Digitalized Product-Service Systems in Manufacturing Firms: A Case Study Analysis: Linking Digital Systems with Physical Products to Create Novel Product-Service Bundles That Provide Services Independently and Proactively Can Enable Advanced Services and Promote Growth

The term servitization has been used in recent years to describe a growing service orientation among product manufacturers, who are increasingly moving from simply selling products to offering supportive services tailored to the product (Baines et al. 2009; Wise and Baumgartner 1999; Vandermerwe and Rada 1988). These services range from traditional product-related services such as maintenance, repair, and training to advanced customer-oriented services (Lay 2014; Oliva and Kallenberg 2003; Mathieu 2001). Advanced services typically take the form of product-service systems (PSS), or physical products bundled with intangible services in a customized manner to fulfill highly individual customer needs (Tukker and Tischner 2006; Goedkoop et al. 1999). These innovative, individualized product-service bundles increase the value delivered to the customer and hence increase the competitiveness of the provider (Boyt and Harvey 1997). The move toward servitization has coincided with a rising trend toward digitalization, with manufacturers equipping products with intelligent digital systems that allow the products to operate independently of human intervention and communicate with other machines. As a logical consequence of the confluence of servitization with this trend toward intelligent machines, an increasing number of manufacturers are using digital systems to support their services (Minister and Meiren 2011), creating totally new industrial product-service offerings, such as comprehensive remote services that bring digital and physical systems together to pave the way for, for instance, availability guarantees. These new kinds of offerings may in turn lead to far-reaching reconfigurations of the mechanisms of value creation in manufacturing. Thus, manufacturers cannot afford to ignore these emerging forces, which have the power to completely reshape the industrial landscape. Companies that do not keep up with these developments may find themselves threatened with extinction in the near future, as competitors with more customized, responsive offerings gain advantage. Three practical case studies from our joint research projects on servitization show how companies can combine digital systems with PSS to harvest value and build competitive advantage. Services Innovation and Digitalization Previous studies of servitization have assumed that manufacturers move from product manufacturer to solution provider along a defined transformation path (Gebauer, Fleisch, and Friedli 2005; Gebauer 2004). This transition path is typically described as taking place in stages, with each stage offering different potentials for differentiation (see, for example, Matthyssens and Vandenbempt 2010; Gebauer, Bravo-Sanchez, and Fleisch 2008; Matthyssens and Vandenbempt 2008; Penttinen and Palmer 2007; Oliva and Kallenberg 2003; More 2001). At the end of the path, manufacturers offer innovative PSS, such as availability guarantees or build-operate-transfer (BOT) models, which increase customer value on the one hand and create competitive advantage for the provider on the other (Brady, Davies, and Gann 2005; Boyt and Harvey 1997). While PSS have been widely discussed--see Velamuri, Neyer, and Moslein (2011) for a review of the literature--the effect of the digital revolution on this servitization pathway has been less well explored. Most articles have dealt with the new challenges and impacts of digitalized services, focusing on how they differ from more traditional product-related services. What is missing in the literature is a comprehensive framework bringing together the emerging trends of servitization and digitalization in one conceptual structure. The integration of digitalization with services innovation has important implications for services. For instance, because digital services can be provided independent of manufacturer and customer location, traditional service characteristics like perishability and inseparability do not apply to digital service creation (Holtbriigge, Holzmuller, and von Wangenheim 2007). …