Escaping the commoditization trap by going downstream : how does a manufacturer manage its capabilities to create wealth from solutions?

Teknologiayritykset tarjoavat aikaisempaa enemmän palveluita asiakkailleen. Syinä tähän ovat taloudellinen epävarmuus, globalisaatio sekä valmistus- ja tuoteliiketoiminnan hyödykkeistyminen. Palveluiden avulla teknologiayritykset ovat pyrkineet saavuttamaan tasaisemman tulovirran, joka auttaa suhdannevaihteluiden yli. Teknologiayritykset ovat siten alkaneet muistuttaa palveluyrityksiä palveluiden muodostaessa merkittävän osan niiden kokonaisliikevaihdosta ja -tuloksesta. Tätä strategista siirtymää kuvataan palvelullistumisilmiöksi, jonka on nähty tuottavan erilaisia strategisia, taloudellisia ja markkinoinnillisia hyötyjä. Väitöskirja rakentuu resurssiperustaisen strategianäkemyksen ja palvelullistamiskirjallisuuden perustalle vastaten seuraavaan tutkimuskysymykseen: Miten teknologiayritys johtaa resursseja ja kyvykkyyksiään luodakseen arvoa asiakaskohtaisista palveluista ja ratkaisuista? Väitöskirja pyrkii vastaamaan tähän tutkimuskysymykseen neljän toisiinsa kytkeytyneen tutkimusartikkelin avulla. Väitöskirjan tutkimustapana on laadullinen vertaileva monitapaustutkimus. Sen kohteena ovat olleet palvelu- ja ratkaisuliiketoiminnan avulla kansainvälisesti menestyneet suomalaiset teknologiayritykset. Väitöskirja pyrkii lisäämään ymmärrystä resurssien johtamisen käytännöistä palvelullistamisen kontekstissa. Tutkimuksen tulosten mukaan menestyneet palvelullistuneet teknologiayritykset kehittävät järjestelmällisesti kyvykkyyksiä, jotka mahdollistavat tiiviimmän yhteistyön heidän asiakkai-densa kanssa. Se on tapahtunut esimerkiksi kehittämällä konsultatiivista myyntikyvykkyyttä tai operoimalla asennettua laitekantaa älykkäämmin. Toiseksi, tutkimuksen tulokset osoittavat, että menestyneet yritykset hyödyntävät aktiivisesti olemassa olevia kyvykkyyksiä uusilla toimialoilla ja tuote-palveluyhdistelmissä. Se on tapahtunut esimerkiksi laajentamalla palveluporftolion kehittämiseen liittyviä kyvykkyyksiä nykyisten asiakkaiden kanssa. Kolmanneksi, menestyneet valmistavat teknologiayritykset luopuivat järjestelmällisesti ydinliiketoimintaan kuulumattomista tai valmistustoimintaan liittyvistä kyvykkyyksistä keskittyäkseen uuden strategian mukaisten kyvykkyyksien kehittämiseen. Tutkimuksen mukaan siirtymä tuotteista palveluihin ei tapahdu hetkessä, eikä se ole toimiva strategia kaikille valmistaville yrityksille. Tutkimusten tulosten valossa tämä strateginen siirtymä vaatii aikaa, näkemystä ja sitoutumista teknologiayrityksen ylimmältä johdolta sisäisten ja ulkoisten voimavarojen kehittämiseen ja uudelleensuuntaamiseen.Economic turmoil, globalization, and increased price pressure in product businesses, have prompted leading manufacturers to provide services/solutions to their customers to avoid the commoditization trap and generate more stable income. Manufacturers have thus started to resemble service companies as services account for a considerable share of their total revenues and profits. This strategic transition has been termed servitization and has been said to generate various strategic, financial, and marketing advantages for those exploiting successful service strategies. This dissertation builds on the intersection of the resource-based perspective and servitization literature to answer the following research question: How does a manufacturer manage its capabilities to create wealth from customer solutions? To address this question, four empirical research articles have been formulated to advance knowledge of resource management practices in servitization. By using a qualitative comparative multiple case study method, this dissertation scrutinizes those internationally operating Finnish manufacturers that have outperformed their rivals by establishing service strategies and capabilities. This dissertation attempts to advance both theoretical and managerial understanding of the resource management practices in servitization The results of the study indicate that highly performing manufacturers systematically build new capabilities required to manage better their customer relationships (e.g., consultative selling, or fleet management capabilities). Second, the results indicate that the solution providers leverage their extant capabilities to enter new industries and product-service markets (e.g., nurturing capabilities to expand their service portfolio with existing customers). Third, solution providers released their non-core and upstream resources to focus on developing downstream resources. This research highlights that entering the solution business may not be a viable strategy for every manufacturer. The strategic transitioning from goods to services does not happen overnight but requires managerial time, vision, attention, and commitment to develop and redirect internal and external resources.fi=vertaisarvioitu|en=peerReviewed

