Service-based Business Models Research Articles

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

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.

Tweeting for change: social media narratives for sustainable service

PurposeThis interdisciplinary study aims to analyze how service organizations communicate sustainable beliefs in their social media narratives and use them to generate brand awareness, customer recognition and ongoing demand for sustainable service.Design/methodology/approachA two-phase exploratory analysis of 10,342 tweets from 2019–2020 was conducted by sustainable global corporations to identify best practices for their social media teams operating within a service-based business model. First, the significant themes were identified using an unguided machine learning approach of three types of firms: services, goods and mixed. Next, the full set of tweets with linguistic sentiment analysis was analyzed followed by a deeper view of the services-based organizations based on their strategic focus (business-to-business [B2B] versus mixed).FindingsThe findings indicate that tweets that appear to create the highest customer engagement are characterized as having high levels of analytical language, high clout (i.e. are socially relevant), a positive tone, a high number of words and a high number of words per sentence. On the other hand, having complex language in terms of six-letter words does not seem to associate with customer engagement. The last level of analysis shows that B2B services-based corporations with positive tone and higher word count exhibit higher levels of retweets. Implications include providing rational and informational tweets to increase engagement and highlight societal relevance.Originality/valueClimate change has negative consequences on human and physical capital, and ecosystems across the globe. This study provides specific recommendations for how services corporations can increase their sustainable communications and actions.Practical implicationsThe key implication of our research is that corporations must strategically design social media narratives about climate change as part of their online branding and communications process.

Business model innovation through the adoption of service logic: evolving to servification

PurposeIn servitization research, there has been a call to move further toward the development of business models based on a service approach. This article aims to answer this call by adopting service logic (SL) and developing strategies and organizational resources and processes to create a service-centric business model called servification, defined as the process of identifying and developing strategies and organizational resources and processes to create a business model based on SL.Design/methodology/approachThis article is conceptual and extends servitization in the direction of service-centric business model innovation by drawing on and extending SL.FindingsThe article defines service as a higher-order concept according to SL and develops the concept of a helping strategy as the foundation for a service-based business model. Further, it develops a typology of organizational resources and processes that must be developed for the emergence of such a business model.Research limitations/implicationsSince this article is the first to conceptually develop servification, more both theoretical and empirical research is naturally required. The development of servification takes servitization in the direction of service-based business model innovation and also contributes to the research on SL.Practical implicationsServification enables the development of service-centric strategies and organizational resources and processes and service-based business models.Originality/valueThis article is the first to adopt SL in studies of business model innovation.

Capability Framework Implementing Pay-Per-Outcome Business Model in Equipment Manufacturing Companies

The primary objective of this paper is to enhance our understanding of the capabilities necessary for implementing a pay-per-outcome business model and how equipment manufacturing companies can successfully implement such a business model. Based on systematic literature research, we analysed 12 research publications that discussed pay-per-outcome capabilities in the equipment manufacturing industry. We identified 36 capabilities and formulated a capability framework for pay-per-outcome business models in the equipment manufacturing industry. We also identified that pay-per-outcome business models require specific capabilities related to customer relationship and contracting, compared with other service-based business models (such as pay-per-use business models). Since earlier studies have failed to distinguish the capabilities necessary for pay-per-outcome business models from those for other types of product–service system business models or focused on some specific required capabilities for the former business models, we contribute to current business model literature by uncovering the unique characteristics of pay-per-outcome business models in the equipment manufacturing industry.

Explaining business model innovation processes: A problem formulation and problem solving perspective

This study explains the business model innovation processes in industrial firms. Drawing on three case studies of leading business-to-business firms shifting from product-based to service-based business models, it introduces problems as a theoretical concept to explain business model innovation processes. We show how formulating and solving problems guide the search for a viable business model and why some problem formulation and solving activities lead firms to shift between backward-looking and forward-looking searches. The decision to shift to a forward-looking search is triggered by the perception of failure to continue with an established way of working, while the shift to a backward-looking search is based on the perception of high alternative costs. We contribute to the business model innovation and servitization literature by theorizing the process of business model innovation and providing implications for managers.

Strategic Emphasis on Service-Based Business Models During the Corona Crisis: Are Customer Solutions a Curse or Blessing for Manufacturing Firms?

