Framing the servitization transformation process: A model to understand and facilitate the servitization journey

Abstract

The concept of servitization is well established in the literature, and yet the processes of organisational change that manufacturers undergo to compete through services have received much less attention. Therefore, this paper develops a model that enables a description of the servitization processes, the principal stages of organisational change, and the forces impacting these processes. It is based on a series of 14 case studies of the process of servitization over time in multinational manufacturers. Evidence and analysis from these cases are used to establish that manufacturers undergo four stages of organisational maturity (Exploration, Engagement, Expansion and Exploitation), through which an organisation progresses according to the pressures of five principal forces (customer pull, technology push, value network positioning, organisational readiness, and organisational commitment). This progression can be characterised as a business growth model with multiple crises or tipping points. This research contributes to our understanding of the process of servitization and proposes a model which can be used to explain progression. It also forms the basis to better prepare manufacturers as to what to expect as they embark on a servitization journey.

Full text

This is an Accepted manuscript of an article published by Elsevier in the International Journal of Production
Economics on 06/08/2019, available online: https://doi.org/10.1016/j.ijpe.2019.07.036
1
* Corresponding author. Email: a.bigdeli@aston.ac.uk
Framing the Servitization Transformation Process:
A Model to Understand and Facilitate the Servitization Journey
Tim Baines1, Ali Ziaee Bigdeli1*, Rui Sousa2, and Andreas Schroeder1
1 The Advanced Services Group, Aston Business School, Aston University, Birmingham, B4 7ET, UK.
2 Catolica Porto Business School, Catholic University of Portugal (Porto)
Abstract
The concept of servitization is well established in the literature, and yet the processes of
organisational change that manufacturers undergo to compete through services have received
much less attention. Therefore, this paper develops a model that enables a description of the
servitization processes, the principal stages of organisational change, and the forces impacting
these processes. It is based on a series of 14 case studies of the process of servitization over time
in multinational manufacturers. Evidence and analysis from these cases are used to establish that
manufacturers undergo four stages of organisational maturity (Exploration, Engagement,
Expansion and Exploitation), through which an organisation progresses according to the pressures
of five principal forces (customer pull, technology push, value network positioning, organisational
readiness, and organisational commitment). This progression can be characterised as a business
growth model with multiple crises or tipping points. This research contributes to our understanding
of the process of servitization and proposes a model which can be used to explain progression. It
also forms the basis to better prepare manufacturers as to what to expect as they embark on a
servitization journey.
Keywords – Servitization, Advanced Services, Process, Transition, Transformation,
Organisational Change
Ackknoledgement – This work was supported by Economic and Social Research Council (ESRC) Grant Ref
ES/P010148/1: Pathways towards Servitization: A trans-national study of Organisational Transformation, and EPSRC
Grants Ref EP/K014064/1, EP/K014072/1, EP/K014080/1: ‘Transforming the adoption of Product-Service Systems
through innovations in applied gaming technology’.

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1. INTRODUCTION
Servitization continues to be a topic of growing importance and interest to both the research and
practice communities. For both, an overriding challenge is to understand and manage the
transformation processes that manufacturing companies must undergo to compete through
services rather than through products alone (Kowalkowski et al., 2017b, Baines et al., 2017). These
transformation processes may be wide ranging and complex, often requiring significant
organisational change involving operating processes, capabilities, and platforms (Martinez et al.,
2017). Yet, despite numerous successful examples such as Goodyear's Proactive Solutions, MAN
Truck & Buses Drivers' Behaviour Monitoring, and Volvo Construction's Proactive Monitoring
and Maintenance, many firms struggle to successfully servitize (Lütjen et al., 2017). This study,
therefore, examines the processes by which manufacturers transform to compete through services,
giving special attention to the more advanced services. It seeks to understand and characterise how
a manufacturing organisation changes and matures in introducing, designing, and delivering
services.
Much of the preceding servitization research has examined the content, and to some extent its
relationship with the context (see Pettigrew, 1988), of organisational change within manufacturing
firms, in other words, what have manufacturers changed and what were the circumstances when
these changes occurred? (Baines et al., 2017). Much less attention has been given to the process
of organisational change through servitization and how this is impacted by the context; in other
words: how did (or should) change occur and what the circumstances were (or should be) when
change occurs. The absence of research in this area has been noted by Martinez et al. (2017),
Lütjen et al. (2017), and Kowalkowski et al. (2017b). All highlight the limitations in our
knowledge of the change process arguing that, despite the prevalence of services amongst
manufacturing firms, many struggle to understand and manage the transition from product-centric
to services-centric businesses. Knowledge about the interplay of environmental factors is also
lacking (Baines and Shi, 2015, Brax and Visintin, 2017). Indeed, Finne et al. (2013) draw attention
to the need to study how contextual factors affect the change process, and that transition can be
slow and cautious because of such factors.
Researchers are now responding to this opportunity. In particular, Martinez et al. (2017) have
studied three diverse organisations and argue that the change process is best explained by the
theory of continuous change; while Lütjen et al. (2017) interviewed senior managers across 14
firms in the energy sector to suggest that innovation theory describes the servitization process.

3
Overall, these researchers agree that the change process is complex and loosely structured, that
there is still much to learn, and that fulfilling this need is best achieved through a broad, in-depth
and longitudinal study of a range of manufacturers (Vendrell‐Herrero et al., 2014).
The study described in this paper, therefore, explores the organisational change process brought
about by servitization and how this is impacted by business contextual factors. As explained in the
paper, this is based on multiple case studies across 14 multinational manufacturing firms engaging
with servitization, with aspirations to compete through advanced services. Data is captured from
a range of expert witnesses from all levels within these organisations. These case studies and their
analyses have been guided by three research questions which examine: (i) the rationalisation of
this process into stages or steps, (ii) the interplay of contextual factors, and (iii) the characteristics
of the change process and the theory describing this process. Our analysis leads to three key
findings and contributions to servitization research and practice.
First, that at an aggregated level, the process of organisational change through servitization can be
explained as four macro-stages: Exploration, Engagement, Expansion and Exploitation. Second,
that progression both between and within these macro-stages is significantly influenced by
contextual factors, which can be grouped into five categories relating to the customer, technology,
the value network, organisational readiness, and the commitment of the host business. Third, that
while progression from one macro-stage to the next does appear as structured and predominantly
unidirectional, within these are sub-processes which are characteristically organic, unstructured
and iterative, and so the whole process can be characterised as a business growth model with
multiple crises or tipping points. These three insights are drawn together to form a model (the
servitization progression model) that represents how the process of organisational change unfolds
as a manufacturer undertakes a servitization journey.
Overall, this study moves forward our understanding of the process of servitization. In particular,
it builds on the studies by Martinez et al. (2017) and Lütjen et al. (2017) by understanding how
relevant contextual factors affect the servitization process, and reconciling how servitization can
be explained theoretically. In addition, it brings together the notions that (i) servitization is a
unidirectional and linear shift from products to product–service offerings (Turunen and Finne,
2014), with (ii) the servitization process being neither logical nor structured (Martinez et al.,
2017). This study establishes that both characteristics (i.e. unidirectional and unstructured) may
be exhibited in practice by a business, depending on the level of aggregation at which the change
processes are viewed (i.e. at a macro-level the servitization process may appear to progress
linearly, yet the underpinning sub-processes are likely to be unstructured and iterative). From a

4
practical perspective, this understanding better prepares managers to appreciate the likely
characteristics of a servitization programme and how this will unfold in practice.
The paper is organised, first, to establish and then present the initial research questions. Then, the
case study methodology is described, along with the process for data collection and analysis.
Analysis and discussion then follow to develop the propositions and the transformation model.
The final section provides the conclusion, outlining limitations and setting out an agenda for future
research.
2. THEORETICAL BACKGROUND
This section sets out the definitions and scope, and develops the research questions for this study
as illustrated in Figure 1.
2.1 Research context and scope
The origins of servitization research lie with Vandermerwe and Rada (1988) and over the last 30
years servitization has received ever increasing attention by the research community (Baines et
al., 2017). Today there is global awareness of the importance of services to manufacturers and yet
some important aspects of the processes of servitization are still to be fully explored. This study
sets out to contribute to this domain, and so this section summarises the context and scope taken
for this work. In particular it provides a foundational (i) definition of servitization, (ii) positioning
of servitization against deservitization, (iii) expressing servitization as a transformation process,
and (iv) transformation as a process of organisational change. Exploring of these topics are taken
in turn.
Servitization is commonly taken to be a transition or transformation which is largely characterised
as a linear and gradual move along a product continuum from less to more sophisticated services
(Lutjen et al., 2017, and Oliva and Kallenberg, 2003). Such conceptualisation implies a direct
relationship between service offerings and the extent of servitization. This is an established view
(see Mont (2004), Tukker (2004), Martinez et al. (2010) and Gaiardelli et al. (2014)), and is similar
to the notion that a firm’s service transformation can be assessed by the number of its service
offerings (see Mathieu (2001), Raddats and Burton (2011), Ulaga and Reinartz (2011)). Other
researchers, however, see such relationships between service offerings and the extent of
servitization as more blurred (see Raddats and Kowalkowski (2014), Windahl and Lakemond
(2010)) and that a manufacturer may have a latent capability to offer services, though the
commercial environment may limit their saleability and success. These reservations are largely

