Internet of things technologies,digital servitization and business model innovation in BtoB manufacturing firms

Technologies like the Internet of Things (IoT) are offering new opportunities and posing serious challenges to firms, forcing them to create entirely new business models, migrating from the conventional product-centric approaches to (digitally-based) service-oriented ones. This paper – following a qualitative research method – aims at describing the service-oriented impact of IoT technologies on firms' business models, with a particular focus on opportunities and challenges for BtoB manufacturing firms.Being the impact of IoT technologies on businesses a quite recent research stream, to date scarce attention has been devoted to the topic with specific attention to its impact on service-oriented business models in manufacturing firms. The paper contributes in this research stream in different ways. It proposes a map of digital servitization that helps in understanding firms' strategic transitions caused by technologies, making both theoretical and managerial contributions. Firstly, the research underlines the impact of the firms' sales model as a strategic factor in shaping firms' digital servitization strategies. In addition, three progressive levels of digital servitization complexity are identified, namely product- process- and outcome-oriented, that are based on an increasing use of IOT technologies and have specific challenges and opportunities.     

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.     

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.     

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.     

Causal or effectual? Dynamics of decision making logics in servitization

This study explores servitization as an innovative market strategy for manufacturers and investigates how the decision making logics change over time in the servitization transformation process. Effectuation theory is applied to examine servitization as a new theoretical exploration. A longitudinal case study of a global heavy vehicle manufacturer's servitization process in China reveals that the decision makers adjust their decision making logics depending on the stage of the servitization process and associated risk patterns. As the servitization process evolves into a more sophisticated stage, decision makers will change their decision making logics from a causation dominant logic to an effectuation dominant logic in order to cope with the increased risks. Effectuation theory originally developed from entrepreneurship research is found to be a valid theory for the explanation of the risk and uncertainty control behaviors in the servitization transformation process of manufacturing firms.     

Barriers to Matching New Technologies and Market Opportunities in Established Firms

In industries that produce high‐technology products or are reliant on technology for administrative or manufacturing processes, it is essential appropriately to link technologies to markets in order to increase shareholder value and to build future cash flows. Research and development (R&D) allocations in such industries are greatly dependent on forecasts of the R&D project's estimated potential contribution to future cash flows, which is related to the project's ability to satisfy current or future customer needs. The resource allocation decisions are difficult, however, since both markets and technology are likely to be highly uncertain. Although the innovation literature ably has addressed specific relationships between certain factors and new product development outcomes, less attention has been given to obstacles faced in linking technology to markets. Grounded in a literature‐based discussion of technology and market opportunity, the authors develop a conceptual framework for identifying and understanding the barriers facing managers in the process of matching technologies to market opportunities. Technology and market barriers include technology‐market linkage, technology availability, technology and market capabilities of competitors, and business model feasibility. Strategy and structure barriers include competition for limited resources, technology capabilities, technology portfolio goals, current market strategies, and competition for control of market charters. Social and cultural barriers include interpretive and communication barriers between functional units and language and cultural barriers within the technology workforce. The article concludes with implications for researchers and managers. The conceptual framework presented here can encourage the development of a stream of research in the area of technology strategy and planning processes, allowing researchers to improve our understanding of the process of technology innovation. Managers can use the framework as a guide for addressing a wide range of issues related to the process of matching technologies to market opportunities. For example, rather than relying strictly on cash flow projections for estimating the value of a new technology, managers also should consider how the technology could create new market opportunities or could reshape existing ones.     

Transforming provider-customer relationships in digital servitization: A relational view on digitalization

Digitalization is viewed as a source of future competitiveness due to its potential for unlocking new value-creation and revenue-generation opportunities. To profit from digitalization, providers and customers tend to move away from transactional product-centric model to relational service-oriented engagement. This relational transformation is brought about through digital servitization. However, current knowledge about how providers and customers transform their relationship to achieve benefits from digital servitization is lacking. This paper addresses that knowledge gap by applying the relational view theory to a study of four provider-customer relationships engaged in digital servitization. The results provide evidence for four relational components – complementary digitalization capabilities, relation-specific digital assets, digitally enabled knowledge-sharing routines, and partnership governance – that enable providers and customers to profit from digital servitization. A key contribution is the development of a relational transformation framework for digital servitization that provides an overview of how the four relational components evolve as the relationship progresses. In doing so, we contribute to the emerging servitization literature by offering key relational insights into the interdependence of activities throughout the transformation phases of provider-customer relationships in digital servitization.     

