SI.20.005 – Competitiveness through servitization in the digital age: Balancing economic and sustainability outcomes of servitization business models

Route: Smart industry

Cluster question: 054 How do we ensure that the Dutch economy remains competitive?

Digitalization enables firms to switch from developing and selling products to providing integrated product-service solutions. This transition is called ‘servitization’ and allows firms to remain competitive in three ways. First, servitization allows firms to distinguish themselves from competition through new business models (i.e., based on leasing, total cost of ownership, add-on services) that more thoroughly address customer needs than just selling products. Second, servitization is a way of generating new revenue streams, for example through service subscriptions, different forms of maintenance, or selling spare parts. To exemplify, integrated milk and feeding robot solutions help farmers in the mechanics of managing their livestock and, at a premium price, also provide detailed analyses and corresponding advice. Third, servitization enables firms to be more adaptive to sustainability. Raw materials are becoming increasingly scarce, CO2 emissions increasingly taxed, and zero-waste and circularity increasingly important. Digital product-service systems include enhanced tracking-and-tracing, predictive maintenance, and digital twinning technologies, that extend product lifecycles through software and hardware upgrading, and enable firms to have control over materials that can be returned for remanufacturing and recycling.
Despite servitization’s clear advantages, many firms fail to realize its benefits. Therefore, the primary goal of this project is to investigate how firms can successfully implement servitization-based business models. We focus on three important issues that inform a successful strategy. First, given that economic activity may go at the expense of sustainability, we aim to uncover under which conditions the relationships between servitization and the three anticipated outcomes are all positive. Second, because servitization is affecting multiple layers within companies, we uncover the technological, managerial, human, legal, and financial challenges involved, as well as the interactions between these challenges. Finally, by using maturity models as our theoretical foundation, we develop practical tools to guide companies on their road to successful servitization business models.

Keywords

business models, Competitiveness, servitization, sustainability

Submitter

Organisation Technical University Eindhoven (TU/e)
Name prof.dr. E. (Ed) Nijssen
E-mail E.J.Nijssen@tue.nl
Website https://research.tue.nl/nl/persons/ed-j-nijssen