, encouraging suppliers and customers to lean towards a performance-oriented mindset (Lightfoot, Baines and Smart, 2013) (Visnjic, Neely and Jovanovic, 2018). In response to this trend, Performance-based contracting (PBC) emerges as a contractual mechanism for the procurement of performance outcomes (Kim, Cohen and Netessine, 2007). ...
Conference Paper
Performance-based contracting (PBC) is gaining importance in the manufacturing industries as innovative business models for the delivery of outcomes. The challenges of availability and cost of information, as well as accurate measurability of performance outcomes, are yet crucial for the implementation of PBC to succeed. Furthermore, the role of Information Systems (IS); namely Digital technologies (DTs), deserves more attention to minimize these known challenges. However, resulting enhancing effects created over measurability of performance outcomes and information asymmetry are rather scarce. We intend to reveal these relationships, by conducting a comprehensive literature review of 32 peer-reviewed empirical publications.
... Research communities of service strategy and service marketing prefer to adopt the resource-based view, business model innovation theory, and dynamic capabilities theory to analyze the process of servitization (Kowalkowski & Kindström, 2014), service performance (Neely, 2008), and service capabilities (Kindström, 2010;Sjödin, Parida, & Kohtamäki, 2016;Ulaga & Reinartz, 2011). Scholars in service science and service operation often use the service-dominant logic and service ecosystem perspectives (Banoun, Dufour, & Andiappan, 2016;Kaartemo, Akaka, & Vargo, 2017;Vargo & Akaka, 2012) to analyze the path of servitization (Vandermerwe & Rada, 1988;Visnjic, Neely, & Jovanovic, 2018;Visnjic, Weingarten, & Neely, 2016), network for servitization (Barile, Lusch, Reynoso, Saviano, & Spohrer, 2016), and 8 institutional arrangement in servitization (Siltaloppi, Koskela-Huotari, & Vargo, 2016;Vargo & Lusch, 2016). ...
Article
Although both servitization and digitalization have been shown to contribute to a manufacturer's performance, how the two strategies interact in affecting firm performance has been largely under-investigated. By adopting the service-dominant logic, this study fills this gap in the literature by examining how two types of servitization-basic and advanced-interact with two types of digitalization-internal and external-in influencing the market performance of a manufacturer. We test our hypotheses using survey responses collected from 257 manufacturers in China. Interestingly, our results indicate both positive and negative interactions between servitization and digitalization interactions. Specifically, basic (advanced) servitization positively interacts with internal (external) digitalization but negatively interacts with external (internal) digitalization in affecting manufacturer market performance. In addition, we find that basic and advanced services reinforce each other's positive effects on a manufacturer's market performance, an interaction effect that we do not find for internal and external digitalization. By bridging the servitization and digitalization literature, this study reveals intriguing findings that can help manufacturers benefit from the simultaneous adoption of servitization and digitalization through the implementation of the best portfolio.
... It therefore seems important to combine eco-innovations and the concept of open innovation; thus, creating open eco-innovations. Such pro-ecological activities, especially in the area of offering open eco-innovations, can make a significant contribution to the development of global ecological solidarity, aiming at common sustainable goals by supporting and promoting Open Business Models [63][64][65] and Business Model Innovation [66][67][68][69]. ...
Article
Full-text available
The paper aims to analyze the environmental aspects of innovation activity undertaken by companies and, in particular, to assess sustainable business leaders’ propensity to generate eco-innovation. The research described in the paper was descriptive and, to some extent, diagnostic. It was based on a non-random sample and was conducted—using the Computer Assisted Telephone Interview (CATI) method—in 2019 among 54 of the most eco-innovative Polish companies. The results of the research indicate that they are more likely to generate radical rather than incremental changes. Moreover, the most eco-innovative companies are those developing technologies for biodiversity protection. The results further indicate that companies with more than 50 employees have a higher propensity to develop incremental and radical eco-innovation than smaller firms with relatively fewer resources. Finally, this study shows that adopting an open innovation strategy strengthens the propensity to generate eco-innovation, especially radical ones. Moreover, developing such changes is dominated by the adoption of strategic and operational forward supply chain collaboration, involving the absorption of knowledge and information streaming directly from the market. The results can provide a frame for developing new business models incorporating collaboration in eco-innovation activities, especially in the situation of a post-pandemic recovery of the economy.
... Probably the most renowned examples are Rolls-Royce's 'Power by the Hour' and 'Total Care' offerings, where operating hours of jet engines are being sold instead of the actual products (Ng, Parry, Smith, Maull, & Briscoe, 2012). To deliver the outcomes agreed to in the contracts, the service providers change their business model to closely resemble and align with their customer's business model (Visnjic, Neely, & Jovanovic, 2018). The given OBM change has been presented as a process consisting of three phases: define, design and deliver (Sjödin, Parida, Jovanovic, & Visnjic, 2020). ...
Article
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Outcome business models (OBMs) guarantee and deliver economic and operational results for customers. The risk transfer from customer to provider enables the emergence of new value drivers, such as mutual learning. However, if the outcome-based service (OBS) customer learns the operational capabilities, based on which they are willing to rely on the OBS provider to achieve outcomes, how then does an OBS provider justify its role as a legitimate partner in the future? To answer this question, we conducted an in-depth single-case study and performed a critical discourse analysis with an OBS provider delivering outcomes. We identify causes for legitimacy struggles (lack of intentional and competence trust) in an OBM and subsequent discursive legitimation strategies used to defend legitimacy: 1) trustification, 2) rationalization, 3) authorization, and 4) normalization. For managers, we elaborate certain OBM problematics causing legitimacy struggles and offer discursive resources that can be mobilized to recreate legitimacy.
