Available online at www.sciencedirect.

com

ScienceDirect
Available online at www.sciencedirect.com
Procedia Computer Science 00 (2019) 000–000

ScienceDirect www.elsevier.com/locate/procedia

Procedia Computer Science 200 (2022) 833–842

3rdInternational
InternationalConference
ConferenceononIndustry
Industry4.0
4.0and
andSmart
SmartManufacturing
Manufacturing

Industry 4.0 as an Enabler of Servitization in the Plant Engineering

Business: Literature Review and Development of a Conceptual
Research Model
Maxim Ruffa, Manuel Woschankb
Faculty of Business, Economics and Management, University of Latvia, Latvia
a
b
Chair of Industrial Logistics, Montanuniversitaet Leoben, Austria
* Corresponding author:manuel.woschank@unileoben.ac.at

Abstract

Industry 4.0 technologies and technological concepts can be considered as a starting point to strengthen the long-term
competitiveness of modern enterprises. In this context, only a handful of recent studies consider the importance of professional
Industry 4.0-driven servitization and, therefore, investigate the causal relationship between servitization and company performance.
This paper aims to preliminary scrutinize a set of influencing factors that are required to build organizational competence in
servitization. Based on the theories of market-based view (MBV), the resource-based view (RBV), and theories on dynamic
capabilities (DC), the authors introduce the constructs of digitization and ICT and networks and relationships as success factors for
the company´s competence in servitization. Moreover, the proposed conceptual model serves as a foundation for further
multivariate analyses in the empirical environment of the plant engineering business.
©
© 2022
2021 The
The Authors.
Authors. Published
Published by
by Elsevier
ELSEVIER B.V.B.V.
This is an open access article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0)
This is an open access article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0)
Peer-review under responsibility of the scientific committee of the 3rd International Conference on Industry 4.0 and Smart
Peer-review under responsibility of the scientific committee of the 3rd International Conference on Industry 4.0 and Smart
Manufacturing
Manufacturing
Keywords: Servitization; Industry 4.0; Service Infusion; Advanced Services

1. Introduction

Manufacturers have transformed from product-centric toward a service-led competitive strategy in the search for
high returns, the lock-out of competitors, differentiation, and further opportunities for sustainable growth [1]. This
customer value-based strategy and the corresponding process by which it is achieved are generally referred to as
servitization [2]. Servitized companies such as Rolls-Royce, Caterpillar, MAN, and XEROX provide some forms of
advanced services [3], in which generated revenue is directly related to outcomes aligned with customer performance

1877-0509 © 2022 The Authors. Published by ELSEVIER B.V.

This is an open access article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0)
Peer-review under responsibility of the scientific committee of the 3rd International Conference on Industry 4.0 and Smart Manufacturing

1877-0509 © 2022 The Authors. Published by Elsevier B.V.

This is an open access article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0)
Peer-review under responsibility of the scientific committee of the 3rd International Conference on Industry 4.0 and Smart Manufacturing
10.1016/j.procs.2022.01.280
834 Maxim Ruff et al. / Procedia Computer Science 200 (2022) 833–842
2 A1, A2, A3

and asset availability in addition to reliability [4]. For the advanced service, value is based on the availability and the
output, although this often results in exploitation of the product itself. Servitization has become increasingly important
for plant engineering businesses. On one hand, this is due to commoditization, the increasing dynamics of innovation,
and dwindling technological competitive advantages of established providers, while on the other hand, research has
identified various benefits over the past few decades that suggest servitization should be expanded. One such gain in
the given case would include the establishment of a sustainable competitive advantage through differentiation from
Asian competitors, which intends to evolve from a mid-tech to a high-tech industrial nation soon through “Made in
China 2049” and the equivalent sub-plans [5]. At the same time, the global market potential for advanced services in
the business community is significantly large and growing. This idea is strongly supported by statements from
prominent industry representatives, such as Jack Welch: “The [service] market is bigger than we ever dreamed” [6].
Despite the advantages of servitization, decision-makers often encounter practical challenges regarding its
development and implementation. Among these, there are matters in the establishment of a service culture, the
allocation of new required resources and capabilities, the modularization of advanced service offerings, the design of
corresponding price models, etc. [7].
The multitude of challenges has led to the fact that, despite its proliferated advantages, advanced services currently
account for an insignificant share of revenue within the examined industry. This is defined as a “service paradox” [8].
The phenomenon describes a situation in which, despite significant investments in integrated or advanced services, a
company cannot generate corresponding levels of revenue. A similar situation is described by the term “service jungle”
[8]. In plant engineering businesses increased customization and digitization require the critical re-thinking of
established business models, which can be associated with major changes, contingencies, and high investment costs.
Furthermore, hybrid or bundle offerings are becoming more complex and manifold due to technological progress [9].
Therefore, the industry-specific promising approaches toward servitization-driven business models are of main
interest, especially for small and medium-sized enterprises (SME), for both practical implications and scientific study
[10]. This paper aims to develop a conceptional model to investigate the relationship between competence in
servitization based on the indepentend variables “digitization and ICT” and “networks and relationship” and the two
dependent variables “customer value” and “company performance” by using the well-establish organizational theories
market-based view (MBV), resource-based view (RBV), and dynamic capabilities (DC).

