## 2 Back-End Challenges
### Costs and Infrastructure Issues  
Considering the costs of executing and performing a servitization strategy, one has inherently to deal with both, customer satisfaction and productivity tasks. However, there is no company described in the literature yet whether these two goals are compatible or comprising trade-offs [31; 67]. In fact, the literature review conducted by [67; 68] revealed two diverging viewpoints considering this matter. Some research advocates that improved customer satisfaction enhances productivity through reduction of effort concerning the handling of returns, rework, warranties and complaint management. Another party negates the compatibility of customer satisfaction and productivity due to the increased costs regarding the improvement of product attributes and product design [67; 68]. The trade-off between customer satisfaction and productivity is furthermore manifested by the diverging approaches of customization and standardization, whereas customization in general maximizes customer satisfaction and vice versa [69]. Customization and standardization are two mutually dependent, but in general often conflicting, characteristics of quality, which therefore account for different cost structures. According to common operations management literature, overall cost decline with an increasing degree of implemented standardization, whereas a growing degree of customization equally will cause growing costs in contrast [67; 70]. The interplay of the degrees of standardization and customization with cost is illustrated in Figure 3.  
In fact, the degree of customization or standardization is likewise limited by the nature of the conducted service offering, which therefore, may comprise substantial financial drawbacks. Considering distribution services one has to be aware of the relatively high fixed costs enabling a sufficiently broad distribution, which decreases profit margins considerably during lower demand periods. Similar non-elastic behavior occurs for maintenance services which require a large installed base in order to repay the costs for delivering the service [71; 72]. Accordingly, potential drawbacks of certain service types rely on the nature of its corresponding product, considering product design and development services that are still combined with complex and technologically intensive products,  
Figure 3: Cost Structure of Customization and Standardization. which therefore do not generate high fixed costs like running a broad distribution network [30; 40; 42; 73]. These findings refer to the research of [71; 74], who conducted an extensive survey amongst servitizing manufacturing companies in order to identify challenges and reasons for bankruptcy, which are consolidated in Figure 4[71]. Figure 4[71] confirms the discussion above, whereas services requiring a large base of investments in infrastructure and therefore high fixed costs for operation (e.g., retail, maintenance or installation) tending rather falling victim of bankruptcy. Offering design and development services or systems and solutions remains in the end fairly beneficial for companies in comparison to providing retail and distribution services, maintenance and support services and installation and implementation services, accounting for the lion's share of bankruptcy cases [54; 55; 71]. A study by [PERSON] et al. (2015) [54] showed that there are more servitizing companies declaring bankruptcy than pure manufacturers, which relies to the lack of exploiting their financial benefits [54; 55; 71]. Corresponding to the service paradox discussed in Section 1.1[27; 33] pointed out that only 11.1 percent of manufacturing companies earn more than 40 percent of their revenue through services, while more than 35 percent of the companies only generate 10 percent of their revenue through services and are therefore struggling with the service paradox.