5
addressed by taking servitization to be the innovation of an organisation’s capabilities and
processes, and that, generally, the extent of servitization can be assessed in terms of the
sophistication of services offered (Baines et al., 2009).
Service sophistication varies on the level of risk, competition, and potential to create competitive
advantages (Oliva and Kallenberg, 2003, and Eggert et al., 2014). Services can be categorised as
either base services (warranties and spare parts), intermediate services (maintenance, repair,
overhaul) and advanced services (Baines and Lightfoot, 2013). Advanced services are complex
value propositions whereby the manufacturer focuses on providing performance outcomes to
customers, and can be thought of as substituting services (Cusumano et al., 2015) that replace the
purchase of the product (Paiola et al., 2013). Iconic examples of these include MAN’s Pay-per-
Kilometre (Bustinza et al., 2015), which offers comprehensive services around drivers’ behaviour
and fuel efficiency based on the distance the company’s trucks are driven. Such services are also
known as Pay-per-Use contracts (Martinez et al., 2017), Outcome-based Contracts (Kowalkowski
et al., 2009, Batista et al., 2017), Performance-based Contracts (Kindström and Kowalkowski,
2014) and Capability Contracts (Gebauer et al., 2011). Advanced services are, therefore, a
convenient categorisation of more sophisticated services, and have been chosen as the focus for
this study.
This study deals with the servitization of the manufacturing firm. A common perception is that
servitization is confined to manufacturing, though this is not necessarily the case (Kawalowski et
al., 2017, Vandermerwe and Rada, 1988), and service sector companies can also servitize by
increasing the bundling of their service offerings. This distinction here is important as the
servitization process may differ based on the form of the host organisation. In a similar vein, it is
important to recognise that manufacturing firms may go in the opposite direction and move away
from service provision. This is the process of deservitization and occurs when a firm reduces or
curtails service provision; indeed the interplay between servitization and deservitization is not yet
well understood and deserves closer examination (Valtakoski, 2017, Kowalkowski et al., 2017a).
However, in this study we have restricted our scope to manufacturing firms engaging with
servitization and excluded services businesses or those undergoing deservitization in our research
design.
Servitization can, therefore, be taken as the transition or transformation towards advanced services
(Lutjen et al., 2017, and Oliva and Kallenberg, 2003). Yet, this opens questions as to whether it is
most appropriate to describe the process of servitization as ‘transitional’ (Oliva and Kallenberg,
2003) or ‘transformational’ (Vendrell‐Herrero et al., 2014). Although the term transition is

6
perhaps most dominant in the literature, these terms are frequently interchanged and often taken
to mean the same. Yet, there are two types of assumptions in the prevalent literature: either
companies move away from products into services, or companies extend or expand their coverage
(Finne et al., 2013). The term transition does suggest more of a shift from one state to a second
‘Goods to Services’, while transformation allows for an extension, where the second state
embraces the first ‘Goods and Services’. In this sense, IBM demonstrated a transition in moving
from producing products to supplying services, whereas Rolls-Royce demonstrated a
transformation by expansion of its product portfolio to include services. In this study, we embrace
both transformation and transition. However, throughout the paper, we will favour the term
transformation, both for brevity in the text and because it suggests a more inclusive approach to
servitization.
Given that our chosen definition of servitization focuses on manufacturing organisations, and the
innovation of these organisations to offer advanced services, then in this context, transformation
is concerned with the processes of organisational change. Organisational change occurs as an
interplay between the context, process and content (Pettigrew, 1988, Whipp et al., 1989, Pye and
Pettigrew, 2005). Context deals with the circumstances of change (internal and external to
organisations), while process deals with how change takes place, and content deals with the actual
decisions reached. According to Baines et al. (2017), there is now a relatively well-established
body of content-focused research on servitization (e.g., co-design processes (Durugbo, 2014),
customer-supplier relationships (Kohtamäki et al., 2013a, Selviaridis and Norrman, 2014), buying
processes (Lindberg and Nordin, 2008), network structures/configurations (Ziaee Bigdeli et al.,
2018, Kohtamäki et al., 2013b, Nordin et al., 2013, Chakkol et al., 2014, Bikfalvi et al., 2013),
and complex networks (Finne et al., 2015). By contrast far less attention has been given to the
process aspects of organisational change associated with servitization (Martinez et al., 2017, Brax
and Visintin 2017, Kowalkowski et al. 2017b) and, in particular, how this interplays with
contextual factors (Baines et al., 2017, Dmitrijeva et al., 2018). Exploring this topic in-depth is,
therefore, the focus of this study.

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Figure 1. Summary of the theoretical framing of this study
2.2 About the stages in transformation
Studies about process differ as to whether they focus on ‘describing’ the transformation process
that manufacturers have followed or ‘prescribing’ how to go about servitization and change
management (see Judson (1991), Kotter (1995), Galpin (1996), Armenakis and Bedeian (1999),
and Armenakis et al. (2000)). The former suggests a reflective study and capturing a description
About the transformation process
Description of the transformation
process followed
Process likely to lack structure and
linearity
Possibly continuous change or
punctuated equilibrium
RESEARCH QUESTION 3
What is the nature of the
organisational change process that
a manufacturer follows when
servitizing to compete through
advanced services?
RESEARCH QUESTION 2
What contextual factors, internal
and external to the organisation,
holistically affect the progression of
a manufacturer through the
transformation process to compete
through advanced services?
RESEARCH CONTEXT
Servitization of the manufacturing firm
Servitization as an innovation of an organisation’s capabilities and processes
Transforming or transitioning to deliver advanced services
Transformation as a process of organisational change
About the stages in transformation
Stages form the basis for analysing
how process unfolds
Efforts to bypass stages seldom
yield a satisfactory result
Mistakes in any step can slow
implementation
RESEARCH QUESTION 1
What stages of transformation does
a manufacturer follow when
servitizing to compete through
advanced services?
About the factors affecting
transformation
Contextual factors are central in
shaping transformation
Interplay between context and
process rarely examined
Strategic and holistic process also
rare
Section 2.2
Section 2.3
Section 2.4

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of the decisions and actions of a manufacturer as the servitization journey unfolds; while the latter
is concerned with prescribing a set of analyses and actions that can be followed to guide
servitization. Practitioners are especially interested in this latter case, and yet for such prescriptions
to be reliable, they should be founded on a thorough understanding and evidence of the former. In
this regard, therefore, this study focuses on capturing the transformation that manufacturers have
followed (i.e. descriptive).
There is only limited reporting of the step-by-step service journeys of individual firms (Vendrell-
Herrero et al., 2014). Martinez et al. (2017) argue that service-driven transformation requires the
reconfiguration of fundamental elements of the product–service offering, organisation and value
network, and that such change processes may unfold over a number of phases of emergence,
development, implementation and diffusion (Hargrave and Van de Ven, 2006). In their review of
servitization literature, Brax and Visintin (2017) discuss stepwise progression models that identify
progressive stages of increasing servitization. They note that stepwise models are particularly
important, as these indicate stages and form the basis for analysing how the servitization process
unfolds, although they also caution against an assumption of the servitization process as
unidirectional. On this basis, Lütjen et al. (2017) suggest that early stages tend to be based on
already existing products, resources and technologies (Oliva and Kallenberg, 2003), while later
stages require substantial changes in the underlying technologies and competences, and in the
customer value and behaviours in a greater extent.
Stages or steps are common in prescriptive models, and one of the best-known change
management models is that of Kotter and Cohen (2002). Their model consists of eight steps to be
followed when implementing fundamental changes: (i) establishing a sense of urgency; (ii)
forming a powerful coalition of individuals; (iii) creating a vision and strategy; (iv)
communicating the vision; (v) empowering others to act; (vi) creating short-term wins; (vii)
consolidating improvements; and (viii) anchoring the new approaches. Such work has its roots in
the primary model proposed by Lewin (1947), which consists of unfreezing, moving, and freezing
phases. Building on this, Judson (1991), Kotter (1995), Galpin (1996), Armenakis and Bedeian
(1999), Armenakis et al. (2000), and Kotter and Cohen (2002) have all proposed multi-staged
models to be followed in implementing changes as an organisation’s commitment and progress
develops. In particular, they extend the Kotter (1995) model to include: (i) readiness for change,
and (ii) dealing with resistance when executing a change management programme.
Stages are also common in models describing organisational change. Scott and Bruce (1987)
develop a model of organisational transformation and growth, which is based on the classical