2. Theoretical Framework

From the perspective of strategic management, the provision of complex and highly customized services for the
plant engineering industry could be interpreted as a specific case of the market-based view (MBV), the resource-based
view (RBV), and the dynamic-capability-based view (DC). Therefore, those theories will be explained in this section
in more detail. Moreover, the authors discuss the terms “services and servitization” and “digitalization and information
and communication technologies” as central elements of the proposed research model. Due to the VUCA environment,
the enterprise alone will not be able to provide and develop the resources and capabilities that are required for
promising servitization transformation. The solution to the dilemma is the establishment of networks, the creation of
long-term trustful business relationships, and the increase of the strategic relevance of relationship management [11].

2.1. Market-Based View

The MBV settled in the early 1980s and builds on the results of strategy-content research, which is a milestone of
strategic management. This strategy is mainly attributed to Michael E. Porter, whose findings are based on previous
research by Mason (1939) and Bain (1956), and takes an outside-in perspective, in which the value chain is grounded
on the company’s strategic position. This concept is based on the “Structure-Conduct-Performance-Paradigm” model.
Also referred to as the “Bain-Mason paradigm”, it deals with the relationships between market structure, market
behavior, and market performance. The MBV centers on the link between the external environment and the company’s
strategy [12], the concept assuming homogeneously distributed resources and mobility within the industry [13].
Accordingly, the performance of the company depends on its ability to exploit the imperfections of the relevant market
in which goods or services are distributed. The organization must, therefore, attain a position within the branch or
industry in which it can best succeed by counteracting or even shaping competitive forces. The attractiveness of the
 Maxim Ruff et al. / Procedia Computer Science 200 (2022) 833–842 835
A1, A2, A3 3

market, the level of competition, and the potential of industry are determined by “(…) the entry of new competitors,
the risk of substitutes, the bargaining power of buyers, the bargaining power of suppliers and the rivalry between
existing competitors (…)” [14]. To survive within the industry and create a sustainable competitive advantage, the
organization must analyze the acting forces. This enables the enterprise to identify its strengths and weaknesses and
to recognize opportunities and threats. Through the MBV, the company can achieve a sustainable competitive
advantage by initiating strategically relevant actions at lower costs, or by inimitable differentiation to contribute to
customer value, or by focusing on a niche market. The company can track the generic strategies separately or partly if
it provides a sustainable competitive advantage [15]. Generally, the strategy is intended to create a defensible position
within an industry and to make the market appear less attractive to the competition. In the context of this thesis, the
established plant engineering industry is scrutinized by implementing a case study approach based on a typical West
European corporation. As already revealed, the engineering plants are highly customized, complex, and resource
intensive. The generic strategy of total-cost leadership is not applicable in this case since it is not feasible to
successfully compete with emerging Asian competitors on this base. Therefore, a strategic focus is placed on
differentiation and a focus on niche markets. Due to economic reasons, these strategies should only be pursued in the
case of acceptable returns. The differentiation strategy intends to place uniqueness on the offer by contributing to
customer value, preferably in a multidimensional way. The niche strategy involves the targeting of a specific
geographical market, market segment, or customer group, and the niche that a company concentrates on should be
served intensively and successfully. As a result, the company aims to constantly improve its capabilities and pursue
strategic goals more effectively and efficiently than the competition. The generic strategies of overall cost leadership
and differentiation can be pursued separately or simultaneously. Some organizational, financial, and technical
resources and capabilities are required to implement differentiation and focus strategies. Concerning the plant
engineering industry, one can assume that the present focus strategy will result in decreasing margins in the long term
and that monopoly rents would not be achieved. Asian competitors today also concentrate on the same niche markets
in which, due to state funding policies, the petrochemical production facilities and single components of comparable
quality can be offered at a significantly lower price. Therefore, the differentiation strategy seems to be the most
promising strategy when following the servitization approach. In addition to focusing on customer value, the strategy
can transform the relationship with customers and suppliers from one that is transaction-based into one that is long-
term relationship-based and, thus, making it more difficult for new competitors to enter the market. The MBV is
somewhat one-sided; therefore, a company’s success is determined primarily by the market structure. The idea that a
company’s strengths and weaknesses are based on resources is attributed to Penrose and is reflected in the RBV
approach, which is explained next [16].

