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Digital servitization business models in ecosystems: A theory of the firm


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The present study intends to extend the discussion about digital servitization business models from the perspective of the theory of the firm. We utilize four theories of the firm, the Industrial Organization (IO), Resource-Based View (RBV), Organizational Identity (OI), and Transaction Cost Approach (TCA) to understand digital servitization business models of firms in the context of ecosystems. Digitalization transforms solution providers' business models, and shapes their firm boundary decisions, as solution providers develop digital solutions across organizational boundaries within ecosystems such as harbours, mines, or airports. Hence, digitalization does not only impact on individual firms' business models, but requires that the business models of different firms within their ecosystems provide some form of fit or alignment. Hence, business models in digital servitization should be considered from the ecosystem perspective. Based on the literature review, we provide future research suggestions for digital servitization business models in ecosystems.
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Journal of Business Research
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Digital servitization business models in ecosystems: A theory of the rm
Marko Kohtamäki
, Vinit Parida
, Pejvak Oghazi
, Heiko Gebauer
, Tim Baines
University of Vaasa, School of Management, PO Box 700, FI-65101 Vaasa, Finland
University of South-Eastern Norway, USN Business School, Norway
Luleå University of Technology, Entrepreneurship and Innovation, 97187 Luleå, Sweden
University of Vaasa, School of Management, Finland
School of Social Sciences, Sodertorn University, 141 89 Stockholm, Sweden
Data Mining and Value Creation, Fraunhofer IMW, Neumarkt 9-19, 04109 Leipzig, Germany
International and Strategic Management, Linköping University, Sweden
Bosch IoT-Lab, University St. Gallen, Switzerland
Operations Strategy, Advanced Services Group, Aston Business School, Aston University, Birmingham B4 7ET, UK
Industry 4.0
Digital servitization
Product-service systems (PSS)
Firm boundaries
Business model innovation
Platforms and sustainability
This study extends the discussion of digital servitization business models by adopting the perspective of the
theory of the rm. We use four theories of the rm (industrial organization, the resource-based view, organi-
zational identity, and the transaction cost approach) to understand digital servitization business models of rms
in the context of ecosystems. Digitalization transforms the business models of solution providers and shapes their
rm boundary decisions as they develop digital solutions across organizational boundaries within ecosystems
such as harbors, mines, and airports. Thus, digitalization not only aects individual rms' business models but
also requires the alignment of the business models of other rms within the ecosystem. Hence, business models
in digital servitization should be viewed from an ecosystem perspective. Based on a rigorous literature review,
we provide suggestions for future research on digital servitization business models within ecosystems.
1. Introduction
Digitalization aids servitization in manufacturing companies,
creating new opportunities for services, platforms, intelligent products,
and novel business models. In servitization studies, digitalization is
increasingly viewed as an enabler and driver of the business model,
value creation, and value capture (Lerch & Gotsch, 2015;Parida,
Sjödin, & Reim, 2019;Porter & Heppelmann, 2014). Digitalization and
software have been inherently involved in servitization from its infancy
(Rabetino, Harmsen, Kohtamäki, & Sihvonen, 2018), shaping serviti-
zation strategies and structures as well as macro- and micro-level ac-
tivities. Companies, such as Rolls-Royce, Wärtsilä, and Caterpillar have
used a variety of sensor-based technologies to enable product-service-
software systems and smart solutions (Grubic, 2018;Rymaszewska,
Helo, & Gunasekaran, 2017). However, software was underemphasized
in the early servitization research (Coreynen, Matthyssens, & Van
Bockhaven, 2017). It is now time to shed light on the role of digitali-
zation in servitization and let digitalization rewrite the servitization
narrativea narrative that may diverge from the original servitization
story (Luoto, Brax, & Kohtamäki, 2017).
Studies have started documenting multiple industrial cases of the
transition toward digital servitization (Cenamor, Sjödin, & Parida,
2017). Business models for smart solutions entail the combination of
various products, services, software, and analytics (Porter &
Heppelmann, 2014). Companies are moving from remote monitoring to
optimization, control, and, ultimately, autonomous systems with ad-
vanced functionalities based on articial intelligence. While some
companies are still overcoming the challenges of data collection,
warehousing, analytics, and prediction, leading companies such as ABB,
Volvo, and Wärtsilä are rapidly moving toward more autonomous so-
lutions (Parida et al., 2019;Porter & Heppelmann, 2015). However,
transition toward digital servitization seems far from easy, and the
implementation of digital servitization and the related technologies,
routines, and business models adds complexity and creates challenges.
Smart solutions (e.g., smart product-service systems) entail changes in
terms of business model conguration (i.e. the purchase of reliability,
availability, or outcomes rather than a product and service agreement;
Visnjic, Neely, & Jovanovic, 2018). Digitalization enables not only
improved preventive and proactive maintenance but also more eective
and ecient value creation and capture through a variety of software
Corresponding author at: University of Vaasa, School of Management, PO Box 700, FI-65101 Vaasa, Finland.
E-mail addresses: marko.kohtamaki@uva.(M. Kohtamäki), (V. Parida), (H. Gebauer).
Journal of Business Research 104 (2019) 380–392
Available online 24 June 2019
0148-2963/ © 2019 The Author(s). Published by Elsevier Inc. This is an open access article under the CC BY license
components. Yet the typical challenges faced by many servitizing
companies remain: Customers expect smart solutions to be customized
to their needs, want to buy hardware instead of outcomes, and are re-
luctant to pilot truly novel smart solutions.
Moreover, digital servitization calls for collaboration across rm
boundaries as smart solutions interact with product-service-software
systems of other companies to implement smart autonomous ecosys-
tems (Bustinza, Bigdeli, Baines, & Elliot, 2015;Kowalkowski, Gebauer,
& Oliva, 2017;Rabetino & Kohtamäki, 2018;Salonen & Jaakkola, 2015;
Sklyar, Kowalkowski, Tronvoll, & Sörhammar, 2019). Indeed, in the
creation of autonomous products, as in the cases of Tesla, Rolls-Royce,
Wärtsilä, Caterpillar, and many others, companies cannot operate se-
parately from customers but must instead operate across rm bound-
aries. Smart solutions must be designed to operate and interact with the
solutions oered by many other manufacturers, used by customers,
delivered by distributors, maintained by dierent service partners, and
operated by third parties. Therefore, the integration of smart solutions
across rm boundaries is crucial. This rapid transformation requires
technological innovation as well as business models and collaborative
innovations when manufacturers struggle to congure their business
models and practices to enable smooth collaboration.
The present study takes stock of the servitization literature and
answers the following research questions: How does digital servitiza-
tion shape business model congurations, and which research direc-
tions should be taken based on the interplay between digital serviti-
zation business models and theories of the rm within ecosystems and
platforms? This study taps into the discussion of digital servitization
business models from the perspective of the theory of the rm. This
review establishes what types of business model congurations are
discussed in the servitization literature and how the digital shapes
servitization business models. This study contributes to both the ser-
vitization and the digital servitization literature.
We use four theories of the rm (industrial organization, the re-
source-based view, organizational identity, and the transaction cost
approach) to understand digital servitization business models within
ecosystems. We use these theories of the rm to understand cong-
urations of the following ve specic business models drawn from the
literature: 1) product-oriented service provider, 2) industrializer, 3)
customized integrated solution provider, 4) platform provider, and 5)
outcome provider (Huikkola & Kohtamäki, 2018;Kowalkowski,
Windahl, Kindström, & Gebauer, 2015). Digitalization transforms the
business models of solution providers and shapes their rm boundary
decisions as they develop digital solutions across rm boundaries
within ecosystems such as harbors, mines, and airports. Through this
conceptual essay and critical review, we address the digital transfor-
mation in manufacturing that is shaping business models, enabling new
strategic congurations, and providing new opportunities for digital
servitization research. This study therefore also makes a signicant
managerial contribution by highlighting the congurations of digital
servitization business models, thereby enabling managers to design
Internet-of-Things-related digital servitization business models and
practices such as sayings and doings (Kohtamäki, Baines, Rabetino, &
Bigdeli, 2018). Finally, we introduce the articles in this special issue.
2. Review method and data description
We used two search strings to retrieve the relevant literature to
achieve our research aims. The rst search string covered servitization-
related keywords. The search was conducted based on article titles,
keywords, and abstracts. The second search string ltered for AJG3-
and AJG4-ranked journals (AJG is the ranking used by the UK Research
Assessment Exercise) in strategic management, management, mar-
keting, organization, innovation, operations, and supply chain man-
agement. The second search enabled us to narrow the focus to papers in
high-impact journals in relevant research areas. We used the Scopus
database to conduct the search. The rst search without the journal
lter returned 465 servitization-related studies in all journals. Of these,
161 studies were published in AJG3 and AJG4 journals. In terms of the
evolution of citations of the 465 studies in all journals, Fig. 1 shows that
the number of citations per year and the number of studies per year in
servitization increased over the period 2010 to 2018 (Kowalkowski
et al., 2017;Rabetino et al., 2018). Based on these yearly numbers,
servitization research has experienced considerable growth.
Of the 465 servitization articles, we were interested in those that
explicitly focused on digital servitization, theories of the rm (in-
dustrial organization, the resource-based view, organizational identity,
or the transaction cost approach), or business models. We used multiple
keywords to identify these areas in the 465 servitization studies. For
instance, we used several keywords when searching the titles, abstracts,
and keywords of the servitization articles to understand the presence of
digitalization in the servitization literature. These keywords included
the IoT, smart solutions, digitalization, and Industry 4.0. We separately
performed a similar process with relevant keywords for each of the
studied topics. Relevant alternative keywords for each topic were
gathered from highly impactful studies. Table 1 shows the number of
articles that had addressed the topics of interest in the servitization
literature at the time of the search (early 2019).
One limitation is our decision not to conduct a general review of
servitization because such extensive reviews already exist (Baines et al.,
2016;Kowalkowski et al., 2017;Rabetino et al., 2018). Hence, we ex-
cluded studies that did not explicitly focus on servitization business
models, any of the rm boundary theories, or the digital or software
component in servitization. Table 1 shows the number of servitization
studies using each of the four theories, reecting the broad use of the
Fig. 1. Evolution of citations in servitization research (number of citations on the left-hand axis and number of studies on the right-hand axis).