9
product life-cycle stages. These are (i) inception (which focuses on the idea development), (ii)
survival and growth (which focuses on gaining backing), (iii) expansion (which focuses on
organisational structures), and (iv) maturity (which focuses on stability). However, both
descriptive and prescriptive models emphasise two key points: (i) the change process typically
occurs in multiple steps that take a considerable amount of time to unfold, and efforts to bypass
steps seldom yield a satisfactory result, and (ii) mistakes in any step can slow implementation as
well as negate hard-won progress. These insights lead to our first question about the change
process.
RQ 1: What stages of transformation does a manufacturer follow when servitizing to compete
through advanced services?
2.3 About the factors affecting transformation
Finne et al. (2013) demonstrate that contextual factors are central in shaping the organisational
transformation towards servitization. In general, contextual factors are seen as wide-ranging and
can be both internal and external to the organisation (Kelly and Amburgey (1991), Pye and
Pettigrew (2005), Hatch (2012)). Internal factors include: (i) organisational structure, (ii) corporate
culture, (iii) power and leadership, (iv) internal political characteristics, (v) strategic directions,
(vi) level of trust and stage of the board development. Whereas external factors include: (vii)
external political characteristics, (viii) economics, (ix) social aspects, (x) technology, (xi)
environment, (xii) industry, and (xiii) regulations. Several servitization studies have explored
some of these factors, such as Gebauer (2008), who has studied how market growth impacts
favourable service strategies, and Turunen and Finne (2014), who have examined how
servitization success might be affected by technologies and political conditions. Table 1 captures
the wide range of such studies that currently exist and illustrates whether they deal with factors
that are internal or external to the manufacturer, and the relationship to the content or process of
organisational change.
Table 1 illustrates that, predominantly, studies focus on relationships between context (internal &
external) and content. For instance, Ahamed et al. (2013) examine how the internal processes of
goal-setting mediated staff concerns during servitization. By contrast, only a few studies consider
the relationships between context and process. Those that have can be subdivided into two broad
groups: the first dealing with the more strategic and holistic aspects of organisational change, and
the second focusing on operational and tactical levels. The former is characterised by

10
Kowalkowski et al. (2017a), who examine how agile leadership within a manufacturer impacts
the service growth route. An example of the latter is Eloranta and Turunen (2016), who provide a
rationale for using platform approaches in the manufacturing context and demonstrate how
complex inter-organisational relationships impact value creation processes in service networks.
The paucity of research examining the interplay between context, both internal and external to the
organisation, and the strategic and holistic process of servitization transformation, leads us to our
second research question.
RQ 2: What contextual factors, internal and external to the organisation, holistically affect the
progression of a manufacturer through the transformation process to compete through advanced
services?
Authors
Factor(s) under investigation
Context
Content
Process
Internal
External
(Alghisi and Saccani, 2015)
Service design capabilities for successful
implementation of service transition strategy.


(Alghisi and Saccani, 2015)
Top management commitments on investment in
service growth.


(Kowalkowski et al.,
2017a)
Agile leadership on service growth routes.


(Alghisi and Saccani, 2015,
Lienert, 2015, Martinez et
al., 2010, Johnstone et al.,
2009, Gebauer and Friedli,
2005)
Internal marketing to create the internal buy-in
that establishes the service culture.


(Burton et al., 2017)
New responsibilities/organisational realignment
for service delivery.


(Parida et al., 2014)
Network management capabilities to facilitate the
servitization transformation.


(Ulaga and Reinartz, 2011)
Availability of resources and knowledge on new
service development.


(Gebauer and Friedli, 2005)
Employee education to facilitate the piloting of
the service offering.


(Ahamed et al., 2013)
Clear goal-setting and performance criteria
development to streamline internal processes for
service development.



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Table 1. Servitization studies’ focus on relationships between context and content
2.4 About the transformation process
Servitization is often seen as a unidirectional and linear shift from products to product–service
offerings and, yet, practice rarely plays out so objectively (Spring and Araujo, 2013). Indeed, on
the basis of three in-depth cases studies, Martinez et al. (2017) conclude that the servitization
process is neither logical nor structured, but is much more emergent and intuitive. Spring and
Araujo (2013) stress the continuously emergent and exploratory nature of the shift to service, and
conceptualise the restless firm – in conjunction with its restless network counterparts – which is
(Bastl et al., 2012)
Shifts towards user process-oriented services on
the creation of a push for more collaborative
relationships.


(Turunen and Finne, 2014)
Regulatory changes that can ban or facilitate new
product–service offerings.


(Benedettini et al., 2015)
Broader social values, the customers’ satisfaction,
relationship, loyalty and retention with the
organisation, which can facilitate servitization.


(Neely, 2008)
The level of economic development, which can
impact servitization.


(Story et al., 2017, Baines
and Lightfoot, 2014,
Lightfoot et al., 2011)
ICT that facilitates servitization by improving the
delivery of new services.


(Holmström and Partanen,
2014)
Technology-driven design of solutions which
facilitates servitization by allowing for new
offerings to be considered.


(Bustinza et al., 2013)
The capability to collect data on the customers’
experience of goods/services to allow for a better
insight into service-related consumer behaviour.


(Opresnik and Taisch,
2015, Lee et al., 2014)
Visualisation and analysis techniques for the
processing of big data to facilitate the
establishment of new service propositions.


(Wilkinson et al., 2009)
Supply chain integration on the development of
new service offering.


(Kamp and Parry, 2017,
Story et al., 2017)
The open sharing of data and knowledge which
can enable collaborative working between buyers
and suppliers and the joint development of new
service offerings.


(Eloranta and Turunen,
2016)
Platform approaches to provide structure for
managing network cooperation in the servitization
process.


(Story et al., 2017)
Managing partner relationships in the network to
support the service value co-creation within the
network.



12
engaged in network reconfiguration rather than simply ‘moving downstream’. Similarly,
Kowalkowski et al. (2012) suggest that the transition takes place through ‘agile incrementalism’
as opportunities are seized and improvements take place independent of a centralised servitization
strategy. Wilkinson et al., (2009) recognise systemic characteristics and, rather than sequential
steps, they suggest that transition takes place through the resolution of organisational problems
along the way.
These differing views of transformation are reflected in the broader literature on organisational
change, which is dominated by two approaches: (i) continuous change and (ii) punctuated
equilibrium. The continuous change approach emphases a situation where organisations and their
people continually monitor, sense, and respond to the external and internal environment in small
steps as an ongoing process (Luecke, 2003). Burnes (2004) identifies continuous change as the
ability to change continuously in a fundamental manner. The theory of continuous change suggests
that change is not episodic but endemic to the way in which organisations operate, having the
ability to engage in rapid and relentless continuous change (Langley et al., 2013). By contrast,
punctuated equilibrium is characterised by long periods of relative peacefulness with small,
incremental changes that are interrupted by brief periods of discontinuous and radical change
(Tushman and Anderson, 1986). There are other frameworks that also explain this organisational
change process. In particular, Scott and Bruce (1987) propose a model of business growth that
somewhat reconciles the differences between linear growth and radical change. They identify five
stages which are punctuated by four crisis points that precede the advance into the next stage of
development. It is the anticipation of these crises, and the successful management of the change
that they cause, that ensures the survival of the growing business.
Servitization research has yet to settle on which model or theory is most appropriate for explaining
the transformation process. The relatively exploratory work by Martinez et al. (2017) argues that
the change process is best explained by the theory of continuous change; though Lütjen et al.
(2017), having interviewed senior managers across 14 firms in the energy sector, suggest that the
innovation management perspective also explains the organisational change process. This leads
us to conclude that further work is necessary in this area and leads to our final research question.
RQ 3: What is the nature of the organisational change process that a manufacturer follows when
servitizing to compete through advanced services?

