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What brings the value to outcome-based contract providers? Value drivers in outcome business models
ESADE Business School.ORCID iD: 0000-0002-1628-2634
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Industrial Management. Universidad Politécnica de Madrid.ORCID iD: 0000-0001-8542-1848
University of Cambridge.ORCID iD: 0000-0001-8220-5242
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Industrial Management.ORCID iD: 0000-0001-9277-0288
2017 (English)In: International Journal of Production Economics, ISSN 0925-5273, E-ISSN 1873-7579, p. 169-181Article in journal (Refereed) Published
Abstract [en]

Outcome-based contracts (OBCs) are frequently seen as the most advanced level of service offering that product firms offer. To deliver OBCs, product firms have to shift from the traditional product business model (PBM) to adopting an outcome business model (OBM). This constitutes a major change that rearranges their activity system and therefore profoundly changes their value-creation process. The literature tells us little about what this change entails and the key value drivers that OBC providers focus on as they adopt outcome business models. To tackle this topic, we study four global capital equipment manufacturers that recently started to offer highly advanced forms of OBC: Bombardier, Caterpillar, Hitachi and Rolls Royce. We learn that, apart from recognized value drivers, such as efficiency, novelty, lock-in and complementarity, OBC providers draw value from what we have labelled accountability value. Second, the value drivers are more diverse in OBMs than in traditional PBMs. Third, while in PBMs there is a trade-off between value drivers, in OBMs value drivers are mutually reinforcing, as they create a synergistic interplay. At the same time, however, firms are exposed to some sources of value loss as they start providing OBCs and shift to OBMs. We contribute to the literature by connecting the OBM literature with the broader value-creation literature and identifying (specific) value drivers as they appear in the OBM context, as well as the relationships among them.

Place, publisher, year, edition, pages
Elsevier, 2017. p. 169-181
Keywords [en]
Servitization, Outcome-based contracts (OBCs), Outcome business models (OBMs), Value drivers
National Category
Business Administration Engineering and Technology
Research subject
Industrial Economics and Management
Identifiers
URN: urn:nbn:se:kth:diva-205949DOI: 10.1016/j.ijpe.2016.12.008Scopus ID: 2-s2.0-85008237829OAI: oai:DiVA.org:kth-205949DiVA, id: diva2:1090869
Note

QC 20170516

Available from: 2017-04-25 Created: 2017-04-25 Last updated: 2018-05-07Bibliographically approved
In thesis
1. Navigating Manufacturing Firms to Service-led Business Models
Open this publication in new window or tab >>Navigating Manufacturing Firms to Service-led Business Models
2018 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis tackles an increasingly popular phenomenon – servitization of manufacturing – a growth opportunity for industrial firms through a service-led business model. However, implementing a servitization strategy in industrial firms triggers multifaceted challenges and requires further research.The thesis builds on extensive studies of world leading multinational capital equipment manufacturers that develop a successful service business model.

The dissertation builds on three closely interconnected studies. The first study is an in-depth exploratory case study of a Swedish industrial firm by cross-comparing two servitization initiatives—one that was highly successful, and one that was less so. The second study juxtaposes 10 worldwide subsidiaries of the same Swedish industrial firm to compare and contrast how the servitization process unfolded. This study focuses on the management of service capability development, as well as the management of emerging tensions between the product business units and service business units. The third study extends the research scope by analyzing four industrial firms that successfully developed advanced services (e.g. outcome-based contracts).

This thesis contributes to the servitization literature and business model literature by demarcating three business model archetypes for industrial firms: product business model, service business models and outcome business model. This thesis unpacks the content of the business model elements that underpins business model archetypes as well as the configuration and the relationship between the business model elements.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2018. p. 90
Series
TRITA-ITM-AVL ; 2018:13
Keywords
servitization, service transition strategy, service business models, outcome-based contracts
National Category
Business Administration
Research subject
Industrial Economics and Management
Identifiers
urn:nbn:se:kth:diva-227275 (URN)978-91-7729-770-3 (ISBN)
Public defence
2018-06-01, F3, Lindstedtsvägen 26, Stockholm, 14:00 (English)
Opponent
Supervisors
Note

QC 20180509

Available from: 2018-05-07 Created: 2018-05-07 Last updated: 2018-05-09Bibliographically approved

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Jovanovic, MarinEngwall, Mats

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