Paths to Service Capability Development for Servitization: Examining an Internal Service Ecosystem

There is a need to examine the internal service ecosystem perspective to understand how the capability development process unfolds. To achieve this, an embedded case study of ten subsidiaries of a large multinational capital equipment manufacturer was conducted to analyze how front- and back-office capability development progresses across the subsidiaries. Three different paths for capability development were identified, indicating: (i) the sequential development of capabilities and capability renewal; (ii) difficulties of capability replication; and (iii) capability retrenchment and service dilution. It is argued that a lack of interaction between the front- and back-office may constrain progress in terms of realizing efficiencies through the standardization of offerings, processes, and performance measures. Important managerial implications indicate the need to manage an internal service ecosystem that allows for capability replication, which requires a strong center to leverage learning.