Successfully Implementing a Service Business Model in a Manufacturing Firm

Purpose: The expected economic benefits of ‘servitization’, a popular trend among durable goods’ manufacturers designed to expand the scope of their offerings from products into through-life-cycle services, have been disputed in light of recent empirical evidence suggesting that hurdles associated with the implementation of services may even result in performance decline. Methodology: We undertake extensive research into ten sales-and-service subsidiaries of a successfully servitized manufacturing multinational to shed light on this ‘service paradox’. Results: Success in setting up a service business in a manufacturing firm results from the presence of three operational capabilities that facilitate service performance. First, a manufacturer must possess a skill set capable of extending the relationship with its (product) clients towards services in order to achieve presence in the service market. At the same time, the capability to develop service offerings that provide better coverage of customers’ needs, and to deliver these sophisticated after-sales services successfully, is required to grow the service business profitably. Implications and originality: Maintaining the breadth of service presence while deepening customer relationships can be a challenging balancing act, since capabilities that contribute to ‘service presence’ may conflict with the deployment of ‘service development’ and ‘service process’ capabilities. This paper offers to academics and practitioners of servitization a guiding framework within which to develop a comprehensive set of service capabilities, and highlights the nature of their relationships.

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