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Abstract

For over three decades now, several product companies around the world have been undertaking servitization paths. They have been devoting growing and substantial efforts to expand their service business. Expanding the service business in addition to their traditional core product business secures long-term growth and strengthens competitive advantages in business-to-business marketplaces. Recently, service business expansion has taken up many of the new digital technologies offered through the digital transformation. Thus, the servitization literature has progressed toward a dialogue on digital servitization . Against this background, the present article introduces the reader to this special issue. It first recalls key aspects of the emerging digital servitization discussion, and then depicts, through illustrative case studies, the growth paths utilized by industrial product companies when they take advantage of the digital servitization process. After discussing how the articles included in this special issue advance the literature, the article develops a number of directions for future research on digital servitization.

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... These advanced services represent essential building blocks for complex business models and industrial product-service systems (IPSS), such as operator or pay per x models [6]. The required changes in context of so-called digital servitization [2] pose major challenges for many manufacturers, leading to service and digitalization paradoxes that can be observed [7]. The service paradox describes, that "it appears more difficult for firms to make incremental profits by adding services than might be expected" [8]. ...
... The service paradox describes, that "it appears more difficult for firms to make incremental profits by adding services than might be expected" [8]. The digital paradox also indicates, that the "investment to procure and develop digital assets have rarely been paid off yet" [7]. Overall, it can be stated that the development of IPSS, reflecting stages of digital servitization [6], is fraught with various pitfalls linked to a lack of service perspective. ...
... Baines and Lightfoot describe servitization as "the process of transforming manufacturers to compete through services integrated with their products" [20]. In this context, digitalization allows "new ways of value creation" [7]. Therefore it is an important enabler for advanced and service-oriented value propositions of manufacturers, which describes "the convergence of servitization and digitalization" [7]. ...
Conference Paper
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The ongoing shift to solution-oriented business models and growing digitalization lead to an increasing importance of services in manufacturing industry. Machine manufacturers in particular struggle to grasp the extent of transformational impact enabled or required by service developments. This is due to a narrow perspective on specific service characteristics, but not on the entire service process. Therefore, a service-dominant perspective is essential in the value creation of manufacturers, placing relevant service phases in the foreground. However, the process-related character of services is rarely considered in the literature. For this purpose, this study provides a taxonomy that classifies services based on phases. In addition to a systematic literature analysis, this study builds on practical insights by conducting eight expert interviews. The applicability and usefulness of the taxonomy is then demonstrated through exemplary application based on a case study, enabling practitioners to adopt a phase-oriented perspective on digital servitization.
... Previous studies used flexibility to achieve organizational resilience by digital servitization process (Gebauer et al., 2021), Governance Mechanism (Awan et al., 2018), Sustainability in the SC (Zavala-Alc ıvar et al., 2020), Social Sustainability (Awan et al., 2018), response due to COVID-19 (Mokline and Ben Abdallah, 2021), strategic human resource management (Lengnick-Hall et al., 2011), SC for effective resilience (Agarwal et al., 2020), digital transformation (Klein and Todesco, 2021), organizational flexibility (Dubey et al., 2021), strategic business performance (Yousaf and Majid, 2018) and corporate decisionmaking . All these studies were not focused on Indian SMEs and further, the relationship of flexibility with organizational resilience was not established. ...
... Acceptance of digital tech assists enterprises in enhancing their data technical capabilities, arising in more effective resource planning (Mukherjee et al., 2021). Previous studies used digitalization for achieving organizational resilience in healthcare manufacturing firms (Zhang and Qi, 2021), and by different concepts like Digitalization Intertwine (Miceli et al., 2021), CSR practices (Bigot and Germon, 2021), Digital servitization in SMEs (Gebauer et al., 2021), and the COVID-19 and the responses of the SMEs (Klein and Todesco, 2021). The implementation of digitalization can help the firm predict the future's disruption in the present time (Zouari et al., 2021). ...
... It helps enhance the capacity of a firm's information processing, which ultimately helps decrease environmental uncertainty. Advanced information technologies like IoT, AI, blockchain technology, etc., can significantly help in gathering various data related to client needs and goods operating circumstances to predict the occurrence of external and internal disruptions related to the Factors impacting firm performance of MSMEs firm (Gebauer et al., 2021). Digitalization helps the decision-makers to take a prompt decision essential for the adoption of the change in the marketplace in a continuous way. ...
Article
Purpose The micro, small and medium scale enterprises (MSMEs) faced various challenges in the ongoing COVID-19 pandemic, making it challenging to remain competitive and survive in the market. This research develops a model for MSMEs to cope with the current pandemic's operational and supply chain disruptions and similar circumstances. Design/methodology/approach The exhaustive literature review helped in identifying the constructs, their items and five hypotheses are developed. The responses were collected from the experts working in MSMEs. Total 311 valid responses were received, and the structural equation modeling (SEM) approach was used for testing and validating the proposed model. Findings Critical constructs identified for the study are-flexibility (FLE), collaboration (COL), risk management culture (RMC) and digitalization (DIG). The statistical analysis indicated that the four latent variables, flexibility, digitalization, risk management culture and collaboration, contribute significantly to the firm performance of MSMEs. Organizational resilience (ORS) mediates the effects of all the four latent variables on firm performance (FP) of MSMEs. Practical implications The current study's findings will be fruitful for the manufacturing MSMEs and other firms in developing countries. It will enable them to identify the practices that significantly help in achieving the firm performance. Originality/value The previous researches have not considered the effect of “organizational resilience” on the “firm performance” of MSMEs. This study attempts to fill this gap.
... Recently published articles have advocated for more consideration of the digital perspective (Lenka et al., 2017;Hasselblatt et al., 2018;Huikkola et al., 2020) and for viewing service-offering organizations as systems embedded in higher-order networks or systems (Jovanovic et al., 2019;Lütjen et al., 2019;Raddats et al., 2019). Still, research on digital servitization, especially in the business-to-business context, is in its infancy (Frank et al., 2019b;Kohtamäki et al., 2019;Paschou et al., 2020;Gebauer et al., 2021). ...
... Firstly, we contribute to the recent research stream on digital servitization. Since research on digital servitization is still limited (Frank et al., 2019a;Kohtamäki et al., 2019;Paschou et al., 2020;Gebauer et al., 2021), this article provides exploratory research based on case studies and investigates capabilities of digital servitization. Secondly, the study uses a socio-technical systems perspective to understand digital servitization. ...
... The literature on digital servitization is still nascent (Frank et al., 2019b;Kohtamäki et al., 2019;Paschou et al., 2020;Gebauer et al., 2021), especially regarding social and technological aspects (Liao et al., 2017). As such, this article intends to explore the capabilities that must be built at the enterprise level during digital servitization and the applicability of the socio-technical systems theory as a structuring framework for capabilities of digital servitization. ...
Article
Full-text available
Driven by pressures for sustainable development and disruptions such as the COVID-19 pandemic, manufacturing companies in the 21st century are affected by two intertwined trends: Industry 4.0 and servitization. Digital servitization, which represents the transition from providing products to offering smart product-service systems, is currently seen as a black box by companies confronting them with major challenges. Current literature has not yet investigated which capabilities are required for the development and provision of smart PSSs. To address this gap, an exploratory multiple case study was performed using semi-structured interviews with 18 representatives of four manufacturing companies and six representatives of companies in a supporting role. A socio-technical systems perspective was adopted to cover the interconnectedness and complementarity of internal and external elements relevant for providing a smart PSS. The study identified 46 capabilities of digital servitization to offer and perform smart PSSs and systemically classified these within the dimensions of the socio-technical systems theory, thus providing companies with numerous insights into successful digital servitization. The results contribute to the practical and academic understanding of digital servitization by outlining capabilities to offer and perform smart PSSs and providing support for the use of socio-technical systems theory to frame these capabilities systematically.
... Empresas de manufatura estão sempre atualizando suas propostas de valor para satisfazer seus clientes (RADDATS et al., 2019). Essas propostas vêm sendo influenciadas pela ênfase em serviços (servitização), pelos investimentos em tecnologias digitais e pelas mudanças nos modelos de negócio, ou seja, essas empresas estão utilizando de meios digitais para adicionar serviços aos seus portfólios (GEBAUER et al., 2020;SJÖDIN et al., 2020). O conceito que 2 destaca da convergência entre a digitalização e a servitização, é conhecido como servitização digital (SD) (GEBAUER et al., 2020;KOHTAMÄKI et al., 2020). ...
... Essas propostas vêm sendo influenciadas pela ênfase em serviços (servitização), pelos investimentos em tecnologias digitais e pelas mudanças nos modelos de negócio, ou seja, essas empresas estão utilizando de meios digitais para adicionar serviços aos seus portfólios (GEBAUER et al., 2020;SJÖDIN et al., 2020). O conceito que 2 destaca da convergência entre a digitalização e a servitização, é conhecido como servitização digital (SD) (GEBAUER et al., 2020;KOHTAMÄKI et al., 2020). ...
... Muitos estudos (VENDRELL-HERRERO et al., 2017;BAINES et al., 2020;TRONVOLL et al., 2020) têm sido desenvolvidos buscando entender e conceitualizar a SD, porém, ainda faltam estudos sobre como as empresas de manufatura podem se tornar digitalmente servitizadas (KOHTAMÄKI et al., 2019;SKYLAR et al., 2019;TRONVOLL et al., 2020). A implementação da SD é um fenômeno complexo que exige grande esforço de transformação das empresas, não só em suas novas propostas de valor, mas em toda sua estrutura organizacional e modelos de negócios (VENDRELL-HERRERO et al., 2017;GEBAUER et al., 2020). Visando esta lacuna na literatura, este estudo parte do seguinte problema de pesquisa: Qual o processo de transformação organizacional seguido por uma empresa de manufatura para alcançar a servitização digital? ...
... As explained at the beginning, researchers in the servitization literature assume that the share of services in companies' portfolio of offerings will continue to increase. An initial matrix illustrating the individual growth paths, that companies can follow, has been described by Gebauer et al. (2020 a). This matrix [as shown in Figure 2]., where there are two main movements in this matrix. ...
