The order of the factors matters: How digital transformation and servitization integrate more efficiently

Abstract

This article draws on existing debates on standardization versus adaptation to propose two possible pathways for digital servitization. On the one hand, the standardization pathway posits that digital transformation enables servitized firms to make their service-based business model more standardized, and as a result, scalable. On the other hand, the adaptation pathway advocates that servitization enables highly digitalized firms to make their digital offerings more adaptable to heterogeneous customer needs, and as a result, customizable. We investigate which of these two paths integrates more effectively, and which one is thus likely to prevail in the long run. We use a purpose-built survey of 127 Spanish product firms to test these relationships using partial least squares structural equation modelling (PLS-SEM), and test single- and multi-mediation models. The results corroborate the existence of both pathways, but also suggest that the standardization pathway contributes more to performance than the adaptation pathway. This is consistent with historical transitions in adoption (services existed before digital transformation) and services being dependent on digital technologies delivered remotely. These findings suggest the benefits of customization in digital servitization are lower than previous studies seem to imply, and provide important managerial implications.