Abstract
Industrial manufacturers are innovating their business models by shifting from selling products to selling outcome‐based services, where the provider (manufacturer) guarantees to deliver the performance outcomes of the products and services. This form of business model innovation requires a profound yet little understood shift in how value is created, delivered, and captured. To address this research gap, our study examines two successful and four unsuccessful cases of this shift. We find that effectiveness in business model innovation hinges on the three process phases that unfold in collaboration with the customers: value proposition definition, value provision design, and value‐in‐use delivery. We also find that that success is determined by the alignment of specific value creation and value capture activities in each phase: identifying value creation opportunities—agreeing on value distribution in value proposition definition, designing the value offering—deciding on the profit formula in the value provision design, and finally refining value creation processes—regulating incentive structures in the value‐in‐use delivery. Our process model contributes to the literature and practice on business model innovation by providing a thorough understanding of how alignment of value creation and value capture processes is ensured, whilst paying special attention to their interdependence and the interactions between provider and customer.
Highlights
Selling an outcome is not the same as selling a product or service; it is a totally different offer, and the composition of the offering means that the whole business model towards the customer needs to change
Business model innovation sits at the top of the agenda for most industrial firms, and it has garnered a strong interest in the management literature as well (Foss and Saebi, 2017; Massa, Tucci, and Afuah, 2017; Ritter and Lettl, 2018)
We develop a process framework aimed at business model innovation for outcome-based services that unfolds in three phases: value proposition definition, value provision design, and value-in-use delivery
Summary
Selling an outcome is not the same as selling a product or service; it is a totally different offer, and the composition of the offering means that the whole business model towards the customer needs to change. This study seeks to address these research gaps by exploring how providers and customers ensure the alignment of value creation and value capture processes in business model innovation for outcome-based services. Recent research points to the importance of agile co-creation processes (Sjödin et al, 2020) and relational governance for value capture in digital servitization (Sjödin, Parida, and Kohtamäki, 2019), we still lack knowledge concerning the activities of value creation and value capture, and the roles that the provider and customer play in aligning these for business model innovation (Appleyard and Chesbrough, 2017; Randhawa et al, 2016; Sjödin et al, 2016). We argue that the context of outcome-based services is relevant to study such processes and may provide important insights into the literature on servitization and business model innovation
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