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.     

Servitization in global business-to-business distribution: The central activities of manufacturers

Manufacturers' servitization development is a prevalent trend in the current business world. Companies then aim to increase customer closeness and complement product offerings with services. However, extant literature on distribution and marketing channels literature remains limited in terms of the implications of servitization for global business-to-business distribution. Therefore, this qualitative multiple case study identifies the central activities of servitizing manufacturers in global distribution. The study concludes with the following research propositions: Servitizing manufacturers develop global service portfolios and customize offerings according to local customer characteristics; build global operation models and adjust local service processes; ensure global brand coherency and design the customer experience according to local customer expectations; and create global value propositions and enhance local value co-creation with business customers. The study outlines managerial implications in terms of organizing global distribution. It also discusses new knowledge sharing and capability needs regarding solution sales, service provision and customer relationship management.     

How to perform collaborative servitization innovation projects: the role of servitization maturity

Although current literature indicates that openness and collaboration are crucial for success in an innovative servitization solution within interorganisational servitization projects, research is limited compared to that on product and technology innovation projects. Moreover, this emerging servitization literature is limited to the traditional lead-firm perspective within larger consortiums. To help redress the balance, our research studied six collaborative servitization projects in mobile information and communication technologies (mICT) to explore why some open innovation efforts succeed in simultaneous service and product innovation with a market application of innovative solution, while others do not. The study provides empirical evidence that only a small number of projects resulted in an effective servitization innovation solution. This conclusion emphasises the complexity of creating service innovation in the mICT sector. By comparing better performing servitization projects with those that were less successful suggests that higher performance, in terms of novel service development, requires more than mere strong intention, adequate leadership and change management competencies. Rather, it also requires real servitization maturity in terms of a shared servitization framework and market-oriented innovation.     

Selling Value in Business Markets: Individual and Organizational Factors for Turning the Idea into Action

Modern business-to-business firms focus increasingly on understanding and selling value, as a strategic priority and to achieve marketing and sales excellence. Yet many companies struggle to implement their value orientation, without sufficient knowledge of how to translate it into sales practice. This study therefore examines value-based selling (VBS) as an implementation of value-based marketing at the sales force level. The proposed motivation–opportunity–ability framework integrates individual- and organizational-level antecedents, outcomes, and moderators in an attempt to explain the adoption and performance outcomes of VBS in business markets. Multilevel path modeling with cross-sectional survey data from 944 salespeople and managers in 43 sales organizations confirms the prediction that VBS enhances salespeople's performance, beyond that achieved with established selling approaches. However, firms need specific types of salespeople and dedicated organizational support for effective VBS implementation. A salesperson's learning orientation and networking competencies emerge as critical antecedents. Organizational value assessment tools can compensate for individual salespeople's lack of learning orientation; reference marketing efforts also strengthen the performance outcomes of VBS. Finally, VBS is most effective in organizational settings where perceived customers value demandingness is lower, enabling salespeople to use VBS as a proactive selling approach.     

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.     

Services growth options for B2B product-centric businesses

Many B2B companies that have traditionally been product-centric businesses (PCBs) are addressing the services opportunity (servitization), providing services aligned with customers' operations and/or that address products from other suppliers. The purpose of this paper is to create a new typology through which PCBs' services strategies can be categorised using these two dimensions, which is used to explore four services strategies and three growth options. Companies selling less complex products predominantly use services to enhance product differentiation, whereas those selling more complex products often undergo servitization, with opportunities and risks from each growth option. The risks of providing operations services are particularly noted since their successful provision requires significant changes to a PCB's activities. The results provide a critique of resource-based theory, specifically those resources that enable PCBs to create market differentiation through services. The importance of relational resources increases as services strategies involve products from other suppliers and customers' operations.     