... The digital component is mainly embodied in the extended services in stage 1 and the products and connections between products and services in stage 2. The digital component has become the core of the solutions in stage 3. The literature on digital servitization has revealed that the impacts of digitalization on servitization can range from incremental changes (e.g., efficiency and transparency enhancement through software and information systems) to radical innovations (e.g., business model innovations through 3D printing, IoT, and digital twins) (Visnjic et al., 2018;Kohtamäki et al., 2019). Therefore, a manufacturer can advance its servitization by integrating more digital technologies into its solutions. ...
Article
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Purpose This paper aims to empirically explore the evolution of servitization and how platforms affect the transition between the stages of servitization. Design/methodology/approach The authors conducted an in-depth case study of a Chinese manufacturer (i.e. Haier) using a longitudinal design. Three rounds of data collection were conducted between 2014 and 2020. The authors carried out 50 semi-structured interviews and 11 workshops to collect data from senior and middle managers of Haier and its business partners. Findings The authors found that Haier’s servitization journey includes three stages (i.e. product-oriented solution, integrated solution and smart connected solutions) that evolve in the target of the services and the digital components of the solutions. Haier has also developed three types of platforms (i.e. service platform, supply chain platform and platform ecosystem) to support the implementation of servitization. The empirical evidence reveals that platforms can address the complexities that emerged when Haier implements the different stages of servitization as well as enable Haier to transition from one stage of servitization to the next. Originality/value This study enhances the current understanding of the evolution of servitization and the roles of digital technologies in the transition between the stages of servitization. It also provides empirical evidence regarding how the platform approach enables the development of servitization. By clarifying the interplay between servitization and platforms, this study provides guidelines for managers on how to develop platforms to both advance and benefit from servitization.
... The next step is to open the business model to take full advantage of the benefits of open innovation. As a driving force for effective external and internal flows of knowledge and technology, open innovation cannot capture the value of these flows unless it is harnessed by key internal resources [13][14][15][16][17]. Open business models enable an organization to be more effective in creating and capturing value. ...
Article
Full-text available
The car-sharing market is changing at a dynamic pace. Along with changes and new user habits, car-sharing systems are required to make this market even more accessible and flexible. This solution is possible due to the joining of Mobility-as-a-Service (MaaS) systems and the sharing of data, as well as the implementation of open innovations. However, these are aspects that strongly interfere with the business models of car-sharing systems. Due to this fact, this article is dedicated to the subject of business models in car-sharing systems and the issues of using data sharing and implementing open innovations. This study aimed to analyze the current state of business models and to propose an individual business model of an open car-sharing system based on the concept of open innovation and data sharing. As part of the study, expert surveys were carried out. The results obtained indicate that the dynamics of business models and the development of innovation in car-sharing enterprises are being disrupted. Moreover, most of the current business models are not updated. They also do not consider the subject of open innovation and data sharing, despite operators considering this problem to be significant. The individual model of an open car-sharing system developed in this article was constructed in such a way as to support operators during the transformation of current business models into a modern open model.
... Proving the value for the customer in pay-per-outcome BM is difficult and to do that, the provider must understand customer's needs (Hou and Neely, 2018;Visnjic et al., 2018), how the customer's business work and how the decisions in the customer's organization are made (Liinamaa et al., 2016). When the provider and the customer don't understand each other, the customer might start to demand more things for the contract until the contract end up being too complicated to be implemented (Hou and Neely, 2018). ...
... It is possible due to having many ideas from outside the organization [40]. Due to the dependence on external resources and the ecosystem, open business models also give the possibility of a wider acquisition of not only ideas but also values that can be implemented in the company [42][43][44][45][46][47]. Open business models are also highly dynamic models [48]. ...
Article
Full-text available
The shared mobility services market is growing and changing very rapidly. Many novelties are introduced to the systems, ranging from improvements to the services already offered to services referred to as innovative. Since the following years are to bring significant development of mobility as a service (MaaS) systems, data sharing, and cooperation on the mobility market, the article is dedicated to check whether the current business models of the industry are ready for the open innovations implementations. The article aimed to analyze the business models of shared mobility systems along with their presentation in the form of CANVAS models and to investigate whether the models contain aspects of open innovation. Moreover, the article presents its own value-added open business model prepared for the whole shared mobility market. The paper also identifies a set of open innovations that can be implemented by all types of shared mobility operators. It proposed the basis that operators can use when developing their own open business models. The developed research is an original contribution to filling the research gap concerning the approach to open innovation by operators of all types of shared mobility services available on the market. The results show that car-sharing service providers are the biggest opponents of open innovation. On the other hand, the most ‘open’ systems are bike-sharing services. The conducted research may support operators in the process of transforming their businesses into more accessible for users. It also helps to develop the open innovation concept to create more sustainable shared mobility systems along the lines of collaborative economy assumptions.
... With this condition monitoring data, maintenance decisions can be made as needed. Besides that, which is no less crucial, maintenance can be conducted effectively and efficiently and contribute to the business profitability [38]. ...
Article
Full-text available
Determining the maintenance strategy for fishing vessels propulsion engines can use engine operational monitoring data. This data is used to prepare the implementation time, spare parts, labor, and costs. Unfortunately, many fishing vessels do not have this data. Currently, electronic devices are available for monitoring machine operations. This device is cheap, easy to use, takes responsibility for various physical quantity parameters, displays it on LCD, stores it digitally, and transmits data wirelessly. This paper aims to review the application of engine operational monitoring tools to apply to fishing vessel propulsion engines. The material used is scientific articles consisting of journals and proceedings indexed by online databases. Several keywords are used to obtain scientific articles that are suitable for the study. The method used is a literature review that is systematically reviewed by applying inclusion and exclusion. The results obtained in this article are the parameters for monitoring propulsion engines, namely temperature, pressure, rotational speed, and hours the engine runs. The monitoring device requires sensors to detect physical parameters, a microcontroller to process data, an LCD to display monitoring results, and memory to store data to obtain this data. The device supports wireless communication via Bluetooth or WiFi radio signal. Fishing vessels are operating in offshore areas that are not covered by internet networks as IoT communication transmissions. Further research on how to transmit operational engine data from offshore to onshore without an internet signal so that data can be accessed using the internet network.