... This matrix [as shown in Figure 2]., where there are two main movements in this matrix. Movement along the horizontal axis indicates that companies are increasingly generating revenue with traditional services, while movement along the vertical axis implies revenue growth through digital offerings (Gebauer et al., 2020 a). However, although these considerations are already being made and implemented in companies, there are signs that companies are struggling to achieve the expected revenue growth. ...
... However, although these considerations are already being made and implemented in companies, there are signs that companies are struggling to achieve the expected revenue growth. This phenomenon is also described as the digital paradox (Gebauer et al., 2020 a;Wortmann et al., 2019), because although high investments are made in the expansion of digital value creation and offerings for customers, economic success often fails to materialize. Gebauer et al. (2020 a) present possible reasons here in their work, which they refer to as barriers within a BM. ...
Conference Paper
The Internet of Things (IoT) is enabling new business opportunities for companies in various B2B environments. Many companies are investing in developing data-driven business models around IoT platforms. However, there is still little systematic research on the elements and patterns of these business models. Based on an exploratory study in the energy industry, this paper examines patterns and elements of business models in the IoT platform context. Furthermore, based on a qualitative study, IoT platform differences and similarities of companies at different position in the value chain are considered.
... Manufacturers such as Rolls-Royce, Caterpillar, ABB, Siemens, IBM, Cisco, and other companies, particularly from developed, often Western economies, have transformed their business models to compete by providing services rather than products alone (Baines, Bigdeli, Sousa, & Schroeder, 2020;Gebauer, Paiola, Saccani, & Rapaccini, 2020;Kohtamäki, Parida, Oghazi, Gebauer, & Baines, 2019;Rabetino, Harmsen, Kohtamäki, & Sihvonen, 2018). The focus on services started in the late 1980s based on the integration of products and services (Vandermerwe & Rada, 1988) to achieve mainly competitive and sustainable goals (Rabetino et al., 2018;Tukker, 2004). ...
... In the same vein, digitalization also stimulates the offering of smart products, digitally-enabled services, and digital services (Paschou, Rapaccini, Adrodegari, & Saccani, 2020;. Although servitization and digitalization can be implemented separately in product companies (Vendrell-Herrero, , they show great convergence (Frank et al., 2019;Gebauer et al., 2020). From this convergence, digital servitization (DS) emerged as a novel concept, referring to the use of digital technologies in the processes and offerings related to servitization (Paschou et al., 2020;Tronvoll et al., 2020;. ...
... New challenges arise when companies combine servitization and digitalization (Frank et al., 2019;Gebauer et al., 2020;Paschou et al., 2020). DS can push product companies to radically transform their business model, particularly of those interested in providing digitally enabled advanced services . ...
Article
Servitization and digitalization are two business model innovations that have affected product companies. From the convergence of these two trends, digital servitization emerged as a novel concept. Digital servitization pushes product companies to radically transform their business model, creating new challenges for its implementation. This paper aims to uncover how digitalization fundamentally transforms product companies in their transition towards services. Based on a systematic review of the literature, we analyze a sample of 180 articles published between 2005 and 2020 using both descriptive and content analysis techniques. Our review thereby offers both theoretical and managerial contributions. We descriptively analyze the evolution of the research field. Furthermore, we propose a new unified definition of digital servitization and discuss nine servitization dimensions where digitalization influences servitization—motivations; strategy; service offerings; structure; culture; resources and capabilities; processes; performance; and servitization ecosystems—leading to a new conceptual framework for digital servitization. Finally, we identify several directions for future digital servitization research.
... As a response to increased competition and decreased profit margins in the manufacturing sector, manufacturers have been increasingly supplementing products with value-added services so as to differentiate their products and simultaneously generate an additional revenue stream [1][2][3][4]. This trend of servitization, firstly identified by Vandermerwe and Rada in the late 1980s [5], has become a critical source of sustainability, contributing significantly to the long-term development of firms [6][7][8], a resource-efficient circular economy [9], and a healthy environment [10]. Following Baines et al., we refer to servitization in this paper as the innovation of an organization's capabilities and processes to shift from selling products to selling integrated products and services that deliver value in use [4]. ...
... Following Baines et al., we refer to servitization in this paper as the innovation of an organization's capabilities and processes to shift from selling products to selling integrated products and services that deliver value in use [4]. The purported benefits of this innovation, such as the enhanced value of physical products, increased pricing power, improved customer loyalty, and higher-value business potential [4,7,8,11,12], have motivated many manufacturers, not only large firms, but also small-and medium-sized enterprises, to reorient themselves toward services [13,14]. ...
... Thus, they are a suitable focus for research in the servitization context. For example, the roles of front-end technological tools, such as IoT, cloud computing, big data, and data analytics, as well as the need for customer contacts in service-business expansions, have been noted and confirmed in recent research [8,23,48]. ...
Article
Full-text available
Servitization has significant implications for the sustainable development of manufacturing, the economy, and the environment. However, it does not always produce returns as the firms expect, which may discourage them from engaging in this transition. In this study, we examine the facilitating effects of two dimensions of strategic orientation (i.e., technology and market orientation) on two types of servitization (i.e., basic and advanced service provision), and further investigate the performance impacts of these servitization types contingent on firm size. By conducting an empirical study, using survey data comprising 210 samples, we confirm that both technology and market orientation are positively related to basic and advanced service provision. Moreover, while they have equal effects on basic services, market orientation is more important than technology orientation for providing advanced services. We also find that, for basic services, these two strategic orientations function independently, whereas they reinforce each other in the provision of advanced services. Finally, the relationship between servitization and firm performance is contingent on the size of the firm. Our results show that small firms can benefit from providing basic services, rather than advanced services, while only advanced services can improve the performance of large firms further.
... The rapid development of digital technologies is currently promoting significant changes in products, services, innovation processes, business models, and the very nature of business activities in industrial ecosystems Gebauer et al., 2021;Iansiti & Lakhani, 2020;Naik et al., 2020;Sjödin et al., 2020;. Industrial manufacturers are responding to these opportunities by increasingly engaging in digital servitization: the "transformation in processes, capabilities, and offerings within industrial firms and their associate ecosystems to progressively create, deliver, and capture increased service value arising from a broad range of enabling digital technologies such as the Internet of things (IoT), big data, artificial intelligence (AI), and cloud computing" . ...
... However, transforming ecosystems for digital servitization is a very complex undertaking for industrial manufacturers Gebauer et al., 2021;Jovanovic et al., 2021;Marcon et al., 2019;Qi et al., 2020). Manufacturing companies need to seek out suitable partners who can complement their competence gaps and make up for their shortcomings in the digital servitization process Kolagar et al., 2022;Krucken & Meroni, 2006;Marcon et al., 2019;Opresnik & Taisch, 2015). ...
... The literature on digital servitization has increasingly begun to recognize ecosystem transformation as a major precondition for digital servitization Gebauer et al., 2021;Kohtamäki et al., 2019;Naik et al., 2020;Sjödin et al., 2020;. In fact, a recent servitization literature review (Khanra et al., 2021) shows that the ecosystem is one of the emergentand increasingly predominantthemes in the research field. ...
Article
Full-text available
Manufacturing firms are increasingly seeking to capture the potential of digitalization by transforming towards digital servitization. Yet, most manufacturers struggle to realize the value through digital servitization because it requires a sustained focus on forming ecosystem partnerships. Digital servitization research has long recognized the importance of ecosystem tranformation but much of the existing discussion on this interlink is fragmented and understudied. Therefore, this study's purpose is to investigate how manufacturing firms engaged in digital servitization transform their ecosystems. To this end, we have examined the triggers, firm-level enablers, ecosystem phases and activities, and effects of ecosystem transformation in digital servitization. We provide a comprehensive review of the phases of ecosystem transformation including ecosystem formation, orchestration, and expansion as well as their associated activities. These findings have been consolidated into an integrative framework for ecosystem transformation and, based on this analysis, suggestions for future research are provided for digital servitization scholars.
... Servitized manufacturers offer a marketable mix of products and services that are capable of jointly fulfilling customer demand (Tukker, 2004;Zhang et al., 2017). Over the past decade, an increasing number of manufacturers around the world have begun to pursue servitization and expanded business by adding customer-oriented services to their existing product offerings (Qi et al., 2020;Gebauer et al., 2021). For example, the number of Chinese firms that have adopted servitization increased from less than 1% in 2007 (Neely, 2008) to 38% in 2018 (Mastrogiacomo et al., 2019). ...
... We conduct a longitudinal case study of a Chinese manufacturer that has implemented servitization since 2011 and has used various digital technologies to offer solutions and develop platforms (Ferdows et al., 2021). This study thus answers the call for more research on digital servitization in emerging economies (Gebauer et al., 2021;Jovanovic et al., 2021). Moreover, this work provides empirical evidence on the effects of platforms on servitization and the roles of network partners in the different stages of servitization, which extends the research scope involving servitization from that of a single-firm or dyadic relationship to that of a network (Paschou et al., 2020). ...
... Moreover, this work provides empirical evidence on the effects of platforms on servitization and the roles of network partners in the different stages of servitization, which extends the research scope involving servitization from that of a single-firm or dyadic relationship to that of a network (Paschou et al., 2020). The findings also enhance the current understanding of the roles of digital technologies in shaping the evolutionary path of manufacturers towards servitization stages and the interplay between servitization and platforms (Gebauer et al., 2021;Jovanovic et al., 2021). Furthermore, this study provides guidelines for manufacturers on how they can benefit from digital technologies to advance their servitization journey and avoid the servitization paradox (Tronvoll et al., 2020). ...
Article
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Purpose This paper aims to empirically explore the evolution of servitization and how platforms affect the transition between the stages of servitization. Design/methodology/approach The authors conducted an in-depth case study of a Chinese manufacturer (i.e. Haier) using a longitudinal design. Three rounds of data collection were conducted between 2014 and 2020. The authors carried out 50 semi-structured interviews and 11 workshops to collect data from senior and middle managers of Haier and its business partners. Findings The authors found that Haier’s servitization journey includes three stages (i.e. product-oriented solution, integrated solution and smart connected solutions) that evolve in the target of the services and the digital components of the solutions. Haier has also developed three types of platforms (i.e. service platform, supply chain platform and platform ecosystem) to support the implementation of servitization. The empirical evidence reveals that platforms can address the complexities that emerged when Haier implements the different stages of servitization as well as enable Haier to transition from one stage of servitization to the next. Originality/value This study enhances the current understanding of the evolution of servitization and the roles of digital technologies in the transition between the stages of servitization. It also provides empirical evidence regarding how the platform approach enables the development of servitization. By clarifying the interplay between servitization and platforms, this study provides guidelines for managers on how to develop platforms to both advance and benefit from servitization.
