Service Business Model Innovation Research Articles

Building a Hierarchical Enablers Framework for Service Business Model Innovation for Sustainable Performance: Evidence from Ghana’s Electricity Sector

Selecting an appropriate business model innovation for sustainable performance is a complex decision that requires a decision support tool. However, despite the importance of business model innovation (BMI) for sustainable performance, there has been limited investigation into how a hierarchical enabler framework grounded in service-dominant logic contributes to the sustainability of service firms. This study examines the critical enablers of service business model innovation (SBMI) for sustainable performance within the utility sector, particularly the electricity supply sector in Ghana. Using the best–worst method (BWM), this study identifies and prioritizes three main enablers and eleven sub-enablers, addressing a notable gap in understanding their impact on sustainable performance. The findings reveal that service value creation innovation is the most critical primary enabler, with human capital, technological platforms, and value-based pricing constituting the top three sub-enablers for sustainability performance. This study contributes to the service-dominant logic and BMI discourse by providing a novel hierarchical framework that aids managerial decision making in service-oriented firms, particularly in developing economies. The results underscore the need for utility companies to prioritize investments in key areas, such as human capital, technological advancements, and customer-centric approaches, to drive sustainable business practices and improve overall performance.

Servitization of Energy Sector: Emerging Service Business Models and Startup’s Participation

Changing asset ownership models in the energy sector is spurring established companies and startups to implement customer-centric smart services. In this sense, startups are pioneers of innovative business models, and unbundle the energy value chain to provide various services to final customers. Although service business models have received large attention in the energy sector, the role of startups in service business model innovation (S-BMI) is not fully understood in the literature. To put this into perspective, the proposed work analyzes the six most practiced energy service categories, specifically, Comfort and Heating, Flexibility and Trading, Energy Efficiency and Management, Solar and Microgrid, Charging and Battery, and Energy Software Solutions are taken into account, accompanying service business model archetypes in the energy sector. Data from two different company databases are combined, and a list of 432 startups dealing with energy services are analyzed. The operating revenue, stakeholders, investors, and funding are considered as the main indicators to compare the service categories. The top two categories in terms of the number of startups are Solar and Microgrid (38.1%) alongside Energy Efficiency and Management (20.1%). The analysis suggests that X-as-a-service (XaaS) and platform-based business models are becoming the center-of-attention for investors and shareholders. Digital marketplaces are also evolving in the energy sector. In fact, the current study found that startups associated with XaaS, platforms, and marketplace activities are attracting the majority of investors and funding programs. From a theoretical point of view, the study has provided the main motivations and enablers behind the energy sector servitization. The findings could serve as an initial methodological framework to analyze services in the energy sector, putting service business models and startups into focus.

A Quest for Fit: Interplay of Service Market Strategy and Business Model Innovation

Product providers have increasingly embraced services alongside their product offerings in order to improve performance. Yet, it remains unclear how this change in the market strategy and the underpinning innovation in the business model – the activity system design –jointly create value. Relying on 12 case studies of product providers that shifted to providing highly sophisticated service offerings – outcome-based contracts – we derive theoretical propositions regarding the interplay of service market strategy and business model innovation on value creation. The product providers we studied report two interdependent changes that they pursue to secure the required fit; they evolve the market strategy from pure products to outcomes so as to achieve a better fit with the client’s needs and to grow the service business. In parallel, they ‘open up’ their business models to maintain the internal activity system’s fit with their core competencies while relying on ecosystem partners for activities outside the pr...

Only the Brave: Product Innovation, Service Business Model Innovation, and Their Impact on Performance

Recent empirical findings concerning the performance effects of service business model innovation (servitization) and its interplay with product innovation are mixed. Using the lenses of the demand‐based view on value creation and complementarity, the performance impact of two key service business models is examined: the product‐oriented model and the customer‐oriented model, implemented jointly with product innovation. Results indicate that the interplay between service business model innovation and product innovation results in long‐term performance benefits coupled with a degree of short‐term performance sacrifice. Service business model innovation in isolation from product innovation results in short‐term profit gains but long‐term knowledge loss and, thus, market performance decline. Our study suggests that firms need to look beyond the evidence on short‐term effects in order to achieve superior performance in the long run.

