Pathways towards Servitization: A trans-national study of Organisational Transformation

Lead Research Organisation: Aston University
Department Name: Aston Business School

Abstract

Manufacturing organisations in developed western economies are increasingly shifting from traditional product-based offerings towards service-oriented business models. Firms such as Rolls Royce, GE, Xerox and Siemens are remaining competitive by creating additional value to their customers through the services they provide, and taking a share of this value. Over the years, providing services embedded within products' offerings has gradually become a fundamental business constituent for manufacturing organisations.

Understanding the organisational transformation required to operate in this way has been an enduring challenge to both researchers and practitioners, and only a few notable contributions address the topic. Some prominent scholars have set out the benefits of, and barriers to, undertaking the transformation , while others describe the state of being a 'servitized' manufacturer and the impact this delivers, but few really deal holistically with the dynamics of the process of transformation itself, or distinguish what is particular about servitization over general organisational change. Although there are significant literature and theoretical frameworks in the general field of organisational change, no models exist to explain the servitization transformation process.

This project addresses this gap by consolidating the servitization knowledge base from the perspective of organisational change. Our integrative approach in this project will complement our goal of conducting a broad and inclusive study of the servitization transformation, which leads to identifying the stages of transformation, the key factors and forces that influence such transformation, and the key tasks and decisions in each stage. The purpose of the project is, therefore, to document the transformation of a manufacturing organisation as it moves towards competing through advanced services. In order to do this, the following research questions will be addressed:

(i) What stages might an organisation expect to go through as it progresses towards servitization? What are the critical decisions and activities that occur in each stage? (Process)
(ii) What are the principal factors and forces that affect progression through these stages? (Context)
(iii) How do these stages and forces interplay as a model to demonstrate pathways towards servitization? (Content)

Planned Impact

In addition to the academic audiences outlined above, this research is expected to have a direct impact upon three separate non-academic groups, as well as the general public interested in manufacturing issues.

The findings will have direct relevance, and provide strategic guidance, to the executives of those firms that are currently moving towards competing through advanced services and servitization. Product-focused manufacturing firms have realised that in a turbulent financial environment, servitization can certainly assist them in achieving a sustainable competitive advantage. However, due to the influence of different factors including organisational structure, customer demands and behaviour, market saturation, the triadic nature of service supply chains, and diffusion of innovation, the most challenging question is "how should we transform?". By developing and proposing the pathways, actions and decision points that will lead them towards servitization, this project will greatly impact such firms.

The development of the pathways will be informed by the established adopters of servitization, and the analysis of their transformation journey will, in turn, provide them with a more rationalised understanding of the ongoing process of servitization. These companies have followed emergent, organic strategies and now find themselves to be seen as exemplars of servitized firms. In all cases, they are continuing to evolve and develop their services strategies, and the systematic capturing of the stages that they have been through will assist them in revisiting some of the decisions and actions that have been taken, and improve the efficiency and effectiveness of their future plans and projects.

Finally, the findings of the proposed research are likely to have practical implications for those parties helping both large and small firms to address their sustainability and scalability. Having surveyed 76 SMEs we identified that the principal barriers to their transformation towards servitization were financial and contractual complexities. Financial sector companies (e.g. banks) and legal firms have, in recent years, become much more interested in supporting these companies with servitization. This project will help these parties to understand what servitization is, how organisations approach it, and what stages organisations will go through. It will also help the companies to understand in which stage(s) of their transformation they most need the help from third parties such as banks and lawyers.

These impacts are expected to be delivered towards the identified groups through: (1) direct contacts with the case organisations throughout the study, (2) dissemination workshops, and (3) engagement and presentations in industry conferences and events.
 
Description The adoption of servitization has been driven by formalising our knowledge of the organisational processes, barriers, and contingencies that enable manufacturers to adopt such new concepts. The main output/finding of this project so far (11 months into the project), therefore, has been around formalising our understanding of organisational change processes and pathways taken by the companies that have been successful in their journey towards servitization. Through extensive engagement activities with several leading manufacturers, we have developed a preliminary model. This model, which we refer to as Servitization Progression Model, explains how the servitization journey unfolds through four distinctive stages of organisational maturity (i.e. Exploration, Engagement, Expansion, and Exploitation stages), in accordance with five sets of internal and external forces (including those related to the market, technology, organisational readiness and commitments, and value network and supply chain).