2.2. Resource-Based View

In contrast to the MBV, the RBV focuses on internal resources and capabilities. This concept assumes that
companies are not administrative units but rather a bundle of resources and capabilities [17]. As such, the strengths
and weaknesses of an organization depend directly on the form and exploitation of internal resources and capabilities.
The development of the RVB can be traced back to the beginning of the 1990s. This strategic management approach
emerged since, at the time, organizational performance could not be accurately explained through the single evaluation
of market position or industry affiliation. The RBV takes an inside-out perspective by focusing on resources and
capabilities as the basis of corporate success and on the competitive advantages that are achieved through their
exploitation. From a company’s perspective, the different resource categories are not strategically valuable for the
improvement of performance. The company’s capabilities correspond to its synchronized deployment of resources.
Moreover, these capabilities enable the coordinated and goal-oriented utilization of resources [17]. The resources are
inherent within the organization, its processes, and its management systems. The RBV also assumes the heterogeneity
of resource distribution within the industry, in addition to its partial immobility. Considering given resource bundles
and capabilities, organizations should implement appropriate strategies to maintain competitiveness.
There are several definitions for resources with the following applied for this research, that resources are “(…)
assets, capabilities, organizational processes, company attributes, information, knowledge, etc. controlled by a
company that enable the company to conceive of and implement strategies that improve its efficiency and
effectiveness”. In addition, resources can be interpreted as process-input variables since given resources and
836 Maxim Ruff et al. / Procedia Computer Science 200 (2022) 833–842
4 A1, A2, A3

capabilities can create a competitive advantage, they constitute the basis for the economic success of a company.
Resources that strategically ensure competitive advantages are referred to as core competencies. The focus of this
paper is how the established companies in the international plant engineering industry can generate a strategic
competitive advantage by following the servitization approach. The organization possesses a strategic competitive
advantage if it can increase “(…) its efficiency and effectiveness in ways that competing companies are not” [18]. One
of the tasks of strategic management is, therefore, to permanently maintain the competitive advantage and to steer the
deployment of the company’s capabilities. The RBV approach is criticized, however, for its isolated view of resources.
Valuable resources and capabilities often arise from their combination with other resources with which they have a
complementary relationship. In addition, the concept does not define whether and how valuable resources and, thus,
rents arise. The scrutinized industry is currently confronted with the fact that Asian competitors offer components and
entire turn-key plants at much lower prices by comparable quality. They can only successfully pursue this strategy
with the support of economic intervention from the state. Based on the RBV approach, this strategy can merely be
exploited to realize normal rents only and no Ricardian rents, which are only earned if the resources can provide
heterogeneity or efficient advantages [19].

2.3. Dynamic-Capabilities

The development of the RBV in the 1990s gave rise to two main directions of strategic management. These are
known as the knowledge-based view and the dynamic-capacity view (DC). The DC is of great relevance to this work.
One general problem of organization and competence-based research is revealed when one examines the balance
between institutionalized routines and their required dynamic capabilities. The area of tension between stability and
dynamics can also be explained as the area of tension between exploitation and exploration. Organizations have certain
inertia toward innovation since they are aimed at maintaining their structures and optimizing exploitative efficiency.
However, organizations regularly risk the successful application of their capabilities and competences, becoming rigid
and, therefore, making renewal more difficult. While both processes are required simultaneously, they are mutually
exclusive and, therefore, must be balanced. The scientific discourse that surrounds dynamic capabilities addresses the
problem of dealing with stability and dynamics at the organizational level [20]. A critical question for strategic
management is how organizations can achieve and maintain a competitive advantage. The RBV provides a previously
discussed explanation. Valuable, rare, inimitable, and non-substitutable resources create competitive advantages
through a corresponding resource configuration. However, sustainability is doubted. The assumption that resources
are static is critiqued in most of the relevant literature [21]. The approach contains some limits for highly dynamic
environments. The valuable, rare, inimitable, and non-substitutable resources criteria of company-specific resources
alone are not sufficient to creating competitive advantages in the long term since resource heterogeneity between
companies is less than previously assumed. Furthermore, in a turbulent environment characterized by continuous
change, long-term competitive advantages cannot be created based on unchanged resource configurations. Rather,
dynamic capabilities and changes in the resource base come into focus. The consideration of dynamic competencies
is based on distinctive competence, organizational routine, core competence, and core capability and rigidity. Dynamic
capabilities should provide an explanatory background for the constant changes in the resource base in the event of
significant environmental changes. A milestone in the development of this construct has been contributed by David J.
Teece. Nevertheless, the basis of the DC is the RBV. The DC criticizes the neglect of intangible resources (the creation
of capabilities, knowledge management, etc.), which are of great importance for strategic decisions because of these
resources not being readily obtainable in markets or being too expensive to acquire. This is where the concept of
dynamic capabilities becomes important. In this context, “dynamic” means that capabilities are flexible and adapted
in such a way that a company can react to rapid environmental fluctuations. The concept also emphasizes the role of
strategic management inadequately adapting, integrating, and reconfiguring internal and external organizational
capabilities, resources, and functional competencies to meet the requirements of a rapidly changing environment.
The nature of strategic decision-making relates to the organizational path dependencies. Available resources are
then coordinated and integrated through processes (i.e., static components). However, processes also require methods
of learning that either involve incremental improvements in resource composition or the identification of new
opportunities (i.e., dynamic components). The conception of DC is expanded on the micro foundation of dynamic
capabilities through the additional consideration besides positions, paths, and processes of capabilities, organizational
 Maxim Ruff et al. / Procedia Computer Science 200 (2022) 833–842 837
A1, A2, A3 5