... There is a line of research focusing on digitalization and servitization within Industry 4.0. Frank et al. [66] study the connection between Industry 4.0 and servitization, presenting a conceptual framework that analyze the role of digitalization and servitization within the product-firm, while Gebauer et al. [67] discuss the paradox of firms that invest in digitalization and servitization but not earn the expected return. It happens when firms do not study the business model well and all its components, mainly the value proposition. ...
... It happens when firms do not study the business model well and all its components, mainly the value proposition. While digitalization and servitization combine digital and services capabilities to facilitate internal growth, the IoS covers the external growth, which is an important view that companies neglect while innovating their business models [67]. Coupled with CPS and IoT, IoS would be a business model proposal that is still being researched and developed to reach Industry 4.0 [35] (P7). ...
... Moreover, analyzing what the customers want and need becomes crucial to develop an IoS-based business model that meets the requirements for a best service delivery. Companies should offer services and solutions that more effectively address their customers' needs [67], always considering their data privacy and security to avoid creating management and governance problems. ...
Article
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The relevance of the Internet of Services (IoS) comes from the global reach of the Internet into everyone’s home and daily activities and from the move from a manufacturing-based economy to a service-based economy. The IoS is seen as a new ecosystem where service providers and consumers explore their business networks for service provision and consumption. The scientific literature refers to IoS as an important cornerstone for Industry 4.0 and Future Internet; thus, it becomes relevant to study how IoS interacts with business models. Nevertheless, there is a lack of clarity on such an intersection. Moreover, a systematic review of IoS-based business models is still missing. This paper aims to make a systematic review of IoS-based business models and their application fields. We included studies from Scopus and Web of Science databases, we excluded duplicated papers and short conference versions of the later full paper journal publications. Twenty-three different studies are presented, categorized in the sub-areas of IoS, and then by the fields of applications. The main finding highlights the opportunities of IoS applications in different fields, offering directions for future research on this new arena.
... In recent years, the convergence of the two phenomena of servitization and digitalization has attracted increasing interest from policymakers and academia [4,5]. That is, the tendency of firms to turn toward and expand their service-oriented businesses, on the one hand, and the advent of Industry 4.0 technologies, on the other, have redesigned how services are conceived and distributed [3]. ...
... Indeed, the advent of Industry 4.0 technologies is redesigning how services are conceived and distributed [3,9]. In recent years, the literature has been converging toward the concept of DS [4]. DS is the "development of new services and/or the improvement of existing ones through the use of digital technologies . . . to enable new (digital) business models, to find novel ways of (co)creating value, as well as to generate knowledge from data, improve the firm's operational and environmental performance and gain a competitive advantage" [13] (p. 284). ...
Article
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The B2B context has experienced a push toward digital servitization (DS), i.e., the development of services by means of digital technologies. There are three levels of DS: (1) product provision, (2) after-sale servicing, and (3) advanced services taking after-sales to the next level. At level 3, DS evolves from a product and service-oriented strategy to a service-centric one. The literature has acknowledged the changes provoked by levels 1 and 2 of DS. Yet, further changes at level 3 still have not been explored. This research aims to understand the impact of DS’s evolution after the DS setup, with an intra- and interorganizational focus. To reach this aim, the case of Beta, an Italian mechatronic manufacturer implementing IIoT-based DS, is analyzed. The adopted framework is the ‘developing’, ‘producing’, ‘using’ (DPU) framework, formulated within the industrial marketing and purchasing (IMP) approach. Results are summarized in three propositions, showing how: (1) DS complexity unfolds intra- and interorganizationally and is gradually embedded in the three settings of the framework; (2) integration of settings and resources becomes essential; and (3) processes of resource procurement, development, and integration allow the evolution toward a service platform. Theoretical and managerial implications are provided.
... Gebauer et al. [38] Digitalization and servitization 4 P20 ...
... Nailler et al. [40] outline six processes by which business models evolve, motivated by the causal mechanism of value anticipation/realization. Gebauer et al. [38] discuss how to increase flexibility by introducing digital servitization. ...
Article
Background: Software plays an essential role in enabling digital transformation via digital services added to traditional products or fully digital business offerings. This calls for a better understanding of the relationships between the dynamic nature of business models and their realization using software engineering practices. Aim: In this paper, we synthesize the implications of digitalization on business model flexibility for software-intensive companies based on an extensive literature survey and a longitudinal case study at Ericsson AB. We analyze how software-intensive companies can better synchronize business model changes with software development processes and organizations. Method: We synthesize six propositions based on the literature review and extensive industrial experience with a large software-intensive company working in the telecommunication domain. Conclusions: Our work is designed to facilitate the cross-disciplinary analysis of business model dynamics and business model flexibility by linking value, transaction, and organizational learning to business model change. We believe that software engineering tools and methods can play a crucial role in enabling more automated synchronization between technology and business model changes.
... Despite the increased complexity introduced by digital servitization, few studies address the associated tensions, especially at interorganizational levels. As noted by recent studies (Kohtamäki et al., 2019(Kohtamäki et al., , 2020Tronvoll et al., 2020;Gebauer et al., 2020), extant literature offers brief or implicit accounts of these tensions; Tronvoll et al. (2020) and Gebauer, Paiola, Saccani, and Rapaccini (2021) explicitly call for further research that can support more effective management of digital servitization initiatives. We respond by applying a paradox lens to capture the multiple viewpoints, values, beliefs, and strategies that account for tensions (Schad & Bansal, 2018). ...
... In a similar vein, the maritime case points toward the importance of remote monitoring, cloud, cyber security, big data, real-time connectivity, and platforms. However, considering advances in digitally supported products, further research should address unexplored opportunities for manufacturers (e.g., Gebauer et al., 2021;Svahn et al., 2017) and the roles of different actors in data-related processes (Zwitter, 2014) pertaining to digital servitization. For example, the rapid and ubiquitous rise of artificial intelligence (AI) warrants investigation of the associated tensions. ...
Article
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Two of the most disruptive changes in today's business markets are servitization and digitalization. Their increasing convergence into digital servitization leads to tensions both within and between organizations. The authors investigate such intra-and interorganizational tensions by applying a paradox theory lens. The study draws on 56 depth interviews and multiple site visits from two cases in the aerospace and maritime industries. Linked to the paradoxes of organizing, learning, belonging, and performing, eight tensions emerge from the findings. The intra-organizational tensions include digitally enabled control, digital upkeep, professional identity , and performance priorities. In turn, the interorganizational tensions comprise platform-based coopetition, information superabundance, organizational identity, and data utilization. For practitioners working with digital services, this study suggests an audit of tensions to inform continued formulations of a mitigation strategy. Highlights: • Explored eight intra- and inter-organizational tensions in digital servitization • Paradox theory lens: paradoxes of organizing, learning, belonging, and performing • Tensions in business networks reflect digital servitization’s highly networked nature • Digital native tensions are specific to digital (but not traditional) servitization • For managers, the tension audit shows each tension’s roots and response strategies
... The literature on digital servitization is in an emergent phase (Gebauer et al., 2021;Kohtam€ aki et al., 2020), and the SME perspective has received little coverage thus far (Peillon and Dubruc, 2019). We have identified three research gaps in the digital servitization and internationalization literature on industrial SMEs. ...
... Using these digital technologies, organizations seek to create value in their businesses and offer an enhanced customer experience. From this has emerged a new concept in the servitization literature called "digital servitization" (Coreynen et al., 2020;Gebauer et al., 2021;Paschou et al., 2020) where companies adapt to current technological developments by offering digitally enabled advanced services Ziaee Bigdeli et al., 2018). In a nutshell, the progression of offerings in digital servitization can be defined as the transition toward smart product-service-software systems that enable value creation and capture through monitoring, control, optimization, and autonomous function (Kohtam€ aki et al., 2019). ...
Article
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Purpose The purpose of this study is to understand how digital servitization enables the process of internationalization for industrial SMEs. Design/methodology/approach The present study has adopted an exploratory multiple case study, conducting a total of 40 interviews in a two-phased approach to data collection. The first phase consisted of exploratory interviews with twenty-six industrial SMEs connected to the manufacturing industry in Sweden and Finland. Then, six SMEs were selected in the second phase to participate in additional in-depth interviews. Findings First, this study identifies three gradual enabling phases concerned with the digital service maturity of SMEs consisting of digital awareness, digital service innovation and digital service mass customization. Second, the three interdependent phases of ecosystem knowledge synergy, ecosystem integration and ecosystem value co-creation were identified to improve ecosystem involvement. Finally, a process framework has been developed for SME internationalization consisting of a digital servitization innovation strategy, a digital servitization ecosystem strategy and a digital servitization scaling strategy. Originality/value The present research contributes to how digital servitization enables SME internationalization by demonstrating how the development of digital service offerings and ecosystem partnerships supports the internationalization process. This research extends the literature by proposing a process framework for the digital-servitization-enabled internationalization of SMEs. This process perspective provides a richer explanation of the complex interplay between servitization, digitalization and ecosystems choices, which supports the expansion into international markets.
... Indeed, IoT's potential to gather finegrained real-time data coming from increasingly affordable sensors and actuators embedded in objects and devices from all over the world (Atzori, Iera, & Morabito, 2010) is said to play a major role in offering advanced services. Many manufacturing companies today sell not only their tangible goods and related traditional pre-and after-sales services, but also digital products such as software and IoT-based digital services, whether wide-ranging as in the case of Siemens or more specialized as in the case of Caterpillar or John Deere (Gebauer, Paiola, Saccani, & Rapaccini, 2021;Leminen et al., 2020). For instance, Caterpillar has developed a standardized interface that collects daily data from the mines in which its machines, as well as those of other manufacturers, are working; on this basis, it is able to identify and provide solutions targeted at specific customer needs in order to improve operator's safety, equipment availability and site productivity (Leminen et al., 2020). ...