M. Kohtamäki, et al. Journal of Business Research 104 (2019) 380–392
resource-based view in the servitization literature (85 studies) and the
multiple discussions related to servitization mindset, orientation, cul-
ture or identity (19 studies). Notably, very few studies actually used
industrial organization (ve studies) or the transaction cost approach
(four studies). The data on servitization studies show that 43 studies
focused on digital servitization or related concepts. In addition, 96
studies used the concept of business models. A key conclusion from this
descriptive review is that servitization and digital servitization studies
tend to underuse well-established theoretical perspectives.
3. The industrial ecosystem perspective in the digital era:
delineating value systems, ecosystems, networks, and platforms
Successful implementation of digital servitization business models
extends operations beyond the boundaries of a single rm. Hence, it is
important to dene the concepts in the context of a local industrial
ecosystem (from the perspective of Wärtsilä, Rolls-Royce, Sandvik, or
Caterpillar) such as harbors, airports, mines, and the like. The strategy
literature uses a variety of concepts and labels to describe the inter-
dependent system of companies. Such labels include the value system,
ecosystem, interorganizational network, and sometimes even the plat-
form, each with dierent meanings. Multiple synonymous concepts can
be found for these terms. For a manufacturing company, it is typical to
dene the value system, understand one's position within it, and un-
derstand where, how, and why rm boundaries are determined and
how digitalization aects business models in dierent positions within
the value system and ecosystem. For example, Fig. 2 illustrates the
value system owing from raw material suppliers to component sup-
pliers, system suppliers, solution providers, operators, and end-custo-
mers. Value systems with levels and denominators vary, and this de-
scription is from the context of moving vehicles where the operator
level separates manufacturing from end-customers. This is only one
description from a solution provider's perspective. Other business
models are discussed in the next section. Firms vary in their degree of
vertical integrationthat is, how they dene their rm boundaries. The
value system as a concept refers to the system extending from raw
material suppliers to end-customers (Porter, 1980). Ecosystems can
exist within the value system. They operate using market or networked
organizational forms. These systems are organized as hierarchies,
markets, or networks (Kohtamäki, Rabetino, & Möller, 2018;Thorelli,
1986;Williamson, 1985). An interorganizational network is typically
described as an organizational form between markets and hierarchies,
suggesting that a network is more integrated than the market but less
integrated than a hierarchy (Thorelli, 1986). This is important when
business models are conceptualized within ecosystems, acknowledging
the interdependency and alignment between a rm and ecosystem ac-
tors (Adner, 2016;Jacobides, Cennamo, Gawer, & Mgmt, 2018), par-
ticularly when developing smart solutions. Hence, make-or-buy deci-
sions have been coined as make-or-collaborate-or-buy decisions to
underline the intermediate organizational form between market and
hierarchy. Newer concepts of ecosystems and platforms can be dened
against the pre-existing concepts in the literature. The ecosystem as a
concept emphasizes the value creation and capture between inter-
related rms. The use of the concept in the literature varies, as does the
empirical landscape of dierent studies, thereby hampering denition
of the concept (Möller & Halinen, 2017). Business ecosystems are
driven by a hub rm such as Apple or Google, which drives and de-
velops its own business ecosystem. In this study, we use the concept of
an ecosystem when we refer to a predominantly local context. To ex-
plain the context we seek to depict here, we use a harbor as an example
of a local ecosystem, where technologies and business model cong-
urations of multiple rms must combine to create an autonomous
Table 1
Firm boundary theories, digitalization, and business models in the servitization
Firm boundary theories Number of studies
Servitization 465
Resource-based view 85
Industrial organization 5
Organizational identity 19
Transaction cost approach 4
Digital servitization (IoT in servitization) 43
Business model 96
Fig. 2. Digitalization eects throughout value system/ecosystem (developed based on Rabetino & Kohtamäki, 2018).
M. Kohtamäki, et al. Journal of Business Research 104 (2019) 380–392
harbor. This approach is to extend the use of the ecosystem concept in a
localized, highly specic setting (in contrast to global settings, which
are also relevant). Thus, an example is a harbor, where companies
develop new autonomous operations. In contrast to the concept of an
interorganizational network, the concept of an ecosystem is indierent
to whether exchanges are coordinated through markets or network-type
mechanisms. This would at least separate ecosystems from inter-
organizational networks. This point is important because, in digital
servitization, the development of smart solutions moves beyond single-
rm boundaries. Hence, the development of, for example, autonomous
or semi-autonomous harbors requires the development of smart solu-
tions, technologies, and business model congurations that go beyond
rm boundaries. When rms develop connected smart solutions and
there is a shift toward the IoT, new ecosystems are likely to emerge.
These new ecosystems are not necessarily organized as interorganiza-
tional networks; instead, assisted by smart technologies such as block-
chain, they can be organized as markets. Hence, it is important to
conceptually dierentiate ecosystems and interorganizational net-
works. Otherwise, we risk mixing concepts.
Gawer and Cusumano (Gawer & Cusumano, 2014: 417; Iansiti &
Levien, 2004)dened platforms as products, services, or technologies
that act as a foundation upon which external innovators, organized as
an innovative business ecosystem, can develop their complementary
products, technologies, or services.Hence, platforms enable connec-
tions between actors (e.g., multiple suppliers and customers) within an
ecosystem. In practice, a platform can refer to a webstore that links
multiple suppliers and customers (multi-sided markets) and that is
managed by a manufacturer. Uber and Airbnb are prominent examples
of platform business models. Hence, this type of platform is a business
When moving toward a digital servitization business model, rms
must redene their business model congurations. To do so, rms
should understand the congurations of other rms within the eco-
system to create strategic t between business models (e.g., technolo-
gies, routines, value propositions, and pricing logics). Because many
potential activities depend on technologies and other capabilities of
other companies, implementing strategies is always limited by colla-
boration with other actors within the ecosystem. Thus, the focus on
ecosystems remains a key condition for digital servitization. We call for
research from this ecosystem perspective in digital servitization.
4. Conceptualization of a digital servitization business model
In the last three decades, the servitization-related literature has
grown through articles on servitization, product-service systems, ser-
vice-dominant logic (SDL), service innovation, and service operations.
Altogether, recent reviews have identied more than 1000 articles on
servitization-related elds (Rabetino et al., 2018), with the core servi-
tization literature accounting for approximately 465. Of these 465 ar-
ticles, only 43 actually discuss digital servitization or related concepts,
which form the core of this study. Digital servitization is still in its in-
fancy, requiring thorough denition and conceptualization. We argue
that digitalization is inherently embedded in servitization because
servitization builds on integrated product-service-software systems.
Thus, servitization is the transition from products and add-on services
to integrated product-service-software systems. Because the digital
servitization literature is in its infancy, a commonly accepted denition
does not yet exist.
We dene digital servitization as the transition toward smart pro-
duct-service-software systems that enable value creation and capture
through monitoring, control, optimization, and autonomous function.
To gain value from digital servitization, rms must capitalize on three
dimensions of digital oerings (i.e., products, services, and software),
which should work together. Thus, the concept of digital servitization
reshapes the conventional idea of products as standalone concepts, in-
stead emphasizing the connectivity between products (IoT) and
between companies (manufacturers, operators, and customers) (Frank,
Mendes, Ayala, & Ghezzi, 2019).
Digital servitization is a multi-dimensional construct that comprises
multiple equinal business model congurations that lead to optimal
outcomes (Sjödin, Parida, & Kohtamäki, 2019). Thus, there are various
pathways to building a digital servitization business model, and one
pressing issue is which dimensions should be used. There are several
business model typologies. Examples include 1) equipment supplier, 2)
solution provider, and 3) performance provider (Helander & Möller,
2008); 1) after sales service provider, 2) customer support service
provider, 3) customer service strategy, 4) development partner, and 5)
outsourcing partner (Gebauer, Edvardsson, Gustafsson, & Witell, 2010);
1) product business model, 2) service-agreement business model, 3)
process-oriented business model, and 4) performance-oriented business
model (Huikkola & Kohtamäki, 2018); and 1) industrializer, 2) avail-
ability provider, and 3) performance provider (Kowalkowski et al.,
2015). The ideal types identied in previous studies exist in the em-
pirical world and are hence viable. Thus, the equinality assumption
holds in servitization as well as digital servitization. In other words,
several congurations can lead to optimal outcomes: There is no single
path or trajectory to success (Fiss, 2007;Forkmann, Ramos, Henneberg,
& Naudé, 2017;Sjödin, Parida, & Kohtamäki, 2016).
To conceptualize digital servitization business models, we start with
the product-service-software oering that reects well the company's
solution strategy (Ehret & Wirtz, 2017;Kohtamäki, Partanen, Parida, &
Wincent, 2013). This strategy is evident in the oerings, and the con-
struction of the business model builds on the value proposition. A
variety of dimensions can be used to construct oerings in digital ser-
vitization. We use three dimensions: 1) solution customization (from
standardization to customization of oerings; Kowalkowski et al., 2015;
Mathieu, 2001;Matthyssens & Vandenbempt, 2010), 2) solution pricing
(from product-oriented to outcome-oriented; Gebauer, Saul,
Haldimann, & Gustafsson, 2017;Parida, Sjödin, Wincent, & Kohtamäki,
2014), and 3) solution digitalization (from monitoring to autonomous
solutions; Porter & Heppelmann, 2015;Fig. 3). These are the core
characteristics of smart solutions that digital servitization business
models are built on.
First, solution customization refers to the value created by tailoring
the product-service-software solution to customer needs. The solution
oerings of manufacturing companies vary by level of customization,
and product, service, and software characteristics can be customized,
modularized, or standardized. Solution customization plays a sig-
nicant role in eectiveness (value creation) and eciency (of value
capture) of the business model, and the tension between eectiveness
and eciency may be paradoxical (Kohtamäki, Rabetino, & Einola,
Second, solution pricing represents the core of value capture. The
levels of this dimension represent the archetypal characteristics of
something that is often referred to as a servitization business model.