Solution providers’ strategic capabilities

Purpose – Drawing on the resource-based view of the firm, this study analyzes solution providers’ strategic capabilities that facilitate above-average returns. Design/methodology/approach – The study applies a qualitative comparative case method. In addition to an extensive set of secondary data, the results are based on interviews with 35 executives from nine leading industrial solution providers, their strategic customers, and suppliers. The analyzed solution providers were identified based on quantitative survey data. Findings – By observing six distinctive resources and three strategic business processes, the present study identifies seven strategic capabilities that occur in different phases of solution development and deployment: 1) fleet management capability, 2) technology-development capability, 3) M&A (mergers and acquisitions) capability, 4) value quantifying capability, 5) project management capability, 6) supplier network management capability and 7) value co-creation capability. Research limitations/implications – The study develops a generic model for the strategic capabilities of servitization. Application of the developed model to different contexts would further validate and enhance it. Practical implications – Managers can use the developed model to benchmark, identify, build, and manage solution providers’ strategic capabilities and associated practices. Originality/value – The study develops a valuable conceptual model based on the comparative case data. Case firms were selected for the study based on a representative quantitative dataset. The results were verified and triangulated with external data.fi=vertaisarvioitu|en=peerReviewed

Manufacturer’s identity challenges when becoming 'Smart'

Purpose: The present paper was set out to understand manufacturer’s identity challenges when moving towards provision of product-service-software solutions. Design/Methodology/Approach: This conceptual study uses illustrative cases to show certain aspects, challenges and practices regarding identity formation and building when manufacturers are becoming smart solution providers. The study builds on rich organization identity theory that is surprisingly underutilized in the extant digital servitization research. Findings: The study suggests that when building and forming new identity, managers should be aware of potential issues, namely ambiguity among personnel, frustration among middle -managers, and confusion among key external stakeholders. This paper suggests that successful identity building requires dynamic capabilities not only inside the firm but across the boundaries, hence contributing to the crossroads of identity, capability, and digital servitization literatures. Originality/value: For managers, this paper unfolds some useful practices how to mitigate identity inertia when managing strategic transition towards smart solutions.©2022 The Advanced Services Group.fi=vertaisarvioitu|en=peerReviewed

Digital service innovation (DSI) : a multidisciplinary (re)view of its origins and progress using bibliometric and text mining methods

Purpose This paper studies the Digital Service Innovation (DSI) concept by systematically reviewing earlier studies from various scholarly communities. This study aims to recognize how recent advances in DSI literature from different research streams complement and can be incorporated into the growing digital servitization literature to define better and understand DSI. Design/methodology/approach After systematically identifying 123 relevant articles, this study employed complementary methods, such as author bibliographic coupling, linguistic text mining/textual analysis and qualitative content analyses. Findings This paper first maps the intellectual structure and boundaries of the DSI-related communities and qualitatively assesses their characteristics. These communities are (1) Innovation for digital servitization, (2) Service innovation in the digital age and (3) Adoption of novel e-services enabled by information system development. Next, the composition of the DSI concept is examined and depicted to comprehend the notion's critical dimensions. The findings discuss the range of theories and methods in the existing research, including antecedents, processes and outcomes of DSI. Originality/value This study reviews, extends the understanding of origins and critically evaluates DSI-related research. Moreover, the paper redefines and clarifies the structure and boundaries of the DSI-concept. In doing so, it elaborates on the substance of DSI and identifies the essential themes for its understanding and conceptualization. Thus, the study helps the future development of the concept and allows knowledge accumulation by bridging adjacent research communities. It helps researchers and managers navigate the foggy emerging research landscape.© Rodrigo Rabetino, Marko Kohtamäki and Tuomas Huikkola. Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcodefi=vertaisarvioitu|en=peerReviewed

Becoming a smart solution provider : Reconfiguring a product manufacturer's strategic capabilities and processes to facilitate business model innovation

The present study analyzes how a product manufacturer alters its strategic capabilities to become a smart solution provider by employing its dynamic capabilities. We scrutinize how a manufacturer facilitates strategic change by realigning its strategic capabilities and processes from a focus on technical product-development capabilities to product-service-software development capabilities, reconfiguring organizational routines focused on efficiency to routines focused on customer productivity, and shifting from a product logic to a service logic. By studying six leading manufacturing firms based on 86 manager interviews, the present study finds that strategic capabilities are renewed through dynamic capabilities, which involve a reconfiguration of strategic capabilities and processes. Furthermore, manufacturers need to consider the dynamic interplay between resource realignment modes (building digital capabilities, leveraging existing capabilities, accessing external capabilities, and releasing decaying capabilities), hence stressing their reinforcing mechanism to converge products, services, and software. For managers, our study highlights several strategic renewal practices designed to assist and benchmark how strategic capabilities are altered.© 2022 The Authors. Published by Elsevier Ltd under a Creative Commons license https://creativecommons.org/licenses/by/4.0/fi=vertaisarvioitu|en=peerReviewed

Recongifuring assets for digital servitization : interplay and capability enhancing practices

