Organizing for servitization: A framework for manufacturing firms

Organizing for servitization
Developing a framework to guide the transition for manufacturing firms
Non-confidential version
By
Lenny Lobert
A thesis submitted in partial fulfilment of the requirements for the degree of
Master of Science
in Management of Technology
at Delft University of Technology
to be defended publicly on Monday, August 22nd at 15.30h
at the Faculty of Technology, Policy and Management

- This page is intentionally left blank -
Colophon
Organizing for servitization

Developing a framework to guide the transition for manufacturing firms
Master thesis
in Management of Technology
at Delft University of Technology
Faculty of Technology, Policy and Management (TPM)
Date
August 8 , 2016
Author
Lenny Lobert
4012895
l.lobert@student.tudelft.nl / lenny.lobert@gmail.com
Thesis Committee
Dr. Robert Verburg (Chair)

Faculty of TPM
Department of Economic of Technology and Innovation (ETI)
Dr. Patrick van der Duin (1st supervisor)

Faculty of TPM
Department of Economics of Technology and Innovation (ETI)
Dr. Mark de Bruijne (2nd supervisor)

Faculty of TPM
Department of Policy, Organization, Law and Gaming (POLG)
External supervisor
Nenno
An electronic version of this thesis is available at http://repository.tudelft.nl/

Abstract
Since the early 1990s an increasing number of manufacturing firms such as IBM, Xerox and MAN are
adding services to their products to meet the competitive pressures of product commoditization, stagnating
sales and more demanding customers. This transition process is referred to as servitization. It appears that
many manufacturing firms are struggling to implement a servitization strategy to attain their strategic goals
since they lack insights into the strategic and organizational aspects of this transition. A framework that
integrates these aspects can present the currently lacking comprehensive overview of servitization for
manufacturing firms. This framework offers a guideline to successfully carry out servitization. Each
transition phase can be described according to the following strategic dimensions: type of offering, type of
services, type of customer, customer relationship and innovation orientation. Each phase also aligns with a
certain organizational structure, since misalignment is a barrier to successful servitization for manufacturing
firms. Proceeding in servitization therefore involves an organizational transition. Manufacturing firms move
from a product-centric to first a more service- and then a customer-focused structure that integrates product
and service activities, to fulfil the strategic goal to become a solution provider.
Keywords: servitization, transition process, organizational structure, manufacturing firm, framework

development
1
Executive summary
Since the early 1990s an increasing number of manufacturing firms such as IBM, GE, Xerox and DAF are
adding services to their products. Product commoditization, increased competition and more demanding
customers have led to stagnating sales and diminishing competitive advantages. Services provide
manufacturing firms with benefits that can augment the value of a product in order to regain a competitive
advantage. These services go beyond basic services such as repair and maintenance. Manufacturing firms
engage in a transition from selling products to selling integrated offerings based upon a combination of
products and services. This transition process is referred to as ‘servitization’. Whilst services and solutions
provide manufacturing firms a novel way to achieve a competitive advantage, servitization involves a major
challenge since it requires significant organizational changes. Therefore, a large amount of manufacturing
firms experience difficulties implementing a servitization strategy. Existing research is lacking in describing
the relationship between a servitization strategy and the organizational structure of manufacturing firms.
Furthermore, manufacturing firms lack the guidelines to implement servitization to reach their strategic
goals. This research therefore answers the following research question: ‘What is the relationship between a
servitization strategy and the organizational structure of a manufacturing firm with a large installed base of products?’ By
taking an exploratory research approach based on theory and multiple case studies, a framework presenting
an integrated view on that relationship has been developed and validated. The framework describes the
phases of the transition and a number of dimensions that describe each phase, which aids a manufacturing
firm with a guideline for implementing servitization. For part A of the framework covering the strategic
aspects of servitization, the following dimensions are important: the type of offering, type of services, type
of customer, customer relationship and innovation orientation. For Part B of the framework, the dimension
organizational structure is described in each phase. For managers of manufacturing firms, the framework
can be used as follows. The dimensions of part A aid in determining which transition phase their firm is
currently in by determining the progress on each dimension. Furthermore, the alignment of the
organizational structure for their current position can be determined, providing a guideline for implementing
organizational changes.
When pursuing the strategic goal of becoming a solution provider, manufacturing firms need to change
their product-centric structures since these are focused on merely product innovation and sales. This inhibits
a successful transition. In the first phase, activities of various product departments should be bundled and
integrated to form coherent product offerings. Similarly, the service activities should be integrated into
combined service offerings with a separate profit-and-loss, either by establishing a service management
function in the existing structure or by establishing a separate service organization. When the phase is
reached where offerings are not only related to products but also to specific customer processes, customer
teams should be established in the organizational structure. Thereby a close customer relationship can be
developed in order to understand their business processes to which solutions are tailored. Those teams
integrate the activities of both product and service departments into solutions and consequently should have
the appropriate resources and decision making power. To become a solution provider, the number of
customer teams needs to be enlarged until the point where the customer has strategic priority equivalent to
the existing product business. Next to structure, organizational elements such as culture, processes and
reward systems should also be aligned when servitizing. Furthermore, besides internal organizational
alignment, the organization of the total system of value creation involving multiple stakeholders, should be
aligned within servitization. These stakeholders are namely essential for successfully developing and
delivering innovative solutions that are more market- instead of technology-driven. Developing a strong
relationship with these stakeholders, such as service partners and distributors, is therefore essential to
successfully implement servitization. Lastly, the commitment of organizational stakeholders in the top of
the firm is essential to lead the transition from a product-oriented towards becoming a service- and solution-
oriented organization.
3
Acknowledgements
An important part of my life has almost come to an end. 7 years of studies in Delft and abroad, coming
together in this thesis. Doing research and writing this report made me experience all possible emotions. It
was challenging, fun, hard, mind boggling and sometimes directionless and frustrating. But in the end it was
a rewarding journey.
First of all, I would like to thank Nenno. Although you were my supervisor I never experienced this in our
relationship. Your enthusiasm, intelligence, kindness and empathy was great to work with and helped me
when I struggled. I’m glad we were on this road together. Let’s get ready to serve!
Secondly, I would like to thank my thesis committee. Your feedback has helped me get to the essence of
this research and has helped me through tough parts of the ride. Robert, your expertise and power to see
the bigger picture have been of great value. Mark, I visited you on the weirdest moments during the past
months. Thank you for being there when needed and for providing me with key insights to carry on. Patrick,
I value your feedback and advice highly. Your open mind and way of working has given me the freedom to
choose my own path. We also developed a personal connection and kept talking about our beloved club in
Amsterdam. I trust we see a match together one day.
Additionally, I would like to thank all the interviewees, both internal and external, for their time and interest
in my research. My research wouldn’t have been possible without your valuable insights and suggestions.
I would like to thank my friends for being there when I needed it the most and drink beers when I needed
them desperately. I haven’t been the best of friends lately, but it was for a good purpose. Thank you for
your support. I’m finished now. Let’s catch up some lost time!
Lastly, I would like to thank my family and my parents in particular. You have been there when I struggled
the most and supported me throughout this journey. I’ve made it! Thank you for everything you have done
to get me this far.
Lenny Lobert
Naaldwijk, 8th of August 2016
“You can conquer almost any fear if you will make up your mind to do so. For remember, fear doesn’t
exist anywhere except in the mind.” - Dale Carnegie
5
Dedication
This thesis is dedicated to my beloved parents, Hans and Margreth. Thank you for your unconditional
love and support. Without you I would not have made it this far.
7
Table of contents
ABSTRACT ..................................................................................................................................................... 1
EXECUTIVE SUMMARY .............................................................................................................................. 3
TABLE OF CONTENTS ............................................................................................................................... 9
LIST OF FIGURES AND TABLES .............................................................................................................. 11
1 INTRODUCTION ................................................................................................................................ 15
1.1 BACKGROUND ............................................................................................................................................................. 15
1.2 PROBLEM STATEMENT ................................................................................................................................................ 17
1.3 RESEARCH OBJECTIVE AND SCOPE........................................................................................................................... 18
1.4 RESEARCH QUESTIONS ............................................................................................................................................... 19
1.5 RESEARCH RELEVANCE .............................................................................................................................................. 20
1.6 CONCEPT DEFINITIONS.............................................................................................................................................. 20
1.7 THESIS STRUCTURE ..................................................................................................................................................... 21
2 RESEARCH METHODOLOGY ......................................................................................................... 22
2.1 RESEARCH APPROACH ................................................................................................................................................ 22
2.2 PHASE 1: EXPLORATION ............................................................................................................................................ 23
2.3 PHASES 2 AND 3: EMPIRICAL RESEARCH STRATEGY .............................................................................................. 24
2.4 DATA COLLECTION METHODS .................................................................................................................................. 26
2.5 DATA ANALYSIS ........................................................................................................................................................... 28
3 LITERATURE REVIEW ..................................................................................................................... 30
3.1 RATIONALE FOR SERVITIZATION ............................................................................................................................. 30
3.2 STRATEGIC ASPECTS OF SERVITIZATION................................................................................................................. 32
3.3 ORGANIZATIONAL STRUCTURE ................................................................................................................................ 41
3.4 THEORETICAL FRAMEWORK ..................................................................................................................................... 49
4 RESULTS: SMALL CASE STUDIES.................................................................................................... 51
4.1 CASE 1: OFFSHORECO ................................................................................................................................................ 51
4.2 CASE 2: HORTICO ....................................................................................................................................................... 55
4.3 CASE 3: MEDICO ......................................................................................................................................................... 58
4.4 CASE 4: TRANSCO ....................................................................................................................................................... 61
4.5 CASE 5: SERVECO ........................................................................................................................................................ 63
4.6 CROSS-CASE FINDINGS ............................................................................................................................................... 65
5 RESULTS: EMBEDDED CASE STUDY ............................................................................................ 68
5.1 CASE DESCRIPTION ..................................................................................................................................................... 68
5.2 AGRICO’S STRATEGIC GOAL AND POSITION IN SERVITIZATION ........................................................................ 69
5.3 ORGANIZATIONAL DEVELOPMENT ......................................................................................................................... 71
5.4 VALIDATION WORKSHOP ........................................................................................................................................... 76
6 CONCLUSIONS .................................................................................................................................. 80
9
7 DISCUSSION ....................................................................................................................................... 82
7.1 ACADEMIC CONTRIBUTION ....................................................................................................................................... 82
7.2 REFLECTION ON METHODOLOGICAL APPROACH ................................................................................................. 84
8 LIMITATIONS AND RECOMMENDATIONS ................................................................................ 85
8.1 RESEARCH LIMITATIONS ............................................................................................................................................ 85
8.2 FUTURE RESEARCH RECOMMENDATIONS............................................................................................................... 86
8.3 MANAGERIAL IMPLICATIONS .................................................................................................................................... 86
REFERENCES ............................................................................................................................................. 89
APPENDIX A. THEORETICAL FRAMEWORK....................................................................................... 93
APPENDIX B. REVISED FRAMEWORK BASED ON SMALL CASE STUDIES .................................... 94
APPENDIX C. CHALLENGES RELATED TO SERVITIZATION ......................................................... 95
C.1 COMPANY STRATEGY .......................................................................................................................................................... 95
C.2 ORGANIZATIONAL STRUCTURE ........................................................................................................................................ 96
C.3 ORGANIZATIONAL CULTURE ............................................................................................................................................ 97
C.4 SERVICE DEVELOPMENT .................................................................................................................................................... 97
C.5 SERVICE PORTFOLIO OFFERING ....................................................................................................................................... 98
APPENDIX D. MANUFACTURING FIRM’S RESOURCES ................................................................... 100
APPENDIX E. IB SERVICE SPACE.......................................................................................................... 101
APPENDIX F. PRODUCT VS. CUSTOMER-CENTRIC FIRMS ............................................................ 102
APPENDIX G. NOKIA FRONT/BACK HYBRID .................................................................................... 103
APPENDIX H. EXPLORATORY INTERVIEW FORMAT (DUTCH) ................................................... 104
APPENDIX I. EXTERNAL CASE INTERVIEW FORMAT .................................................................... 105
I1. INTERVIEW FORMAT...........................................................................................................................................................105
APPENDIX J. POSITIONING OF OFFSHORECO ................................................................................. 107
APPENDIX K. POSITIONING OF HORTICO ........................................................................................ 108
APPENDIX L. POSITIONING OF MEDICO .......................................................................................... 109
APPENDIX M. POSITIONING OF TRANSCO ....................................................................................... 110
APPENDIX N. OVERVIEW OF CASE POSITIONINGS ........................................................................ 111
APPENDIX O. WORKSHOP INVITATION ............................................................................................ 112
O.1 WORKSHOP INVITATION DOCUMENT ............................................................. ERROR! BOOKMARK NOT DEFINED.
APPENDIX P. WORKSHOP STATEMENTS ........................................................................................... 113
APPENDIX Q. WORKSHOP OBSERVATIONS....................................................................................... 114
Q.1 SUMMARY WORKSHOP OBSERVATIONS ........................................................... ERROR! BOOKMARK NOT DEFINED.
10
List of figures and tables
FIGURE 1| RESEARCH APPROACH .................................................................................................................................... 22
TABLE 1| SCHEMATIC OVERVIEW OF THEORETICAL FRAMEWORK BUILD UP ...................................... 24
TABLE 2| OVERVIEW OF STUDIED CASES ................................................................................................................... 25
TABLE 3| OVERVIEW OF CHARACTERISTICS AGRICO .......................................................................................... 26
FIGURE 2|PRODUCT-SERVICE CONTINUUM [ADOPTED FROM OLIVA & KALLENBERG (2003)] ...... 33
TABLE 4| DEFINING THE TRANSITION PHASES ....................................................................................................... 34
TABLE 5| FRAMEWORK EXPANSION WITH DIMENSION ‘TYPE OF OFFERING’ ...................................... 35
TABLE 6| FRAMEWORK EXPANSION WITH DIMENSION: ‘TYPE OF SERVICES’........................................ 37
TABLE 7| FRAMEWORK EXPANSION WITH DIMENSION: ‘TYPE OF CUSTOMER’ .................................... 38
TABLE 8| FRAMEWORK EXPANSION WITH DIMENSION: ‘CUSTOMER RELATIONSHIP’...................... 39
TABLE 9| FRAMEWORK EXPANSION WITH DIMENSION: ‘ORGANIZATIONAL STRUCTURE’ ........... 48
TABLE 10| SIMPLIFIED THEORETICAL FRAMEWORK ............................................................................................ 50
FIGURE 3| GENERAL ORGANIZATIONAL STRUCTURE OF AGRICO .............................................................. 72
TABLE 11| POSITIONING OF AGRICO WITHIN FRAMEWORK ........................................................................... 74
TABLE 12| FINAL FRAMEWORK ......................................................................................................................................... 79
TABLE 13| ALIGNMENT OF ORGANIZATIONAL STRUCTURE IN EACH PHASE OF SERVITIZATION
STRATEGY ........................................................................................................................................................................... 81
TABLE 14| IB SERVICE SPACE [ADOPTED FROM OLIVA AND KALLENBERG (2003)] ............................101
TABLE 15| PRODUCT CENTRIC VS CUSTOMER CENTRIC FIRMS [INSPIRED BY GALBRAITH (2002)
AND SHAH ET AL. (2006)] ............................................................................................................................................102
FIGURE 4| FRONT/BACK HYBRID MODEL BY NOKIA [ADOPTED FROM GALBRAITH (2002B)]......103
TABLE 16| POSITIONING OF EACH CASE ON THE THEORETICAL FRAMEWORK ................................111
11
"A business absolutely devoted to service will have only one worry about profits. They will be
embarrassingly large."
- Henry Ford -
1 Introduction
1.1 Background
During the last decades, an increasing number of industries have faced intensifying competitive pressures.
Markets are subject to high rates of change and have become more complex. Furthermore, buyers have
become more powerful and more demanding (Galbraith, 2002). In capital goods manufacturing this is no
different (T. S. Baines, Lightfoot, Benedettini, & Kay, 2009; Windahl, 2007). For capital goods
manufacturers, product innovation alone is no longer sufficient to convince customers and ensure success
(Antioco, Moenaert, Lindgreen, & Wetzels, 2008; T. S. Baines et al., 2009; Tim Baines & Lightfoot, 2013).
Especially in Western economies, declining growth, commoditization of manufacturing goods and declining
profits in core markets urge them to find new ways of achieving a competitive advantage (T. S. Baines et al.,
2009; Eloranta & Turunen, 2015; Gebauer, Ren, Valtakoski, & Reynoso, 2012; Vandermerwe & Rada, 1988).
This was for instance seen in the truck business after the global crisis in 2008, as discussed in Box 1.
Box 1. ‘Servitization within the truck business’

In the early 2000’s the truck business was flourishing. Companies like DAF, MAN and
Scania saw increasing sales every year. Those truck manufacturers eventually even had to
let customers down since production could not keep up with rising demand.
Then the global crisis struck. Sales diminished rapidly and price competition increased as
a result. Instead of customer calling to manufacturers, the manufacturers had to call their
customers if they were willing to buy another truck. The whole industry was suffering and
truck manufacturers began searching for alternatives to become profitable again. This
alternative was presented by combining products with advanced services into solutions.
Therefore, instead of focusing on truck sales, truck businesses focused on selling service
contracts to their installed base that charged customers a fixed price during the lifecycle.
This was beneficial for both parties, since the customer also was not able to buy trucks
during the crisis, and enabled the manufacturer and its customers to regain profitability.
This profitability however now stemmed from services, whereas trucks were sold below
manufacturing costs!
Gradually, the truck business has been evolving since then. Now they offer not only
maintenance and repair services for their trucks with worldwide support, but also
advanced services such as Fleet Management. This service focuses on increasing the fleet
efficiency by letting the customer take control of their fleet to optimize their business.
Instead of selling a truck, firms like MAN now sell a solution that helps a customer reduce
his total cost of operation. Compared to 2008, the competitive environment and business
models within the truck business have thus completely changed (Tim Baines & Lightfoot,
2013; Evans, 2016).
Illustrated by the example in box 1, services can provide these manufacturers a number of benefits that can
augment the value of a product in order to gain a competitive advantage, especially for firms possessing a
large installed base of products (Oliva & Kallenberg, 2003). Therefore, to tackle the aforementioned
competitive pressures, manufacturers move progressively towards strategies based upon services and
solutions (T. S. Baines et al., 2009; Eloranta, 2016; Mathieu, 2001; Oliva & Kallenberg, 2003). They engage
in a transition from selling products to selling integrated offerings based upon a combination of products
and services (Tim Baines et al., 2009; Vandermerwe & Rada, 1988). This process was described first by
15
Vandermerwe and Rada (1988) and is referred to as ‘servitization’ (Vandermerwe & Rada, 1988). Since then
an increasing number of manufacturing firms have gone through a transition. Xerox for instance
transitioned from the development and sales of printers and copiers towards provision of a Document
Management Service, which essentially delivers customers a capability for copying and printing (Lay, 2014a;
H. Lightfoot, Baines, & Smart, 2013). Besides Xerox, other pioneering organizations such as Caterpillar,
IBM and Rolls-Royce receive a significant share of their revenue from services and solutions since the 1990s
(Antioco et al., 2008; T. S. Baines et al., 2009; Martinez, Bastl, Kingston, & Evans, 2010a; Pawar, Beltagui,
& Riedel, 2009). IBM now even obtains 59 % of its total revenues from services (Gebauer et al., 2016). Box
2 on the next page describes the ‘Power by the hour’ concept by Rolls-Royce to show what servitization
entailed for this company.
Box 2. ‘Power by the hour’

A commercial aerospace engine contains more than 10.000 parts. It is a long-life product
lasting 20-25 years. The issue is that the engine requires regular servicing and a full
overhaul every 5 years which is expensive and involves down-time of operation. Rolls-
Royce’ customers, commercial airlines, demand high reliability and uptime of their
products. This led to a situation in which these large airlines had their own support
infrastructure to maintain their aircraft in the 1990s. With increased competition and
pressure to cut costs, this situation eventually became unsustainable. Airlines wanted to
focus more on their core business to be profitable (Zeidner & Zeidner, 2009).
At the time, Rolls-Royce’ revenue model was based upon product breakdowns, which
clearly does not align with customer needs. In addition, insufficient cash flows were
generated to support R&D investments. Therefore, Rolls-Royce changed their business
model and strategy. It focused on its ‘Power by the hour’ concept, where customers are
charged for the hours flown with an engine. Pricing is thus tied to product availability and
the capability it delivers. Power by the hour has gradually been expanded and is now a
part of Rolls-Royce’ general TotalCare service offering, consisting of various maintenance
and add-on services such as engine health monitoring, spare engine support, logistics
management and reliability improvements (Tim Baines & Lightfoot, 2013; Zeidner &
Zeidner, 2009).
Servitization has transformed Rolls-Royce over the course of over 20 years, leading to
advanced service and solution concepts such as Power by the hour. As a result services
account for more than 50 % of total revenues and is their largest profit driver.
Simultaneously, the company has gone through an organizational transition. Instead of an
engine manufacturer, Rolls-Royce is now a solution provider that is closer to customers
and understands their needs better, but still develops innovative equipment (Rolls-Royce,
2016).
Illustrated by the Rolls-Royce example, servitization is much more than the simple addition of services to
existing products within manufacturing firms (Antioco et al., 2008; T. S. Baines et al., 2009; Windahl &
Lakemond, 2006). Going through the process of servitization requires an organizational transition in which
aspects such as structure, culture, processes and skills are adapted (Tim Baines & Lightfoot, 2013). This is
why, despite the aforementioned examples of successful transitions, many manufacturers struggle with the
provision of services and integrated solutions (T. S. Baines et al., 2009; Gebauer, Fleisch, & Friedli, 2005).
In addition, services in manufacturing organizations are often perceived as a necessary add-on to products
and not seen as a driver of profitability and competitive advantage (T. S. Baines et al., 2009; Oliva &
Kallenberg, 2003). Therefore, changing a manufacturer’s organization to become a solution provider is
difficult (T. S. Baines et al., 2009; Gebauer, Fischer, & Fleisch, 2010; Oliva & Kallenberg, 2003).
16
This research therefore will investigate the concept of servitization and the transition that is associated with
it from both a strategic and organizational perspective. This is done within the research context of an
organization currently engaged in a transition.
The remainder of this introductory chapter is structured as follows. Section 1.2 will present both the
scientific and practical problem studied within this research. Section 1.3 discusses the research objective of
the research and elaborates upon the scope of the research. The research question and sub-questions used
to guide the research are introduced in section 1.4. Hereafter, section 1.5 discusses the scientific and
managerial relevance of the present study after which the thesis structure is briefly discussed in section 1.6.
1.2 Problem statement

1.2.1 Scientific problem
The increasing importance of services within manufacturing firms was first acknowledged almost 30 years
ago by Vandermerwe and Rada (1988). Since its first introduction, scholars have studied servitization from
a variety of different perspectives. Research efforts are however scattered across research domains and the
terminology differs widely. The most common term is “servitization” (e.g. Tim Baines & Lightfoot, 2013;
T. S. Baines et al., 2009; Vandermerwe & Rada, 1988). Baines (2009, p. 10) defines servitization as follows:
“The innovation of an organization’s capabilities and processes to better create mutual value through a shift
from selling product to selling integrated solutions” (T. S. Baines et al., 2009, p. 10). Other designations of
same subject include “service infusion” (Eloranta, 2016; Lay, Copani, Jäger, & Biege, 2010), “service-driven
manufacturing” (Gebauer et al., 2012; Kindström, Kowalkowski, & Kindstro, 2014), “service transition”
(Fang, 2014; Fundin, Witell, & Gebauer, 2012; Salonen, 2011). Some researchers focused more on the
contents of the value propositions, discussing terms such as “product-service systems” (T. S. Baines et al.,
2007), “integrated solutions” (Davies, 2004; Windahl & Lakemond, 2010) or “value-added solutions”
(Matthyssens & Vandenbempt, 2008), “advanced services” (Tim Baines & Lightfoot, 2013) and “hybrid
offerings” (Ulaga & Reinartz, 2011).
Servitization is often seen as a transitional process in which the relative importance of products diminishes,
whilst the relative importance of services increases (Vandermerwe & Rada, 1988). The seminal work by
Oliva and Kallenberg (2003) captured this in a continuum ranging from pure product to pure service
organizations (Martinez et al., 2010a; Oliva & Kallenberg, 2003; Visnjic, Wiengarten, & Neely, 2014).
Moving along the continuum a manufacturing firm evolves into a service organization in which the relative
importance of services is larger than products (Tim Baines et al., 2009; Oliva & Kallenberg, 2003).
Manufacturing firms engage in servitization since services offer benefits on a financial, strategic, marketing
and environmental level, which have been well researched (e.g. T. S. Baines et al., 2009; Oliva & Kallenberg,
2003; Vandermerwe & Rada, 1988).
However, the implementation of a servitization strategy significantly challenges a manufacturing company

(Martinez, Bastl, Kingston, & Evans, 2010b; Oliva & Kallenberg, 2003; Vandermerwe & Rada, 1988). They
face challenges on a variety of levels, among others: strategy formulation, organizational culture,
organizational structure, service portfolio and service development (T. S. Baines et al., 2009; Martinez et al.,
2010b)1. The challenges related to servitization have been well documented in scientific literature (e.g. Ts
Baines, Lightfoot, & Kay, 2009; Gebauer et al., 2005; Martinez et al., 2010). Manufacturing firms run the
risk of becoming subject to the service-paradox when failing to meet these challenges. This paradox refers
to when investments in the service business do not lead to expected higher returns but instead to higher
costs and decreasing margins (Gebauer et al., 2005).
1 A discussion of these challenges is appended in Appendix C
17
Researchers have taken different perspectives to discuss those challenges. Some researchers have taken a
strategic perspective in describing servitization. Others have researched the organizational transformation
that is associated with servitization. However, an integrated perspective of the relevant contributions is
currently lacking.
In addition, research that couples the strategic and organizational aspects of servitization, such as
determining the alignment of a servitization strategy and the organizational structure of a manufacturing
firm, is limited (Gebauer, Edvardsson, Gustafsson, & Witell, 2010). Failing to align strategy and structure
can be detrimental to a servitizing firm (Bustinza, Bigdeli, Baines, & Elliot, 2015; Neely, 2009b). Existing
contributions such as Oliva and Kallenberg (2003) and Neu and Brown (2005) have only addressed general
recommendations such as whether to separate or integrate the service business within the existing
organizational structure (Neu & Brown, 2005; Oliva & Kallenberg, 2003). Furthermore, existing
contributions largely fail to address the change in structure during the transition. In addition, a lot of
ambiguity towards organizational structures in the context of servitization is present (Raddats & Burton,
2011).
Summarizing, the present research will address the following research gaps:
 The lack of a comprehensive and integrated perspective on servitization.
 The relationship between a servitization strategy and the organizational structure of a
manufacturing firm.
1.2.2 Practical problem

Servitization offers manufacturing firms new possibilities to compete. However, as previously mentioned,
servitization presents significant challenges for these firms. Existing literature has mainly focused on
conceptualizing the transition and developing overviews of the challenges manufacturing firms face. It
however fails in describing how companies can overcome the aforementioned challenges (Antioco et al.,
2008; T. S. Baines et al., 2009). Until now, research has lacked in developing guidelines for manufacturing
firms that pursue a servitization strategy. Baines (2009) states: “the principal research need is to engineer tools or
techniques that practitioners can apply to help in service design, organizational design and organizational transformation.” (T.
S. Baines et al., 2009, p. 17). Hence, the scientific research gaps also contribute to a practical problem for
manufacturing firms that lack the guiding techniques to successfully implement servitization.
Therefore, an empirical research is carried out at the manufacturing firm AgriCo. This large firm is engaged
in developing, assembling and selling agricultural machinery. AgriCo has introduced several product
innovations into the agricultural industry over the years. Based on preliminary analyses, the firm can be
regarded as a typical manufacturing firm devoted to developing technological innovations and selling
products. Similar to other manufacturing firms, this firm is currently experiencing the pressures of increased
competition, stagnating sales and more demanding customers. As a result, the competitive advantages based
upon the product business are under pressure. AgriCo therefore is contemplating a servitization strategy as
a way to become a provider of integrated solutions. However, the company is struggling with formulating a
servitization strategy and striking the balance between the dominant product-business and the relatively
novel and growing service business. In addition, insights into the required organizational changes are not
present.
This research therefore aims to address the practical problem by means of a scientific research within
AgriCo. By an in-depth study of this organization the research contributes to addressing the practical
problem related to servitization within this particular firm. Summarizing, the following practical problems
are addressed:
18
 The development of a guiding technique for manufacturing firms that describes the previous
relationship.
 The practical problem related to lack of comprehensive insights and guidelines to carry out
servitization within Lely as to become a solution provider.
1.3 Research objective and scope

Section 1.2 introduced both the scientific as well as the practical problem. Based upon that research context,
this research engages in a practice-oriented research aimed to solve a scientific and practical problem. The
research focuses on the following research objective:
To provide recommendations to manufacturers of high-tech capital goods with a large installed base on
the alignment between the strategic position within the servitization transition and the internal
organizational structure by developing a guiding diagnostic tool that provides a comprehensive overview
of this strategy-structure relationship and can analyse a company’s current and future position.
Many organizations are engaged in the delivery of services. The attention within this project however goes
to firms having historically been engaged in the development and production of innovative products. Hence,
the scope is limited to innovative manufacturing firms, who have a product-centric perspective. More
specifically, the research focuses on large innovative manufacturing firms that develop capital goods and
possess an installed base of products. Servitization in this respect thus focuses on such organizations that
sell a portfolio of capital intensive products to which services can be coupled. The value delivered by such
firms will hence always contain both a product and services coupled to it.
The organization of AgriCo is headquartered in the Netherlands and this is where the research is carried
out. As such, the geographical scope is limited to the Netherlands primarily and Western-Europe in general.
Servitization is mainly relevant currently for Western-European markets which has been the firm’s primary
and most mature markets, such that the geographical scope is well chosen.
1.4 Research questions

The research question, derived from the research objective, is:
‘What is the relationship between a servitization strategy and the organizational structure of an
innovative manufacturing firm with a large installed base of products?’
To answer the research question, a number of sub-questions have been formulated:
1. What are the drivers for servitization?

Servitization is a novel strategy for manufacturing firms. Services can deliver a number of benefits,
for both the manufacturer as well as the customer. An overview of these drivers ensures an
understanding of why manufacturers pursue a servitization strategy and why it is also beneficial for
their customers.
2. What are the characteristics of a servitization strategy?