13
3. RESEARCH METHOD
This study set out to illuminate the transformation process that a product-centric manufacturer
undertakes as it servitizes to compete through advanced services. Given the nature of the research
questions, this paper has adopted a multiple case study approach that allows the examination of
replication logic (Yin, 2003), a condition in which empirical analyses can be seen as a series of
independent experiments that confirm or disconfirm conceptual insights as they emerge
(Eisenhardt, 1989). This section describes the case selection as well as the data collection and
analysis methods.
3.1 Case selection
A critical aspect of the study was securing the participation of manufacturers involved in
servitization, and specifically involved with a transformation centred on competing through
advanced services. However, identifying such a pool is fraught with challenges. The research team
faced two issues in particular: (i) an ideal case company would have fully executed and
experienced a transformation process, yet the anticipated extended time-line of such a process (i.e.
several years) means that evidence of earlier stages of maturity are unlikely to be available within
such organisations; and (ii) an ideal case company would report business performance indicators
about advanced services, yet financial conventions for such reporting differ across businesses
(Baines and Lightfoot, 2013). The solution for this study was to accept a less specific selection
and, instead, allow manufacturers to be chosen as case candidates if they indicated some reliable
evidence of a trajectory towards advanced services. For example, early experimentation with an
outcome-based contract or developing a services-led offering were considered to be positive
indicators. As a result, selected cases were at different levels of organisational readiness in the
development and delivery of advanced services, and evidence of this was recorded and analysed
for scrutiny (see Section 4.1).
Search, selection and engagement proceeded as follows. A range of techniques was used to
establish a shortlist of companies, including: (i) monitoring attendees at field service networking
events, (ii) participating in forums and networking on LinkedIn, (iii) reviewing articles in
professional periodicals and magazines, and (iv) web searches for businesses that have
associations with advanced service-type contracts. During the process, extra care was taken to: (i)
focus on manufacturers (note that services business can also offer forms of advanced services),
(ii) achieve a broad view of transformation by covering a range of servitization maturity levels,

14
and (iii) avoid selection of competing companies since this would inhibit willingness to
participate.
Shortlisted companies were then invited to participate in this study. The participating companies
had to agree to: (i) provide access to middle/senior management, (ii) take part in several rounds of
interviews, workshops, meetings, etc., and (iii) grant the research team access to their facilities to
observe day-to-day operations. Following this process, 14 company cases were identified and
preliminarily engaged by August 2014. For all cases, negotiations concerning access and
confidentiality were carried out, and, therefore, the names of the manufacturing organisations have
been coded (Case A through to Case N). An overview of the selected cases is provided in Table
2.

15
Case
Identifier
Industry/ Business Focus
Size (Turnover/No.
of Staff)
Evidence of Advanced Services Trajectory (Reason for Engagement in Study)
Case A
Passenger and commercial
vehicle and aircraft tyre
manufacturer
~ £12bn / ~ 70,000
Chief Innovation Officer approached research team to enquire about transformation expertise and
to identify industry leaders.
Case B
Gas turbine engine manufacturer
~ £8bn / ~ 50,000
Frequently cited in publications as exemplar of advanced services.
Case C
Rail transportation manufacturer
~ £7bn / ~ 32,000
Cited in trade press as most innovative and successful advanced service provider in rail industry.
Case D
Heavy equipment manufacturer
~ £30bn / ~ 95,000
Frequently cited as exemplar of advanced services in business and management publications.
Case E
Manufacturer and provider of
document solutions and services
~ £10bn / ~ 36,000
Widely cited in trade press as most pioneering and successful advanced service provider of printing
machinery.
Case F
Truck and trailer manufacturer
~ £550m / ~ 34,000
CEO engaged research team to audit advanced service operations with customers.
Case G
Packaging equipment
manufacturer
~ £600m / ~ 3,500
Service Director engaged in discussion around advanced services at tradeshow, discussed industry
trends, and how the company sought to innovate their offerings.
Case H
Manufacturer of air filtration
equipment
~ £3bn / ~ 1,900
Director of IoT engaged in discussion around advanced services at tradeshow, discussed need to
capture value through advanced services.
Case I
Heavy equipment manufacturer
~ £5bn / ~ 18,000
Service Director engaged in discussion around advanced services at tradeshow, discussed
aspiration to compete through advanced services.
Case J
Manufacturer of precision motion
control systems
~ £2bn / ~ 10,700
Director of IT approached research team to deliver keynote on advanced services at their annual
service conference.
Case K
Power generation, renewable
energy and transmission
manufacturer
~ £26bn / ~ 74,000
Engaged in discussion with business development team following presentation by research team
at field service conference.
Case L
Aerospace and defence
equipment manufacturer
~ £16bn / ~ 85,000
The research team was introduced to new Business Development Manager with interest in
advanced services via university liaison officer.
Case M
Lifting and material-handling
manufacturer
~ £700m / ~ 3,800
Service Director engaged in discussion around advanced services following his presentation at
field service event.
Case N
Manufacturer of transport
temperature control systems
~ £2bn / ~ 10,000
Widely cited as the leading company in developing and delivering advanced services where
controlled temperature is vital.
Table 2. Overview of the selected case companies

16
3.2 Data collection
Data collection occurred in the period 2014–2018 and was supported by a data collection protocol
based around the research questions. Accordingly, data was collected principally through semi-
structured interviews (both face to face and by telephone) from a range of personnel levels.
Interviews directly reflected the research questions, and were designed to guide the conversation
flow towards a characterisation of servitization initiatives over time, focusing on process, as well
as the contextual forces affecting progress towards increased servitization maturity. At least two
researchers were present at each interview, and responses were captured by both audio recording
and written notes. Each interview lasted from one to two hours. Overall, the study conducted 62
rounds of interviews, with at least three key stakeholders from each case company, resulting in
more than 100 hours of recorded material. Written transcripts were prepared soon after each
interview. Triangulation (Jick, 1979) was carried out to verify responses and included
supplementary data, such as observation notes, organisational charts, process maps, operating
protocols, and crosschecked responses from interviewees.
In addition, data collection included informal follow-ups through meetings and workshops and
several rounds of on-site observations. After each of these activities, the involved researchers
produced a written description of the gathered data (e.g. an account of the salient aspects discussed
in a meeting). Finally, we examined archival data (mainly business plans, annual reports and
internal company materials), extracting relevant information – as per the themes associated with
the research questions – and transcribing/summarizing it into text, while keeping a reference to
the raw data source. All of these written notes (from interviews and additional data sources) made
up the case-study database (Yin, 2003) that was used for subsequent data analysis.
3.3 Data analysis process
We followed the principles of qualitative data analysis (Miles and Huberman, 1994) to describe,
interpret and categorise the data. The key mechanisms for generating meaning from the data were
noting patterns, seeing plausibility, clustering, making contrasts/comparisons, and subsuming
particulars into the general (Miles and Huberman, 1994). We first performed within-case analysis,
starting by organising the data around each of the research questions. We coded the data against
the research questions, while simultaneously allowing for new codes and relationships to emerge
inductively from the data. In order to ensure reliability and construct validity, the data was coded
by two independent researchers and different interpretations of the data (e.g. classification of codes

17
into broader conceptual categories) were discussed vis-à-vis raw data to arrive at a consensual
coding. We then performed cross-case analysis by summarising the data from each case and
building displays to reveal cross-case patterns and make comparisons. Validity was further
enhanced by identifying commonalities across cases, as well as by comparing cases with different
levels of progression in servitization over time (Yin, 2003). Finally, we presented our findings
(stages and their timing, and key contextual factors affecting progression and reconstructed
pathways) to informants in each case to assess plausibility (Yin, 2003).
Analysing the findings to answer the research questions led to the formation of propositions that
explain the transformation process. The next section provides additional details on the data
analysis and reports the findings for each of the research questions.
4. ANALYSIS AND FORMATION OF THE TRANSFORMATION MODEL
4.1 Principal stages in the transformation process (RQ1)
From the onset, it was apparent that multiple stages of transformation maturity do exist. Case A,
for instance, was concluding their activities centred on the ways in which further value could be
created for current and prospective customers, and also searching for industrial exemplars that the
company could study in detail. As their Chief Innovation Officer noted: ‘We started by exploring
the ideas around servitization by investigating the practices of manufacturers in our or other
industries, what could we learn from them, and how should we go about it.’ Similarly, Cases B
and C were also quite developed in their transformation journey and were focusing on their
organisational strategy to optimise the delivery of advanced services, and exploit their services-
led offering portfolios. In contrast, Case I was much less mature and struggling to conceptualise
what an advanced service might look like for their industrial products. Indeed, they were
questioning whether they might be most successful if they simply sought to sell data captured
about their products directly back to their customers without any complementary services. Other
cases, such as J, L and M, operated between these extremes: experimenting with offerings around
advanced services, having a strong ambition to grow their portfolios, and exploring the potential
of such services to their future competitive advantages.
We analysed the data with the goal of representing this progression through the transformation
process at an appropriate level of abstraction, seeking to identify meaningful, distinctive stages.
The data was coded to identify the significant actions or events associated with the servitization
process over time in each case (as per the interviewees’ accounts and other sources of data). The
codes were then used to build a timeline for each case. To illustrate, Figure 2 shows the timeline

18
for Case A. We then iteratively analysed the servitization events within and across cases against
the lenses of the different change models discussed in Section 2.4, grouping actions/events
according to their conceptual similarity.

