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Towards Digital Product-Service Platforms in Manufacturing Firms: Exploring Organizational and Managerial Aspects
KTH, School of Industrial Engineering and Management (ITM), Machine Design (Dept.).ORCID iD: 0000-0002-2444-6168
2021 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis is positioned at the intersection of product and service development and enabling digital technologies in the context of incumbent manufacturing firms. When these concepts are blended together into digital product-service systems, value growth and business model innovation may be achieved. However, incumbents may face a number of technical, managerial, and organizational challenges, which they must deal with in order to reap the full benefits of such a digital transformation. This research area has received an increasing amount of attention in recent years, but many research gaps still exist. Research addressing these gaps may support incumbent firms in their transformation towards fruitful digital product-service systems.

This thesis explores three research questions: “How does the development of digital product-service systems take place in incumbent manufacturing firms?”, “What managerial and organizational challenges and opportunities are encountered in the digitalization of product-service systems?”, and “How does the use of a platform approach influence the innovation of digital product-service systems in incumbent manufacturing firms?”. The results build on the findings of five studies, all of which included at least one incumbent manufacturing firm. These firms were selected based on their histories as successful suppliers of physical goods and on the basis of their recent strategies to develop product-service systems facilitated by different digital technologies.

The empirical findings suggest that digital transformation evolves in clear stages: an entrepreneurial phase, a platform-establishment phase, and an acceleration phase. The entrepreneurial spirit of a few individuals is important for initiating the first phase and for building the internal competences needed for continuous movement through the subsequent phases. The transition also includes a shift from integrated digital product-service systems to the use of a platform across several digital product-service offerings as a means to, for example, manage complexity and scale business-model portfolios. An additional finding is that the transformation into digital product-service systems involves the addition of new business models rather than the transformation of existing models. 

The transformation into digital product-service systems is associated with a number of managerial challenges and opportunities. The empirical findings presented here underline the importance of a holistic customer-value approach for the evaluation of the opportunities offered by a digital transformation. However, they also reveal that developing an understanding of the value dimensions of a new digital service offering may be difficult. While a platform stands out as a fruitful way to manage a number of challenges in the design of digital product-service offerings and to avoid a service paradox with underperforming business models, it may be difficult to govern and manage across firm structures. More specifically, the challenges relate to: (1) platform governance, (2) ownership of various activities, (3) deriving an overview of related product and service development, and (4) the budgeting of product-service bundles.

A platform approach to digital servitization may positively affect the digital transformation of incumbent manufacturing firms by serving as a resource that can allow for business-model portfolios based on shared resources and capabilities. A platform is also a suitable resource for innovation and the prototyping of new potential offerings, as it can facilitate new combinations of existing modules and resources, which can be developed more rapidly than if they had to be developed from scratch for each proof of concept. Platforms can also be used for scaling fruitful product-service offerings. 

Abstract [sv]

Två tydliga trender inom tillverkningsindustrin är ett ökat fokus på att erbjuda tjänster och en tilltagande digitalisering av erbjudanden. Denna utveckling kan generera flera fördelar för etablerade, tillverkande företag. Exempelvis kan både attraktiva kunderbjudanden och nya affärsmodeller skapas. Samtidigt medför en produkt-tjänstestrategi, baserad på digitalisering, ett antal nya tekniska och organisatoriska utmaningar. 

 

Denna avhandling syftar till att undersöka tre forskningsfrågor. Den första frågan undersöker hur utvecklingen av produkt-tjänstesystem, baserade på digitalisering, sker i etablerade tillverkande företag. Den andra frågan formuleras som vilka ledningsmässiga och organisatoriska utmaningar, samt vilka möjligheter företag möter i en sådan omställning? Den tredje frågan handlar om hur användningen av en plattformsstrategi påverkar innovation av digitala produkt-tjänstesystem? Slutsatserna bygger på resultat från fem olika empiriska studier, alla inkluderande ett eller flera etablerade industriföretag. 

 

De empiriska resultaten tyder på att digital transformation tenderar att utvecklas i tydliga steg – en entreprenöriell fas, en etableringsfas och en accelerationsfas. Entreprenörskap hos ett fåtal individer är viktig för initieringen av den första fasen och för att etablera intern kompetens nödvändig för en fortsatt förändring i kommande faser. Övergången innefattar också ett skifte från distinkta integrerade system, till användning av gemensamma plattformar, vilka utgör ett sätt att hantera komplexitet, men också en strategi för att hantera en portfölj av affärsmodeller. Ytterligare resultat visar att omvandlingen till digitala produkt-tjänstesystem snarare innebär ett tillägg av nya affärsmodeller, än att de befintliga modellerna förändras. 