... This has led to the merge of these two streams of research converging under the name of digital servitization (Paschou et al., 2020) that has seen a strong increase in academics' and practitioners' attention in the last years (Favoretto et al., 2022;Gebauer et al., 2021;Kohtamäki et al., 2020;Kohtamäki, Rabetino, Einola, Parida, & Patel, 2021). At the core of this strand of studies is the awareness that only through the proper interplay between digitalization and servitization, i.e., digital servitization, companies can overcome the digitalization paradox, that occurs when their investment in digitalization is abundant, but they do not achieve the expected revenue enhancement (Gebauer, Fleisch, Lamprecht, & Wortmann, 2020). ...
Article
Industry 4.0 is dramatically affecting firms' strategies. In particular, technologies like the Internet of Things (IoT) are offering firms the possibility to manage product functions, remotely and globally, enabling the design of innovative business models. The aim of the article is to investigate how incumbent small and medium enterprises can manage the evolution of a new IoT-based business model in parallel with its extant one. A qualitative and longitudinal case study research has been conducted on two Italian firms involved in a process of IoT-driven business model innovation. The empirical evidence show that the process of business model innovation is incremental in terms of resources dedicated to the new business, with a fine tuning based on trial-and-error learning. During the phases of this process, namely inception, experimentation, and replication, the effective management of the interaction between the two business models with their dedicated resources and the customer-related capabilities play a crucial role.
... However, the intensified value co-creation processes between the back-end R&D unit and the front-end service network partner often create diverse challenges (Jaakkola and Hakanen, 2013;Chowdhury et al., 2016;Kohtamäki and Rajala, 2016;Sjödin et al., 2021). Such challenges may relate to conflicting business models (Gebauer et al., 2021;Hsuan et al., 2021), opportunistic behaviors (Sumo et al., 2016;Steinbach et al., 2018), role ambiguity (Rönnberg Sjödin et al., 2016), role conflicts, and power plays (Chowdhury et al., 2016). The literature currently lacks insights into the dyadic value co-creation challenges embedded in global service networks, limiting the possibility of fully understanding the reciprocal consequences of servitization in global markets (Raddats et al., 2019;Kamalaldin et al., 2020) as well as the antecedents of servitization failure (Valtakoski, 2017). ...
Article
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This study investigates how global manufacturers offer advanced services, such as outcome-based contracts, to global customers. Offering advanced services requires companies to engage in and manage win-win collaborations with a diverse set of service network partners. However, there is currently a lack of insights into the value co-creation challenges faced by manufacturers' R&D units and their service network partners. Equally, there is a pressing need for roles to be properly aligned when offering advanced services in global markets. Based on 34 exploratory interviews with respondents from two manufacturers and their six globally dispersed front-end service network partners, this study identifies diverse co-creation challenges related to the provision of advanced services in global markets. The results show that complex collaborations of this nature often do not lead to win-win relationships but rather to less understood win-lose or lose-win scenarios. Our proposed framework unpacks how to manage value co-creation challenges and establish win-win relationships through role alignment. This study's findings show that the successful provision of advanced services requires manufacturers to play the role of global service orchestra-tors and service network partners to act as global service integrators. Thus, role alignment provides greater latitude to establish a joint sphere of value co-creation for back-end and front-end actors. We conclude by discussing this paper's theoretical and practical contributions to the emerging literature on servitization in global markets and global service networks.
... • Digital servitization: The importance of digital servitization is rising in tandem with the availability of service business extensions using digital technologies (Gebauer, Paiola, Saccani, & Rapaccini, 2021;Raddats, Kowalkowski, Benedettini, Burton, & Gebauer, 2019). However, manufacturers are focusing too much on technology in their quest to drive service growth with digital servitization and, consequently, are often failing to attain the outcomes they desire (Tronvoll, Sklyar, Sörhammar, & Kowalkowski, 2020). ...
Article
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Manufacturing firms are increasingly adopting a strategy known as 'servitization' to add services to existing product-based offerings to stimulate additional revenue and growth. While the emerging research domain of servitization is mobilizing relevant knowledge across academic establishments, the present study aims to perform a comprehensive bibliometric analysis to organize the prior knowledge in this area, more importantly, highlights areas for future research. This study acknowledges important contributions from authors and organizations, as identified through analyses of citation chains and co-authorship networks. Next, a co-citation analysis of the prior literature is used to identify four main thematic areas relating to capability development, customer involvement, business models, and transformational challenges for servitization. Finally, the dynamic co-citation analysis technique reveals the development of these thematic areas. This study assumes importance in the extant literature by delivering valuable insights from the prior research on servitization and by providing guidance for future avenues of study.
... Whereas the digitalization literature emphasizes digital technology as an enabler to business model innovation at the organizational and ecosystem level Linde et al. 2021), the servitization literature concerns such change in business models for manufacturing firms moving from product to service dominant logic (Baines et al. 2009;Hyun and Kim 2021). Although digital technologies have been an essential ingredient of servitization from its conception, the two literature streams have only recently converged explicitly as digital servitization (Gebauer et al. 2021). ...
Article
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Transforming a traditional industry by adopting autonomous solutions is complex, generating paradoxical tensions on multiple aggregate levels. We undertake an in-depth case study of a leading maritime autonomous solutions provider and its ecosystem partners. We apply the paradox lens using thematic analysis. Our research contributes to the digital servitization literature by identifying six paradoxes inherent in the shift to autonomous solutions, nested in the micro, meso, and macro levels. We develop a multilevel framework of organizational paradoxes, delineating cascading effects of paradoxes across levels. We offer valuable insights for providers to integrate multilevel perspectives into the shift to autonomous solutions.
... Digitalization is driving product-oriented manufacturing companies to adopt, design and deliver new smart, connected innovative products and services that change the way they compete (Porter and Heppelmann, 2015;. A growing literature has been analyzing the role of digitalization in the servitization of manufacturing firms under the heading digital servitization (Coreynen et al., 2017;Kamalaldin et al., 2020;Kohtam€ aki et al., 2020a, b;Vendrell-Herrero and Wilson, 2017), which emphasizes the interplay between digitalization and servitization (Gebauer et al., 2021). To be specific, digital servitization can be defined as "The transition towards smart solutions (product-service-software systems) that enable value creation and capture through monitoring, control, optimization, and autonomous function. ...
Article
Purpose The present study sets out to understand how a manufacturing company in the maritime industry utilized creative design principles and developed service design routines to advance digital servitization (i.e. the transition to offering smart product-service-software systems–PSS) and realize subsequent positive growth outcomes. Design/methodology/approach We build upon a longitudinal single case of a marine solution provider. Using an action research approach, we collected data through in-depth interviews and informal conversations involving senior managers, project members and customer representatives over a three and a half-year period. In addition, secondary data such as documentary data, service design tools and visualization were utilized. Findings The inductive analysis highlights the underlining role of four service-design routines that drive creativity and an innovative approach to digital servitization transformation. More specifically, we identify (a) user insights through creative customer data acquisition, (b) smart PSS collaboration through co-creation across departments, (c) smart PSS ideation through creative forms of collaboration and (d) effective smart PSS delivery and commercialization through creative concept design as the drivers of the case company digital servitization transformation. Practical implications We encourage senior managers within large manufacturing companies to promote the development of service design routines as these promote the transformation process from being a product-centric to service-centric firm. The four service design routines are built on a set of service design sub-activities providing concrete actions that can be applied by senior managers to successfully develop and deliver smart PSS offerings and achieve growth outcomes. Originality/value This study contributes by integrating digital servitization and service design literatures. We illustrate how manufacturing firms can drive a transition to digital servitization through service design activities and routines development for smart PSS strategy implementation.
... Suppliers can replace traditional value creation (Weking et al., 2020) with customer-oriented, outcome-dependent, and performance-based digital solutions. This change is also understood as digital servitization, in which complex smart product-service systems appear as sales objects rather than the product alone (Baines et al. 2009(Baines et al. , 2017Gebauer et al., 2021;Raddats et al., 2019). This opens up new possibilities to the companies using the machines. ...
Article
The transition towards smart manufacturing is challenging for companies with a considerable installed base of legacy machines and equipment. In this regard, smart retrofitting has been introduced as a sustainable approach of transforming the current state of legacy equipment into smart and connected assets. By equipping the existing installed base with hardware and software as well as networking capability, smart retrofitting allows for new data-driven processes and business models. While we see a growing number of articles that focus on retrofitting in the context of smart manufacturing, there is still a lack of a uniform definition of smart retrofitting as well as a holistic understanding of its drivers, challenges, and benefits. Therefore, we conducted a systematic review of the retrofitting literature available through the online databases Scopus and Web of Science. We identified 23 particularly relevant academic articles for a detailed full-text analysis. In this full-text analysis, we searched for definitions of smart retrofitting and synthesized them into a novel definition. Furthermore, we inductively derived contextual drivers and challenges of smart retrofitting as well as retrofit benefits. This literature review provides an overview of the current body of knowledge on smart retrofitting. For academics, our findings show that current research on smart retrofitting focuses on new technologies and legacy systems but largely disregards transformational aspects regarding business models and servitization as well as sustainability aspects, although these deserve more attention in times of global climate challenges. For practitioners, we provide an overview of the drivers, challenges, and benefits that can guide their smart retrofitting initiatives.
... Servitization's adoption of digital technologies, software, and digital platforms has been labeled "digital servitization" (Kowalkowski et al., 2017a). Digital servitization describes the convergence between servitization and digitalization (Gebauer et al., 2020a); it represents a large-scale "transformation in processes, capabilities, and offerings within industrial firms and their associated ecosystems, to progressively create, deliver, and capture increased service value, arising from a broad range of enabling digital technologies" (Sjodin et al., 2020, pp. 479). ...