Servitization has been described as a transition process to reach a long term strategic goal. This sub-
question allows to investigate and understand which dimensions are required to describe a
servitization strategy.
19
3. What are the characteristics of servitization in terms of organizational structure?
Servitization also requires an organizational transition. This sub-question describes how the
organizational structure of manufacturing firms going through this transition is characterized. This
allows to understand the structural alignment during the transition.
4. How would a framework that integrates the strategic and organizational aspects of servitization look like?
Such a framework integrates the concepts researched in questions 3 and 4, presenting a
comprehensive overview of the relationship between a servitization strategy and organizational
structure, as to answer the research question. Secondly, it addresses the practical problem,
supporting servitizing organizations such as AgriCo with a framework to understand servitization
as a transition that also requires an organizational transition. This sub-question will be answered
first of all by means of theory in chapter 3 and by means of empirical results in chapters 4 and 5.
1.5 Research relevance

From a managerial perspective this research is relevant since it develops an integrated approach towards
servitization, something that is currently lacking in both theory and practice. By means of developing a
framework describing the relationship between strategy and structure, managers are enabled to determine
in which phase of the transition they are currently positioned and to which phase they need to proceed to
attain their strategic goals. Furthermore it describes the relevant dimensions to consider when going through
a transition. This is evident since having these insights is critical to determine appropriate organizational
measures for change. This framework therefore solves the practical problem since manufacturing firms are
now lacking the guidelines and techniques to successfully approach servitization.
In scientific terms, the research builds upon the relatively new field of servitization. Current literature to a
large extent is descriptive in nature, elaborating on examples of firms having carried out servitization. Scarce
research has been done to develop guidelines and success factors for the actual implementation of a
servitization strategy and overcoming the widely acknowledged challenges. An integrated approach
coherently describing the strategy-structure coupling within the servitization context of manufacturing firms
is currently lacking. The present research contributes to solving this scientific problem by means of a
framework that combines the scattered and ambiguous contributions from different research domains. By
investigating a variety of different organizations in case studies, a validated and rich overview is created
which offers opportunities for future research. The framework can serve as a basis for further research that
can focus on expanding the number of factors and level of detail.
1.6 Concept definitions

Servitization is an ambiguous concept, both in business and scientific literature. Servitization involves both
products and services. Product-oriented firms are familiar with products and corresponding product-related
terms, but less with services and their associated terminology. Therefore this section presents the definition
of a number of terms used throughout this report.
Servitization
Servitization is defined in many different ways in literature. Some authors refer to it as a trend, others
perceive it as a process or strategy. Within this thesis the following definition is used: ‘Servitization for
manufacturing firms is a transition process to reach a long term strategic goal related to services’.
Taking the Rolls-Royce example, they used a servitization strategy to reach the strategic goal of becoming a
solution provider delivering combined offerings of products and services. They went through different
transition phases of servitization to reach that goal.
20
Product
A product can be defined as a tangible commodity manufactured to be sold and is typically referred to as a
‘good’ in academic literature. In the manufacturing industry a product is usually a material artefact such as a
computer or a car (H. Lightfoot et al., 2013).
Manufacturing firm
Within this research, a manufacturing firm is seen as an organization that develops and manufactures
products that correspond with previous definition, hence capital goods with a long lifecycle. This is to
distinguish them from companies making consumer products.
Installed base
A company’s installed base (IB) is the total number of products that is currently under use and is usually an
order or magnitude greater than the annual sales (Tim Baines & Lightfoot, 2013).
Service
The definition of a service is more ambiguous. It usually may refer to an offering such as repair or a level of
performance such as ‘good customer service’. Within the “pure” service industry such as banking, services
are mostly defined by what they are not. Service is defined as anything that is not a tangible, manufacturing
good (Kahl, 2008).
Within product industries however, services are necessarily coupled to products such that this definition
requires more sophistication. Some scholars have therefore defined such product-related services as assets
that complement products (Kahl, 2008). The direct relationship between products and services within
product industries is for instance observed in the automobile industry, where repair and spare parts are
required to keep the product operational. Hence, given the scope of this thesis, services are defined by
following the definition of Kahl (2008): “Services are activities that can be sold or given away separately
from a firm’s products, relate directly to those products and may even be requisite for using those products
but are not part of the production process of those physical goods.” (Kahl, 2008, p. 9)
Integrated solutions
Integrated solutions can be defined as combinations of products and/or services in innovative offerings for
customer problems such that the integrated added value is larger than the sum of loose products and services
(Salonen, 2011; Ulaga & Reinartz, 2011). Implementing servitization, firms progressively incorporate
extended service offerings within their value proposition, building upon their existing products, eventually
resulting in integrated solutions based on customer needs (T. Turunen, 2013). Well-known examples of
these solutions are Fleet Management services from the example in box 1 and train availability solutions by
Alstom Transport (T. S. Baines et al., 2009; Brady, Davies, & Gann, 2005; Bustinza et al., 2015).
1.7 Thesis structure

This thesis has been structured as follows. First of all, a discussion of the research methodology and data
collection methods is presented in chapter 2. Chapter 3 then discusses the literature review in which the
framework is constructed and presented based on theory. Chapter 4 then discusses the results from the
small case studies that served to validate and enrich the aforementioned theoretical framework. Chapter 5
then discusses the results of the embedded case study conducted at the organization of AgriCo during which
the framework was applied and tested. Chapter 6 will present the conclusions of the findings within the
research. This is followed by a discussion of the academic contribution as well as reflection on the research
approach in chapter 7. Finally, chapter 8 will present the limitations of the present research, followed by
both future research recommendations as well as managerial implications for both manufacturing firms as
AgriCo in particular.
21
2 Research methodology
The present chapter will discuss the methodology used to answer the research question. First of all, the
research approach taken is discussed in section 2.1. This consisted of different phases, which are discussed
in sections 2.2 and 2.3. This is followed by a discussion of the various data collection methods in each phases
in section 2.4. Lastly, the principles for analysing and ensuring validity and reliability of the data are discussed
in section 2.5.
2.1 Research approach

An exploratory research strategy has been adopted to study servitization and answer the research question.
The previous chapter identified that research contributions are fragmented and that manufacturing firms
have a lack of guidelines to implement servitization. Therefore, an integrated approach has been taken within
the present research, drawing from three different data sources that ensure triangulation, namely: theory,
the firm Lely and a selection of other servitizing firms. Figure 1 presents an overview of the research
approach, where three phases can be distinguished: an exploration phase, a validation phase and the
combined application and testing phase. These phases are discussed in the following sections.
Figure 1| Research approach
22
2.2 Phase 1: Exploration
Within the first phase, the research problem has been explored. This has been done by conducting a number
of exploratory interviews to become acquainted with AgriCo and have preliminary insights into the status
and challenges of servitization for this company. In addition, a theoretical exploration has been done by
means of a literature review. A review of relevant literature ensures that all the important variables for the
research problem are acknowledged. It enables the researcher to identify and define the core concepts of
the problem and effectively acts as a glasses for the research. Furthermore, it identifies the possible
relationships between different variables leading to a comprehensive theoretical framework (Sekaran &
Bougie, 2013). Literature from various research directions has been investigated due to the multidisciplinary
nature of the subject. This includes literature from the fields of servitization, service management, service
science, product-service systems, organizational design and organizational change.
The literature has been found by conducting a systematic literature research. Initial web searches were
conducted to obtain initial understanding of the subject. The academic databases used to extract scientific
articles are the following: WebofScience, Sciencedirect, Researchgate and Google Scholar. Several search
terms have been used, e.g. “servitization”, “product service integration”, “product service systems“,
“integrated solutions”, often combined with terms such as “manufacturing firm”, “customer-centricity”,
“challenges” or “organizational design”. The number of results varied, depending on the search term.
Considering the limited timespan of the total project a full review of literature was not attainable. Instead
the goal was to obtain the articles of highest significance. This was done by initially selecting articles based
on the number of citations. Its significance for the research was determined by reading the title and the
abstract. Meta-analyses and literature reviews were of primary interest in order to avoid redundancy.
Furthermore, articles ranging from 1988 to present were considered since servitization as a concept arose
in that particular year (T. S. Baines et al., 2009; Vandermerwe & Rada, 1988).
The highest cited articles used for this research are Oliva & Kallenberg (2003), Baines et al. (2007) and
Baines et al. (2009). The latter two were literature reviews which enabled to obtain an initial overview of
important articles to be inquired. Moreover, the bibliography of these articles was consulted in order to
obtain additional relevant articles. By doing so, the search strategy changed into a snowballing approach in
order to exhaust the relevant literature. A selection of whitepapers were also explored as an indication of
the current state of research w.r.t. servitization, but these do not serve as backbone of the literature review.
A selection of books has been used additionally to the scientific articles. These include the book ‘Made to
serve’ by Baines and Lightfoot (2013), covering an overview of servitization with examples. This book has
been used as a reference throughout the entire research. In addition, the book ‘Designing Organizations’ by
Galbraith (2002) and the book ‘The structuring of organizations’ by Mintzberg (1979) have been used to
understand the basics of organizational design.
The literature review aimed to develop a theoretical framework that couples the various literature
contributions. This is needed to get the comprehensive integrated view on servitization to be able
understand the process and the most relevant aspects of it. This framework can then also attain the practical
goal of developing a guideline for manufacturing firms. Within the literature review the framework is
gradually constructed as shown in table 1. The framework is built up as to describe the relevant dimensions
a firm needs to consider when going through a transition, as well as what the value of each of these
dimensions is in each respective phase of the transition. It consist of two parts. Part A describes the
dimensions related to strategic aspects. Furthermore, servitization involves an organizational transition. Part
B therefore describes the organizational dimensions, of which this research focused on the organizational
structure. The framework thus couples strategic and organizational aspects of servitization and can later be
tested in the empirical research.
23
Table 1| Schematic overview of theoretical framework build up
Increasing importance of services →

Transition
phase
Characteristics of each phase
Dimension XX
Dimension XX
Dimension XX
Dimension XX
Matching organizational configuration
Organizational
structure
2.3 Phases 2 and 3: empirical research strategy

Phases 2 and 3 constitute the empirical part of the research. As a research strategy, case studies have been
executed for both phases. A qualitative approach is taken for one reason since metrics to measure
servitization are still lacking. An essential step prior to doing a case study is the development of theoretical
propositions, which has been done by means of the literature review resulting the theoretical framework
(Yin, 2009). Case studies are carried out when the researcher tries to gain profound insights into a subject.
Furthermore, case studies enable to obtain a general picture of a contemporary phenomenon by making
observations in a natural context (Verschuren & Doorewaard, 2010; Yin, 2009). Servitization indeed is a
contemporary and not extensively researched phenomenon. A case study then forms a suitable method to
develop an integrated view within this exploratory research project (Yin, 2009). The exploratory nature of
the project made that an iterative process ensued during which empirical findings were critically compared
with existing literature. Novel empirical findings were utilized as a means to derive additional required
research perspectives from literature.
2.3.1 Phase 2: Framework validation and enrichment

Phase 1 delivered an integrated framework based on theory. However, in order to order to validate and
enrich the theoretical assumptions within the framework, five smaller exploratory case studies have been
done in phase 2 of the research. This is important, since it allowed to test the framework and its dimensions
in practice, which increases the validity and practical relevance of the framework. The framework and its
dimensions hence allowed to focus the case studies and the questions to be asked during the case studies.
The case studies focused on different organizations engaged in servitization and enabled to study how they
implemented servitization, thereby enriching the framework with practical insights.
Case selection
For the case studies, a heterogeneous sample of companies was taken where the unit of analysis was their
complete organization since time did not allow for a more elaborate approach. As is common to case study
research, the selection was made to attain a diverse sample of companies rather than statistical
representativeness (Yin, 2009). However in order to reasonably compare the companies a number of criteria
have been taken into account. Firstly, the selection was limited to manufacturers of capital good equipment
with a large installed base of products. In addition, they had to operate on an international scale and devote
strategic attention to the service business. Furthermore, in order to reasonably compare results with the firm
24
AgriCo, the intention was to select firms of similar size across different industries. Cases were initially
selected on the basis of network relations of the researcher. Within the selection process, no specific
attention to industry contingencies has been given.
Secondly, the goal was to select companies in different phases of servitization to capture the complete
transition. As a result of that second goal, one selected company did not fit the initial criterion. This
particular company has no background in product development and manufacturing, but was selected for its
background in services. Namely, as Turunen (2013) observed, traditional service firms seem to be engaging
in servitization as well. Therefore, much can be learnt by making a comparison between these traditional
service providers (T. Turunen, 2013).
An overview of the studied companies in shown in table 2. For reasons of confidentiality, the companies
are referred to as OffshoreCo, HortiCo, MediCo, TransCo and ServeCo.
Table 2| Overview of studied cases
Company Participant Company size Company offering Existing resources

background
OffshoreCo Manager Operations €350 million revenue Design and Product Development
Approx. 3000 manufacturing of expertise; Service
employees heavy construction organization
equipment for on- and
offshore business
HortiCo Strategic Business €62 million revenue Solutions for Growing IB; Product
Developer Approx. 450 horticulture and Development
employees building automation expertise; Distribution
network; Service
organizations
MediCo Senior Manager €24.2 billion revenue Medical equipment IB; Product
Innovation Services Approx. 100.000 Personal health Development
employees equipment expertise; Distribution
network
TransCo Technical Service €12 billion revenue Trucks and transport IB; Product
Support Manager Approx. 44.000 solutions Development
employees expertise; Distribution
network; service
organizations
ServeCo Director Strategy & €1 billion revenue Service solutions Service Development
Innovation Approx. 3500 related to mobility expertise; Distribution
employees network
2.3.2 Phase 3: Framework application and testing

After having validated and enriched the theoretical assumptions from the framework, phase 3 was executed.
Within this phase the main study at AgriCo has been carried out, by means of an embedded case study. The
research was taken one step further. Namely, the practical applicability of the framework as a guideline for
organizations was tested. This was carried out in two phases. First of all, a number of focused interviews
had the purpose to determine AgriCo’s position in the transition by means of the framework.
Secondly, a workshop was used as a method to corroborate that positioning and thereby validate the
framework and its applicability for AgriCo. Multiple organizational stakeholders from various departments
took part in this workshop by means of means of a discussion based upon framework related statements.
25
The results of the case study made sure the research objective, the development of a guiding framework for
manufacturing firms, was attained.
Case selection
The organization of a globally operating manufacturer of high-tech agricultural machinery, AgriCo, is taken
as research subject and principal unit of analysis in the embedded case study. An overview of AgriCo is
shown in table 3. The company is a capital goods manufacturer with a large installed base of products,
similar to earlier case studies discussing servitization such that it can be seen as a typical case, although the
industry is different from prior research. This firm is in early phases of the servitization process. Closely
studying their organization enabled to understand the complexity of the servitization process in practice.
The company has a large history regarding the development and production of machinery within the
agricultural industry. Broadly speaking the firm is organized in two business units, being Forage operations
and Dairy operations. Ideally, these business units would mutually support each other’s activities. However,
the difference between the two markets in terms of maturity, technological complexity, ways of working
and distribution channel makes this difficult. Hence, following the observations in phase 1 of the research,
the embedded case study focuses on the Dairy branch as unit of analysis, since this market is expected to
grow and servitization is mostly applicably to this business.
Table 3| Overview of characteristics AgriCo
Company Company size Company offering Existing resources

AgriCo Confidential Design and assembly of high- IB of products; field service
tech capital equipment for organization; distribution
agricultural industry network; product
development expertise
2.4 Data collection methods

The data collection process from phase 1 to 3 lasted from December 2015 to June 2016. Case studies rely
on multiple sources of evidence (Yin, 2009). The primary means of data collection for the case studies were
interviews. These interviews were complemented by participant observation data as well as secondary data
such as organizational charts, company presentations and other documents. Additionally a workshop
discussion was carried out at AgriCo. The following subsections describe the data collection methods in
each aforementioned research phase.
2.4.1 Phase 1: Exploration

In phase 1, exploratory semi-structured interviews were carried out at AgriCo with informants from
different organizational levels. These took place in December 2015 and January 2016. A broad sample of
interviewees was taken from a variety of departments such as Product Management, Marketing, Human
Resources, Engineering, Sales and Technical Service Support in order to gain broad insights into the
organization and its practices. The majority of interviewees were managers with long-term experience within
the firm. An interview guide was developed for the interviews, see Appendix H. Eventually, 12 interviews
were carried out which was enough to reach theoretical saturation. That is, until the point where no novel
information arose from the interviews. All interviews lasted from 45-60 minutes and were loosely structured
in order to obtain broad insights in to the case study firm and its practices. Hence, following Yin (2009) the
interviews were indeed guided conversations rather than structured queries (Yin, 2009). The interviewees
were eventually asked to mention knowledgeable colleagues for additional interviews, enabling the
researcher to engage in a snowballing approach for gathering interview data. In general, this round of
interviews served to become acquainted with the company and its activities. It enabled to develop a rich
picture on current activities of servitization, the challenges this particular company faces, as well as the
26
identification of both formal and informal organizational arrangements. It provided preliminary insights
into the research topic and directives for the literature study and following case studies.
2.4.2 Phase 2: Framework validation and enrichment

The theoretical framework resulting from the literature review was taken as a basis for analysis of the small
case studies. The main source of data for these cases were interviews carried out in April 2016 with
representatives of each company. The position the participants held differed, ranging from Technical Service
Support manager to Director Strategy and Innovation but in general interviewees had long term experience
within their respective firms. This enabled to obtain a comprehensive view of the historical development of
these organizations. The interviews were semi-structured and carried out face-to-face, lasting from 60-120
minutes. Again, an interview guide was developed to structure the interviews, supplemented in Appendix I.
Participants were emailed upfront with a short introduction of the research and a selection of questions to
prepare.
The interviews served the goal to identify on a strategic level, the reasons behind servitization for their firm,
the servitization process so far, the experienced difficulties during the process and the implementation
measures in terms of organizational structure. The aim was to corroborate the findings within the theoretical
framework whilst leaving room for enriching insights. Hence, the interviews typically included questions
such as:
 ‘What does servitization entail for your company?’

 ‘What is the strategic goal behind servitization for your company?’
 ‘How have you organized the firm to deliver services?’
The interviews did not precisely follow the interview guide. Some flexibility was required to extract the right
data from the interviews. The limited time available made this a challenging task. General questions were
used to derive follow-up questions in order to acquire more detailed information on key issues related to
servitization and organizational structure. At the end of the interviews, participants were asked for additional
comments to ensure no vital information was omitted.
2.4.3 Phase 3: Framework application and testing

After the smaller case studies of phase 2, a second round of interviews was held with AgriCo. This time, the
interviews had more focus, concentrating on corroborating the insights from theory and smaller cases that
resulting in the framework. The interviews took place in May 2016 and were again semi-structured
conversations. Eventually, 7 employees from again multiple departments were interviewed. The interviews
lasted from 45-60 minutes and inherently covered many aspects. The executed interviews built upon earlier
observations from phase 1. During the interview the build-up of the framework was explained, and
participants were asked to determine the relative position of AgriCo within the framework. The framework
hence served as the guiding principle for the interview. Time constraints made that some of the interviews
were conducted by phone.
The interviews were a precedent of the workshop discussion. Within this workshop, a group of participants
from a variety of departments (Product Management, Technical Service Support, Marketing, Product
Development, Continuous Improvement) engaged in a discussion. Diversity in participants allowed for a
complete perspective, increasing the generalizability of the results.
Workshop participants were selected on the basis of their significance with respect to implementation of
servitization and their interest in the topic. An experienced AgriCo employee aided in selecting the
appropriate participants. Upfront, the participants were invited to the discussion and a document was sent
(Appendix O) to introduce the context, goal and schedule of the workshop. Eventually 9 out of 11 invitees
participated. The workshop started off by an introductory presentation of the researcher, restating the
27
context and goal of the discussion. The discussion was then directed by statements proposed by the
researcher. These statements were based upon AgriCo’s position in the transition by introducing a statement
for each of the framework dimensions. The statements were discussed with several company employees
upfront to ensure the appropriate relevance and depth of the discussion. The goal was: determining if indeed
the framework provided the comprehensive overview for an organization and if the positioning of AgriCo
within the framework, based upon the interviews and secondary data, could be corroborated.
The previously discussed methods of data collection were complemented by other data sources such as
participant observation and company documentation such as organizational charts, presentations, company
web pages and annual reports. By making use of multiple sources, a converging line of reasoning during the
research has been developed. This was achieved by a process of corroboration and triangulation, thereby
increasing the reliability of observations and conclusions as well as the construct validity of results (Sekaran
& Bougie, 2013; Verschuren & Doorewaard, 2010; Yin, 2009).
2.5 Data analysis

A total of 23 interviews were conducted during the research. The majority of the interviews were tape-
recorded, subsequently transcribed and analysed by utilizing an open coding approach (Corbin & Strauss,
1990). A minor part of the data was not tape-recorded, but was ascertained by making notes during the
interviews, which were also eventually analysed and coded. For the smaller cases, the transcripts together
with secondary company data resulted in individual case reports which were sent to the participants for
reviewing. This was done to prevent errors and wrong interpretations of the collected content, augmenting
the construct validity of the results. The case descriptions were then used to position each of the cases
individually within the theoretical framework. Hence, a pattern-matching logic was adopted in order to
match the empirically obtained data with existing theory (Yin, 2009).
The adjusted framework was then utilized for analysing the position of the embedded case study of AgriCo.
The data originating from the focused interviews and the workshop was used to achieve this. Again, this
data was transcribed and coded according to an open-coding approach. A summary was sent to the
participants of the workshop to validate the workshop findings. Again a pattern-matching logic was adopted
in order to cross-analyse the results from the cases as well as theory. The coincidence of these patterns
augment the internal validity of the case study (Yin, 2009). The total process of data analysis was an iterative
process of systematically combining findings from theory and empirical observations.
2.5.1 Validity and reliability

It is imperative to test the quality of a case study design. Yin (2009) considers 4 possible tests to do this:
construct validity, internal validity, external validity and reliability. For the present research, the most
important criterion has been to achieve a decent construct validity. When meeting the construct validity,
observations will reflect events instead of the researcher’s impression only (Yin, 2009). The construct validity
within this research is met in different ways. First of all, the theoretical framework has operationalized
servitization by means of different dimensions which have been validated in practice. Secondly, multiple
sources of evidence are utilized within the process of data collection, resulting in triangulation of sources.
The case descriptions have been reviewed by the respective participants to further ensure construct validity
(Yin, 2009).
Internal validity is relevant when case study research attempts to seek a causal relationship between certain
events. A pattern-matching logic has been adopted in order to attempt capturing the relationship between
servitization strategies and the organizational structure of manufacturing firms. As Yin (2009) however
states, “the specific tactics for achieving internal validity are difficult to identify” (Yin, 2009). Hence, no
specific method is developed to address internal validity.
28
The third test concerns the external validity, i.e. whether the study’s results are generalizable. Case studies
rely on analytical generalization instead of statistical generalization (Yin, 2009). Extensive theory has been
used to augment the validity. By making use of multiple case studies on top of an embedded case study to
test the framework, the external validity is enhanced. Furthermore, the embedded case study has been
conducted in a context that shows similarities with previous research projects focusing on servitization.
The reliability issue has been addressed by explaining the research approach towards the total project, as
discussed in the introduction section. Furthermore, this chapter has elaborated on the specifics of the
various research methods including the case study design and the ways of data collection. These efforts
enhance the reliability of the research project. A case study database is mentioned by Yin (2009) as a way to
enhance the reliability since later investigators can review the evidence without being limited to written case
study reports. Hence, the appended unbiased, raw interview data of both the main case as well as
supplementary cases increase the reliability of the research.
29
3 Literature review
The present section covers the review of relevant literature for the research. The literature review aims to
answer the following sub-questions of the research:
2. What are the characteristics of a servitization strategy?
4. How would a framework that integrates the strategic and organizational aspects of servitization
look like?
The chapter is structured according to these questions and gradually builds up the dimensions of the
theoretical framework that was mentioned in chapter 2. First of all, the drivers of servitization are discussed
in section 3.1. This is followed by a discussion on the characteristics of a servitization strategy in section 3.2,
which will result in the construction of part A of the framework. Section 3.3 then discusses organizational
structure and its relationship to servitization, which covers part B of the framework. The chapter will
conclude with the complete framework, shown and discussed in section 3.4.
3.1 Rationale for servitization

The rationale behind servitization is twofold. First of all, manufacturing firms recognize the potential for
the service business based on certain drivers. The firm’s benefits appear on financial, marketing, strategic
and environmental level (T. S. Baines et al., 2009; Tim Baines & Lightfoot, 2013; Mathieu, 2001). Secondly,
customers too have an incentive for servitization. For customers, the benefits include improved financial,
risk and asset management (Tim Baines, 2013). This section will first elaborate on the drivers for the
manufacturer in section 3.1.1, after which the customer’s drivers are discussed in section 3.1.2.
3.1.1 Manufacturer’s drivers

First of all, services are expected to offer firms financial benefits. Services are argued to have higher margins
than products, possibly being two orders of magnitude higher than product margins in particular sectors
(Gebauer et al., 2005; Oliva & Kallenberg, 2003). This growth potential is especially present for firms
possessing a large installed base (Oliva & Kallenberg, 2003; T. Turunen, 2013). In addition, they provide a
more stable source of revenue since revenue is generated over the lifecycle of a product, making firms less
volatile to economic cycles of investment (T. S. Baines et al., 2009; Gebauer et al., 2005; Oliva & Kallenberg,
2003). As a result, the majority of revenue is moving downstream towards services and support, making
firms less volatile to compete by means of product pricing.
Secondly, servitization can result in strategic benefits leading to a competitive advantage. Due to
commoditization and increased competition in products, a competitive strategy based on products is now
harder to maintain (Antioco et al., 2008; T. S. Baines et al., 2009). Services can differentiate a manufacturer’s
offerings since they are intangible and more labour dependent so that services are more difficult to imitate
by competition (Tim Baines et al., 2009; Mathieu, 2001; Oliva & Kallenberg, 2003). Furthermore, by
delivering services and solutions during the product lifecycle, a long term relationship is initiated with
customers that enables to lock them in. Namely, instead of simply selling a product, tailored services and
solutions are offered with long-term contracts to cover and extend the lifecycle of a product (T. Turunen,
2013). This makes customers more dependent and increases the barriers for competition.
Thirdly, services have new marketing opportunities for manufacturing firms (T. S. Baines et al., 2009).
Strategies based on a combination of products and services are argued to augment overall client satisfaction,
30
increase new product adoption and enhance customer loyalty (T. S. Baines et al., 2009; Mathieu, 2001).
Services namely depend more strongly on customer interaction and are based upon their needs. As such the
service component influences the purchasing decision of customers. Services can hence be utilized to
increase both first time and repeat sales. Furthermore, by strengthening the customer relationship the firm
can better understand customer needs. Consequently, they are in a better position to offer other products
or services and to tailor their offerings in order to achieve differentiation (T. S. Baines et al., 2009; Mathieu,
2001).
A more recently acknowledged benefit of implementing a servitization strategy is the environmental gain
attained. Especially literature on product-service-systems take the environmental perspective to analyse
servitization. This stems from the concerns about the global energy consumption level and population
growth (Tim Baines & Lightfoot, 2013). Servitization can lead to dematerialization and encourages
companies to consider the total lifecycle of their products. The lifecycle can be lengthened and firms can
engage in end-of-life services such as take-back, recycling and refurbishment of equipment for re-use.
During this lifecycle firms will be induced to lower their energy and material cost of operating, as such
diminishing the environmental impact of their product (T. S. Baines et al., 2007).
3.1.2 Customer’s drivers

The drivers of servitization within literature have mainly been described from the perspective of the
manufacturing firm. However, servitization is also stimulated by a market pull movement. Customers are
becoming more demanding and have the willingness to outsource non-core activities, such as services.
(Galbraith, 2002; T. Turunen, 2013).
First of all, customers are becoming more specialized. In general, firms are focusing more on their core
competencies in today’s competitive environment (Galbraith, 2002). Maintaining an organization focusing
on repairing and maintaining equipment is too consuming in terms of both resources and time. Instead
manufacturers possess the unique product related expertise and are thus considered to be in the best position
to deliver services for these products. They can also use the service delivery to identify problems and
redesign products to prevent future problems. Contracting out such non-core operations to the supplier
enables customers to focus on their core activities. (Tim Baines & Lightfoot, 2013).
Another incentive for customers is that costs can be extended over the product lifecycle. A capital good no
longer represents a fixed cost that requires large upfront investment resources, but a variable cost paid
during regular intervals for the duration of the service contract (Tim Baines & Lightfoot, 2013; Davies,
2004). The ‘Power by the Hour’ service by Rolls-Royce is an example of such an arrangement. Furthermore,
demand fluctuation can be met more easily by engaging in lifecycle contracts. Namely, instead of having to
acquire or sell product, the required capacity can be managed by for instance leasing equipment.
Furthermore, the borne risk by the customer diminishes when engaging in lifecycle contracts instead of
acquiring equipment. Manufacturing firms often develop new technologies or products that have not proved
themselves yet. It is hard for buyers to engage in purchasing and adoption of such a product or technology.
Customer might be hesitant to switch to a new technology when large acquisition costs are involved, referred
to as a ‘wait and see’ attitude (Kahl, 2008). Selling services can lower the concerns of adoption and lead to
acceptance of a new technology of product in the market (Tim Baines & Lightfoot, 2013; Kahl, 2008).
Customers can adopt these new technologies with relatively low risks since the supplier ensures the
availability, reliability and performance of the product, moving the risk from the customer to the supplier
(Tim Baines & Lightfoot, 2013; Salonen, 2011).
31
3.2 Strategic aspects of servitization
A servitization strategy can be used to reach a strategic goal. This section discusses the sub-question ‘What
are the characteristics of servitization in term of strategy?’. Within this section, the first part of the theoretical
framework is developed, according to the approach discussed in chapter 2. First, the basics of strategy
formulation and the unique resources of manufacturing firms are discussed in section 3.2.1. Secondly, the
key features of servitization are discussed in section 3.2.2. Section 3.2.3 discusses the ways in which scholars
characterize and categorize servitization strategies. These categorizations form the basis for the strategic
dimensions in the framework and gradually the framework is developed. Hereafter, section 3.2.4 discusses
in which direction servitization strategies are evolving.
3.2.1 Competitive strategy and servitization

A strategy defines the overall long term goal and objectives of a firm and displays how a firm attempts to
obtain a competitive advantage within the external environment (Galbraith, 2002). Firms strive for a
competitive advantage that generates revenue and profits such that the organization performs successfully.
This is dependent on the ability to form core capabilities that create superior value and are difficult to imitate
(Neu & Brown, 2005). Manufacturing firms conventionally adopt different competitive strategies to achieve
this, such as product leadership by investing heavily in product-related innovation or operational excellence
by focusing on economies of scale and minimal production costs (Tim Baines & Lightfoot, 2013). As
aforementioned, competitive pressures force these manufacturing firms to pursue other than traditional
product-related strategies (Antioco et al., 2008; Oliva & Kallenberg, 2003).
Services and the combination of products and services into integrated solutions are seen as an opportunity
to overcome those competitive pressures and create a new competitive advantage. This competitive
advantage therefore still builds upon products such that product innovation and operational efficiency are
still important. Services can be coupled to these products to make the combination stand out. Services can
serve different strategic goals for manufacturing firms depending on their resources and strategic objectives.
Most manufacturing firms are seen to offer services to protect their product business (Auguste, Harmon, &
Pandit, 2006). Then services only serve to support the product. Another option is that a manufacturing
pursues the integration of products with complementary services into solutions based upon customer needs
to achieve a competitive advantage based upon differentiating the total offering from competitors (Davies,
2004; Galbraith, 2002; Windahl & Lakemond, 2010). This corresponds to the strategy of solution provider.
Furthermore, firms might eventually choose to pursue a strategy to deliver services that are independent
from the products they make, making them a service provider that delivers a capability for its customers
(Auguste et al., 2006; Tim Baines & Lightfoot, 2013; T. T. Turunen & Toivonen, 2011; Windahl &
Lakemond, 2006).
To reach such strategic goals with services, manufacturing firms can follow a servitization strategy, in which
firms go through different transition phases. Servitization is interesting for manufacturing firms since they
already possess a number of unique resources2 that are argued to enhance their ability to develop services
and solutions (Tim Baines & Lightfoot, 2013; Davies, 2004; Oliva & Kallenberg, 2003; Ulaga & Reinartz,
2011). These entail: an installed base of products (IB), product development and manufacturing assets, a
sales and distribution network and a field service organization (Ulaga & Reinartz, 2011).
The next question is how such a transition proceeds and what the relevant aspects are that characterize the
different phases of this transition. The next section will elaborate on this by discussing the theoretical
contributions used to explain this.
2A resource is defined as “all assets, capabilities, organizational processes, firm attributes, information and
knowledge controlled by a firm to conceive and implement strategies that improve its efficiency and effectiveness”
(Barney, 1991, p. 3).
32
3.2.2 Explaining the transition
Broadly speaking, two perspectives are dominant as to explain how a servitization strategy unfolds: the
continuum approach and the strategic approach. These views are complementary to each other and will be
discussed in the following subsections. First of all, the different phases within the transition are defined.
Thereafter, the framework is gradually built up by introducing the relevant dimensions to be considered to
describe the transition.
Defining the transition phases