... Considering that in product-service-software systems, these elements become increasingly interdependent, studies have emphasized the role of modularity in managing the tensions between them (Hsuan et al., 2021;Kohtamäki, Einola, et al., 2020;Rajala et al., 2019). This integration between products, software, and services may take place through the product life cycle (Rabetino et al., 2015), while the potential value created by information and communications technology (ICT) and software is sometimes embedded in advanced services, such as optimization and outcome-based services (Sjödin, Parida, Jovanovic, et al., 2020;Visnjic et al., 2018). Effective integration enables higher use value by optimizing combinations of products, services, and software (Sjödin, Parida, Kohtamäki, et al., 2020). ...
Article
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Manufacturers are increasingly struggling with the transition from products to product-service-software systems. Our study takes stock of the current research on servitization and digital servitization to investigate the challenging transition process from product to more complex product-service-software systems. We examine how does the digital servitization journey unfold as sayings and doings, and how do intentional narratives guide digital servitization. The present in-depth single case study spanning 8 years reveals the emergent process during the transition of a leading solution provider from servitization to digital servitization. The study uses social practices, such as managers' sayings and doings, to map the change process that unfolds first as servitization and, in a second stage, as digital servitization. Even more importantly, this study unpacks the role of intentional narratives in shaping digital servitization as a lengthy change process. For managers, this study provides a detailed depiction of the servitization and digital servitization processes, and some intentional narratives for guiding the process. Thus, the process may be challenging but perhaps manageable by using intentional narratives as a strategic practice.
... As customers increasingly demand new customised solutions and switch to digitally integrated services, digitalisation enhances competitiveness and provides new ways to fulfil customer expectations (Davies, 2004). As noted by Visnjic et al. (2018), companies need to innovate and orient their business models to digital technologies to build and capture value during different stages of the product life cycle. ...
Article
Digitalisation has become embedded in products and services, and it increasingly supports corporate business processes. However, few empirical studies have analysed the state of digitalisation and its implementation within companies, and the extant literature has painted an inconsistent picture concerning the effects of digitalisation. This survey-based study explores the diffusion of digitalisation, the advantages and difficulties in the practical transition to digitalisation, and its impact on performance. The sample includes Italian listed companies across diverse industries. The results highlight the still embryonic adoption of digital tools to support daily company operations; however, the impacts of digitalisation on company performance are noticeable. This research contributes to the literature on digitalisation and performance, breaks new ground by focusing on listed companies, and has implications for management investment in digitalisation for value creation.
... Financial measures to assess the servitization transformation are widely used to estimate the success (Visnjic et al., 2018), and especially measures as profitability of the firm (Colen et al., 2013) and increased overall revenue (Cestino et al., 2017). Due to the fact that revenue-based measures rely on relatively homogeneous data, the accessibility and availability entail a highly comparable and applicable measure for most manufacturers (Schwartz et al., 2017). ...
Conference Paper
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This paper identifies a fundamental ambiguity in the definitions of servitization and, consequently, the perception of servitization success. The aim is to discuss paradoxes emerging from such diverse perception, and illuminate the external and internal tensions resulting from the paradoxes. The paper seeks to establish a more profound understanding of the servitization concept, and to shed light on the definitional diversities to promote coherence within future research. To map the existing perspectives of servitization success, a systematic literature review unfolds a fine-grained theoretical discussion. The paper conducts a typology-based conceptualization to embrace prior studies on the construct ´success´ in relation to definitional differences. The study conceptualizes new approaches to understand servitization success. The novelty is the revised methodological view of servitization success emerging from the identified definitions, which has the potential to inform future studies.
... The facilitators of BM redesign for emerging enterprise and network architectures were disruptive technologies and the progression of the 'era of digitalization' (Chandna & Salimath, 2018;Cozzolino, Verona & Rothaermel, 2018;Ehret & Wirtz, 2017). The facilitators, especially digital technologies, enabled the BM concept to enter previously neglected domains such as frugal innovation and outcome market strategy (Howell, van Beers & Doorn, 2018;Täuscher & Laudien, 2018;Visnjic, Neely & Jovanovic, 2018). A strong research sub-stream emphasizes the need for network-based models in the more recent emergence of coopetition-based networks (Bankvall, Dubois & Lind, 2017;Bouncken & Friedrich, 2016;Tallman, Luo & Buckley, 2017). ...
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Recent reviews demonstrate the usefulness of the business model concept as a level of analysis in management, whereas less attention has been devoted to the analysis of the paths of past research to guide its future development. We used bibliometric methods, specifically bibliographic coupling and algorithmic historigraphy, to trace the development of the business model literature from its origins in e-business to its current state. In addition to reviewing the literature as a whole, our study investigated the time-dependent co-evolution of research sub-streams. We examined the relative influence of publications and canonical papers (algorithmic historiography) within and between three separate time spans (bibliographic coupling). We found that business model foundations draw from three major business sub-disciplines—strategy, entrepreneurship, and innovation—whilst new frontiers (e.g., Industry 4.0, sustainability, and networks) offer an opportunity to increase the inter-connectedness of business model research. Finally, we discuss contemporary topics and future avenues for business model research.