19
Figure 2. Timeline of the servitization process events and actions for Case A
Exploration
Engagement
Expansion
Exploitation
The innovation
team started to
explore how much
value could be
created by properly
managing tyres and
which technologies
might help their
customers
Exploring relevant
industrial examples
through benchmarking
visits to the leading
manufacturers in
servitization
The appointment of a new VP
for innovation who promoted a
highly customer-centric form
of business model innovation,
identifying the customer’s pain
points and how to create value
for the customer
Creation of
significant interest
and sense of
urgency due to the
acquisition of a
telematics company
by the key
competitor
Restructuring of the Innovation
Team to streamline the
initiative and communicating
the benefits and risks with the
wider teams
Development of
initial experiments
Secure further investment to do
more customer experiment projects
The nomination of a
senior champion to
drive the initiative
commercially
The launch
of the
‘Proactive
Services’
offering in
Europe
Creation of several
integrated global teams to
roll out the advanced
service offering in North
and South America
Bringing in several related
workforces in marketing,
operations and sales to launch
the service business in Europe
Promoting the initiative, its
benefits and risks among other
regions such as Asia and Australia
by the Global Innovation Team
Strong resistance from the
senior management team in
North American business on
improving the product
quality rather than
introducing new service-led
business models
Collaboration
agreement
with a
leading
telematics
provider
The appointment
of a senior VP to
further move the
advanced services
initiative forward
in the US
Developing plans for
strategic acquisitions
to expand services
offerings globally
Expanding and exploiting
pro-active and advanced
services portfolio in Europe
to serve new customer base
2015
2016
2017

20
Four conceptual categories of events in the transformation process became apparent. We found
that, in each case, the events associated with each category clustered around a well-delimited
time period, thus constituting different stages of maturity. In addition, each stage exhibited
similar features across firms. These stages were well aligned with the four stages described in
the model of organisational change proposed by Scott and Bruce (1987). The terminology and
definitions of the stages were revised to better represent the servitization and advanced services
context: Exploration, Engagement, Expansion, and Exploitation. By looking at the nature of
the events grouped under a given stage we produced an abstract description for each stage.
Table 3 summarises the features of each stage and provides illustrations from the case studies
in the form of managerial concerns that were salient in each stage (from interview data).
Exploration
Engagement
Expansion
Exploitation
Definition
Searching and
finding out about the
concept and the
implications of
competing through
advanced services,
until they are
confident that the
opportunity exists.
Seeking to evaluate
and demonstrate
advanced services,
until the potential is
accepted within the
organisation.
Increasing the scale
and speed at which
advanced services are
innovated and
implemented, until
significant value is
demonstrated within
the organisation.
Seeking to optimise
innovation and
delivery of an
advanced services
portfolio, unless
business is adversely
disrupted.
Illustrations
from the case
studies
(managerial
concerns)
Is this right for us?
(CEO, Case F)
How much money
could we make?
(Service Director,
Case E)
Who does this well?
(Business
Development
Manager, Case L)
What are the key
customer
requirements? (CIO,
Case A)
What is the overall
organisational mind-
set on services?
(Service Director,
Case J)
What are our
differential
How do I get the
board to invest?
(Technical Director,
Case G)
How do we educate
our customers?
(CEO, Case F)
Why can’t we just
sell our monitoring
technology? (Service
Director, Case I)
What is the right
business model?
(CIO, Case A)
What should be
considered as KPIs in
experimentation
projects? (Service
Director, Case G)
How do we overcome
our production
legacy? (Service
Solutions Director,
Case M)
How do we build our
market share?
(Service Director,
Case J)
Who are our
competitors now?
(Service Director,
Case E)
How could this
become an
organisation-wide
initiative? (CIO, Case
A)
What acquisitions
should we make?
(CIO, Case A)
How do we integrate
production with
service? (Senior
Engineering
Manager, Case B)
How do we extend
our services
business? (CFO,
Case F)
What next, both in
terms of the service
portfolio and
organisation
direction? (Service
Director, Case C)
How do we improve
efficiency of service
delivery? (IT
Director, Case H)

21
advantages?
(Solutions Manager,
Case L)
Table 3. Characterisation of the four stages of servitization maturity
Table 4 shows for each case the predominant incidence over time of traits associated with the
four stages. It reveals that all firms seem to follow the same sequence, though not all companies
had managed to progress through each stage at the time of the research. In addition, there is no
evidence that firms skipped stages. Overall, the data supports the existence of the four stages
in servitization journeys.

22
* Note: Time units are in years. 0 signals the start of the journey for the relevant case
Table 4. Cross-case mapping of maturity stages over time
Incidents of stages over time
Case A
Case B
Case C
Case D
Case E
Case F
Case G
Case H
Case I
Case J
Case K
Case L
Case M
Case N
2
Exploration
Engagement
0
1
2
Exploration
Engagement
Expansion
0
2
Exploration
Engagement
0
3
4
Exploration
Engagement
Expansion
0
1
Exploration
Engagement
0
2
Exploration
Engagement
0
2
3
4
Exploration
Engagement
Expansion
Exploitation
0
1
2
8
Exploration
Engagement
Expansion
Exploitation
0
2
3
5
Exploration
Engagement
Expansion
Exploitation
0
1
2
6
Exploration
Engagement
Expansion
Exploitation
0
2
4
5
Exploration
Engagement
Expansion
Exploitation
0
1
3
6
Exploration
Engagement
Expansion
Exploitation
0
1
3
6
Exploration
Engagement
Expansion
Exploitation
0
1
3
4
Exploration
Engagement
Expansion
Exploitation
0

23
This conceptualisation of the transformation process as four stages provides a viable structure
for differentiating the progress of the case companies. In the first phase of Exploration, all the
case companies were looking to understand their market and explore how advanced services
could play a key part in their growth. For instance, the CEO of Case F explained: ‘We started
to explore what are the pain points of our customers – we found that it wasn’t the price of the
truck at all; it was the cost of fuel as well as uptime … we started to realise we can do a lot to
address those pains.’ Similarly, the Business Development Manager of Case K said, ‘We
started to be aware of the requirements and needs of our customers through a reverse engineer
initiative, it feels like “by the way you’ll need one of those, and one of those, and one of those.
And you stick them together like this”.’
In the second stage, Engagement, the focus shifted towards securing internal backing, both
financially and organisationally. The CIO in Case A stated:
We started to build alignment with the people inside the organisation for the advanced services
initiatives. There was a sponsor for a group of three people who were business leaders … so
partly it was keeping them in the loop, bringing them up to date with what the global team was
doing and building relationships with them.
Similarly, the Business Development Manager of Case E said:
After understanding the basics of the market and our offering, we had to think about an internal
coalition to take the advanced services initiative forward … The team was one-hundred-per-
cent dedicated to advanced services initiatives … in hindsight I look back and I don’t think it
would have succeeded had it not been a dedicated group. There was never a pressure to support
the core business; the pressure was to go and prove the new venture to be successful.
In the Expansion stage, the focus and efforts moved to scaling a portfolio of advanced service
offerings, creating a larger market segment and enhancing cultural change initiatives. The CIO
of Case A noted:
After the success of several rounds of experimentations with the selected customers (for nearly
18 months), we launched our first advanced services offering. It was initially called [xxx], but
later changed to Proactive Services. The offering focused on taking care of the entire tyre-
related operation for the road haulage companies through the sensor-enabled monitoring of
tyre pressure and alerts, based on a monthly service fee model. A dedicated team from
innovation, marketing and sales came together to work closely in identifying new relevant
customers across the continent.