Servitization is often captured by means of a continuum, where manufacturing firms move from initially
selling products towards selling combinations of products and services, shown in figure 2 (T. S. Baines et
al., 2009; Oliva & Kallenberg, 2003). Within this classification the pure product manufacturer is positioned
along the far left of the continuum. On the far right, the organization is purely service oriented with the
product as an add-on (Tim Baines et al., 2009; Oliva & Kallenberg, 2003).
This idea was introduced by Oliva and Kallenberg (2003) and has been adopted widely by scholars
afterwards (e.g. Davies, 2004; Gebauer et al., 2005; Neu & Brown, 2005). Some authors claim that
servitization can also proceed in other directions, hence referred to as ‘reversed servitization’ (Finne, Brax,
& Holmström, 2013a; T. Turunen, 2013). However, limited empirical research has been delivered to support
this alternative view as of yet, such that the present research is limited to the dominant unidirectional view.
Figure 2|Product-service continuum [Adopted from Oliva & Kallenberg (2003)]
The continuum approach reasons from the assumption that manufacturing firms should first develop a
proficiency in delivering basic product-related services such as maintenance and repair before moving on to
more advanced services. Firms attempting to sell advanced services without first developing the proficiency
in basic product-related services are more likely to fail in their servitization efforts (Tim Baines & Lightfoot,
2013; Oliva & Kallenberg, 2003). This agrees with Fang et al. (2008) whom argues that service transition
strategies are more successful when relating to a firm’s core business (Fang, Palmatier, & Steenkamp, 2008).
According to Oliva and Kallenberg (2003) five phases can be distinguished during the transition for
manufacturing firms with an installed base. First of all, the existing service offerings within an organization
should be consolidated to identify the service potential. Hereafter, the market for after-sales can be targeted
by servicing the IB. The third step is to expand towards relationship-based services. The fourth step covers
the expansion towards process-oriented services. Lastly, the fifth step is to become a solution provider that
can takes responsibility of the customer’s total operation, although limited firms attain this final stage (Oliva
& Kallenberg, 2003).
33
The continuum perspective is complemented by the views within the strategic perspective on servitization.
Namely, according to the strategic perspective, firms can occupy different positions within the continuum
(Tim Baines & Lightfoot, 2013; Gebauer, Edvardsson, Gustafsson, et al., 2010; Gebauer, Fischer, et al.,
2010). Multiple comparable typologies are defined discussing these positions. Raddats and Easingwood
(2010) for instance consider: services engagement, services extension, services penetration and services
transformation (Raddats & Burton, 2011). Saccani and Perona (2014) similarly describe after-sales services
sellers, after-sales offering integrators, life-cycle solution sellers and life-cycle solution orchestrators (Lay,
2014b). Gebauer (2008) considers the positions of customer-service provider (CP), after-sales service
provider (ASP), customer-service support provider (CSP), development partner (DP) and outsourcing
partner (OP) (Gebauer, 2008). These positions correspond to phases within the transition. Therefore, these
perspectives are combined.
Since servitization in this research is defined as a transition, different phases will be considered rather than
positions. The typology by Gebauer (2008) is most widely adopted, such that this typology is used to define
the different phases in the framework. In the build-up of the theoretical framework, two assumptions are
incorporated based upon the previous discussion. First of all, the transition is assumed to happen in a
unidirectional manner, in the way shown in figure 2. Second, it can be categorized in 5 phases that
correspond to different levels of servitization, where each phase builds upon the previous one and the
relative importance of services increases in each step. Table 4 shows the transition phases.
Table 4| Defining the transition phases
Increasing importance of services 

Transition Customer After-sales Customer Development Outsourcing
phase (Gebauer, service service support provider partner partner
2008) provider provider
Next, the analysis focuses on investigating the most important characteristics of each of these phases. This
is done by introducing a number of dimensions. This dimensions allow to conceptualize and describe each
of the previously introduced strategic positions.
Dimension 1: Type of offering

First of all, the value delivered to a customer by the total offering is a key feature of a servitization strategy
(T. S. Baines et al., 2009; Tim Baines & Lightfoot, 2013; Gebauer, Edvardsson, Gustafsson, et al., 2010).
This offering contains both a product as well as a service. Moving through the transition phases involves a
change in the offering. This value is initially delivered by a product but can eventually be an integrated
combination of products and services that takes over responsibility and risk for performing activities (Tim
Baines & Lightfoot, 2013; Windahl, 2007). Hence the first dimension incorporated is the ‘type of offering
delivered’. This is incorporated in table 5. The following paragraphs discuss the value of this dimension for
each phase.
Within the initial phase of customer-service provider the goal is simply to augment the existing product
business and manufacturer’s reputation by offering a range of basic services that enhance customer
interaction. This includes a main offering focused on providing a product to a customer along with base
services such as documentation and warranty (Gebauer, Fischer, et al., 2010), as seen in table 5.
Within the after-sales service provider phase, firms focus on protecting the existing service business and
gaining market share for services (Raddats & Burton, 2011). This is done by augmenting the product with
after-sales services that allow to respond as quickly as possible to product breakdowns. The value
proposition is based upon offering products and ensuring their proper functioning within the customer’s
operation (Tim Baines & Lightfoot, 2013; Gebauer, Edvardsson, Gustafsson, et al., 2010; Gebauer, 2008).
These products and services can be loosely bundled such that a customer can choose the services he needs
34
(Gebauer, 2008). In table 5, this offering is referred to as a product bundled with after-sales services focused
on responding to breakdowns.
Within the phase of customer support provider the goal is optimize the product efficiency and effectiveness
over the lifecycle. The focus is to actively prevent any product breakdowns (Gebauer, Edvardsson,
Gustafsson, et al., 2010). This contrasts with the after-sales service provider phase in which the response
towards breakdowns was reactive instead of proactive. This is done by an offering that consists of highly
reliable products and tailored service offerings that satisfy a particular customer’s needs (Gebauer, 2008).
Manufacturing firms in this respect have the advantage of experience with the maintenance of own
equipment when competing with service organizations (Oliva & Kallenberg, 2003). These product-related
services now include the total lifecycle of product, including the pre-sales, sales and after-sales phase (Lay,
2014b). Hence, the offering consists of a reliable product bundled with lifecycle services focused on
preventing product breakdowns as shown in table 5.
When moving to the phase of development partner, the goal is to ensure product functionality through
basic services and optimize both the product and the customer’s business processes (Lay, 2014b).
Manufacturing firms then mostly offer a complete spectrum of products and services that are integrated
into solutions (Gebauer, 2008; Oliva & Kallenberg, 2003). This goes beyond bundling products and services,
where standardized bundles of components are combined to meet a customer need (Davies, 2004). Firms
also typically involve customers into the development process so that products, services and solutions can
be tailored to their unique needs and preferences. The type of offering for this phase is an integrated solution
that is co-created with a customer, seen in table 5.
Within an outsourcing partner phase the goal is to assume operating risk and take full responsibility for a
customer’s operating processes. Therefore, the value proposition is simply based upon taking over the risks
and responsibilities for the customer’s operations (Gebauer, Edvardsson, Gustafsson, et al., 2010; Lay,
2014b). It hence relies on both a good product and service reliability since the manufacturer is accountable
for risks involved in the total solution (Gebauer, 2008). Customized solutions are offered that include
products and services from different suppliers and are not limited to a firm’s own products. Eventually, this
may lead to offerings independent from a firm’s own product (Tim Baines & Lightfoot, 2013; Mathieu,
2001). The offering in this phase is thus based upon integrated operational solutions that can be sourced
both internally and externally and deliver a capability rather than a product or service (Tim Baines &
Lightfoot, 2013) as seen in table 5.
Table 5| Framework expansion with dimension ‘type of offering’

Type of offering Product Product Reliable product Integrated Integrated
delivered (T. S. bundled with bundled with bundled with solutions, co- operational
Baines et al., 2009; basic services after-sales lifecycle services created with a solutions from
Tim Baines & (Gebauer, Fischer, services focused on customer (Davies, both internally and
Lightfoot, 2013; et al., 2010)
focused on preventing 2004; Gebauer, externally sourced
Gebauer, Edvardsson,
Edvardsson,
Gustafsson, et al., responding to breakdowns products and
Gustafsson, et al.,
2010) breakdowns (Gebauer, Fischer, et services (Tim Baines
2010; Gebauer, 2008;
(Tim Baines & al., 2010; Gebauer, & Lightfoot, 2013;
Oliva & Kallenberg,
Lightfoot, 2013; 2008; Lay, 2014b) Gebauer, Edvardsson,
2003)
Gebauer, 2008) Gustafsson, et al.,
2010; Gebauer, 2008)
35
Dimension 2: Type of services
Secondly, for servitization the most important determinant of the offering is the type of services. This has
been identified as another key feature of servitization and follows from the discussion of dimension 1 (Tim
Baines & Lightfoot, 2013; Gebauer, 2008; Oliva & Kallenberg, 2003). Naturally, as in product-related
strategies, where the product portfolio is at the heart of strategic decisions, type and breadth of services are
at the heart of strategic decisions for servitization (Gebauer, 2008). During a transition the type of services
changes from product-oriented services to end-user’s process-oriented services. Oliva and Kallenberg
(2003) captured this in the IB-service space, seen in Appendix E. Hence, the ‘type of services’ is the second
dimension of the framework as seen in table 6.
In the customer service provider phase the services include product-oriented services that aim to support a
product. It may include basic services information services, basic advisory services, documentation and
delivery services (Gebauer, Fischer, et al., 2010). These are referred to as ‘basic supplementary services’
within the framework in table 6.
Being in the phase of after-sales service provider involves delivering standardized product-oriented after-
sales services for the installed base to respond to occurring product breakdowns (Gebauer, 2008). Oliva and
Kallenberg (2003) refer to these as basic IB services, which include the basic supplementary services and
after-sales services such as product-oriented training, repairs, spare parts, product upgrades, a helpdesk and
refurbishment and takeback (Oliva & Kallenberg, 2003). These basic IB services are incorporated in table
6.
A firm in the phase of customer support provider delivers product-related services that cover the total
lifecycle. Although still product-related, these services aim to maximize uptime and yield of services within
the customer’s processes instead of merely preventing breakdowns (Gebauer, 2008). Oliva and Kallenberg
(2003) refer to these as ‘maintenance services’. It includes lifecycle services such as preventive maintenance,
condition monitoring, and full maintenance contracts. Hence, within the framework in table 6 these are
referred to as ‘product lifecycle maintenance services’.
The integrated solutions delivered in the development partner phase still consist of product-related services
but are complemented with process-oriented services such as process-oriented engineering and training,
spare parts management and process-oriented R&D (Oliva & Kallenberg, 2003). Gebauer et al. (2010)
therefore also refers to these as R&D oriented services (Gebauer, Edvardsson, Gustafsson, et al., 2010),
since these services specifically target the customer’s business processes and the customer can be involved
as co-creator (Gebauer, 2008; Lay, 2014b). Within the framework in table 6, these services are thus referred
to as ‘process-oriented services’.
The last phase of outsourcing partner is associated with delivering operational solutions that include both
product and services. The type of services delivered goes beyond process-oriented services but involve so-
called operational services. These are standardized and relate to for instance managing operations or
complete maintenance functions (Gebauer, 2008; Oliva & Kallenberg, 2003). The earlier mentioned ‘Power
by the hour’ agreement by Rolls-Royce is an example of such operational services, which are incorporated
in table 6.
36
Table 6| Framework expansion with dimension: ‘type of services’

Edvardsson,
Gustafsson, et al.,
2010; Gebauer, 2008;
Oliva & Kallenberg,
2003)
2010; Gebauer, 2008)
Type of services Basic Basic after- Product lifecycle Process-oriented Operational
(Tim Baines & supplementary sales IB maintenance services (Gebauer, services (Gebauer,
Lightfoot, 2013; 2008; Oliva & 2008; Oliva &
services services (Oliva services (Gebauer,
Gebauer, 2008; Oliva Kallenberg, 2003) Kallenberg, 2003)
(Gebauer, 2008) & Kallenberg, 2008; Oliva &
& Kallenberg, 2003)
2003) Kallenberg, 2003)
Dimension 3: Type of customer

Third, proceeding in the transition also means the type of customer gradually changes. Namely, customers
of product manufacturers tend to have different perceptions of value than customers of service and solution
providers. The former type values ownership of an asset, whereas the latter values the functional result (T.
S. Baines et al., 2009). Therefore, manufacturing firms should be aware of which customer type is involved
when progressing to a next phase. Hence, the type of customer is another dimension to consider and is
incorporated in the framework in table 7.
In the initial phase of customer service provider the offering is a product with very basic services. Hence,
customers should then value the ownership of a good, whilst carrying out services such as maintenance
himself (Tim Baines & Lightfoot, 2013). In table 7 this is referred to as a ‘customer that wants a stand-alone
product’.
The second phase of after-sales service provider is associated with slightly more demanding customers. This
type of customer wants a product that functions well and requires support for repair in case of breakdowns
(Lay, 2014b). However, the customer still desires the freedom to choose which services to buy and does not
need full maintenance contracts. The type of customer is referred to as ‘customers that want a well-
functioning product’ in table 7.
In the phase of customer support provider, customers are looking for outstanding products that are reliable
and well performing. Furthermore, such customers focus on core competencies and demand services that
are focused on increasing the efficiency and effectiveness of products in their operation. These customers
hence value offerings based on products and lifecycle services (Tim Baines & Lightfoot, 2013; Gebauer,
2008). Such customers are referred to as ‘customers that want a product operating continuously and
effectively’ in table 7.
For the fourth phase, the customer not only requires effective and efficient products but also an effective
and efficient process. Furthermore, these customers expect particular tailored solutions for operating
processes (Lay, 2014b). Such customers are referred to by Baines and Lightfoot (2013) as “customers who
want us to do it with them” (Tim Baines & Lightfoot, 2013, p. 65). These customers value the expertise of
37
the manufacturing firm but also want to be of influence in developing the integrated solution. This type of
customers is referred to as ‘customers that want an integrated solution for their processes’ in table 7.
In the last phase, a new type of customer is involved that are aseen to concentrate on core capabilities. They
are in demand of the mere performance of a solution (Lay, 2014b). Baines and Lightfoot (2013) refer to
these as “customers who want us to do it for them” (Tim Baines & Lightfoot, 2013, p. 65). The offering
they value is uncoupled from products and services. Rather, they value the capability delivered by the
manufacturing firm instead of the ownership of a physical asset. Therefore, such customers are referred to
in table 7 as ‘customers that want a level of performance’.
Table 7| Framework expansion with dimension: ‘type of customer’

Edvardsson,
Gustafsson, et al.,
2010; Gebauer, 2008;
Oliva & Kallenberg,
2003)
2010; Gebauer, 2008)
& Kallenberg, 2003)
Type of Customers Customers Customers that Customers that Customers that
customer (T. S. that want a that want a want a product want an want a level of
Baines et al., 2009) stand-alone well- operating integrated performance (Lay,
product (Tim functioning continuously solution for their 2014b)
Baines & product (Lay, and effectively processes (Lay,
Lightfoot, 2013) 2014b) (Tim Baines & 2014b)
Lightfoot, 2013;
Gebauer, 2008)
Dimension 4: Customer relationship

Fourthly, servitization also involves a change in customer relationship (Gebauer, Edvardsson, Gustafsson,
et al., 2010; Gebauer, 2008; Oliva & Kallenberg, 2003). This logically follows from the discussion of the
previous dimensions. Namely, engaging in integrated solutions that cover the total product lifecycle requires
different customer interaction. Initially, manufacturing firms offer services based on transaction. Moving
towards services covering the lifecycle of a product, a long-term customer relationship is initiated (Tim
Baines & Lightfoot, 2013; Brady et al., 2005; Davies, 2004; Mathieu, 2001; Oliva & Kallenberg, 2003).
Customer-centricity is thus a key feature of servitization. Table 8 shows the revised framework where
‘customer relationship’ is added as a novel dimension.
In the first phase, a manufacturing firm merely delivers a customer a product coupled with basic services.
The interaction between manufacturer and customer involves negotiations about a product and eventually
delivery in the field. However, during the lifecycle the customer simply operates a product and rarely
interacts with the manufacturer and often in an indirect way through for instance surveys. This is thus a
38
relationship based upon transaction, since no further support is given after the sales-phase (Tim Baines &
Lightfoot, 2013; Oliva & Kallenberg, 2003). This customer relationship in the first phase is incorporated in
table 8.
Table 8| Framework expansion with dimension: ‘customer relationship’

Tim Baines & (Gebauer, Fischer, services focused on customer (Davies, both internally
focused on preventing 2004; Gebauer, and externally
Edvardsson,
Gustafsson, et al., responding to breakdowns sourced
Gustafsson, et al.,
2010) breakdowns (Gebauer, Fischer, et products and
2010; Gebauer, 2008;
(Tim Baines & al., 2010; Gebauer,
Oliva & Kallenberg, services (Tim
Lightfoot, 2013; 2008; Lay, 2014b)
2003) Baines & Lightfoot,
Gebauer, 2008) 2013; Gebauer,
Edvardsson,
Gustafsson, et al.,
2010; Gebauer,
2008)
& Kallenberg, 2003)
Type of Customers Customers Customers that Customers that Customers that
customer (T. S. that want a that want a want a product want an want a level of
Baines et al., 2009) stand-alone well- operating integrated performance
product (Tim functioning continuously solution for their (Lay, 2014b)
Baines & product (Lay, and effectively processes (Lay,
Lightfoot, 2013) 2014b) (Tim Baines & 2014b)
Lightfoot, 2013;
Gebauer, 2008)
Customer Transaction Transaction Lifecycle Lifecycle Lifecycle
relationship (Tim based (Oliva & based + relationship partnership (Tim partnership (Tim
Baines & Lightfoot, Kallenberg, reactive (Oliva & Baines & Lightfoot, Baines & Lightfoot,
2013; Davies, 2004; 2003) Kallenberg, 2003) 2013; Davies, 2004) 2013; Davies, 2004)
service
Oliva & Kallenberg,
2003) delivery (Tim
Baines &
Lightfoot, 2013)
During the second phase the number of touch points between manufacturer and customer already increase.
By means of after-sales services the manufacturer is more involved, reacting to product breakdowns and
supplying spare parts. However, the product and services are still offered separately. Therefore, despite the
increase in interaction points the customer relationship is still transaction based since it involves separately
delivering services in a reactive manner (Tim Baines & Lightfoot, 2013), such that in table 8 the relationship
is referred to as ‘transaction based + reactive service delivery’.
In the phase of customer support provider, the interaction with a customer becomes relationship-based
since the manufacturer is involved in all phases of the product lifecycle with services such as preventive
maintenance and condition monitoring (Oliva & Kallenberg, 2003). This requires much better
39
understanding of product’s functioning during its lifecycle in the customer’s process. Consequently, it
requires more customer touch points. Thus, in table 8 this is referred to as a ‘lifecycle relationship’.
Moving to the phase of development partner this relationship is reinforced even more. Providing integrated
solutions require a detailed understanding of the activities carried out by the customer throughout the total
lifecycle of a product (Brady et al., 2005; Davies, 2004; Gebauer, Edvardsson, Gustafsson, et al., 2010; T. T.
Turunen & Toivonen, 2011). The manufacturer’s staff will interact much more with a customer to optimize
his business processes, especially when a customer is involved as a co-creator of solutions (Tim Baines &
Lightfoot, 2013). The customer then plays a much more central role, acting as a resource of information (T.
T. Turunen & Toivonen, 2011). Firms can become more embedded in customers’ operations and can
acquire intimate customer knowledge (Sawhney, 2004). The manufacturer and customer develop a learning
relationship in which they collaborate to develop solutions. Therefore, the relationship is referred to as a
‘lifecycle partnership’ in table 8.
In the last phase, the partnership relationship is sustained. Again, a manufacturer delivers integrated
solutions. In contrast to a development partner these also contain operational services which also requires
close interaction between manufacturer and customer. A customer is offered a capability, but the
manufacturer takes on increased responsibility and risk. Therefore, the manufacturer is incentivized to
maintain a close relationship and the ability to quickly respond (Tim Baines & Lightfoot, 2013; Gebauer,
2008). Therefore, table 8 shows this relationship again as a ‘lifecycle partnership’.
3.2.3 Whether to go through all phases

The previous section has shown that firms move through a transition in different phases, of which table 8
was the assembly. Manufacturing firms can have different strategic goals, such that the transition does not
have to be fully completed and the level of servitization reached differs. However, firms are progressively
moving away from strategies that involve basic after-sales services supporting a product, towards solution
strategies in order to capture the strategic benefits of services (Gebauer, Fischer, et al., 2010; Mathieu, 2001).
Namely, a certain level of services is required to participate in the market for services and this level is rising
(Mathieu, 2001; Salonen, 2011). Services considered basic by all customers work as an entry barrier for firms
entering the market and do not deliver a competitive advantage (Gebauer, Fischer, et al., 2010; Mathieu,
2001). This is a challenging for manufacturing firm since as Salonen (2011) observed, whilst manufacturing
firms initially can still leverage product-related expertise, this diminishes rapidly beyond the basic strategies
of customer service and after-sales provider (Salonen, 2011).
Thus, the question is whether engaging in full servitization is always the best idea for manufacturing firms
(Mathieu, 2001). Rather, this differs for each organization, depending on the competences they and their
customers possess and their long term strategic goals (Windahl, 2007). Hence, manufacturing firms do no
always proceed through a complete transition. Rather, depending on the interplay between the market, the
strategic goals of a company and its resources and capabilities, reaching less far in the transition might be a
more suitable approach for particular organizations.
The framework thus far has discussed the relevant strategic dimensions an organization need to consider
when implementing a servitization strategy. The following section will discuss what implications this
transition poses for the organizational structure of a manufacturing firm.
40
3.3 Organizational structure
A strategy sets the objectives of a firm. Changing a strategy requires corresponding changes in the
organization. Therefore, implementing servitization requires every aspect of the way firms do business to
be changed (T. S. Baines et al., 2009; Oliva & Kallenberg, 2003; Salonen, 2011). Firm should achieve
alignment between their strategy and organizational arrangements such as human resources, structure,
measurements and rewards, decision making process and culture (Gebauer, Fischer, et al., 2010; Matthyssens
& Vandenbempt, 1998; Neu & Brown, 2005; Oliva & Kallenberg, 2003). This starts with aligning the
organizational structure. Hence, structure follows strategy (Mintzberg, 1979; Robbins & Judge, 2014). This
section therefore discusses the aspects of organizational structure during servitization and incorporates this
as a dimension within the framework. The objective is thus to answer the subquestion ‘What are the
characteristics of servitization in terms of organizational structure?’.
First of all, a general introduction of organizational structure is given. Section 3.3.1 describes the definition
of organizational structure and its characteristics. Various forms of organizational structures exist, discussed
in section 3.3.2. A comparison between the product-centric firm and customer-centric firm and the
associated structural arrangements is done in section 3.3.3 and 3.3.4. This is followed in section 3.3.5 by an
elaboration on the organizational structure of manufacturing firms during servitization.
3.3.1 Definition of organizational structures

Early organizational design theory was preoccupied by the notion that one best way of organizing existed
(Lam, 2010). Those conventional organizational structures were based often on products or functions and
had high levels of hierarchy. The structure of an organization determines where decision making power and
authority is located in the organization (Galbraith, 2002; T. Turunen, 2013). Mintzberg (1979) defines it as:
‘The sum of the ways in which an organization divides its labour into distinct tasks and then achieves
coordination among them.’ (Mintzberg, 1979, p. 2). It defines how the different people, departments and
processes work together and must form an integrated whole to achieve its goal of successfully carrying out
the organizational strategy (Kavale, 2012). According to Galbraith, four areas determine the structure of an
organization: specialization, shape, distribution of power an departmentalization (Galbraith, 2002).
Specialization refers to the number and type of specialties that is used to perform the work. Work can be
subdivided in different tasks. High specialization ensures better execution of subtask performance but
simultaneously makes the integration of activities into the whole task more difficult.
The shape refers to the number of people making up departments at each level, which is also referred to as
span of control. The more people a manager supervises, the larger his or her span of control and the more
efficient an organization operates (Robbins & Judge, 2014). Command and control structures that include
relatively small spans of control are increasingly abandoned. The hierarchy becomes flatter and spans of
control become larger, which leads to faster decisions since less supervision and control is exerted
(Galbraith, 2002).
Distribution of power consists of two aspects. First it describes the vertical distribution of decision making
power within an organization. This is referred to as centralization or decentralization. The degree of
(de)centralization differs among organizations and should be carefully weighed. Secondly, the horizontal
distribution of power across the value chain plays a role. Today’s customers are becoming more
knowledgeable and demanding and consequently possess more buying power. As such, within the firm the
power is shifting towards the units in close contact with customers (Galbraith, 2002).
People carrying out specialized work can be put together into departments. Mintzberg (1979) refers to this
as grouping. Departmentalization involves choosing to integrate specialized work into departments that
together form a hierarchy of departments. The type of department differs and can vary along each
41
hierarchical level. The type chosen depends on the specific situation a firm is in and the strategic goal they
pursue. Departments can be categorised by: function/specialty, product or service type, customer segment,
geographical area or work flow process. Most firms combine various ways of departmentalization, resulting
in hybrid structures such as combined product/market structures. The latter is often found in product-
oriented organizations (Galbraith, 2002).
3.3.2 Types of organizational structures

The question is how firms decide upon the appropriate structure of a firm, such as the choice between
functional or product departments or the choice for centralize or decentralize. In their seminal work, Burns
and Stalker (1961) argued that these choices depend on certain contingency factors such as market dynamics
and organizational size (Lam, 2010; Mintzberg, 1979). Similarly, Mintzberg (1979) argues that successful
organizations design their structure to match their situation. He synthesized this by developing five different
structural archetypes: the simple structure, the machine bureaucracy, the professional bureaucracy, the
divisionalised firm and the adhocracy. It is argued that each firm is dominated by one of the archetypes. The
most suitable configuration differs for each firm (Mintzberg, 1979).
Firms usually start out with a simple structure, characterized by a flat, organic structure with few or no levels
of hierarchy and low levels of departmentalization, formalization, enabling fast decision making. A simple
structure is usually seen in young entrepreneurial firms. It strongly contrasts with the other extreme, the
bureaucracy. This structure is characterized by a high level of standardization and formalization and routine
tasks. This configuration is appropriate for firms that operate in stable environments. They operate within
a tight vertical structure that is grouped in functional departments. Machine bureaucracies are advantageous
when pursuing efficiency and economies of scale (Mintzberg, 1979).
Furthermore, Mintzberg (1979) considers the divisionalised or diversified form, which is an organization
consisting of different divisions that operate relatively independent in related or non-related markets. These
are controlled by an overarching corporation. Divisionalised forms often consist of multiple bureaucratic
firms and are mostly suited for stable and not too complex environments (Mintzberg, 1979). The adhocracy
on the other hand is best suited for firms operating in dynamic and complex environments that require
flexibility. Innovation is an important characteristic of the adhocracy. Organization pertaining to such a
designation have little formalized behavioural rules. Innovation requires breaking through established
patterns, such that activities are not standardized within adhocracies. Rather, the organizational structure as
well as jobs and accompanying tasks are rather flexible (Mintzberg, 1979).
Although Mintzberg’s archetypes are still observed in today’s organizations, various other forms of
organizational structures have surfaced since then, such as matrix structures. The matrix structure achieves
a balance between two ways of grouping such as functional and product departments to achieve the benefits
of both ways of departmentalization. By implementing a matrix structure, the firm engages in a dual
authority structure where employees in the matrix have two bosses: for example a functional manager and
a product manager. The strength of a matrix structure is the ability of coordinating complexity within an
organization as to operate more flexible in response to the needs of customers, the market or technology.
Furthermore, the interaction between different specialties within the matrix ascertain that information
permeates the organization quickly (Galbraith, 2002; Mintzberg, 1979; Robbins & Judge, 2014).
Another organizational structure that has surfaced is the virtual organization, also known as the network
organization. Traditionally, firms developed and controlled all value creating activities, but have recognized
that they cannot be best in everything in today’s competitive environment, especially in quickly changing
industries. A virtual organization may prove beneficial in this respect since up can provide the answer to
deliver superior total value for a customer by acquiring or partnering with firms that are best at other parts
of the total solution (Galbraith, 2002). A virtual organization consists of independent companies that focus
42
on their core business and outsource non-core activities. These companies work together in the value chain
as if it were a single organization. Firms engage in relationships with a diversity of firms consisting of
suppliers, channel members, clients and sometimes competitors. It gives a company the advantage of
flexibility and eliminates costly offices and hierarchical roles (Galbraith, 2002; Mathieu, 2001; Robbins &
Judge, 2014).
3.3.3 Product-centric organizations

The previous section introduced the general overview of organizational structures. A servitization strategy
however applies to specific organizations, namely product-centric organizations. As the framework in table
8 depicted, it involves a transition. In order to be successful, product-centric organizations clearly need to
become both increasingly service oriented and customer-centric (Galbraith, 2002; Kowalkowski,
Kindström, & Witell, 2011; Sawhney, 2004). Often, the existing organizational structure of manufacturing
firms does not facilitate the establishment of long term relational processes to create customer value with
solutions and services (Gebauer & Kowalkowski, 2012). For instance, capital goods manufacturers with
strong engineering and R&D capabilities seem unsuited for becoming extremely customer-centric (Salonen,
2011). Indeed, product-centric organizations differ at large from customer-centric organizations and they
are seen as two opposing extremes. Appendix F shows an overview of the two extremes. This contrast is a
source of tension that needs to be overcome if a firm wants to become customer-centric (Galbraith, 2002).
Product-centric organizations reason from the product perspective. Technology innovators are specifically
focused on innovative products. Product-centric organizations aim to develop superior products whilst
simultaneously improving existing products. Hence, product-centric organizations are mainly occupied with
designing, producing and selling products (Tim Baines & Lightfoot, 2013; Shah, Rust, Parasuraman, Staelin,
& Day, 2006; T. T. Turunen & Toivonen, 2011).
Product-centric firms are structured according to their product business, typically around functional silos
that are defined by product type or category and have strong hierarchical control (Galbraith, 2002; Martinez
et al., 2010a; Shah et al., 2006). These can be supplemented by geographical structures to account for the
dispersion of customers in different regions (Galbraith, 2002; Gebauer & Kowalkowski, 2012). The
structure includes departments such as product development, product marketing and product sales
(Galbraith, 2002; Sawhney, 2004), which have product and sales managers assigned to each product (Shah
et al., 2006).The decision making power hence resides in the product related units. Their production facilities
are generally centralized (T. T. Turunen & Toivonen, 2011). Usually these firms have a form of front-office
activities, although mostly very limited. Sales are usually realized through intermediaries such as dealerships
(Tim Baines & Lightfoot, 2013). Services are tied to the product units, implying that service development is
a sub-process of product development whilst services sales fall under the responsibility of product sales
units (Gebauer & Kowalkowski, 2012).
Within this thesis, a particular product-centric firm is researched, namely manufacturing firms of capital
goods that develop product innovations. Since innovation resides in complex, uncertain and dynamic
environments that require agility and flexibility it is best fostered with organic organizational structures with
low degrees of formalization and standardization (Lam, 2010; Schilling, 2013). This is challenging in large
firms focusing on efficiency. Organizations want to adopt more flexible and adaptive ways of organizing in
order to overcome rigidity and inertia. They want to take advantage of their size in achieving economies of
scale whilst simultaneously retaining a small firm’s flexibility and simplicity. It requires a balance within the
firm between both exploration and exploitation activities, also referred to as the “ambidextrous
organization” (Galbraith, 2002; Lam, 2010; Schilling, 2013). Ambidexterity involves managing the existing
product lines in terms of efficiency, consistency and incremental innovation whilst also being able to
respond to technological change with radical innovation and new product development. As a result, product
centric firms often have R&D divisions or teams that operate separately from the rest of the organization.
43
These have low to non-existing levels of formalization and standardization as to stimulate creativity and
innovation. Other parts of the firm such as manufacturing and distribution however can be more formalized,
standardized and even centralized in order to profit from economies of scale (Schilling, 2013).
3.3.4 Customer-centric organizations