Article
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Purpose This study aims to enhance the theoretical foundations of servitization research by establishing a theoretical connection with complexity management. The authors develop a conceptual framework to describe complexity management mechanisms in servitization and digital platforms' specific role in allowing synergies between complexity reduction and absorption mechanisms. Design/methodology/approach A theory adaptation approach is used. Theory adaptation introduces new perspectives and conceptualization to the domain theory (servitization, with a focus on the role of digital platforms) by informing it with a method theory (complexity management). Findings This study provides four key contributions to the servitization literature: (1) connecting the servitization and complexity-management terminologies, (2) identifying and classifying complexity-management mechanisms in servitization, (3) conceptualizing digital platforms' role in servitization complexity management and (4) recognizing digital platforms' complexity-management synergies. Originality/value This study highlights that by using digital platforms in servitization and understanding the platform approach more thoroughly, companies can gain new capabilities and opportunities to manage and leverage complexity.
... Recent studies have emphasized the technological infrastructure for servitization and suggested that digital technologies were integral parts of servitization [13]. To cope with servitization, manufacturing firms have increasingly implemented digitalization to deliver services and to create more value for customers [40,41]. Digitalization is the transformation of business models as a result of a fundamental change to core internal procedures by adopting information and communication technologies [42]. ...
Article
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For healthcare manufacturing firms, creating a crisis-prepared product and service portfolio and operational processes is essential for their long-term prosperity. In this paper, we examine how healthcare manufacturing firms cope with the operational disruptions and opportunities associated with the COVID-19 pandemic. We highlight the central role of organizational resilience and examine whether servitization and digitalization can improve the organizational resilience of healthcare manufacturing firms. On the basis of the organizational information processing theory, we suggest that servitization and digitalization can improve the stability and flexibility of operations, which make healthcare manufacturing firms more resilient to the COVID-19 pandemic. The hypotheses were tested using survey data from 163 manufacturing firms located in China. The results indicate that both servitization and digitalization improve the organizational resilience of healthcare manufacturing firms, leading to higher firm growth during the COVID-19 pandemic. Moreover, organizational resilience mediates the impacts of servitization and digitalization on firm growth. Environmental dynamism strengthens the relationship between digitalization and organizational resilience. This study offers new insights for healthcare manufacturing firms to prepare for crisis events and achieve sustainable development in a highly competitive environment.
... An emerging stream of the literature has started to examine the interaction between servitization and digitalization (Baines et al., 2017). One group of studies has paid attention to the convergence of servitization and digitalization, which is regarded as a single strategy called digital servitization (Coreynen et al., 2020;Gebauer, Paiola, Saccani, & MarioRapaccini, 2020). Digital servitization can be conceptualized as a manufacturer's transformational process from a product-centric to service-centric logic through the use of digital technologies (Ardolino et al., 2018;Coreynen et al., 2017;Kohtamäki et al., 2020b;Kowalkowski, Gebauer, Kamp, & GlennParry, 2017;Tronvoll, Sklyar, Sörhammar, & Kowalkowski, 2020). ...
Article
Although both servitization and digitalization have been shown to contribute to a manufacturer's performance, how the two strategies interact in affecting firm performance has been largely under-investigated. By adopting the service-dominant logic, this study fills this gap in the literature by examining how two types of servitization-basic and advanced-interact with two types of digitalization-internal and external-in influencing the market performance of a manufacturer. We test our hypotheses using survey responses collected from 257 manufacturers in China. Interestingly, our results indicate both positive and negative interactions between servitization and digitalization interactions. Specifically, basic (advanced) servitization positively interacts with internal (external) digitalization but negatively interacts with external (internal) digitalization in affecting manufacturer market performance. In addition, we find that basic and advanced services reinforce each other's positive effects on a manufacturer's market performance, an interaction effect that we do not find for internal and external digitalization. By bridging the servitization and digitalization literature, this study reveals intriguing findings that can help manufacturers benefit from the simultaneous adoption of servitization and digitalization through the implementation of the best portfolio.
... In addition, the growing influence of digital technologies is raising customers' need for services that make use of them. To satisfy those customer needs and provide new ways of value creation (Baines et al. 2020;Gebauer et al. 2020), manufacturing companies are transitioning to providers of smart services. This transition is defined as digital servitization (Vendrell-Herrero et al. 2017), and innovative customer-oriented smart service business models complementing the product portfolio are the result (Baines et al. 2017). ...
Conference Paper
The past decades have seen a strategic change of mechanical engineering companies defined as digital servitization. The results are innovative customer-oriented smart service business models that complement the product portfolio. Developing and integrating innovative smart service business models is complex and implies different adjustments that companies at times have difficulties with. Research has reacted to this by providing guidance. Especially in the early stages of the smart service business model development, numerous contributions can be found. However, there seems to be a lack of research when it comes to the market entry of smart services and, in particular, how the performance of named services can be measured. This research-in-progress contributes to the research gap by addressing the question of which indicators are currently applied in big German mechanical engineering companies to measure the market performance of their smart services.
... utilities, platforms, software applications, etc.) and smart services (e.g. condition monitoring, notification, diagnostic, analytical reports, etc.) (Gebauer et al. 2020). Core to this smart product-service systems (smart PSS) (Pirola et al. 2020) are Cloud Computing, IoT technologies and Predictive Analytics (Ardolino et al, 2018). ...
Conference Paper
Purpose: this paper proposes a novel model to describe how data collected from smart connected products(SCP) should be managed to generate customer value through digitally-enabled advanced services (DEAS). Design/Methodology/Approach: literature integrative review and action research Findings: there are connections between the configuration of the service system designed to deliver DEAS, and the value (net benefits in terms of efficiency, efficacy and focus) that different customers expect. Originality/Value: the integration of literature on SCP, smart PSS, service science and sdl facilitates the understanding of mechanisms through which DEAS create customer value.
... While most of the literature on hybridization focuses on large manufacturing corporations (Gebauer, Paiola, Saccani, & Rapaccini, 2021), our research shows that much smaller firms sell integrated solutions too, and that a wide spectrum of industries are selling hybrid productservice bundles, including firms in retailing or construction. Related to this, we also find that the benefits of product-service bundling transcend industrial boundaries, and therefore product and service firms can benefit equally by offering complementarities. ...
Article
Drawing on the disciplines of operations management and international business theories, this paper evaluates the effect of bundling products and services on a firm’s export intensity. After surveying more than 4,000 German SMEs, we report several findings. First, bundling is a relatively rare activity, which is unevenly spread over sectors. Second, SMEs that bundle products and services are more productive than those selling products and services separately. Third, using regression analysis and matching techniques, we find that product–service bundling is strongly associated with higher levels of export intensity. Lastly, the competitiveness-enhancing effect of bundling goes beyond manufacturing, affecting non-manufacturing firms as well.
... Another avenue to understand our results deal with the digital servitization paradox. Gebauer et al. (2020) posit that manufacturing companies can invest in services and digital technologies without achieving positive returns. Contradictory results are found within the literature addressing this type of paradox. ...
Article
Purpose This study aims to validate a model of relationships between critical factors such as service strategy, culture-climate, leadership, customer involvement, technology strategy and service innovation (SI). Moreover, it investigates the impact of SI on a company’s performance and the moderating role of digitalization in the relationships between critical factors and SI. Design/methodology/approach Primary data were collected through a survey and partial least squares structural equation modeling was used to analyze the collected data and test the research hypotheses. Findings The results suggest positive associations of service strategy toward culture-climate, leadership, customer involvement and technology strategy in terms of significance and effect size. However, only two factors (e.g. customer involvement and technology strategy) positively influence SI, which affects financial and non-financial performance. Furthermore, digitalization does not strengthen the influence of four antecedents (i.e. culture-climate, leadership, customer involvement and technology strategy) in SI. Originality/value First, the study provides a comprehensive framework of SI critical factors and their impact on company performance. Second, it links servitization, SI and digitalization. Third, it tests the effects of digitalization.
... Merging the physical and digital worlds has emerged as an attractive subarea under the term digital servitization (e.g. Gebauer et al., 2021;Kohtam€ aki et al., 2019). While the term captures industry's focus and appetite on new digital business opportunities and models, we argue that servitization today is essentially all digital, driven or enabled by novel data and technological opportunitiesand has so been for several years. ...
... Digitalization is defined as "the use of digital technologies and digitized data to impact how work gets done, transform how customers and companies engage and interact, and create new digital revenue streams" (Strønen 2020). Recently, various digital technologies have triggered service business growth through digitalization or digital transformation (Gebauer et al. 2021). Major technologies for digitalization are AI, Internet of Things (IoT), cloud computing, and big data (Kretschmer and Khashabi 2020). ...
Article
Full-text available
Digital transformation has influenced value chain operations of both manufacturing and service firms. This study examined digital transformation in the service sector through network text analysis of 330 related articles published during the past 10 years. The selected papers’ keyword link relations were analyzed to create network maps of research topics, ranging from traditional to emerging ideas of researchers. Dominant research topics and their clusters were identified using centrality and community analyses, and research trends were identified. The results of this study will help researchers and practitioners in the relevant fields capture the overall picture of the field.
... The user experience should be measurable which can be done on three different levels: by offering high levels of usability, providing carefully designed aesthetic properties which elicit an emotional response from the users and evoke engagement in customers by making the user experience meaningful (Nylén & Holmström, 2015). A mirrored complexity and customer-centricity can be found in other perspectives of servitization -referring back to service-dominant logic (Vargo & Lusch, 2004)stressing the importance of value that is created during the interaction between provider and consumer (Gebauer, Paiola, Saccani, & Rapaccini, 2020;Jang, Bae, & Kim, 2020;Oliva & Kallenberg, 2003). Thus, the qualitative expert interviews will further look into the characteristics of service innovation and, especially, shed light on the practical perspective on complexification and customer-centricity in service innovation. ...
Technical Report
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Our Digital Innovation Audit provides a detailed overview of the mapping of a Digital Innovation Process for Services, based on Scientific Literature and Expert Interviews. Due to the challenges arising from changes in technology and customer behavior, companies are asked to constantly innovate. In this regard, servitization or service innovation has appeared as a successful way for many companies to overcome the dead-end road of competition. As companies focus more and more on developing services, service innovation has started to gain increasing attention also in research causing the traditional product innovation view to shift towards a multidimensional service innovation view. However, the development and designing of new services is still little researched and not a lot is known about the process. The knowledge and understanding about how digital technologies are being strategically used during the process of service innovation is even more limited. Thus, the goal of Digital Innovation Audit is clear: to shine light on the service innovation process and to focus on how and which digital tools can facilitate the innovation process.