However, at its core, it considers the pricing logic used in the product-
service-software oering. Thus, the pricing of the oering may be
product oriented, agreement oriented, availability oriented, or outcome
oriented (Gebauer et al., 2017;Huikkola & Kohtamäki, 2018).
The third dimension is solution digitalization. From the early days
of servitization, the digital or software dimension has been considered
central. The digital servitization draws from previous research on re-
mote diagnostics (Brax & Jonsson, 2009), remote monitoring tech-
nology (Davies, 2004;Grubic & Peppard, 2016) or smart technology
(Ostrom et al., 2010), to name a few concepts used in previous studies.
Whereas the early studies have focused mostly on technological aspects,
the research on digital servitization intends to emphasize the interplay
between technology and business model. A few studies have acknowl-
edged the important role of software in product-service-software sys-
tems suggesting that software can enable product and service bundling,
and therefore act as a catalyst (Kowalkowski, Kindström, & Gebauer,
2013;Töytäri et al., 2018). In particular, the latest servitization studies
M. Kohtamäki, et al. Journal of Business Research 104 (2019) 380–392
have emphasized the role of the IoT and software in smart solutions
(Coreynen et al., 2017;Sklyar, Kowalkowski, Sörhammar, & Tronvoll,
2019). The levels of this dimension reect the literature on digital
servitization, the IoT, and smart products. They also include features
such as monitoring, control, optimization, and autonomous function
(Porter & Heppelmann, 2014). These are the core digital features in
smart solutions today. The description of these characteristics is not
conclusive, but it is parsimonious enough to separate digital servitiza-
tion business models and is coherent, in contrast to the literature.
These three dimensions can be used to create a typology of digital
servitization business models using the characteristics of solution of-
ferings as a starting point. Fig. 3 simplies the ideal typical business
models based on the three dimensions that dene the characteristics of
solution oerings. Any individual rm may apply a variety of business
models with dierent customer segments or business lines. The ideal or
typical descriptions of business models based on these three dimensions
provide a starting point for the analysis of business model congura-
tions in digital servitization. Dierent business units may also follow
dierent business models and strategic congurations. Thus, a business
model is a collection of routines used by the company to create, deliver,
and capture value (Osterwalder, Alexander & Pigneur, 2010;Teece,
2010). Hence, a manufacturing company's business model as a com-
prehensive concept can embed any variety of strategic congurations.
5. Theory of the rm and digital servitization
Digitalization enables the emergence of new business models, which
then aect companies beyond rm boundaries within ecosystems, af-
fecting component manufacturers, system suppliers, system integrators,
solution providers, operators, distributors, and customers. Changes in
one rm's business model can have a signicant impact on other rms'
operations. For example, when companies change their business
models, value propositions, organizational structures, and IT-systems,
changes in one rm aect others within the ecosystem. Thus, the
concept of the business model should be understood as a dynamic one,
something that is continuously constructed and reconstructed. Many of
these changes take place at the micro-level when a rm changes its
activities. Changes in micro activities often shape the macro-level
ecosystem because the micro-level activities together constitute the
macro-level environment (Kohtamäki, Baines, Rabetino, & Bigdeli,
2018;Seidl & Whittington, 2014). In this setting, changes to a rm's
business model conguration may inuence other rms' business
models at the ecosystem level.
We use four theories to study the optimal digital servitization
business model congurations within platforms and ecosystems and
thus understand these congurations. We use the theory of the rm to
craft the business model congurations of digital servitization (Santos &
Eisenhardt, 2005). The theory of the rm provides four theoretical
perspectives to analyze how digitalization aects servitization within
platforms and ecosystems. Typically, strategy theory provides four
theories to conceptualize the theory of the rm: industrial organization,
the resource-based view, organizational identity, and the transaction
cost approach (Santos & Eisenhardt, 2005).
We use these theories to provide insight into competitive advantage
in digital servitization. How do companies use dierent business
models to generate competitive advantage and increase power? Where
in the ecosystem do rms create the highest prots and how? Who is
our rm? What should the rm make or buy? These questions are re-
levant to any rm, but they are especially pertinent in times of digi-
talization and the IoT. At the micro level, changes in rm boundaries
refer to make-or-buy decisionsso-called outsourcing or insourcing
decisions. From the macro perspective, changes in rm boundaries
Fig. 3. Understanding the characteristics of solution oerings in digital servitization business models.
M. Kohtamäki, et al. Journal of Business Research 104 (2019) 380–392
aect the organization of the value systems, roles, capabilities, and
collaborative practices between actors (Rabetino & Kohtamäki, 2018).
Over time, architectures within ecosystems, players, and rm bound-
aries change, as do the boundaries between strategic groups and in-
dustries. These changes shape industrial value systems, raising many
pressing questions for future studies to address.
Servitization research has often used these theories separately when
studying servitization or digital servitization. When used together, they
create a powerful diagnostic tool to understand dierent business
models. Prior studies tend to explain why these theories should be used
together to focus on the interplay between them (e.g., Bäck &
Kohtamäki, 2015) instead of analyzing their processes or impact sepa-
rately. In servitization, few studies seem to have used these theories
together to delimit rm boundaries (Salonen & Jaakkola, 2015). The
selected theories provide grounds for advancing the discussion on the
organization of ecosystems, value systems, relationships, and compa-
nies when rms change their business models. Business model changes
shape rm boundary decisions, leading to outsourcing or insourcing
upstream or downstream.
Research Direction 1a: The literature on digital servitization should
study the interplay between servitization, the IoT, and dierent
theories of the rm.
Research Direction 1b: The interplay between theories of the rm
may shed light on the business model congurations in digital ser-
vitization and therefore deserve further attention in future studies.
5.1. The resource-based view
The resource-based view was developed to understand how com-
binations of valuable, rare, inimitable, nonsubstitutable, and organized
resources (VRIN/O) can generate competitive advantages for a rm
(Barney, 1991;Penrose, 1959). Competitive advantages emerge as
combinations of VRIN/O resources and processes in servitization too
(Baines, Lightfoot, Smart, & Fletcher, 2013;Lenka, Parida, Sjödin, &
Wincent, 2017;Paiola, Saccani, Perona, & Gebauer, 2013;Ulaga &
Reinartz, 2011). Resources should be recongured to seize new busi-
ness opportunities such as digital servitization. On these occasions,
companies should use dynamic capabilities of sensing, seizing, and re-
conguring (Huikkola, Kohtamäki, & Rabetino, 2016;Kindström,
Kowalkowski, & Sandberg, 2013;Teece, 2007;Teece, Pisano, & Shuen,
The digital part of digital servitization may provide a means to
develop processes and capabilities for better value creation and capture,
increased customization eciency, more ecient order delivery, and
more eective resource reconguration when moving toward new
business opportunities such as new customer markets (even blue
oceans), novel projects, and smart solutions. The advantage is created
through processes and activities, through which technology companies
create value from competencies and resources located internally or
externally (Ardolino et al., 2018;Coreynen et al., 2017;Huikkola &
Kohtamäki, 2017;Visnjic et al., 2018).
To achieve the benets of digital servitization, companies need
software capabilities where their business models become dependent on
the continuous acquisition, warehousing, analytics, and implementa-
tion of machine and eet-level data (Hasselblatt, Huikkola, Kohtamäki,
& Nickell, 2018). For instance, Lenka, Parida, and Wincent (2017)
identied capabilities related to digitalization such as connect, in-
telligence, and analytic capabilities. Thus, digital servitization adds to
the capability requirements of companies. Adding advanced service and
software capabilities to the capability portfolio will not remove the
need for product engineering and manufacturing capabilities as shown
by previous servitization research. Ulaga and Reinartz (2011) identied
unique resources such as 1) installed base product usage and process
data, 2) product development and manufacturing assets, 3) product
salesforce and distribution network, and 4) eld service organization
and distinctive capabilities. Such capabilities include 1) service related
data processing and interpretation capability, 2) execution risk assess-
ment and mitigation capability, 3) design-to-service capability, 4) hy-
brid oering sales capability, and 5) hybrid oering deployment cap-
ability, which could lead to advantages based on either dierentiation
or cost leadership. Huikkola and Kohtamäki (2017) identied critical
resources and strategic processes that create strategic capabilities and
competitive advantages for solution providers. They found seven stra-
tegic capabilities: 1) eet management, 2) technology development, 3)
mergers and acquisitions, 4) value quantication, 5) project manage-
ment, 6) supplier network management, and 7) value co-creation. In
their empirical study of 17 cases, Gebauer et al. (2017) identied the
organizational capabilities required for pay-per-use services. These in-
clude capabilities related to 1) nancing, 2) aligning costs with
equipment usage, and 3) customer collaboration. Hasselblatt et al.
(2018) studied manufacturers' capabilities in the IoT and found ve
bundles of strategic IoT capabilities: 1) digital business model devel-
opment, 2) scalable solution platform building, 3) value selling, 4)
value delivery, and 5) business intelligence and measurement. The IoT
seems to transform capability requirements of manufacturers sig-
nicantly, and further research is needed to dene manufacturers'
capabilities in digital servitization.
Research direction 2a: The literature on digital servitization should
explain how digital capabilities in servitization generate competitive
advantage and what types of congurations of resources and pro-
cesses they require. We call for studies on strategic capabilities in
digital servitization.
Research direction 2a: Research is needed on the role of dynamic
capabilities in resource reconguration for digital servitization.
5.2. Organizational identity
Building on the cognitive perspective of strategy, organizational
identity is concerned with who we are as an organization. Hence, or-
ganizational identity as a theory highlights the role of identity and
culture of the organization: How do the actors in dierent levels per-
ceive the organization, and how do the other actors within the eco-
system conceptualize the role and identity of the servitizing solution
provider? These are the key questions when the rm intends to make
sense of its existence, boundaries, identity, and mindset. Identity in-
forms strategic and organizational decisions and both vertical and
horizontal boundaries. As a theory, organizational identity builds on
managerial and strategic cognition as well as sensemaking (Gioia,
Patvardhan, Hamilton, & Corley, 2013).