structures, decision rules, and discipline. For analytical purposes, the dynamic capabilities are split up into the ability
to recognize opportunities and threats (i.e., sensing), the ability to seize opportunities, and the ability to maintain
competitiveness (i.e., managing and maintaining) [22]. The dynamic capabilities are characterized by intangibility and
are to be understood as accumulated knowledge, which must then be developed and cannot be externally purchased.
The concept of DC is not, however, free of criticism. If capabilities aim to use resources, then they themselves could
also be interpreted as resources.

2.4. Services and Servitization

Both central constructs of service and servitization are defined here regarding their further utilization for this paper.
In particular, the term “service” which is often cited in relevant literature is used heterogeneously, resulting in multiple
possible definitions. However, the different definitions indicate two basic characteristics. These are the assumed
intangibility of the service and its time perishability, which is mostly associated with the immediate consumption of
the service at the point of its creation. These characteristics imply a strict separation between physical goods and
services that no longer applies today. This separation largely ignores the fact that most goods today also include a
service component and must, therefore, be viewed as a bundle of both. Due to the complexity of this definition, an
alternative approach has been taken to describe service packages as a bundle. The current tendency also considers the
increasingly blurred boundaries between the manufacturer and the service provider. Regarding the trend in the plant
engineering industry that is examined in this paper, it can also be noted that customers actively participate in the early
design phase of the facility and, thus, become a part of the value-creation process. Based on experience, most
manufacturers are aware that providing service packages as a value-adding service is a strategic way to differentiate
from Asian competitors. In the context of this paper, service is used to define service packages as the output of the
servitized organization or as an element of the product-service offering. Technical service packages are the focus here.
These are requested by the customers and offered accordingly by the manufacturers. The importance of the technical
aspect of these services is since the extrusion and subsequent process engineering steps are regarded as technology-
intensive commodities. These systems require the customer to rely on the expertise of the manufacturer in cases of
extraordinary operation and sophisticated maintenance. The technical services are usually cost-intensive and strictly
regulated. If the manufacturer intends to pursue a sustainable differentiation strategy, this cannot be initiated solely
through the already established basic technical services. It requires a decision by the strategic management, according
to which additional supplementary (integrated or advanced) service packages must be offered [23]. The supplementary
service packages contribute to the overall increase in perceived customer value and are unique in their design.
Hereafter, this paper scrutinizes these supplementary technical service packages, which can implement a sustainable
differentiation strategy for the engineering plant industry. The provision of service packages is intended to generate
added value for the customer by integrating services into the core product, as described by the principal of servitization
[24]. The following definition of the term is used for this paper: "(…) servitization is the process of transforming
manufacturers to compete through services integrated with their products; a transition from production-centric to
services-centric manufacture.” In this definition, service offers are classified into base services, intermediate services,
and advanced services. While base services support the actual product, the intermediate and advanced services focus
on customer support. It can be assumed that the provision of supplementary service packages may only be exploited
to pursue a differentiation strategy if a comprehensive view of the life cycle costs, plant’s service life, and prevailing
competition take place on the manufacturer’s side [23,24].

