Managing value in use in business markets

Suppliers in business markets are increasingly providing complex offerings, which is reflected in concepts like hybrid offerings, servitization and solution business. Such complex offerings are characterized by value propositions in which the value that emerges throughout the entire customer usage cycle builds the core element. To secure and increase this value in use, as perceived by the customers, suppliers need to establish activities of value-in-use management. This value-in-use management comprises monitoring the delivery of the promised value, and enhancing customer value in use throughout the entire lifecycle of a complex offering. This article investigates which value-in-use management activities are currently implemented by suppliers, how these activities are linked to other business processes, and what differences in value-in-use management activities exist between various types of complex offerings. By addressing these questions, this research contributes to literature by exploring post-deployment processes that affect value in use customer experience when using complex offerings. Moreover, from a managerial perspective, it reveals in which constellations measures of value-in-use management are currently implemented in practice and therefore are of particular importance. Furthermore, the results of the study may serve as a starting point to elucidate how measures of value-in-use management can be implemented successfully.     

Paths Toward Radical Service Innovation in Manufacturing Companies—A Service‐Dominant Logic Perspective

Research on servitization of manufacturing companies concentrates on typologies of product–service bundles, on transition pathways to increased servitization, and on resource and capabilities configurations necessary to accomplish this transition. Missing from existing research is an analysis of the degree of novelty of service innovations introduced by manufacturing companies. Therefore, this article shifts the focus from the transition process itself to the question of how manufacturing companies can introduce radical service innovations to the market. This article links servitization literature with service innovation literature and investigates how manufacturing companies can introduce radically new services in terms of three forms of innovations: service concept innovations, customer experience innovations, and service process innovations. Service‐dominant logic (SDL) is applied as the theoretical lens because it covers four significant factors influencing the success of companies’ innovation activities: actor value networks, resource liquefaction, resource density, and resource integration. Based on a multiple case study of 24 Danish business‐to‐business manufacturing small‐ and medium‐sized enterprises and through a fuzzy set qualitative comparative analysis, different configurations of the principles of SDL are analyzed. They describe the paths to radical service innovation. Digitalization appears as a central causal condition in the bulk of the configurations. Big and rich data generated internally within the focal company in combination with for instance customer data can enhance the innovativeness of the service offerings. However, digitalization is not a sufficient condition for launching radical service innovation—it should be combined with an efficient mobilization of resources internally within the focal company and/or collaboration with other organizations within the value system. In addition, the analysis hints to a need to detach from immediate customers as the prime driver of service innovation.     

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.     

Servitization: A contemporary thematic review of four major research streams

Servitization describes the addition of services to manufacturers' core product offerings to create additional customer value. This study aims to identify the key themes and research priorities in this body of literature over thirteen years from 2005 and 2017, based on four major research streams (general management, marketing, operations, and service management). Prior multi-theme literature reviews have focused on operations journals, overlooking important work in other streams, particularly marketing. Informed by a systematic literature review of 219 papers, the study identifies five main themes: service offerings; strategy and structure; motivations and performance; resources and capabilities; service development, sales, and delivery. Within each theme, gaps in the literature are identified and eleven research priorities presented. The review shows that the literature has evolved significantly in recent years, becoming increasingly diverse. A recent noteworthy topic is the use of digital technologies, which indicates the increasing relevance of technological developments to manufacturers' service activities. Our review highlights that there are still some fundamental aspects of servitization that warrant further research, primarily the need to replace the focal-manufacturer perspective with a multi-actor perspective that highlights the important role of relationships with existing and potentially new actors as a result of technological developments.     

Servitization and deservitization: Overview,concepts, and definitions

The topic of servitization has generated a considerable body of research and many conferences, as well as industry engagement. Yet, despite the extensive literature associated with this now-mature discipline, there is no broad-based consensus on the core concepts and definitions deployed by servitization scholars, and both terminology and usage often seem ambiguous. This paper examines challenges related to service growth strategies, as well as strategies involving deservitization or a retreat from service offerings. Showing that these strategies have been pursued for more than fifty years, clarification is sought here by framing the corresponding processes and proposing definitions for four core terms: servitization, service infusion, deservitization and service dilution. It becomes clear that in focusing on the organizational change entailed by these processes, future research must elucidate “softer” issues such as leadership and business logic.     