Our analysis of the servitization and digital servitization literature
shows that few studies have directly used the identity approach. In the
servitization literature, 19 studies have used related concepts such as
service culture, mindset, and service orientation, but studies have
mainly used service culture as one of many concepts without actually
focusing on identity as such or the micro processes or underlying me-
chanisms of solution provider identitythat is, servitization identity.In
terms of digital servitization, we found very little research on the shift
from a manufacturing rm to a software company. Töytäri et al. (2018)
study was one of the rare studying the role of mindset and capabilities
in adoption of smart services. This is a meaningful shift beyond pure
servitization, combining manufacturing, service, and software en-
gineering identities. An interesting and potentially paradoxical question
is how can manufacturing, service, and hacker identities be combined
to create solution providers in the age of digitalization (Kohtamäki,
Rabetino, & Einola, 2018).
Research direction 3a: Research on digital servitization should ex-
plain how digital servitization transforms the identity of a manu-
facturing company. We call for research on the profound eect of
digital servitization on the organizational identity and culture of
M. Kohtamäki, et al. Journal of Business Research 104 (2019) 380–392
Table 2
Firm boundary theories in servitization.
Resource-based view Power-dependency approach Organizational identity Transaction cost approach
Central object of analysis Competitive advantage Power position Strategic cognition Make-or-buy decision
Core logic Build on capabilities
Firm builds competitive advantage by reconguring
resources and processes for VRIO(N) combination
Control the exchange relationship
Firms should adjust position through boundary
adjustment for improved bargaining power
Focus on the core
Firms should dene the boundaries to align the
organizational mindset and activities
Minimize costs
If outsourcing creates cost advantages, rms
should outsource activities as opposed to own
Core topics - Critical resources
- Strategic processes
- Strategic capabilities
- Bargaining power toward upstream and
- Dependency between buyer and supplier
- Threat of entrants and complementarities
- Service-oriented vs. engineering-oriented
organizational identity
- Organizational strategy
- Organizational culture
- Organizational structure
- Opportunism
- Bounded rationality
- Environmental uncertainty
- Relationship-specic investments
- Number of transactions
Tools, or criteria to identify VRIN/O Description of the value system
Five forces
Cognitive maps
Discourses, narratives
Environmental uncertainty
Relationship-specic investments
Number of transactions
Central question for the rm What constitutes your rm's core capability? How can we improve our inuence? Who are we as an organization? Will the sum of production cost and transaction
cost achieved after outsourcing be less than the
total costs achieved within the rm before
Central questions in
Which factors constitute our competitive advantage
when we move toward digital servitization?
How can resources and capabilities be recongured
for digital servitization?
How does digital servitization inuence our
bargaining power? How does digitalization
change power positions within our industry and
across industries?
If/when we move toward digital servitization,
who will we become as an organization?
How does digital servitization inuence our
make-or-buy decisions? How does digitalization
aect transaction costs across customer and
supplier relationships?
The eect of digitalization on
rm boundary
Manufacturing technology companies become more
like software companies. Capability requirements
change signicantly with emphasis on data
acquisition, warehousing, analytics, and
Digitalization enables information search on
alternative options, decreasing information
asymmetries. Digital economy requires new
ways of dierentiation.
Identities change from product manufacturing to
servitization, advanced services, and software.
From pure production and engineering to
customer and service orientation.
Digitalization and IoT enables more eective
data acquisition, analytics, and implementation,
decreasing transactions costs.
Number of studies in
85 5 19 4
Number of studies in digital
13 2 1 1
Authors in strategy Barney, Peteraf, Wernefelt Porter Weick, Gioia, Coase, Williamson
Authors in servitization Visnjic, Baines, Kowalkowski, Gebauer, Parida,
Kohtamäki, Kowalkowski, Kindström
Neely, Martinez, Baines, Rabetino Bowen, Kowalkowski,
Bustinza, Bigdeli, Rabetino,
Sjödin, Parida, Kohtamäki
M. Kohtamäki, et al. Journal of Business Research 104 (2019) 380–392
manufacturing companies.
Research direction 3b: Research is needed on the paradoxical ten-
sions between product, service, and software organizations and or-
ganizational identities in solution providers.
5.3. Power approach
Drawing on industrial organization theory (Porter, 1980) and the
resource-dependency approach (Pfeer & Salancik, 1978), the power
approach builds on the long tradition of studies that explore the impact
of positioning on bargaining power, competitive advantage, and per-
formance. Thus, the roots of the power approach are in the realist,
objectivist approach of industrial economics, where rational actors seek
the highest prots (Ezzamel & Willmott, 2004). Under this approach,
the theory and operational criteria are used to determine how a rm
can build an optimal position within the industry, strategic group, or
value system, where this position should be optimized for growth and
bargaining power. To operationalize the approach, Porter (1980) de-
veloped ve forces to dene an optimal market position. Porter's Five
Forces have since been used in a variety of contexts to describe and
determine the attractiveness of a market position with respect to other
positions. Competitive advantage is sought through low cost, dier-
entiation, or competitive scope (Porter, 1991). Strategy may be de-
termined as a conguration of sources of competitive advantage and
competitive scope. The theory and its main conceptual tools are still
relevant today when considering competitive advantage in the age of
digitalization (Porter, 2001;Porter & Heppelmann, 2014).
The analysis of the literature reveals a lack of empirical studies that
have used industrial economics in servitization. Few studies have em-
ployed industrial organization and related models. In a single case
study, Rabetino and Kohtamäki (2018) presented a case in point, ar-
guing that, in some cases, such as the propulsion industry, servitization
requires repositioning and direct engagement with the operator to sell
and deliver integrated solutions. They used Porter's Five Forces to
analyze positioning in the propulsion industry. Davies, Brady, and
Hobday (Davies, Brady, & Hobday, 2007)dened two options for im-
plementing servitization to provide integrated solutions: system in-
tegration and vertically integrated system selling. In their study on
servitization, organizational structure, and value chain position,
Bustinza et al. (2015) found that manufacturing rms in the UK use
servitization to dierentiate and move upstream to improve control and
enhance performance. Hence, value chain position plays an important
role in service performance. Visnjic, Jovanovic, Neely, and Engwall
(2017) identied ve value drivers of outcome business models, re-
ferring to their framework as CLEAN (Complementarities, Lock-in, Ef-
ciency, Accountability, Novelty). The use of and interplay between
value drivers should improve a rm's position when using the outcome
business model. Hou and Neely (2018) cited dependency as a critical
factor that increases commercial risk in outcome-based services. Thus,
some studies have applied the power approach to servitization, but
none have actually focused on the interplay between digitalization, the
ecosystem architecture, and positioning. Further research is needed to
study the eect of digitalization on rms' power position in dierent
parts of the ecosystem, also acknowledging Rabetino and Kohtamäki's
(2018) observation that manufacturers need some bargaining power to
sell integrated solutions and enable data acquisition, analytics, and
implementation (i.e., digital servitization). Moreover, power positions
play an important role in shaping ecosystems for autonomous opera-
tions. Collaborative eorts are often needed when seeking a balance
between dierent players within the ecosystem. Further research on
these topics is needed.
Research direction 4a: Digital servitization studies should examine
how digitalization transforms bargaining power in dierent sections
of value systems and ecosystems and how manufacturers increase
their power using digitalization.
Research direction 4b: Future research is needed to explore not only
how digitalization enables value creation but also how manu-
facturers shift their value capture from product-centric, to service-
centric, and further to data-centric.
Table 2 summarizes the four dierent theories of the rm and builds
on the strategy, servitization and digital servitization literatures (Santos
& Eisenhardt, 2005, 2009).
5.4. Transaction cost approach
Since its infancy, the transaction cost approach has been used to
develop a theory on make-or-buy decisions and the conditions that
determine the emergence of transaction costs (Coase, 1937;Williamson,
1985). While the theory acknowledges opportunism and bounded ra-
tionality as important preliminary assumptions, it denes environ-
mental uncertainty, relationship-specic investments, and number of
transactions as important decision-making criteria. According to the
theory, environmental uncertainty, relationship-specic investments
and a large number of transactions generate conditions where manu-
facturing rms' transaction costs tend to increase, wiping out the ben-
ets of the lower production costs that would result from the use of
market mechanisms (i.e., outsourcing activity to markets). Accordingly,
in conditions of high environmental uncertainty, relationship-specic
investments, and a large number of transactions, a company should
make instead of buy because buying products or services under ex-ante
uncertainties would increase the sum of resulting production and
transactions costs over the overall costs of producing the same outputs
within the organization (Williamson, 1985). Williamson's generic
model emphasizes pure governance models instead of intermediate
ones, whereas some scholars claim that, as intermediate hybrid forms
exist anyway, rms need capabilities to collaborate within ecosystems.
Hence, networks or hybrid governance forms are dened as inter-
mediate forms between markets and hierarchies (Powell, 1990).
In the provision of product-service-software systems, transaction
costs can be signicant because of the sales and delivery of highly
complex, customized smart solutions. Delivering smart solutions also
incurs signicant transaction costs because of upstream interactions
with the service supply chain in addition to product supply.
Digitalization may potentially increase visibility in the exchange re-
lationship and, because of this visibility, decrease transaction costs.
However, scarce empirical research has examined the role of transac-
tion costs in servitization or digital servitization. Accordingly, any
considerations are based on general transaction cost theory. In their
congurational study, Sjödin et al. (2019) identied governance con-
gurations used in governing advanced service partnerships. They
discuss the management of partnerships in the context of advanced
service innovation, identifying three relational or network governance
tactics: innovation governance strategy, relational governance strategy,
and market-based governance strategy. Bigdeli, Bustinza, Vendrell-
Herrero, and Baines (2018) identied the key role of supply chain
collaboration in mitigating the risk of implementing advanced services.
Kamp, Ochoa, and Diaz (2017) emphasized the importance of trust
building between users and producers to share data. So far, no studies
have focused on the eect of digitalization on transaction costs, so
empirical research from this perspective is needed.
Research direction 5a: The servitization literature lacks studies of
the role of transaction costs in servitization. The digital servitization
literature has so far neglected the eect of digitalization on trans-
action costs in downstream and upstream interactions. We call for
studies that explore how digitalization transforms collaboration in
servitization ecosystems.