2.5. Digitalization and Information Communication Technologies

Hsu (2007) defines digitization as the increased implementation of digital technologies to connect people, products,
systems, etc., which, at the same time, also enables certain interactions between actors [25]. Therefore, the deployment
of digital technologies has the potential to significantly improve both customer value and business performance.
Digital servitization can enable different types of service innovation [26]. Storbacka (2011) proposes that
manufacturers primarily deal with business cross-cutting functionality during the servitization process, the issues of
which can generally be viewed from an industrial (back-end) and commercial (front-end) perspective [27].
838 Maxim Ruff et al. / Procedia Computer Science 200 (2022) 833–842
6 A1, A2, A3

The back-end issue is primarily about improving an organization's operational performance through the deployment
of digitalization, exemplary including process automation. Digital technologies can resolve the effectiveness-
efficiency trade-off and promote organizational ambidexterity, being essential for an enterprise's survival. Ulaga and
Reinartz (2011) state that digital servitization enables the manufacturer to entirely take over part of the customer
process and, thus, generate a sustainable lock-in effect [28]. The front-end perspective on the other hand is about
internalizing the customer value creation process to such an extent that one can later make a significant contribution
to achieving customer goals [27]. Front-end digitization also enables to answer more precisely the question of how
much the customer is worth to one's own company. Coreynen et al. (2017) note that, currently, manufacturers are also
leveraging digital technologies to create disruptive innovations which have the potential to significantly impact both
their own and customers’ business models [29]. Hybrid offerings such as smart, or predictive maintenance, or output-
based contracts are creating new value proposition opportunities.
The potential of digital servitization has already been discussed frequently in contemporary research. Digital
technologies enable cost-effective standardized adaptation through the modularization of hybrid offerings, or so-called
solutions if implemented correctly. Sultan (2014) states that digitalization, in addition, reduces organizational
transaction costs [30]. Moreover, digitization can enable manufacturing enterprises to integrate more effectively and
efficiently into supplier and customer processes [29]. This deep-rooted process integration is likely to contribute to
the development of innovative service offerings. Digital servitization also appears to have a meaningful impact on
building the comprehensive entrepreneurial serivitization competency and significantly influence business model
transformation [31]. Gago and Rubalcaba (2007) note that information and communication technologies (ICT) are an
effective way of interaction between the manufacturer, its customers, and the supplier network [26]. The process of
value co-creation is then fast-tracked and improved by more comprehensively and dynamically capturing the needs
of all network partners involved. Accordingly, the development of corporate competence in digital technologies and
corresponding ICT can be regarded as the seminal competence within servitization competence. Chesbrough and
Spohrer (2006) conclude that digitization and ICT enable servitization in the first place [32].

3. Research Model

Based on the theories outlined in the previous section, this section is dedicated to deriving the research model. For
this purpose, the requirements for the research model are first defined to select the most suitable theories for this
research purpose and to set up the final research model. Subsequently, the individual constructs of the model, as well
as their definitions, are determined from the research literature and the hypotheses underlying the model are
established as a basis for the validation of the model. The following requirements are defined that comprehensively
explain the cause-and-effect principle of servitization competencies on customer value and company performance and
also have a certain relevance for practice.
Therefore, the main requirements of our conceptual research model can be summarized as follows: 1) The model
should be based on a validated and accepted theory in the field of strategic management to ensure the best possible
stability and generalizability of the results. The same applies to the constructs implemented and their
operationalizations. 2) The objective of the explanatory model should be to understand the properties and their impact
on perceived customer value and enterprise performance from the perspective of servitization. These insights are
essential for the practical implementation of the model, as this is the only way for a company to improve its
fundamental servitization competencies, such as digitization and network formation, or their management through
targeted measures. 3) For practical benefit, it is necessary to set up a forecasting model that provides information about
future perceived customer benefits and company performance even before extensive digitization and network
formation; only in this way can it be applied as an assistive tool during the transformation process toward a more
servitized business model.
Servitization research is an extensive field of exploration with a variety of theories and models, but their focuses
and basic assumptions are different. Considering the requirements defined in the previous section, it is evident that
none of the previously defined concepts of strategic management to explain the generation of sustainable competitive
advantage concerning servitization as a business model transformation in its original version meets all three criteria.
A focal enterprise perspective with resources and capabilities required by the manufacturer is often chosen, drawing
respectively on the concepts of the RBV and DV approaches. The current research contributions draw on the theory
 Maxim Ruff et al. / Procedia Computer Science 200 (2022) 833–842 839
A1, A2, A3 7

of network actors [33]. The basic assumption is that manufacturers need networks to create competencies that they
cannot generate on their own without a feasible cost [34]. Further, the focus is on network creation with key actors
throughout the value chain, by which networks consider interactions with customers, suppliers, and intermediaries. It
is these continuous interactions that enable both individual actors and the entire network to develop unique capabilities
and competencies for generating a sustainable competitive advantage. However, in addition to its strategic relevance,
the network perspective presents some complex challenges and risks for the manufacturer. For example, the
opportunity to leverage the supplier network is a bottleneck for many manufacturers due to the demand for a reliable
and trustworthy partner and due to the need for the company to release a certain degree of control. Based on these
considerations, a mixed research model is proposed that combines the respective advantages of MBV, RVB, and DC
concepts, thus bringing the three strategic management concepts together. In this regard, we refer to the basic premises
of Ajzen (2005) [35]. The compatibility principle applies here, according to which the more likely the target, action,
context, and time elements of one indicator are to be like those of the other, the greater the statistical correlation among
them will be. For this reason, the proposed model is based on the concept of RBV at its core, while, at the same time,
incorporating the fundamental assumptions of MBV and DV. Therefore, the conceptual model of this paper is outlined
in Figure 1.