Product-centric organizations clearly are not aligned with delivering customer-focused solutions. Therefore,
contrary to product-centric organizations, customer-centric organizations begin with analysing a customer
problem instead of a product. Thus, the essential thought is how to create customer value rather than in
how to sell a product (Galbraith, 2002; Sawhney, 2004; Shah et al., 2006). Integrated solutions are developed
from the insight that customers have no interest in a product or a service per se. Product and services are
seen as a means to an end, namely to solve a customer problem (Sawhney, 2004). Customer-centric
organizations are therefore on the side of the buyer and try to help this buyer to become more effective in
doing business. It requires deep knowledge of the customer and the ability to integrate product lines and
services (Galbraith, 2002).
From the differences in approach and strategy, it follows that these firms are organized differently as well.
Customer-centric firms are structured along markets or customer segments instead of products in order to
develop coherent solutions (Sawhney, 2004). These solutions are delivered by multiple business units
focusing on products as well as services (Gebauer & Kowalkowski, 2012). Decision making power shifts;
firms move away from product profit centres and product teams towards an extended front-office with
customer teams, customer relationship managers and customer segments having customer P&L
responsibility (Galbraith, 2002; Gebauer & Kowalkowski, 2012; Sawhney, 2004). This leads to the
establishment of customer-faced organizational units such as key or global accounts which coordinate the
product and service units by means of account managers that are the single contact point (Galbraith, 2002;
Gebauer & Kowalkowski, 2012). An example of such a customer-centric structure is the front/back hybrid
organizational model, implemented by among others IBM and Nokia (Galbraith, 2002; Sawhney, 2004; Shah
et al., 2006). The design consists of a ‘front-end’ that is focused on customer/market segments and
geography and a ‘back-end’ that focuses on technologies and product lines. The front-end develops and
delivers the integrated solutions, whilst the back-end is supportive by means of developing and
manufacturing products and services (Galbraith, 2002; Raddats & Burton, 2011; Sawhney, 2004). Both parts
of the organization should collaborate closely and develop coordinating mechanisms such as overarching
performance measurement systems, cross-functional teams and rotation of personnel (Galbraith, 2002;
Sawhney, 2004). Successful deployment of the front-back hybrid structure gives a company a lot of flexibility
by exploiting the benefits of both product and market structures (Galbraith, 2002). An illustrative overview
of a ‘front/back hybrid’ as implemented by Nokia is shown Appendix G.
Tight linkages are needed to ensure integration between the product-, service- and customer-related units
(Galbraith, 2002; Gebauer & Kowalkowski, 2012; Shah et al., 2006). This is achieved by working through
lateral processes, defined as information and decision making processes that coordinate activities across
different organizational units (Galbraith, 2002). Mintzberg (1979) refers to these lateral coordination
mechanisms as liaison devices (Mintzberg, 1979). In practice, firms move through the various forms of
lateral coordination processes in order to become a customer-centric organization. Five types can be
distinguished, increasing in complexity: informal processes, e-coordination, formal groups, integrators and
lastly the matrix organization (Galbraith, 2002). Those processes should be integrated in order to deliver
superior customer value (Shah et al., 2006). The type and amount of lateral coordination required, is set by
the firm’s business strategy (Galbraith, 2002; Mintzberg, 1979). The corporate centre fulfils an essential role
of coordinating tasks among the services and product business units, by mediating between the two ends
and leading the transition towards solutions (Raddats & Burton, 2011; Sawhney, 2004). As such, companies
such as HP and Intel have installed a Chief Customer Officer to explicitly represent the customer function
within the top of the organization (Shah et al., 2006).
44
Having reviewed the characteristics of both product- and customer-centric organizations and knowing that
servitization requires product-centric firms to become more customer-centric, we are interested how this
proceeds. Here the basis of the theoretical framework helps to describe this transition in structure. Namely,
the organizational structure should align within each phase of the transition. This is discussed next in section
3.3.5.
3.3.5 Organizational structure during servitization

Different approaches are described in literature as to how product-centric firms organize the service
business within their organizational structure during servitization. The literature on organizational structures
within a servitization perspective generally revolves around the question whether to integrate or separate
the service function within the existing organizational structure (e.g. Bustinza et al., 2015; Gebauer, Fischer,
et al., 2010; Neu & Brown, 2005; Oliva & Kallenberg, 2003). Three general models for the organizational
structure can be distinguished within literature: a combined product and service structure, a separated service
structure and a customer focused structure (Auguste et al., 2006; Gebauer & Kowalkowski, 2012; Raddats
& Burton, 2011). The framework in table 8 identified five phases: customer service provider, after-sales
service provider, customer support provider, development partner and outsourcing partner. How the
organizational structure aligns within each phase is discussed in this section.
Phase 1: Customer service provider

Manufacturing firms initially have a product-centric organizational structure. As discussed, this involves
products or product groups as the primary basis for structuring the organization. The delivered basic
services as a customer service provider are attached to different product-related functions. Gebauer &
Kowalkowski (2012) argue that the first step for product-centric firms is to increase the service-orientation
within the organization by detaching service activities from product functions. Most firms already offer
services but these are mostly fragmented and considered an unprofitable necessity (Oliva & Kallenberg,
2003). A service management function that bundles service related activities of different service departments
is therefore often created that runs as a distinct profit centre (Gebauer & Kowalkowski, 2012). According
to Turunen & Toivonen (2011) integration within the existing product structure is logical initially, since
product-centric firms offer product-related services such as maintenance and repair, which requires the
expertise of product designers and engineers (T. T. Turunen & Toivonen, 2011). Therefore, in the first
phase, servitizing firms have a combined product and service structure (Raddats & Burton, 2011) with both
product-focused departments and a service management function as seen in table 9.
Phase 2: After-sales service provider

Combining product and service activities within the same structure is considered a necessary but insufficient
measure for firms that want to eventually deliver integrated solutions (Kindström et al., 2014). Therefore,
moving to the phase of after-sales service provider, where the service offering has expanded and contributes
significantly to revenues, manufacturing firms isolate services from their product operations (Kowalkowski
et al., 2011; T. T. Turunen & Toivonen, 2011). Service activities of different departments are bundled in a
distinctive business unit or organization (Bustinza et al., 2015; Gebauer et al., 2005; Gebauer &
Kowalkowski, 2012; Oliva & Kallenberg, 2003). It makes the service activities visible, measurable and
controllable (Oliva & Kallenberg, 2003). An independent service unit is also argued to contribute to the
growth of the service business within a firm (Auguste et al., 2006; Raddats & Burton, 2011) and is argued
to enhance the success of transitioning to a more service oriented business delivering integrated solutions
(Fang, 2014; Fundin et al., 2012; Raddats & Burton, 2011). Furthermore, employees are argued to be more
committed to the goal of the service business within a separate organization since they do not have to satisfy
different priorities. Otherwise the dual roles will arguably lead them to satisfy the existing product related
priorities (T. T. Turunen & Toivonen, 2011). According to Gebauer (2010) separating both business
functions can also aid in establishing a service-oriented culture and mind-set (Gebauer, Edvardsson, &
45
Bjurklo, 2010). Lastly, a separate service organization is associated with higher levels of customer satisfaction
(Bustinza et al., 2015).
The independent unit is assigned full profit-and-loss (P&L) responsibility for the service business and
effectively operates independently, with its own salesforce, service technicians and monitoring system
(Gebauer et al., 2005; Gebauer & Kowalkowski, 2012; Oliva & Kallenberg, 2003). Simultaneously, strong
collaboration between product and service units is needed to deliver the total offering (Galbraith, 2002).
Since a separate service unit requires substantial investment and the build-up of capacity and training of
personnel, this is a challenging decision that takes time (Fundin et al., 2012) and requires a critical mass of
customers in order to be profitable (Neely, 2009b). This explains why some firms are reluctant to install an
independent service unit, since managers do not see the relative merits compared to combined structures.
Therefore, some firms choose to retain a combined product/service structure within this phase, especially
those focusing on differentiating own products without aiming for advanced servitization levels (Raddats &
Burton, 2011).
Hence, the second phase involves an increasingly service-oriented structure. The structure can be
characterized as service focused, where firms still have product-focused departments, complemented by
either still a service management function or an independent service unit with P&L responsibility. This is
seen in table 9.
Phase 3: Customer support provider

Literature is ambiguous in determining whether firms should already implement an independent service unit
in phase 2. However, moving to the phase of customer support provider, combining product and service
functions in the existing structure is no longer suitable (Gebauer, 2008). Instead, this phase aligns with the
previously introduced independent service unit with P&L responsibility. This is logical since the total
offering has become more complex, involving products combined with lifecycle services that serve the needs
of a more demanding type of customer. Hence, different goals and employees skills are required, which
favours separation of the products and services in the structure. This separation is a collaborative effort of
product and service departments (Gebauer & Kowalkowski, 2012; Lay, 2014b; Raddats & Burton, 2011).
Besides a profit centre, the independent service unit also becomes an investment centre for new service
business development opportunities (Gebauer & Kowalkowski, 2012). Hence, the third phase of customer
support provider aligns with a separation of the product and service operations as shown in table 9.
Phase 4: Development partner

In the fourth phase, the customer plays a much more central role, being involved in solution development
leading to a lifecycle partnership. Therefore, besides a service orientation by means of an independent
service unit, moving to this phase also requires an increased customer-orientation in the organizational
structure. Separate product and service units are considered less appropriate to deliver these integrated
solutions (Raddats & Burton, 2011; Windahl & Lakemond, 2006). This increased customer-orientation is
therefore initially established by forming customer-teams (e.g. key account teams) within the existing sales
units of product-centric firms. These teams specialize in a particular customer segment and integrate and
coordinate the activities of both product and service departments (Galbraith, 2002; Gebauer &
Kowalkowski, 2012).
In addition, multidisciplinary R&D teams can be established that work with a customer to develop
innovative solutions for their processes, thereby developing a mutual beneficial partnership. A resident
engineer may even be working at the organization of a customer (Galbraith, 2002; Lay, 2014b). The
challenge in this phase is to manage both the product and service business and integrate these activities into
solutions. Summarizing, in the phase of development partner the organizational structure is characterized
by an increased customer orientation, where customer teams integrate and coordinate the activities of the
various product and service departments. This is incorporated into table 9.
46
Phase 5: Outsourcing partner
In the last phase, customers that demand a level of performance are served with operational solutions. Here,
the customer is assumed to have attained strategic priority equivalent to the traditional product business,
requiring an even stronger customer-orientation than in the previous phase. The customer orientation within
the organizational structure is therefore further developed. Moving towards this phase, the established
customer teams can work as enabler for organizational change: when a few customer teams operate
successfully, the size of the customer dimension in the organizational structure can be enlarged. More
customer teams can be formed in order to build a critical mass of agents for change within a firm (Galbraith,
2002; Sawhney, 2004).
This eventually enables to establish customer-focused organizational units that operate in the front end.
Customer units are added to the existing product or functional structures and result in a matrix organization
(Galbraith, 2002; Gebauer & Kowalkowski, 2012; Mintzberg, 1979). A hybrid structure results, structured
along two lines: product and service units as back-end on the horizontal axis and customer units as front
end on the vertical axis, similar to the Nokia example. The matrix structure is considered the ultimate step
in organizing around the customer. Decision making power and P&L responsibility is separated or shifted
from the product-units to the customer dedicated organizational units (Galbraith, 2002; Sawhney, 2004).
The customer units share product and service functions including pricing, R&D, marketing, HR etcetera
and have strong resource flexibility to configure products and services in solutions. For companies serving
geographically dispersed customers, these customer units typically focus on key accounts. This involves
setting up a key account management system that leads to separate P&L’s for each customer to determine
customer profitability and creating integrating roles to form a single point of contact for accounts.
Collaboration among the different teams and organizational units can be augmented in this way. These so-
called key account managers sell the complete range of products and services the firm has (Galbraith, 2002;
Gebauer et al., 2012; Mintzberg, 1979). The development to this customer-centric structure should be
backed by visibility in the top of the organization, for instance by the chief customer officer previously
introduced.
Summarizing, within the last phase of the transition a customer-focused organizational structure with
customer units that integrate the activities of the product and service units should be established. This is
shown in table 9.
This section has discussed the alignment of organizational structure with each of the earlier identified phases
within the servitization transition. This is shown in table 9. It is observed that firms then move from a
product-centric towards a service-focused and eventually customer-focused organizational structure. The
next section will briefly discuss the composition of the developed theoretical framework.
47
Table 9| Framework expansion with dimension: ‘organizational structure’

phase (Gebauer, service provider service provider support provider partner partner
2008)
Type of offering Product bundled Product bundled Reliable product Integrated Integrated
delivered (T. S. with basic with after-sales bundled with solutions, co- operational
Baines et al., 2009; services (Gebauer, services focused lifecycle services created with a solutions from
Tim Baines & Fischer, et al., 2010) on responding to focused on customer (Davies, both internally
Lightfoot, 2013;
breakdowns (Tim preventing 2004; Gebauer, and externally
Baines & Lightfoot, Edvardsson,
Gustafsson, et al., breakdowns sourced
2013; Gebauer, 2008) Gustafsson, et al.,
2010) (Gebauer, Fischer, et products and
2010; Gebauer, 2008;
al., 2010; Gebauer,
Oliva & Kallenberg, services (Tim
2008; Lay, 2014b)
2003) Baines & Lightfoot,
2013; Gebauer,
Edvardsson,
Gustafsson, et al.,
2010; Gebauer, 2008)
Type of services Basic Basic after-sales Product lifecycle Process-oriented Operational
(Tim Baines & supplementary IB services (Oliva maintenance services (Gebauer, services (Gebauer,
Lightfoot, 2013; & Kallenberg, 2003) 2008; Oliva & 2008; Oliva &
services (Gebauer, services (Gebauer,
2008) 2008; Oliva &
& Kallenberg, 2003)
Kallenberg, 2003)
relationship (Tim based (Oliva & based + service relationship partnership (Tim partnership (Tim
Baines & Lightfoot, Kallenberg, 2003) contacts (Oliva & Baines & Lightfoot, Baines & Lightfoot,
2013; Davies, 2004; Kallenberg, 2003) 2013; Davies, 2004) 2013; Davies, 2004)
Oliva & Kallenberg,
2003)
Type of Customers that Customers that Customers that Customers that Customers that
customer (T. S. want a stand- want a well- want a product want an want a level of
Baines et al., alone product functioning operating integrated performance
2009) (Tim Baines & product (Lay, continuously and solution for their (Tim Baines &
Lightfoot, 2013) 2014b) effectively (Tim processes (Lay, Lightfoot, 2013;
Baines & 2014b) Lay, 2014b)
Lightfoot, 2013;
Gebauer, 2008)
Organizational Combined Service-focused Service focused Customer- Customer-
structure product/service structure: structure: focused focused matrix
structure: - Product- - Product- structure: structure:
- Product- focused focused - Independent - Independent
focused departments departments product and product and
departments - Service - Independent service units service units
- Service management service unit with separate - Integrating
management (Raddats & (Gebauer & P&L customer units
Burton, 2011) OR Kowalkowski,
function - Integrating with P&L
2012; Lay, 2014b;
bundling Independent customer teams (Galbraith, 2002;
Raddats & Burton,
service unit (Galbraith, 2002; Gebauer &
service 2011)
Gebauer & Kowalkowski,
activities of with P&L
Kowalkowski, 2012; 2012; Sawhney,
(Bustinza et al.,
separate Raddats & Burton, 2004)
2015;
service Kowalkowski et 2011; Windahl &
departments al., 2011) Lakemond, 2006)
(Gebauer &
Kowalkowski,
2012; Raddats &
Burton, 2011)
48
3.4 Theoretical framework
Following the analysis of literature contributions on servitization in terms of strategy and structure, a
theoretical framework is presented within this section. The framework is the synthesis of the findings of
sections 3.2 and 3.3. Table 10 shows a simplified version of the framework and a full version is appended
in Appendix A.
The purpose of the framework is to provide a comprehensive overview of servitization on both a strategic
and structural level. The framework thereby applies to manufacturing firms possessing all or several of the
unique resources defined by Ulaga and Reinartz (2011): an IB of products, a field service organization, a
distribution network and product development and manufacturing assets.
The framework consists of two parts. Part A considers the different phases of the transition and the strategic
dimensions that can be used to characterize the phases within a servitization strategy, namely: type of
offering delivered, type of services, type of customer and customer relationship.
The type of offering refers to the value that a firm delivers to a customer, identified as one of the key features
of a servitization strategy. The type offering changes from stand-alone products bundled with basic services
to operational solutions that deliver a performance level within the transition.
Type of services has also been identified as a key feature of servitization. The types have been identified
following the typology of Oliva and Kallenberg (2003), starting with product-oriented services and moving
towards operational services in the transition.
A changed offering also involves a different customer type in each phase. Although customer segmentation
is not an explicit part of this thesis, each strategy targets different customers and should hence be
incorporated. Furthermore, delivering an offering during a product lifecycle requires different interaction
with a customer and hence a different relationship. For the latter two strategies, it can lead to a partnership
when a customer is closely involved into the development process of solutions. The customer relationship
thus is the last dimension that follows from the theoretical inquiry.
Part B considers the organizational configuration that aligns to each of the transition phases. Within this
research, this only covers the organizational structure of a manufacturing firm.
The framework is taken as a basis for conducting the case studies of chapters 4 and 5. It is used to position
a firm with respect to servitization. Assessing this position is critical, since as Bustinza et al. (2015) stated,
firms contemplating a move into servitization should analyse their current structure to determine the
appropriate measures to implement servitization. Therefore, when determining a firm’s position an analysis
of the strategic dimensions and organizational structure dimension is done. By judging the progress on each
dimension, a firm’s position can be determined. This is done making use of the following colour scheme:
The green shading shows that a firm has experienced full progress for a dimension in a particular phase.
The orange shading shows where a firm currently focuses on for each dimension, while yellow shading
shows the future situation required in order to reach the strategic position they want.
The following chapters will present the results of the case studies that have been analysed.
49
Table 10| Simplified theoretical framework

phase service provider service provider support provider partner partner
Type of offering Product bundled Product bundled Reliable product Integrated Integrated
delivered with basic with after-sales bundled with solutions, co- operational
services services focused lifecycle services created with a solutions from
on responding to focused on customer both internally
breakdowns preventing and externally
breakdowns sourced
products and
services
Type of services Basic Basic after-sales Product lifecycle Process-oriented Operational
supplementary IB services maintenance services services
services services
Type of Customers that Customers that Customers that Customers that Customers that
customer want a stand- want a well- want a product want an want a level of
alone product functioning operating integrated performance
product continuously and solution for their
effectively processes
relationship based based + reactive relationship partnership partnership
service contacts
Organizational Combined Service-focused Service focused Customer- Customer-
structure product/service structure: structure: focused focused matrix
structure: - Product- - Product- structure: structure:
- Product- focused focused - Independent - Independent
focused departments departments product and product and
departments - Service - Independent service units service units
- Service management service unit with separate - Integrating
management OR with P&L P&L customer units
function Independent - Integrating with P&L
bundling service unit customer teams
service with P&L
activities of
separate
service
departments
50
4 Results: Small case studies
The theoretical framework obtained in section 3.4 was taken as a basis for further research. Five small case
studies have been executed to validate and enrich the theoretical framework. Within the case studies the
focus was to determine how those companies deal with implementing servitization and what they
experienced over time during the transition. The theoretical framework thereby assured the right dimensions
were addressed. The goal was twofold: determining if the framework was applicable and valid and if all the
relevant strategic dimensions were considered. Hence, the following sub-question is partly answered in this
chapter: How would a framework that integrates the strategic and organizational aspects of servitization look like?
The results are presented as follows. First of all, a description of each case company is given. Then, the
results of each case are discussed on the basis of the theoretical framework. This is done by first presenting
the results for part A of the framework. Namely, the characteristics of each company on each strategic
dimension: the type of offering, type of services, type of customer and customer relationship. By describing
how each company is positioned with respect to these dimensions, it can be determined whether a firm is
in the phase of customer service provider, after-sales service provider, customer support provider,
development partner or outsourcing partner. Thereafter, the results for part B of the framework,
organizational configuration, are discussed. By determining the organizational structure of each case, the
alignment of organizational structure for each phase can be validated.
The following sections present the results of the analysis of the cases OffshoreCo, HortiCo, MediCo,
TransCo and ServeCo. This is done sequentially in sections 4.2, 4.3, 4.4, 4.5 and 4.6. Note that ServeCo is a
special case that does not fit the framework since it is not a manufacturing firm. Therefore, the discussion
of that case is different and ServeCo cannot be positioned in the framework. The chapter is concluded by
present the most important cross-case findings and an overview of the position of each company within the
framework.
4.1 Case 1: OffshoreCo

OffshoreCo is a globally operating Dutch company in the on- and offshore business that develops and
manufactures heavy construction equipment. Such equipment includes cranes, pipe lay and drilling
equipment. The projects the firm executes are often complex and require an innovative approach;
innovation is therefore at the heart of the company’s DNA. Each project is tailor-made to a customer’s
needs and their customers are typically large companies. The firm employs approximately 3000 people and
has an annual revenue of €350 million. OffshoreCo is headquartered in the Netherlands, where the R&D
department and the academy are located as well. Due to its growth it has expanded production to the Czech
Republic, China and Brazil. Furthermore, it has located offices worldwide for engineering, local sales and
service support.
The increase in oil prices in recent decades has driven the large growth of the company, as the interviewee
stated: ‘Every spare part was bought, because high oil prices forced them to operate 24/7. Missing a day of operation would
have been very costly.’ Those high prices hence motivated their customers to invest large amounts in new
products and accompanying spare parts to make sure the product ran continuously. As a result, the share
of services in revenue increased to 15 % in the recent years. However, the rapid decline in oil prices in the
past few years however proved detrimental to all firms within the value chain. Large oil refineries such as
BP and Shell are forcing their cost reductions on their partners, which in turn affects firms such as
OffshoreCo. As a result, the firm’s sales are declining, providing the incentive for OffshoreCo to consider
alternative ways of competing. OffshoreCo is therefore contemplating servitization with the strategic goal
of delivering integrated and eventually turnkey solutions.
51
4.1.1 Strategic goal and position in the transition
OffshoreCo is a typical product manufacturer, relying on the development of innovative customized
products. Services however are generally only considered after selling a product. According to the
interviewee this is done on an ad-hoc basis and in an organic way without a clear strategic purpose.
According to the interviewee, servitization for this firm is still in its infancy such that OffshoreCo is in the
early phases of servitization but wants to become a solution provider delivering integrated solutions,
corresponding to reaching the phase of development partner.
Type of offering
The first dimension is the type of offering. OffshoreCo focuses mainly on delivering products. These
however are of a special type. The products are large scale and costly projects customized for each customer
such as a crane that needs to operate on a remote location. OffshoreCo therefore refers to these as solutions.
Within a new project, these products are complemented by the appropriate spare parts, the latter being the
main profit driver of services within the firm. These spare parts are unique for each project and thus are
generally tailor made. The latter also brings the difficulty that standardization is hard to implement.
Furthermore, the delivery of services is really uncoupled from the products such that only in the after-sales
phases services play a role. Hence, the current type of offering delivered are products bundled with after-
sales services that are delivered in a reactive way.
Type of services
The second dimension is the type of services that are tied to the total offering. What is interesting is that
despite lacking a clear strategic goal for services, OffshoreCo currently already offers a range of different
types of services. Products are supplemented with documentation, warranty and an installation and a
standardized service manual. For first use, the equipment is installed and commissioned by technicians.
Furthermore, after-sales services include availability of spare parts and operational support services focused
on trouble shooting. This for instance contains a 24/7 hotline for emergency support and on-site or remote
support. Software engineers can for instance remotely log-in to monitor a product’s condition and adjust
the system, but if the problem is too complex an OffshoreCo technician will visit the client’s site. In addition,
survey and inspection services that consist of condition monitoring and periodic product inspections are
offered. Furthermore, during the lifecycle of the product preventive maintenance is offered to minimize
downtime of the system.
Since the equipment is tailor made and often operates on remote locations, customers often have their own
technical team in place that carries out maintenance and repair:
‘Our customer cannot afford to have downtime. Since we cannot get on board in time, they have their own crew on board for
repairs.’
OffshoreCo instead offers training focused on maintenance, technical support and operational handling to
these customers to ensure they can operate and maintain the equipment. This can also include simulator
training. This is done through a dedicated academy within their organization. Product upgrades and
enhancements however are done by the firm’s own employees.
An important lacking type of service are process-oriented services. OffshoreCo’s products however often
consist of a system with components from other suppliers. These components have separate service
prescriptions. The service delivered by OffshoreCo then limits itself to the in-house developed components
of the total system. A system approach bundling the service activities for all components is currently lacking,
thereby hindering an integrated service solution focusing to improve customer’s processes. According to
the interviewee these services are a future prospect as to help the customer optimize the system. However,
this does not go as far as operational services according to the interviewee.
52
Type of customer
Thirdly, OffshoreCo also targets a specific type of customer. Due to the limited amount of customers the
firm has since operating in a niche market, it cannot afford to dissatisfy a customer. Products as well as
services are tailored to each customer’s needs. These customers are very demanding and have a lot of buying
power as illustrated by the interviewee:
‘Our customers are incredibly powerful. Mostly we are only to agree with their conditions. Some customers have a fleet that is
so large that they for instance want a dedicated person available at all times.’
Due to the troubling industry conditions, customers are becoming more demanding in terms of services.
OffshoreCo’s customers namely experience pressures to differentiate their offerings from competitors.
Therefore, a shift of customer demand towards more advanced services that optimize a customer’s process
is expected:
‘The demand for more advanced services such as ‘How do I optimize my system?’ and advisory services will grow in the coming
years.’
Customer relationship
Since each product is custom made, OffshoreCore has an intense customer relationship before and during
the sales phase of a product. Since their customers often have their own service technicians to carry out
maintenance and repair this often stops in the after-sales phase. The intensive customer relationship
OffshoreCo upfront offers clear benefits for their own service activities. Such an intensive customer
relationship enables for knowledge spill-overs as the interviewee illustrates:
‘Some customers have much better insights into the lifecycle of products. They aid us in improving our service operation. The
relationship then really works both ways.’
However, the relationship is underdeveloped as of yet and is mainly based on transactions and reactive
service delivery.
Innovation orientation
According to the interviewee a key issue with respect to servitization for OffshoreCo is the adaptation of
the innovation process. Since innovation is at the heart of their strategy, the interviewee considers this an
important dimension to incorporate for describing servitization. Currently OffshoreCo develops products
in order to achieve a functional solution, without incorporating the needs of efficient production processes
but more importantly, without incorporating the needs for services such as maintenance, repair etcetera.
‘The step towards engineering has yet to be taken. In terms of software, we are somewhat further with modular approaches and
upgrade possibilities, but our hardware such as hydraulic systems has been insufficiently developed to for services.’
Hence, for manufacturing firms that are servitizing, the adaptation of the innovation process by
incorporation of service requirements is considered evident in the case of OffshoreCo. The first step
according to the interviewee is ‘engineer to maintain’, enabling the incorporation of maintenance requirements
instead of developing stand-alone functional products.
4.1.2 Organizational development

OffshoreCo underwent large growth due to the flourishing of the total on- and offshore industry. As a result
of rising product sales, the requests for services grew. These were initially handled within the existing
product-centric organizational structure:
53
‘A product was made and a customer wanted the appropriate spare parts. When a component failed, service was delivered. This
went well for a long time since we did not have a lot of products in the field.’
However, as the requests for spare parts and the installed base grew, the existing structure was no longer
suitable. The demand for spare parts and services became too large to handle within the existing
organization. Therefore, within the internal structure, sales and services were separated into different
independent organizations. This was also incentivized by the fact that new product sales were given more
attention than the service business within the integrated structure. After separation, services receive more
priority within the independent service organization and now employs more than 140 people.
Within the service organization, every customer is a key account which is managed by an account manager.
This manager forms the first point of contact and handles all issues related to the equipment. A dedicated
account manager is necessary due to the large size of customers and the money loss in case of down-time.
Furthermore, it ensures short lines of communication. It provides a single point of contact for customers,
coordinates the previously discussed services worldwide and supports local service subsidiaries which
operate relatively autonomously. In addition, the service organization is explicitly represented in
OffshoreCo’s board of directors.
One of the challenges according to the interviewee is that customers are becoming more demanding and
want to optimize their systems. However, OffshoreCo does not possess a proactive way of dealing with this
demand. Despite having account managers, no active relationship management to optimize a customer’s
processes is done:
‘We’re contemplating to establish a Product Management department, to manage a customer relationship and analyse his needs
and goals as to give the right advice.’
Furthermore, the separation of product and service organizations has also brought new problems. The
product and service organizations operate independently and ‘a wall of lead’ is in between, according to the
interviewee. R&D and the account managers for services are for instance not involved in each other’s
projects. No overarching linking processes are in place to enhance collaboration between these two
organizations. According to the interviewee it depends on the person feeling responsible to ‘look over the
wall’. Hence, instead of an integrated view every department executes tasks within their own responsibility
and then passes on the project:
‘Sales engineering often sells a functional solution. Hereafter the project team takes over and the service organization only plays
a role after the sales.’
Hence, OffshoreCo wants to move towards an approach incorporating the needs of the total value chain in
which production, services and the customer are involved. The current organizational arrangements are
considered an important barrier to the delivery of integrated solutions.
Framework positioning
Having considered both the strategic dimensions and the organizational configuration of OffshoreCo, the
company can be positioned within the framework. Following the discussion OffshoreCo is now positioned
in the phase after-sales service provider with an organizational structure consisting of separate
product and service units. The company is thereby pursuing the strategic goal of becoming solution
provider, such that these should reach the phase of development partner in the transition. An important,
non-addressed aspect in the theoretical framework is the importance of the innovation process. A detailed
positioning on each dimension is shown in Appendix J.
54
4.2 Case 2: HortiCo
HortiCo is a Dutch company that develops and sells high-tech climate management and automation systems
for the horticultural and building intelligence market. Historically the firm has been focusing on climate
systems for horticulture by originally selling heaters for greenhouses in the Netherlands. This experience
enabled them broaden their scope towards developing and selling climate management systems and
expertise in horticulture. Later on they moved into the market for climate management in buildings such as
offices, hospitals and hotels. The company is family-owned and has gone through international expansion
over the years and is now operating on a global scale. It currently occupies a market leading position in their
horticulture market. Traditionally, the firm has innovation strongly anchored in its DNA and as such devotes
significant resources to R&D. The firm employs approximately 450 people and has a yearly revenue of €62
million. HortiCo is headquartered in the Netherlands, where its R&D department and several service
partners are located. Due to its growth it has several regional offices, in among others Canada, France, and
Russia. The organization is structured according to the two markets served in distinct business units, namely
Horticulture and Building Automation.
The firm is currently facing challenges in their markets which are becoming increasingly complex and
globalized, which challenges the old ways of working. The firm is therefore increasingly focusing on
developing a competitive advantage by means of the integration of products and services as to offer
customers a ‘total solution’.