Research direction 5b: The creation of ecosystems for autonomous
smart solutions entails signicant transaction costs as developers
must congure and integrate technologies, routines, and business
M. Kohtamäki, et al. Journal of Business Research 104 (2019) 380–392
models between multiple rms within the ecosystem. More research
is needed on the role of transaction costs in these collaborations and
on appropriate governance structures for these collaborations.
6. Digital servitization business models and the theory of the rm
Table 3 shows the ve business models and their congurations
based on the four theories discussed in this paper. We distinguish be-
tween ve separate business models: product-oriented service provider,
industrializer, customized integrated solution provider, platform pro-
vider, and outcome provider. Table 3 compares the business models
through the dierent lenses, identifying the central characteristics of
the business model congurations.
Product-oriented service provider reects the business model of a rm
that provides products and add-on services. The role of remote diag-
nostics depends on the company technology strategy, but, in this de-
nition, it does not aect product or add-on service pricing, which is still
based on sold units. Accordingly, this could be thought of as a tradi-
tional product business model. Regarding capabilities, product manu-
facturers need the processes required for ecient design, manu-
facturing, and delivery. The service portfolio is mainly based on basic
oeringsso-called add-on services (Parida et al., 2014). Product-or-
iented service providers have faced the commoditization trap that they
often try to evade through improved service oerings and new digital
services. Often, power is on the customer side, particularly in the case
of simpler products and services where the manufacturer switching cost
is low. Product manufacturers build on product and manufacturing
identity. Transaction costs are reduced by oering standard products
and add-on services that are fairly easy to sell and purchase.
Research direction 6a: Because the digital servitization research
domain lacks empirical studies of smart solutions and advanced
services, digital servitization scholars should analyze the role of
digitalization in developing these companies, their oerings, and
capabilities, as well as the role of digitalization in developing these
Research direction 6b: Considering the product-oriented focus of
these companies, studies should focus on how IoT applications can
shape future business models and how the IoT aects the role of
services in the future.
Industrializer emphasizes product and service modularity to improve
eciency despite increasing demands by customers to customize of-
ferings to their needs. Hence, in this business model, the company
emphasizes modularity to increase eciency of product-service de-
livery and cope with the paradox of eective provision of customized
solutions (Cenamor et al., 2017) versus ecient delivery of solu-
tionsthe so-called paradox of performance in servitization
(Kohtamäki, Rabetino, & Einola, 2018). In terms of strategic cap-
abilities, the emphasis is on combining eective solution customization
with ecient order delivery. To achieve this goal, an industrializer
should develop capabilities in modularity. Prior studies have pre-
dominantly examined modularity in terms of product or service mod-
ules. In the age of digitalization, however, the importance of software
should also be considered. Digitalization builds on oerings and cap-
abilities that can be integrated into modular oerings. The bargaining
power of industrializers is based on relatively low prices with some
capacity for ecient modular customization. The identity of an in-
dustrializer still builds on manufacturing with an emphasis on e-
ciency rather than eectiveness and customization. Moreover, in many
of these companies, engineering plays an important role in company
culture. Eective modularity can reduce transaction costs in down-
stream and upstream interactions.
Research direction 7a: The digital servitization literature fails to
provide detailed micro-level empirical evidence of the role of
Table 3
Connecting business models and rm boundaries in digital ecosystem.
Product provider Industrializer Integrated solutions provider Outcome provider Platform provider
Description of the
business model
Emphasis on standardized products
and add-on services
Modular product oerings and service
Customized/modular product-service
systems with some performance
guarantees or operational services
Provision of availability
Customized/modular product-service
systems owned by the manufacturer,
predominantly performance pricing
Service-dominant business model where the
platform provider enables provider-customer
interactions and sharing services
The role of
Some smart features based on
remote diagnostics
Ecient use of some remote
diagnostics features, typically related
to monitoring, diagnostics, and
proactive maintenance
Remote diagnostics enabling provision of
availability requiring eective
monitoring, control, and optimization
Remote diagnostics enabling monitor,
control, optimization, and autonomous
operation (in some highly advanced cases
such as moving vehicles)
Digital platform enabling eective
interactions. Operator may monitor, control,
optimize, and provide ecosystem enabling
autonomous products (e.g., vehicles)
Resource-based view Capabilities related to product
selling, manufacturing,
distribution, and delivery as well as
brand management.
Capabilities to mass customize while
maintaining high production capacity.
Particular emphasis on modularity-
based eciencies.
Solutions sales and delivery, remote
diagnostic, preventive maintenance,
advanced services, IoT. Increasing
emphasis on project management
Value-based selling, delivery of outcome-
based services, IoT, AI solutions
Digital platform, user interface, and large
number of providers and customers. Brand
development. IoT to enable monitoring,
control, optimization and autonomous
Power approach Product dierentiation or cost-
Product-service strategy relies on cost-
advantage and scale economies
Customized product-service system,
advanced services, customer lock-in
Ease of buying and use, customer lock-in Strong provider holds signicant power
generated by knowledge about actors and the
Organizational identity Product manufacturing Technology and Manufacturing
Solution provider, customer orientation,
balancing between technology and
customer orientation
Performance provider
Fully customer oriented, yet also
evolving technology orientation
Interest in platform and true service-
dominant logic. Saves the worldthrough
sharing business model and waste reduction
Transaction cost
Low relationship-specic
More stable and simple business
Intermediate relationship-specic
Dynamic and complex business
High relationship-specic investments
Very dynamic and complex business
High relationship-specic investments
Very dynamic and complex business
Digital platform enabling creation of sharing
services. Digital platform saves transaction
M. Kohtamäki, et al. Journal of Business Research 104 (2019) 380–392
modularity in digital servitization or servitization in general. Future
research should provide more detailed empirical ndings on mod-
ularity and related routines in digital servitization, particularly
concerning industrializers.
Research direction 7b: The conguration of the product, service,
and software modules to ensure better service and digital content
needs clarifying. What should constitute a core module and how is it
possible to benet from such a modular approach?
Customized integrated solution provider refers to companies that oer
integrated product-service solutions. Under this model, provision of
availability may play a signicant role, and, particularly in large in-
tegrated solutions, the model often entails relatively high levels of so-
lution customization (Windahl & Lakemond, 2010). Provision of
availability sets relatively high standards of remote diagnostics, re-
quiring accurate data acquisition, analytics, and implementation.
However, the customers of companies that apply this business model
may still want to purchase integrated solutions with performance
guarantees and availability instead of pure outcomes (e.g., cost-per-ton-
contracts; Rabetino, Kohtamäki, Lehtonen, & Kostama, 2015). Some
companies using this business model may move toward autonomous
features in their solutions by providing monitoring, control, optimiza-
tion and crewless autonomy as a service. This requires the development
of capabilities in digitalization (e.g., capabilities in monitoring, control,
optimization, and autonomous vehicles). These capabilities build on
sales, design, and delivery of integrated lifecycle solutions. Develop-
ment of integrated solutions requires in-depth knowledge of not only
customers but also other partner company equipment and processes, as
well as the integration of technologies (e.g., software beyond rm
boundaries). Hence, in many ways, the bargaining power of these
companies is increasingly based on knowledge integration to create and
capture value from customers or customers' customers. Organizational
identity of an integrated solution provider is based on a paradoxical
combination of engineering and customer orientations (Kohtamäki,
Rabetino, & Einola, 2018). Customization and delivery of complex so-
lutions increase transaction costs that heighten the importance of pro-
ject management capabilities.
Research direction 8a: The digital servitization literature broadly
neglects changes in business model congurations of customized
integrated solution providers. More empirical evidence is required
to understand how digitalization shapes the ability of customized
integrated solution providers to engage with other ecosystem actors
to deliver higher value to customers.
Research direction 8b: A related issue has to do with how to co-
develop business models with ecosystem partners. How is it possible
to co-create and capture value over extended contracted duration of
the solution?
Outcome provision refers to solution providers that sell outcomes
instead of products or services (Visnjic et al., 2017). Thus, instead of
selling products, providers retain ownership and sell the value created
by the product. Examples are the power generated by engines, as in
Rolls-Royce's iconic power-by-the-hour concept (Ng, Parry, Smith,
Maull, & Briscoe, 2012;Smith, 2013). Oering such solutions requires
the capability of accurately measuring the generated performance,
often entailing accurate monitoring and control of the product or eet
of products. Being able to continuously measure and optimize the
equipment or processes is a critical underlying requirement of outcome
providers. The company needs strategic capabilities to sell and imple-
ment outcome-based contracts, suggesting capabilities in detailed
monitoring, control and optimization of even autonomous solutions.
Implementation of these systems, require also in-depth collaboration
between ecosystem actors. Thus, the outcome-based business model
sets very high capability-requirements for solution providers. The or-
ganizational identity of these types of companies centers on the
customer as well as the value of engineering and technology, creating a
paradoxical tension between the customer and the technology mindset
(Kohtamäki, Rabetino, & Einola, 2018). In many ways, these companies
must maintain technological development to provide performance in
the future too. Provision of performance can potentially decrease
transaction costs at the eet level, but this decrease is related to factors
such as technological uncertainty, relationship-specic investments,
and information asymmetry between provider and customer.
Regarding outcome provision, very little research exist demon-
strating pure ideal typical models of outcome provision in customized
integrated solutions (Grubic & Jennions, 2018). Currently, descriptions
of outcome-based contracts may be ideal-typical, while in the empirical
world, dierent hybrid-models prevail. This conclusion of course holds
to any conceptual business model description, and description of
business model congurations. More empirical evidence is needed on
outcome-based business models, with detailed empirical data.
Research direction 9a: The literature on outcome-based business
models is still relatively scarce, and the role of digitalization in these
models seems to be understudied. Thus, more empirical research on
the role of digitalization in outcome-based business models is
needed. There is a need for further research on outcomes in these
business models (e.g., energy savings) and the increasing role of
sustainability in these business models.
Research direction 9b: A key challenge for outcome solution pro-
viders is to deliver the promised performance over time (e.g., three
or more years of contracts). There is currently a poor understanding
of how to manage digitalization-enabled governance mechanisms
during this implementation phase.