Fig. 1. Research model.

In the context of this thesis, the presented combined research model is applied as a basis for the investigation of
business competence in digitization and network formation, or network management from the perspective of
servitization as a business model transformation and its effects on perceived customer value and business performance.
On the one hand, the model meets the second requirement concerning the analysis of system properties by integrating
established theories of strategic management, and on the other hand, it acts as a forecasting model by integrating
current research on servitization. Further, similar models have already been empirically validated and extended by
specific constructs, which ensures basic model and construct validity. In the following section, the individual
constructs of the research model are defined, and the resulting hypotheses are derived.

3.1. Dependent Constructs

Customer value: In the analogy to RBV and DC concepts, a company that has strategically superior resources and
competencies compared to its competitors may provide hybrid offerings with greater customer value compared to its
competition. The perceived customer value is an indicator of the extent to which the customer benefits from the hybrid
offering in each case and can be conceptualized as the total benefit deducted by the corresponding transaction costs.
The customer's willingness to pay a premium for the hybrid offering increases the higher the perceived customer
benefit. Ideally, the customer gains a net profit over the complete product life cycle. To achieve the premium price,
840 Maxim Ruff et al. / Procedia Computer Science 200 (2022) 833–842
8 A1, A2, A3

hybrid offerings must significantly distinguish from competitive offerings and provide a high level of customer value.
This condition is critical to generate subsequent order intake. In the context of this paper, customer value as defined
above must be explicitly distinguished from customer satisfaction.
Company performance: To measure the company's performance, the non-financial performance indicator of order
intake is applied. The level of order intake determines the company's position in the industry segment. Due to the
fierce global competition, it currently seems hardly possible for established plant manufacturers to achieve a premium
price. Therefore, their competitive advantages result in normal earnings rather than economic rents. As presented in
the previous sections and highlighted in the conceptual model, positive relationships are, therefore, expected from a
theoretical perspective between the constructs of "digitization", "information and communication exchange", and
"customer value", or "company performance", which is measured in terms of order intake.

3.2. Independent Constructs

Digitization and ICT: Digitization boosts the required resource base by transforming digital data into knowledge
[36], enabling path-specific resource configuration for the enterprise. Some case-specific digital methods support the
servitization pathway as well as their contribution at different levels of dynamic resource configuration. These levels
follow the hierarchical distinction of the DC approach between resources, capabilities, and dynamic capabilities, with
increasing impact on competitive advantage and customer value. In industrial servitization, the supplier translates the
knowledge gained from internal process optimization into concrete value-adding measures for the customer. Barney
et al. (2001) state that enterprises that can transfer (tangible) digital assets into (intangible) knowledge can gain a
sustainable advantage over their competitors [36]. Commercial servitization refers to the process in which the
manufacturer initializes the value proposition by involving internal customer processes and, thus, co-creates the value
proposition in collaboration with the customer. In this process, the deployment of ICT supports the management of
customer relationships and the scalability of hybrid offerings, with a simultaneous increase in customer interactions.
Ulaga and Reinartz (2011) conclude that companies must have the capabilities to continuously balance both front-
office customization, back-office production, and delivery processes to achieve sustainable competitive advantage and
deliver the corresponding customer value, respectively [28]. Value servitization implicates a substantial renovation of
the present value chain through the creation of a new digital servitized hybrid offering, which affects the customer
processes and has a truly disruptive impact on vendor-customer relationships. Networks and relationships: In the
business markets, there is a shift in manufacturers' offering strategies from products toward hybrid offerings. Cova
and Salle (2008) argue that servitization poses a multitude of challenges and identify a solution approach based on S-
D logic [33]. The major cornerstones of this concept are identified as value co-creation within supplier and customer
networks, which are primarily geared to the provision of solutions. A two-stage approach is advocated. On the one
hand, value co-creation ought to be developed among the manufacturer and corresponding customer network. At the
same time, value co-creation would also require to be initiated between the manufacturer and its supplier network
value. The evolved solution concept advocates a step-by-step approach of value co-creation within the customer
networks and, at the same time, facilitates an understanding of the customer value within the customer network.