... Finally, at the highest level (level I) is the expected financial performance achieved by the development of prior capabilities. Indeed, several studies (e.g., Gebauer et al., 2021;Kohtamäki et al., 2020) discuss the called digital servitization paradox, in which product companies invest in digitalization and servitization, but fail to enhance their revenue accordingly. Therefore, our results show that, according to the experts, the development of the previous capabilities would be necessary to achieve financial returns with digital servitization. ...
Article
Manufacturers seeking to provide smart product-service systems require new sets of capabilities such as digitalization and ecosystem-related capabilities. Studies have investigated these capabilities separately, although it seems to have an unexplored convergence between them. Therefore, this article aims to identify the digitalization and ecosystem-related capabilities of manufacturers in the agricultural machinery industry that are seeking digital servitization and offering smart product-service systems. Moreover, it aims to uncover the relationships among these capabilities to determine their driving and dependence power. A combination of methods was employed to achieve this result. First, a systematic literature review was conducted to define key digitalization and ecosystem-related capabilities. Next, the Interpretive Structural Modelling and fuzzy MICMAC analysis were employed to define the capabilities’ driving power and dependence power. By combining these analyses, we propose a conceptual framework that integrates these two sets of capabilities, which is comprised of three macro-layers: driving, linkage, and dependent. This article contributes to the literature by showing the interrelationships between digitalization and ecosystem-related capabilities. Also, it proposes a conceptual framework that groups capabilities based on their contributions to the development of digital service innovation.
... More recently, manufacturing companies are adopting the servitization strategy to provide advanced digital services to existing products. This provides fresh opportunities for the companies to expand their business models and increase their revenue and profits [16][17][18][19][20]. Previous studies have highlighted that the lack of perceived value by the customer can impact the adoption of such advanced services [11,[21][22][23]. ...
Article
Full-text available
Digitally enhanced advanced services (DEAS), offered currently by various industries, could be a challenging concept to comprehend for potential clients. This could result in limited interest in adopting (DEAS) or even understanding its true value with significant financial implications for the providers. Innovative ways to present and simplify complex information are provided by serious games and gamification, which simplify and engage users with intricate information in an enjoyable manner. Despite the use of serious games and gamification in other areas, only a few examples have been documented to convey servitization offers. This research explores the design and development of a serious game for the Howden Group, a real-world industry partner aiming to simplify and convey existing service agreement packages. The system was developed under the consultation of a focus group comprising five members of the industrial partner. The final system was evaluated by 30 participants from engineering and servitization disciplines who volunteered to test online the proposed system and discuss their user experience (UX) and future application requirements. The analysis of users’ feedback presented encouraging results, with 90% confirming that they understood the DEAS concept and offers. To conclude, the paper presents a tentative plan for future work which will address the issues highlighted by users’ feedback and enhance the positive aspects of similar applications.
... However, this necessitates to establish respective mindsets and perspectives (Figure 1). Related developments are discussed increasingly as "digital servitization" [32][33][34] by augmenting existing offerings and value propositions with (digital) service elements. In the remainder, we argue a service perspective to overcome the challenges of digital transformation. ...
Chapter
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The paper presents insights from a longitudinal case study of an insurance company. Digital transformation requires companies to review their strategy. Today, information technologies fundamentally transform whole business models, products, and services. Innovations are an opportune strategy for companies to compete in the digital age and to transform their business models, taking a service perspective on their value creation. Service Dominant Architecture (SDA) offers practitioners a framework and environment to design and operate service systems and systems of engagement. Furthermore, it stimulates collaborative theorizing processes by involving decision-makers, managers, and practitioners in general as active participants in the research process (midrange-theory). Our focus is on evolving and applying our framework and IT artifact SDA. SDA provides guidance to practitioners and researchers, respectively, on how to build implementable and operable solution designs in real practice. Our research on SDA is primarily informed and guided by a Design Science Research (DSR) approach.
... Although previous literature addresses the nature of customer value from integrated product-service offerings and smart PSS (Gebauer et al., 2021;Zambetti et al., 2021), apart few exceptions these studies do not explore in sufficient details how data-driven services should be designed and delivered. ...
Article
In the age of the industrial internet, manufacturers of industrial equipment compete through the offering of digital product-service solutions. These are built integrating smart connected products (SCP) and data-driven services, such as remote control, data analytics, diagnostic and predictive maintenance services. These services strongly influence the value created in the customer context and, consequently, the attractiveness of the integrated offering. A great issue remains about how these services should be designed by manufacturers of industrial equipment. Through integrative literature review over multiple domains, this paper provides a conceptual model that shows: i) which benefits can be created from smart product-service systems offerings at both business and individual level, in the customer organization; ii) how these benefits are linked to the choices about design and delivery of data-driven services. In respect to the second point, this study merges service science theory and data management to show how the data autonomously collected by SCP can be transformed into insights that deliver value, as far as the customer and the supplier interact, share resources and apply their specialized competences. Applying these concepts, we elaborate four exemplary archetypes of data-driven services that differ in respect to the kind of customer-supplier interactions along this data life cycle, bringing these options to different kind of customer value co-creation. Linking the mechanisms of value co-creation to design options of data-driven services, this paper has therefore notably implications for the research on servitization and smart product-service systems.
Article
This research proposed and enhanced a statistically reliable paradigm for determining the impacts of the role of digital servitization (DS) as a potential facilitator of sustainable and smart service innovation ecosystem (SSSIE) establishment and sustainability-oriented organizational performance (SOOP) improvement. Additionally, this research aimed to cast light on the role of digital leadership (DL) as a moderator of the hypothesized model. Structural equation modeling and multigroup analysis (MGA) were employed to process and analyze the data procured from a cross-sectional convenience sample of 412 respondents representing various public service sector organizations (PSSOs). The statistical outcomes corroborated that DS was positively and significantly correlated to SSSIE establishment, and at the same time, SOOP was significantly intensified by DS and SSSIE. Next, the nexus between DS and SOOP was enhanced when SSSIE was operationalized. Lastly, the MGA analysis confirmed that all of the coefficients in the proposed model were statistically significantly different under the moderating effect of DL. These obtained findings could bring numerous valuable in-depth insights for practitioners and policymakers in digital initiatives management and governance.
Article
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Data collected from interconnected devices offer wide-ranging opportunities for data-driven service innovation that delivers additional or new value to organizations’ customers and clients. While previous studies have focused on traditional service innovation and servitization, few scholarly works have examined the influence of data on these two concepts. With the aim of deepening the understanding of data as a key resource for service innovation and overcoming challenges for a broader application, this study combines a systematic literature review and expert interviews. This study (a) synthesizes the various existing definitions of a data-driven service, (b) investigates attributes of data-driven service innovation, and (c) explores the corresponding organizational capabilities. The goal is to examine the repercussions of data utilization for service provision. The findings indicate that the use of data makes service innovation more complex. Data add new attributes, including a data-oriented culture; issues of data access, data ownership, privacy, and standardization; as well as the potential for new revenue models. The paper contributes to current discussions by providing an aligned perspective of theory and practice in data-driven service innovation and recommending that managers implement a culture and strategy that embraces the specifics of data usage.
Article
Providers' access to customer data (e.g., data related to products' use, location, and condition) is essential for digital servitization. However, customers are often reluctant to grant data access. Although prior research has identified lack of data access as an inhibitor of digital servitization, the peculiarities of data exchange in digital servitization have not been considered until now. Therefore, it remains unclear which intra- and interorganizational challenges emerge within and between providers and customers that lead to lack of data access. This study uses paradox theory to address the complex and multi-faceted phenomenon of data access in digital servitization. Specifically, 40 in-depth interviews with managers across a wide range of industries revealed four paradoxes inhibiting data access and comprising one overarching interorganizational paradox in the form of (1) the need for access vs. the need for shielding, and three intra-organizational paradoxes in the form of (2) product-focused identity vs. digital-focused identity, (3) data appreciation vs. data depreciation, and (4) goodwill perception vs. opportunism perception. To address each paradox, this study also provides a comprehensive set of coping strategies. The findings may help providers facilitate their digital servitization efforts by addressing the identified data access paradoxes that they and their customers face.
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Digital servitization transforms value creation processes and subsequently affects relationships and power structures in supply chains. Yet, previous studies present insightful but incomplete views on how digital servitization changes power balances between supply chain actors. Specifically, little attention has been paid to upstream firms, although they are particularly vulnerable to becoming disadvantaged participants in a digitally servitized supply chain, as they are positioned far away from end-users. Addressing this research need, we performed an explorative single case study of an industrial supplier – using the resource dependence theory as theoretical framework – to investigate (1) the effects of digital servitization on the power balance between the supplier and its OEM customers and (2) the strategic responses of the supplier to these effects. We find that for an industrial supplier, the successful deployment of digitalized product-service systems (DPSS) depends not only on the development of digital capabilities, but also on the ability to establish close end-user connections, continuous access to product usage data, and a trustful relationship with OEM customers. In addition, we show that digital servitization shifts power towards the actor who is more dominant prior to its advent, refining the common notion that digital servitization favors per se downstream firms. We enrich existing literature by outlining five specific strategies that industrial suppliers can pursue to maintain critical resource access and regain power in a digitally servitized supply chain. Finally, we offer managers guidance in establishing DPSS offerings by providing a comprehensive picture of the industrial supplier's digital servitization journey.
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This paper explores the governance mechanisms for value co-creation when product–service systems (PSS) providers move into PSS business ecosystems. The PSS providers in our study applied both internal and external governance mechanisms to regulate value co-creation. Internally, they relied on formal organisational setups and informal coordination between product, service and digital divisions. Externally, they had strong relational governance mechanisms supported by appropriate contractual governance mechanisms. As frontline (field) interactions became an important factor for realising value co-creation, PSS providers also attempted to develop individual-based psychological governance to complement group-based relational governance. Our findings reveal five challenges in managing the governance mechanisms: (1) orchestrating all digital resources and capabilities, especially managing the incompatibility and isolation of different digital tools in product and service divisions; (2) managing all relations in one platform that can embrace customer relationship management (CRM), supplier relationship management (SRM) and form relations with emerging actors such as authorities; (3) designing appropriate contractual governance to measure co-created value from economic, societal and environmental perspectives, and govern data ownership and security; (4) managing the interplay between contractual and relational governance mechanisms during PSS agreement implementation; and (5) developing psychological governance for frontline staff. We direct PSS providers towards essential aspects that require attention when developing governance mechanisms by identifying these challenges. Moreover, identifying such challenges will allow policymakers, practitioners, and scholars to jointly develop standards, policies and guidelines in these increasingly prevalent ecosystem business arrangements.
