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Purpose – Manufacturing companies are increasingly making efforts to combine products and services into integrated offerings. However, the companies’ success in such transformation is linked with the presence of structured routines and processes, which the authors conceptualize as product-service systems (PSS) innovation capabilities. The purpose of this paper is to address the important question of how manufacturing companies can systematically build PSS innovation capabilities and does its presence or absence significantly influence PSS innovation. Design/methodology/approach – This study is based on longitudinal data from an aerospace company, which acts both as an OEM providing through-life services for aircraft engines, as well as a developer of innovative subsystem technologies. Data has been collected over three years (2009-2012) and constitutes 40 in-depth explorative and semi-structured interviews with diverse respondents. For analysis of the data, the authors have used constant comparison technique leading to identification of three high-order categories. In addition, the authors gain from observations and secondary data which enable to achieve data triangulation and data validity. Findings – The results objectively depict an overview of how the case company developed PSS innovation capabilities, though progression of routines over three early PSS development stages. More specifically, the authors find evidence for development of formalized routines related to customer interaction and innovative organizational climate during need phase, cross-functionality, and network partnering during solution-seeking phase, and competence and business case development during solution development phase. As these routines become more structured within the case company, they forge a path for PSS innovation capabilities development. Originality/value – This study provides two distinctive contributions to emerging PSS literature. First, the authors propose and explain how PSS innovation capabilities are developed. Although prior studies acknowledge the importance of possessing specialized PSS innovation capabilities, limited studies have reported empirically how they are developed. Second, through adopting a longitudinal perspective, the authors reveal key routines and actions that drive PSS innovation during different development stages. To the knowledge, no prior study has combined insights from PSS literature and resource-based view to objectively explain capabilities development process.

Apparent from the latest pandemic, the dynamics and rate of change in society accelerate on a global scale. Ongoing mega-trends in society, such as digitalization, sustainability, and servitization, fundamentally changes the conditions for manufacturers when developing and providing new products. This study clarifies the combined impact and consequences on product development capabilities in manufacturing firms of the three mega-trends: (i) digitalization, (ii) sustainability, and (iii) servitization. The research is based on a pre-study, complemented with a semi-structured interview study at small, medium-sized, and large Swedish-based manufacturing companies, and a systematic literature review. The research makes evident that the main challenge is to empower engineers and development teams to model, present, evaluate, and develop expected and smart digitalized solutions in a time-limited environment and prioritize the most resource efficient and sustainable solution. Therefore, four complementary support resources are suggested: (i) a knowledge management platform, (ii) a data management platform, (iii) a set of criteria and metrics measuring progression, and (iv) support methods and tools to define, model, and evaluate solutions. When integrated into a digital platform, developers can simultaneously access and process the necessary information needed for sustainable, digitalized, and servitized solutions.

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