24
The General Manager of Case N also explained:
There’s nothing like having a successful project to start to open people’s minds … it became
real for people at that point; they could see this project, this customer, these outcomes … here’s
the financial performance of that transaction, how it fits into the P&L of the business.
At the time of data collection, only eight of the case companies had reached the Exploitation
stage of transformation, where their efforts started to focus more on institutionalising
servitization across different business units and on designing their products with the mind-set
required for the delivery of advanced services. On this concern, a Senior Engineering Manager
from Case B stated: ‘Today, our engines are designed and manufactured in a way that enables
us to provide and deliver advanced services more effectively towards our customers.’
Similarly, a Senior Business Development Manager from Case N highlighted: ‘Rather than
having an organisation for building the products and an organisation for supporting the
products – which we have currently – we now realise that we will need to manage a product
through-life and have an organisational structure to reflect this.’
Therefore, in response to the first research question, we offer:
Proposition 1: In a manufacturer’s transformation to servitize and compete through
advanced services, the organisation will experience four stages of process maturity as the
organisation’s commitment and capabilities progress.
Proposition 1.1 The manufacturer will firstly focus on Exploration, searching and
finding out about the concept and the implications of competing
through advanced services, until it is confident that the opportunity
exists.
Proposition 1.2 The manufacturer will secondly focus on Engagement, seeking to
evaluate and demonstrate advanced services, until the potential is
accepted within the organisation.
Proposition 1.3 The manufacturer will thirdly focus on Expansion, increasing the scale
and speed at which advanced services are innovated and
implemented, until significant value is demonstrated within the
organisation.

25
Proposition 1.4 The manufacturer will fourthly focus on Exploitation, seeking to
optimise innovation and delivery of an advanced services portfolio,
unless business is adversely disrupted.
4.2 Principal contextual factors that affect progression through the transformation
process (RQ2)
We analysed the data based on first-order and second-order coding (Strauss and Corbin, 1998,
Miles and Huberman, 1994). We started by coding the data (mainly interview data) for
incidents or phenomena that constituted an evidence (or manifestation) of a contextual factor
shaping the transformation process, assigning a first-order code to each. Then we grouped these
factors into aggregate second-order conceptual factors. Establishing a second-order factor
required the existence of at least two conceptually related first-order incidents associated with
different data sources (e.g., two different respondents). For example, appetite from customer
base to experiment new innovations, and commitments from key customers to engage in
experimentation projects were grouped under customer pull. Since the literature is scarce on
contextual factors pertaining to the servitization process (see Section 2.3), this was primarily
an inductive process. The process as a whole was iterative, involving the revision of the
definitions of the second-order factors to arrive at a comprehensive and consistent set of factors.
The analysis resulted in five categories of factors: customer pull, technology push, value
network positioning, organisational readiness and organisational commitment. Table 5 shows
the result of the cross-case data analysis.

26
Factor
Presence of factors across cases
Case A
Case B
Case C
Case D
Case E
Case F
Case G
Case H
Case I
Case J
Case K
Case L
Case M
Case N
Examples from cases
Customer
pull








 Strong appetite from customer base to experiment with new innovation
 Initial request from key customers to purchase uptime rather that the asset
 Customer engagements in experimentation projects
 Level of maturity within the market about valuing outcome rather than the asset
Technology
push










 The existence of the relevant technology to unlock the development of services-led offerings
 Maturity of the remote monitoring sensors in the market
 The realisation that new technologies could enable the company to do more
 The threat from digital technology start-ups in analysing data from the use of the asset
Value network
positioning










 Understanding of ‘who the customers actually are’
 Awareness of the fact that the partner company within the value network may change as the service
proposition develops
 Restructuring the relationship with dealers to get control and direct access to customers
 Realisation of the existence of technology providers within the ecosystem, who could provide better,
cheaper, and more effective tools to enable the company’s product to be smarter and provide a wide
range of offerings to their customers
Organisational
readiness









 Empathetic that advanced services journey could only start if you have a realisable product
 Experience of successful organisational transformation/acceptance of change
 Understanding the importance of internal buy-in to move towards servitization
 Organisational and strategic alignment across different business units
 Having the right service vision and mission for the entire organisation
Organisational
commitment










 Education of the senior management regarding the benefits of moving towards advanced services
 Identifying new opportunities among existing customers to support the transformation progress
 Engagement from the leadership in the development of advanced services offering early on
 Development of a shared service to manage the data across different segments
 Ability to learn from experimentation projects in the customer base
Table 5. Cross-case analysis of contextual factors

27
The results show that each factor was active across several cases (ranging from 8 to 10 cases,
out of 14), thus receiving significant replication. They also show that, in general, several factors
are active in each individual case (at least three), suggesting that progress benefits from a
conjunction of different forces. The exception is Case M, which as yet has only been subject
to customer pull. Overall most factors appear to influence each stage of the process to a greater
or lesser extent, and indeed may lead to particular pathways through each stage.
Customer pull refers to the external context factors about the market environment that affect
the progression. As an illustration, the Service Director of Case C stated, ‘We had to move
towards output- or outcome-based contracts, because it was a direct request from two of our
largest customers … this did play in our favour later, as we didn’t need to involve in engaging
or persuading the customers for such offerings.’
Technology push refers to the external context factors about digital technologies that affect the
progression. A good example took place in Case F. This firm became aware of technology that
could record how its products (commercial trucks) were being used (e.g., driven by operators)
and could transmit this data back to the operating company (logistics provider). Such data
improved the operators’ visibility of drivers’ actions, which subsequently led to a moderation
of drivers’ behaviour through the use of incentives and training. By bundling this with other
services, Case F was then able to develop an advanced services contract based around payment
for cargo moved rather than based on asset ownership. In this regard, the CFO of Case F stated:
The technology change brought about a new realisation that we could do more. It was no
longer enough for us to say this is the product, this is the component, these are the features
and the benefits, and we had to start proving the performance. We then had to move towards
taking care of the total cost of operation rather than cost of the asset.
Value network positioning refers to the external context factors about the value network
structure that affect the progression. We found diverse examples in the cases. In Cases F and
N, the distributors were observed to restrict access to customers, field service facilities and
improvements in performance to such an extent that they were acquired. Case I failed to
progress beyond the Engagement stage because the distributor inhibited customer interaction,
which the management of Case I failed to navigate. Somewhat similar situations occurred
around the access to remote sensing technologies, as illustrated by Case F, which for some time
wrestled with the decision to acquire a technology vendor in order to increase access to and
control of information about truck fleets. All these cases provide evidence supporting the

28
significant influence of positioning in the value network that delivers dependable access to both
customers and suppliers.
Organisational readiness refers to the internal context factors about the organisation that affect
whether or not the process starts. Particularly evident in the cases was the effect of the basic
reliability and performance of the manufacturer’s existing products. For example, Cases A, F,
and G all indicated that their product platforms were entirely reliable, so that their interest in
advanced services stemmed, in part, from product reliability and performance that were no
longer differentiators. The CEO of Case F stated: ‘Unless you manufacture a reliable asset,
you will have no place in the advanced services space … we build a reliable truck, so we can
provide a platform of services.’ In contrast, Case I was unable to reach an acceptable pace in
its transformation journey because its products were not sufficiently reliable to form a platform
for advanced services. The Service Director of the company said:
We cannot start adding services to a range of our engines yet, because we’re still testing those
engines and improving their efficiency. Unless we are convinced about the reliability of our
product, I’m not convinced about getting any customer on board with advanced services.
Organisational commitment refers to the common internal factors that act across all stages and
focuses on the key capabilities that enable or inhibit the progression. Organisational
commitment has been widely acknowledged as a key success factor for any change efforts
(Kotter and Cohen, 2002, Burnes, 2004). Case H, for instance, progressed relatively quickly
through the Exploration and Engagement stages because it had the support of the management
board. In contrast, Case G failed to move through the Engagement stage because it lacked
internal support. The Chief Innovation Officer of Case A said of this issue:
One of the principal factors which has been influencing our transformation journey is the
commitment from the people – not only the leadership and senior people but also those who
are actively involved in the effort. Getting organisational buy-in is a real challenge; I had to
go around lighting lots of little bush fires.
In Case A, organisational commitment to advanced services was enhanced when a principal
competitor acquired a network of service providers in South America, which caused anxiety
amongst the senior management of the case company. The reaction was to significantly
increase investment in its own advanced services programme.
Analysis of the principal factors affecting progression through the transformation process
provides a response to the second research question as follows:

29
Proposition 2: In the transformation of a manufacturer to servitize and compete through
advanced services, progress through the transformation process will be principally affected
by (i) the extent of customer pull, (ii) the strength of technology push, (iii) the structure of
the value network positioning, (iv) organisational readiness, and (v) organisational
commitment.
4.3 Nature of the organisational change process (RQ3)
After having established the existence of stages and identified the contextual factors that
significantly influenced progression, we addressed the nature of the transformation process.
Specifically, we sought to determine whether the progression would be relatively linear or,
instead, there would be reiterations and regression. Would there be consistency of decisions
and actions within the stages? To find this out, we drew on the previously analysed patterns,
as well as the detailed analysis of the dynamics of change within the cases, based on the rich
qualitative data from the interviews.
Table 4 showed that all the firms seemed to follow the same sequence of four stages and there
is no evidence that stages are skipped. Moreover, the individual case timelines (see Figure 2
for an example) showed that the events/actions associated with each stage were clustered
around well-delimited time periods. Although in some cases there was some time overlap of
events belonging to different stages, this overlap was short and confined to the transition period
between stages. We also did not find evidence of actions/events belonging to the previous stage
beyond the short transition period. Thus, at an aggregated level, the process appears to be
structured and predominantly unidirectional.
However, the qualitative analysis of the dynamics of change also revealed that, within stages,
there were sub-processes which were organic, unstructured and iterative. By looking at the
transition periods, we also found evidence of tipping points between stages. These are triggered
when the case for support is sufficiently strong, whether in terms of personal conviction or
organisational permission, so that consent is achieved to move on to the following
transformation stage. Companies would switch from Exploration to Engagement only when
senior management became confident that a viable business opportunity existed; from
Engagement to Expansion only when the potential of advanced services was accepted within
the organisation; from Expansion to Exploitation only when significant value was
demonstrated within the organisation. As illustrated by Cases G, I, L and M which did not
move beyond the Engagement stage, not all companies had a sufficiently strong case to

30
overcome the tipping points. Within the stages, multiple reiterations of decisions and actions
took place until such tipping conditions prevail – that the transformation process ‘tips’ and
moves on to the following stage. In the case studies, once the process had moved on to a new
stage, it did not return to the preceding stage unless some form of relatively catastrophic change
took place within the business. Case J illustrated this: the Service Director and Technical
Director both described (independently) how they were experimenting with advanced service
offerings (Engagement stage), but the circumstance of a senior board member’s bereavement
resulted in the loss of a major supporter. Subsequent staff changes ultimately resulted in the
team being disbanded, the service strategy abandoned, and both the Service Director and
Technical Director leaving the organisation.
The unstructured nature of the sub-processes was strongly influenced by the confluence of
different contextual factors (see Table 5), which affected the detailed activities carried out by
the firms. Case B, for example, was initially pulled by its customers into delivering advanced
services. The strength of this pull was such that it affected the activities with which it engaged
– for instance, it was not necessary to scan and analyse the market sector to identify relevant
customers. Rather, the challenges centred more on developing the organisational conviction to
take this opportunity, along with putting in place technologies to enable delivery of its
advanced services. The situation for Case F, as another example, was different. By his nature,
the company CEO was inquisitive about technology and how it might be exploited. He was
introduced to one of the leading telematics providers, and the two companies collaborated
closely to experiment on ways in which technology systems might enable Case F to develop
and deliver advanced services. Case F experimented with, for example, having its own rental
fleet to develop a proposition that could then be taken to market. Unlike Case B, it was
necessary for Case F to scan, identify and engage customers. However, where Case B had to
formally engage in joint ventures and acquisitions to enhance its technological capabilities and
create its engine health management systems, Case F had implicitly moved through many of
these decisions. Case A’s initial driver was on of the senior personnel in the innovation team
that were exploring ways to inspire growth, and came to recognise that business model
innovation around advanced services could provide a possible route. Case A’s interest was
influenced by the growing attention to services by its key competitors. Consequently, it had to
engage in a range of activities, from developing and experimenting with customer value
propositions through to deciding on relationships with technology suppliers. However, Case A

31
came to the process with a relatively higher level of organisational engagement and a more
structured methodology for innovating the propositions.
This analysis of the nature of the organisational change process leads to the proposal:
Proposition 3: In the transformation of a manufacturer to servitize and compete through
advanced services, the progression from one macro-stage to the next appears as structured
and predominantly unidirectional, but within these are sub-processes which are
characteristically organic, unstructured and iterative, and so the whole process can be
characterised as a business growth model with multiple tipping points.
5. DISCUSSION AND DEVELOPMENT OF THE MODEL
This study has focused on the servitization of manufacturing firms and the organisational
transformation such firms undergo in order to offer complex and sophisticated services at scale.
We have revealed insights into (i) the rationalisation of this process into stages or steps, (ii) the
contextual factors (what the situation was) which interplay on this process, and (iii) the change
process (how change occurred) and the theory which describes this. We now discuss the
formation of a theoretical model and contrast this research with other contemporary studies in
the field.
5.1 Formation of the servitization progression model
Our findings and experiences from executing this study provide the basis for a theoretical
model which explains how manufacturers progress through transformation processes when
they servitize to compete through advanced services. Drawing together the propositions above
enables the formation of such a model, and we refer to this as the servitization progression
model (see Figure 3).
The servitization progression model explains how the servitization journey unfolds through
four distinctive stages of organisational maturity, in accordance with five sets of internal and
external forces. At a macro-level, progression from stage to stage appears linear and
unidirectional; yet, within each stage, activities to progress servitization are organic, intuitive
and repetitive. Progress from one macro-level stage to the next is punctuated by tipping points,
which are only overcome once the activities of the preceding stage demonstrate sufficient value
that the organisation consents to progression to the following stage. So significant are these

32
tipping points that progression is not guaranteed, and under certain conditions the servitization
journey may stall or even fail entirely. Overall, this process can be characterised as a business
growth model.
The rate of progression is determined by five sets of forces. While organisational readiness
seems to be present only in the first two stages, the other forces are present across the four
stages. It is helpful to reflect how these forces typically interplay on the process. For instance,
transformation only effectively begins if there is sufficient organisational readiness (i.e. reliable
products, robust processes, etc.). Then the progression is significantly affected by the
prevailing organisational commitment (i.e. management buy-in, resource availability,
awareness of competitors, etc.). Working around these internal forces are the external forces of
customer pull (i.e. customers requesting services, strong relationships, etc.), technology push
(i.e. the availability of and access to digital technologies, etc.), and the value network
positioning (i.e. relationships with distributors, dealers and vendors). These five forces
interplay and collectively determine progress.
The servitization progression model explains the experience of practitioners within
manufacturing firms typically in the following way. At inception, the process is triggered when
one or more practitioners within the host organisation become aware of the general concepts
of servitization and advanced services, and in accordance with the extent of their organisational
commitment, they begin with Exploration and reflecting upon the concept. Then, if there is
sufficient organisational readiness (and no immediate blocks apparent from other forces), they
seek managerial consent to move on to the stage of Engagement. In Engagement, they search
for evidence of customer demand (customer pull), and/or test the potential of technologies
(technology push), and if suitable conditions prevail, they move to pilot and experiment with
new advanced service offerings. If the outcomes of these are positive, these help to demonstrate
the value of servitization to the organisation and progression takes place. However, this is
inhibited if, for instance, the host organisation struggles to engage customers because they work
through dealerships and distributors (value network). If the outcome of Exploration is positive,
the organisation moves to Expansion. Pilots are translated into commercial offerings and there
is a general increase in the scale and speed at which advanced services are innovated and
implemented. Then, if expansion is successful, attention switches to Exploitation. In
Exploitation, the organisation continues to develop new offerings and scale these, but also
invests in initiatives to improve the reliability and efficiency of the delivery of services at scale.