Steering Manufacturing Firms Towards Service Business Model Innovation: Embracing Indicators that Reflect Market Performance

Increasingly, manufacturing firms are turning to services as a new way of creating and capturing value. Despite the potential benefits, evidence suggests that many new product-service providers struggle to deploy service activities effectively, not least because they fail to reflect the presence of service activities in their performance management systems (PMS). This paper reports the results of an in-depth case study, which examines how manufacturers can steer the transition towards services. Our findings suggest that manufacturing firms need to emphasize two separate but related dimensions of the market performance of service activities: 'service adoption', reflecting the proportion of customers who purchase the manufacturer’s services, and 'service coverage’, signaling the range of service elements or the comprehensiveness of the service contract that customers opt for. These two indicators, reflecting service market performance, should be supplemented with a 'complementarity index’ designed to disclose whether the relationship between products and services is reinforcing or substitutive. This is particularly important, since a common concern expressed by manufacturers is that increasing their service activities may cannibalize their product activities. Combined, these indicators allow manufacturing firms to deploy a service-based business model in an integrated and sustainable manner.

Servitization: Disentangling the Impact of Service Business Model Innovation on Manufacturing Firm Performance

Servitization: Disentangling the Impact of Service Business Model Innovation on Manufacturing Firm Performance

Steering Manufacturing Firms towards Service Business Model Innovation

Increasingly, manufacturing firms are turning to services as a new way of creating and capturing value. Despite its potential benefits, many new product-service providers struggle to deploy service activities effectively, not least because they fail to reflect the presence of service activities in their performance management systems. This article reports the results of an in-depth case study, which examines how manufacturers can steer the transition towards services. It shows that manufacturing firms need to emphasize two separate but related dimensions of the market performance of service activities: “service adoption,” reflecting the proportion of customers who purchase the manufacturer's services; and “service coverage,” signaling the range of service elements or the comprehensiveness of the service contract that customers opt for. These two indicators, reflecting service market performance, should be supplemented with a “complementarity index” designed to disclose whether the relationship between products and services is reinforcing or substitutive. When combined, these indicators allow manufacturing firms to deploy a service-based business model in an integrated and sustainable manner.

Servitization: Disentangling the impact of service business model innovation on manufacturing firm performance

As manufacturing businesses operate in an ever more competitive, global economy where products are easily commoditized, innovating by adding services to the core product offering has become a popular strategy. Contrary to the economic benefits expected, recent findings pinpoint implementation hurdles that lead to a potential performance decline, the so-called ‘servitization paradox’. In this paper, we analyze this paradox by disentangling the value creation and value appropriation processes of 44 national subsidiaries of a global manufacturing firm turned product-service provider, in the 2001–2007 period. Our findings show that the firm under study is able to successfully transcend the inherent substitution of products by services and to enact complementary sales dynamics between the two activities. Moreover, labor-intensive services such as maintenance, which imply higher levels of customer proximity, further enhance product sales. Empirical results also reveal a positive yet non-linear relationship between the scale of service activities and profitability: while initial levels of servicing result in a steep increase in profitability, a period of relative decline is observed before the positive relationship between the scale of services and profitability re-emerges. These findings suggest the presence of initial short-term gains but also indicate the existence of a ‘profitability’ hurdle; profitable growth seems feasible only to the extent that investments in service capability are translated into economies of scale. In helping to clarify the performance implications of service innovation, our findings suggest pathways to sustainable growth through servitization for manufacturing firms.

Servitization: Disentangling the Impact of Service Business Model Innovation on the Performance of Manufacturing Firms

As manufacturing businesses compete in an ever more competitive and global economy where products get easily commoditized, innovating by adding services to the core product offering has become a highly popular strategy. Contrary to the expected strategic and economic benefits, recent findings warn of implementation hurdles that lead to a potential performance decline, the so-called 'service paradox'. In this paper, we analyze this paradox by disentangling the value creation and value appropriation processes of 44 subsidiaries of a multinational manufacturing firm that has been successfully developing an after-sales service business. Empirical analysis reveals that products and services act as revenue complements, thereby managing to transcend the inherent substitution of products by services. In addition, more labor-intensive services, which imply higher levels of customer proximity, further enhance product sales. Finally, our findings reveal a positive yet non-linear relationship between profitability and the scale of service activities: while initial levels of servicing result in an increase in profitability, a period of relative decline is observed before the positive relationship between the scale of service activities and profitability unfolds again. While these findings suggest the presence of initial short-term gains, they also indicate the presence of a 'profitability' hurdle; sustainable (profitable) growth seems feasible only to the extent that investments in service capabilities are translated into economies of scale. In helping to clarify the performance implications of service innovations, our findings suggest pathways to sustainable growth for manufacturing firms.