Developing and leveraging platforms in a traditional industry: An orchestration and co-creation perspective

In the current fast-changing and digitalizing world, ever more firms active in traditional industries are transforming themselves into ‘Smart Factories’. Within their value chains, manufacturers are shifting from working at arm's length with other firms, to creating integrated platforms. These are composed of co-creating and collaborating actors. Even though the opportunities and competitive advantages of platforms for industrial applications have been proven, insights in the lead actors' efforts to ensure co-evolution of the platform and the platform actors' contributions to value co-creation are scarce. That way, the full potential of collaborative firm settings might not be realized. Addressing this gap, we explore through a multiple case study how manufacturers in the traditional Chinese textile industry gradually adopt a platform-based logic. This results in an integrative framework unfolding the lead actor's orchestration capabilities to ensure co-evolution, and the prerequisites for value co-creation in a platform. As such, we adapt and extend the co-evolution concept mostly examined in a dyadic setting to a multiple actors' logic and answer calls for additional research on the micro-foundations of value co-creation in platforms.     

An empirical analysis on purposes,drivers and activities of technology opportunity discovery: the case of Korean SMEs in the manufacturing sector

Technology opportunity discovery (TOD) is becoming increasingly important for identifying technology opportunities so that they can be reflected in firms' strategy planning. However, understanding of TOD practices within firms is limited, and the diversity of TOD practices has not been fully reflected in previous studies, especially from the perspective of small and medium enterprises (SMEs), which typically lack diverse technology portfolios or plentiful innovation resources, so technology opportunities have seldom been defined and analyzed. This study aims to investigate SMEs' TOD practices and to identify their characteristics. Interviews were conducted with Korean SME executives to define a conceptual TOD model for SMEs, and 104 Korean SMEs' TOD drivers and activities were surveyed focusing business drivers, business models, and information gathering. The results were then analyzed to define six technology opportunity types and to derive similarities and differences among them, which are used to understand and further support SMEs' TOD practices. The research findings are expected to enhance understanding about TOD practices and to help establish SMEs' TOD strategies.     

Factors influencing strategic alliance outcomes in a manufacturing supply chain: Role of alliance motives,interdependence, asset specificity and relational capital

Integration of various theories is essential to completely understand and explain strategic alliances in a supply chain. The purpose of this paper is to develop a framework by integrating the features of transaction cost theory, resource-based theory, contingency theory, social exchange theory, and Kelley's personal relationship theory and test the framework through empirical research. The present study addresses the impact of strategic alliance motives, environment, asset specificity, perception of opportunistic behavior, interdependence between supply chain partners, and relational capital on strategic alliance outcomes. Besides, the study has also tested the role of relational capital as a central mediating construct. A sample of 2156 companies representing different industries in manufacturing in Malaysia was selected for the distribution of questionnaire. We tested the structural model using structural equation modeling (SEM). Based on the results, we conclude the following significant relationships: (1) strategic alliance motives and perception of opportunistic behavior on interdependence and relational capital, (2) interdependence on relational capital, (3) environment on strategic alliance motives, (4) relational capital on strategic alliance outcomes, and (4) the mediating role of relational capital. The current study adds significantly to the body of knowledge on strategic alliances and can help managers identify factors that influence the success of strategic alliances and provide a proper direction to develop robust and effective collaborative relationships between supply chain partners.     

Identifying Technology Commercialization Opportunities: The Importance of Integrating Product Development Knowledge

New product development (NPD) is a knowledge‐intensive activity, perhaps even more so in recent years given the shift toward more open innovation processes, which involve active inward and outward technology transfer. While the extant literature has established that knowledge is critical for NPD performance, knowledge generated through NPD can have an additional impact on external technology exploitation—as when firms go beyond pure internal application of knowledge to commercialize their technologies, for example, by means of technology outlicensing. Grounded in the knowledge‐based view of the firm, this paper examines how the integration of domain‐specific knowledge, procedural knowledge, and general knowledge generated through NPD affects a firm's proficiency in identifying technology commercialization opportunities. Additionally, analysis of how technology opportunity identification relates to technology commercialization performance is provided. Empirically, the paper draws on survey data from 193 Swedish medium‐sized manufacturing firms in four industries active with NPD, and regression analyses and structural equation modeling were used to test the hypotheses. The results highlight the importance of integrating domain‐specific and general NPD knowledge to proficiently identify technology licensing opportunities. The empirical findings also provide strong support for a subsequent link between technology opportunity identification and technology commercialization performance. Altogether, these results point to strong and previously unexplored complementarities between inward and outward technology exploitation, that is, between NPD and technology licensing. As such, the results provide important theoretical implications for research into the fields of knowledge integration, technology exploitation, opportunity identification, and technology markets. Moreover, the results have significant managerial implications concerning how knowledge generated through NPD can help firms to achieve both strategic and monetary benefits when trying to profit from technology. In particular, to set up proficient technology commercialization processes, it appears beneficial for firms to integrate knowledge that is gained through the ordinary activities of developing and commercializing products. Specifically, the integration of domain‐specific knowledge and general knowledge helps firms to match their technologies with new applications and markets, which is often the critical barrier to successful technology commercialization activities. Managers are thus encouraged to integrate domain‐specific knowledge and general knowledge from NPD to reap additional benefits in profiting from investments in innovation and technology.     