In terms of strategy, HortiCo has traditionally differentiated itself by means of innovative products. Within
this traditional business, the focus regarding services was on ‘keeping the system running’. The company is now
increasingly focusing its strategy on developing customer-focused solutions consisting of a combination of
products and services. However, they do not want to engage in operational services since ‘we are not and don’t
want to be behind the wheel and thus do not influence the end-result.’ Hence, their strategy corresponds to reaching
the development partner phase.
Type of offering
The range of products and services has been extended, extending the activities within the value chain, i.e.
vertical integration. The move into building automation shows the firm is also horizontally integrating by
crossing industry boundaries. The aim is to obtain a competitive advantage by means of integration of soft-
, hardware and services in their two markets:
‘Instead of merely delivering a computer, we should move towards a turnkey solution for customers.’
Their solutions currently consists of a multitude of different products that fit together as a complete system
covering the relevant business processes. These processes include e.g. climate management, water
management and process management. Innovative products will however stay part of the proposition:
´We focus on piling services on top of our hard- and software in order to serve our customers.’
Although services are hence becoming more important, the type of offering the company currently delivers
is limited to products and after-sales services. The product stays at the core of the offering delivered,
although increasingly the company engages in projects that feature total solutions.
Type of services
Whereas previously mainly reactive repair and maintenance was delivered, HortiCo now offers a range of
different services. Besides after-sales services, the portfolio is increasingly incorporating lifecycle and
55
process-oriented services. More specifically, the product-oriented services include the provision of
documentation such as an installation manual and product description. This is supplemented by warranty
agreements. With regards to after-sales services, the firm offers repair, maintenance, installation and
transport of its products.
Furthermore, customers can contact the help desk or retrieve support online through a service portal where
the customer can log in. Via the helpdesk or service portal, minor technical issues can also be resolved
remotely. The service portal also serves as a platform for offering product-oriented training to customers.
Furthermore, the customer can engage in subscriptions for regular product updates in terms of software.
Similarly, in order to prevent breakdowns from happening, preventive maintenance contracts can be
composed.
Regarding more complex services that are process-oriented, the firm offers advisory services to optimize
the product’s functioning within the customer’s operations. This includes for instance advice on the
optimization of the energy and water usage within a greenhouse by for instance enhancing the product’s
settings. Another example of process-oriented services is remote diagnostics by means of an application
through which the customer can manage his business on his smartphone.
Type of customer
A move towards integrated solutions for HortiCo is instilled by means of strategic intent as well as
increasingly complex customer needs. Originally HortiCo dealt with traditional customers in horticulture
that required a product and basic services to run the product. However, their targeted type of customers is
changing. The novel customers generally have larger businesses and require a complete solution set to their
business operations from one supplier. Increasingly, the demand is moving towards integrated solutions.
Their needs exceed the simple request for a product:
‘Increasingly we are being asked for non-standardized projects from large investors. These include for instance a request for a
system that enables them to simply produce food.’
Such requests for total solutions also present challenges for the firm in the quest for replicability of solutions.
The challenge is to standardize such tailor made solutions as to make it part of the portfolio. This also
involves focusing on customer segments and key accounts instead tailoring to each separate customer’s
needs.
The change in the type of customer HortiCo targets also implies a change in the way these customers are
dealt with. Instead of a transactional-based way of interacting, where a customer buys equipment and calls
in when the system is down, their customer’s need is taken as a starting point. Taking into account his
demands and developing a relationship has become much more important now that the focus is towards
integrated solutions. However, this relationship is currently underdeveloped, mainly consisting of
transactional sales and reactive service delivery.
As in the OffshoreCo case, the importance of changing the approach with regards to innovation was
mentioned by the interviewee. Whereas the firm previously focused on long-term innovations, the changing
competitive landscape and focus on solutions has led to a more market-driven approach for innovations.
As the interviewee highlighted:
‘The old ways of working, like we always took care of things, are becoming insufficient. We’re innovating more and more on
the basis of market needs’
56
Product technology is to a lesser extent leading the innovation process. Customer needs and service
requirements are instead increasingly integrated into the innovation process. This way the firm becomes
more flexible and is able to respond faster to new market needs.

HortiCo is family owned and was traditionally led by the founder which acted as a father figure. The firm
was highly loyal to its customers, solving every customer problem regardless of time and budget constraints.
As a result of historical development, the firm has a separate services department for both the Building
Intelligence and Horticulture market. Traditionally, HortiCo carried out basic services such as repair and
maintenance in-house:
‘Originally, sales sold the products, product management managed stock and service made sure everything kept running.’
However, the international expansion made that services and sales are now mostly delivered by third parties
through a network of certified dealers and service partners, whom receive product training for their
certification. Those third parties are supported through relatively autonomous regional subsidiaries of
HortiCo strategically located across the globe.
HortiCo’s innovation orientation was mainly technology-driven and not focused on market needs or
business profitability. However, the changing environmental conditions and growth of the company led to
a different innovation orientation and thus also a more market-driven way of organizing:
‘Previously product managers shouted something and it went into the development process. Nowadays these departments
collaborate much more.’
The change in innovation approach makes that the R&D departments have less autonomy and decision
making power. Instead, the various departments collaborate much more in the development of solutions.
For instance, multidisciplinary teams called ‘Product Market teams’ in which both product management and
R&D take part have been formed. In addition, HortiCo wants to retain their innovative capacity by having
an organic structure in place which is also perceived as a contributor to innovation by relying on informal
linkages between employees of various departments.
In addition, besides efforts to foster more market driven innovative solutions by means of enhanced internal
collaboration, the company is also involved an innovation network through partnerships. This not only
includes aforementioned certified dealers and partners but also alliances with other companies, universities
and research institutes to share knowledge and foster innovation. The interviewee acknowledged that
utilizing the knowledge of different parties is needed in order to compete with integrated solutions.
Furthermore, the identified new type of customer demanding ‘total solutions’ has resulted in the formation
of a separate department called ‘Business Solutions’. This department specifically takes a customer-centric
point of view in order to meet the needs of more demanding customers thereby increasing the customer
focus in the organizational structure. It integrates activities from both product and service functions into
solutions and operates more flexible and agile on project basis. It effectively operates as a pioneering part
of the organization. As a result, this department causes tensions with the other parts of the organization
still used to the product-centric way of working:
‘The shift towards tailored made solutions puts pressure on our organization since it requires something that is not yet there.’
In order to make the transition, the participant highlighted the need for leadership and promotors of services
throughout all organizational layers. According to the interviewee the largest inhibitor within this process is
company culture. A lot of employees have worked their way and base their decisions on the traditional ways
57
of working that focused on keeping products running, instead of the new approach where integrated
solutions are pursued.
Summarizing, the organizational structure has evolved from product-centric towards more service- and
customer focused. A hybrid structure consisting of separate product and service departments, with an
integrating team is established.
Having considered both the strategic dimensions and the organizational configuration of HortiCo, the
company can be positioned within the framework. Following the discussion HortiCo is now positioned in
between the phases of after-sales service and customer support provider. The company is pursuing a
solution provider strategy, corresponding to reaching the phase of development partner. An
organizational structure is in place where the product and service units are separated. Furthermore,
a distinct departments that focused on a more demanding customer type has been installed called ‘Business
solutions’. This can be interpreted as an integrating customer team. Again, the adaptation of the
innovation approach as well as the organization thereof was perceived as an important dimension that was
not addressed in the framework. A detailed positioning on each dimension is shown in Appendix K.
4.3 Case 3: MediCo

MediCo is a Dutch company that develops, produces and sells products for health technology as well as on
a global scale. The company has been historically focused on the development of products. Innovation is at
the heart of the company’s DNA and as such significant resources are devoted to R&D. Approximately
100.000 people are employed by MediCo worldwide and its annual revenue amounts to €24.2 billion.
MediCo is headquartered in the Netherlands but has various regional offices to manage all regions and serve
regional customers.
The company has recognized that markets are changing and product innovation alone is insufficient to
remain competitive. Therefore in recent years, MediCo has focused increasing efforts on services and
solutions next to their technological innovations.

MediCo has already servitized to a certain extent and pursues a strategy based upon solutions that add value
through integration of products and services, driven by a changing demand and competitive landscape. The
healthcare is industry is acknowledged to transition to value-based healthcare which requires organizations
to integrate solutions. By leveraging their innovative capacity and taking an integrated approach, MediCo
wants to deliver such integrated solutions that can also consist of third party products and services,
amounting to reaching the phase of outsourcing partner in the framework.
Type of offering
The company envisions the convergence between the businesses of consumer health and medical health
technologies. New customer demands are expected that require more advanced services and solutions. The
present business of the firm is however still largely product-centric and sales-oriented:
‘There’s additional gain from services, we can sell more than just equipment.’
They aim to leverage their expertise in both their businesses to develop integrated health solutions. As a
result, the firms is progressively moving from product-oriented outcomes towards solutions that are co-
created and deliver a capability. Therefore, the company is for instance experimenting with advanced
services such as ‘pay per use’ service for MRI scanners to hospitals instead of upfront transactional sales of
equipment. These solutions are of course based upon innovative technology, but the main value proposition
58
is shifted away from the product. Hence, the type of offering currently offered by MediCo are lifecycle
solutions that are increasingly integrated and co-created.
Type of services
MediCo currently already delivers a wide range of services. This includes basic services such as installation,
documentation and warranty to supplement the product. Furthermore, the firm offers after-sales services
such as spare parts, repair and remote support aimed at minimizing unplanned down-time. MediCo also
offers refurbishment services at attractive prices for their customers, covering systems such as CT, X-ray
and MRI scanners.
In addition, customers can engage in lifecycle service agreements that cover the total product lifecycle,
tailored to their specific needs. These lifecycle services include for instance staff training, system upgrades,
condition monitoring and preventive maintenance. The customer can access service information via a
dashboard that tracks a product’s performance and planned maintenance data.
Next to the product lifecycle services, MediCo also provides process-oriented services such as consulting to
optimize business processes. This includes clinical support and performance dashboards for medical
equipment. Effective data management is key to such optimization. The equipment can be monitored by
proactive remote monitoring services. Advanced services include education, consulting and business-
oriented services aimed at process improvement and system integration.
Type of customer
MediCo’s customers are becoming more demanding. Increasingly the firm experiences the needs are
exceeding a stand-alone product:
‘As a customer you’re only interested in what you want and what you get in return. It’s not about the architecture behind a
product or service.’
Customers now find the addition of basic services to products normal, such as an installation manual and
helpdesk for problems. Instead, increasingly MediCo deals with customers that want integrated solutions or
even a level of performance for which they are willing to pay. In order to meet advanced customer needs,
more services should be offered around products. Hence, MediCo will increasingly move towards customer
segmentation in order to meet these differing needs among customers.
By engaging in more advanced services and dealing with more demanding customers, the relationship is also
subject to change. According to the interviewee, when dealing with standardized products it has been
designed and checked to last a certain amount of time. After transaction, the manufacturer-customer
relationship is usually ended. The quality of services and solutions is however tested every day during the
lifecycle. A relationship is developed over time, such that consistent service delivery and customer contact
is essential. MediCo’s current customer relationship is mainly based upon transactional sales, although
customers can engage in service contract to cover the lifecycle of their products. The interviewee
acknowledged that the current product-oriented organization acts as a barrier to developing this relationship.
The interviewee highlighted the fact that the different nature of services compared to products has far
reaching implications for a manufacturing organization. Services, like products, also require clear and
standardized innovation processes but this is difficult to understand for manufacturing firms such as
MediCo:
‘Product firms think that service innovation originates ‘somewhere’ without asking how it should be developed Services like
products are developed. This is hard to comprehend for product oriented organizations.’
59
This commences by taking a customer need as a basis for innovation and designing the service process
around it. Within the process of developing a total solution, the products and services have to be aligned.
Therefore, clear innovation processes should be established focusing on combining products and services.

Historically, MediCo has been focused on developing and selling innovative products and therefore has
been structured along products and product divisions. This currently still holds as the firm is structured
along consumer health and medical health divisions. Within these divisions a product, service and solution-
combining structure is installed. Previously, the structure was dominated by products and complemented
by a service group focusing on basic after-sales services such as maintenance and support. However, the
need for solutions led to the recent establishment of a solution group focused on more advanced services
and solutions. This group focuses on developing complete solutions, by complementing already existing
high-tech products with software, big data technologies and services to address healthcare opportunities.
An integrated approach to healthcare systems is taken by partnering up with Healthcare providers to deliver
these solutions. Although this service group is growing, the structure is still dominated by the product
groups.
According to the interviewee this separated and mainly product-centric structure makes the transition to a
strategy based on integrated solutions complex:
‘Product-centric and separated structures are not well suited for integrated solutions. Every department is judged on its own
achievements while it should be focused on the total proposition.’
An increased customer-focus and provision of solutions according to him requires an overarching

department or team that considers the total spectrum of products and services in order to compose a
customer-centric solution. However, the product-oriented structure was deemed to be best for now because
the market for integrated solutions is also still developing. The interviewee argued that a gradual path is
required for product-centric firms in changing their organization:
‘You cannot expect that your current product-structured organization, even if you have solution oriented employees, can change
to a customer- and service-focused organization in an instant moment.’
Hence, within the organization a front-office that enables to develop a customer relationship should be
installed, complemented by a back-office covering product- and service-related activities and closely
collaborating with the front end to reach integration:
‘The low-paid front line employee is vital for customer contact and the corresponding customer relationship.’
This front-office to carry out service activities and manage a customer relationship is however
underdeveloped within MediCo’s current organizational structure. This can be problematic because
otherwise third parties will establish themselves as service partners that buy products from MediCo whilst
managing the customer relationship.
Besides increased commitment to integration within the internal organizational structure, the integrated
solution strategy is executed by collaborating with external parties. An open innovation strategy is pursued
by MediCo to develop these solutions:
‘Services can be a way for product oriented companies to leverage their expertise. Parts of the solutions can be developed in-house
while collaborating for expertise we do not possess.’
60
This requires teams which co-create innovations by engaging in cross-disciplinary teams across the internal
value chain and with partners in the network. The company is engaged in partnerships with a variety of
stakeholders such as universities and industrial partners and its customers. However, the company still wants
to occupy the orchestrating role within the network; hence the key elements of the solution should be
developed in-house, whilst tasks less related to the firm’s core activities are outsourced:
‘We don’t want to take care of all services within the solutions. Local service providers will never be an in-house resource’
Having considered both the strategic dimensions and the organizational configuration of MediCo, the
company can be positioned within the framework. Following the discussion MediCo is now positioned as
a customer support provider. The company is pursuing a position as an outsourcing partner. The
organizational structure is characterized by dominance of product groups, although service and
solution departments have been established. Like the previous two cases, the adaptation of the
innovation approach was again perceived as an important dimension that was not addressed in the
framework. A detailed positioning on each dimension is shown in Appendix L.
4.4 Case 4: TransCo

The fourth case, TransCo, concerns a globally operating Swedish firm that develops, manufactures and sells
trucks and accompanying services. The firm has a history in product development and manufacture and
devotes significant resources to R&D. Product innovation has always fulfilled a key role in their strategy.
The company is headquartered in Sweden but has regional subsidiaries throughout the world. It employees
approximately 44.000 people and has an annual revenue of €12 billion.
Traditionally, the companies within this industry were product- and sales-oriented but the global crisis in
2008 led to a strong decline in sales and profit margin. Within a mature and competitively intense market,
the firm was inclined to reposition itself to overcome stagnating sales and production overcapacity.
According to the interviewee the crisis really created the ‘sense of urgency’ to act. Therefore, TransCo
strategically shifted towards services and the integration of these services within customer-focused solutions.
As a result, services is progressively increasing its stake within the total revenue of the firm, now making up
approximately 25 % of total revenues.

TransCo strategically repositioned itself after the crisis and aims to gain a competitive advantage by creating
integrated solutions for their customers. Since standalone products and services have low profitability, the
integration of these was the only way to regain profitability according to the interviewee. However, making
the transition towards ‘pay per use’ services in an outsourcing partner strategic position is perceived as a
‘huge step’ that has not been made by TransCo. Instead, they pursue the position of development partner.
Type of offering
During the transition so far TransCo has extended its focus from basic services such as maintenance towards
supporting the customer in its operating processes and ensuring high-uptime of equipment. The type of
offering has hence been changing from selling a truck towards selling a capability, namely the ability to
transport something. This is in fact an operational solution for a customer.
Type of services
During the transition so far, the service portfolio has been expanding gradually. The basic service portfolio
consisting of basic services such as repair, maintenance and quick access to spare parts is still delivered.
These are delivered through a network of local franchise workshops. These workshops are spread across
61
the globe to ensure close customer contact. Customers can engage in full maintenance contracts with these
workshops which includes preventive maintenance to prevent product breakdowns. Furthermore, the firms
offers 24/7 emergency technical assistance through a call-centre for unexpected breakdowns and repairs.
The firm also offer refurbishment of used vehicles as a service.
Moreover, the firm is progressively developing technology to leverage data that can provide insights into
the usage of vehicles. The intelligence obtained by connectivity of vehicles is used to improve logistical
flows by capturing and analysing the data to improve services and customer’s operational costs. This for
instance focuses on analysing vehicle performance diagnostics in order to augment for instance the fuel
efficiency of vehicles. Another service to improve efficiency is a driver training service, which focuses on
improving the driving skills such that the fuel economy is enhanced and the product life endured.
In addition, the availability of vehicle performance data also enables the offering of remote diagnostics
services to detect faults. Services visits can be scheduled accordingly either in the workshop or at the
roadside tailored to the customer to minimize downtime. It hence improves the efficiency of the workshop
network.
The additional step taken by the firm is to help customers take control of their total operation by means of
data management. This is called Fleet Management Services. It focuses on increasing the fleet efficiency by
letting the customer take control of their fleet to optimize their business. It includes tracking vehicle
utilization, fuel consumption and drive performance via computer and smartphone. Furthermore the
previously mentioned remote diagnostics and driver coaching are also part of this business-oriented service.
In short, the firm has progressed from basic services towards lifecycle services to ensure the optimal
performance of the product within the customer’s process. The resulting integrated solutions maybe be
financed through different financing options the firm offers.
Type of customer
Besides strategic necessity, the customers have become more demanding as well. Putting the customer first,
understanding his business and improving their profitability is at the core of their current approach. Truck
buyers previously were generally emotionally attached to a brand. New customer types have arisen, as the
interviewee states:
‘Our current customers buy trucks and only consider the cost argument. The truck needs to drive as much as possible, how it
looks like doesn’t matter.’
Hence, these customers demand flexible and efficient solutions to meet their needs and are not satisfied
with a mere product and basic services. These solutions involve building a much stronger customer
relationship than with previous transaction-based interactions.
An important aspect of the firm’s design process is modularisation such as engines, gearboxes and frames.
Different components can be flexibly combined to allow for a tailor made truck. This truck has particular
characteristics that the customer requires for its purpose. The modular product system is integral to the
firm’s approach and is considered a success factor for its business model. This modular approach also allows
to tailor their service offerings. However, the interviewee acknowledged the challenge of service innovation
and development as opposed to products.
‘We have standardized manufacturing and NPD processes. For services this doesn’t exist yet. They seem simple at first but
are difficult to develop. Product organizations don’t know how to approach service innovation and expect that it somehow
magically develops.’
62
Their innovation processes still at large focus on product innovations. TransCo wants to retain their
innovative capacity but wants to incorporate customer’s daily operations to a larger extent. Innovations are
thus increasingly focused on optimizing the customer’s processes and uptime of products to deliver value.
Therefore the firm now applies an outside-in approach by working together with the customer and various
other partners in a network. Their network enables flexible and agile response to changing market needs.
This market driven development is required to sustain their technological leadership and innovative capacity.
In addition it provides the possibility for reversed engineering, namely tailoring solutions can lead to new
insights for R&D. The connected field of trucks currently already provides input for this.

Within the internal structure, the product-centric approach is also increasingly abandoned and interchanged
with a more customer-oriented approach. This is seen with the establishment of customer focused teams
that integrate products and services into solutions and account managers that manage the customer
relationship. In order to do so, TransCo did not establish a separate service organization. Instead, the service
activities carry a separate P&L but are integrated within the existing product structure by tying services to
the different corporate units such as R&D, Purchasing, Sales etcetera. This also implies that TransCo has
integrated service innovation activities within the existing product innovation processes. This has also been
done in order to enable standardization of service processes.
As a result of this combined structure, the company is still mainly oriented on product sales:
‘We are still sales oriented. A lot of people think short-term to realize sales with the thought: put a license plate on and we’re
done.’
Although the obtained information was limited, again having considered both the strategic dimensions and
the organizational configuration of TransCo, the company is positioned within the framework. Following
the discussion MediCo is now positioned as a customer support provider. The company is pursuing a
position as a development partner. The organizational structure is characterized by dominance of
product groups, where services are tied to each of those groups. Customer teams and account
managers are installed to develop solutions and manage customer relationships. Like the previous two
cases, the adaptation of the innovation approach was again perceived as an important dimension that was
not addressed in the framework. A detailed positioning on each dimension is shown in Appendix M.
4.5 Case 5: ServeCo

ServeCo is a Dutch firm that does not develop products like the previous cases, but services related to
mobility. The firms is headquartered in the Netherlands and employs approximately 3500 employees with a
yearly revenue of €1 billion. Since its origin ServeCo has been focusing on providing services. Their
customers are designated ‘members’ of their organization, subscribed to a membership of the organization.
The primary goal is to satisfy the needs of their members. The firm initially started out by developing
services related to mobility such as a car breakdown service, the latter being the most well-known service
offered. The portfolio of services has been widely extended over the years, now also containing e.g.
insurances, driver training and tourism related services. The difficulty they are facing however is that most
offerings are loosely coupled. The challenge is to position themselves as a solution provider in the coming
years. ServeCo thereby aims retain its identity as service organization that it currently is, without making a
move towards product development or manufacturing.
63
4.5.1 Strategic goal
Currently ServeCo is focusing its strategy towards customer-focused solutions composed of new
combinations of existing as well as novel services. The difference resides in the fact that instead of separately
selling services, these are to be combined into complete propositions. ServeCo wants to evolve from being
a service provider towards being a provider of mobility solutions. According to the interviewee this requires
a broader range of services than the traditional car breakdown services. Within this strategy, focus is on the
integration of service activities and the customer is put at the centre. Instead of focusing on selling services,
the focus should be to help a customer acquire what he needs. According to the interviewee this is not novel
to the firm:
‘Our firms has always put the customer first, as such we have always been a service organization.’
In order to stay relevant for these customers they are pursuing so-called ‘total concepts’. Such concepts for
instance entail all activities related to traveling, from insurance to the travel itself to the hotel booking
afterwards. This way, the customer need is approached integrally instead of by means of separate services.

The implementation of a strategy based upon of integrated value propositions requires corresponding
integration within the organizational structure. This is perceived as difficult:
‘The collaboration between separate business units is really complicated and problematic.’
Namely, the firm is currently organized along different service-groups in separate business units each
covering their own responsibilities, thereby inhibiting collaborative efforts. Moreover, these units are also
geographically spread across the Netherlands. The structure revolves around these separate service units.
The same accounts for the performance targets, which focus on short term departmental goals instead of
the total value delivered. According to the interviewee the firm is having troubles making up customer-
centric propositions as a result of the troubled collaborative efforts. The firm wants to portray one image
to its customer, whom requires a single contact point and does not distinguish between separate business
units:
‘Our customer has nothing to do with the fact we are organized in this manner. He requires one contact point without considering
which department to contact for each service he wants.’
Therefore, the firm is increasingly organizing around the customer. Multidisciplinary teams from different
departments are working together on integrated value propositions. The interviewee mentioned the example
of the concept ‘riding a bike’, where various departments from insurance to bike holiday bookings are
involved in developing the integrated solution. These teams are also judged upon the benefits of those
combined efforts. According to the interviewee, this also requires its employees to adapt their mind-set:
having the belief that the whole is larger than the sums of the parts.
ServeCo relies on innovative services to achieve long-term business success. Service innovation is dealt with
by means of a stage-gate process by the innovation department. Traditionally, the firms has had the tendency
to develop all innovations in-house. Increasingly though, partnerships and alliances with third parties are
formed, for the following reason:
‘In the present day it’s no longer possible to try everything on your own. We are increasingly looking for ways to collaborate.’
64
These third parties were initially only suppliers, such as telecom providers for the call-centre. However, to
develop innovative services the firm increasingly partners up with foreign partners in joint ventures as well
as with small start-up firms. An example is a joint venture together with the German and English equivalent
of ServeCo for a global technology. Collaboration is especially required for the development of technology
related solutions such as mobile applications, for which no expertise resides in-house. In addition in-house
development is generally expensive or takes up too long. Cooperation enables risk sharing and increased
agility in decision making, contrary to the existing organization.
‘Our existing organizational structure forms an incredibly large treshold to flexible and agile execution of new ideas.’
The existing firm architecture and infrastructure inhibits the required flexibility and agility. Therefore,
cooperation with start-ups is particularly interesting since these do not need to adhere to company standards
or architectures. The firm does a small investment in the start-up and gains access to novel concepts which
are unable or unlikely to be developed in-house. It can monitor the start-up’s progress to decide whether to
continue the support. In return, the start-up gains access to a larger amount of resources and a large existing
base of customers.
According to the interviewee, ServeCo by means of these initiatives is becoming a more hybrid organization
that operates in a network of stakeholders where some activities are retained in-house and others
outsourced. Within this network, ServeCo wants to occupy the integrator role, managing the network
relationships and retaining first contact with customers.
4.6 Cross-case findings

This study has discussed the results of five case studies. These case studies have enabled to corroborate the
theoretical framework and check its validity and completeness. This chapter gives an overview of the results.
First of all, the importance of the existing strategic dimensions has been confirmed. The framework
therefore proves to serve well in determining a firm’s position within servitization. Within each of the
investigated cases, the type of offering, type of services, type of customer and customer relationship were
integrally discussed. The results show that both manufacturing and service-centric firms are pursuing
strategies with offerings that integrate products and services into solutions. All of the firms acknowledged
the need for integrated solutions, both to meet customer needs as well as to remain competitive. This
corresponds with earlier findings in literature. The fact that each case was positioned differently in the
transition, allowed to cover almost all cells in the theoretical framework. An interesting observation is that
none of the firms has attained the phase of outsourcing partner, but also that only MediCo is strategically
moving to that position. The other firms either explicitly or implicitly stated that their own products and
innovations stay at the core of the value proposition, amounting to reaching the phase of development
partner. Hence, servitization as a transition does not have to lead to the final phase of outsourcing partner.
An integrated overview of the positioning of all the researched companies is shown in Appendix N.
An additional, non-addressed framework dimension was the so-called ‘innovation orientation’. This was not
incorporated as an interview question, but all the companies explicitly mentioned this as an essential
dimension to take into account when implementing servitization. For manufacturing firms, the innovation
process is one of the most important processes. Following the results, service innovation should become
an integral part of the innovation process within a manufacturing firm that strives for integrated solutions.
Service innovation is based upon customer needs and thus market-driven and hence requires a different
innovation approach. Simultaneously, service innovation however is difficult to understand for their firms
and has not yet been standardized and incorporated within the product innovation process they are used to.
Hence, based upon this finding the ‘innovation orientation’ is added to the framework as a novel dimension.
The representative of OffshoreCo suggested that a basic premises is to develop easy maintainable products.
Following this finding, an additional dimension ‘innovation orientation’ is added to the framework. This is
65
shown in Appendix B. Based upon the findings the following innovation orientations are suggested for each
phase:
 Customer service provider: product oriented innovation
 After-sales service provider: product-oriented innovation including maintenance requirements
 Customer support provider: product-oriented innovation including lifecycle maintenance
requirements
 Development partner: Integrated product/service innovation process
 Outsourcing partner: Integrated product/service innovation process
The findings regarding the organizational structure are generally in accordance with the theoretical findings:
product-centric structures make the transition more difficult. Furthermore, as in theory, moving through
the transition the investigated firms implemented a more service- and customer-focused structure.
First of all, the service orientation is increased. A separate service organization can be established to facilitate
that, but can later on also work as an inhibitor to an integrated approach, as the OffshoreCo case revealed.
A separate service department or group has often been established as a result of growing importance of the
service business over time, such as in the case of OffshoreCo, HortiCo and MediCo. TransCo however
chose to integrate services within the existing product structure, which then again makes that the firm is still
largely product-focused. However, also in this firm services carries a separate P&L. In general it thus seems
that when services become more important in an organization, it requires separate bundling of service
activities with a corresponding separate P&L, which was also observed in theory.
Secondly, firms experience not only the difficulty of product focus within their organization but also to
integrate the activities of different product and service departments when progressing towards integrated
solutions. This is mainly due to product and service silo structures. This holds for the investigated
manufacturing firms as well as ServeCo. In the case of OffshoreCo for instance, the separation of products
and services really established ‘a wall’ in between the two organizations. As a measure to integrate both
activities, firms establish customer-focused elements in the organizational structure. TransCo for instance
has established customer teams that integrated product and service activities into solutions. Similarly,
HortiCo created a new department focusing on customized solutions to meet the needs of more demanding
customers. Within HortiCo, this resulted in tension within the traditional product-centric organization due
to conflicts in terms of intradepartmental goals and decision making power.
What was interesting to see is that firms already implement integrating customer teams to serve the needs
of new customers in early transition phases. Whereas, the theoretical framework shows that only within a
phase of development partner, such teams are created, the cases reveal otherwise. HortiCo for instance is
in between the phases of after-sales provider and customer support provider but already has a separate
department that takes a customer-centric approach and develops tailor made solutions. Similarly, TransCo
has implemented a number of customer teams as a customer support provider. Hence, the values assigned
to this dimension require a slight adaptation. As a customer support provider, the organizational structure
is not only characterized by a service-focus but also features a customer team, working as a pioneering part
for the rest of the organization. This is incorporated into the adapted framework in Appendix B.
An interesting additional contribution from the cases is the attributed importance to external partnerships
to foster the development of integrated solutions. Apparently the activities that integrated solutions require
are best met by extensive collaboration within a network of stakeholders. Within this perspective,
servitization requires additional expertise outside of the core capabilities of product-centric organizations.
Both HortiCo and TransCo already engaged in partnerships with dealers and service partners to deliver
services. However, for the development of innovative solutions they are also increasingly in collaboration
with third parties. The same accounts for the service organization ServeCo which engages in collaborative
efforts with start-ups as a mean to increase innovation. Hence, a solution provider strategy not only require
66
a strong collaboration with customers but also with other actors within the network to ensure successful
performance.
Now that a validated, enriched and revised framework (Appendix B) has been developed, the next chapter
will discuss how the framework is tested in practice within an embedded case study at AgriCo.
67
5 Results: Embedded case study
The previous chapter has led to a validated theoretical framework (see Appendix B) describing a servitization
strategy according to different phases, which are characterized by a number of strategic and organizational
dimensions. An embedded case study was then executed at AgriCo to determine how AgriCo is positioned
in this transition and how its organizational structure aligns. Furthermore, the validity of the framework in
terms of this positioning was tested. Recalling the research approach, this has been done as follows: first of
all, exploratory and semi-structured interviews were held to determine the status of servitization within
AgriCo and thereby position the company within the framework. Second, a workshop discussion was held
with the goal to corroborate those finding. Hence, the following sub-question is answered in this chapter:
How would a framework that integrates the strategic and organizational aspects of servitization look like?
This chapter is structured as follows. First of all, the description of the AgriCo case and their strategic goal
with regards to services given in section 5.1. Then similar to the previous chapter, the position of AgriCo is
determined on the basis of the dimensions of Part A of the framework in section 5.2. Again the dimensions
type of offering, type of services, type of customer and customer relationship are considered, but in addition
‘innovation orientation’ is also incorporated since in the previous chapter this was identified as essential for
manufacturing firms in servitization. These dimensions enable to position AgriCo within a phase of the
framework. Then section 5.3 addressed part B of the framework, the organizational configuration with
specific attention to the dimension organizational structure. Thereafter, section 5.4 discusses the workshop
that was used to corroborate the findings.
5.1 Case description