Effective product-service systems: A value-based framework

Manufacturers increasingly engage in servitization and as a result offer services in combination with their products (i.e., product-service systems, PSS). However, while servitization in theory seems to be a promising strategy, in practice, the bundling of services with product offerings does not always result in the expected performance outcomes. In this paper, we propose a framework that helps manufacturers to overcome this servitization paradox. The underlying premise of our framework is the need to give primacy to the value customers derive from PSS. The framework builds on the idea that products and services differ with regard to the value that is created by the tangible elements and the interaction moments between manufacturers and customers; this is presented in a 2 × 2 matrix. Subsequently, this paper provides guidelines for identifying PSS that are effective in terms of value creation. First, the product and service elements of the PSS should have sufficient autonomous value to be sold separately on the market. Secondly, they should come from different quadrants of the 2 × 2 matrix. Lastly, the combination of product and service elements should create synergy. Through a survey among product and service developers and an experimental auction among customers we validate our ideas.     

Understanding the role of service innovation behavior on business customer performance and loyalty

Providing new services to customers gives firms a competitive advantage in the market. Consequently, firms strive to develop innovative service that delivers new value propositions to customers and leads to customer satisfaction and the acquisition of new customers. The authors investigate the relationship between the innovative behavior of service providers, business customer performance, and business customer loyalty in the safety industry. The study's results show that technology-oriented and co-creation-oriented innovative behavior leads to business customer performance. Business customer performance is closely related to recommendations and re-contracts. Moreover, the degree of safety involvement has a moderate effect between service innovation and business customer performance. The findings have important theoretical and managerial implications for service innovation for researchers as well as service providers.     

Meta-model of servitization: The integrative profiling approach

This study develops a profiling framework that allows systematic comparison of different value constellations of industrial, service-based business models. Following the systematic review method, 154 research articles on servitization are analyzed using this profiling approach, producing an integrative meta-model of servitization. Three different approaches to represent servitization in studies are identified: 1) end-state models; 2) gradual transition models, and 3) stepwise progression models. These are systematically compared and eight conceptually different, generic value constellations ranging from low to high levels of servitization are identified: products with limited support; installed and supported products; complementary services; product-oriented solutions; systems leasing; operating services; managed service solutions; and total solutions. These form a pattern of servitization showing increases in complexity of the offering and value for the customer as well as changes in operational responsibilities in the value constellations. This approach resolves the gap of conceptual incommensurability’ in the literature by providing a reference against which the different value constellations of servitization can be compared. The meta-model connects the various perspectives, models and terminology into a base line theory of servitization as a process, and enables a systematic comparison of the different empirical studies.     

Challenges of servitization: A systematic literature review

The challenges of servitization have gained significant attention from both academics and practitioners, as more firms in the industrial sector are seeking marketing opportunities leading to business growth through the adoption of a service strategy. Although existing research has explored its challenges from multiple perspectives, this is largely fragmented and the studies offer little understanding of the impacts of the challenges on the realisation of servitization benefits and improvements in business performance. This study, therefore, aims to create a formal construct of the challenges and develop a set of hypotheses through a systematic review of the servitization literature to build a theoretical model explaining the underlying relationships. Five challenges are identified: organisational structure, business model, development process, customer management, and risk management. The indicators of each challenge are discussed to support the establishment of hypotheses. This study contributes to the current body of knowledge by reaching a clear conclusion from the fragmented literature and brings together five challenges to explore their impacts on the overall business.     

Firm boundaries in servitization: Interplay and repositioning practices

The present study analyzes how servitization delineates a manufacturer's boundaries. Based on interviews with 57 senior managers and extensive secondary data collected from four global solution providers, this study contributes by revealing how servitization shapes firm boundary decisions and repositioning practices. First, the results demonstrate that servitization changes a manufacturer's a) identity from technology-focused to customer-centric, b) capabilities to integrate technology development with customer value understanding, c) power position in the manufacturing ecosystem from upstream to downstream, and d) efficiency logic toward a service factory logic. Second, this study describes the interplay among these boundary lenses in servitization. The developed framework can assist managers in their strategy implementation when moving toward servitization.     

