Exploring the value of IoT data as an enabler of the transformation towards servitization: an action design research approach

Abstract

ABSTRACT Servitization is a well-recognised phenomenon in the manufacturing industry. Business potentials are demonstrated mainly from the marketing perspective on servitization. However, increased digitalisation makes servitization interesting to other research areas. This paper applies the resource-based view (RBV) to argue how to value the data and explore its potential and impact on servitization. We examine the evolving role of information technology (IT), particularly of the Internet of Things (IoT), and the role of data in the servitization journey. This research is based on a longitudinal study of a product-oriented manufacturing company’s transformation towards servitization. The engagement with the company also includes the development of an IT platform that consolidates IoT and enterprise data, which enables managers to explore new data-based insights. Our goal is to investigate the organisation and in particular cross-functional effects of data-based insights and their impact on supporting strategic decision-making. The action design research (ADR) approach is applied to unfold the servitizing activities inside the organisation and extract the lesson learned into the joint domains of servitization and information systems research. First, we argued that exploring the value of data is becoming a more complex process. Rather than having one design perspective, technical concerns, business considerations, and operational purpose must be aligned to frame the value of data to support decision-making. Second, we discuss the emerging managerial implications, especially the role of IT in the transformation. A cross-functional team is a prerequisite to exploring complex transformation projects. Thus, managers must recognise the problematic situation and bootstrap the available organisational resources. Finally, we provide empirical evidence on how scholars and practitioners can address mutual interests by applying the ADR approach to a transformation project. In summary, servitizing a product-centric manufacturing firm to have a digital services business model is a transformation involving complex social and organisational relations. This study advocates resource-based analysis as a lens and demonstrates how IT and data as heterogeneous and imperfectly mobile resources create value for a product-oriented manufacturing company. However, a critical question remains on how to manage the expanding operational condition of a servitizing organisation and its business system to sustain its competitive advantage and win the digital market.