Academic journal article Journal of Applied Management and Entrepreneurship

Identifying Servitization Capabilities of Manufacturers: A Conceptual Model

Academic journal article Journal of Applied Management and Entrepreneurship

Identifying Servitization Capabilities of Manufacturers: A Conceptual Model

Article excerpt

Introduction

Today, partly due to the globalized product market and cost pressures, manufacturing companies are increasingly beginning to offer solutions and services in order to enhance profitability and maintain existing customer relationships. Over the past decade, the potential of services offered by industrial manufacturing companies has been revealed and increasingly viewed as part of organizational strategy. This phenomenon of manufacturers adding services to their offering, here referred to as servitization, creates both benefits and challenges for companies aiming to increase the value perceived by customers (Quinn, Doorley, & Paquette, 1990; Windahl & Lakemond, 2010; Wise & Baumgartner, 1999). Various terms have been used in the academic literature, including service infusion, service differentiation, service business development, or simply transition from products to services (Davies, 2004; Oliva & Kallenberg, 2003; Vandermerwe & Rada, 1988).

Despite the growing interest of both scholars and practitioners, research focusing on service transformation has mostly discussed the requirements for sensitization without considering the current organizational situation. In the service strategy literature, the broadest company-wide strategies have been seen as the most successful for manufacturers, although the starting point for this transformation is rarely discussed. Studies that have examined the service orientation of servitizing companies have assumed manufacturing companies have a companywide manufacturing-oriented culture. Additionally, organizational structure in servitization has been mainly discussed only relating to whether one of the business units, or all of them, should focus on services. Furthermore, many scholars have accepted the servitization process as a set of incremental expansion phases beginning with product-related services such as spare parts and maintenance and moving towards integrated solutions (e.g., Gebauer & Fleisch, 2007; Gebauer & Friedli, 2005; Mathieu, 2001a; Oliva & Kallenberg, 2003; Tukker, 2004). However, these models fail to examine how the transition depends on and affects company traits and customer relationships, as they have solely concentrated on the changes in the offering (Brax, 2005). Thus, the literature to date has not offered manufacturing companies much guidance on how to begin servitizing.

The focus of the current study is on the beginning of the servitization process. We aim to answer the following research questions: How can we determine and depict the ability of a manufacturing company and its business units to begin to servitize? How can we define the required scope of change to reach set service-strategy goals? In order to shed light on the first steps of servitization, we utilize previous literature on servitization challenges to propose a conceptual model for analyzing the servitization capabilities of manufacturing companies.

Here, servitization is viewed as a conscious strategic decision by top management. However, it is assumed that separate business units within a manufacturing company can pursue different strategies and operate in different markets. Additionally, according to Schein (2004, 2009) the organizational culture may consist of various levels (artifacts, espoused values, basic underlying assumptions) and subcultures that may not all be visible even to the organization's own members. Acknowledging this complexity of both organizational strategy and culture, it can be assumed that a company-wide servitization process may be difficult, or even unnecessary, to implement. Hence, we examine the servitization phenomenon at the business-unit level in order to provide more detailed and applicable results.

An interdisciplinary literature review combined elements from organizational studies, operations management, service management, and organizational strategy to extend existing theories relating to the servitization of manufacturing companies. …

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