Consumer Resistance to Innovation in Services: Challenges and Barriers in the Internet of Things Era

The Internet of Things (IoT) is expected to be the next phase of the Internet revolution and to transform consumers’ service experience. It nevertheless raises challenges on innovation in services. Based on Ram and Sheth's ( 1989 ) theoretical framework, this work attempts to provide a better understanding of the barriers that lead to consumers’ resistance to smart services as an innovation. To this end, our research adopts an integrative framework that combines functional barriers, psychological barriers, and individual barriers to explain consumer resistance to smart services. Structural equation modeling was used to test this theoretical framework. Our research enriches the existing literature by (1) adapting Ram and Sheth's ( 1989 ) theoretical framework to the evolution of digital technologies (technological vulnerability barriers), (2) taking into account the ideological aspect of resistance (ideological barriers), and (3) considering dispositional variables (individual barriers). Moreover, it highlights the key role of skepticism toward IoT devices as a mediator between technological vulnerability barriers and individual barriers on the one hand and consumer resistance to smart services on the other.     

Differential Potency of Factors Affecting Innovation Performance in Manufacturing and Services Firms in Australia

Whether or not industrialized nations are experiencing a fundamental shift from a manufacturing- to a service-based economy may be a matter of debate. However, the service sector is clearly growing at an explosive rate, particularly in comparison with manufacturing. With this in mind, we need to better understand how the successful development of new services differs from that of new products. Such understanding requires identifying the critical success factors for new service development (NSD), as well as contrasting them with the factors underlying successful new product development (NPD). Kwaku Atuahene-Gima describes the results of a study comparing the innovation activities of Australian services firms and manufacturers. The study explores managers' perceptions of the factors necessary for successful NSD and NPD. In addition to comparing the differing perceptions of managers of services firms and manufacturers, the study highlights implications of these differences for managers striving for improved NSD. Services and manufacturing firms focus on similar factors for improving innovation performance. However, the relative importance of those factors depends on the type of firm. The critical factor for services—the importance accorded to innovation activity in the firm's human resource strategy—ranks third in importance for manufacturers. Manufacturers focus primarily on product innovation advantage and quality. In contrast, service innovation advantage and quality ranks third in importance for service firms. Surprisingly, technology synergy is found to have a negative effect on new service performance. If a new service is a close fit with a firm's current technologies, competitors will likely be able to quickly imitate the new service. As a result, NSD efforts based on technology synergy will not provide a competitive advantage. Compared to manufacturers, successful service firms must place greater emphasis on the selection, development, and management of employees who work directly with the customer. Through effective self management, these contact personnel shape the quality of the customer relationship. In addition, their close contact and potentially long-term relationships with customers make such employees an important source of new ideas in the firm's NSD process. Such relationships also cast contact personnel in a make-or-break role in the launching of new services.     

Flexibility: The next competitive battle the manufacturing futures survey

Over the past 4 years research teams from INSEAD (Fontainebleau), Boston University and Waseda University (Tokyo) have administered a yearly survey on the manufacturing strategy of the large manufacturers of the three industrialized regions of the world. In this paper the results for the 1986 survey are compared. One of the most striking results of that year's survey is the emphasis some of the more advanced manufacturers put on their efforts to overcome the trade-off between flexibility and cost efficiency. In particular for the Japanese respondents these attempts become clear. Europeans and North Americans are not yet seizing the opportunity to cut costs through rapid production and design changes, and are focusing more on traditional cost reduction programmes and the improvement of quality. This might mean that they are preparing the basis on which they can built to obtain added value from flexible automation. If this is the case then the Japanese are clearly ahead.