Platform provider refers to a fully-edged digitally enabled service
business model where the company is a platform provider that connects
various providers and customers. For instance, consider a car manu-
facturer that transforms its business model to a car-sharing platform
business model. This transformation entails a full transition from car
manufacturer to provision of car sharing services and may require a
software platform for multiple dierent providers and customers.
Similar models may take place and disrupt multiple industries. These
business models are related to sustainability and waste reduction. Thus,
instead of only providing performance (e.g., moving from A to B), these
models may combine sustainability and energy saving arguments.
People support the sustainability movement by not owning a vehicle
and instead using ride-sharing services when required. Thus, platform
business models may be aligned with sustainability arguments by re-
ducing energy consumption and waste by eectively using economies
of scope. Platform providers need the digital platform, numerous pro-
viders and customers, and, to achieve this, a strong brand name. A
digital platform is needed not only to share information and facilitate
exchanges but also to monitor, control, and optimize services and
products. The power position of platform providers is potentially strong
because of the data they collect on the usage of services. Platform
providers can use the data to generate a variety of new business op-
portunities, but need capabilities that enable creation and im-
plementation of a platform (Eloranta & Turunen, 2016). In terms of
organizational identity, platform providers are likely to have a service-
dominant identity, as the core operational model builds on interaction
between potentially large number of customers and providers. The
platform reduces transaction costs involved in the exchanges by using
eective applications. Existing platforms provide good example of how
digital technologies hold potential to minimize transaction costs
through automation. Yet, the literature on digital servitization and
servitization provide very little detailed empirical evidence on platform
business models. The study from Eloranta and Turunen (2016) is one of
the rare examples of platform studies in servitization. In the near future,
we may see these types of models to emerge also in manufacturing and
integrated solutions. Perhaps the digital servitization literature can
M. Kohtamäki, et al. Journal of Business Research 104 (2019) 380–392
provide necessary conceptual models and tools to develop platform
business models in companies.
Research direction 10a: The literature on platform-based business
models is modest or almost nonexistent in the digital servitization
literature. Thus, we call for the digital servitization literature to tap
into platform business models. Further research is also needed on
the role of sustainability in the provision of platform-based business
Research direction 10b: The management or orchestration of multi-
actor business models needs further investigation. We also call for
empirical studies that capture process insights into how providers
transition toward becoming platform providers.
7. Conclusions
7.1. Theoretical conclusions
The four theories of the rm used in this study provide opportunities
to create novel insights into digital servitization business model con-
gurations and oer a good starting point for strategizing in the era of
digitalization. When crafting the concept of digital servitization, the
heritage of the servitization literature should be acknowledged. Since
its infancy, software has been included in the research on servitization
and product-service-software systems (e.g., smart solutions). The cur-
rent review explores how the servitization literature acknowledges di-
gitalization, what types of business model congurations are discussed
in the servitization literature, how the digital component shapes ser-
vitization business models, and how digital servitization is dened and
constructed in the servitization literature. To craft a series of business
model congurations, we use four theories of the rm. This study
contributes to both the servitization and the digital servitization lit-
Our rst contribution is the review of the servitization literature.
Drawing on previous studies (Kowalkowski et al., 2015), we provide a
denition and conceptualization of digital servitization. We dene di-
gital servitization as the transition toward smart product-service-soft-
ware systems that enable value creation and capture through mon-
itoring, control, optimization, and autonomous function (For other
denitions, see e.g., Lerch & Gotsch, 2015;Sklyar, Kowalkowski,
Sörhammar, & Tronvoll, 2019). Unlike previous servitization research,
this study conceptualizes and highlights the eects of digitalization.
Although the digitalization has been part of the servitization literature
since its infancy, its role has been undermined (Coreynen et al., 2017).
We present some key characteristics of digital servitization in relation
to the need to consider the digital dimension, which is an inherent
component of product-service-software systems and digital servitiza-
Second, we extend the dialogue on digital servitization by pre-
senting a typology of ve business models (Huikkola & Kohtamäki,
2018;Kowalkowski et al., 2015). The goal is to describe digital servi-
tization business model congurations within ecosystems. We craft a
three-dimensional model consisting of the dimensions of solution cus-
tomization (standardized, modular, or customized), pricing (product-,
agreement-, availability-, or outcome-oriented pricing), and digitaliza-
tion (monitoring, control, optimization, or autonomous). These di-
mensions are then used to dene ve business models: 1) the product
business model, 2) industrializer, 3) integrated solution provider, 4)
outcome provider, and 5) platform provider. A key message of this
study is that companies may choose between the digital servitization
business models and that each of them could provide performance gains
for the company. We also contribute to the digital servitization research
by listing numerous avenues for further research as a result of using the
theory-of-the-rm to conceptualize digital servitization business model
The third and perhaps most important contribution is the use of four
theories of the rm (industrial organization, the resource-based view,
organizational identity, and the transaction cost approach) to under-
stand the congurations of the ve identied digital servitization
business models. Table 3 shows the ve business model congurations
interpreted using the four theories of the rm. These theories provide a
basis to theorize about business model congurations in digital servi-
tization. A key nding aligned with previous reviews of servitization
(Rabetino et al., 2018) is that researchers continue to underuse estab-
lished theoretical perspectives. The most dominant theoretical per-
spective is still the resource-based view. To address the proposed
challenge, we provide numerous suggestions for how the theoretical
perspectives can be adopted in future studies of digital servitization.
Finally, as the number of studies of digital servitization increase in
the coming years, we call for more studies to adopt an ecosystem or
value system perspective. Most studies are rm centric, and few studies
have taken a dyadic view of servitization (Forkmann, Henneberg,
Witell, & Kindström, 2017) and digital servitization. However, as rms
mature in their ability to combine servitization with digitalization, they
advance in their monitoring, control, optimization, and automation
capabilities. This would imply that digital servitization business models
will require value system actors' involvement and that this platform and
ecosystem would be critical.
In conclusion, a core argument throughout this study and the entire
special issue is the eect of digitalization on solution providers' business
models and rms' boundary decisions as companies develop digital
solutions across rm boundaries to monitor and operate a eet. The
evolution of digitalization requires increasing emphasis beyond the
boundaries of a single rm to align the business models and technolo-
gies of dierent rms within the ecosystem. Hence, the business models
in digital servitization should be considered in the context of a value
system or ecosystem. Based on this discussion, we provide suggestions
for future research.
From a practical perspective, this paper sheds light on how digital
servitization can emerge within an ecosystem from the perspective of a
rm boundary. This could be of signicance as digitalization becomes
more and more central to success within industries and markets. More
specically, we provide three key contributions to managers re-
sponsible for digitalization and servitization initiatives within manu-
facturing companies. First, we recommend that managers recognize the
linkages between servitization and digitalization because they work
best together. We foresee challenges and missed opportunities for value
creation and value capturing if rms overlook the use of these concepts
together. For example, service delivery benets from digitalization
capabilities for logistic management. Similarly, remote monitoring
technology would need service contacts to capture the value it gen-
erates for customers. Second, we present ve digital servitization
business models. These business models are unique in relation to the
level of oer conguration, servitization, and digitalization. We re-
commend that managers critically evaluate which business model best
ts their internal capabilities and external market environment because
all these business models have the potential to generate revenue and
growth. However, for long-term competitiveness, we foresee the need
to move toward a more advanced oering with customization, out-
come-oriented, and autonomous characteristics. Finally, we urge com-
panies to recognize that, in increasingly competitive and turbulent
market environments, they must work and experiment with multiple
business models. Being locked into a single business model, no matter
how protable, can create deep-rooted rigidity. Thus, continuously
exploring business model innovation, such as through servitization and
digitalization, is critical for survival.
The nal section presents the papers included in this special issue.
In addition to this introductory article, the special issue comprises 10
studies of servitization and product-service oerings in ecosystems,
many of which embrace theories of the rm, digital servitization, ser-
vice transformation, and ecosystems.
M. Kohtamäki, et al. Journal of Business Research 104 (2019) 380–392
Introduction to the special issue
Bustinza, Lafuente, Rabetino, Vaillant, and Vendrell-Herrero (2019)
study rm boundary congurations (e.g., make-or-buy decisions) in
manufacturing companies. Using fuzzy-set qualitative comparative
analysis, they show that optimal performance is achieved by collabor-
ating with value-added service providers for basic and intermediate
services (buying) while developing advanced services within the com-
pany (making).
Baik, Kim, and Patel (2019) analyze the role of human resource
practices, namely high performance work systems, and environmental
eects such as industry dynamism and industry complexity as drivers of
employees' service-providing capability. According to their longitudinal
study, high performance work systems have a positive eect on the
service-providing capability of the workforce. This eect is stronger
when inuenced by environmental complexity and dynamism.
Hedvall, Jagstedt, and Dubois (2019) combine interorganizational
perspectives with a process view of solutions, studying the provision of
solutions in business networks. Their case study provides insight into
how rms are involved in solution provision and how rms play various
roles in the process and engage in interdependencies, creating what the
authors refer to as networks of solutions.
Hullova, Laczko, and Frishammar (2019) study independent dis-
tributors in transition toward advanced services. Their study presents
problems experienced by companies under service transformation such
as conicting interests, misalignment of strategy and managerial at-
tention, and ineective knowledge management across rm bound-
aries. The study provides a servitization-readiness decision tree to
identify the factors that hamper the servitization journey.
Garcia Martin, Schroeder, and Bigdeli (2019) conduct a systematic
review to analyze how value is understood in the servitization litera-
ture. They create a value architecture model to conceptualize value at
the triadic, network and system levels in the servitization research.
Sklyar, Kowalkowski, Tronvoll, and Sörhammar (2019) focus on the
transition toward digital servitization and the role of the service eco-
system. Their study presents the organizational change processes,
highlighting the key role of organizational integration, centralization,
and service-centricity in implementing digital servitization.
Reim, Sjödin, and Parida (2019) analyze servitization and the re-
quired transition in the manufacturers' service network. The study
provides insight into how service network actors approach servitization
in various conditions. Identifying major capability- and market-related
challenges, their analysis reveals four servitization strategies (service
extension, service benchmarking, digitalization, and customer co-
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strategies to achieve servitization of the service network.
