Outcome-based contracts – Linking technology, ownership and reputations

Shanmugam, Ramesh Kumar; Dhingra, Tarun

doi:10.1016/j.ijinfomgt.2023.102624

Cited by 5 publications

(3 citation statements)

References 113 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Indeed, outcome-oriented offerings and services can be defined as service business models [60] in which at least some of the provider's payment [61] is determined by functional results [24]. This type of offering can be most clearly recognized in Rolls-Royce's "power by the hour", which bills customers according to engine usage hours [60], [62]. Many engineering companies, including Hitachi, Caterpillar, and Bombardier, charge customers based on the number of hours their equipment is used [62], [63].…”

Section: B a Configurational Perspective Towards Customer Sustainable...mentioning

confidence: 99%

“…This type of offering can be most clearly recognized in Rolls-Royce's "power by the hour", which bills customers according to engine usage hours [60], [62]. Many engineering companies, including Hitachi, Caterpillar, and Bombardier, charge customers based on the number of hours their equipment is used [62], [63]. In this regard, smart solution providers are often able to identify and diagnose operational problems in a customer's organization (the business model and processes of which the customer might be unaware) and offer proactive solutions designed to assist the customer in overcoming them [34].…”

Section: B a Configurational Perspective Towards Customer Sustainable...mentioning

confidence: 99%

See 1 more Smart Citation

Linking Digital Servitization and Industrial Sustainability Performance: A Configurational Perspective on Smart Solution Strategies

Kolagar,

Parida,

Sjödin

2024

IEEE Trans. Eng. Manage.

View full text Add to dashboard Cite

Manufacturing companiesare introducing innovative ways to facilitate the sustainable transition of their customers' operations. The emerging literature on digital servitization proposes numerous factors, such as the use of advanced AI analytics, orientation toward outcomes, and aligning ecosystem partnerships, which can potentially influence the sustainable performance of industrial customers. However, there is currently a lack of understanding regarding how these factors interact to result in sustainable outcomes. Hence, this study seeks to shed light on these complex relationships by identifying viable smart solution strategy configurations for achieving customer sustainable performance. Drawing on a dataset of 180 Swedish manufacturing firms, this study uses a configurational comparative methodnamely, fuzzy-set qualitative comparative analysis (fsQCA) -to identify the impact of different configurations of "AI-driven optimization", "outcome orientation", "value co-creation", and "ecosystem orchestration" conditions on the realization of customer sustainable performance. This study has identified five smart solution strategies that empower manufacturers to realize sustainable performance for their customers. Among the five configurational strategies identified, the first configurational strategy appears to be the most prominent, as it is based on an outcome-based approach in which the firm uses its technological expertise and its ecosystem partnerships to take over customer operations. Thus, this study contributes to the ongoing discussion in digital servitization on its enabling role for industrial sustainability practices.

show abstract

Section: B a Configurational Perspective Towards Customer Sustainable...mentioning

confidence: 99%

Section: B a Configurational Perspective Towards Customer Sustainable...mentioning

confidence: 99%

Linking Digital Servitization and Industrial Sustainability Performance: A Configurational Perspective on Smart Solution Strategies

Kolagar,

Parida,

Sjödin

2024

IEEE Trans. Eng. Manage.

View full text Add to dashboard Cite

show abstract

“…Manufacturing enterprises that were previously selling only their machines have now started to offer outcomes with the help of outcome-based contracts (OBCs) (Schaefers et al, 2021). In OBCs, this outcome is in the form of the hours of machine availability, output units produced from the machine, and the savings/ economy created by the OBCs (Böhm et al, 2016;Grubic and Jennions, 2018;Korkeamäki et al, 2022;Neely and West, 2022;Lin et al, 2023;Shanmugam and Dhingra, 2023). Offering OBCs has many advantages from the perspective of manufacturing enterprises, such as becoming loyal suppliers (Baines et al, 2007), enhancing business knowledge (Solima et al, 2016), and having positive environmental impacts (Tukker, 2015).…”

Section: Introductionmentioning

confidence: 99%

Challenges, Mitigation and Benefits of Outcome-based Contracts in Small and Medium-sized Machine Manufacturers: A Qualitative Exploratory Study

Uuskoski,

Mittal,

Menon

et al. 2023

Int. j. math. eng. manag. sci.

View full text Add to dashboard Cite

Outcome-based contracts (OBCs) offer machine outcomes while maintaining machine ownership with the manufacturer. To this end, the scientific literature lacks systematic studies on sharing insights from the perspective of small and medium-sized enterprise (SME) machine manufacturers (MMs) while implementing OBCs. We interviewed four SME MMs that have successfully offered OBCs. Further, we use exploratory multiple-qualitative case study research. We identified that SME MMs face various challenges, such as ownership of expensive machines, the long payback period of OBCs, protection of IP, the need for constant innovation, and delivering the required performance while offering OBCs. Further, we identified that SME MMs have identified ways to mitigate these challenges, such as involving third parties to own the machine and ensuring earnings by including separate contracts for other activities such as installation, maintenance, training of the employees working on machines, and logistics, to overcome the challenge of the long payback period of OBCs. Additionally, we identified various SME MM-related benefits from OBCs, such as entering competitive markets, optimizing the cost of operating the machine, novel efficient ways of selling and marketing machines, avoiding money laundering and legal issues, and reducing investment through recycling the machine and its components that SME MMs have while offering OBCs. We share insights into how SME MMs offer OBCs, which typically involve significant risks, by empirically studying the challenges, mitigation of challenges, and benefits of offering OBCs.

show abstract

Managing resources for digital transformation in supply chain integration: The role of hybrid governance structures

Franco,

Benitez,

Sousa

et al. 2024

International Journal of Production Economics

View full text Add to dashboard Cite

Outcome-based contracts – Linking technology, ownership and reputations

Cited by 5 publications

References 113 publications

Linking Digital Servitization and Industrial Sustainability Performance: A Configurational Perspective on Smart Solution Strategies

Linking Digital Servitization and Industrial Sustainability Performance: A Configurational Perspective on Smart Solution Strategies

Challenges, Mitigation and Benefits of Outcome-based Contracts in Small and Medium-sized Machine Manufacturers: A Qualitative Exploratory Study

Managing resources for digital transformation in supply chain integration: The role of hybrid governance structures

Contact Info

Product

Resources

About