AgriCo is a globally operating Dutch company that develops and manufactures agricultural machinery. It is
headquartered in the Netherlands, where its R&D department is also located and has regional subsidiaries
throughout the world. The company is family-owned and represented in the board by the CEO. Its annual
revenue amounts to €600 million and approximately 2000 people are employed by the company. AgriCo
has a long track record within the agricultural industry and is known for its technological innovations. The
products the company develops are high-tech capital goods such as automated milking robots and feeding
robots.
AgriCo has experienced large growth in recent decades through the sales of their innovative products. The
IB as a result is growing as well as the revenue from the service business. This revenue growth is mainly
driven by the sales of spare parts. However, the market environment is subject to change. Whereas AgriCo
positioned itself traditionally as product leader with innovative products, increased competition is leading
to commoditization of products within the market and customers are becoming more demanding. As a
result, product sales are stagnating and product margins are declining. Only focusing on the development
and sales of a high-tech product is therefore insufficient to remain competitive in the future:
´We can continue developing products but the industry future is to deliver total solutions. If we do not act, new competitors will
arise to develop these.’ (Director Operations)
‘Competition has become more intense. We need more than product innovation to obtain a competitive advantage.’ (Director
Sales)
The company thus faces significant competitive challenges. For AgriCo, product sales however still
constitute the main part of revenues and are at the core of the firm’s strategy. With regard to the service
business, the company now mainly focuses on strengthening the potential for after-sales such as spare parts
68
sales. Interviewees talked about ‘a gutfeeling’ that something has to change. Therefore, with a growing IB
the firm is seeking opportunities to regain a competitive advantage by means of advanced services and
solutions:
‘We want to move to something that can add value, through new combinations of products and services that create a total
solution.’ (Manager Technical Service Support)
AgriCo sells high-tech products operating 24/7, such that continuous operation is essential for their
customers in order to have a profitable business. Services are therefore acknowledged to play a pivotal role
for the company, since having a well-organized service model can distinguish them from competitors:
‘Services can make the difference between a farmer buying or not buying our products.’ (Manager Technical Service
Support)
Hence, the firm has the strategic goal of becoming a solution provider that uses integrated product/service
combinations to serve customers. The next section will by means of the strategic dimensions discuss what
the current position of the firm is in servitization.
5.2 AgriCo’s strategic goal and position in servitization

AgriCo wants to attain the strategic goal of becoming a solution provider, which corresponds to reaching
the phase of development partner. AgriCo is not that far in the transition. To determine where they are
positioned now, the dimensions type of offering, type of services, type of customer, customer relationship
and innovation orientation are discussed sequentially in this section, after which the position of the firm is
determined according to the value on each dimension.
5.2.1 Type of offering

Traditionally, AgriCo focused on developing and selling a product. However, over the years a range of
different services to complement their products have been incorporated into the offering. Hence, AgriCo
currently delivers a portfolio of different products and services. The main value proposition is still focused
on a product. These are bundled with separate after-sales services:
´We are looking at it from a product-perspective, developing all types of loose services that are bundled with our products. This
is not true servitization. We develop and sell services the same way as products!’ (Marketing Intelligence Manager)
According to the participants, the company should therefore make a transition towards offerings that form
an integrated whole in order to deliver value to the customer, instead of being loosely bundled and sold:
‘We put our focus on a single product only. Focusing on a total solution of which services is an integral part would be much
more logical.’ (Manager Marketing)
The value proposition according to the interviewees will always consist of technologically complex products,
since AgriCo has the expertise to develop these. The current type of offering is however limited to products
bundled with after-sales services although the company is increasingly focusing on lifecycle offerings.
5.2.2 Type of services

Within AgriCo’s type of offering, a range of different services is offered which are generally sold separately
from products. First of all, the products are complemented with basic product-related services such as
documentation and warranty. Furthermore, AgriCo’s current focus is on providing basic after-sales services
69
such as repair, maintenance, installation, spare parts, product-oriented training and upgrades. These basic
after-sales services are still challenging for AgriCo and significant efforts are therefore made to improve the
profitability and efficiency of these services.
Despite the challenges related to after-sales services, AgriCo already delivers some of the advanced services
that target the product lifecycle and end-user’s processes. These lifecycle services include for instance full
repair and maintenance agreements, leasing possibilities and condition monitoring. Furthermore, process-
oriented services include business-oriented consulting and process-oriented training. As aforementioned,
these advanced services however are not yet integrated into solutions but are loosely developed whilst
reasoning from a product-perspective. As such, the company is not yet proficient in those advanced services
and accompanying solutions. In general, the company is thus currently working on both enhancing the
basic after-sales IB services and product lifecycle maintenance services.
5.2.3 Type of customer

The type of customer interested in AgriCo’s products and services is subject to change. Conventionally the
firm targeted customers that were interested in innovative products. However, customer perceptions have
changed: previous innovative products are becoming commoditized and are increasingly adopted by novel
customer types. Additionally, more and more customers are looking to outsource activities. This is
reinforced by the increasing complexity of machinery, requiring the management of data and intelligence.
Such customers look for an efficient solution for their processes instead of products:
‘The future of the industry is characterized by increasingly large customers that are focused on efficiency. Services are incredibly
important to target these customers.’ (Manager Customer Service)
These customers do not merely value a stand-alone product and basic services. Their expectation is a highly
reliable and mature product. Product reliability is seen as a prerequisite by these customers, but they in
addition expect AgriCo to deliver them an integrated solution. According to the interviewees AgriCo should
therefore focus on customer segmentation in order to properly address the demands of old and novel types
of customers:
‘We need to develop clear customer profiles: farmers who want to do most activities themselves, farmers that want to collaborate
with us and farmers that want a total solution package.’ (Manager Customer Service Desk)
Hence, the company is increasingly getting new types of customers, also progressively the ones that want a
‘pay per kg of milk’ solution. Hence, the type of customers that now emerges are customers wanting an
integrated solution for their processes.
5.2.4 Customer relationship

Regarding the relationship with customers, most interaction still goes on a transactional basis. Product sales
are dominating the company. After these sales, services are mainly delivered in a reactive way, for instance
when corrective maintenance is required on a machine. The attitude and relationship towards customers is
thus underdeveloped:
‘Besides selling a product, the customer is on his own. This is really dangerous for our organization.’ (Manager Technical
Service Support)
Instead, according to the interviewees AgriCo should manage customer relationships more actively by
engaging in a partnership to enhance customers’ business processes. This involves partly abandoning the
focus on product leadership and instead focusing on customer needs:
70
‘If a farmer wants to increase his production, we need to talk to him and see what meets his needs. That’s being customer
oriented, whereas currently we simply sell a product since that is most profitable for us.’ (Marketing Intelligence Manager)
Within the current situation, this is only attempted by means of business-oriented training services.
However, these services are sold on a transactional basis and not included into the total proposition. With
the type of customer changing as discussed in the previous paragraph, a need for change in managing the
customer relationship is required. The starting point should be the customer and how AgriCo can support
him in reaching his business goals. In the current situation however, a transaction based relationship
with reactive services has been established which should evolve towards a lifecycle partnership to deliver
integrated solutions.
5.2.5 Innovation orientation

AgriCo has traditionally focused on product innovation. The innovation process is still mainly technology-
driven. Products are developed from a technology perspective and then brought to market. More recently,
a few maintenance requirements have been added to the product development process as a first effort to
incorporate service requirements. Interviewees acknowledged that the input of actual customer needs within
the innovation process is however omitted. The products are developed from a technology perspective, but
the same holds for service innovations within AgriCo:
‘Products and services are developed without taking the customer into account. The fulfilled customer need is only regarded
afterwards.’ (Marketing Intelligence Manager)
AgriCo hence has no a priori insight into the need that a product or service will fulfil which sometimes leads
to disappointing results when products and services are marketed. The perspective of AgriCo is hence still
inside-out instead of outside-in, where customer needs are the basis for innovation. This requires change in
the innovation-orientation:
‘If you do not know what a customer values, how can you then develop a good innovation?’ (Manager Marketing)
Hence instead of retaining a technology-based perspective on innovation, the interviewees acknowledged

the need for a more market-driven innovation approach in order to target customers with the required
integrated solutions, for instance by means of involvement of lead-users in the process. This way, the
company’s innovation process much better aligns with optimizing a customer’s processes and developing
integrated solutions. The current innovation orientation however is mainly product-oriented innovation
with increasing attention for maintenance requirements.
Having discussed the strategic dimensions to determine AgriCo’s position, the following section will discuss
how the organizational structure aligns with this strategic position, after which the progress on each
dimension will be filled in.
5.3 Organizational development

AgriCo has historically been focused on products and therefore has been structured along products and
product groups. Services were of less importance in an organization focused on innovation and sales. Due
to its growth, the company gradually evolved from an organically structured firm towards a more
professionally structured organization that remains focused on developing innovative products. The current
organizational structure can be observed in figure 3. It is still a typical product-centric organizational
structure. People are grouped by means of function as well as product. Furthermore, since the company
71
operates on a global scale, the structure also consists of a variety of geographical elements resulting in a
hybrid product/geographical structure.
Confidential
Figure 3| General organizational structure of AgriCo
With regard to the organization of the service business some improvements have been made recently. Spare
parts management for instance has been professionalized and informal teams are established to think about
new service propositions. Service activities are currently however carried out in various departments without
an overarching goal. As shown in figure 5, one the one hand, there’s the aftermarket department covering
after-sales services including spare parts. On the other hand, the commercial services department is
responsible for customer service, technical services and process-oriented services such as advisory and
training. According to the interviewees due to this fragmentation the company revolts to its product-
orientation:
‘Because of the fragmentation (of service activities) we operate less efficient and things are not coordinated and executed system-
wise such that lots of stuff happens without any results.’ (Manager Product Development)
To that end the firm has recently established a service management position. This manager will be
responsible for the coordination of existing service activities related to repair and maintenance. Still, the
power within the organization stays mainly within the product-focused departments:
‘Nobody has the power to implement changes, because engineering does things to their liking.’ (Marketing Intelligence
Manager)
Top-down commitment to services and explicit representation of services within the board of the
organization are argued therefore to be necessary in order to overcome the dominance of the product
business within the firm. This way, decision making power can be shifted in order to balance both product
and service activities within the organization. Furthermore, establishing a separate services P&L is argued
to aid in this development since it enables to measure service profitability.
AgriCo’s product-centric structure and mind-set were continuously identified as a major inhibitor to a
servitization transition. An organizational focus on innovation, products and sales is embedded within the
entire organization and is hindering a strategy based upon integrated solutions, as the following illustrates:
‘Our product-orientation is hindering us. Once it’s about selling more machines, we let go of everything else.’ (Manager
Marketing)
A separate innovation department is present which focuses on long term technological developments. In
addition, within the business unit responsible for operation, a department focusing more on incremental
innovation and continuous development has been established. As such, the firm’s innovation activities are
separated. However, within this set-up the coupling in terms of communication and activities between
commercial and innovation departments is not well established:
‘Our biggest handicap as an innovative company is that we don’t tell each other what our plans for the future are. That really
inhibits us as a company.’ (Manager Product Development)
72
Most departments are therefore focusing on their own projects and goals. One interviewee even used the
following metaphor: ‘every department wants to be the playmaker in the field.’ This ‘silo culture’ features a lack of
communication and sharing ideas, as such inhibiting intrafirm collaboration and synergy:
‘We are too much structured into product silos. These pillars should become more of an integrated whole to carry out our lifecycle
service activities’ (Technical Service Support Manager)
Instead, in order to pursue integrated solutions, internal integration is required:
‘We need an integrated approach in dealing with customers by increasing the integration among departments. Namely our
customers require one contact point’ (Manager Services)
With regard to this integrated approach, the rise of novel more demanding customer types has led to the
establishment of a dedicated customer team. This consists of representatives from different departments
and focuses activities on large customers. The team, similar to the cases in chapter 4, works as a pioneering
part of the organization, reasoning from a customer-centric perspective. As such, the team is faced with
significant intrafirm resistance. This lack of customer-orientation within the other parts of the organization
is currently working as a barrier towards the large scale provision of integrated solutions.
5.3.1 Framework positioning

Now that both the strategic dimensions as well as the organizational structure has been discussed, AgriCo
can be positioned within our framework based on those results. This is shown in table 11. Currently AgriCo
is positioned in between the phases of after-sales service provider and customer support provider. To
attain long term solution provider strategy, AgriCo needs to transition to the phase of development partner.
What is interesting to see is that there exists significant misalignment between the strategic dimensions.
Whilst the firms has not yet progressed beyond all the requirements of an after-sales service provider, they
are already developing offerings and services that adhere to a development partner position.
With regards to the organizational structure, the same misalignment is observed. The current structure is
largely product-centric, although various service departments have been established. Their activities are
however not yet bundled together in a single unit or overarching service management function.
In addition, to serve new customers that require an integrated solution for their processes, a customer team
that focuses on integrating products and services has already been established. Similar to the HortiCo case,
this operates as a pioneering part of the organization, pressuring the traditional product-centric organization.
Hence, a significant misalignment exists between where the company is positioned strategically and the
organizational structure AgriCo has in place, indicated by the orange shading in three phases for the
organizational structure in table 11.
73
Table 11| Positioning of AgriCo within framework

Transition phase Customer service provider After-sales service provider Customer service support provider Development partner Outsourcing partner

Type of offering delivered Product bundled with basic services Product bundled with after-sales services Products bundled with lifecycle services Integrated product/service Integrated operational solutions of both
focused on preventing breakdowns combinations, possibly customer co- internally and externally sourced
created products and services
Type of services Basic supplementary services: Basic after-sales IB services Product lifecycle maintenance services: Process-oriented services: Operational services:
- Installation manual - Documentation - Preventive maintenance - Process-oriented engineering - Managing operations
- Documentation - Transport to client - Condition monitoring - Process-oriented R&D - Managing maintenance function
- Warranty - Installation/commissioning - Spare parts management - Spare parts management - Lease contracts
- Delivery - Product-oriented training - Full maintenance contracts - Process-oriented training
- Hot line/help desk - Business-oriented training
- Inspection/diagnosis - Process-oriented consulting
- Repairs/spare parts - Business-oriented consulting
- Product updates/upgrades
- Refurbishing
- Recycling/machine brokering
Type of customer Customers that want a stand-alone Customers that want a well-functioning Customers that want a product Customers that want an integrated Customers that want a level of
product product operating continuously and effectively solution for their processes performance
Customer relationship Transaction based Transaction based + reactive service Lifecycle relationship Lifecycle partnership Lifecycle partnership
delivery
Innovation orientation Product-oriented innovation Product-oriented innovation including Product-oriented innovation including Integrated product/service innovation Integrated product/service innovation
maintenance requirements lifecycle requirements process process
Organizational structure Combined product/service structure: Service focused structure: Service focused structure: Customer-focused structure: Customer-focused matrix structure
- Product-focused functional - Product-focused departments - Product-focused departments - Independent product and along two lines:
departments and geographic - Service management function - Independent service-focused service units with separate P&L - Separate product units and
structures OR independent service unit units with P&L - Integrating customer teams service units
- Service management function with P&L - An integrating customer - Customer units with P&L
bundling service activities of team/department acting as a
separate service departments pioneering part
74
5.3.2 The importance of AgriCo’s service network
Whilst the initial focus of the embedded case study was the internal organizational structure, the analysis
revealed that servitization for AgriCo also importantly reveals the importance of their partners within the
service network. AgriCo occupies an integrating role within its network of stakeholders, consisting of
suppliers and distributors. According to the interviewees, the mere focus on the internal organization is
insufficient to successfully transition towards integrated solutions:
‘Together with our regional sales organizations as well as our dealerships we should form one organization. However, we operate
independently. Headquarters commands what needs to be done and our partners receive the troubles.’ (Director Spare Parts)
The delivery of basic services such as installation, maintenance and repair is carried out by intermediary
organizations. These intermediaries are certified franchised dealers that distribute and service AgriCo’s
products, similar to arrangements in the automotive industry. This distribution and service network is
perceived as a unique asset of the company to serve their customers. It enables to maintain a close end
customer relationship as to better meet their needs on a local level:
‘Services have to be delivered locally, since local knowledge is an important factor for service delivery. Headquarters cannot decide
upon the exact service delivery in all countries.’ (Manager Customer Service)
The service network is thus a valuable asset in delivering service and obtaining customer information.
However, maintaining a relationship with these dealers and coordinating their activities is difficult. The
performance of the different dealers varies widely:
‘We have an enormous spread in the quality of our service network; some are doing well, others are doing worse.’ (Technical
Support Engineer)
Due to the commitment of AgriCo to product sales, the intermediary is also mainly focused on sales. Hence,
the service network does not acknowledge the potential of services and obtains most of its revenues from
sales. As a consequence, the dealership network acknowledges services as a necessary evil. This is further
strengthened by the inability to determine the profitability of services, both at the dealers as well as
headquarters:
‘Our distributors have no clue if they lose money on services. It’s just a feeling they possess. To improve the service model you
first need to know what’s going on now.’ (Product Manager Services)
As a result, the dealers have lots of difficulties managing their service operations and overall profitability.
According to the interviewees the lack of coordination and communication by headquarters amounts to this
development. Consequently, the dealers have adopted widely differing activities to sustain profitability. This
has resulted in a loss of quality and customer-orientation within the dealer network, which leads to
frustration at AgriCo:
‘Our dealers are autonomous and sometimes do things we’re not happy with.’ (Software Engineer)
The difficulty with managing the relationship with the intermediaries has already led to new third party
service suppliers that see the opportunity of servicing AgriCo’s installed base. Therefore, some interviewees
suggested that AgriCo should take the lead in service delivery since the delivery of a total solution that
leverages their expertise is what can develop their competitive advantage.
According to the interviewees, moving towards integrated solutions and customer-centricity requires taking
into account much more the perspective of the intermediary and local support organization. Since these
75
organizations are closest to the customer, these are best at identifying and addressing those customer’s
needs. Currently however, the field service network has low decision making power in deciding upon the
development of products and services:
‘I have the idea that we would like to innovate outside-in, but still we don’t do it. It’s more like: we develop a product and then
we fill in the corresponding customer need when it’s brought to the market.’ (Local Manager Technical Service Support)
In order to increase the profitability of their service network and ensure the retrieval of customer
information, more coordination by means of a more regulated franchise formula was deemed necessary by
the interviewees. Simultaneously, giving orders to franchise dealers is troublesome since they are the owner
of the dealership and can only be controlled to a limited extent by the franchise formula. Therefore, instead
of coordinating the roles of intermediaries from AgriCo’s headquarters, a relationship with both
intermediaries as well as end-customers should be developed that benefits all parties:
‘It has to work both ways. We offer them training, advice and support. In return they have to give us something back.’
(Manager Marketing)
Hence, a transition towards integrated solutions involves both internal as well as external alignment and
integration. This also holds for developing innovative solutions. Whereas previously product innovations
could be introduced relatively independently within the market, solutions need to be co-developed.
Therefore the total system of value creating and the management of network relationships is acknowledged
to play a significant role in order successfully servitize in the case of AgriCo. The challenge is to engage a
large number of external organizations within a transition.
Having discussed the position of AgriCo within the framework and the alignment of the internal and
external organization, the next section will discuss the results of the validation workshop.
5.4 Validation workshop

Having positioned AgriCo within the framework as the previous analysis discussed, a workshop discussion
was carried out to validate those findings. As explained in chapter 2, within this discussion, the relevant
organizational stakeholders were brought together to discuss AgriCo’s strategy and position within
servitization. This was done by means of statements that each related to a specific framework dimension.
This section presents the most important findings of this workshop. An overview of the workshop
statements is given in Appendix P.
Strategy and type of offering

The first statement was related to AgriCo’s long term strategic goal and the corresponding type of offering
they want to deliver. The corresponding discussion led to unanimous confirmation of the earlier findings,
namely that indeed a solution provider strategy is pursued on the long term and that a transition towards
the phase of development partner should be made. Product leadership as a strategy was acknowledged to
be insufficient to stay competitive:
‘Product innovation is insufficient. The customer perception should be leading in order to stay ahead of competition.’
Furthermore, with respect to the type of offering, it was confirmed that AgriCo currently offers products
bundled with after-sales services mostly, but that this should proceed towards integrated solutions in the
future. AgriCo will thereby continue to develop products, since these are an essential part of such as solution.
The combination is what should make AgriCo stand out.
76
Type of services
Another statement was related to the type of services delivered. The discussion confirmed the earlier
findings, that service activities are fragmented throughout the different departments. The lack of
coordination and overarching goals makes that AgriCo is working on developing and improving various
types of services simultaneously. AgriCo is not yet proficient in after-sales services (phase 2) but also already
engages in process-oriented services (phase 4). For instance the firm is focusing on lowering the lifecycle
costs of their products for customers whilst also trying to maximize sales from spare parts. According to
the interviewees the fact that AgriCo is attempting to resolve all issues simultaneously is hindering the
transition:
´AgriCo is already busy developing products and services for advanced servitization, whilst we do not possess a solid base.’
(Manager Marketing Intelligence)
Hence, this confirmed the view that AgriCo is operating within different phases of the transition. AgriCo
has not yet finished the second phase of after-sales service provider but is already developing advanced
services.
Type of customer and customer relationship

Furthermore, statement 3 related to the type of customer AgriCo deals with and how they manage the
relationship with their customers. It was acknowledged that AgriCo often reasons from a product-
perspective where it should be about what a product can do for a customer. The type of customer is
acknowledged to be changing. A number of services that come with AgriCo’s products are now considered
standard. This confirms earlier findings that AgriCo’s customers do not only want a stand-alone product.
Rather, an increasing part wants integrated solutions for their processes.
AgriCo is currently not proficient at managing the relationship with such customers. A customer deals with
different departments to get problems solved, whereas he requires a single contact point for this.
Furthermore, the first line employees also lack the ability to develop a relationship:
‘Our technicians currently doesn’t manage a customer relationship. He does his job and that’s it.’
The findings related to AgriCo’s innovation orientation support earlier findings. AgriCo’s is mainly product-
innovation oriented, perceived as problematic:
‘Market introductions should become a symbiosis. Now the innovation department develops a product. Suddenly it’s there and
then it has to be introduced quickly.’
Organizational structure
A number of statements were related to the organizational configuration of AgriCo. The current
organizational structure was characterized by the participants as ‘product-centric’, confirming the earlier
findings. They also acknowledged that this structure misaligns with delivering solutions:
‘Our activities are too much structured within product silos. This has to change, we need to integrate our activities.’
Participants experienced lacking synergy between those silos, where every product and service department
works for its own goals. The current product management role was perceived as insufficient to bridge the
gap between for instance the engineering and marketing departments, since those managers often also have
a product-centric perspective. In addition, the fragmentation of different service departments is perceived
to be working as an inhibitor to a transition, which corroborates the earlier findings. An overarching and
77
integrating effort for all service activities was deemed necessary, either by a distinct unit or by internal
integration of the current activities.
The participants furthermore acknowledged that within a transition AgriCo would have to gradually
transform its organization from product-centric towards more customer-centric. Similar to the earlier
findings, the single customer team was acknowledged to work as a pioneering part of the organization,
working already from a customer-centric perspective. Within the discussion, it was interesting to observe
that the participants suggested that a first step in the transition towards integrated solutions is to form
business units. These business units integrate the activities of separate departments that are each responsible
for a product line. This was perceived to an easier intermediate step to achieve for AgriCo, for two reasons.
Firstly, since AgriCo sells many different products and secondly since AgriCo is so much product-focused
that immediate implementation of customer units would raise resistance. Later, these business units could
then evolve more easily into a customer-focused structure that integrates the activities of product- and
service units. Hence, for a manufacturing firm with different product lines, servitization firstly involves
establishing separate integration of both product and service activities. Regarding the framework, this
suggests that in the first phase, an additional structural adaptation should be added, namely: bundling the
activities of product departments into business units. This is incorporated in table 12.
Service network
Within the workshop, the service network quickly became subject of discussion. Enormous spread between
the various franchise intermediaries delivering services and selling products exists. This supports the earlier
findings discussed in section 5.3.2. Following the discussion, going through servitization requires the
incorporation of the activities of the total value chain. The participants argued that all of the involved
organizations should adapt to be successful providers of integrated solutions. Namely, the franchise
intermediaries are much close to the customer and as such can obtain better insights into their needs.
Therefore, for AgriCo those intermediaries should play a more important role in the future. Hence, it was
suggested that within the previously acknowledged business units, these intermediaries should also have a
voice to ensure that the customer’s stakes are taken into account. These intermediaries should be
approached much more as a partner in maintaining a customer relationship and developing solutions.
AgriCo should take the lead in this:
‘We should take the lead in motivating our intermediaries to do the right changes. Otherwise, it stays the same: we generate
ideas within headquarters without creating an effect for our customers.’
A summary of the workshop observations is also appended in Appendix Q.
Conclusion
The workshop served well to validate the earlier findings. By bringing together various organizational
stakeholders, broad support was generated for those findings. A workshop is thus useful as means to apply
the framework in practice. Furthermore, it allowed to slightly adapt the framework with respect to the
organizational aspects. This leads to the final framework, presented in table 12. This framework features a
slight adaptation compared to the framework within Appendix B, being the following:
Moving from the initial phase of customer service provider to after-sales service provider also involves an
organizational structural change of bundling the activities of separate product departments into
business units. These units should develop integrated product offerings and operate in parallel to the
service unit having bundled the activities of various service departments.
Consequently, in phase 3 this organizational structure is observed in the same manner explained above.
78
Table 12| Final framework

Transition phase Customer service provider After-sales service provider Customer support provider Development partner Outsourcing partner

Type of offering delivered Product bundled with basic services Product bundled with after-sales services Products bundled with lifecycle services Integrated product/service Integrated operational solutions of both
focused on preventing breakdowns combinations, possibly customer co- internally and externally sourced
created products and services
Type of services Basic supplementary services: Basic after-sales IB services Product lifecycle maintenance services: Process-oriented services: Operational services:
- Installation manual - Documentation - Preventive maintenance - Process-oriented engineering - Managing operations
- Documentation - Transport to client - Condition monitoring - Process-oriented R&D - Managing maintenance function
- Warranty - Installation/commissioning - Spare parts management - Spare parts management - Lease contracts
- Delivery - Product-oriented training - Full maintenance contracts - Process-oriented training
- Hot line/help desk - Business-oriented training
- Refurbishing
Type of customer Customers that want a stand-alone Customers that want a well-functioning Customers that want a product Customers that want an integrated Customers that want a level of
product product operating continuously and effectively solution for their processes performance
delivery
Innovation orientation Product-oriented innovation Product-oriented innovation including Product-oriented innovation including Integrated product/service innovation Integrated product/service innovation
maintenance requirements lifecycle requirements process process
- Product activities of product - Product activities of product - Product activities of product - Independent product and along two lines:
departments bundled in product departments bundled in product departments bundled in product service units with separate P&L - Separate product units and
business units business units business units - Integrating customer teams service units
- Service management function - Service management function - Independent service-focused - Customer units with P&L
bundling service activities of bundling service activities of units with P&L
separate service departments separate service departments - An integrating customer
OR independent service unit team/department acting as a
with P&L pioneering part
79
6 Conclusions
This research was carried out in order to attain the following research objective:
To provide recommendations to manufacturers of high-tech capital goods with a large installed base on
the alignment between the strategic position within the servitization transition and the internal
organizational structure by developing a guiding diagnostic tool that provides a comprehensive overview
of this strategy-structure relationship and can analyse a company’s current and future position.
This research has taken an explorative approach to investigate the relationship between a servitization
strategy and the organizational structure of a manufacturing firm. An integrated view has been taken in
order to study the research problem. A research question and sub-questions were formulated to attain this
objective. This section will present the answers to those questions.
Servitization for manufacturers is driven by benefits on a financial, strategic, marketing and environmental
level. Servitization enables to meet the competitive pressures of product commoditization, increasingly
complex customer demands and more dynamic competitive environments. Especially the opportunities for
servicing the installed base over the lifecycle are large. Those services can generate revenues over the product
lifecycle, lock-in customers and diminish the environmental footprint of products.
2. What are the characteristics of servitization in terms of strategy?
Servitization is a strategy that is a means to move a product-oriented strategy such as product leadership
towards a service- and solution-oriented strategy, in a transition. The following transition phases exist:
customer service provider, after-sales service provider, customer support provider, development partner
and outsourcing partner. These phases can be described according to a number of dimensions, being the
following: type of offering, type of services, type of customer, customer relationship and innovation
orientation. These dimensions are essential characteristics of a servitization strategy and are subject to
change during the transition.
In the first phase of servitization, manufacturing firms are focused on providing products and therefore
have a product-oriented structure. During the transition this structure is subject to change to reach the
strategic goal of for instance solution provider. Solution providers deliver integrated solutions consisting of
combinations of products and services. In the first phase, existing activities for separate product-lines are
bundled. The activities within separate service departments are also bundled in phases 1 and 2, either in a
service management function or in an independent organization with a separate profit-and-loss. In the third
phase of customer support provider, the organizational structure incorporates a customer team that
integrates activities of both product and service departments into solutions. In phase 4, the number of
customer teams is expanded until in phase 5 these teams lead to customer units with a separate P&L and
the resources and decision making power equivalent to the traditional product business.
80
4. How would a framework that integrates the strategic and organizational aspects of
servitization look like?
This research has developed a framework describing the transition of servitization, shown in table 12. Within
this framework, each phase is described according to a number of strategic dimensions. These dimensions
allow to determine the relative position of a manufacturing firm in servitization. In addition, by adding the
aspect of organizational structure, the alignment of this structure within each phase has been described. The
developed framework presents the integrated view on servitization that was lacking in existing theoretical
and practical research contributions. It also provides a practical guideline for manufacturing firms to
determine their relative position in the transition. The results show that a workshop discussion with various
organizational stakeholders is a proper method to validate the positioning of a firm within the transition.
These sub-questions enable to answer the research question of this research:
‘What is the relationship between a servitization strategy and the organizational structure of an
innovative manufacturing firm with a large installed base of products?’
A servitization strategy for manufacturing firms is a means to achieve a strategic goal with services. This
strategy consists of a number of transition phases: customer service provider, after-sales service provider,
customer support provider, development partner and outsourcing partner. The relationship between a
servitization strategy and the organizational structure of a manufacturing firm with a large installed base of
products can be described by means of the developed framework. This framework describes the phases of
the transition according to a number of strategic dimensions, being the following: type of offering, type of
services, type of customer, customer relationship and innovation orientation. Each phase corresponds to a
particular organizational structure. During a transition the organizational structure of manufacturing firms
gradually changes from product-centric to service-focused and eventually customer-focused. Within each
phase, the relationship with the organizational structure is described in table 13 as follows:
Table 13| Alignment of organizational structure in each phase of servitization strategy
Transition phase Organizational structure