 

Med digital transformation, och nya produkt-tjänsteerbjudanden baserade på etableringen av digitala produkt-tjänstesystem, följer ett antal utmaningar och möjligheter. De empiriska resultaten understryker vikten av att förstå olika kundutmaningar för att kunna ta tillvara på de mest intressanta möjligheterna med en digital transformation, men avslöjar också att det är en svår utmaning att förstå alla värdedimensioner i ett nytt digitalt erbjudande. En plattform framstår som en intressant strategi för att hantera ett antal utmaningar i utformningen av nya erbjudanden, men medför också nya utmaningar. Mer specifikt relaterar dessa utmaningar till (1) styrning av plattformen, (2) tydligt ägande av olika aktiviteter, (3) översikt över relaterad produkt- och tjänsteutveckling och (4) budgetering av produkt-tjänstepaket. En plattformsstrategi kan positivt påverka den digitala omvandlingen av etablerade tillverkningsföretag genom att vara en resurs som kan delas av flera olika affärsmodeller. Plattformen är också en resurs lämplig för innovation och prototypframställning av nya potentiella erbjudanden då nya kombinationer kan skapas av redan befintliga byggstenar och dessutom underlättar effektiv uppskalning av produkt-tjänsteerbjudanden.

Place, publisher, year, edition, pages
KTH Royal Institute of Technology, 2021. , p. 96
Series
TRITA-ITM-AVL ; 2021:53
Keywords [en]
Keywords: Servitization, product-service system, digitalization, digital transformation, platform
National Category
Other Mechanical Engineering
Identifiers
URN: urn:nbn:se:kth:diva-309291ISBN: 978-91-8040-172-2 (print)OAI: oai:DiVA.org:kth-309291DiVA, id: diva2:1640757
Public defence
2022-03-18, D2 / https://kth-se.zoom.us/j/67677001023, Lindstedtsvägen 5, kholm, 10:00 (English)
Opponent
Supervisors
Available from: 2022-02-28 Created: 2022-02-25 Last updated: 2022-06-25Bibliographically approved
List of papers
1. Development of Digital Product-Service Platforms in Incumbent Manufacturing Firms
Open this publication in new window or tab >>Development of Digital Product-Service Platforms in Incumbent Manufacturing Firms
(English)Manuscript (preprint) (Other academic)
National Category
Business Administration
Identifiers
urn:nbn:se:kth:diva-305976 (URN)
Note

QC 20211213

Available from: 2021-12-13 Created: 2021-12-13 Last updated: 2022-06-25Bibliographically approved
2. Organizing the Development of Digital Product-Service Platforms
Open this publication in new window or tab >>Organizing the Development of Digital Product-Service Platforms
2020 (English)In: Technology Innovation Management Review, E-ISSN 1927-0321, Vol. 10, no 3, p. 36-47Article in journal (Refereed) Published
Abstract [en]

Servitization is today a common theme among manufacturing companies, with the goal of better addressing the needs of their customers. Digitalization is one key enabler of servitization. One aspect of this concept can be provided through digital product-service platforms, which may facilitate the enrichment of a market offer, as well as keeping costs under control. Platforms are in general a well-established concept for manufacturing companies, as enablers of rich product offerings based on a few components. Less is known, however, about how the ambition to create digital product-service platforms interplays with the business model innovation needed as a result of the servitization efforts, along with processes and organization. This paper identifies a number of challenges that manufacturing companies may face when undertaking platform development for services, based on an empirical study made in the Swedish company Husqvarna Group.

Place, publisher, year, edition, pages
CARLETON UNIV GRAPHIC SERVICES, 2020
Keywords
Servitization, Business Model Innovation, Digital Platforms, Corporate Entrepreneurship
National Category
Production Engineering, Human Work Science and Ergonomics
Identifiers
urn:nbn:se:kth:diva-272630 (URN)10.22215/timreview/1335 (DOI)000523275000005 ()2-s2.0-85083824218 (Scopus ID)
Note

QC 20200622

Available from: 2020-06-22 Created: 2020-06-22 Last updated: 2024-03-15Bibliographically approved
3. Collaboration Challenges in Digital Service Innovation Projects
Open this publication in new window or tab >>Collaboration Challenges in Digital Service Innovation Projects
2018 (English)In: International Journal of Automation Technology, ISSN 1881-7629, E-ISSN 1883-8022, Vol. 12, no 4, p. 499-506Article in journal (Refereed) Published
Abstract [en]

