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The path to outcome delivery: Interplay of service market strategy and open business models
ESADE Business School.ORCID iD: 0000-0002-1628-2634
University of Cambridge, UK.ORCID iD: 0000-0001-8220-5242
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.).ORCID iD: 0000-0001-8542-1848
2018 (English)In: Technovation, ISSN 0166-4972, E-ISSN 1879-2383, Vol. 72-73, no April - May 2018, p. 46-59Article in journal (Refereed) Published
Abstract [en]

Firms in a variety of manufacturing sectors as well as the software industry have increasingly embraced services alongside their product portfolios in order to improve financial performance. Yet, the key question “How do service market strategy change and the accompanying business model change interact, and how does their interplay affect value creation?” remains open. Relying on twelve case studies of firms that have shifted towards providing highly advanced services (e.g. outcome-based contracts), theoretical propositions concerning the interplay of market strategy and business model on value creation are derived. The firms studied report two interdependent changes: first, they evolve the market strategy from provision of pure products to provision of services and then outcomes, in order to achieve a better fit with customer needs and to grow their service businesses. Second, they rely increasingly on partners and suppliers to provide new activities that are outside their competence base. This 'open business model' allows them to grow their new service businesses effectively and efficiently. At the same time, however, the shift to a service market strategy requires enhanced accountability to customers and increases the threat of penalties in the case of failure, while reliance on partners and suppliers leads to loss of control over the activity system and increases the threat of failure due to third party dependency. Thus, this paper finds that the success of firms that shift to services and outcomes hinges on their ability to balance the trade-off between increased value (i.e. growth, efficiency and effectiveness) and increased uncertainty associated with service market strategy/open business model interplay.

Place, publisher, year, edition, pages
Elsevier, 2018. Vol. 72-73, no April - May 2018, p. 46-59
Keywords [en]
Service market strategy, Open business models, Outcome-based contracts, Service innovation, Servitization
National Category
Business Administration
Research subject
Industrial Economics and Management
Identifiers
URN: urn:nbn:se:kth:diva-226705DOI: 10.1016/j.technovation.2018.02.003ISI: 000436889400005Scopus ID: 2-s2.0-85045098947OAI: oai:DiVA.org:kth-226705DiVA, id: diva2:1201384
Note

QC 20180509

Available from: 2018-04-25 Created: 2018-04-25 Last updated: 2018-07-16Bibliographically approved

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Jovanovic, Marin

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