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... The growth of interest in digital servitization is attested in the literature, with recent studies focused on capturing and understanding the interplay between Industry 4.0 technologies and servitization (Kohtamäki, Parida, Oghazi, Gebauer, & Baines, 2019). However, academic research into this interlay is in its infancy when it comes to the role of Industry 4.0 technologies in enabling servitization (Frank, Mendes, Ayala, & Ghezzi, 2019). ...
... Empirical studies have shown that in practice manufacturers frequently fail to recognize the importance of this integration in various design aspects of advanced services, such as diverse customer characteristics and changes in resources, customer relationships, cost dynamics, and intangible value attributes (Kamalaldin, Linde, Sjödin, & Parida, 2020). This is because digital servitization involves a change in a manufacturer's value propositions (Chen, Visnjic, Parida, & Zhang, 2021;Kohtamäki et al., 2019). However, conventional design frameworks (e.g., design for manufacturability and assembly) focus on managing the production and end of life of products rather than the integration of Industry 4.0 technologies (Benabdellah, Bouhaddou, Benghabrit, & Benghabrit, 2019;Nguyen et al., 2022). ...
... However, there is a dearth of research on service design's applications for digital servitization in the manufacturing context (Solem et al., 2021). Designing advanced service value propositions brings with it challenges related to the specificities of servitization in industry (Kimita, McAloone, Ogata, & Pigosso, 2022;Kohtamäki et al., 2019;Zhang & Banerji, 2017). These challenges include a lack of organizational commitment to servitization (Gebauer, Edvardsson, Gustafsson, & Witell, 2010), the absence of technical service expertise, knowledge, and skills (Alghisi & Saccani, 2015;Story, Raddats, Burton, Zolkiewski, & Baines, 2017), a lack of cultural awareness and mindset in customercentric and service-oriented approaches (Kowalkowski et al., 2017;Tronvoll et al., 2020), potential negative impacts due to changes in the business model (e.g., pricing mechanisms, customer relationships, and operations; Barquet, de Oliveira, Amigo, Cunha, & Rozenfeld, 2013;Kamalaldin et al., 2020;Parida, Sjödin, Wincent, & Kohtamäki, 2014). ...
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Industry 4.0 provides increasing opportunities for manufacturing companies in servitization, which has led to the emergence of digital servitization. Several single case studies have suggested service design as a means to advanced services value proposition design in digital servitization. However, these case studies are context-constrained, while multicase studies investigating the impact of service design on digital servitization remain sparse. In the present study, we examined, over two and a half years, the application of service design for advanced services value proposition design in a multicase study of 10 manufacturers engaged in digital servi-tization. By applying a research through design method, we studied the impact of service design on the digital servitization process and identified the types of events that shape the advanced services value proposition design. As a result, this research provides further insights into the impact of service design on digital servitization in the manufacturing context and offers new avenues for further research in the field.
... There is a consensus on the importance of a customer's acceptance of new services and the critical role of salespeople in that process (Kindström et al., 2015). To achieve benefit from digital technologies, both the supplier and customer need complementary digitalisation capabilities, relation-specific digital assets, digitally enabled knowledge-sharing routines and partnership governance (Kamalaldin et al., 2020), and they require an alignment of the business models (Kohtamäki et al., 2019;Wünderlich et al., 2015). Previous research has covered how and through which capabilities, sales approaches and methods manufacturing firms can add new services into their portfolios and move from product sales to service sales. ...
... Recent studies on smart services, mainly from a focal firm perspective or in a dyadic relationship with customers, have acknowledged the uncertainty on the demand side of smart services (Kamp et al., 2022;Klein et al., 2018;Momeni and Martinsuo, 2018). While successful implementation of smart services requires new capabilities (Ardolino et al., 2018;Hasselblatt et al., 2018), processes and business models (Kohtamäki et al., 2019), it also requires the understanding of the uncertainties, concerns and needs of different actors (Töytäri et al., 2018). The identified requirement categories provide a more explicit understanding of the latter stage of service innovation and steer the firm towards service introduction. ...
Purpose Smart services have gained attention both among academics and practitioners, but manufacturing firms struggle in getting their new smart services extensively adopted by customers, employees and distributors. The purpose of this paper is to identify and analyse the requirements of different actors and the interconnectedness between their requirements in introducing smart services. Design/methodology/approach An embedded single-case study was conducted with a manufacturing firm and its network, including its sales and service personnel, customers and external salespeople. Data were collected via 30 in-depth interviews. Findings The paper advances the multi-actor perspective by identifying the requirements of key actors for introducing smart services. These requirements were divided into eight categories: value of smart services, reliability of smart services, competence for smart services, data security and management, attitude towards services, reliance, knowledge of installed base of equipment and services and service reputation. The findings reveal the interconnectedness of different actors’ requirements for introducing new smart services and how discussion and relationships between actors affected their requirements. Practical implications The findings represent a comprehensive template of requirements, as well as mapping the interconnectedness of actors’ requirements, serving as a practical guideline for managers. Originality/value This study characterises the introduction of smart services as a multi-dimensional, interconnected effort by manufacturing firms and their networks. It shows that service introduction cannot be viewed as manufacturer’s development task or customers’ adoption decision only. Propositions are offered on how multiple actors’ viewpoints can be combined to achieve success in introducing smart services.
... First, alliance learning research, as well as interorganizational learning research in general, is in great danger of becoming outdated and neglected by new and emerging research on ecosystems, and platforms, as the newer research streams may be recreating all the content of the alliance and network research in a new context using slightly different labels (Möller and Halinen, 2017). Hence, a review such as this one on the alliance learning literature and its sub-streams can provide a gentle and helpful reminder about the existing research while identifying and structuring subcommunities, systematically reviewing content, and providing ideas about how to utilize previously developed theories and concepts to solve future challenges in ecosystems, networks, and platforms (Kohtamäki, Parida, Oghazi, Gebauer, & Baines, 2019). It is likely that alliance learning research, the research in all of the sub-streams, and interorganizational network research in general, are now needed more than ever due to rapidly evolving digitalization, vicious global challenges, and blurring firm boundaries. ...
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The present study examines the alliance learning literature in these uncertain times, which highlights the importance of alliance learning that takes place across organizational boundaries within a variety of business ecosystems. The study builds on a literature review of 198 articles and uses bibliographic coupling to identify four sub-streams of alliance learning research: 1) learning in strategic alliances, 2) relationship learning, 3) learning in innovation networks, and 4) learning in social networks. We review and analyze the alliance learning research streams, identify gaps, and develop a research agenda for alliance learning research.
... Hence, reflection on the definitive AI/HI replacement is needed compared to a strategic collaboration (Barile et al., 2021a(Barile et al., , 2021bBassano et al., 2020). The value cocreated between FLE and technologies offers valuable digital opportunities for servitization to create and capture new value (Autio et al., 2018;Kohtamaki et al., 2019). Also, our conceptual approach is useful in understanding the democratization of AI capabilities through the collaborative logics of AI-FLEs extendable to the entire organization (Sjödin et al., 2021). ...
Purpose This paper aims to recall the attention on a key challenge for customer relationship management related to the role of human agents in the management of the “switch point” for ensuring the effectiveness and efficiency in a customer-machine conversation. Design/methodology/approach This study contributes to the discussion about the firms’ approach to artificial intelligence (AI) in frontline interactions under the conceptual umbrella provided by knowledge management studies. Findings This paper provides a theoretical model for clarifying the role of human intelligence (HI) in AI-based frontline interactions by highlighting the relevance of the actors’ subjectivity in the dynamics and perceptions of customer-machine conversations. Originality/value An AI-HI complementarity matrix is proposed in spite of the still dominant replacement view.
... In the digital age, skills needed for successful entrepreneurship can be obtained by using automated software with machine learning and artificial intelligence. Digital technologies are increasingly becoming a valuable source of future competitiveness for various organizations [57][58][59]. As they are widely used in business and everyday life, we propose to also use them in education [2]. ...
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This paper introduces the KABADA (Knowledge Alliance of Business Idea Assessment: Digital Approach) tool, together with the opinions of young people about entrepreneurship, their skills, and their experience with this tool. The focus is on non-business students who study natural sciences, engineering, and other areas at the Faculty of Forestry and Wood Technology at Mendel University in Brno, Czech Republic. The KABADA tool has been developed and tested by a team of international experts. It can be used by a wide audience, including forester management specialists. This structured, web-based platform is based on theoretical research, relevant statistics, and artificial intelligence insights. It guides entrepreneurs through business idea assessment including challenges and opportunities. The research included survey answers from 60 university students before and after using the KABADA tool. The results show that students are interested in entrepreneurship but do not have the knowledge or experience, or support from the curriculum. The majority of the students had no or very low experience with entrepreneurship, no entrepreneurship training, and had not studied entrepreneurship. After using the tool, students declared that they had a higher knowledge of entrepreneurship and the number of students who intended to become an entrepreneur increased. The tool is available online, free of charge.
... One of the factors affecting the performance of Indonesian startups in this study is the digitization of information systems (Santoso, et al., 2019). The purpose of digitizing the information system is to make it easier for employees to convey, provide, compile and explain information received by Startup Indonesia to be processed and used as information suitable for consumption by the public (Kohtamäki, et al., 2019). ...
Since the pandemic occurred, the digital work model has begun to be implemented in many companies. This was done as a solution to overcoming work constraints due to Covid-19 and government regulations regarding restrictions on interactions. However, even though the pandemic status has been revoked, the digital work system is seen as more efficient in creating an effective work system and increasing employee performance. Based on this explanation, this research was conducted to describe employee performance in digital work models and information systems. To prove the research objectives, a quantitative-based survey method was used. Where the research data was obtained through distributing questionnaires, with a Likert scale as the quantification of respondents' answers. The number of samples used was 100 people, all of whom were Startup Indonesia employees, using the incidental sampling technique. The collected research data were analyzed using multiple regression methods. The results of the study show that there is an increase in employee performance with the existence of a digital and information system-based work system. Digital work systems help facilitate employee work, while information systems create communication and coordination effectiveness, so that work processes can be carried out more efficiently.
