Servitization and solution provision of manufacturing companies - A contingency theoretical analysis

Aalto University, P.O. Box 11000, FI-00076 Aalto www.aalto. fi Author Max Finne Name of the doctoral dissertation Servitization and solution provision of manufacturing companies: A contingency theoretical analysis Publisher School of Science Unit Department of Industrial Engineering and Management Series Aalto University publication series DOCTORAL DISSERTATIONS 84/2014 Field of research Service operations management Manuscript submitted 25 February 2014 Date of the defence 8 August 2014 Permission to publish granted (date) 21 May 2014 Language English Monograph Article dissertation (summary + original articles) Abstract Manufacturers in developed countries are struggling to find ways for a competitive edge against their peers from countries with lower cost levels. Servitization has been suggested as one possible way to achieve this aim: the manufacturer increases the proportion of services in the offering and eventually can become a solution provider. Accordingly, understanding central aspects of servitization and solution provision has become a must for many manufacturers, and the amount of academic research around these phenomena has been increasing. This dissertation sees servitization research currently at the typical early phase in which the strategy is praised as a best practice (cf. Sousa and Voss, 2008), one which would be applicable irrespective of the context. This dissertation applies a more critical view on servitization and solution provision and attempts to systematically study their contextuality. The research design is a combination of analysing existing research literature and empirical company cases. The analysis of the contextuality proceeds from higher-level considerations of the effects of operational environment on companies' servitization to the more detailed focus on individual companies' actions regarding solution provision, which are affected by network position. The findings provide novel insights into how six different aspects of operational environment either encourage or inhibit servitization of companies within an industry. These environmental factors are the density of servitized manufacturers, the effects of other competing populations, resource availability, institutional linkages, technological innovation, and legislation and policies. In addition, the findings shed light on the particularities of suppliers' and integrators' development actions regarding their solution provision. Further, supplier companies' transformation toward solution provision is identified to be requiring forming ways to cooperate with the integrator companies to reach customers. In addition, contradictory development paths of manufacturing companies are analysed, where the firms transition away from solution provision. These transition paths are labelled 'reversed servitization'. Manufacturers in developed countries are struggling to find ways for a competitive edge against their peers from countries with lower cost levels. Servitization has been suggested as one possible way to achieve this aim: the manufacturer increases the proportion of services in the offering and eventually can become a solution provider. Accordingly, understanding central aspects of servitization and solution provision has become a must for many manufacturers, and the amount of academic research around these phenomena has been increasing. This dissertation sees servitization research currently at the typical early phase in which the strategy is praised as a best practice (cf. Sousa and Voss, 2008), one which would be applicable irrespective of the context. This dissertation applies a more critical view on servitization and solution provision and attempts to systematically study their contextuality. The research design is a combination of analysing existing research literature and empirical company cases. The analysis of the contextuality proceeds from higher-level considerations of the effects of operational environment on companies' servitization to the more detailed focus on individual companies' actions regarding solution provision, which are affected by network position. The findings provide novel insights into how six different aspects of operational environment either encourage or inhibit servitization of companies within an industry. These environmental factors are the density of servitized manufacturers, the effects of other competing populations, resource availability, institutional linkages, technological innovation, and legislation and policies. In addition, the findings shed light on the particularities of suppliers' and integrators' development actions regarding their solution provision. Further, supplier companies' transformation toward solution provision is identified to be requiring forming ways to cooperate with the integrator companies to reach customers. In addition, contradictory development paths of manufacturing companies are analysed, where the firms transition away from solution provision. These transition paths are labelled 'reversed servitization'.