Taking no risk is the greatest risk: Coping with the paradoxes of Outcome-based services

Abstract

Traditional manufacturing firms take more operational responsibility and business risk when offering their customers outcome-based services (OBS). Research on servitization recognizes multiple paradoxical tensions between product- and service business that manufacturers must to accept and cope with. Using an explorative case study approach on three OBS providers, we find that the paradoxes related to this extreme servitization business model are related to control, knowledge and dependency. The found paradoxes are interlinked through an insoluble trefoil knot, which will persist while the OBS relationship continues to exist. Thus, OBS provider firms’ managers cope with the paradoxical tensions using coping strategies we coin commitment, acknowledgement and alliancing. Overall, the current study contributes to the paradox theory – an alternative to traditional organization theories. More specifically, we contribute to paradoxes in servitization literature by elaborating the interplay of paradoxical tensions in an advanced form of servitization, that is, OBS.