Purpose While the servitization concept has gained increasing attention in the domestic marketing literature, there is more limited knowledge with respect to its implications within the international context. The purpose of this paper is to examine the servitization concept in the international context considering its boundary conditions and its effects on firm performance. Relying on the resource-based view and the boundary conditions function, the authors aim to identify a set of research gaps focusing on how strategic resource decisions (i.e. slack resources and digital marketing capabilities) help industrial firms to provide different types of service offerings (i.e. services in support of product (SSPs) and services in support of client's actions (SSCs)) that leverage their performance in international markets. Design/methodology/approach The authors illustrate international servitization strategies and the boundaries of servitization activities that firms employ through a series of case vignettes. The authors derive a conceptual framework, serving as a guideline for future research endeavors. Findings The authors indicate the importance of servitization strategies in international markets and identify eight research gaps, which help to build an agenda for future research. Key differences between international servitization strategies and strategic resource decisions are addressed through illustrative case vignettes from different industries. Practical implications The insights from this work inform marketing executives about how international servitization strategies are influential in the context of overseas markets by characterizing the servitization concept and elaborating upon the specific resources and capabilities that underpin its execution in foreign markets. Originality/value This conceptual paper provides a comprehensive understanding of international servitization strategies in overseas markets and identifies several research paths that contribute to the complex nature of servitization in the international context and help scholars spot gaps and research questions worthy of investigation.
Servitization allows manufacturing firms to differentiate themselves from rivals and become more competitive. Scholars have studied the service paradox, but analysis of the relationship between servitization and firm performance has provided inconclusive results. In terms of the antecedents that influence this relationship, the literature has tended to focus on firm and product characteristics but not on companies' innovative behavior. This article probes the relationship between servitization and firm performance by focusing on two forms of innovation (technological and open) that may exert an influence. The study draws on the resource‐based view literature to explain the role of interactions between technological innovation, service innovation, and open innovation in enhancing firm performance. Longitudinal empirical analysis was conducted with a sample of Spanish industrial firms for the period 2010–2016. Two time‐lagged models were built and analyzed. The results show that technological innovation influences servitization. This relationship is moderated by open innovation. Servitization mediates the relationship between technological innovation and firm performance. The findings contribute to the literature on servitization and innovation management. Innovation is posited as an antecedent to the service paradox. Products, services, and open innovation should be considered when firms design innovation strategies to improve their performance. Such innovation strategies should lead to an increase in servitization. Service innovation should be supported by open innovation to strengthen technological innovation potential.
The production function of economies in the twenty-first century—assuming that it correctly summarizes reality—has nothing to do with that of past decades and centuries. New generations of innovations have appeared and question the relationship between capital and labor. The statistics show some paradoxes. In the midst of a new technological revolution, we are witnessing a slowdown in productivity gains, a drop in investment rates, and a decline in labor productivity. Potential growth itself is not as high as it could be. This chapter tries to provide some answers to these puzzles.
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Servitization generates implications for the manufacturers' value creation, delivery and capture processes and also for their customers and business partners. As individual studies have started to investigate the different value processes in servitization and the effects they have on the manufacturers' wider context, it becomes important to consolidate prior research and develop an integrative understanding of value in servitization. The present study is based on a systematic review of the servitization literature, expanding the research scope from a dyadic to a triadic, network and system level of analysis. The study creates a value architecture framework which establishes a comprehensive understanding of value in servitization, with implications for future servitization theory building and strategy development.
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As digitalisation increasingly encompasses entire service ecosystems , it modifies resource integration patterns that connect ecosystem actors through strong and weak ties. To clarify how technological development contributes to this change, and how resource integration transforms the service ecosystem, this qualitative case study explores the digitalisation strategy of a market-leading systems integrator in the maritime industry. Based on 40 depth interviews with managers, the findings show how technology increasingly serves as a key operant resource in the transformation of resource integration patterns. The study contributes to ecosystem dynamics research by identifying major differences between the pre-digitalised and digitalised states of a service ecosystem, and demonstrates the dual role of technology in both increasing pattern complexity and facilitating coordination of that complexity.
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The ability of manufacturing companies to offer advanced services and achieve superior financial performance remains an open question in the servitization literature. One central question relates to how providers govern customer relationships to realize profits through servitization. This study addresses this question by unraveling the complex relations between advanced service provision, relational governance strategies, and the financial performance of manufacturing firms. Drawing on a dataset of 50 Swedish advanced service providers, this study uses a configurational comparative method—namely, fuzzy-set qualitative comparative analysis (fsQCA)—to identify the influence of configurations of governance conditions (i.e., service innovation, perceived switching costs, the attractiveness of alternatives, and explicit contracts) on firm performance. This study contributes through the identification of three alternative governance strategies that enable advanced service providers to benefit from service provision: 1) innovation governance strategy (high service innovation, low attractiveness of alternatives, and low use of explicit contracts); 2) relational governance strategy (high service innovation, high perceived switching costs, and low use of explicit contracts); and 3) market-based governance strategy (high service innovation, low perceived switching costs, high attractiveness of alternatives, and high use of explicit contracts). These results enrich the literature on servitization and advanced services by reflecting the need to apply diverse relational governance strategies. The results suggest multiple paths to superior financial performance.
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Servitization, or expanding service offerings associated with products, is increasingly central to sustaining competitive advantage in manufacturing industries. We propose the role of an internal ecosystem of human resource practices—High Performance Work System (HPWS)—and the contingent effects of environmental conditions—industry dynamism and industry complexity—as drivers of employee service-providing capability. Based on longitudinal data from 217 firms representing 718 firm-years, HPWS is positively associated with the service-providing capability of employees, and this association is stronger at higher levels of environmental dynamism or environmental complexity. This research contributes to the servitization literature by examining how employee service-providing capability relies on the internal ecology of employee practices and changes in the external environment.
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Harnessing digital technology is of increasing concern as product firms organize for service-led growth. Adopting a service ecosystem perspective, we analyze interfirm and intrafirm change processes taking place as firms pursue digital servitization. The study draws on in-depth interviews with 44 managers involved in organizing activities in two multinational industry leaders. Our findings identify major differences between the two focal firms in terms of digital service-led growth and associated ecosystem-related activities. The study disentangles underlying processes of organizational change in the ecosystem and suggests that within-firm centralization and integration play a key role in the capacity to organize for digital servitization. For managers, the findings highlight the need to foster service-centricity in order to take full advantage of digitalization beyond purely technological benefits.
The success of service innovations is intertwined with firms' capabilities to coordinate, orchestrate, and collaborate with a set of external actors. Adopting an ecosystem and dynamic capability perspective, this article examines ecosystem-related capabilities for developing service innovation in product-centric firms. The research uses a mixed-methods approach focusing on the energy utility sector: (1) a survey with 133 managers from 28 firms that allows a comparison of ecosystem-related capabilities between firms with high and low service-innovation intensity; and (2) a complementary interview study with 8 of these firms that have high service-innovation intensity, allowing a detailed understanding of the relevant ecosystem-related capabilities to be developed. From the data we derive a set of 12 ecosystem-related capabilities for service innovation related to the sensing, seizing, and reconfiguring of external resources. The results indicate that firms with high service-innovation intensity possess significantly stronger ecosystem-related capabilities than firms with lower service-innovation intensity. Those firms also seem to sense and seize external opportunities and resources to a greater extent in order to reconfigure their service-related ecosystems. The findings also show that successful service innovators consider not only value-adding partnerships, such as suppliers and customers, to be relevant for service innovation, but also relationships with non-direct value-adding ecosystem stakeholders (e.g., local governments, communities, legislators).
There is a need to examine the internal service ecosystem perspective to understand how the capability development process unfolds. To achieve this, an embedded case study of ten subsidiaries of a large multinational capital equipment manufacturer was conducted to analyze how front- and back-office capability development progresses across the subsidiaries. Three different paths for capability development were identified, indicating: (i) the sequential development of capabilities and capability renewal; (ii) difficulties of capability replication; and (iii) capability retrenchment and service dilution. It is argued that a lack of interaction between the frontand back-office may constrain progress in terms of realizing efficiencies through the standardization of offerings, processes, and performance measures. Important managerial implications indicate the need to manage an internal service ecosystem that allows for capability replication, which requires a strong center to leverage learning.
By bridging strategy, innovation, servitization, and new service development literatures, this study suggests that customer participation enhances the effectiveness of new service development strategies. The effects are particularly pronounced in the environments characterized by low competitive intensity and high complexity of customer needs. Empirical evidence is obtained from a sample of 226 large manufacturing firms with respondents representing service, functional, and general management. The results are the first to support the importance of customer participation in the new service development context. While largely consistent with the new product development research, they offer novel insights into the role of environmental contingencies in harnessing the input of customers in the new service development process for the benefit of the firm.
Based on the combination of an interorganizational perspective and a processual view of solutions, this paper analyzes the provisioning of solutions in business networks. Drawing on a case study in a transportation industry setting, the interdependencies between solutions are uncovered. The case illustrates how 1) firms are simultaneously involved in the provisioning of multiple solutions, 2) firms take on multiple roles in the provisioning of solutions in the business network, and 3) solutions are subject to interdependencies via connected relationships and thus form “networks of solutions.” The paper concludes that interdependence among solutions is a significant characteristic, adding to previous research on solutions. Consequently, it is suggested that firms' interaction with various parties in the provisioning of solutions needs considerable managerial and theoretical attention.
Independent distributors (IDs), just as equipment manufacturers, have the potential to initiate a transition towards the provision of advanced services. However, the internal and ecosystem-related problems experienced by IDs during servitization differ due to their distinct organizational structure. The purpose of this study is therefore to uncover problems faced by servitizing IDs during transition towards provision of advanced services, a topic which is still scarcely covered in the literature. Using an abductive research approach, we identify three overarching groups of servitization problems specific to IDs: (1) conflicting interests of key stakeholders; (2) misalignment between distribution of managerial attention and servitization strategy; and (3) ineffective knowledge management within the ecosystem. To diagnose these problems, we propose a servitization-readiness decision tree that allows IDs to pinpoint hindering factors before embarking on a servitization journey. In so doing, we provide a starting point for identifying and describing criteria for assessing IDs' servitization readiness.