Organization Architecture Configurations for Successful Servitization

Abstract

Despite the growing importance of servitization as a source of competitiveness for manufacturers, limited knowledge exists about organizational issues of servitization. Drawing on transaction cost economics theory and a configuration theoretical perspective, our study illuminates different organization architectures for servitization and how firms align such architectures with servitization approaches to achieve high financial performance. We analyze qualitative data based on interviews with 22 managers and quantitative data from a survey of 161 equipment manufacturers. The results indicate that manufacturers mostly opt for one of three organization architectures for servitization: internal product business unit, internal specialized service business unit, or external service provider. In addition, they reveal equifinal configurations of servitization characteristics to achieve high financial performance for each organization architecture. The internal specialized service business unit turns out as a flexible organization architecture to successfully provide smoothing, adapting, and substituting services. The use of an external service provider is less suited for the provision of adapting and substituting services, which require more knowledge specialization and coordination. All three organization architectures can be used to provide smoothing services. In summary, the results may serve as decision-making templates for aligning organization architecture, offering characteristics, and service provider integration to pursue servitization successfully.

Capability configurations for successful advanced servitization

“…We pre-tested two paragraphs describing different services that manufacturers could provide in combination with core products, followed by different illustrative examples. This approach has been employed by studies on organizational strategy (Miles et al, 1978) and servitization (Heirati et al, 2023). Respondents were asked to assess each of the servitized offerings regarding their importance as part of the manufacturer's offering to customers.…”

Moving to subscriptions: service growth through business model innovation in consumer and business markets

“…Manufacturers across diverse industries are increasingly expanding beyond conventional product-centric approaches to novel service business models that enhance customer outcomes (Gebauer et al. , 2017; Heirati et al. , 2023; Kowalkowski et al.…”

“…Manufacturers across diverse industries are increasingly expanding beyond conventional product-centric approaches to novel service business models that enhance customer outcomes (Gebauer et al, 2017;Heirati et al, 2023;Kowalkowski et al, 2022). This transformation, known as servitization, is pervasive across both business-to-business (B2B) and business-to-consumer (B2C) markets (Vandermerwe and Erixon, 2023).…”