Servitization in Manufacturing Firms Understanding the obstacles that determine service scope

Abstract

With increased globalization, the threat of price-based competition has lead to an upward trend of western manufacturing firms adding services to their product offerings, in an effort to deliver product-service systems (PSSs) that cover a wider range of customers’ needs. In this transition towards more services, there are many firms that fail to develop successful systems, get stuck, or fall back in their original business. This study aims to investigate why some firms fail to servitize their offering when others do not. To develop the understanding of this discrepancy, this study is designed as a multiple case study with five manufacturing case firms. From the data collected in these cases, twomajor findings emerge. Firstly, a typology of PSSs that enables a connection between different types of obstacles and different PSS types is developed. Secondly, with the help of the typology in the first finding, it is found that a firm’s relative position in the value chain has an impact on the range of attainable PSSs. Finally, the main implication of these findings is that manufacturing firms that have a distant position in the value chain relative to the customer should not try to develop certain PSSs. More specifically, such firms should avoid developing PSSs that have non-separable product and service components and primarily generate value for the customer that is charged for, unless they circumvent or partner up with the middleman in between themselves and the customer.