At a macro-level, progression from stage to stage appears linear and unidirectional; yet, within each stage, activities to progress servitization are organic, intuitive and repetitive. Progress from one macro-level stage to the next is punctuated by tipping points , which are only overcome once the activities of the preceding stage demonstrate sufficient value for the organisation to consent progression to the following stage. Under some circumstances, these tipping points can be significant enough to halt progression, and the servitization journey may stall or even fail entirely. Through the development of this model, we reveal insights into (i) the rationalisation of the organisational change process into stages, (ii) the contextual factors at play (what the situation was), and (iii) the change process (how change occurred), and the theory which describes this. However, these findings are preliminary and can be strengthened further by comparing and contrasting with additional empirical data gathered throughout the course of the project.

With this, we address an important call for further research on the process of organisational transformation towards servitization. Much of the preceding servitization research has examined the content, and to some extent its relationship with the context, of organisational change within manufacturing firms in other words, what have manufacturers changed and what were the circumstances when these changes occurred?. Much less attention has been given to the process of organisational change through servitization and how this is impacted by the context; in other words: how did (or should) change occur and what the circumstances were (or should be) when change occurs.
Exploitation Route As mentioned above, the findings of the project are at their preliminary stage and require additional empirical and theoretical support. From an academic perspective, this research, similar to any other case study-based research, has certain limitations, which provide opportunities for future work. These could potentially be around (i) significantly increasing the understanding of the organisational change process, and the content for each stage of the change process; and (ii) investigating linkages between context and process. From a practical perspective, once the model is fully developed, it will (i) enable executives within manufacturing businesses to comprehend the process they will undergo, should they choose to follow a servitization strategy; and (ii) provide a structured roadmap with decision points for manufacturers, who are setting out to servitize their organisations and grow their businesses through advanced services.
Sectors Aerospace, Defence and Marine,Agriculture, Food and Drink,Digital/Communication/Information Technologies (including Software),Healthcare,Manufacturing, including Industrial Biotechology,Pharmaceuticals and Medical Biotechnology,Transport

 
Description Many manufacturing and industrial organisations are facing immense social, economic and political uncertainties across the globe. In the UK specifically, one of the biggest challenges to such industry is the uncertainty created following Brexit, alongside the mounting pressure from low-cost economies. There will always be fluctuations in export competitiveness, and the real issue for manufacturers, when it comes to Brexit, will be its impact on legalities and regulations. In such an environment, servitization has the potential to secure ongoing businesses by offering a defensible long-term strategy that localises value creation, delivery and capture. Manufacturers need to understand these long-term service relationships, which are new to many in the sector, whilst ensuring the right agreements and effective contracting are in place. This project, therefore, has been designed with the aim of producing good quality, cross-disciplinary social research that is carefully positioned to deliver rigorous theoretical insights coupled with findings that are highly relevant for senior executives in this field. The servitization progression model that has been developed as part of this project so far, has taken into account both (i) current knowledge on servitization and organisational transformation processes, and (2) retrospective reflections from a cross-section of staff involved with the implementation of servitization strategies within companies leading in servitization (established adopters). Hence, the impacts until date have been mainly towards the (i) academic community - through presentations at academic conferences (including EurOMA and the Academy of Management), and development of journal papers to discuss the model in detail (two papers are currently in the second round of review) (ii) practitioners and senior executives in manufacturing - by raising awareness about servitization and organisational transformation, and the processes required to compete through advanced services. This has been achieved through keynote presentations and talks at different industrial events (listed in the engagement section), and hands-on workshops. Furthermore, the ESRC grant has enabled the research team to engage with more than seven large multinational manufacturing firms to further refine the servitization progression model. We believe more impacts will become apparent as the project progresses, especially when we commence engagements with ten small and medium sized (SME) manufacturers. Our plan is to translate and validate the proposed model and pathways to servitization in the SME context, and to reflect on the relevant economic and social consequences of their actions. To evaluate the economic impact of such transformation, we will measure the Gross Value Added (GVA) of the selected ten SMEs throughout the period of our involvement with them (24 months). We will systematically record their financial data on a 3-months basis to capture the economic trends of these ten SMEs.
First Year Of Impact 2019
Sector Healthcare,Manufacturing, including Industrial Biotechology,Other
Impact Types Economic,Policy & public services

 
Description Newton Fund
Amount £2,020,000 (GBP)
Funding ID BB/S020993/1 
Organisation Biotechnology and Biological Sciences Research Council (BBSRC) 
Sector Public
Country United Kingdom
Start 03/2019 
End 03/2021
 
