Free-to-Fee Transformation of Industrial Services

Abstract

Industrial firms venturing into services is a common phenomenon in B2B markets. However, companies are often unable to monetize many such services, thus incurring high costs of service provision without benefiting from revenue generation in return. To address this critical but little-studied problem, we investigate how industrial firms can transform existing free services into for-fee offerings. Employing a theories-in-use approach, we explore leading global firms via a cross-section of B2B industries, including automotive, maritime, material handling, medical equipment, mining and construction tools, and petrochemicals. Contingent on the empirics, we precisely characterize and define free industrial services. Based on the internal and external challenges that firms face in free-to-fee (F2F) transformations, we develop a typology classifying free services into four distinct categories: Front-runners, Tugs of War, In-house Shackles, and Dead Ends. For each category, we provide empirical illustrations and identify critical actions and activities that firms deploy to successfully implement F2F transformations along the dimensions of structures, processes, people, and rewards. Thus, we offer guidance on how to overcome both external and internal challenges. Our findings demonstrate that F2F transformations of industrial services are not isolated marketing, sales, or pricing activities but require a concerted effort among all organizational functions involved.