Motivations for servitization:the impact of product complexity

Purpose – The purpose of this paper is to identify the commonalities and differences in manufacturers’ motivations to servitise. Design/methodology/approach – UK study based on interviews with 40 managers in 25 companies in 12 sectors. Using the concept of product complexity, sectors were grouped using the Complex Products and Systems (CoPS) typology: non-complex products, complex products and systems. Findings – Motivations to servitise were categorised as competitive, demand based (i.e. derived from the customer) or economic. Motivations to servitise vary according to product complexity, although cost savings and improved service quality appear important demand-based motivations for all manufacturers. Non-complex product manufacturers also focus on services to help product differentiation. For CoPS manufacturers, both risk reduction and developing a new revenue stream were important motivations. For uniquely complex product manufacturers, stabilising revenue and increased profitability were strong motivations. For uniquely systems manufacturers, customers sought business transformation, whilst new service business models were also identified. Research limitations/implications – Using the CoPS typology, this study delineates motivations to servitise by sector. The findings show varying motivations to servitise as product complexity increases, although some motivational commonality existed across all groups. Manufacturers may have products of differing complexity within their portfolio. To overcome this limitation the unit of analysis was the strategic business unit. Practical implications – Managers can reflect on and benchmark their motivation for, and opportunities from, servitisation, by considering product complexity. Originality/value – The first study to categorise servitisation motivations by product complexity. Identifying that some customers of systems manufacturers seek business transformation through outsourcing.

Servitization capabilities for advanced services:a multi-actor perspective

Servitization is the process by which manufacturers add services to their product offerings and even replace products with services. The capabilities necessary to develop and deliver advanced services as part of servitization are often discussed in the literature from the manufacturer’s perspective, e.g., having a service-focused culture or the ability to sell solutions. Recent research has acknowledged the important role of customers and, to a lesser extent, other actors (e.g., intermediaries) in bringing about successful servitization, particularly for use-oriented and results-oriented advanced services. The objective of this study is to identify the capabilities required to successful develop advanced services as part of servitization by considering the perspective of manufacturers, intermediaries and customers. This study involved interviews with 33 managers in 28 large UK-based companies from these three groups, about servitization capabilities. The findings suggest that there are eight broad capabilities that are important for advanced services; 1) personnel with expertise and deep technical product knowledge, 2) methodologies for improving operational processes, helping to manage risk and reduce costs, 3) the evolution from being a product- focused manufacturer to embracing a services culture, 4) developing trusting relationships with other actors in the network to support the delivery of advanced services, 5) new innovation activities focused on financing contracts (e.g., ‘gain share’) and technology implementation (e.g., Web-based applications), 6) customer intimacy through understanding their business challenges in order to develop suitable solutions, 7) extensive infrastructure (e.g., personnel, service centres) to deliver a local service, and 8) the ability to tailor service offerings to each customer’s requirements and deliver these responsively to changing needs. The capabilities required to develop and deliver advanced services align to a need to enhance the operational performance of supplied products throughout their lifecycles and as such require greater investment than the capabilities for base and intermediate services.

Identifying (territorial) tensions in the servitization value chain

Purpose: To understand the tensions that servitization activities create between actors within networks. Design/methodology/approach: Interviews were conducted with manufacturers, intermediaries and customers across a range of industrial sectors. Findings: Tensions relating to two key sets of capabilities are identified: in developing or acquiring (i) operant technical expertise and (ii) operand service infrastructure. The former tension concerns whom knowledge is co-created with and where expertise resides. The latter involves a territorial investment component; firms developing strategies to acquire greater access to, or ownership of, infrastructures closer to customers. Developing and acquiring these capabilities is a strategic decision on the part of managers of servitizing firms, in order to gain recognized power and control in a particular territory. Originality/value: This paper explores how firms’ servitization activities involve value appropriation (from the rest of the network), contrasting with the narrative norm for servitization: that it creates additional value. There is a need to understand the tensions that servitization activities create within networks. Some firms may be able to improve servitization performance through co-operation rather than competition, generating co-opetitive relationships. Others may need to become much more aggressive, if they are to take a greater share of the ‘value’ from the value chain.

Capabilities for advanced services:a multi-actor perspective

Servitization involves manufacturers developing service offerings to grow revenue and profit. Advanced services, in particular, can facilitate a more service-focused organization and impact customers' business processes significantly. However, approaches to servitization are often discussed solely from the manufacturer's perspective; overlooking the role of other network actors. Adopting a multi-actor perspective, this study investigates manufacturer, intermediary and customer perspectives to identify complementary and competing capabilities within a manufacturer's downstream network, required for advanced services. Interviews were conducted with 24 senior executives in 19 UK-based manufacturers, intermediaries and customers across multiple sectors. The study identified six key business activities, within which advanced services capabilities were grouped. The unique and critical capabilities for advanced services for each actor were identified as follows: manufacturers; the need to balance product and service innovation, developing customer-focused through-life service methodologies and having distinct, yet synergistic product and service cultures; intermediaries, the coordination and integration of third party products/services; customers, co-creating innovation and having processes supporting service outsourcing. The study is unique in highlighting the distinct roles of different actors in the provision of advanced services and shows that they can only be developed and delivered by the combination of complex interconnected capabilities found within a network.

Interactively developed capabilities:evidence from dyadic servitization relationships

Purpose – The paper challenges the focal firm perspective of much resource/capability research, identifying how a dyadic perspective facilitates identification of capabilities required for servitization. Design/methodology/approach – Exploratory study consisting of seven dyadic relationships in five sectors. Findings – An additional dimension of capabilities should be recognised; whether they are developed independently or interactively (with another actor). The following examples of interactively developed capabilities are identified: knowledge development, where partners interactively communicate to understand capabilities; service enablement, manufacturers work with suppliers and customers to support delivery of new services; service development, partners interact to optimise performance of existing services; risk management, customers work with manufacturers to manage risks of product acquisition/operation. Six propositions were developed to articulate these findings. Research implications/limitations – Interactively developed capabilities are created when two or more actors interact to create value. Interactively developed capabilities do not just reside within one firm and, therefore, cannot be a source of competitive advantage for one firm alone. Many of the capabilities required for servitization are interactive, yet have received little research attention. The study does not provide an exhaustive list of interactively developed capabilities, but demonstrates their existence in manufacturer/supplier and manufacturer/customer dyads. Practical implications – Manufacturers need to understand how to develop capabilities interactively to create competitive advantage and value and identify other actors with whom these capabilities can be developed. Originality/value – Previous research has focused on relational capabilities within a focal firm. This study extends existing theories to include interactively developed capabilities. The paper proposes that interactivity is a key dimension of actors’ complementary capabilities.