Description 2018 Spring Servitization Conference 
Organisation Copenhagen Business School
Country Denmark 
Sector Academic/University 
PI Contribution I was one of the co-chairs of the 2018 Spring Servitization Conference in Copenhagen Business School (14,15 & 16 May 2018). As part of my duties, I was in charge of (i) selecting and assessing the quality of the venue, (ii) identifying the right industrial and academic keynote speakers, (iii) developing the call for papers and the theme of the conference, (iv) promoting the conference in social media and other networks, (v) managing the review process both at the abstract and full submission stages, and (vi) helping the organising committee during the conference.
Collaborator Contribution Dr Thomas Frandsen and Dr Jawwad Raja of Copenhagen Business School were two of the co-chairs of conference. They were also in charge of organising the conference, and similar activities mentioned above.
Impact The key output of the conference was the conference proceedings which was co-edited by the conference chairs.
Start Year 2018
 
Description 2019 Spring Servitization Conference 
Organisation Linkoping University
Country Sweden 
Sector Academic/University 
PI Contribution Similar to last year, I am one of the co-chairs of the 2018 Spring Servitization Conference to be held at Linkoping University in Sweden (13,14 & 15 May 2019). As part of my duties, I am collaborating with the host co-chairs in (i) selecting and assessing the quality of the venue, (ii) identifying the right industrial and academic keynote speakers, (iii) developing the call for papers and the theme of the conference, (iv) promoting the conference in social media and other networks, (v) managing the review process both at the abstract and full submission stages, and (vi) helping the organising committee during the conference.
Collaborator Contribution Professors Christian Kowalkowski and Daniel Kindström are two of the co-chairs of conference. They were also in charge of organising the conference, and similar activities mentioned above.
Impact No output as of yet.
Start Year 2019
 
Description Advanced Services Partnership 
Organisation BAE Systems
Country United Kingdom 
Sector Private 
PI Contribution We have engaged at the senior management level to enhance the understanding of servitization in the company and the organisational transformation required to move towards advanced services. We have also worked closely with the companies in order to design and develop new business models around advanced services, and helped them to test and validate their customer value propositions.
Collaborator Contribution The companies have given us access to the ways in which they carry out their day to day operations. Also, we have received regular updates about the journey towards servitization.
Impact There are several white papers under development as the result of the research with the companies.
Start Year 2015
 
Description Advanced Services Partnership 
Organisation Corin Group PLC
Country United Kingdom 
Sector Private 
PI Contribution We have engaged at the senior management level to enhance the understanding of servitization in the company and the organisational transformation required to move towards advanced services. We have also worked closely with the companies in order to design and develop new business models around advanced services, and helped them to test and validate their customer value propositions.
Collaborator Contribution The companies have given us access to the ways in which they carry out their day to day operations. Also, we have received regular updates about the journey towards servitization.
Impact There are several white papers under development as the result of the research with the companies.
Start Year 2015
 
Description Advanced Services Partnership 
Organisation DHL
Country Germany 
Sector Private 
PI Contribution We have engaged at the senior management level to enhance the understanding of servitization in the company and the organisational transformation required to move towards advanced services. We have also worked closely with the companies in order to design and develop new business models around advanced services, and helped them to test and validate their customer value propositions.
Collaborator Contribution The companies have given us access to the ways in which they carry out their day to day operations. Also, we have received regular updates about the journey towards servitization.
Impact There are several white papers under development as the result of the research with the companies.
Start Year 2015
 
Description Advanced Services Partnership 
Organisation Daimler AG
Country Germany 
Sector Private 
PI Contribution We have engaged at the senior management level to enhance the understanding of servitization in the company and the organisational transformation required to move towards advanced services. We have also worked closely with the companies in order to design and develop new business models around advanced services, and helped them to test and validate their customer value propositions.
Collaborator Contribution The companies have given us access to the ways in which they carry out their day to day operations. Also, we have received regular updates about the journey towards servitization.
Impact There are several white papers under development as the result of the research with the companies.
Start Year 2015
 
Description Advanced Services Partnership 
Organisation Goodyear Tire & Rubber Company
Country United States 
Sector Private 
PI Contribution We have engaged at the senior management level to enhance the understanding of servitization in the company and the organisational transformation required to move towards advanced services. We have also worked closely with the companies in order to design and develop new business models around advanced services, and helped them to test and validate their customer value propositions.
Collaborator Contribution The companies have given us access to the ways in which they carry out their day to day operations. Also, we have received regular updates about the journey towards servitization.
Impact There are several white papers under development as the result of the research with the companies.
Start Year 2015
 
Description Advanced Services Partnership 
Organisation Ishida Europe
Country United Kingdom 
Sector Private 
PI Contribution We have engaged at the senior management level to enhance the understanding of servitization in the company and the organisational transformation required to move towards advanced services. We have also worked closely with the companies in order to design and develop new business models around advanced services, and helped them to test and validate their customer value propositions.
Collaborator Contribution The companies have given us access to the ways in which they carry out their day to day operations. Also, we have received regular updates about the journey towards servitization.
Impact There are several white papers under development as the result of the research with the companies.
Start Year 2015
 
