Trapped in the supply chain? Digital servitization strategies and power relations in the case of an industrial technology supplier

Abstract

Digital servitization transforms value creation processes and subsequently affects relationships and power structures in supply chains. Yet, previous studies present insightful but incomplete views on how digital servitization changes power balances between supply chain actors. Specifically, little attention has been paid to upstream firms, although they are particularly vulnerable to becoming disadvantaged participants in a digitally servitized supply chain, as they are positioned far away from end-users. Addressing this research need, we performed an explorative single case study of an industrial supplier – using the resource dependence theory as theoretical framework – to investigate (1) the effects of digital servitization on the power balance between the supplier and its OEM customers and (2) the strategic responses of the supplier to these effects. We find that for an industrial supplier, the successful deployment of digitalized product-service systems (DPSS) depends not only on the development of digital capabilities, but also on the ability to establish close end-user connections, continuous access to product usage data, and a trustful relationship with OEM customers. In addition, we show that digital servitization shifts power towards the actor who is more dominant prior to its advent, refining the common notion that digital servitization favors per se downstream firms. We enrich existing literature by outlining five specific strategies that industrial suppliers can pursue to maintain critical resource access and regain power in a digitally servitized supply chain. Finally, we offer managers guidance in establishing DPSS offerings by providing a comprehensive picture of the industrial supplier's digital servitization journey.