Customer service provider Combined product/service structure:
- Product-focused functional units and geographic structures
- Business units bundling product activities
- Service management function bundling service activities of separate
service departments
After-sales service provider Service focused structure:
- Product-focused units
- Service management function OR independent service unit with P&L
Customer support provider Service focused structure:

- Product-focused units
- Independent service-focused units with P&L
- An integrating customer team/department acting as a pioneering part
Development partner Customer-focused structure:
- Independent product and service units with separate P&L
- Integrating customer teams
Outsourcing partner Customer-focused matrix structure along two lines:
- Separate product units and service units
- Customer units with P&L
81
7 Discussion
This research has developed a framework to describe a servitization strategy in terms of strategic and
organizational aspects, with a focus on the internal organizational structure. The explorative nature of the
research led to the identification of an additional number of findings. Within this section the contribution
of the findings to existing research will be discussed in section 7.1 as well as a reflection on the
methodological approach in section 7.2.
7.1 Academic contribution

The main academic contribution of this research is a comprehensive framework that presents an integrated
view on servitization. This framework has been established by taking into account the perspectives of
various research domains into servitization and has been validated in practice. It covers the most important
dimensions a manufacturing firm should take into account when implementing servitization. It furthermore
describes the organizational structure that aligns within each phase. Hence, it provides an integrated
overview of the relationship of a servitization strategy and the organizational structure of a manufacturing
firm, thereby building upon earlier studies of Raddats and Burton (2011) and Gebauer (2010). The
applicability of this framework has been tested in practice and therefore provides a basis for future research.
With regards to the organizational structure, this study identified that in the initial phase of servitization, a
manufacturing firm should separately integrate their product-related activities as well as service-related
activities. This implies that within servitization, those separate activities should first be integrated separately
before a customer-focused structure can be established. This was not explicitly addressed in existing
research. With regard to the discussion on separating or integrating service departments within the existing
structure, the findings suggest that either choice may prove appropriate.
Furthermore, the research provides support for the claims done by Gebauer and Kowalkowski (2012) and
Galbraith (2002a) whom suggest patterns of change from product-oriented towards customer-focused
structures. It was observed that firms gradually implement customer-focused elements within the
organizational structure, starting with a single customer team and gradually expanding towards more
customer teams or customer segment units. This might eventually result in a customer-oriented matrix
structure that integrates both product- and service functions by means of customer-faced units. However,
no actual evidence of the latter claim by Galbraith (2002a) was observed within this research. It appears that
a transition towards such a hybrid matrix configuration is a long term process. Not all organizations might
attain such a situation. This depends on whether they go through the entire transition.
The findings also suggest that servitization influences the innovation process of product-oriented
organizations. Instead of technology-driven innovation, more market-driven innovation processes are
established when going through a transition towards integrated solutions. This confirms earlier findings
within literature by e.g. Gebauer et al. (2005) whom considered market-oriented development an essential
requisite for servitization. It involves developing an understanding of customer’s processes over the lifecycle
of products. Several authors identified the essential importance of front-line employees to obtain customer-
information as input for innovation processes (Matthyssens & Vandenbempt, 1998; T. T. Turunen &
Toivonen, 2011). This was confirmed by the findings within the MediCo and AgriCo case.
Furthermore, manufacturing firms have product-oriented cultures with values that are embedded within the
DNA of an organization. The findings unanimously suggest that changing the culture of a product-oriented
organization is much more difficult than organizational structure, although the latter can aid in nurturing a
service- and customer-oriented organizational environment. These organizations have traditionally focused
82
on developing and selling product-innovations and are therefore less familiar with service-oriented values
and behaviour. TransCo for instance has been considered one of the pioneering firms with respect to
servitization their industry but according to the interviewee is still largely product-oriented despite having
progressed almost 10 years in the process. The adaptation of organizational culture was therefore identified
as one of the most important challenges for product-oriented organizations and is considered a long-term
process of change (Gebauer, Edvardsson, & Bjurklo, 2010; Mathieu, 2001; Oliva & Kallenberg, 2003).
In addition, the research findings suggest only taking an internal perspective of the manufacturing firm is
insufficient for implementing servitization. Service intermediaries for instance form the first contact point
for a customer and securing this information is thus essential (T. T. Turunen & Toivonen, 2011). The
research findings revealed that a firm working through intermediaries therefore becomes more dependent
on intermediaries when providing integrated solutions. This finding is in support of the research by Windahl
and Lakemond (2006) whom identified that the creation of integrated solutions has major impact on
relationships in the business network and vice versa (Windahl & Lakemond, 2006). Therefore, besides
internal alignment, servitzation also requires external alignment. Previous research already paid attention to
the relationship of buyers/suppliers and described it as a challenge for servitizing organizations to meet (see
Appendix C; Baines, Lightfoot, Benedettini, & Kay, 2009; Davies, 2004; Martinez, Bastl, Kingston, & Evans,
2010).
Previous contributions in literature however fail to acknowledge the fundamental importance of this
relationship to the success of servitization for a firm. Furthermore, the majority of existing literature has
described this relationship from the perspective of the manufacturing firm. Much more insight into
customer’s processes and needs is necessary when moving to integrated offerings and the absence of a direct
relationship with the end-customer can be an important impeding factor to servitization (Finne, Brax, &
Holmström, 2013b; Martinez et al., 2010b; Windahl & Lakemond, 2006). Davies (2004) in this respect
suggests that suppliers making the move towards integrated solutions should take control of the customer
channel, either by developing partnerships with channel controllers or buying the channel (Davies, 2004).
The results of this research suggest that successful servitization requires alignment of the total system of
value creation. This finding builds upon earlier research (Story, Raddats, Burton, Zolkiewski, & Baines,
2016; Windahl & Lakemond, 2006). This systems is not limited to service partners and the customer but
might also involve various other actors in the wider network such as governmental stakeholders, research
institutes and business partners. The findings suggest that the interdependencies within such networks are
reinforced when implementing servitization. This includes developing capabilities within different business
activities for each of the actors, such as ‘innovation’, ‘interaction processes’ and ‘infrastructure development
and management’. The aim should be for these actors to complement each other’s capabilities in order to
successfully develop and deliver integrated solutions (Eloranta & Turunen, 2015; Finne & Holmström, 2013;
Gebauer, Paiola, & Saccani, 2013; Story et al., 2016). This implies that instead of a focal firm perspective, a
systems perspective should be adopted to determine the relationship between a firm and its ecosystem
(Davies, 2004; Windahl & Lakemond, 2006).
The previous discussion illustrated the system perspective on servitization. The system perspective has been
discussed widely in innovation literature, where e.g. Chesbrough (2003) discussed that innovation
increasingly resides in ecosystems. Such ecosystems have for instance been described for the cases of IBM,
Apple and Microsoft (Gawer & Cusumano, 2013). Within such ecosystems, organizations engage in strong
relationships that leverage each other’s innovative capabilities, delivering mutual benefits that can sustain a
competitive advantage for the total ecosystem (Eloranta & Turunen, 2015; Gawer & Cusumano, 2013).
Within a servitization perspective, where integrated offerings are developed, such an ecosystem approach
could also be valuable. Theoretical linkages between the servitization and innovation and strategic
management literature discussing this phenomenon however are largely absent. It is strongly suggested here
83
to adopt a systems approach in researching servitization in order to develop an understanding of the
complex interdependencies and relationships within the network (Eloranta & Turunen, 2015).
7.2 Reflection on methodological approach

This research was carried out by taking an explorative and qualitative research approach. The theoretical
foundation was conceptualized by means of a framework, which was empirically validated and enriched
through five small case studies. Hereafter, the framework was tested in practice within an embedded case
study. The total research was executed as an iterative process in which a continuous reflection of empirical
findings and theoretical assumptions was done. No prescribed theoretical perspective was adopted, but
rather an open approach towards investigating the relationship of a servitization strategy and organizational
structure. The approach allowed for continuous enrichment of the subject when empirical findings gave
reason to collect additional scientific literature. Developing a comprehensive overview was prevailed over
attaining a certain level of detail in the analysis, which led to an integrated view on the ambiguous subject
of servitization. Perhaps, the adoption of a particular theoretical perspective from the start would have led
to more detailed insights in studying the relationship between strategy and structure, but that would have
omitted particular research findings. For instance, the importance of the innovation process and taking a
systems approach to servitization. These might not have been found when using a more detailed approach.
The current explorative approach was therefore well chosen and future studies could add more detail.
In addition, due to the qualitative nature of the research approach, researcher bias was more likely to occur.
By means of investigating multiple cases this has been limited. Still, quantitative analyses were not done but
could have complemented and supported the currently developed views, such as investigating how the ratio
of service to product revenue changes during the phases of servitization.
In hindsight, due to the ambiguity surround servitization as a concept and the wide-spread and differing
terminology associated with servitization the development of a clear research perspective was initially
troubling. It comprised a relatively long time to narrow down the research scope as a result, which posed
consequences for the total research process in terms of time and depth of the research findings. However,
taking an explorative research approach has led to the identification of several interesting research findings
in- and outside of the scope of the research which provide useful insights for both practice as well as science.
84
8 Limitations and recommendations
The final chapter of this thesis discusses the limitations of the executed research in section 8.1. Furthermore,
based upon the discussion of the findings and those limitations some opportunities for future research have
been identified in section 8.2. The chapter concludes with a concise discussion on the managerial
implications that this research has identified in section 8.3.
8.1 Research limitations

The research has been built upon literature as well as empirical findings. First of all, the extensive amount
of literature was brought together within a theoretical framework. Five exploratory case studies were carried
out in order to validate and enrich the initial theoretical framework. However, those case studies were limited
to one interview only due to both time constraints and the fact that the emphasis within the empirical
research was devoted to the embedded case study. This might have resulted in biased data, due to strategic
or socially desirable answers by the interviews although confidentiality has been assured within the research.
Therefore, the quality and depth of the obtained interview data varied. Moreover, a limited amount of firms
were investigated, within different industries. Together, these limitations pose constraints on the reliability
and generalizability of results of those five cases.
The embedded case study in contrast was more elaborate, although the scope was limited to a particular
industry and corresponding unique industrial environment. The scope was also limited to Western-Europe
and only considered one business unit within the organization. Furthermore, this organization has particular
characteristics that probably influence servitization in certain ways. For instance, the perspective of an
organization possessing a service network, manufacturing expertise and an IB of products is different from
an organization lacking such resources. No comparison for the influence of the existing resources was
carried out although it can be suspected those resources influence the choices made by manufacturing firms.
The research results therefore poses constraints on the generalizability of the data, although this is enhanced
by the findings from the additional smaller cases.
Furthermore, the embedded case study revealed a number of additional findings, such as the importance of
network relationships and a system approach in servitization. These results are limitedly generalizable since
the results only originate from one case study.
The framework is shown to be suitable for generically determining the phase in which a manufacturing firm
is positioned during servitization. The position of different manufacturing firms within the framework could
however only be discussed on a general level within this research. Possibly more intermediate phases exist
in between the five phases addressed in this research. This possibility has not been researched here. In
addition, within existing literature, the dimensions of the framework have not been described according to
phases but often according to extremes. Researcher bias (Yin, 2009) can thus play a role with the
interpretation of these dimensions, although the validation efforts lower this.
Furthermore, the framework is currently incomplete in addressing all the organizational arrangements that
play a role such as processes, reward systems and people. The interplay of these different organizational
aspects has not been studied in this research but might be influential in the transition.
85
8.2 Future research recommendations
Following the discussion and research limitations, various opportunities for future research exist. First of
all, the previously discussed limitations feature some opportunities. Future studies could furthermore build
upon the present research by expanding the number of case studies conducted and by expanding the scope
of the study across industries and geographies to enhance the generalizability of results.
Furthermore, it would be interesting to engage in longitudinal studies of manufacturing firms in order to

develop more detailed insights into organizational changes and how long certain phases take. This can
augment existing theory which often conveys generic adaptations. In addition, distinguishing different
industries within these studies could provide insights into industry contingencies. This might also include
service-oriented organizations such as ServeCo, which was investigated in this research. Furthermore,
investigating the influence of existing resources of a manufacturing firm on the servitization path might be
interesting.
The developed framework can serve as a basis for future research, since it has integrated the various
scattered research contributions and is applicable in practice. Additional studies can be executed in order to
further validate the findings and possibly identify new dimensions that have been omitted in this research.
Whereas current dimensions for instance are qualitative, quantitative data such as the share of services in
revenue might help in determining a firm’s position more accurately. Furthermore, within this research no
company that has progressed to phase five has been researched. Future research could specifically study
such firms to generate more information about that phase.
Future research could also investigate the other aspects of organizational design that require alignment such
as processes, systems, rewards and people. It could be for instance researched how these aspects align, but
also how they influence the time span of a phase or which aspects are more important than others.
In addition, future research can focus on determining whether additional phases should be added to the
framework. It might be possible that the identified phases in this research are too generic, especially in the
early phases of the transition.
In addition, most research contributions in the field of servitization are predominantly described from the
perspective of the servitizing organization. The findings from the AgriCo case suggest that the importance
of network relationships is of key importance to successful servitization, which is mostly omitted in previous
research contributions. Hence, a future research opportunity exists in adopting various stakeholder
perspectives on servitization strategies, such as the intermediary, the component supplier and the customer
and investigating the relationships and influencing factors on the relationships between these actors. This
might identify more insights into the changing relationship between these stakeholders during servitization.
Furthermore, in line with the previous, a research gap was identified with respect to taking a systems
approach to servitization. Whereas this has been discussed widely in innovation literature, a coherent and
consistent view within a servitization perspective is currently lacking. The discussion revealed a few insights
into recent research covering this approach. Future research could focus on developing a connection
between existing literature on innovation in ecosystems or network and servitization literature. Such research
may for instance pay attention to service innovation within manufacturing ecosystems.
8.3 Managerial implications

The research findings within this thesis have particular implications manufacturing firms developing and
selling products. First of all, the implications for manufacturing firms in general are discussed in section
8.3.1. This is followed by the specific implications for the manufacturing firm AgriCo for which this research
was partly carried out.
86
8.3.1 General implications
The integrated and empirically validated framework of this research provides manufacturing firms an
instrument to understand servitization better and successfully go through a transition. Based on the strategic
goal of the organization, different phases should be gone through. Managers should therefore take this
practical framework as a basis to analyse their organization. This can be done by conducting a workshop
discussion with various organizational stakeholders. They should first of all determine their position by
taking the following dimensions into account: type of offering, type of services, type of customer, customer
relationship and innovation orientation.
By determining the progress on each dimension, the phase in which an organization is currently operating
is determined. Furthermore, managers can determine for which dimensions misalignment exists. For
instance, if you are already working on integrated solution offerings that involve process-oriented services,
but the innovation orientation is still product-oriented, misalignment exist. Then, specific attention needs
to be devoted to the adaptation of the innovation process, otherwise this misalignment will lead to failures.
Similarly, lacking the efficiency in after-sales services but already focusing on process-oriented services will
inhibit the transition.
Particular attention should be given to aligning the organization in each phase. Therefore, after determining
the position of the firm on the basis of the strategic dimensions, the organizational structure should be
analysed in order to determine if alignment exists. Failing to align the organization during the transition is a
major inhibitor to successfully become a solution provider. Therefore, moving to such a strategic goal
involves first of all bundling the existing product activities in integrated business units that focus on
combined product offerings in phase one. Simultaneously, the existing activities of service departments
should also be integrated with a separate profit-and-loss responsibility in phase one and two.
In phase 3 of the transition, when next to product-related services such as maintenance and repair, also
process-oriented services are delivered, the customer becomes much more important for the development
and delivery of solutions. Therefore, this requires establishing one or multiple customer teams that develop
a customer relationship and meet the for lifecycle solutions by integrating the activities of product and
service departments. It is vital to establish the right processes to link and integrate the activities of the
different departments to prevent silo structures that inhibit the transition. In phase 4, the customer
relationship should then become a partnership and the number of customer teams should be expanded.
Lastly, in order to complete the transition, the organizational structure should be characterized by customer-
focused units that integrate the activities of both product and service departments into solutions. These
units should have the resources and decision making power to carry this out.
Clearly, besides aligning the organizational structure, other organizational arrangements which this research
has not focused on, also require alignment. It should be followed by appropriate measures in terms of goal
setting, rewards systems, processes, systems and people. It for instance implies that rather than measuring
product sales, customer satisfaction becomes the dominant metric. Furthermore, instead of departmental
goals a firm should focus on aligning various intradepartmental goals to augment the total value creation
process. This entails for instance the systems of service delivery. Especially when transitioning towards
lifecycle services, this system becomes quite different.
Moreover, especially for firms having a history as a technology innovator, organizational culture is the largest
inhibitor to servitization. Therefore, a transition requires the commitment of the board and top-
management to lead the transition and guide the required cultural change to make a firm more service-
focused and customer-driven.
87
Specific attention should be given to the innovation process. Product innovation is predominantly
technology-driven and requires R&D activities to generate output. Service innovation on the other hand
requires customer needs as primary input. During servitization this process should gradually change. It
requires the access to customer information in order to develop solutions. For firms working through
intermediaries such as sales and service organizations it implies they should gain control of the channel to
the end-customer in order to understand their needs. This requires strong linkages between the intermediary,
the customer and the manufacturing firm. Acquiring the intermediary channel might also be an option to
manage the end-customer relationship.
Hence, the organizational transformation is not limited to the internal organizational environment only. The
mutual interdependencies within a firm’s business network will be reinforced when transitioning to
integrated offerings. Therefore, firms should adopt a system perspective on servitization and analyse the
total system of value creation to determine how to implement servitization. This requires the systematic
analysis and incorporation of perspectives of network stakeholders to develop strong linkages between all
the actors and develop a uniform ecosystem to be competitive. For innovative product-oriented
organizations occupying an integrating role within the network, it implies that managing network
relationships becomes increasingly important in order to develop innovative solutions. Hence, instead of
being the autonomous technology innovator, such firms should focus on collaborating with external parties,
leveraging each other’s capabilities in order to be innovative and develop a competitive advantage by means
of the total system.
8.3.2 Implications for AgriCo

Confidential
88
References
Alghisi, A., & Saccani, N. (2015). Internal and external alignment in the servitization journey –
overcoming the challenges. Production Planning & Control, 26(14-15), 1219–1232.
http://doi.org/10.1080/09537287.2015.1033496
Antioco, M., Moenaert, R. K., Lindgreen, A., & Wetzels, M. G. M. (2008). Organizational antecedents to
and consequences of service business orientations in manufacturing companies. Journal of the Academy
of Marketing Science, 36(3), 337–358. http://doi.org/10.1007/s11747-008-0085-1
Auguste, B. G., Harmon, E. P., & Pandit, V. (2006). The right service strategies for product companies.
The McKinsey Quarterly, 1(1), 41–51.
Baines, T. (2013). Servitization impact study, 24. Retrieved from
https://connect.innovateuk.org/documents/416351/3926914/Servitization+impact+study.pdf/
Baines, T., & Lightfoot, H. (2013). Made to serve. Chichester, West Sussex: John Wiley & Sons Ltd.
Baines, T., Lightfoot, H., & Kay, J. (2009). Servitized manufacture: practical challenges of delivering
integrated products and services. Proceedings of the Institution of Mechanical Engineers, Part B Journal of
Engineering Manufacture, 223(9), 1207–1215. http://doi.org/10.1243/09544054JEM1552
Baines, T., Lightfoot, H., Peppard, J., Johnson, M., Tiwari, A., Shehab, E., & Swink, M. (2009). Towards
an operations strategy for product‐centric servitization. International Journal of Operations & Production
Management, 29(5), 494–519. http://doi.org/10.1108/01443570910953603
Baines, T. S., Braganza, a, Kingston, J., Lockett, H., Martinez, V., Michele, P., … Wilson, H. (2007). State-
of-the-art in product service-systems. Proceedings of the Institution of Mechanical Engineers, Part B: Journal of
Engineering Manufacture, 221(Part B), 1543–1552. http://doi.org/10.1243/09544054JEM858
Baines, T. S., Lightfoot, H. W., Benedettini, O., & Kay, J. M. (2009). The servitization of manufacturing. Journal
of Manufacturing Technology Management (Vol. 20). http://doi.org/10.1108/17410380910960984
Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management.
http://doi.org/10.1177/014920639101700108
Brady, T., Davies, A., & Gann, D. M. (2005). Creating value by delivering integrated solutions. International
Journal of Project Management, 23(5), 360–365. http://doi.org/10.1016/j.ijproman.2005.01.001
Bustinza, O. F., Bigdeli, A. Z., Baines, T., & Elliot, C. (2015). Servitization and Competitive Advantage.
Research Technology Management, 58(5), 53–60. http://doi.org/10.5437/08956308X5805354
Corbin, J. M., & Strauss, A. (1990). Grounded theory research: Procedures, canons, and evaluative criteria.
Qualitative Sociology, 13(1), 3–21. http://doi.org/10.1007/BF00988593
Davies, A. (2004). Moving base into high-value integrated solutions: A value stream approach. Industrial
and Corporate Change. http://doi.org/10.1093/icc/dth029
Eloranta, V. (2016). Servitization, strategy and platforms.
Eloranta, V., & Turunen, T. (2015). Seeking competitive advantage with service infusion: a systematic literature review.
Journal of Service Management (Vol. 26). http://doi.org/10.1108/JOSM-12-2013-0359
Evans, D. (2016). What servitization did for MAN Truck and Bus UK. Retrieved from
http://www.aston.ac.uk/aston-business-school/research/events/adserveglobalforum-/man-truck-
and-bus/
Fang. (2014). Service on Transition Firm Value. 2008, 72(5), 1–14.
Fang, E., Palmatier, R. W., & Steenkamp, J.-B. E. M. (2008). Effect of Service Transition Strategies on
Firm Value. Journal of Marketing, 72(5), 1–14. http://doi.org/10.2307/20618968
89
Finne, M., Brax, S., & Holmström, J. (2013a). Reversed servitization paths: A case analysis of two manufacturers.
Service Business (Vol. 7). http://doi.org/10.1007/s11628-013-0182-1
Finne, M., Brax, S., & Holmström, J. (2013b). Reversed servitization paths: A case analysis of two
manufacturers. Service Business, 7(4), 513–537. http://doi.org/10.1007/s11628-013-0182-1
Finne, M., & Holmström, J. (2013). A manufacturer moving upstream: triadic collaboration for service
delivery. Supply Chain Management: An International Journal, 18(1), 21–33.
http://doi.org/10.1108/13598541311293159
Fundin, A., Witell, L., & Gebauer, H. (2012). Service transition: finding the right position on the goods-to-
services continuum. International Journal of Modelling in Operations Management, 2(1), 69.
http://doi.org/10.1504/IJMOM.2012.043961
Galbraith, J. R. (2002). Designing organizations. San Francisco: John Wiley & Sons Inc.
Gawer, A., & Cusumano, M. (2013). Industry Platform and Ecosystem Innovation. Journal of Product
Innovation and Management, 31(3), 417–433.
Gebauer, H. (2008). Identifying service strategies in product manufacturing companies by exploring
environment-strategy configurations. Industrial Marketing Management, 37(3), 278–291.
http://doi.org/10.1016/j.indmarman.2007.05.018
Gebauer, H., Bravo-Sanchez, C., & Fleisch, E. (2008). Service strategies in product manufacturing
companies. Business Strategy Series, 9(1), 12–20. http://doi.org/10.1108/17515630810850073
Gebauer, H., Edvardsson, B., & Bjurklo, M. (2010). The impact of service orientation in corporate culture
on business performance in manufacturing companies. Journal of Service Management, 21(2), 237–259.
http://doi.org/10.1108/09564231011039303
Gebauer, H., Edvardsson, B., Gustafsson, A., & Witell, L. (2010). Match or Mismatch: Strategy-Structure
Configurations in the Service Business of Manufacturing Companies. Journal of Service Research, 13(2),
198–215. http://doi.org/10.1177/1094670509353933
Gebauer, H., Fischer, T., & Fleisch, E. (2010). Exploring the interrelationship among patterns of service
strategy changes and organizational design elements. Journal of Service Management, 21(1), 103–129.
http://doi.org/10.1108/09564231011025137
Gebauer, H., Fleisch, E., & Friedli, T. (2005). Overcoming the service paradox in manufacturing
companies. European Management Journal, 23(1), 14–26. http://doi.org/10.1016/j.emj.2004.12.006
Gebauer, H., Institu-, S. F., Joncourt, S., Insti-, S. F., Saul, C., & Insti-, S. F. (2016). Services in product-
oriented companies : past , present , and future, (January).
Gebauer, H., & Kowalkowski, C. (2012). Customer-focused and service-focused orientation in
organizational structures. Journal of Business & Industrial Marketing, 27(7), 527–537.
http://doi.org/10.1108/08858621211257293
Gebauer, H., Paiola, M., & Saccani, N. (2013). Characterizing service networks for moving from products
to solutions. Industrial Marketing Management, 42(1), 31–46.
Gebauer, H., Ren, G., Valtakoski, A., & Reynoso, J. (2012). Service‐driven manufacturing. Journal of Service
Management, 23(1), 120–136. http://doi.org/10.1108/09564231211209005
Kahl, S. (2008). A THEORY OF SERVICES IN Paper 242 October 2008 A Theory of Services in
Product Industries *. Management.
Kavale, S. (2012). The Connection Between Strategy and Structure. International Journal of Business and
Commerce, 1(6), 59–70.
Kindström, D., Kowalkowski, C., & Kindstro, D. (2014). Users who downloaded this article also
downloaded : Service innovation in product-centric firms : a multidimensional business model
perspective. http://doi.org/10.1108/JBIM-08-2013-0165
Kotter, J. P. (2012). Leading Change. Boston: Harvard Business Review Press.
90
Kowalkowski, C., Kindström, D., & Witell, L. (2011). Internalisation or externalisation?: Examining
organisational arrangements for industrial services. Managing Service Quality (Vol. 21).
http://doi.org/10.1108/09604521111146252
Lam, A. (2010). Innovative organizations: Structure, Learning and adaptation. InnovaTIon Perspectives for the
21st Century, (April), 163–180.
Lay, G. (2014a). Servitization in Industry. http://doi.org/10.1007/978-3-319-06935-7
Lay, G. (2014b). Servitization in Industry, 349. http://doi.org/10.1007/978-3-319-06935-7
Lay, G., Copani, G., Jäger, A., & Biege, S. (2010). The relevance of service in European manufacturing
industries. Journal of Service Management, 21(5), 715–726. http://doi.org/10.1108/09564231011092908
Lightfoot, H., Baines, Ti., & Smart, P. (2013). The servitization of manufacturing: investigating
contributions to knowledge production. International Journal of Operations & Production Management,
33(11/12), 1408–1434.
Lightfoot, H. W., & Gebauer, H. (2011). Exploring the alignment between service strategy and service
innovation. Journal of Service Management, 22(5), 664–683.
http://doi.org/10.1108/09564231111175004
Martinez, V., Bastl, M., Kingston, J., & Evans, S. (2010a). Challenges in transforming manufacturing
organisations into product‐service providers. Journal of Manufacturing Technology Management, 21(4),
449–469. http://doi.org/10.1108/17410381011046571
Martinez, V., Bastl, M., Kingston, J., & Evans, S. (2010b). Challenges in transforming manufacturing
organisations into product‐service providers. Journal of Manufacturing Technology Management, 21(4),
449–469. http://doi.org/10.1108/17410381011046571
Mathieu, V. (2001). Service strategies within the manufacturing sector: benefits, costs and partnership.
International Journal of Service Industry Management, 12(5), 451–475.
http://doi.org/10.1108/EUM0000000006093
Matthyssens, P., & Vandenbempt, K. (1998). Creating competitive advantage in industrial services. Journal
of Business & Industrial Marketing, 13(4/5), 339–355. http://doi.org/10.1108/08858629810226654
Matthyssens, P., & Vandenbempt, K. (2008). Moving from basic offerings to value-added solutions:
Strategies, barriers and alignment. Industrial Marketing Management, 37(3), 316–328.
Mintzberg, H. (1979). The structuring of organizations. New Jersey: Prentice Hall Inc.
Neely, A. (2009a). Exploring the financial consequences of the servitization of manufacturing. Operations
Management Research, 1(2), 103–118. http://doi.org/10.1007/s12063-009-0015-5
Neely, A. (2009b). Why do servitized firms fail ?, (i), 1–10.
Neu, W. A., & Brown, S. W. (2005). Forming Successful Business-to-Business Services in Goods-
Dominant Firms. Journal of Service Research, 8(3), 3–17. http://doi.org/10.1177/1094670505276619
Nijssen, E. J., Hillebrand, B., Vermeulen, P. a M., & Kemp, R. G. M. (2006). Exploring product and
service innovation similarities and differences. International Journal of Research in Marketing, 23(3), 241–
251. http://doi.org/10.1016/j.ijresmar.2006.02.001
Oliva, R., & Kallenberg, R. (2003). Managing the transition from products to services. International Journal
of Service Industry Management, 14(2), 160–172. http://doi.org/10.1108/09564230310474138
Pawar, K. S., Beltagui, A., & Riedel, J. C. K. H. (2009). The PSO triangle: designing product, service and
organisation to create value. International Journal of Operations & Production Management, 29(5), 468–493.
http://doi.org/10.1108/01443570910953595
Raddats, C., & Burton, J. (2011). Strategy and structure configurations for services within product-centric
businesses. Journal of Service Management, 22(4), 522–539.
http://doi.org/10.1108/09564231111155105
91
Robbins, S. P., & Judge, T. A. (2014). Essential of organizational behavior (12th ed.). New Jersey: Pearson
Education Inc.
Rolls-Royce. (2016). Rolls-Royce annual report 2015. Retrieved July 27, 2016, from http://ar.rolls-
royce.com/2015/
Salonen, A. (2011). Service transition strategies of industrial manufacturers. Industrial Marketing Management,
40(5), 683–690. http://doi.org/10.1016/j.indmarman.2011.05.005
Sawhney, M. (2004). Going Beyond the Product : Defining , Designing and Delivering Customer
Solutions. Logik of Marketing: Dialog, Debate and Direction, (December), 365–398.
Schilling, M. (2013). Strategic management of technological innovation.
Sekaran, U., & Bougie, R. (2013). Research methods for business (6th ed.). West Sussex: John Wiley & Sons
Ltd.
Shah, D., Rust, R. T., Parasuraman, A., Staelin, R., & Day, G. S. (2006). The Path to Customer Centricity.
Journal of Service Research, 9(2), 113–124. http://doi.org/10.1177/1094670506294666
Story, V. M., Raddats, C., Burton, J., Zolkiewski, J., & Baines, T. (2016). Capabilities for advanced
services: A multi-actor perspective. Industrial Marketing Management, (May).
Turunen, T. (2013). Organizing Service Operations in Manufacturing. Helsinki: Aalto University.
Turunen, T. T., & Toivonen, M. (2011). Organizing customer-oriented service business in manufacturing.
Operations Management Research, 4(1-2), 74–84. http://doi.org/10.1007/s12063-011-0047-5
Ulaga, W., & Reinartz, W. J. (2011). Hybrid Offerings: How Manufacturing Firms Combine Goods and
Services Successfully. Journal of Marketing, 75(6), 5–23. http://doi.org/10.1509/jmkg.75.6.5
Vandermerwe, S., & Rada, J. (1988). Servitization of business: Adding value by adding services. European
Management Journal, 6(4), 314–324. http://doi.org/10.1016/0263-2373(88)90033-3
Vargo, S. L., & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of Marketing,
68(1), 1–17. http://doi.org/10.1509/jmkg.68.1.1.24036
Verschuren, P., & Doorewaard, H. (2010). Designing a research project (2nd ed.). The Hague: Eleven.
Visnjic, I., Wiengarten, F., & Neely, A. (2014). Only the Brave: Product Innovation, Service Business
Model Innovation, and Their Impact on Performance. J Prod Innov Manag, (1986), n/a–n/a.
http://doi.org/doi: 10.1111/jpim.12254
Windahl, C. (2007). Integrated Solutions in the Capital Goods Sector : Exploring innovation, service and network
perspectives. Retrieved from http://liu.diva-portal.org/smash/record.jsf?dswid=-
4564&pid=diva2:23580&c=2&searchType=SIMPLE&language=sv&query=charlotta+windahl&af=
[“hasFulltext:true”]&aq=[[]]&aq2=[[]]&aqe=[]&noOfRows=50&sortOrder=author_sort_asc&onlyF
ullText=false&sf=all&jfwid=-4564
Windahl, C., & Lakemond, N. (2006). Developing integrated solutions: The importance of relationships
within the network. Industrial Marketing Management, 35(7), 806–818.
Windahl, C., & Lakemond, N. (2010). Integrated solutions from a service-centered perspective:
Applicability and limitations in the capital goods industry. Industrial Marketing Management, 39(8),
1278–1290. http://doi.org/10.1016/j.indmarman.2010.03.001
Yin, R. K. (2009). Case study research: Design and Methods (4th ed.). Los Angeles: Sage.
Zeidner, B. R., & Zeidner, B. R. (2009). Executive Briefing. Executive Briefing, (March), 1–7.
92
Appendix A. Theoretical framework

