Challenges and Success Factors in Digital Servitization

Abstract

In recent decades, it has become increasingly attractive to firms to implement a service logic into their offerings in a process called servitization: a transformation process that manufacturers undergo when shifting from being a product provider to becoming a provider of outcome-based services. Servitization can benefit the company as well as the environment, as it fosters great potential for circular innovation by shifting corporate incentives towards product longevity. However, many firms struggle to successfully pursue service innovations. With the onset of digital technologies, servitization has become more promising, but also more complex. Much like traditional servitization, firms struggle to implement digital servitization (DS) successfully. However, due to the novelty of the field, there is only limited evidence on the factors that lead to the success or failure of DS transformations. This paper collects the available evidence in a systematic literature analysis of empirical case studies documenting DS processes with the primary purpose of building a conceptual framework of the factors that contribute to successful DS. This, in turn, contributes to smaller aims: firstly, to understand which factors are broadly agreed upon and which ones are still contentious; secondly, to suggest directions for further research based on those themes that are still contentious or underanalysed; and thirdly, to understand which success factors for service-based circular business models may contribute to servitization success and vice versa. Based on the analysis, the thesis finds that DS success hinges on a value network consisting of the servitizing firm, its customer and supplier, and several other new partners. The relation between these actors is close and mediated by digital technologies as the actors share knowledge, competences, and information among each other. Notably, though, extant literature makes little to no claims on how circular economy questions are considered in the DS offering’s development, suggesting that this is not yet a salient concern among servitizing firms. Based on this analysis, the thesis suggests further research into the topics of DS paradoxes; customer relations for DS; the structure of the value network; business models for DS; digital servitization in the circular economy; and risk management for DS.