... By advancing the recent whole-value-chain view (Dung et al., 2020), this study extends prior studies by finding that interaction response with customers on one side and information sharing with suppliers on the other side mediate the relationship between outside-in thinking and manufacturing firms' BMI. The results of our study also refine the previous case studies that suggested that risk and uncertainty should be handled when manufacturing firms adopt open business models that rely on partners, suppliers and customers (Visnjic et al., 2018). Those results show that value-chain collaboration that includes interaction response with customers (Ramani and Kumar, 2008) and information sharing with suppliers (Gao et al., 2015) can boost BMI. ...
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Purpose This paper aims to explore how manufacturing firms pursue business model innovation (BMI) through their use of outside-in thinking. Design/methodology/approach Survey data were collected on 175 Chinese manufacturing firms. A regression model was used to verify the research results. Findings Manufacturing firms rely on outside-in thinking to develop BMI under different market and institutional environments. From a whole-value-chain perspective, interacting with customers and sharing information with suppliers are two key ways to develop BMI. Research limitations/implications Firms focus on customer needs, sense the dynamics of external markets and technology and seize market opportunities to measure outside-in thinking. Empirical results suggest using other measures of outside-in thinking. BMI itself can be multidimensional, so scholars could consider BMI’s diverse dimensions and measurements, which may demand different kinds of outside-in thinking. Practical implications Manufacturing firms can use outside-in thinking to overcome inertia and rigidity and increase their knowledge, information and technology. Managers should develop outside-in thinking to respond quickly to emerging economies. Managers should use value chain collaboration and improve the firm’s capacity to interact with customers and suppliers to apply the benefits of outside-in thinking to their BMI. Originality/value The study explores how outside-in thinking is a key driver of BMI. Applying the whole-value-chain view, it finds that interacting with customers and suppliers connects outside-in thinking with BMI. It also highlights the effects of intense market competition and volatile government regulation on BMI.
... While it appears simple for product enhancement, it is more challenging to adjust the business model to capture product optimization through OTA updates. In this regard, manufacturers may provide customers with outcome-based contracts, meaning that they guarantee a specific outcome to customers and align the provision of products and services accordingly (Visnjic et al. 2018). While outcome-based contracts for smart products are feasible due to monitoring possibilities, OTA updates can now help drive efficiency gains. ...
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Over-the-air (OTA) updates are gaining traction across various industries such as manufacturing, healthcare, and automotive. However, there is currently no consistent conceptualization of OTA updates in place. Also, we know little about what organizational capabilities are needed to turn OTA updates into customer value and thus infuse digital business models. Against this backdrop, this work follows two goals. First, to conceptually delineate what constitutes OTA updates and second, to pinpoint the organizational capabilities required to successfully manage OTA updates. Building on a large-scale survey of 360 product managers in manufacturing companies, we suggest that organizations follow two strategic steps when building OTA capabilities. First, they build the required technical competence and leverage it through their ability to create new innovative services. Second, performant companies deliver and monetize their value proposition in new ways by refining their business models.
Chapter
In recent years, the financial technology of blockchain has become a disruptive innovation that is transforming the management of banks. If blockchain represents an opportunity for financial services, it also represents a severe threat of financial disintermediation. What are the business models available to banks when deploying a business model to integrate the blockchain technology? In this chapter, the authors surveyed the strategic intent of 45 international banks for blockchain technology and analyzed the different business models that might facilitate a management transformation for the banking industry. They developed a taxonomy of five different business models. They were labeled as the following: the coordinators, the integrators, the solution providers, the disrupters, and the explorers.
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Purpose The purpose of this paper is to explore how home-country institutions influence firms’ servitization decisions. Existing studies have mostly neglected differences across countries and implicitly assumed the servitization process and drivers are homogenous across national institutional environments. The authors challenge this assumption. Design/methodology/approach Using case-based research, the authors explored the influence of formal institutions of the product, financial and labor markets on the servitization of two firms operating in a developed country and two in an emerging country. Findings The absence of robust home-country institutions did not necessarily hinder the servitization process. On the contrary, firms servitizate to overcome the difficulties posed by these institutional voids. The flexibility associated with service offerings enables firms to create viable alternatives to cope with taxes, lack of infrastructure and qualified labor force. Originality/value These outcomes contribute to the servitization literature, which has mainly focused on single-country studies and takes for granted the institutional differences between countries. The findings suggest future studies need to consider how and, to what extent, the country where the company is located influences servitization strategies and processes. Such reflections will improve the inferences made concerning firms’ servitization. For practitioners, the results suggest that the move into the provision of services can be a fruitful strategy to overcome the difficulties faced in emerging markets.
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This article reviews the literature on business models in process industries. The review reveals that the business model concept has gained an increasing amount of attention in process-industrial research, but it also shows that the literature exhibits a lack of construct clarity and that it is developing in different domains, depending on the perspectives scholars have taken to study business models in process industries. Specifically, while innovation management scholars have explored the relationship between technological innovations and business models as well as the process and outcomes of business model innovation, scholars from the domain of production management have focused on value chain (re)configurations and taken a system-based perspective to consider boundary-spanning exchanges with key stakeholders in the design of business models. However, despite variance in the perspectives, the review further shows that works in these divergent domains point to a family of emerging themes and to common ideas that have not been explored together. This allows us to identify the particularities of business models in process industries and develop a definition of process-industrial business models, which extends prior business model literature into the process industry context. Furthermore, we synthesize these connections to develop an agenda for future, cross-disciplinary research on business models in process industries that assists cumulative theorizing and subsequent empirical progress.