Conference Paper
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Summary: We break the concept of Industry 4.0 down into a series of technologies and look whether their adoption influences industrial firms’ servitization indicators. Likewise, we assess whether the existence of prior digital skills and training initiatives to work with the adopted technologies influence company scores on these indicators. We establish that there is a stronger influence on the development of intelligent services than on revenue generation from services. 1. INTRODUCTION Digitalization has been hailed many times as a catalyzer for servitization. Similarly, Industry 4.0 has been portrayed as an enabler for smart service development. However, in such occasions either digitalization and/or Industry 4.0 are often referred to in generic terms or as container concepts. Rarely are they broken down into a series of constituent technologies to see their relationship with (forms of) servitization. Therefore, in our proposed contribution we follow Gilchrist (2016) and dissect Industry 4.0 into 9 technologies that companies can apply, and look whether these have an impact on company’s servitization behaviour. We also look whether prior availability of specific (digital) skills inside the company adopting the respective technologies influences the servitization behaviour. Similarly, we look whether the companies count with a training strategy and programmes to prepare the employees for working with the technologies adopted. We draw from a survey organized in 2019 among industrial firms from the Basque Country, which resulted in valid 271 answer sets. 2. THEORETICAL BACKGROUND Our work combines insights from studies that look into the concept of Industry 4.0 and servitization. Furthermore, it builds upon studies that investigate the role of skills and training for service business development amidst industrial companies (Marcos Martínez and Martín Peña, 2016). Industry 4.0 refers to a family of technologies that entail the use and coordination of information, automation, computation and sensing activities (Acatech 2015; Posada et al. 2015). Servitization refers both to industrial firms expanding their service business and income from services (Vandermerwe and Rada, 1988) and to their attempts of sophisticating or making their service offering more advanced (Baines and Lightfoot, 2013). Skills crafting and training for service business is an area that has been approached from a knowledge development angle (Maglio and Spohrer, 2008) and a competence shaping perspective (Barile and Saviano, 2013) with regards to servitization behaviour. 3. RESEARCH METHODOLOGY We process data from a large-scale survey drawn from 271 industrial firms. As independent variables we look at: the adoption of 9 technologies that correspond to Gilchrist’s (2016) categorization of Industry 4.0. Similarly, we enquire after the existence of prior digital skills to work with the adopted technologies in the company, and whether the company counts with a training strategy and/or programme to allow employees getting to grips with the implemented technologies. As dependent variables, regarding servitization behaviour, we look at income generation from services and the development of intelligent services as a consequence of the adoption of the respective technologies. We control for company size in terms of number of employees and annual turnover. We formulate corresponding hypotheses and test these by means of hierarchical logistic regressions. 4. FINDINGS We find that certain technologies are more likely to boost the servitization of business than others. In addition, we find that the uptake of Industry 4.0 technologies is more likely to foster the development of intelligent services than the generation of income from services. Alternatively, Industry 4.0 technologies seem to have more impact on the “smartization of services” than on the “servitization of revenues”. This also leads us to think that the offering of intelligent services requires more technology, or are more technology-intensive, than services in general. As for the relevance of available skills and training schemes, we find that the implementation of training strategies for the right utilization of new technologies raises the chances of companies developing intelligent services. 5. THEORETICAL AND PRACTICAL CONTRIBUTIONS The findings show that developing services is one thing, but that charging for them is another thing. This may hint at industrial companies having difficulties of shifting from “services for free” to “services for a fee” or that they tend to offer integrated “product service offerings” or “package deals”, where the service part is not charged or accounted for separately. They also provide insights on the relevance of skills development for exploiting Industry 4.0 technologies for the sake of servitization. Finally, the study raises questions around how to conceptualize and measureservitization behaviour. I.e., depending on the way that servitization behaviour is measured, its determinants could vary to a great extent.
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Servitization increasingly requires the use of digital technologies such as the Internet of Things (IoT), cloud computing, and predictive analytics. This paper investigates digital service innovations (DSIs) that use these technologies. Using a service innovation lens, it is distinguished from most prior servitization research through specifying DSIs from incremental to radical modes, rather than measuring service innovation on self-reported scales. Data were collected using expert interviews and secondary sources from 20 manufacturers from four sectors. Using changes from baseline service offerings, the study identified nine DSIs with varying degrees of innovativeness. The paper develops a framework within which each DSI can be placed, with two axes representing innovation mode (incremental, intermediate, radical) and impact of innovation (customer, manufacturer, hybrid). This latter dimension addresses concerns about the lack of focus on customer value in prior service innovation research. The study also develops a new typology of DSI groupings (Business enabler, Service enhancement, Digital service offering) demonstrating that DSIs have mainly enabling or service enhancing roles for manufacturers rather than one that is predominantly designed to create digital service offerings. The exceptions are ‘predictive maintenance’ and ‘process improvement’, which are radical/intermediate DSIs respectively and provide strong value for both manufacturers and customers.
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Servitization and digitalization are two well-researched phenomena investigated by a multidisciplinary research community. This paper presents a bibliometric overview of the convergence between servitization and digitalization. The new research stream has emerged in the academic literature under the heading of Digital Servitization (DS). DS emphasizes the role of digitalization as both the driver and the enabler of the firm transition to service-oriented activities. In view of this, this study aims to assess the evolution and prospects of the burgeoning literature on DS by conducting a bibliometric analysis of published documents on the subject. The results revealed the status of the literature by describing key bibliometric parameters such as volume and type of publications, most cited articles, most prolific authors, main journals and influential countries. Bibliometric networks elucidated the intellectual structure of DS through networks of co-citation, co-authorship and keywords. The findings may well contribute to inform both researchers and practitioners by providing useful insights concerning the current and future development of this new research stream.
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The convergence of services and digital technologies is generating unprecedented opportunities in manufacturing, by adding value to products, allowing more efficient processes, and supporting improved managerial decisions with richer, faster and sounder information. Yet, despite its high relevance, there is still a lack of scientific knowledge regarding this phenomenon. We analyse the merging trends of manufacturing digitization and servitization with the main purpose to describe and explain if and how the evolving technological landscape facilitates, habilitates and supports manufacturing servitization. More specifically this paper aims to put the current knowledge on the topic into order. We present a systematic review of the scientific literature concerning how digital technologies enable ser-vitization in manufacturing, as the first step of a research programme on how these two megatrends are jointly disrupting resources, competences, skills and consequently business models. We show that the knowledge about how digital technologies support service transformation in manufacturing is still at an early stage and rather limited. Then, key challenges and future research directions within this topic are highlighted.
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Service growth in product firms is one of the most active service research domains and is open to a variety of conceptualizations. This article provides a critical inquiry into the past, present, and future of the research domain. The evolution of the research on service growth is discussed in two phases: (1) setting the boundaries of the research domain, and (2) emergence of the conceptual foundation. We find that while research in this area has a well-established tradition in terms of output, theoretically it is still largely in a ‘nascent’ phase. Next, we highlight the contributions of the papers in this special section, emphasizing their challenges to prevailing assumptions in the research domain. We conclude by identifying, from the contributions to this special section, suggested themes for further research on service growth: the assessment of empirical evidence of the impact of service growth on firm performance, the role of merger & acquisitions in the service growth strategy, the exploration of single/multiple positions along the transition line, the process of adding or removing services, and expanding the context of service growth beyond product manufacturing firms.
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Purpose The purpose of this paper is to consolidate the servitization knowledge base from an organizational change perspective, identifying developed, developing and undeveloped topics to provide a platform that directs future research. Design/methodology/approach This paper addresses three objectives: it comprehensively examines organizational change management literature for selection of a theoretical framework; it classifies extant studies within the framework through a systemic literature review; and it analyses 232 selected papers and proposes a research agenda. Findings Analysis suggests increasing global awareness of the importance of services to manufacturers. However, some topics, especially related to servitization transformation, remain undeveloped. Research limitations/implications Although the authors tried to include all publications relevant to servitization, some might not have been captured. Evaluation and interpretation relied on the research team and subsequent research workshops. Practical implications One of the most significant challenges for practitioners of servitization is how to transform a manufacturing organization to exploit the opportunity. This paper consolidates literature regarding servitization, identifying progress concerning key research topics and contributing a platform for future research. The goal is to inform research to result eventually in a roadmap for practitioners seeking to servitize. Originality/value Although extant reviews of servitization identify themes that are examined well, they struggle to identify unanswered questions. This paper addresses this gap by focusing on servitization as a process of organizational change.
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This study draws on literature at the intersection of servitization, digital business models and supply chain management. Work empirically explores how digital disruption has affected Business-to-Business (B2B) interdependencies. Dematerialization of physical products is transforming the way firms are positioned in the supply chain due to a reduction in production and transport costs and the different ways business engage with customers. Specifically, we propose that these new market conditions can empower downstream firms. We further propose that upstream firms can still capture additional value through digital service if their servitized offer includes difficult to imitate elements. The context of the analysis is the publishing industry. The Payment Card method employed is used to test UK and US consumer’s perceptions of digital formats (eBooks) and assess their willingness to pay in relation to printed formats. The method undertaken enables us to elicit aggregate consumer demand for eBooks which in turn identifies optimal pricing strategies for the digital services. Analysis demonstrates that during digital servitization upstream firms should seek to deploy unique resources to ensure their strategic position in the supply chain is not diminished.