Type of offering delivered Product bundled with basic services Product bundled with after-sales Products bundled with lifecycle Integrated product/service Integrated operational solutions of
services services focused on preventing combinations, possibly customer co- both internally and externally
breakdowns created sourced products and services
Type of services Basic supplementary services: Basic after-sales IB services Product lifecycle maintenance Process-oriented services: Operational services:
- Installation manual - Documentation services: - Process-oriented engineering - Managing operations
- Documentation - Transport to client - Preventive maintenance - Process-oriented R&D - Managing maintenance
- Warranty - Installation/commissioning - Condition monitoring - Spare parts management function
- Delivery - Product-oriented training - Spare parts management - Process-oriented training - Lease contracts
- Hot line/help desk - Full maintenance contracts - Business-oriented training
- Refurbishing
Type of customer Customers that want a stand-alone Customers that want a well- Customers that want a product Customers that want an integrated Customers that want a level of
product functioning product operating continuously and solution for their processes performance
effectively
delivery
- Product-focused functional - Product-focused units - Product-focused units - Independent product and along two lines:
units and geographic - Service management function - Independent service-focused service units with separate - Separate product units and
structures OR independent service unit units with P&L P&L service units
- Service management function with P&L - Integrating customer teams - Customer units with P&L
bundling service activities of
separate service departments
93
Appendix B. Revised framework based on small case studies

- Refurbishing
effectively
delivery
Innovation orientation Product-oriented innovation Product-oriented innovation Product-oriented innovation Integrated product/service Integrated product/service
including maintenance requirements including lifecycle requirements innovation process innovation process
- Product-focused functional - Product-focused departments - Product-focused deparments - Independent product and along two lines:
departments and geographic - Service management function - Independent service-focused service units with separate - Separate product units and
- Service management function with P&L - An integrating customer - Integrating customer teams - Customer units with P&L
bundling service activities of team/department acting as a
separate service departments pioneering part
94
Appendix C. Challenges related to servitization
A servitization strategy represents an opportunity to gain a competitive advantage and a sustainable and
profitable income whilst serving new customers in new markets of growth. Despite the perceived benefits
of servitization for both suppliers and customers, many firms struggle to exploit the potential of extended
service operations (Gebauer et al., 2005; Oliva & Kallenberg, 2003).
From the outside, servitization may be perceived as a change in offering such as the continuum approach
suggests. However, this change is the result of much larger change within the organization itself. Indeed,
implementing servitization strategies comes with significant corporate and cultural challenges for the
organization. Misunderstanding the requirements for successful servitization is detrimental to an
organization and may lead to bankruptcy (Neely, 2009a). The transition involves a complete transformation
of the organization which is difficult since it affects among others corporate strategy, culture, organizational
design and customer/supplier relationships (e.g. T. S. Baines et al., 2009; Tim Baines & Lightfoot, 2013;
Gebauer et al., 2005; Martinez et al., 2010; Neu & Brown, 2005; Oliva & Kallenberg, 2003). The challenges
related to servitization have been well documented in previous research and cover all aspects of the
company.
Scholars developed various categorisations to identify the challenges related to servitization. Baines et al.
(2009) generally discusses the challenges on three levels: organizational strategy, integrated product-service
design and organizational transformation (T. S. Baines et al., 2009). Although useful, a slightly more detailed
approach will be used here. Namely, a hybrid categorisation between the ones introduced by Alghisi &
Saccani (2015) on the one hand and Martinez et al. (2010) on the other hand will be used (Alghisi & Saccani,
2015; Martinez et al., 2010a). Challenges on five levels can be distinguished within this thesis:
 Company strategy
 Organizational culture and mindset
 Organizational structure
 Service development
 Service offering
The following sections discuss the challenges within each of these categories.
C.1 Company strategy

Firms adopt a competitive strategy in order to create and maintain a competitive advantage over rivals
(Matthyssens & Vandenbempt, 1998). Service strategies are a means to differentiate from competition when
traditional sources of competitive advantages in manufacturing are eroding. (Antioco et al., 2008; Gebauer
et al., 2005; Oliva & Kallenberg, 2003). Such strategies involve a radically different strategy for
manufacturing firms, requiring changes in attitudes, expertise and established practices and ways of thinking
(Windahl & Lakemond, 2010). According to Gebauer et al. (2005) by defining a clear service strategy
companies are committed to change the organization correspondingly and make appropriate decisions on
resource allocation (Gebauer et al., 2005). In the infancy of servitization, manufacturing firms did not pursue
a deliberate service strategy, rather they acknowledged that they had to do something with services and thus
added some services to their product offerings (Gebauer et al., 2005). However, later research shows that a
deliberate, systematic and structured effort to transform the organization has been identified to be of key
importance for the servitization process (Gebauer et al., 2005; Oliva & Kallenberg, 2003). The majority of
manufacturing firms already provide services related to their products but these are mostly fragmented and
scattered throughout different parts of the organization. Consequently, these services do not contribute to
95
solid revenues and profits and as such are considered an unnecessary evil in most product-oriented firms
(Fundin et al., 2012; Oliva & Kallenberg, 2003). Hence, service strategy formulation is a key ingredient to
becoming a successful firm regarding servitization.
Customer/supplier relationship
The change of strategy towards integrated solutions implies a changed customer relationship. Firms
developing integrated solutions comprise a larger part of the total value chain, resulting in different
competitive pressures due to the new positioning. Hence, firms may be put into competition with their
suppliers, distributors or even the end-user (T. S. Baines et al., 2009).
These customers might not always understand the added value of an integrated solution which leads to
differences in expectations between the firm and its customers (Martinez et al., 2010a). Many customers are
used to owning the products that they buy and tend to get emotionally attached to it. They would have to
accept that ownership is not always necessary (Neely, 2009a). Some customers might try to reconfigure the
integrated offering in order to bring the total package price down for features that are perceived as
unnecessary. Therefore, it is important to manage customer expectations within the system of integrated
solutions and enable cooperation with customers. This would eventually result in increased reciprocal
interdependencies between customers and suppliers (T. T. Turunen & Toivonen, 2011).
C.2 Organizational structure

Firms are often hindered in the road to success due to a misalignment between strategy and the organization
(Gebauer, Edvardsson, Gustafsson, et al., 2010). This causes friction, conflicting goals and dissipated energy,
which may be detrimental to an organization (Bustinza et al., 2015; Galbraith, 2002). According to
Kowalkowski (2011) this is caused by sticking to the original product-centric organizational design whilst
changing the strategy (Kowalkowski et al., 2011). Hence, specific structures should be implemented to
succeed with different servitization strategies (Galbraith, 2002; Gebauer, Edvardsson, Gustafsson, et al.,
2010; Neu & Brown, 2005).
Aligning the organization with strategy covers dimensions such as human resources, structure, processes
and reward systems (Gebauer, Fischer, et al., 2010; Oliva & Kallenberg, 2003). Essentially, organizations
that want to servitize, need to balance both production and service related activities within the organization.
The simultaneous delivery of both products and services creates tensions within the organization since
differing priorities have to be met and resources have to be devoted to each operation (Ts Baines et al.,
2009; Oliva & Kallenberg, 2003).
Furthermore, the transition towards the service business requires the development of a service network. A
new infrastructure is required in order to meet the needs of a combined solution. Firms have to set up an
infrastructure that is able to meet local customer requirements for service. Large upfront investments have
to be done in order to install a local, regional and sometimes global infrastructure to serve customers (Oliva
& Kallenberg, 2003). However this infrastructure will not immediately generate revenues. Furthermore, at
the operational level firms have to develop the capability for running a large distribution network of services:
large amounts of service personnel have to be managed and the capabilities to diffuse knowledge across
those people have to be developed (Oliva & Kallenberg, 2003). The total system will thus be much more
complex than a traditional product delivery system. This goes beyond the traditional production business
and requires a complex delivery system able to support the customer and monitor and maintain the product
throughout its lifecycle (Martinez et al., 2010a). The decision whether to integrate or outsource activities
within the value chain then also become an issue of concern (Lay, 2014b).
96
C.3 Organizational culture
The management of services within traditional manufacturing firms has widely been acknowledged as
challenging and problematic. A lot of managers struggle with visualizing servitization in their dominant
product-centric paradigm (Tim Baines & Lightfoot, 2013). The majority of problems these problems can
be attributed to the role of organizational culture (Martinez et al., 2010a; T. Turunen, 2013). This culture
loosely refers to the atmosphere within an organization (Tim Baines & Lightfoot, 2013). Culture is important
since it can influence employees’ behaviour in a powerful way since it might be difficult to change and is
nearly invisible from the outside (Kotter, 2012). According to Mathieu (2001) firms implementing
servitization will make a transition into a new organizational and cultural environment to support the goals
of service within the organization (Mathieu, 2001; Oliva & Kallenberg, 2003). The shift IBM made from
being a computer manufacturer to a consulting firm illustrates such a cultural transformation. Such
maneuvers greatly impact the shared values, norms and behaviour of an organization (Mathieu, 2001).
A typical manufacturing culture differs at large from a service culture. An organization used to designing
and producing complex products generally has difficulties becoming enthusiastic about servicing a product.
Manufacturing firms traditionally focus on values such as efficiency, economies of scale and low variety and
flexibility since this increases costs. Services are quite frequently considered to be a ‘necessary evil’, thought
of as ‘add-ons’ to the product and regularly provided for free when negotiating sales (Gebauer et al., 2005;
Oliva & Kallenberg, 2003). This may lead to failing to recognize the economic potential that the extension
of the service business can entail (Gebauer et al., 2005; Neely, 2009a; Oliva & Kallenberg, 2003). On the
other hand, service oriented values focus on innovation, customization and the notion that variety and
flexibility generates profits (Gebauer et al., 2005). Service culture is defined as an organizational culture in
which service quality is the guiding value and philosophy (Mathieu, 2001). These two opposing cultures will
clash, since the counterculture challenges the ‘way we do things around here’ (Kotter, 2012).
This should be fostered by active leadership within the firm, in order to ensure success in the development
of the service business within manufacturing firms. These leaders, especially in executive positions, should
promote the importance of services throughout the organization (Galbraith, 2002; Kotter, 2012).
Language and communication

In order to communicate the new strategy and culture, simply speaking the same language when it comes
to services and integrated solutions is imperative. Personnel operating in traditional product manufacturers
are used to terms such as product, part and component. They are only loosely familiar with the terminology
involved with service. Complexity therefore arises since companies do not share a common language for
describing services (Tim Baines & Lightfoot, 2013; Ts Baines et al., 2009). Mostly, services are referred to
as an activity such maintenance, repair, monitoring etc. However, in different instances it might also refer
to a performance based contract, a capability contract, an operations management contract. Such ambiguous
terminology creates confusion among employees as well as customers. In addition, a clear distinction exists
in communication of service between personnel involved with products and employees involved with the
service business. Hence, a common language should be developed such that employees understand each
other as well as the customer (Tim Baines & Lightfoot, 2013; Ts Baines et al., 2009).
C.4 Service development

Whilst designing integrated solutions, both products and services have to be developed. Essential to the
development of new services is to have a market oriented point of view. This implies that systematically
identifying customer needs and putting customers at the centre of the value proposition is key for successful
new services (Gebauer et al., 2005). Successful firms are the ones able to identify customer needs by wide-
ranging practices such as market-research and workshops. Furthermore, according to Nijssen et al. (2006)
already possessing an innovation capability positively influences innovation in a service context (Nijssen et
97
al., 2006). An extracted quote from Gebauer et al. (2005) is exemplary for the importance of understanding
customer needs in the light of new services:
‘When we first introduced services, we simply defined them ourselves. We did not ask our customers what their needs were or
what kind of service they really wanted. We were convinced we understood their needs well enough. This led to several service
offerings, unfortunately these were not accepted by customers.’ (Gebauer et al., 2005)
New Service Development (NSD) has been identified as a hurdle for manufacturing firms aiming to extend
the service business (Nijssen et al., 2006), whilst also being acknowledged as a critical success factor for
manufacturing firms extending their services business (H. W. Lightfoot & Gebauer, 2011).
According to Gebauer et al. (2005) NSD practices in manufacturing firms should be similar to those used
in service companies (Gebauer et al., 2005). Manufacturing firms have profound experience in NPD
practices and therefore have clearly defined NPD processes. NPD processes involves design, prototyping,
testing and refining and eventually implementation. Service prototyping is usually done through application
in real time and in collaboration with customers. They need to correspond to modifications in service
delivery systems, such that interaction between NSD employees and the service delivery departments is
stronger than in the manufacturing context of NPD and production facilities (Ts Baines et al., 2009; Nijssen
et al., 2006). In addition, these new services need to fit the existing service operations whereas new products
can usually be introduced more independently (Nijssen et al., 2006).
Consequently, the dynamics of service innovation practices are not clearly understood. Different units
within a firm tend to be developing services simultaneously, hence amounting to decentralized innovation
practices. This is contrary to centralized NPD practices that most firms conduct. In addition, measuring
NSD practises quantitatively, e.g. in terms of R&D spending, is harder (T. Turunen, 2013). Most service
organizations are not characterized by a high degree of R&D spending since instead of new technologies,
new services deal with new procedures and concepts; the innovation lies in the novel way of meeting
customer demands (T. S. Baines et al., 2009; Nijssen et al., 2006).
C.5 Service portfolio offering

Product and service differences
A number of scholars argue that the differences between product and service are troublesome when
attempting to achieve integration. Services are argued to be intangible, fuzzy and more difficult to define
than products. The focus on goods equals emphasis on mass production and standardization whereas
services focus on customization (Windahl & Lakemond, 2010). However, integrated solutions require
elements from both a goods and a service perspective. Therefore, abandoning completely the manufacturing
paradigm and shifting towards a complete service oriented mind-set is not the goal. Rather, Windahl and
Lakemond (2010) among others argue that balancing both business logics presents the real challenge instead
of problematizing product and service differences (Windahl & Lakemond, 2010). Within a service-centred
dominant logic the integration of the customer and supplier is strong such that mutual interdependencies
are formed. It implies that besides being customer-oriented, collaboration and learning from and with
customers whilst being flexible for their individual needs is required (Vargo & Lusch, 2004).
Within the capital goods industry firms are accustomed to a goods-dominant logic, which needs to be
overthrown when developing integrated solutions. However, the existing business of developing products
is an invaluable source of knowledge during this development process (Windahl & Lakemond, 2010).
Namely, existing R&D operations focus on both incremental product improvement and new technologies
to overthrow existing dominant technology paradigms. These practices should be retained in order to
complement the customer-centred perspective. Therefore, the transition towards integrated solutions is not
98
completely equivalent to the shift towards a service-centred dominant logic as proposed by Vargo and Lush
(2004). Offerings should thus be perceived as combinations of products and services providing unique value
to a customer (T. Turunen, 2013). It is thus essential to align product and service design processes to
respond to customer needs in an effective way (Martinez et al., 2010a).
Types of services
Services initially were mostly offered as an add-on to their existing products (Vandermerwe & Rada, 1988).
As services grew more important and proved to possess the ability to be a competitive asset, the variety and
scope of the offered services increased too. A wide range of services can be delivered; from maintenance
and repair to financial and consultancy services. Mathieu et al. (2001) identified a great heterogeneity
amongst firms in the approach towards service offerings (Mathieu, 2001).
Likewise, various classification schemes are used to distinguish these various types of service offerings.
Kotler (1994) initially considered two broad categories: maintenance and repair services on the one hand
and business advisory services on the other hand. Mathieu (2001) developed a typology in which three types
of services were distinguished: customer services, product services and services as a product. This typology
attempts to illustrate the idea that service for manufacturing firms carries much more potential than services
supporting the product (Mathieu, 2001). The first has the purpose to facilitate customer and seller
interaction. An example is providing assistance by means of an online helpdesk. Product services are focused
on ensuring proper operation of a product and are exemplified by for instance technical assistance or after-
sales services. Lastly, ‘services as a product’ are seen to be independent from a firm’s product-related
activities (Mathieu, 2001).
Gebauer et al. (2005) makes a distinction between product-related services and customer support services.
Firms gradually expand their offerings during the transition, starting with product-related services. Such
services are only aimed at ensuring proper functioning of the product and customer use and access to it.
Examples of such services are transportation, documentation, inspection, repair etcetera. Moving on, firms
should offer customer-support services, e.g. spare parts management and process-oriented engineering
(Gebauer et al., 2005; Oliva & Kallenberg, 2003). Basically, as firms become more knowledgeable about
their products, incrementally more complex services are offered to their customers. These services are
usually still tied to transactional interaction with customers such as contracts including fixed amount of
hours for repair and maintenance (T. Turunen, 2013).
99
Appendix D. Manufacturing firm’s resources
Following the resource-based view, manufacturing firms can leverage a number of resources to achieve a
competitive advantage (Davies, 2004; Eloranta & Turunen, 2015; Ulaga & Reinartz, 2011). Ulaga and
Reinartz (2011) defined four critical resources that manufacturing firms possess for servitization:
 An installed base of products

▫ Primarily, the installed base is argued to provide firms with a knowledge-driven resource.
Namely, data on product usage and the customer’s process can be extracted from these
products and provides a manufacturer with unique insights. (Eloranta & Turunen, 2015;
Oliva & Kallenberg, 2003; Ulaga & Reinartz, 2011).
 Product development and manufacturing assets
▫ Manufacturers hold assets related to R&D and production such as production equipment,
but also patents and licences as well as manufacturing principles such as standardization,
quality control and capacity management. These can result in synergies between
manufacturing and services while developing integrated offerings (Mathieu, 2001; Ulaga &
Reinartz, 2011).
 Sales force and distribution network
▫ Manufacturers typically rely on personal selling and have invested in direct sales
organizations or have intermediaries such as dealers to cover sales regions. This enables
close access to customers and reinforces local ties (Ulaga & Reinartz, 2011).
 Field service organization
▫ Manufacturers invest in field organizations to install their goods and provide services to
the installed base. The aftermarket can be leveraged with an investment in such a service
network, representing a key resource (Ulaga & Reinartz, 2011).
100
Appendix E. IB Service space
Table 24| IB service space [Adopted from Oliva and Kallenberg (2003)]
Product-oriented services End-user’s process oriented services

Transaction-based Basic installed base services Professional services
services  Documentation  Process-oriented engineering
 Transport to client (tests, optimization, simulation)
 Installation/commissioning  Process-oriented R&D
 Product-oriented training  Spare parts management
 Hot line/help desk  Process-oriented training
 Inspection/diagnosis  Business-oriented training
 Repairs/spare parts  Process-oriented consulting
 Product updates/upgrades  Business-oriented consulting
 Refurbishing
 Recycling/machine brokering
Relationship-based Maintenance services Operational services
services  Preventive maintenance  Managing maintenance
 Condition monitoring function
 Spare parts management  Managing operations
 Full maintenance contracts
101
Appendix F. Product vs. Customer-centric firms
Table 15| Product centric vs customer centric firms [Inspired by Galbraith (2002) and Shah et al. (2006)]
Product-centric firm Customer-centric firm

Goal Best product for customer Best solution for customer
Business orientation Transaction-oriented Relationship-oriented
Value creation route Cutting-edge products, useful Customizing for best total solution
features, new applications
Mental process Divergent thinking Convergent thinking
Most important customer Most advanced customer Most profitable, loyal customer
Priority-setting basis Portfolio of products Portfolio of customers
Main offering Specific products Personalized packages of service,
support, education, consulting
Organizational concept Internal focus, Product profit External focus, Customer segments,
center, product reviews, product customer teams, customer P&Ls,
teams, rigid structures flexible structures
Most important process New Product Development Customer Relationship Management
Measures Number of products Customer share of most valuable
Percentage of revenue from customers
products Customer satisfaction
Market share Lifetime value of a customer
Customer retention
Culture New product culture; open to new Relationship management culture:
ideas; experimentation searching for more customer needs to
satisfy
Rewards Based on business unit performance Based on company performance
Approach to personnel Power to people who develop Power to people with in-depth
products knowledge of customer’s business
Sales bias On the side of the seller On the side of the buyer
102
Appendix G. Nokia front/back hybrid
Figure 4| Front/back hybrid model by Nokia [Adopted from Galbraith (2002b)]
103
Appendix H. Exploratory interview format
(Dutch)
Interviewee
Company AgriCo
Position
Date/time
Format Semi-structured
Dit interview neem ik af in het kader van mijn afstudeeronderzoek aan de TUDelft. Zoals u wellicht heeft
gehoord is de integratie van product en service een erg belangrijke pijler voor fabrikanten van
kapitaalgoederen, zogenoemde servitization. Mijn onderzoek richt zich erop om te bekijken in hoeverre
AgriCo klaar is voor servitization en het integreren van producten en services. Daarnaast is mijn onderzoek
erop gericht te identificeren welke organisatieveranderingen daarbij zouden passen. Daarom doe ik een
aantal verkennende interviews om meer over de organisatie te weten te komen en zo mijn onderzoek af te
bakenen. Tijdens het interview zal ik notities maken en als ik iets erg belangrijk vind wellicht het gesprek
even onderbreken. Verder ga ik confidentieel om met het materiaal dat ik hiermee verzamel. Het gesprek
zal zo’n 45 minuten duren verwacht ik.
1. Kunt u uzelf kort voorstellen?

a. Naam
b. Afdeling
c. Verantwoordelijkheden
d. Historie binnen het bedrijf
2. Hoe ziet u de toekomst van AgriCo als bedrijf?
a. In hoeverre past service in de lange termijn strategie van het bedrijf?
b. Hoe onderscheidt AgriCo zich op dit moment mbt services?
c. Hoe zou dit bedrijf zich in de toekomst moeten onderscheiden op het gebied van services?
d. Hoe ziet u een transitie voor zich en welke veranderingen zouden dan doorgevoerd moeten
worden?
3. Hoe zou u de koppeling tussen product en service implementeren binnen de huidige organisatie?
a. Is de huidige organisatiestructuur hiervoor geschikt?
b. Wat zijn de uitdagingen op het gebied van organisatie die overwonnen zullen moeten worden?
c. Waar zou de besluitvormende macht moeten liggen binnen de organisatie?
d. Zijn er ‘quick wins’ te behalen voor AgriCo op het gebied van services?
e. Zou een afzonderlijke service organisatie een optie zijn voor AgriCo?
4. Welke bedrijven zijn volgens u succesvol op het gebied van service en vergelijkbaar met AgriCo?
Nb. Due to the explorative nature of the research not all interviews had the exact same interview questions. These interviews
were meant to become acquainted with the firm as well as discuss the research topic. The researcher therefore had an open mind
to new insights within each interview. This format contains the most common asked questions.
104
Appendix I. External case interview format
This appendix contains the general interview format for external case interviews. The researcher well
prepared each interview in order to ask company specific questions. Therefore, this appendix presents the
general format.
I1. Interview format

Interviewee
Company
Position
Date/time
Format Semi-structured
Interview guide
1. Introduction of interviewer and research
2. Introduction interviewee
3. Interview goal
4. Interview structure
5. Confidentiality issues
6. Closure
Introduction
Companies such as AgriCo and yours have their roots in technology, innovation and production.
Servitization is a transition which leads to integrated combinations of products and services in which service
and customer-orientation are extremely important. This brings along significant challenges. A large amount
of product-oriented firms therefore struggle with the implementation of service and integrated solutions.
Servitization namely requires not only a strategic shift but also an organizational transition in terms of
structure, culture, skills, systems and people. Servitization is a topic that can be studied from various
perspectives. Within my research I aim to investigate the influence of servitization on the organizational
structure of a technology and product-oriented organization. Therefore my research question is the
following: ‘What is the relationship between a servitization strategy and the organizational structure
of a product-oriented organization with a large installed base of products?’
Servitization is a transition, implying that it can be implemented in various ways and therefore it is interesting
to research how organizations implement servitization, the characteristics of these strategies and if they
gradually transition towards more advanced strategies. Furthermore, I want to address how this is related to
changes in organizational structure and the factors influencing this relationship. It can provide companies
such as AgriCo and yours with insights into suitable transition paths and with insights into implementation
requirements of a certain strategy. Therefore the goal of this interview is to address how your company has
dealt with servitization so far in terms of strategy and what the implications on the organizational structure
were.
The interview will last approximately 1 hour and will, as agreed upon upfront, be tape-recorded and
eventually transcribed. Recording ensures no vital information is lost within the conversation. Furthermore,
possible issues may be clarified after a first analysis. Needless to say, all obtained information will be dealt
with discretely.
105
Introduction
1. Can you briefly introduce the background of your company and your own background?
Transition and strategy
1. Wat is servitization according to you?

2. How service-oriented is your company? Can you illustrate this with numbers?
3. Has your strategy with respect to services changed a lot in recent years?
4. Was there a key trigger for expanding the service business?
5. What are the characteristics of the service strategy within your organization?
Structure and transition

1. What characterizes the current organizational structure of your organization?
2. How have you organized service operations within your organization? Is this different from the
existing product business?
3. Has the organizational structure changed under the influence of expanding the service business?
Extra questions if time allows

1. Where in the continuum from products to services would your company be now and the past?
2. What are the biggest challenges related to organizing the service business within your organization?
3. Has your company set up a separate organization for services?
4. How is integration between the product- and service business attained?
5. Has the relationship with customers changed by means of servitization?
6. What is the role of technology and innovation within a servitization strategy?
Closure
Summary of results; thanking the interviewee and rewarding a present.
106
Appendix J. Positioning of OffshoreCo

- Refurbishing
effectively
delivery
107
Appendix K. Positioning of HortiCo

- Refurbishing
effectively
delivery
108
Appendix L. Positioning of MediCo

- Refurbishing
effectively
delivery
109
Appendix M. Positioning of TransCo

- Refurbishing
effectively
delivery
110
Appendix N. Overview of case positionings
Table 16| Positioning of each case on the theoretical framework

Transition OffshoreCo
phase HortiCo
MediCo
TransCo
Corresponding OffshoreCo
strategic HortiCo
position MediCo
TransCo
Characteristics of each strategic position
Type of OffshoreCo
offering HortiCo
MediCo
TransCo
Type of OffshoreCo
services HortiCo
MediCo
TransCo
Type of OffshoreCo
customer HortiCo
MediCo
TransCo
Customer OffshoreCo
relationship HortiCo
MediCo
TransCo
Organizational OffshoreCo
structure HortiCo
MediCo
TransCo
111
Appendix O. Workshop invitation
Confidential
112
Appendix P. Workshop statements
Confidential
113
Appendix Q. Workshop observations
Confidential
114

Organizing for servitization: A framework for manufacturing firms

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Organizing for servitization: A framework for manufacturing firms

Uploaded by

Copyright:

Available Formats

Organizing for servitization

Developing a framework to guide the transition for manufacturing firms

A thesis submitted in partial fulfilment of the requirements for the degree of

to be defended publicly on Monday, August 22nd at 15.30h

at the Faculty of Technology, Policy and Management

Organizing for servitization

Dr. Robert Verburg (Chair)

Dr. Patrick van der Duin (1st supervisor)

Dr. Mark de Bruijne (2nd supervisor)

An electronic version of this thesis is available at http://repository.tudelft.nl/

Keywords: servitization, transition process, organizational structure, manufacturing firm, framework

Naaldwijk, 8th of August 2016

Box 1. ‘Servitization within the truck business’

Box 2. ‘Power by the hour’

1.2 Problem statement

However, the implementation of a servitization strategy significantly challenges a manufacturing company

1 A discussion of these challenges is appended in Appendix C

1.2.2 Practical problem

1.3 Research objective and scope

1.4 Research questions

To answer the research question, a number of sub-questions have been formulated:

1. What are the drivers for servitization?

2. What are the characteristics of a servitization strategy?

1.5 Research relevance

1.6 Concept definitions

1.7 Thesis structure

2.1 Research approach

Figure 1| Research approach

Increasing importance of services →

2.3 Phases 2 and 3: empirical research strategy

2.3.1 Phase 2: Framework validation and enrichment

Table 2| Overview of studied cases

Company Participant Company size Company offering Existing resources

2.3.2 Phase 3: Framework application and testing

Table 3| Overview of characteristics AgriCo

Company Company size Company offering Existing resources

2.4 Data collection methods

2.4.1 Phase 1: Exploration

2.4.2 Phase 2: Framework validation and enrichment

 ‘What does servitization entail for your company?’

2.4.3 Phase 3: Framework application and testing

2.5 Data analysis

2.5.1 Validity and reliability

3.1 Rationale for servitization

3.1.1 Manufacturer’s drivers

3.1.2 Customer’s drivers

3.2.1 Competitive strategy and servitization

Defining the transition phases

Figure 2|Product-service continuum [Adopted from Oliva & Kallenberg (2003)]

Table 4| Defining the transition phases

Increasing importance of services 

Dimension 1: Type of offering

Table 5| Framework expansion with dimension ‘type of offering’

Increasing importance of services 

Increasing importance of services 

Dimension 3: Type of customer

Table 7| Framework expansion with dimension: ‘type of customer’

Increasing importance of services 

Dimension 4: Customer relationship

Table 8| Framework expansion with dimension: ‘customer relationship’

Increasing importance of services 

3.2.3 Whether to go through all phases