Firms increasingly rely on service-based business models, such as customer solutions, to strengthen their market position and secure robust revenues in competitive environments. While extant research has shed light on the financial implications of service-based business models in general, no empirical research has yet explored whether a strategic emphasis on customer solutions pays-off or backfires in a global crisis such as the corona pandemic. As theoretical arguments lend support for both, favorable and unfavorable consequences of a strategic emphasis on customer solutions during a pandemic crisis, this study creates a unique dataset of 565 U.S. manufacturing firms and analyzes the revenue implications of customer solutions during the crisis peak. Results demonstrate the resilient character of customer solutions. Manufacturing firms with a strategic emphasis on customer solutions experience on average $30 million less revenue decline during the pandemic. A finer-grained view distinguishes different types of customer solutions and uncovers mixed performance effects. While customer solutions generally help manufacturers to weather the crisis, resource-intensive turnkey solutions have a negative effect on firm revenues. These insights help managers to understand the financial implications of customer solutions and navigate successfully through a health-based crisis.

Exploring reluctance to circular business models – the case of light as a service

Selling light as a service is one example of a service-based business model that could enable a more circular economy. However, despite a growing interest to become more circular, there is still hesitation among customers to change the way they meet their need for light. In an ongoing project, we explore this reluctance and seek to identify obstacles and driving forces for large customer organizations to buy light as a service. As a first step, an interview study and a workshop were made to identify current perceptions in a broad range of stakeholders including lighting manufacturers, suppliers of light as a service, light designers and architects, private and public customers, collaborative bodies, and sector organizations. The focus was on large customers (municipalities and property companies) and on indoor lighting in offices and schools in Sweden. Barriers and driving forces could be found in 5 categories: environmental impact, economic consequences, social effects, competence, and roles and responsibilities. The analysis points to the importance of increasing knowledge, reducing uncertainties, and creating trust between actors in the business ecosystem to decrease barriers to change. It also appears extending the value proposition and increasing emphasis on social and user benefits are key for light as a service to become competitive with traditional business models.

Service-based business models in the Swedish railway industry

PurposeThe purpose is to describe new business opportunities within the Swedish railway industry and to support the development of business models that corresponds with the needs and requirements of Industry 4.0, here denoted as Service Management 4.0.Design/methodology/approachThe study is an in-depth and descriptive case study of the Swedish railway system with specific focus on a railway vehicle maintainer. Public reports, statistics, internal documents, interviews and dialogues forms the basis for the empirical findings.FindingsThe article describes the complex business environment of the deregulated Swedish railway industry. Main findings are in the form of identified business opportunities and new business model propositions for one of the key actors, a vehicle maintainer.Originality/valueThe article provides valuable understanding of business strategy development within complex business environments and how maintenance related business models could be developed for reaching Service Management 4.0.

Business Model Innovation for Circular Economy in Fashion Industry: A Startups' Perspective

Circular Economy (CE) has emerged as a potential strategy for developing business practices based on sustainability concerns, especially in the fashion industry, which presents high environmental and social impacts. Startups are responsible for introducing innovations in business conduction toward CE. As a current theme, research on Business Model Innovation for Circular Economy (BMI4CE) has increased. However, empirical research in the fashion industry and startups is still scarce. This paper aimed to identify the key elements of startups' BMI4CEs, using the fashion industry as the context of the study. We conducted an exploratory and descriptive multiple case study composed of ten early-stage fashion startups from Europe, North America, and Asia. The findings suggest that environmental and economic sustainability dimensions receive priority in the analyzed BMI4CEs. On business type, we found differences between product-based and service-based Business Models (BMs). The Business Models Innovations (BMIs) were based mainly on CE principles of closed-loop and reducing material use and consumption. BMs focus on CE strategies of product reuse and extend resource time by lowering consumption and material use. Findings also demonstrate the role of emerging and digital technologies (e.g., blockchain and artificial intelligence) for BMI4CEs effectiveness. We developed five propositions and a theoretical framework from a triple bottom line perspective. This research highlights new theoretical perspectives under an investigation area still little explored in the literature. Results enable fashion startup managers to understand better the functioning of BMI4CEs and the critical elements needed for their effectiveness.

Resource Orchestration in Supply Chain Service-Based Business Model: The Case of a Cross-Border E-Commerce Company

E-commerce is gaining traction in academia, industry, and with policymakers. Along with this development, the intersection of supply chain management and e-commerce research has become increasingly important. This study explored Osell, a cross-border e-commerce company in China, through a resource orchestration perspective to understand how supply chain resources are deployed to create value in a supply chain service-based business model. We investigated and analysed Osell’s business model based on primary data collected from senior executives and managers, as well as secondary data such as online public resources, and found that the structuring and bundling of resources can be leveraged to enhance service capabilities, which in turn creates value, contributing to supply chain service-based business models with regard to trust improvement, risk mitigation, and consumer satisfaction. This study contributes to the supply chain service-based business model through propositions that have been developed regarding cross-border e-commerce.