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By drawing on a business model lens, this study proposes that the competitive performance of servitization is higher for manufacturing firms selling long-lifespan products since they better develop the key elements required for transitioning towards integrated Business to Business (BtoB) solutions delivery. Additionally, the study argues that the moderation role of product lifespan is stronger in advanced stages of servitization as it reduces replacement and information costs. To test these hypotheses, this study merges a unique survey of Manufacturing Multinational Enterprises (MMNEs) and the Lifespan Database for Vehicles, Equipment and Structures (LiVES). Results show a positive moderating effect of product lifespan in the relationship between servitization and performance. Following this finding, across firms with high-intensity servitization, the firm that sells longest-lifespan products is predicted to capture most value from servitization. Overall, the present study suggests that the implementation of recurrent services during an extended product lifecycle provides an opportunity for BtoB solutions delivery and product usage optimisation. By including product lifespan in the equation, we improve understanding of why servitization is an excellent mechanism for managing long-lasting industrial relationships and explain why servitization boosts performance in some manufacturing industries but has a neutral effect on others.
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To be competitive, small and medium-sized enterprises (SMEs) need to transform their business models. To overcome the liability of smallness, SMEs often need to collaborate with external partners—implement open innovation. The complex processes behind business model transformation and open innovation combined remain unexplored. Linking the literature on business model innovation, open innovation, and SMEs, we examine how open business models can be a solution for SMEs. In particular, taking a process perspective, we study business model transformations in several European SMEs using a two-dimensional typology of SME business model innovation, considering the radicalness of the transformation and SME openness toward external partnerships. We identify the triggers for SMEs’ business model innovation: market turbulence, market immaturity, competition, prior failure in open innovation, and scaling production. We also signify how SMEs address the challenges related to the open business model transformation.
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Manufacturers that develop product-service innovation (PSI) attend increasingly to two criteria: choosing the right set of technologies to achieve PSI, and choosing how to manage the technologies—that is, whether to manage them internally or through collaboration with knowledge-intensive business service (KIBS) firms. This study argues that manufacturing outcomes for financial and organizational performance depend on the organization's decision whether or not to develop PSI and how the two criteria coexist and interact. To test this hypothesis, a sample of Spanish manufacturing firms was chosen through purposive sampling. A fuzzy-set qualitative comparative analysis (fsQCA) of the data returned two superior manufacturing performance scenarios. One involved pure manufacturers that did not develop PSI and relied entirely on traditional supportive manufacturing technologies. The other involved servitized manufacturers that developed PSI with or without KIBS firms and benefitted from access to larger Smart Manufacturing technologies. This study is novel in affirming the importance of choosing the right set of technologies for manufacturers that embrace service infusion. The study also reaffirms the role of KIBS firms in supporting PSI, while recognising that collaboration with KIBS firms enables firms to benefit from Smart Manufacturing technologies.
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The digital economy is growing at unprecedented speed and scale. Digital technologies generate the digital transformation of everything – organizations, industries, society. Digital technologies and digital business models disrupt industries in a digital vortex to a different degree by industry. In the new business context, value creation changes from the classical net present value of discounted cash flow or economic value added. Changes are given mostly by uncertainty. Reconciling classical value with digitalization becomes a research topic – the topic of this chapter. The chapter is a case study on Siemens, a Harvard Business Review case in digitalization, and one of the most important value-based management practitioners in the world, in the view of the economic value added model and in the view of journals indexed in Web of Science. The Siemens case is used to explore how economic value added and digitalization can work together and finds that they do in different stages that follow the logic of the innovation lifecycle.
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Drawing on the digital organization of production leading to Smart Systems, this article analyzes the factors influencing the adoption of product analytic capabilities as well as the optimal smart product capability configuration. In this way, the interplay between smart products, firm internationalization, offer hybridization, and firm performance is examined. By using a unique sample of Spanish industrial SMEs, this study differentiates from previous ones that have mainly used case studies to analyze product smartness. The quantitative analysis yields three contributions. First, it provides rare evidence that the adoption of basic analytic capabilities, i.e. monitoring capabilities, is a relatively frequent activity (about 35%), whereas the adoption of fully analytic capabilities, i.e. autonomous capabilities, is much less usual (less than 10%). Second, through binary choice models the study shows direct and mutually reinforcing positive effects of offer hybridization (combined product-service offer) and firm internationalization (foreign production and sales) on the adoption of monitoring capabilities. Third, through the use of a fuzzy-set qualitative comparative analysis (fsQCA) it is demonstrated that monitoring capabilities are necessary and sufficient conditions to obtain superior firm performance. By exploring different sub-samples, other optimal configurations are identified. For instance, fully internationalized firms achieve superior performance by implementing autonomous capabilities.
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This article investigates to what extent and how public-private innovation networks in services (PPINSs) can provide an original understanding of servitization-based innovations in ecosystems. To do this, we examined the biopharmaceutical industry in the Ile-de-France region in north-central France. We performed a longitudinal study from 2005 to 2016, building on structural holes and personal network efficiency methodology. Our results confirm the centrality of public actors in structuring and diffusing knowledge within a PPINS; the role of structural holes in controlling and filtering transferred knowledge, the main beneficiaries of which are private actors; and finally, the evolution and development of the PPINS around these central private/public actors. The network reveals that product-service innovation in the sector would be difficult to achieve without complex private/public interdependencies (knowledge, big data, logistics, digital therapies, etc.). Our paper also stresses on the need to move forward the public economic model from a public service into an innovative service to the public.
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Using survey data from 208 Chinese manufacturing firms, this paper empirically explores whether servitization facilitates or hinders radical product innovation performance. On the basis of organizational knowledge creation theory, we argue that servitization enables manufacturers to identify latent customer needs that are valuable in searching for radical product innovation opportunities. However, according to social structural embeddedness theory, a firm with a high level of servitization becomes overembedded in customer relationships, which prevents it from seizing such opportunities. We integrate these two theories and find an inverted U-shaped relationship between servitization and radical product innovation performance. Our research enriches the servitization literature by identifying and integrating the two roles of servitization for radical product innovation performance.