Digitalization is frequently seen as an important source of service innovation, enabling new solutions where products and services are bundled into offerings. As the realization of such offerings frequently requires the inclusion of new technological components and implies changes to activities across the value chain, they often require collaboration with other companies. This article explores what challenges arise when different organizations collaborate in service innovation enabled by digitalization. This study investigates a joint project between three companies aiming to innovate, build, and verify a proof-of-concept for an automated return process at a European rental company in the construction industry. An explorative case study approach was selected, and data were collected through semi-structured interviews with key managers in the collaborating companies as well as through meetings and workshops during the innovation project. The empirical observations revealed four main challenges: (1) the formulation of shared and complementary innovation objectives, (2) the joint design of a new business model addressing both value creation and value appropriation, (3) the management of the collaborative project across organizational boundaries, and (4) the fruitful combining of multiple agile organizing approaches.

Place, publisher, year, edition, pages
Fuji Technology Press, 2018
Keywords
service innovation, digitalization, business model innovation, collaboration
National Category
Business Administration
Research subject
Industrial Economics and Management
Identifiers
urn:nbn:se:kth:diva-250563 (URN)10.20965/ijat.2018.p0499 (DOI)000992572500007 ()2-s2.0-85049440003 (Scopus ID)
Note

QC 20190618

Available from: 2019-04-30 Created: 2019-04-30 Last updated: 2024-03-15Bibliographically approved
4. Digital Business Model Innovation: Implications for Offering, Platform and Organization: Driving Transformation and Innovation
Open this publication in new window or tab >>Digital Business Model Innovation: Implications for Offering, Platform and Organization: Driving Transformation and Innovation
2018 (English)In: Digital Business Models: Driving Transformation and Innovation / [ed] Annabeth Aagaard, Palgrave Macmillan, 2018, p. 147-168Chapter in book (Refereed)
Abstract [en]

Simonsson and Magnusson address a range of issues facing original equipment manufacturers (OEMs) using digital technologies as a means for increasing the service part of their offerings. Digitalization enables manufacturing companies to pursue new strategies where various services are bundled with products to support customers in a larger part of their businesses and operations, often referred to as servitization. Such a transition is of interest for OEMs as it allows them to target a bigger area of the customer business and builds closer customer contact. This chapter identifies and explores a number of fundamental challenges related to this type of digital business model innovation, more specifically customer interaction, offer delivery, platform strategies and organization, based on a case study from the Swedish company Husqvarna.

Place, publisher, year, edition, pages
Palgrave Macmillan, 2018
Keywords
Digitalization, Business model, Servitization, Challenge, Case study
National Category
Business Administration
Research subject
Industrial Economics and Management; Business Studies
Identifiers
urn:nbn:se:kth:diva-250558 (URN)10.1007/978-3-319-96902-2_6 (DOI)2-s2.0-85085677513 (Scopus ID)
Note

QC 20241108

Part of ISBN 978-3-319-96902-2

Available from: 2019-04-30 Created: 2019-04-30 Last updated: 2024-11-08Bibliographically approved
5. Perception of value delivered in digital servitization
Open this publication in new window or tab >>Perception of value delivered in digital servitization
2021 (English)In: Industrial Marketing Management, ISSN 0019-8501, E-ISSN 1873-2062, Vol. 99, p. 167-174Article in journal (Refereed) Published
Abstract [en]

This paper intends to explore the perception of value delivered in digital servitization in a business-to-business context of incumbent manufacturing firms. We investigate how individual entrepreneurial orientation (IEO) influence and affect the adoption of such digital servitization strategies. The observations are made through a survey and empirical assessment across a couple of large industrial organizations interested in servitization and digitalization. Findings contribute to the existing literature on digital servitization and business model innovation by suggesting that IEO influence perceived value in delivering digital service offers, whereas functional affiliation does not. Further observations suggest that digital capabilities can become a crucial enabler for the perception of value delivered in digital business models by providing swift access to data for affected stakeholders.

Place, publisher, year, edition, pages
Elsevier, 2021
Keywords
Marketing
National Category
Business Administration
Identifiers
urn:nbn:se:kth:diva-305975 (URN)10.1016/j.indmarman.2021.10.011 (DOI)000720546200001 ()2-s2.0-85119074094 (Scopus ID)
Note

QC 20220421

Available from: 2021-12-13 Created: 2021-12-13 Last updated: 2024-03-15Bibliographically approved

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