Toward a circular economy: The role of digitalization

Toward a circular economy: The role of digitalization

Current Status of Circular Economy Research in Finland

Circular economy has emerged as a sustainable alternative to the traditional, linear, extract-produce-use-dump economy. The scientific society, practitioners, policymakers, and business sectors are all actively taking part in driving the transition toward circular economy in their own sectors. Every sector is striving to address the environmental issues of their own area, and to find solutions to the problem of resource scarcity. However, there is a lack of comprehensive studies on the general status of circular economy research and applied projects. Finland aims to be a global pioneer in this field, which is why there is a tremendous boost in research in various fields of sustainable materials management. Therefore, there is a need to have a better perspective of the research society’s efforts to accelerate the transition to circular economy. The objective of this paper is to review scientific research and practices of circular economy transition in Finland, in order to categorize and analyze them. The paper aims to give an insight into the current status and provide a comprehensive understanding of the trend changes during the past 20 years. The analysis shows that there is growing attention to circular economy in many research fields, researchers and practitioners in all fields have responded to the need of the society. However, the recycling-based ‘end-of-pipe’ interpretation of circular economy is still more dominant than developing and implementing strategies for circular product design, dematerializing society, and developing service-based business models. It is important to bear in mind that circular economy is about much more than improved resource flows and waste management practices. Achieving a circular economy needs the engagement of the society, it needs invention and innovation and it also requires the creation of new technologies, products, services, and business models. This study gives a comprehensive perspective at the national level and addresses the key actions and sectors which require more investment and attention from the scientific community to boost the transition toward circular economy. There are some limitation in this study derived from the method of data collection and selection of databases. Due to this, there may be valuable works that were not published, or only in the Finnish language and were, therefore, not identified in this study.

Towards sustainable servitization: A literature review of methods and frameworks

Service-based business models have attracted growing interest as means to capture sustainable value. There is still unclear terminology and lack of understanding on how servitization can locate sustainability as central value. The purpose of this study is to consolidate the terminology and methods for servitization, to identify factors and elements that contribute to a sustainability perspective. The followed methodology includes a comprehensive literature review, further analyzed through a conceptual framework using an evidence-based approach. The findings of this study will clarify existing terminologies and frameworks while supporting the development of service-based business models that avoid the sustainability paradox of servitization.

AbCellera's success is unprecedented: what have we learned?

The search for antibody therapeutic candidates is a timely and important challenge well-suited to lab on a chip approaches. Vancouver-based AbCellera Biologics Inc. developed a microfluidic antibody screening platform, ancillary technologies, and a service-based drug discovery business model that has proved a tremendous success. We take the opportunity here to reflect on what enabled this success. We consider the common lab on a chip motivations that were part of their success, and those that were not.

Method towards reconstructing collaborative business processes with cloud services using evolutionary deep Q-learning

Service-oriented architecture (SOA) is a significant framework that enables intelligent information systems to offer business process-based services, namely Business Process as a Service (BPaaS). Cloud service-based business model reconstruction within and across enterprises has become an important issue to obtain competitive advantages. Finding appropriate service component is a critical phase in enterprise collaboration, to improve the quality and correlations among collaborative service-providers. Existed methods for business processes reconstruction have not systematically and fully considered the quality correlations in finer-grain, i.e. task-level or activity-level, and temporal performance in a process model optimization. Moreover, the existed approaches might fail to work in an uncertain cloud environment where the quality parameters are unknown in advance. Q-learning has proven its worth in an uncertain cloud environment. However, advances in Q-learning are challenges to leverage in collaborative business process reconstruction. The reconstruction algorithms based on Q-learning suffered from the two core drawbacks: lack of effective exploration and extremely slow convergence property. A hybrid Evolutionary Deep Q-Learning-based BPaaS reconstruction algorithm, named as EDQL-BPR, is proposed by leveraging Particle Swarm Optimization to improve Deep Q-Learning algorithm for systematically optimizing collaborative business processes reconstruction. In order to verify the effectiveness of the proposed algorithm, an annotated transition system has been developed supporting for all possible behaviors state convention from heterogeneous initial states to the target with several collaborative information at activity level, and encoding annotated BP representation matrix automatically. Then, an autonomous three-layer framework has been built to facilitate business process discovery and service reconstruction. In this framework, our optimal collaborative services composition is treated as a multi-objective constraint optimization problem via Evolutionary Deep Q-learning with updated strategy of Q-value, and each annotated component launch a service discovery by service agent. Extensive evaluation results show that EDQL-BPR can outperform several representative business process reconstructions in terms of model optimal convergence, QoS optimality, effectiveness and efficiency under heterogeneous service selection workloads in an uncertain Cloud environment.