4. Conclusions and Implications

The market share of established plant engineering companies in the fields of extrusion and bulk-material handling
has been declining for the last ten to fifteen years. Most providers face a challenging economic situation that forces
them to adapt their strategies to survive with global competition. These strategies center on focusing on the
development of high-performance equipment and the design of special plants around material handling. However,
technological, and qualitative competitive advantages based on innovation are decreasing. In the meantime, Asian
competitors can build complex polyolefin bulk-material plants, too. It can, therefore, be assumed that the market
position of established providers will continue to decline. Since bulk-material plant engineering has a significant
influence on the overall economy, it should be in the interest of society to promote this industry. Competence in
servitization reveals the potential to obtain a sustainable competitive advantage through the corporate strategy of
providing complimentary service packages as a means of differentiation. The strategic market position of the company
can thus be improved. It may be assumed that these complementary service packages, which contribute to an increase
 Maxim Ruff et al. / Procedia Computer Science 200 (2022) 833–842 841
A1, A2, A3 9

in customer value, are difficult to imitate by competitors and that the mandatory resources and capabilities are rare,
valuable, and unique and, therefore, cannot be easily purchased on the market.
The objective of this paper was to explore a set of enablers for competence in servitization. Therefore, the constructs
of digitization and ICT, as well as networks and relationships, were defined as the main prerequisites by using theories
of market-based view (MBV), the resource-based view (RBV), and theories on dynamic capabilities (DC). Next, a
conceptual research model was proposed which can be used to investigate the relationship between the competence in
servitization and the customer value and/or the company performance. Thus far, no comparable research has been
carried out in the field of servitization for the plant engineering industry with a focus on bulk material handling. Based
on the RBV and DC, it can be anticipated that competence in servitization as a special constellation of the company´s
internal resources and capabilities constitutes a competitive advantage due to its ability for the provision of
complimentary service packages. Furthermore, concerning the MBV, an assumption was made that the provision of
customer-valued service packages constitutes an additional competitive advantage since it enables the organization to
follow the differentiation strategy. The expert interviews confirmed that competence in servitization and the
subsequent provision of complimentary service packages were significant for customer value and order intake. The
assumption was made that digitization facilitates competence in servitization by enhancing the transparency,
flexibility, and modularity of both internal production processes and interactions with the customer.
As a limitation, it should be noted that this paper is purely conceptual in scope. Therefore, as the next logical step,
the prospered research model will be operationalized and tested in the empirical environment of the plant engineering
business by using multivariate procedures based on a large-scale sample. Thereby, a subsequent refinement of the
research model would certainly be relevant for the comprehensive understanding of servitization as a business model
transformation. Specifically, the questions here would be how the serviced manufacturer or buyer business models
must be designed to achieve the best possible fit or the highest shared value in terms of co-creation. It can be assumed
that there are several equivalent constellations in this regard.

Acknowledgments

The paper is part of the project ‘SME 4.0 – Industry 4.0 for SMEs’ which has received funding
from the European Union’s Horizon 2020 research and innovation program under the Marie
Skłodowska-Curie grant agreement No. 734713.

References

[1] Oliva, R., and Kallenberg, R. (2003) “Managing the transition from products to services” International Journal of Service Industry Management
14: 160–172.
[2] Vandermerwe, S., and Rada, J. (1988) “Servitization of business: Adding value by adding services” European Management Journal 6: 314–
324.
[3] Baines, T.S., and Lightfoot, H. (2013) “Servitization of the manufacturing firm: Exploring the operations practices and technologies that deliver
advanced services” International Journal of Operations and Production Management 34: 2–35.
[4] Brax, S.A., and Visintin, F. (2017) “Meta-model of servitization: The integrative profiling approach” Industrial Management 60 (1): 17–32.
[5] Prandini, M., Lehmann, R., Blumer, H., and Keller, J. (2018) “Industrielle After Sales Services in China”, Springer Gabler, Wiesbaden.
[6] Mathieu, V. (2001) “Product services: From a service supporting the product to a service supporting the client” Journal of Business and
Industrial Marketing 16: 39–61.
[7] Zhang, W., and Banerji, S. (2017) “Challenges of servitization: A systematic literature review” Industrial Marketing Management 65: 217–227.
[8] Gebauer, H., Fleisch, E., and Friedli, T. (2005) “Overcoming the service paradox in manufacturing companies” European Management Journal
23: 14–26.
[9] Ulaga, W., and Reinartz, W. J. (2011) “Hybrid offerings: How manufacturing firms combine goods and services successfully” Journal of
Marketing 75: 5–23.
[10] Kowalkowski, C., Witell, L., and Gustafsson, A. (2013) “Any way Goes: Identifying value constellations for service infusion in SMEs”
Industrial Marketing Management 42: 18–30.
[11] Baines, T. S., and Lightfoot, H. (2013) “Servitization of the manufacturing firm: Exploring the operations practices and technologies that
deliver advanced services” International Journal of Operations and Production Management 34: 2–35.
[12] Porter, M.E. (1981) “The Contributions of Industrial Organization to Strategic Management” The Academy of Management Review 6 (4): 609–
620.
842 Maxim Ruff et al. / Procedia Computer Science 200 (2022) 833–842
10 A1, A2, A3

