Strategic Emphasis on Service-Based Business Models During the Corona Crisis: Are Customer Solutions a Curse or Blessing for Manufacturing Firms?

Abstract

Firms increasingly rely on service-based business models, such as customer solutions, to strengthen their market position and secure robust revenues in competitive environments. While extant research has shed light on the financial implications of service-based business models in general, no empirical research has yet explored whether a strategic emphasis on customer solutions pays-off or backfires in a global crisis such as the corona pandemic. As theoretical arguments lend support for both, favorable and unfavorable consequences of a strategic emphasis on customer solutions during a pandemic crisis, this study creates a unique dataset of 565 U.S. manufacturing firms and analyzes the revenue implications of customer solutions during the crisis peak. Results demonstrate the resilient character of customer solutions. Manufacturing firms with a strategic emphasis on customer solutions experience on average $30 million less revenue decline during the pandemic. A finer-grained view distinguishes different types of customer solutions and uncovers mixed performance effects. While customer solutions generally help manufacturers to weather the crisis, resource-intensive turnkey solutions have a negative effect on firm revenues. These insights help managers to understand the financial implications of customer solutions and navigate successfully through a health-based crisis.