Consumer Preferences for Electric Vehicle Charging Services: Evidence from NIO’s ‘Worry Free Plan’

Range anxiety restrains the widespread adoption of plug-in electric vehicles. This paper utilises novel survey data on NIO ES8 owners in order to investigate whether preferences for innovative electric vehicle charging services (EVCS) are augmented by range anxiety. Our limited dependent variable models draw upon NIO ES8 owners’ revealed and stated preferences for the Worry Free Plan. Objective measures of range are found to feed into consumers’ stated preferences, whilst the owners’ subjective concerns appear to statistically dominate the consumers’ revealed preferences for this service. A suite of specification checks supports the view that EVCS primarily overcomes the psychological foundations of range anxiety, elucidating insights for the development of innovative and sustainable service-based business models and policy design.

Transition to the circular economy: the story of four case companies

Shifting from a linear sales model to a circular service-based business model is far from straightforward. Many challenges accrue in the transition process, including finding the right market for the recirculated product/service, setting up the reverse supply chain, selecting the right partners, and making sure the new business model is sustainable in the short, medium and long term. This paper discusses the challenges of four companies trying to close the loop while preserving current profit levels. It describes their initial ideas on how the circular business model should be designed, the process they went through, challenges faced, and the eventual outcome. Based on the learnings of the four case companies, we summarise recommendations about preparatory steps required before making the transition towards a circular business model.

Manufacturing practices and servitization: The role of mass customization and product innovation capabilities

Servitization has been viewed as an important method for manufacturers to gain competitive advantages. The purpose of the study is to empirically examine the effects of lean and agile practices as well as mass customization and product innovation capabilities on the implementation of servitization. The hypotheses are empirically examined using structural equation modeling with data collected from 647 manufacturers. The results show that product innovation capability directly improves servitization. Although the direct effect of mass customization capability on servitization is not significant, it improves servitization indirectly through product innovation capability. The findings also reveal that the direct impacts of lean and agile practices on servitization are not significant. Lean and agile practices affect servitization indirectly through product innovation capability, whereas the indirect effects of lean and agile practices on servitization through mass customization capability are not significant. Therefore, this study draws the conclusions that a manufacturer should develop mass customization and product innovation capabilities simultaneously when implementing servitization. Moreover, a manufacturer should also invest on lean and agile practices and product innovation capability at the same time when transforming to a service-based business model to cultivate their synergies on servitization.

Simulation-as-a-Service for Reinforcement Learning Applications by Example of Heavy Plate Rolling Processes

In the production industry, the digital transformation enables a significant optimization potential. The concept of reinforcement learning offers a suitable approach to train agents on learning control strategies, further advancing automation. While applications training directly on real-world processes are rare due to economical and safety constraints, simulations offer a way to develop and evaluate agents prior to deployment. With the rise of service-based business models, the simulation owner and the machine learning expert are likely to be different stakeholders in a joint project. Due to different requirements for both simulations and reinforcement-learning agents, the stakeholders may be reluctant or unable to grant full access to the respective software. This poses a serious impediment to the potential of the digital transformation. In this paper, a distributed architecture is proposed, which allows the remote training of reinforcement learning agents on a simulation. It is shown that this architecture allows the cooperation between two stakeholders by exposing a suitable technical interface to the simulation. The proposed architecture is implemented for a simulation of the multi-step metal forming process of heavy plate rolling. Furthermore, the implemented architecture is used to successfully train a reinforcement-learning agent on the task of designing optimal parameter schedules.

Taking Container-Based Sanitation to Scale: Opportunities and Challenges

Container-Based Sanitation (CBS) has rapidly progressed from its inception less than a decade ago to its recent classification as a type of improved sanitation facility by the Joint Monitoring Programme. CBS in many ways represents a sustainable service, as it addresses the entire sanitation service chain; offers a variety of service-based business models; and is affordable to people living in marginalized and informal urban settlements. At the same time, CBS services which have been operating for a number of years have grown relatively slowly. Taking CBS to scale will require solving several diverse challenges, particularly the need for government mandates; regulation; and innovative financing. This paper presents the collective views of some of the world’s leading CBS practitioners in an effort to summarize the potential, research gaps, and major challenges to scaling CBS.