The Transition towards Servitized Business Models - Insights from the European Manufacturing Industry

Abstract

Manufacturing companies face several complex challenges and decisions when transitioning towards servitized business models. The concept of a business model has evolved significantly, becoming integral to understanding value creation and competitiveness. Servitization, exemplified by a shift towards service-centric approaches, offers a transitional pathway for manufacturing companies. However, this transition poses challenges such as complexity, increased risk, and deficiencies in digital capabilities. Successful management of technology shifts requires integrating service and technological innovations to create a viable business model. The purpose of this study is to explore the transition towards servitized business models within manufacturing companies and to understand what implications that might arise from a risk- and financial perspective. A case study investigating eleven companies within the European manufacturing industry was conducted to provide an in-depth analysis on the phenomenon of servitization and contribute to the academic discourse on servitization within a B2Bcontext. The findings underscore that the transition towards servitized business models for manufacturing companies demands a holistic approach encompassing organizational, sales, partnership, and risk and financial considerations. Success hinges on adopting a customer-centric mindset, forging abiding relationships, articulating clear service strategies, and developing new competencies. Critical enablers for this transition include establishing separate service organizations, fostering partnerships, and navigating cultural shifts towards a service-oriented focus. Furthermore, strategic planning and the development of new financial performance measurements, such as the balanced scorecard, are essential for assessing profitability and managing financial risks associated with servitization. Ultimately, embracing servitization requires a nuanced understanding of market dynamics and customer preferences, with a strategic integration of service-oriented approaches alongside traditional product-centered businesses.