The path to outcome delivery: Interplay of service market strategy and open business models

Visnjic, Ivanka and Neely, Andy and Jovanovic, Marin (2018). The path to outcome delivery: Interplay of service market strategy and open business models. "Technovation" ; ISSN 0166-4972. https://doi.org/10.1016/j.technovation.2018.02.003.

Description

Title: The path to outcome delivery: Interplay of service market strategy and open business models
Author/s:
  • Visnjic, Ivanka
  • Neely, Andy
  • Jovanovic, Marin
Item Type: Article
Título de Revista/Publicación: Technovation
Date: 10 April 2018
ISSN: 0166-4972
Subjects:
Freetext Keywords: Service market strategy, Open business models, Outcome-based contracts, Service innovation, Servitization
Faculty: E.T.S.I. Industriales (UPM)
Department: Ingeniería de Organización, Administración de Empresas y Estadística
Creative Commons Licenses: None

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Abstract

Firms in a variety of manufacturing sectors as well as the software industry have increasingly embraced services alongside their product portfolios in order to improve financial performance. Yet, the key question “How do service market strategy change and the accompanying business model change interact, and how does their interplay affect value creation?” remains open. Relying on twelve case studies of firms that have shifted towards providing highly advanced services (e.g. outcome-based contracts), theoretical propositions concerning the interplay of market strategy and business model on value creation are derived. The firms studied report two interdependent changes: first, they evolve the market strategy from provision of pure products to provision of services and then outcomes, in order to achieve a better fit with customer needs and to grow their service businesses. Second, they rely increasingly on partners and suppliers to provide new activities that are outside their competence base. This 'open business model' allows them to grow their new service businesses effectively and efficiently. At the same time, however, the shift to a service market strategy requires enhanced accountability to customers and increases the threat of penalties in the case of failure, while reliance on partners and suppliers leads to loss of control over the activity system and increases the threat of failure due to third party dependency. Thus, this paper finds that the success of firms that shift to services and outcomes hinges on their ability to balance the trade-off between increased value (i.e. growth, efficiency and effectiveness) and increased uncertainty associated with service market strategy/open business model interplay.

More information

Item ID: 50862
DC Identifier: http://oa.upm.es/50862/
OAI Identifier: oai:oa.upm.es:50862
DOI: 10.1016/j.technovation.2018.02.003
Official URL: https://doi.org/10.1016/j.technovation.2018.02.003
Deposited by: Mr Marin Jovanovic
Deposited on: 18 May 2018 06:40
Last Modified: 18 May 2018 06:40
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