Description Advanced Services Partnership 
Organisation Yanmar Holdings Co., Ltd.
Department Yanmar Europe BV
Country Netherlands 
Sector Private 
PI Contribution We have engaged at the senior management level to enhance the understanding of servitization in the company and the organisational transformation required to move towards advanced services. We have also worked closely with the companies in order to design and develop new business models around advanced services, and helped them to test and validate their customer value propositions.
Collaborator Contribution The companies have given us access to the ways in which they carry out their day to day operations. Also, we have received regular updates about the journey towards servitization.
Impact There are several white papers under development as the result of the research with the companies.
Start Year 2015
 
Description Interview 
Form Of Engagement Activity A press release, press conference or response to a media enquiry/interview
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact I was interviewed (and quoted) for an article on titled "The Big Promise of Everything-As-A-Service". The article published by Forbes AI in September 2018. The article has been read 30,218 times as of today (21 Feb 2019).
Year(s) Of Engagement Activity 2018
URL https://www.forbes.com/sites/insights-intelai/2018/09/21/the-big-promise-of-everything-as-a-service-...
 
Description Interview/Writing 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact I was interviewed and later helped in the writing of a piece that was later published by The Field Service Digital (FSD). FSD belongs to ServiceMax by GE. The talk focused on 'How Do We Do It?': Charting a Course to Servitization.
Year(s) Of Engagement Activity 2018
URL https://www.servicemax.com/uk/fsd/charting-a-course-to-servitzation-advanced-services-group
 
Description Invited Keynote Talk (Industrial Meeting) 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Industry/Business
Results and Impact I was the keynote speaker at Philips Global Customer Services Marketing Meeting in Best, The Netherlands. This was part of a week gathering from all of the sales and marketing executives at Philips Healthcare to develop their services strategy for the coming year. My talk focused on Servitization, advanced services and outcome-based contracts in Healthcare. I also ran a hand-on workshop with the attendees to frame their current service offerings against a business model framework that we have developed based on our research.
Year(s) Of Engagement Activity 2019
 
Description Invited Keynote Talk (Industrial Workshop) 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Industry/Business
Results and Impact I was one of the invited academic keynote speakers for an industrial workshop organised by Lulea University of Technology in Stockholm, Sweden. The workshop was around 'Profiting from Digitalization' and my talk focused on Digitally-enabled Performance Intelligence Services. The attendees were all senior executives from industrial companies such as ABB, Volvo, Sandvik, and Saab.
Year(s) Of Engagement Activity 2018
URL https://www.youtube.com/watch?v=35CtDgQ31Ko
 
Description Invited Talk (Academic Seminar) 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Other audiences
Results and Impact I gave a presentation on "What do we really mean by servitization?" at an academic seminar held at the Westminster Business School in London.
Year(s) Of Engagement Activity 2018
 
Description Presentation (Henley Business School) 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Other audiences
Results and Impact I gave an invited presentation at the quarterly research seminar series organised by Henley Business School, University of Reading. The presentation focused on servitization in manufacturing: a business model perspective.
Year(s) Of Engagement Activity 2019
 
Description Presentation (Industry) 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Industry/Business
Results and Impact Kawaljeet Kapoor, the post-doc Research Fellow on this project, gave a talk at the Advanced Services Partnership Winter Roundtable in Washington DC. Her talk focused on platforms and platform strategies, and the impact of such strategy/approach on organisations moving towards servitization.
Year(s) Of Engagement Activity 2019
 
Description Workshop 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Industry/Business
Results and Impact Since April 2018, we have conducted 2 industry focus group workshops with 4 large multinational manufacturers in order to address the objectives of the research project. These companies could be identified as established adopter of sevitization strategy. The main focus of the workshops has been to (i) understand the transformation pathways that have taken place as the organisation servitized and adopted advanced services, and (ii) develop a resultant theoretical framework that demonstrates the organisational transformation towards servitization. We will carry out more workshops with these companies as well as those companies that have recently started their transformation journey to enrich and deepen the developed framework by recording, comparing and contrasting the actual decisions, their processes and contexts, taken by a cross-section of staff who are actively involved in the execution of servitization strategies within the companies currently moving towards the adoption of servitization.
Year(s) Of Engagement Activity 2018,2019
 
Description Workshop 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact I was part of a wider group from the Advanced Services Group (Aston University) who developed and delivered several hand-on workshops for a multinational defense contractor (the name is withheld due to confidentiality). The workshops focused on (i) identifying and mapping services-related offering within different business lines, and (ii) mapping the maturity of each business line in their transformation towards servitization.
Year(s) Of Engagement Activity 2018