33
Finally, it is important to stress the scope of this study (see Section 2) as this bounds the validity
of the model we propose. Primarily, this study has focused on manufacturing firms undergoing
servitization (we have purposely excluded deservitization) and to describe the transformation
process these firms have followed. This study has not considered the content (what was
changed or what should be changed) of servitization, where servitization has been taken to be
indicated through the sophistication of services offered (see Baines et al., 2009; 2017).
5.2 Comparisons with contemporary servitization research
The first finding from this study is that at an aggregated level the process of organisational
change through servitization can be explained as four macro-stages: Exploration, Engagement,
Expansion and Exploitation. This is largely consistent with the work of Lütjen et al. (2017)
who identify the three steps of (i) service initiation, (ii) service anchoring and (iii) service
extension, and these align with the Exploration, Engagement and Expansion stages. In the
study described here, Exploitation is teased out as an additional stage, and this is attributed to
our particular focus on servitization towards advanced services, and observing that some cases
(e.g., Case B) have largely absorbed business improvement activities typical of this stage.
There are more striking differences to the work of Martinez et al. (2017), who identify seven
steps, along with limited commonality and considerable iterations. This difference is
explainable by the different level of aggregation adopted in the study, and which is consistent
with that suggested by Scott and Bruce (1987). In this way, our first finding emphasises the
value of a higher level of aggregation (as per Lütjen et al. (2017)) for rationalising the
servitization process as a manageable concept.
The second finding is that progression both between and within these macro-stages is
significantly influenced by contextual factors. These can be grouped into five categories
relating to customer pull, technology push, value network positioning, organisational readiness,
and organisational commitment. It has been known for some time that contextual factors are
central to shaping organisational transformation and progress towards servitization (Finne et
al., 2013, Cusumano et al., 2015). Indeed, various works have looked at the barriers to
servitization, particularly in terms of content (what have manufacturers sought to change?)
(i.e., Baines and Shi, 2015). However, by establishing a holistic set of factors and categorising
these as key influencers in the process of servitization, this paper provides the foundation to

34
delve deeper into the factors in each category and their influence on detailed decisions within
the process.
The third finding is that, while progression from one macro-stage to the next appears as
structured and predominantly unidirectional, within these are sub-processes which are
characteristically organic, unstructured and iterative. This reconciles the notions that: (i)
servitization is a unidirectional and linear shift from products to product–service offerings
(Turunen and Finne, 2014), and that (ii) the servitization process is neither logical nor
structured (Martinez et al., 2017). In their work Martinez et al., describe how they observed
that ‘the chronological order of steps differs from journey to journey’. Likewise, Kowalkowski
et al. (2017b:15) suggest evolutionary stages and ‘tentative steps of trial and error’. Yet, the
more general literature on organisational change and innovation demonstrates that process
stages, iterations and key decision points can be approximately organised and ordered (see
Section 2.3). Our study builds on this understanding and demonstrates that both sets of
characteristics can be exhibited, depending on the level of aggregation at which the process is
viewed (i.e. at a macro-level the process stages appear as a progression; yet the processes within
these stages are unstructured and iterative). This is aligned with the business growth model
developed by Scott and Bruce (1987) that comprises of multiple crises or tipping points, and
helps to explain how the process of organisational change unfolds as a manufacturer undertakes
the servitization journey.

35
Figure 3. The servitization progression model
Expansion
Increasing the scale
and speed at which
advanced services
are innovated and
implemented, until
significant value is
demonstrated within
the organisation.
Exploitation
Seeking to optimise
innovation and
delivery of an
advanced services
portfolio, unless
business is adversely
disrupted.
Engagement
Seeking to evaluate
and demonstrate
advanced services,
until the potential is
accepted within the
organisation.
Exploration
Searching and
finding out about the
concept and the
implications of
competing through
advanced services,
until the organisation
is confident that the
opportunity exists.
Organisational Commitment
Common internal factors that act across all stages
Customer Pull
External context factors about the market environment that affect progression
Organisational Readiness
Internal context factors about the organisation that affect Exploration and Engagement Stages
Value Network Positioning
External context factors about value network structure that affect progression
Technology Push
External context factors about digital technologies that affect progression
Consent for
Engagement
Consent for
Expansion
Consent for
Exploitation
Consent to
initiate the
journey

36
6. CONCLUSIONS
The principal contribution of this study is a series of propositions, represented collectively as
the servitization progression model, which describes the transformation process that takes
place as a product-centric manufacturer servitizes to compete through advanced services. This
model shows that the transformation process comprises four principal stages of organisational
maturity, through which the manufacturer proceeds according to the pressures of five principal
forces. This contribution has both theoretical and practical implications.
6.1 Theoretical implications
A recent review by Raddats et al. (2019) emphasises that there are still some fundamental
aspects of servitization that warrant further research. Primarily, this paper answers the call for
further research on the process and stages of organisational transformation towards
servitization (Martinez et al., 2017), along with addressing the limited attention given to
contextual factors (Baines et al., 2017). It establishes that: (i) the process of organisational
change through servitization can be explained as the four macro-stages of Exploration,
Engagement, Expansion and Exploitation, (ii) progression both between and within these
macro-stages is significantly influenced by contextual factors, which can be grouped into five
categories relating to markets, technology, organisational readiness, organisational
commitment and the value network of the host business, and (iii) progression from one macro-
stage to the next appears as structured and predominantly unidirectional, punctuated by
multiple tipping points; but within these stages are sub-processes that are characteristically
organic, unstructured and iterative. The whole process can be characterised as a business
growth model.
This study also (i) draws a distinction between the stages of the transformation process and the
forces that could significantly influence progression, and (ii) focuses clinically on the process
manufacturers have followed and avoiding intertwining a conversation about content. While
our study largely builds on and develops insights into the transformation process, it also
expands confidence because of the range and depth of organisations we have studied. Earlier
studies of researchers such as Martinez et al. (2017) and Lütjen et al. (2017) have been crucial
to forming new ideas around the structure of the transformation process, and our work provides

37
a timely complement while building confidence through the depth and breadth of organisations
studied.
6.2 Practical implications
Servitization can involve a raft of challenges for those executives from a production-centric
background, especially for those faced with the task of evaluating and potentially implementing
this concept within their organisation. This study has shown that a servitization programme
will typically unfold through four stages of organisational change (exploration, engagement,
expansion and exploitation) in accordance with a range of contextual factors, in which the
factors and stages will interplay, and this will result in an iterative process with critical points
where progress can stall.
Executives should find it particularly helpful to understand the characteristics of each stage
along with those factors that are key to success. Figure 2 and Table 5 are helpful to illustrate
typical activities in each stage and the associated contextual factors. On the basis of such data,
we surmise that in the early exploration stage of a programme, executive sponsorship is likely
to have the most influence on progress (i.e. Case H rapidly progressed because a board director
was an advocate of the programme). Following this, engagement will focus on demonstrating
the opportunity of servitization and the piloting of innovative customer value propositions.
Most helpful at this stage is the use of in-depth (and ideally independent) customer analysis
using empathising techniques and structured experimentation with new service offerings at
carefully chosen customer sites (i.e. Case A applied these techniques and rapidly progressed
through this stage, while Case G developed an offering largely based on assumptions of
customer need and still fails to gain traction). The subsequent Expansion stage will be
characterised by increasing tensions between the support and growth of the new service
offering(s) and the established (production-centric) business model, and this is likely to result
in turbulence around people, their priorities and structures (i.e. Case A experienced such
upheaval that the executive responsible for the initial focus on services was retired from the
organisation but, after a short period of tension, he was eventually replaced by an equally strong
advocate of services). In the relatively mature stage of Exploitation, the focus will be
characterised by initiatives to improve delivery efficiency while continuing to innovate
advanced services (i.e. Case B is entirely focused on these priorities).

38
The characteristics and priorities of an organisation at the earlier stage of maturity are very
different to the later, and these distinctions are very important to recognise when executing
popular management techniques such as benchmarking. The practitioner should also be
mindful that the time taken to progress through these four stages can be significant and may
take decades for a company embarking on a servitization programme to achieve the capabilities
typical of the later stages of maturity.
6.3 Limitations and opportunities for future work
This research, similar to any other case study-based research, has certain limitations, which
could provide opportunities for future work. These are summarised in the below three areas:
Development of a richer understanding of the process and content at each stage. During this
study it was observed that particular techniques and specific decisions were commonly
adopted. For instance, Cases A, H and K used a business model canvas (see Osterwalder et al.,
2005) as an analytical tool during the Engagement stage, while Cases B, F and M put in place
a dedicated business unit to support services during Expansion. Therefore, within the model
established here, it would be valuable to understand the variety, popularity and sequencing of
process and content within each stage. Also, it would be valuable to know the relationship
between these and the forces impacting the progression – perhaps in the first instance by
dealing with each stage separately and in-depth.
Investigate the linkages between context and process. A richer understanding of process and
context would then allow an investigation into whether there are distinct selections and
sequences of activities through the pathways. A likelihood exists that various pathways exist
and organisations may switch pathways as people and contextual circumstances change.
Development of a prescriptive transformation roadmap. As mentioned, this descriptive study
set out to lay the foundation for a more prescriptive process that practitioners can follow in
order to servitize their businesses and compete through advanced services. Future research
should explore links between different aspects of our progression model (e.g., the four macro-
stages, the five forces and their interplay) and servitization journey outcome measures, such as
the rate of progression along the journey or the efficiency and effectiveness with which
advanced services are provided. Rationalising this knowledge into a management aid is a
logical next step, and yet caution will be required as the multitude of variables could easily
result in a process that is overly complex and unworkable. As a recommendation for future

39
work, an intermediate step would be to use this model, in the first instance, to audit existing
servitization initiatives, and in doing so, to better understand how to apply this thinking in
practice.

40
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