The impact of servitization and digitization on productivity and profitability of the firm: a systematic approach

Abstract

We propose a new systematic method to answer the research question: ‘What is the financial and economic impact of servitizing the firm, digitising the firm, and combined servitization and digitization strategy?’ Our method quantifies servitization, digitization and their synergy by analysing their relationship with firm financial and economic outcomes. The method is applied to the British publishing industry. Using text-mining and econometric analysis of secondary data, 258 UK book publishers (93% of the market share) are analysed over a period of 10 years (1,508 observations). Firms are categorised as servitized (S-firms), digitized (D-firms), digitized and servitized (DS-firms) and pure (P-firms) that are neither servitized nor digitized (control group). We detect no significant difference in terms of productivity and profitability between P-firms and D-firms. Although we find evidence of a servitization paradox, both S-firms and DS-firms show greater productivity than P-firms. Profitability of DS-firms is greater than that of P-firms, but profitability of S-firms is lower than that of P-firms. The research improves on the existing methodology employed to examine the impact of servitizing or digitising the firm and provides a means to measure how servitization and digitization impact on the productivity and profitability of a firm within a specific context.