Equipment upgrade service provision in the context of servitization: drivers, capabilities, and resources

Abstract

Building on manufacturing servitization, midlife equipment upgrade services introduce a value-adding alternative to traditional, capital intensive and time-consuming equipment replacement. Midlife upgrades improve the performance of and add new functional capabilities to an equipment during its middle-of-life to satisfy customers’ evolving preferences. Recent explorative studies report a low adoption of this strategy in industry and attribute this to the limited strategic awareness and readiness of manufacturing firms. This study addresses this gap by, (i) revealing three sets of drivers (strategic, market, financial) that prompt manufacturers to offer equipment upgrade services; (ii) identifying distinctive capabilities and resources that are key to generate successful upgrade offerings leveraging the resource-based view as a theoretical foundation; and (iii) integrating the drivers, capabilities, and resources into a framework that manifests different stages of industrial service development process, namely, market sensing, development, sales, and delivery. Our novel framework provides a foundation for researchers to test, refine, and expand on why manufacturers provide upgrade services and how upgrade service offerings can succeed on the marketplace. Our framework can serve as a benchmarking tool to guide managers to identify capability gaps and prioritize capabilities to develop and offer successful upgrade offerings.