Steering Manufacturing Firms Towards Service Business Model Innovation: Embracing Indicators that Reflect Market Performance

Visnjic Kastalli, I., B. Van Looy and A. Neely. 2013. Steering Manufacturing Firms Towards Service Business Model Innovation. California Management Review 56(1): 100-123.

42 Pages Posted: 12 Mar 2014

See all articles by Ivanka Visnjic

Ivanka Visnjic

ESADE Business School; University of Cambridge

Bart Van Looy

KU Leuven - Department of Economics

Andy Neely

University of Cambridge; London Business School

Date Written: 2014

Abstract

Increasingly, manufacturing firms are turning to services as a new way of creating and capturing value. Despite the potential benefits, evidence suggests that many new product-service providers struggle to deploy service activities effectively, not least because they fail to reflect the presence of service activities in their performance management systems (PMS). This paper reports the results of an in-depth case study, which examines how manufacturers can steer the transition towards services. Our findings suggest that manufacturing firms need to emphasize two separate but related dimensions of the market performance of service activities: 'service adoption', reflecting the proportion of customers who purchase the manufacturer’s services, and 'service coverage’, signaling the range of service elements or the comprehensiveness of the service contract that customers opt for. These two indicators, reflecting service market performance, should be supplemented with a 'complementarity index’ designed to disclose whether the relationship between products and services is reinforcing or substitutive. This is particularly important, since a common concern expressed by manufacturers is that increasing their service activities may cannibalize their product activities. Combined, these indicators allow manufacturing firms to deploy a service-based business model in an integrated and sustainable manner.

Keywords: servitization, open service innovation, product-service systems, performance measures, business model innovation

Suggested Citation

Visnjic, Ivanka and Van Looy, Bart and Neely, Andy D., Steering Manufacturing Firms Towards Service Business Model Innovation: Embracing Indicators that Reflect Market Performance (2014). Visnjic Kastalli, I., B. Van Looy and A. Neely. 2013. Steering Manufacturing Firms Towards Service Business Model Innovation. California Management Review 56(1): 100-123.. Available at SSRN: https://ssrn.com/abstract=2407392 or http://dx.doi.org/10.2139/ssrn.2407392

Ivanka Visnjic (Contact Author)

ESADE Business School ( email )

Avda. de Pedralbes 60-62
Barcelona, 08034
Spain

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Bart Van Looy

KU Leuven - Department of Economics ( email )

Leuven, B-3000
Belgium

Andy D. Neely

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

HOME PAGE: http://www.ifm.eng.cam.ac.uk/people/adn1000/

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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