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The implementation of Industry 4.0 brings about potential gains for firms in terms of efficiency, productivity, and the generation of new sources of income. A process that offers considerable opportunities for revenue generation is what is known as servitization. Both features (Industry 4.0 and servitization) are complementary and have critical implications for territories as regards technological upgrading and the diversification of their economy. Here, the extent to which the managerial conditions for transitioning towards Industry 4.0 and, specifically, for adopting digital technologies can influence small manufacturers’ attitudes towards servitization is examined. The empirical study is carried out using both a quantitative approach based on an ordered logit model and a qualitative analysis of 174 manufacturing SMEs in the province of Gipuzkoa (Basque Country, Spain). Preliminary results show that firms’ awareness of external and internal conditions for Industry 4.0 can be used as a lever of servitization. Furthermore, firms with a higher level of digitalization and involved in activities with a medium to a high level of technology intensity were found to have a more favourable attitude towards servitization.
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This paper brings together firm-level research on business models and industry-level research on value migration to examine patterns of business model innovation. We draw on qualitative data from 14 cases and 68 interviews in the computer and telecommunications industries to demonstrate how business model innovation is sensitive to industry-wide forces of value migration. Based on our analysis we conclude that when value is rapidly migrating across industries and between firms, proactively substituting key elements of the primary business model provides a better fit with the new value landscape than launching secondary business models in parallel. We suggest four underlying mechanisms that link business model innovation, value migration and subsequent outcomes. Unpacking business model innovation allows us to discuss contingencies for the main business model strategies, specifically in terms of limitations to—and opportunities of—changing the primary business model and the practice of parallel business models.
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Innovation ecosystems are increasingly regarded as important vehicles to create and capture value from complex value propositions. While current literature assumes these value propositions can be known ex-ante and an appropriate ecosystem design derived from them, we focus instead on generative technological innovations that enable an unbounded range of potential value propositions, hence offering no clear guidance to firms. To illustrate our arguments, we inductively study two organizations, each attempting to create two novel ecosystems around new technological enablers deep in their industry architecture. We highlight how ecosystem creation in such conditions is a systemic process driven by coupled feedback loops, which organizations must try to control dynamically: firms first make the switch to creating the ecosystem following an external pull to narrow down the range of potential applications; then need to learn to keep up with ecosystem dynamics by roadmapping and preempting, while simultaneously enacting resonance. Dynamic control further entails counteracting the drifting away of the nascent ecosystem from the firm's idea of future value creation and the sliding of its intended control points for value capture. Our findings shed new light on strategy and control in emerging ecosystems, and provide guidance to managers on playing the ecosystem game.
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Purpose This study theoretically articulates and empirically tests an integrated model of capability antecedents and performance outcomes of servitization strategies. We characterize servitization strategies based on the offering of two types of services: Basic Services (BAS) and Advanced Services (ADS). Methodology Hypotheses are tested based on statistical analyses of a large survey of manufacturers from different countries and sectors. Findings We find that: (i) manufacturing capabilities associate with the provision of BAS, while service capabilities associate with both BAS and ADS; (ii) BAS do not impact financial performance, but support the offering of ADS; (iii) there seem to be naturally occurring servitization trajectories involving the gradual development of balanced levels of BAS and ADS and adequate levels of manufacturing and service capabilities. Limitations The findings on servitization trajectories are based on the observation of manufacturing business units at different stages of servitization (cross-sectional data). Practical implications Manufacturers wishing to servitize should distinguish between BAS and ADS and deploy a balanced adoption of BAS and ADS, using BAS as a platform. This should be accompanied with the building of appropriate capabilities. Originality This is one of the first studies to show an explicit link between different servitization strategies, capabilities and servitization maturity. It provides new insights into the servitization paradox and servitization trajectories.
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Over the last 15 years, business model innovation (BMI) has gained an increasing amount of attention in management research and among practitioners. The emerging BMI literature addresses an important phenomenon but lacks theoretical underpinning, and empirical inquiry is not cumulative. Thus, a concerted research effort seems warranted. Accordingly, we take stock of the extant literature on BMI. We identify and analyze 150 peer-reviewed scholarly articles on BMI published between 2000 and 2015. We provide the first comprehensive systematic review of the BMI literature, include a critical assessment of these research efforts, and offer suggestions for future research. We argue that the literature faces problems with respect to construct clarity and has gaps with respect to the identification of antecedent conditions, contingencies, and outcomes. We identify important avenues for future research and show how the complexity theory, innovation, and other streams of literature can help overcome many of the gaps in the BMI literature.
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Service growth in product firms is one of the most active service research domains and is open to a variety of conceptualizations. This article provides a critical inquiry into the past, present, and future of the research domain. The evolution of the research on service growth is discussed in two phases: (1) setting the boundaries of the research domain, and (2) emergence of the conceptual foundation. We find that while research in this area has a well-established tradition in terms of output, theoretically it is still largely in a ‘nascent’ phase. Next, we highlight the contributions of the papers in this special section, emphasizing their challenges to prevailing assumptions in the research domain. We conclude by identifying, from the contributions to this special section, suggested themes for further research on service growth: the assessment of empirical evidence of the impact of service growth on firm performance, the role of merger & acquisitions in the service growth strategy, the exploration of single/multiple positions along the transition line, the process of adding or removing services, and expanding the context of service growth beyond product manufacturing firms.
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Abernathy's (1978) empirical work on the automotive industry investigated relationships among an organization’s boundary (all manufacturing plants), its organizational design (fluid vs. specific), and its ability to execute product and/or process innovations. Abernathy's ideas of dominant designs and the locus of innovation have been central to scholars of innovation, R&D, and strategic management. Similarly, building on March and Simon's (1958) concept of organizations as decision making systems, Woodward (1965), Burns and Stalker (1966), and Lawrence and Lorsch (1967) examined relationships among organizational boundaries, organization structure, and innovation in a set of industries that varied by technology and environmental uncertainty. These and other early empirical works have led a diverse group of scholars to develop theories about firm boundaries, organization design, and the ability to innovate.
