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A Business Model for Establishing Service Orientation of Capital Goods Manufacturing Companies

The objective of this research was to develop a service-oriented business model for capital goods manufacturers that supports managers in order to guide a transition from goods to service in practice. The service orientation which includes the increase of the relevance of the service component in the total offering of manufacturing companies has been well documented in research literature. It should be noted however that the literature review has revealed very little knowledge on how to apply popular business model frameworks in a service orientation and on how to view them from a service- dominant logic perspective. Consequently, the two research questions addressed are as follows “€œWhich configuration of the elements increases the service orientation of a capital goods manufacturer’€™s business model?” and “€œHow is the business model elements’ configuration driven by the company’€™s service strategy?”€. Or in other words how does a contemporary best practice business model for a service orientation need to be designed in order to be supportive in practice?

The review of literature in the three key areas “service strategies for capital goods manufacturers”€, “€œservice-dominant logic”€, and “€œbusiness models”€, has further informed the development of a service-oriented business model and the corresponding propositions.

A critical realist paradigm was determined to be appropriate in order to investigate how capital goods manufacturing companies operationalise a service orientation in practice and how comprehensively the proposed business model captures the dimensions of a company undergoing a transformation. In a qualitative case study four capital goods manufacturing companies with different service strategies were examined. The data collection involved twelve semi-structured in-depth interviews. Secondary data sources were used to contrast the information. In order to ensure quality of research, amongst other methods, multiple sources of evidence and data triangulation reduced the risk of misinterpretation and increased the confidence in the findings. Additionally, clearly documented data collection and data analysis procedures further contributed to the validity and reliability of the research.

Based on the results of the data analysis the proposed theoretical service-oriented business model was enriched and modified in order to answer the research questions.

The results from this research clearly demonstrate that the service orientation of a capital goods manufacturer’€™s business model is increased through the following drivers: “value proposition customisation”€, “€œcommitment to long-term relationship development”€, “€œcustomer knowledge”€, “€œcustomer’s value realisation engagement”€, “€œpartner co-operation”€, “€œservice department distinctiveness”€ and “€œdependence on operant resources”€. Furthermore, it is evident that the adoption of a new service strategy such as “€œcustomer support service provider”€, “development partner”€ or “€œoutsourcing partner”€ induces distinct activities in respect of these drivers and inevitably within the business model elements. It can be surmised that there is a fit between a service strategy and the business model.

In summary, this research contributes to theory by adapting a business model to accommodate service-dominant logic and to support a transition from goods to service and to professional practice by providing a framework that can be used by managers from capital goods manufacturing companies in order to support the management of a
service orientation.

from the thesis “A Business Model for Establishing Service Orientation of Capital Goods Manufacturing Companies” by Dr. Eugen Rodel