Exploring the financial consequences of the servitization of manufacturing

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. © Springer Science + Business Media, LLC 2009.

One style does not fit all

The different types of outsourcing and the management requirements for each of them are discussed. An outsourcing has a high strategic importance to the buying company when it is aligned with the organization's long term strategies and when its results are either positive or negative. Functional outsourcings are characterized by both low strategic importance and financial impact, and the products/services that fall in this category belong to support activities which are highly standardized. Leverage outsourcings are those that have a low strategic importance, but high financial impact to the outsourcer, and they concentrate on operational aspects, leaving strategic issues.

Empathy for pain involves the affective but not sensory components of pain.

Our ability to have an experience of another's pain is characteristic of empathy. Using functional imaging, we assessed brain activity while volunteers experienced a painful stimulus and compared it to that elicited when they observed a signal indicating that their loved one--present in the same room--was receiving a similar pain stimulus. Bilateral anterior insula (AI), rostral anterior cingulate cortex (ACC), brainstem, and cerebellum were activated when subjects received pain and also by a signal that a loved one experienced pain. AI and ACC activation correlated with individual empathy scores. Activity in the posterior insula/secondary somatosensory cortex, the sensorimotor cortex (SI/MI), and the caudal ACC was specific to receiving pain. Thus, a neural response in AI and rostral ACC, activated in common for "self" and "other" conditions, suggests that the neural substrate for empathic experience does not involve the entire "pain matrix." We conclude that only that part of the pain network associated with its affective qualities, but not its sensory qualities, mediates empathy.

Motor learning of novel dynamics is not represented in a single global coordinate system: evaluation of mixed coordinate representations and local learning.

Successful motor performance requires the ability to adapt motor commands to task dynamics. A central question in movement neuroscience is how these dynamics are represented. Although it is widely assumed that dynamics (e.g., force fields) are represented in intrinsic, joint-based coordinates (Shadmehr R, Mussa-Ivaldi FA. J Neurosci 14: 3208-3224, 1994), recent evidence has questioned this proposal. Here we reexamine the representation of dynamics in two experiments. By testing generalization following changes in shoulder, elbow, or wrist configurations, the first experiment tested for extrinsic, intrinsic, or object-centered representations. No single coordinate frame accounted for the pattern of generalization. Rather, generalization patterns were better accounted for by a mixture of representations or by models that assumed local learning and graded, decaying generalization. A second experiment, in which we replicated the design of an influential study that had suggested encoding in intrinsic coordinates (Shadmehr and Mussa-Ivaldi 1994), yielded similar results. That is, we could not find evidence that dynamics are represented in a single coordinate system. Taken together, our experiments suggest that internal models do not employ a single coordinate system when generalizing and may well be represented as a mixture of coordinate systems, as a single system with local learning, or both.