This paper investigates how manufacturing companies reconfigure their assets in their digital servitization journey (transition from selling products to selling product-service-software offerings). By studying five leading manufacturers for a longer time-period (2010-2018), we found that depending on their previous role of being whether system sellers or system integrators, their capability development practices differed: system sellers used practices emphasizing control (e.g., insourcing, acquisitions) whereas system integrators stressed practices that enabled flexibility (e.g., outsourcing, alliances). Based on these findings, manufacturers should establish their vision as provider of smart, connected solutions, and develop associated capabilities and practices that support this vision achievement.©2022 The authors. Published by Universitat Politècnica de València. Please cite the original version: Huikkola, T., Kohtamäki, M. & Ylimäki, J. (2022). Recongifuring assets for digital servitization: interplay and capability enhancing practices. In: Tracey, B., Heinonen, K., Trull-Domínguez, O. & Peiró-Signes, Á. (eds.) Proceedings of the QUIS17 : The 17th International Research Symposium on Service Excellence in Management. València: Universitat Politècnica de València. http://dx.doi.org/10.4995/QUIS17.2022.15169fi=vertaisarvioitu|en=peerReviewed

A contextual account of digital servitization through autonomous solutions : Aligning a digital servitization process and a maritime service ecosystem transformation to autonomous shipping

This study focuses on digital servitization (DS) through autonomous solutions by building on a service ecosystems perspective. The rise of autonomous solutions exemplifies the ongoing digitalization and societal transformation and therefore integrative theoretical perspectives are needed to complement the dominant focal actor perspective in extant DS research. The study presents a longitudinal case of a solution provider's DS process to demonstrate how transformation towards autonomous shipping was driven in the maritime sector. An empirically enriched framework communicates DS process as aligned changes in value propositions, resource configurations and institutional arrangements within the service ecosystem. The study offers academic contributions and practical implications on managing DS through autonomous solutions as a strategic reorientation of a firm in the multi-level context of service ecosystem transformation.© 2022 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).fi=vertaisarvioitu|en=peerReviewed

Unfolding the simple heuristics of smart solution development

Purpose The present study intends to foster understanding of how a traditional manufacturer can utilize the “simple rules” approach of managerial heuristics to facilitate its smart solution development (SSD) process. Design/methodology/approach The study uses an in-depth single case research strategy and 25 senior manager interviews to understand the application of simple rules in smart solution development. Findings The findings reveal process, boundary, preference, schedule, and stop rules as the dominant managerial heuristics in the case and identify how the manufacturer applies these rules during the innovation process phases of ideation, incubation, transformation, and industrialization for attaining project outcomes. Research limitations/implications The study contributes to the new service development (NSD) literature by shedding light on simple rules and how managers may apply them to facilitate SSD. The main limitations stem from applying the qualitative case study approach and the interpretative nature of the study, which produces novel insights but prevents direct generalization to other empirical cases. Practical implications The resulting framework provides guidelines for managers on how to establish formal and clear simple rules that enable industrial solution providers to approach decision-making in smart solution development in a more agile manner. Originality/value The study comprises one of the first attempts to investigate managerial heuristics in the context of SSD and puts forward a plea for further NSD research applying psychological conceptualizations to enrich the simple rules perspective.© Tuomas Huikkola, Marko Kohtamäki, Rodrigo Rabetino, Hannu Makkonen and Philipp Holtkamp. Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode.fi=vertaisarvioitu|en=peerReviewed

Solution Provider's Microfoundations in the Development of Product-Service Innovations

Purpose: The present paper was set out to study how a solution provider manages organisational processes and routines to support product-service system (PSS) development. Design/Methodology/Approach: This single-case study investigates in-depth one large international solution provider to understand the detailed microprocesses and routines shaping the microfoundations of product-service system development. Findings: The study suggests that technology companies should consider creating a flexible structure to unleash many types of innovations instead of establishing tailored models to foster different innovation types and avoid falling into the exploitation trap of using innovation to only support the existing business without aiming for new explorative openings. Originality/Value: The present study opens up the black-box of new product-service innovation (PSI) development model.©2020 Authors. Published by The Advanced Services Group & Aston University.fi=vertaisarvioitu|en=peerReviewed

A contextual account of digital servitization through autonomous solutions: Aligning a digital servitization process and a maritime service ecosystem transformation to autonomous shipping

This study focuses on digital servitization (DS) through autonomous solutions by building on a service ecosystems perspective. The rise of autonomous solutions exemplifies the ongoing digitalization and societal transformation and therefore integrative theoretical perspectives are needed to complement the dominant focal actor perspective in extant DS research. The study presents a longitudinal case of a solution provider's DS process to demonstrate how transformation towards autonomous shipping was driven in the maritime sector. An empirically enriched framework communicates DS process as aligned changes in value propositions, resource configurations and institutional arrangements within the service ecosystem. The study offers academic contributions and practical implications on managing DS through autonomous solutions as a strategic reorientation of a firm in the multi-level context of service ecosystem transformation.</p