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This paper brings together the recent literature on industry platforms and shows how it relates to managing innovation within and outside the firm as well as to dealing with technological and market disruptions and change over time. First, we identify distinct types of platforms. Our analysis of a wide range of industry examples suggests that there are two predominant types of platforms: internal or company-specific platforms, and external or industry-wide platforms. We define internal (company or product) platforms as a set of assets organized in a common structure from which a company can efficiently develop and produce a stream of derivative products. We define external (industry) platforms as products, services, or technologies that act as a foundation upon which external innovators, organized as an innovative business ecosystem, can develop their own complementary products, technologies, or services. Second, we summarize from the literature general propositions on the design, economics, and strategic management of platforms. Third, we review the case of Intel and other examples to illustrate the range of technological, strategic, and business challenges that platform leaders and their competitors face as markets and technologies evolve. Finally, we identify practices associated with effective platform leadership and avenues for future research to deepen our understanding of this important phenomenon and what firms can do to manage platform-related competition and innovation.
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Purpose – The purpose of this paper is to report the state-of-the-art of servitization by presenting a clinical review of literature currently available on the topic. The paper aims to define the servitization concept, report on its origin, features and drivers and give examples of its adoption along with future research challenges. Design/methodology/approach – In determining the scope of this study, the focus is on articles that are central and relevant to servitization within a wider manufacturing context. The methodology consists of identifying relevant publication databases, searching these using a wide range of key words and phrases associated with servitization, and then fully reviewing each article in turn. The key findings and their implications for research are all described. Findings – Servitization is the innovation of an organisation's capabilities and processes to shift from selling products to selling integrated products and services that deliver value in use. There are a diverse range of servitization examples in the literature. These tend to emphasize the potential to maintain revenue streams and improve profitability. Practical implications – Servitization does not represent a panacea for manufactures. However, it is a concept of significant potential value, providing routes for companies to move up the value chain and exploit higher value business activities. There is little work to date that can be used to help practitioners. Originality/value – This paper provides a useful review of servitization and a platform on which to base more in-depth research into the broader topic of service-led competitive strategy by drawing on the work from other related research communities.
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Commentators suggest that to survive in developed economies manufacturing firms have to move up the value chain, innovating and creating ever more sophisticated products and services, so they do not have to compete on the basis of cost. While this strategy is proving increasingly popular with policy makers and academics there is limited empirical evidence to explore the extent to which it is being adopted in practice. And if so, what the impact of this servitization of manufacturing might be. This paper seeks to fill a gap in the literature by presenting empirical evidence on the range and extent of servitization. Data are drawn from the OSIRIS database on 10,028 firms incorporated in 25 different countries. The paper presents an analysis of these data which suggests that: [i] manufacturing firms in developed economies are adopting a range of servitization strategies—12 separate approaches to servitization are identified; [ii] these 12 categories can be used to extend the traditional three options for servitization—product oriented Product–Service Systems, use oriented Product–Service Systems and result oriented Product–Service Systems, by adding two new categories “integration oriented Product–Service Systems” and “service oriented Product–Service Systems”; [iii] while the manufacturing firms that have servitized are larger than traditional manufacturing firms in terms of sales revenues, at the aggregate level they also generate lower profits as a % of sales; [iv] these findings are moderated by firm size (measured in terms of numbers of employees). In smaller firms servitization appears to pay off while in larger firms it proves more problematic; and [v] there are some hidden risks associated with servitization—the sample contains a greater proportion of bankrupt servitized firms than would be expected.
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Technologies like the Internet of Things (IoT) are offering new opportunities and posing serious challenges to firms, forcing them to create entirely new business models, migrating from the conventional product-centric approaches to (digitally-based) service-oriented ones. This paper – following a qualitative research method – aims at describing the service-oriented impact of IoT technologies on firms' business models, with a particular focus on opportunities and challenges for BtoB manufacturing firms. Being the impact of IoT technologies on businesses a quite recent research stream, to date scarce attention has been devoted to the topic with specific attention to its impact on service-oriented business models in manufacturing firms. The paper contributes in this research stream in different ways. It proposes a map of digital servitization that helps in understanding firms' strategic transitions caused by technologies, making both theoretical and managerial contributions. Firstly, the research underlines the impact of the firms' sales model as a strategic factor in shaping firms' digital servitization strategies. In addition, three progressive levels of digital servitization complexity are identified, namely product- process- and outcome-oriented, that are based on an increasing use of IOT technologies and have specific challenges and opportunities.
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In this study, we present an exploratory framework to support the development of hybrid solutions within the context of product-centric servitization. We hypothesise that the development of hybrid solutions should be driven by two main variables: the potential value in use of the product and the perceived risk associated with the value creation process. Moreover, we suggest splitting the perceived risk into availability, use, process, and environment-related components. Hence, based on these variables, we suggest: (i) the services that should be attached to a product; (ii) the effect of these attached services on the customer value creation process; and (iii) the benefits that both customer and supplier can achieve from the delivery of hybrid solutions. The practical implications of this study are discussed with respect to several case examples.
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Services of different types have become increasingly important for product firms. While these firms mainly focus on products, managers and researchers lack a comprehensive framework to understand when to make significant investments in particular kinds of services. We identify three categories of product-related services from a product firm – smoothing and adapting services, which complement products, and substitution services, which enable customers to pay for the use of a product without buying the product itself. We develop propositions about the relative level of these different kinds of services vis-a-vis industry evolution, as well as suggest how these services affect industry structure. We draw upon various literatures, though we conclude that the relationship between products and services is more complex and richer than any one literature suggests.
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Purpose – To provide a perspective on the nature of service infusion in manufacturing companies based on a case analysis in the context of a maintenance management solution for industrial production equipment. Design/methodology/approach – The paper first discusses how manufacturers becoming service providers is treated in the literature. Next, a qualitative single-case study is reported, in which a troublesome business concept was surveyed through 35 thematic focus group interviews. The analysis revealed a set of challenges that were compared to arrive at a conclusion, the paradox. Findings – The findings suggest that many challenges stemmed from the manufacturing-oriented way of doing business. This further indicates that the common implicit view, that manufacturers can shift to service provision steadily, by adding service offerings to their total offering one by one, may actually be hazardous. Research limitations/implications – The limitations are based on the methodology. First, the case study focuses on only one manufacturing company, and therefore the aim of the paper is not to generalize the findings. On the other hand, the data collected for the case are rich and in-depth in nature, and the brief reporting can only cover the tip of the iceberg. Yet, even one divergent case yields for questioning the existing beliefs, which is the aim of this study. Originality/value – The paper provides an original perspective to this topical, but under-studied, phenomenon of manufacturers increasingly providing service offerings, and brings into daylight the implicit tone of the existing research.
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Due to network effects and switching costs in platform markets, entrants generally must offer revolutionary functionality. We explore a second entry path that does not rely upon Schumpeterian innovation: platform envelopment. Through envelopment, a provider in one platform market can enter another platform market, combining its own functionality with the target’s in a multi-platform bundle that leverages shared user relationships. We build upon the traditional view of bundling for economies of scope and price discrimination and extend this view to include the strategic management of a firm's user network. Envelopers capture share by foreclosing an incumbent’s access to users; in doing so, they harness the network effects that previously had protected the incumbent. We present a typology of envelopment attacks based on whether platform pairs are complements, weak substitutes or functionally unrelated, and we analyze conditions under which these attack types are likely to succeed.
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Function-oriented business models or product–service systems (PSSs) are often seen as an excellent means for achieving ‘factor 4’. SusProNet, an EU network on PSSs, showed a more complicated reality. At least eight different types of PSS exist, with quite diverging economic and environmental characteristics. The economic potential of each type was evaluated in terms of (i) tangible and intangible value for the user, (ii) tangible costs and risk premium for the provider, (iii) capital/investment needs and (iv) issues such as the providers' position in the value chain and client relations. The environmental potential was evaluated by checking the relevance of certain impact reduction mechanisms (e.g. more intensive use of capital goods, inherent incentives for sustainable user and provider behaviour etc.). Most PSS types will result in marginal environmental improvements at best. The exception is the PSS type known as functional results, but here liability and risk premium issues, amongst others, need a solution. Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment.
Article
We observed that extending the service business in manufacturing companies often leads to a “service paradox.” Where there is such a paradox, substantial investment in extending the service business leads to increased service offerings and higher costs, but does not generate the expected correspondingly higher returns. We have worked with more than 30 equipment manufacturing companies to gain an understanding as to why manufacturing companies often fail to exploit the financial benefit of extending their service business. Based on this broad research, we attempt to provide guidance for managers in manufacturing companies seeking to successfully extend their service business.
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Whenever a business enterprise is established, it either explicitly or implicitly employs a particular business model that describes the design or architecture of the value creation, delivery, and capture mechanisms it employs. The essence of a business model is in defining the manner by which the enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit. It thus reflects management's hypothesis about what customers want, how they want it, and how the enterprise can organize to best meet those needs, get paid for doing so, and make a profit. The purpose of this article is to understand the significance of business models and explore their connections with business strategy, innovation management, and economic theory.
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Higher market complexity and increasing competitive intensity are forcing traditional product-manufacturing companies to change their position in the goods–services continuum by continuously extending the service business. However, the existing literature tends to be somewhat vague in defining service strategies for manufacturing companies wishing to move along the continuum. The purpose of this study is to identify service strategies that correspond with specific environment–strategy fits. Using an exploratory factor and cluster analysis for testing Western European firms, the study highlights four different service strategies. The four service strategies include after-sales service providers (ASPs), customer support providers (CSPs), outsourcing partners (OPs), and development partners (DPs). After-sales service providers concentrate on cost leadership and ensure proper functioning of the product. Customer support providers form a unique value proposition by investing in a strong product and service differentiation. Outsourcing partners combine cost leadership with service and product differentiation to offer attractive prices for operational services. Their goal is to assume the operating risk and full responsibility for the customer's operating processes. Development partners provide research and development services to create a situation in which customers benefit directly from their development competencies.
Platforms and Complexity Management: An Exploration of the Digital Servitization Domain
  • M Ardolino
  • V Eloranta
  • N Saccani
Ardolino, M., Eloranta, V., & Saccani, N. (2020). Platforms and Complexity Management: An Exploration of the Digital Servitization Domain. accepted for publication.
State-of-the-art in product-service systems
  • T S Baines
  • H W Lightfoot
  • S Evans