Revenue Models for Digital Servitization: A Value Capture Framework for Designing, Developing, and Scaling Digital Services

Abstract

Manufacturing companies are currently undergoing a digitalization transformation in which digitally enabled, new, and innovative advanced service offerings are being launched. These so-called “digital services” represent a shift in the business logic of manufacturing firms, from up-front product sales to advanced service contracts. This business model shift has profound implications for cost structures, risk management, and revenue streams, providing manufacturing companies with the key challenge of rethinking how to capture value. Using a multiple case study of 11 companies, the purpose of this article is to enhance knowledge on how to design new revenue models for digital services. Results reveal a revenue model design framework of key phases and activities that carries implications for the emerging literature on digital servitization, as well as the business model innovation literature. The findings reveal a highly customer-centric, iterative, and agile process where close collaboration with key customers during the early stages guides the framing of revenue models for digital services. For practitioners, it provides hands-on advice on how to implement the design, development, and scaling processes for revenue models in the context of new digital services.