Strategy and structure configurations for services within product‐centric businesses

Abstract

PurposeThe purpose of this paper is to investigate how product‐centric businesses (PCBs), operating in a business‐to‐business environment, configure their organizations to align services strategy with structure. PCBs are companies whose businesses were historically based on the products, rather than services, they sold.Design/methodology/approachA UK‐based study was undertaken which comprised 40 interviews with managers in 25 PCBs from 11 sectors.FindingsThe main parameter which determines the appropriate organizational configuration for services within the PCB's structure is strategy. A new framework is developed from the empirical research which identifies a number of PCB configurations, based on PCBs' services strategies (services engagement, extension, penetration and transformation) and organizational structures aligned to strategic business units (SBUs), i.e. combined product and services, independent services and customer‐focused. The framework is used to show how organizational structure changes in response to changes in strategy. For certain strategies, the degree of product differentiation (services engagement) and future product sales potential (services transformation) also plays a part in determining strategy/structure configurations.Research limitations/implicationsFuture research could confirm and compare the effectiveness of the identified structural configurations.Practical implicationsManagers in PCBs can identify appropriate organizational structures based on their services strategies and products. They can configure organizational design in light of evolving strategies that enable services‐led growth.Originality/valueThe paper presents a large pan‐sector study of organizational design for services as it related to PCBs, providing a new framework through which appropriate strategy/structure configurations can be identified and investigated as services‐led growth takes place.