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Innovation has become more open in recent years. Yet the decision to become more open and the challenge of sustaining that openness are not well understood. This is the concern of the “content” branch of Open Strategy, defined as the branch that addresses an organization's open innovation strategy. We examine the initial motivations to adopt an open strategy, and then consider when organizations choose to maintain that open strategy or revert to a more proprietary approach. Similarly, we examine motivations to open up a previously proprietary strategy. We find that these dynamics depend on the organization's desire to either foster greater growth (which favors a more open strategy) or secure greater control and profit directly from the innovation (which favors a more proprietary strategy). Crucially, these choices can shift over the life cycle of a market and are dependent on the competencies amassed by the organization. In early phases, when there are relatively few legacy customers and many new arrivals, open strategies attract customers at a faster rate. In later phases, as the market matures and new arrivals have slowed, there are few new customers to attract with an open strategy and reversion to a more proprietary strategy becomes quite attractive. This suggests that the longevity of open initiatives might be curtailed as organizations opt for value capture over cooperative value creation.
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Purpose The purpose of this paper is to consolidate the servitization knowledge base from an organizational change perspective, identifying developed, developing and undeveloped topics to provide a platform that directs future research. Design/methodology/approach This paper addresses three objectives: it comprehensively examines organizational change management literature for selection of a theoretical framework; it classifies extant studies within the framework through a systemic literature review; and it analyses 232 selected papers and proposes a research agenda. Findings Analysis suggests increasing global awareness of the importance of services to manufacturers. However, some topics, especially related to servitization transformation, remain undeveloped. Research limitations/implications Although the authors tried to include all publications relevant to servitization, some might not have been captured. Evaluation and interpretation relied on the research team and subsequent research workshops. Practical implications One of the most significant challenges for practitioners of servitization is how to transform a manufacturing organization to exploit the opportunity. This paper consolidates literature regarding servitization, identifying progress concerning key research topics and contributing a platform for future research. The goal is to inform research to result eventually in a roadmap for practitioners seeking to servitize. Originality/value Although extant reviews of servitization identify themes that are examined well, they struggle to identify unanswered questions. This paper addresses this gap by focusing on servitization as a process of organizational change.
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This study draws on literature at the intersection of servitization, digital business models and supply chain management. Work empirically explores how digital disruption has affected Business-to-Business (B2B) interdependencies. Dematerialization of physical products is transforming the way firms are positioned in the supply chain due to a reduction in production and transport costs and the different ways business engage with customers. Specifically, we propose that these new market conditions can empower downstream firms. We further propose that upstream firms can still capture additional value through digital service if their servitized offer includes difficult to imitate elements. The context of the analysis is the publishing industry. The Payment Card method employed is used to test UK and US consumer’s perceptions of digital formats (eBooks) and assess their willingness to pay in relation to printed formats. The method undertaken enables us to elicit aggregate consumer demand for eBooks which in turn identifies optimal pricing strategies for the digital services. Analysis demonstrates that during digital servitization upstream firms should seek to deploy unique resources to ensure their strategic position in the supply chain is not diminished.
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Driven by recent socio-economic developments, manufacturing firms increasingly adapt their business models along two dimensions. Apart from vertically integrating the entire product life cycle, traditionally separated tasks are re-allocated into new forms of horizontal stakeholder collaborations. Incorporating these two dimensions, this article develops a framework of nine business model archetypes that holistically capture the increasing openness of business models towards consumers in the emerging closed-loop value chain. Using illustrative examples, it demonstrates their broad applicability in different industries and derives important managerial implications for firm-consumer relationships, the relevance of consumer communities, new product development activities, and the sustainability of business models.
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Purpose – In an effort to further explain why manufacturing firms that move towards service provision often do not achieve the financial benefits they would expect, the purpose of this paper is to examine the impact of service additions on the risks affecting the firm. Design/methodology/approach – Using data drawn from a sample 129 bankrupt manufacturers (75 servitized and 54 non-servitized) and a categorization framework of failure risks, the study explores the impact of the presence of a service business on environmental and internal bankruptcy risks that a manufacturing firm must face. Findings – The study finds that the presence of a service business leads to a greater number of bankruptcy risks for the supplying firm. This is essentially because of greater internal risks. In addition, two types of service offerings are identified – demand chain and product support services. When firms offer demand chain services, they are also exposed to greater environmental risks. Research limitations/implications – The study provides empirical evidence on the relationship between servitization and bankruptcy risks, and on how this is influenced by the type of service offering. The research should be extended by a more comprehensive assessment of organizational risks in order to further validate and develop the conclusions. Practical implications – The study suggests that, as adding services introduces new risks for firms, managers have to seek means of mitigating these risks to ensure successful introduction of services. Originality/value – The paper addressed the gap in the literature for structured analyses of the risk consequences of service strategies.
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The past several decades have witnessed the adoption and diffusion of open innovation processes across a variety of organizational and industry contexts. Despite significant scholarly investigation into open innovation's importance to firms' R&D strategies, a deep theoretical understanding of the open innovation framework remains elusive. This study contributes to this burgeoning literature by providing new theoretical and practical underpinnings of the open innovation framework. Specifically, we conduct a comparative case study of two global banks to articulate the theoretical underpinning of this approach in the micropractices and microfoundations of the two firms. Although all organizations practice some combination of internal and external sourcing of innovation, we find that there is a tendency for these practices to fall into two broad categories: inside-out open innovation and outside-in open innovation. Our comparative case study formalizes these two forms of open innovation as mechanisms to align global and local search in a service industry context. We found that the two banks' deployment of open innovation processes produced strong results including greater top-line growth and bottom-line efficiency gains, albeit by two distinctly different strategies, offsetting the many headwinds that crippled their peers during the past five years. We end this study by translating our results to possible avenues for future theoretical development and empirical investigation.
