Servitization as a driver for organizational change
Summary (2 min read)
Introduction
- Traditional business models used by manufacturers that exclusively focus on exploiting economies of scale are frequently proving unsuitable for growth, profitability, and firm survival.
- The addition of service offerings to the portfolio of traditionally product-oriented companies is of growing importance and this special issue publishes work which addresses this observed industry phenomenon dubbed ‘servitization’ (Vandermerthe authors and Rada, 1988; Neely, 2008).
- Next section will review the state-of-the-art of servitization literature and further sections will summarize the academic contributions published in this issue.
- Different terms have been employed to define the concept in the management literature.
- In the following sections the authors give more detail of each paper and their relation to theory.
Industry level
- The first paper by Redding presents a strategy development method which leads to greater understanding of an organisations competitive space and facilitates alignment of service offerings, structure, level of technical monitoring support, and the products position in the value chain - the main link to value creation (Holweg and Helo, 2014).
- The method allows detailed assessment and understanding of the customer need, internal and external organisational requirements, technologies to support intelligent products and service strategies and aligned service delivery systems.
- The long time period illustrates the impact of servitization on the industry, driven by disruptive innovations (Tidd and Bessant, 2005) which have replaced physical format music with digital music product service systems (Parry et al., 2012).
- Consistent with previous literature on the topic (Vendrell-Herrero et al., 2014) analysis confirms there is a link between the fall in industry revenues and firm profits and shows that decrease in profits were greater for local firms than multinationals.
- Galera-Zarco et al. contribute with an analysis of servitization in the construction sector with an examination of Project Based Firms (PBFs), an organizational challenge in business model design and business structure in itself (Davies and Brady, 2006).
Cost and revenue efficiency
- Thenent et al. provide a paper examining the challenge of costing service systems.
- Thenent et al. point out that cost estimators methods traditionally focus upon predicting how much something costs using aggregate data and drawing on past experience.
- The work discusses a costing methodology which is suitable for address the problem and context.
- Action and practical implementation of service strategies may be undertaken based on claims made for potential cost savings or increased revenue through service.
- Without addressing the concerns raised in the paper such actions may be imprudent.
Territorial competitiveness
- Current literature is silent with regards analysis of how public policies could encourage the development of service-oriented strategies in companies to foster territorial competitiveness.
- In fact, while there is burgeoning research on innovation policy and innovation policy mix (Flanagan et al., 2011), there is little explicit analysis of how innovation policy mixes might relate to servitization processes.
- Kamp and Alcalde present an analysis of the Basque region of Spain and the readiness of firms there to servitize.
- The analysis focuses on the value of knowledgeintensive services (KIS) as a proxy for the readiness for servitization of businesses.
- The analysis highlights a number of issues and areas where investment and support for the region may help firms servitize to reach the stated goals of competing in national and international markets in the knowledge-intensive service area.
Digital technology
- Sultan examines the Cloud Computing phenomenon, a disruptive innovation that has servitized the IT industry (Vendrell-Herrero and Lafuente, 2014).
- Cloud computing as a disruptive innovation requires organisations and computing service providers undertake a fundamental and cultural shift in the way they view their IT use and requirement.
- Enterprise Resource Planning (ERP) systems are core IT systems for firms which integrate manufacturing processes and functions with parts and orders in the supply chain (Cannon and Homburg, 2001).
- The paper contributes to the literature by examining, through a single case context, bolt-on software extensions.
- Findings indicate that firms engaging in a process of servitization may benefit from CRM and SRM bolt-ons and that these should be integrated into the ERP system to strengthen and facilitate customer and supplier integration.
Conclusions and future research
- The present special issue contributes to a growing literature on service management, product service systems and servitization.
- The theoretical developments and the qualitative and quantitative evidence provided offer valuable lessons for academics, managers and policy makers.
- In particular this issue offers relevant and detailed developments on gap analysis , Cost analysis (Thenent et al.), and Enterprise resource planning (Opazo-Basaez et al.).
- The inclusion of service offering may be forced upon a sector via disruptive innovation.
- The papers published provide insights into servitization from different perspectives, highlighting areas where there is a need for further research.
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...It seems, however, that there is limited reporting of in-depth longitudinal studies explaining the details of individual firms’ step-by- step service journeys (Vendrell-Herrero et al., 2014; Baines, Bigdeli, Bustinza, Shi, Baldwin and Ridgway, 2016)....
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...Business transformations and organizational change Servitization is a form of business transformation that calls for organizational change (Vendrell-Herrero et al., 2014)....
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...Table 1: Steps in the transition to services from literature Business transformations and organizational change Servitization is a form of business transformation that calls for organizational change (Vendrell-Herrero et al., 2014)....
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References
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"Servitization as a driver for organ..." refers background in this paper
...The long time period illustrates the impact of servitization on the industry, driven by disruptive innovations (Tidd and Bessant, 2005) which have replaced physical format music with digital music product service systems (Parry et al., 2012)....
[...]
...The long time period illustrates the impact of servitization on the industry, driven by disruptive innovations (Tidd and Bessant, 2005) which have replaced physical format music with digital music product service systems (Parry et al....
[...]
2,228 citations
"Servitization as a driver for organ..." refers background in this paper
...Servitization describes how companies consciously transform their businesses into services to gain competitive ground (Vandermerwe and Rada, 1988)....
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...companies is of growing importance and this special issue publishes work which addresses this observed industry phenomenon dubbed ‘servitization’ (Vandermerwe and Rada, 1988; Neely, 2008)....
[...]
...The addition of service offerings to the portfolio of traditionally product-oriented companies is of growing importance and this special issue publishes work which addresses this observed industry phenomenon dubbed ‘servitization’ (Vandermerwe and Rada, 1988; Neely, 2008)....
[...]
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"Servitization as a driver for organ..." refers background in this paper
...Baines et al. (2007) identify five terms used to discuss the phenomenon: Servitization, Product Service Systems, Service Marketing, Service Operations, and Service Science....
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"Servitization as a driver for organ..." refers background in this paper
...Nevertheless, current empirical research is silent on the organizational change that a firm may experience during the implementation of servitization strategies and its subsequent financial costs and benefits (Pettigrew et al., 2001)....
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Frequently Asked Questions (2)
Q2. What are the future works in "Servitization as a driver for organizational change" ?
The papers published provide insights into servitization from different perspectives, highlighting areas where there is a need for further research. In this regard future research may contribute to the development of firms and economies by providing greater understanding of the challenge of servitization and guidance as to how best to proceed in both developing business and research. As a firm ’ s product offering mature they are likely to seek further revenue through provision of services which draw upon their knowledge. The authors believe that the servitization phenomenon will be an area of significant interest for the upcoming years.