On the road to digital servitization – The (dis)continuous interplay between business model and digital technology

Abstract

PurposeThe authors seek to understand the process of digital servitization as a shift of manufacturing companies from the provision of standard products and services to smart solutions. Specifically, the authors focus on changes in the business model (i.e. the value proposition, the value delivery system and the value capture mechanism) for digital servitization.Design/methodology/approachThe authors examine a Chinese air conditioner manufacturer, Gree, who became the global leader with their smart solutions. These solutions included performance-based contracts underpinned by artificial intelligence (AI)-powered air conditioners that automatically adjust to environmental changes and are capable of remote monitoring and servicing thanks to its Internet of things (IoT) technology.FindingsTo successfully offer smart solution value propositions, a manufacturer needs an ecosystem value delivery system composed of suppliers, distributors, partners and customers. Once the ecosystem relationships are well aligned, the manufacturer gains value with multiple value capture mechanisms (i.e. efficiency, accountability, shared customer value and novelty). To arrive at this point, a manufacturer has to pass through different stages that are characterized by both discontinuous and continuous interplay between business models and digital technologies. At the beginning of each stage, new value propositions and value delivery systems are first discontinuously created and then enabled with digital technology. As a result, new value capture mechanisms are activated. Meanwhile, the elements of the existing business model are continuously improved.Research limitations/implicationsBy combining process-perspective and business-model lenses, the authors offer nuanced insights into how digital servitization unfolds.Practical implicationsExecutives can obtain insights into the business model elements, they need to change over the course of digital servitization and how to manage the process.Originality/valueA longitudinal case study of a traditional manufacturer that has achieved stellar success through digital servitization business models development.

Interplay between servitization and platforms: a longitudinal case study

“…, 2019; Kamalaldin et al. , 2020; Chen et al , 2021a). We find that Haier has transformed from product-oriented solutions to integrated solutions but, at the same time, offers integrated and smart connected solutions, which suggests that we should combine gradual transition and stepwise progression models in understanding the stages of servitization (Brax and Visintin, 2017).…”

“…fundamental, intermediate and advanced phases) of the digital servitization relationship and find that investment and engagement in this relationship grow as it evolves. Chen et al (2021a) conduct a longitudinal case study of a Chinese air conditioner manufacturer and conclude that its servitization journey includes three stages: (1) standard product service supported by an internal activity system, (2) customized solutions supported by a supply and distribution chain, and (3) smart solutions supported by an ecosystem. Moreover, some studies have investigated the organizational changes associated with the implementation of servitization.…”

“…, 2019; Paschou et al. , 2020; Chen et al , 2021a). First, manufacturers are becoming increasingly focusing on advanced services (e.g.…”

Data analytics capability and servitization: the moderated mediation role of bricolage and innovation orientation

“…Existing servitization studies have explored the influence of data analytics capability on servitization based on exploratory conceptual analysis or qualitative case studies (Ardolino et al. , 2018; Opresnik and Taisch, 2015), whose findings need confirmatory validation from a relatively large-scale dataset (Chen et al. , 2021).…”

“…First, it contributes to the servitization literature by providing empirical evidence for the critical role of data analytics capability for servitization. Existing servitization studies have explored the influence of data analytics capability on servitization based on exploratory conceptual analysis or qualitative case studies (Ardolino et al, 2018;Opresnik and Taisch, 2015), whose findings need confirmatory validation from a relatively large-scale dataset (Chen et al, 2021). However, to date, there have been few studies providing empirical evidence.…”