Towards Digital Product-Service Platforms in Manufacturing Firms

Abstract

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. 

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