[13] Barney, J. (1991) “Firm Resources and Sustained Competitive Advantage” Journal of Management 17 (1): 99–120.
[14] Porter, M.E. (2004) “Competitive Advantage: Creating and Sustaining Superior Performance”, First Free Press Export Edition, New York.
[15] Porter, M.E. (1991) “Towards a dynamic theory of strategy” Strategic Management Journal 12: 95–117.
[16] Penrose, E. (1995) “The Theory of the Growth of the Firm”, Oxford, Oxford University Press.
[17] Barney, J.B. (1996) “The Resource-based Theory of the Firm” Organizational Science 7 (5) 469–469.
[18] Amit, R., and Schoemaker, P.J.H. (1993) “Strategic Assets and Organizational Rent” Strategic Management Journal 14 (1): 33–46.
[19] Wernerfelt, B. (1995) “Resource-Based Strategy in a Stochastic Model”, in Montgomery, C.A. (ed): Resource-Based and Evolutionary
Theories of the Firm: Towards a Synthesis, New York, Springer US: 133–145.
[20] Teece, D., Pisano, G., and Shuen, A. (1997) “Dynamic Capabilities and Strategic Management” Strategic Management Journal 18 (7): 509–
533.
[21] Eisenhardt, K., and Martin, J. (2000) “Dynamic Capabilities. What are they?” Strategic Management Journal 21: 1105–1121.
[22] Teece, D. (2007) “Explicating Dynamic Capabilities. The Nature and Microfoundations of (Sustainable) Enterprise Performance” Strategic
Management Journal 28: 1319–1350.
[23] Beamish, P.W., Morrison, A.J., Inkpen, A.C., and Rosenzweig, P.M. (2003) “International Management – Text and Cases”, Boston et al.,
Springer.
[24] Baines, T., Lightfoot, H.W., Benedettini, O., and Kay, J.M. (2009) “The servitization of manufacturing: A review of literature and reflection
on future challenges” Journal of Manufacturing Technology Management 20 (5): 547–567.
[25] Hsu, C. (2007) “Scaling with digital connection: Services innovation” Proceedings of 2007 IEEE International Conference on Systems, Man
and Cybernetics, New York 2007, IEEE: 4057–4061.
[26] Gago, D., abd Rubalcaba, L. (2007) “Innovation and ICT in service firms: Towards a multi-dimensional approach for impact assessment”
Journal of Evolutionary Economics 17 (1): 25–44.
[27] Storbacka, K. (2011) “A solution business model: Capabilities and management practices for integrated solutions” Industrial Marketing
Management 40 (5): 699–711.
[28] Ulaga, W., and Reinartz, W. J. (2011) “Hybrid offerings: How manufacturing firms combine goods and services successfully” Journal of
Marketing 75 (6): 5–23.
[29] Coreynen, W., Matthyssens, P., and Van Bockhaven, W. (2017) “Boosting Servitization through digitization: Pathways and dynamic resource
configurations for manufacturers” Industrial Marketing Management 60: 42–53.
[30] Sultan, N. (2014) “Servitization of the IT industry: The cloud phenomenon” Strategic Change 23: 5–6.
[31] Sklyar, A., Kowalkowski, C., Tronvoll, B., and Sörhammar, D. (2019) “Organizing for digital servitization: A service ecosystem perspective”
Journal of Business Research 104: 450–460.
[32] Chesbrough, H., and Spohrer, J. (2006) “A research manifesto for services science” Communications of the ACM 49 (7): 35–40.
[33] Cova, B., and Salle, R. (2008) “Marketing solutions in accordance with the SD logic: Co-creating value with customer network actors”
Industrial Marketing Management 37: 270–277.
[34] Storbacka, K., Windahl, C., Nenonen, S., and Salonen, A. (2013) “Solution business models: Transformation along four continua” Industrial
Marketing Management 42: 705–716.
[35] Ajzen, I. (2005) “Attitudes, Personality and Behavior”, New York, Open University Press.
[36] Barney, J., Wright, M., and Ketchen, D.J.Jr. (2001) “The resource-based view of the firm: Ten years after 1991” Journal of Management 27
(6): 625–641.