Boosting servitization through digitization: Pathways and dynamic resource configurations for manufacturers

The importance of digital technologies for services in manufacturing has often been posited, but current literature has neglected to explain how companies can leverage digital methods to increase their service offering. In this article we contribute to current theory by examining how digitization can enable servitization for manufacturers. By performing a multiple-case study at four manufacturing SMEs, we provide evidence for a priming and a capability effect. In terms of priming, we find that specific digitization options lead to three servitization pathways: industrial, commercial and value servitization. Through a dynamic resource-based lens, the barriers, dynamic resource configurations and competitive benefits specific to each pathway are discussed. Finally, this paper offers managers insight on successfully reaching higher service levels through development of digital assets, and on the skills necessary to further integrate into customers' processes.     

Developing logistics value propositions: Drawing Insights from a distributed manufacturing solution

With a focus on supply chains as ecosystems of service exchange, our paper aims to explore how value propositions are developed and evolve via combinations of service innovation. A single longitudinal case study is presented. The units of analysis are different projects along a logistics service provider (LSP)’s innovation journey. The study explores how the case company identified innovation in logistics as a gap and developed a distributed manufacturing strategy with a unique business model involving a reallocation of production functions across a global supply network. Our contribution is two-fold. In terms of theory, we adopt a service-dominant logic perspective to investigate how companies' value propositions evolve over time. In terms of managerial contributions, our paper provides insights into how service providers can strategically integrate their resources with service ecosystem partners to provide competitive business propositions.     

How mutuality reinforces partnership development: Japanese and Korean marketing perspectives

Relationship building is about ‘mutuality’ and how an organizational cultural value system enhances the development of long-term relationships that influence the marketing strategy process. This paper explains how senior managers embrace the concept of mutuality in order to establish a partnership arrangement in the context of a vertical marketing system. From the literature, four propositions relating to customer service policy, the process of innovation, relationship marketing and comparative national culture were developed and placed in the context of a Japanese and a South Korean electronics company based in the UK. The propositions were validated using in-depth, personal interviews with a limited number of senior managers in the two global companies. Evidence suggests that managers in Japanese companies formulate industry and country specific customer service policies, dictate R&D programmes, and spend a long time getting to know an individual in a potential partner organization(s) before they engage in any form of business integration. Whereas managers in South Korean companies are keen to communicate extensively and seek to acquire additional skills and knowledge so that they can innovate and implement cost effective strategies.     

Explaining servitization failure and deservitization: A knowledge-based perspective

The literature on servitization suggests that manufacturers benefit from moving towards solution provision and closer integration with customers. Yet, empirical evidence indicates two notable deviations from this accepted wisdom: servitization failure and deservitization. This conceptual article seeks to explain these observed deviations by developing a knowledge-based perspective on servitization. Drawing on literature on knowledge-based theory, organizational search, organizational learning, and organizational capabilities, the article analyses the interorganizational structure of production between the solution provider and its customer. Reconceptualizing the integrated solution offering as a bundle of knowledge components, a coherent theoretical framework is developed for understanding servitization. This framework provides insight into the antecedents and consequences of servitization and offers multiple explanations for servitization failure and deservitization. The knowledge-based perspective also points towards several new avenues for future research on servitization.     

Transitioning and co-evolving to upgrade value offerings: A competence-based marketing view

This article shows how subcontractors in the steel and metalworking industry can effectively upgrade their customer value offerings. The study intends to identify internal and external drivers for successful transitions. It builds on the IMP's (Industrial Marketing and Purchasing Group) research tradition by looking into value creation and competence-based marketing within business networks. Using qualitative methods, the research identifies ‘ideal’ value-added market positions and relates these to specific competence configurations. It also reveals the need to manage co-evolution with other network partners in order to make a successful transition from basic to value-added offerings. The paper contributes to business marketing science by looking explicitly into the mechanisms of internal alignment when upgrading value offerings (a pre-condition often overlooked in extant literature) and by extending the concept of co-evolution.     