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Purpose - To investigate which resources and capabilities are most important to enable large manufacturers undergoing servitization to develop and deliver successful services. Design/methodology/approach - A survey of 155 UK-based manufacturers provided the basis for the study. Data analysis was undertaken using confirmatory factor analysis and multiple regression. Findings - Five constructs (‘resource configurations’) which enable the development and delivery of successful services and a construct to measure services performance (‘Success of Services’) were developed from the literature. A measurement model based on these constructs was empirically tested and verified. Two resource configurations; ‘Leaders and Services Personnel’ and ‘Services Methods and Tools’ were found to make a unique and statistically significant contribution to ‘Success of Services’. Research implications/limitations - The study highlights the importance of corporates leaders and service employees in developing and delivering success. Service-specific methods and tools are important for developing compelling customer offerings. The study demonstrates the utility of a resource-based perspective in terms of understanding the factors that enable successful services, but also exposes the limitations of using such broad measures, with common lower order resources underpinning multiple resource configurations. The study was conducted from the manufacturer’s perspective, and future studies could also include the customer’s perspective. Practical implications - The research identifies important factors in developing a greater service orientation in manufacturing companies. Originality/value - This is one of the first studies to develop and test a model of services success, generalizable to the population of large manufacturers.
Article
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Research on open innovation suggests that companies benefit differentially from adopting open innovation strategies; however, it is unclear why this is so. One possible explanation is that companies' business models are not attuned to open strategies. Accordingly, we propose a contingency model of open business models by systematically linking open innovation strategies to core business model dimensions, notably the content, structure, governance of transactions. We further illustrate a continuum of open innovativeness, differentiating between four types of open business models. We contribute to the open innovation literature by specifying the conditions under which business models are conducive to the success of open innovation strategies.
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This paper investigates the new business model of outcome-based contracts where the firm is tasked to achieve outcomes of equipment as a service contract instead of the traditional maintenance, repair and overhaul activities (e.g., power-by-the-hour® engine service contract). Through a qualitative study of two outcome-based contracts between BAE Systems, MBDA and the UK Ministry of Defence, we derive three value drivers of information, material and people transformation. Mapping it with transaction cost literature we propose five relational assets based on the value drivers; three value-driven alignments and two partnership inputs. We then study the relationships between the relational assets and contract performance through a quantitative survey by applying the partial least square (PLS) method. Our study shows that behavioral and information alignments are important to achieve outcomes. However, material and equipment alignment (i.e., joint supply chain) does not have a significant effect on contract performance. In addition, perceived control and empowerment mediated the relationship between partnership inputs and value-driven alignments. Our study provides a more integrated view of how various theoretical management domains overlap in the understanding of business models, and contribute to the understanding of value drivers and partnership factors in achieving performance in outcome-based contracts.
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Purpose – The purpose of this paper is to understand how firms manage their product and service offerings, integrating supply chain management (SCM) and demand chain management (DCM) strategies. Adding services to the product portfolio of a firm may bring benefits to an organisation, but requires a reconsideration of the supply chain management approach. Design/methodology/approach – A survey is used to collect data, with valid questionnaires obtained for 4,227 UK-based respondents. Empirical analysis utilises structural equation modelling (SEM). Findings – The paper proposes that a combination of management approaches is required by firms which add services to their portfolio of traditional product offerings. A supply chain management approach may be suitable for traditional product offerings. The management of the services value chain, where the customers' role as value creator is a central feature of the construct, is better served by integration of the market orientation of DCM. Originality/value – The paper addresses a research gap related to the shift in traditional activities carried out by a firm moving from purely product to a product service offer and reconsiders the supply and demand chain management approach. The paper is from a Business to Consumer (B2C) perspective. In this context, the work pioneers analysis into a particular case where a firm's product and service offerings may be substitutes for each other in the eyes of the customer.
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Purpose – The purpose of the present research is to identify how business model innovation can be used to make the transition from service for free to service for fee. In particular, the focus is on identifying, describing and analysing alternative transition strategies, degree and type of innovation, and how building blocks in the business model change. Design/methodology/approach – A multiple case study of six manufacturing firms was performed. Data were collected through interviews with CEOs, service managers and sales managers. In addition, two workshops were performed with the participating firms. Findings – The present research identified eight strategies for transitioning from service for free to service for fee. These strategies represent change in the business model, incremental business model innovation and radical business model innovation. It is suggested to change the content and structure to perform incremental business model innovation and change the governance to perform radical business model innovation. Originality/value – In most models for service infusion, the change of business model is seen as a necessary step and focus is placed on that a change of business model is needed. The present study elaborates on what approaches manufacturing firms use to make the change from one business model to another.
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An integrative framework is proposed to advance management research on technological platforms, bridging two theoretical perspectives: economics, which sees platforms as double-sided markets, and engineering design, which sees platforms as technological architectures. While the economic perspective informs our understanding of platform competition, the engineering design perspective informs our view of platform innovation. The article argues that platforms can be usefully conceptualized as evolving organizations or meta-organizations that: (1) federate and coordinate constitutive agents who can innovate and compete; (2) create value by generating and harnessing economies of scope in supply or/and in demand; and (3) entail a modular technological architecture composed of a core and a periphery. In support of this conceptualization, a classification system is presented, indicating that technological platforms appear in a variety of organizational forms: within firms, across supply chains, and across industry innovation ecosystems. As an illustration, the framework is then applied to derive a simple model highlighting patterns of interaction between platform innovation and competition, yielding hypotheses that could be tested empirically by future scholars.
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