Digital servitization: Crossing the perspectives of digitization and servitization

For over three decades now, several product companies around the world have been undertaking servitization paths. They have been devoting growing and substantial efforts to expand their service business. Expanding the service business in addition to their traditional core product business secures long-term growth and strengthens competitive advantages in business-to-business marketplaces. Recently, service business expansion has taken up many of the new digital technologies offered through the digital transformation. Thus, the servitization literature has progressed toward a dialogue on digital servitization . Against this background, the present article introduces the reader to this special issue. It first recalls key aspects of the emerging digital servitization discussion, and then depicts, through illustrative case studies, the growth paths utilized by industrial product companies when they take advantage of the digital servitization process. After discussing how the articles included in this special issue advance the literature, the article develops a number of directions for future research on digital servitization.     

Perception of value delivered in digital servitization

This paper intends to explore the perception of value delivered in digital servitization in a business-to-business context of incumbent manufacturing firms. We investigate how individual entrepreneurial orientation (IEO) influence and affect the adoption of such digital servitization strategies. The observations are made through a survey and empirical assessment across a couple of large industrial organizations interested in servitization and digitalization. Findings contribute to the existing literature on digital servitization and business model innovation by suggesting that IEO influence perceived value in delivering digital service offers, whereas functional affiliation does not. Further observations suggest that digital capabilities can become a crucial enabler for the perception of value delivered in digital business models by providing swift access to data for affected stakeholders.     

Business models: Impact on business markets and opportunities for marketing research

Business models have evolved in the context of new venture creation. By offering an entrepreneurial perspective to established marketing elements such as value propositions, value capturing and value networks, business models provide marketing discipline with both challenges and opportunities to engage with entrepreneurial environments. In particular, business models call for approaches that elucidate value-in-use of marketing offerings, reveal the performance of contracts in orchestrating value networks and identify the performance of network configurations. In this article we present some implications of and opportunities for business models for marketing research.     

Sustainable value propositions: Framework and implications for technology suppliers

Advances in sustainable purchasing put pressure on firms to evaluate and demonstrate the sustainability of their products and services. In this paper, we coin the term sustainable value proposition, develop a process framework for building sustainable value propositions, and illustrate its application with two technology-intensive offerings. By integrating the literature on sustainable marketing and customer value propositions with life cycle assessment methodologies, we build a process framework that can be applied to demonstrate and evaluate the economic, environmental and social benefits of industrial products and services. The framework comprises 1) identification of potential impacts, 2) identification of key value creation mechanisms, 3) choosing key indicators, 4) life cycle modeling, and 5) life cycle value demonstration. Through two case studies, we examine the development of sustainable value propositions in two industry sectors: metallurgical and automotive. The results highlight the value provided to customers through the combination of direct economic benefits and derivative benefits of reduced environmental and social impacts. Our paper contributes to the growing field of sustainable marketing by offering guidelines on how to integrate sustainability with the marketing and purchasing of technology-intensive offerings. In addition, we offer guidelines for how to construct sustainable value propositions that resonate with customers.     

Only the Brave: Product Innovation,Service Business Model Innovation,and Their Impact on Performance

Recent empirical findings concerning the performance effects of service business model innovation (servitization) and its interplay with product innovation are mixed. Using the lenses of the demand‐based view on value creation and complementarity, the performance impact of two key service business models is examined: the product‐oriented model and the customer‐oriented model, implemented jointly with product innovation. Results indicate that the interplay between service business model innovation and product innovation results in long‐term performance benefits coupled with a degree of short‐term performance sacrifice. Service business model innovation in isolation from product innovation results in short‐term profit gains but long‐term knowledge loss and, thus, market performance decline. Our study suggests that firms need to look beyond the evidence on short‐term effects in order to achieve superior performance in the long run.