Paths Toward Radical Service Innovation in Manufacturing Companies:A Service‐Dominant Logic Perspective

Research on servitization of manufacturing companies concentrates on typologies of product–service bundles, on transition pathways to increased servitization, and on resource and capabilities configurations necessary to accomplish this transition. Missing from existing research is an analysis of the degree of novelty of service innovations introduced by manufacturing companies. Therefore, this article shifts the focus from the transition process itself to the question of how manufacturing companies can introduce radical service innovations to the market. This article links servitization literature with service innovation literature and investigates how manufacturing companies can introduce radically new services in terms of three forms of innovations: service concept innovations, customer experience innovations, and service process innovations. Service-dominant logic (SDL) is applied as the theoretical lens because it covers four significant factors influencing the success of companies’ innovation activities: actor value networks, resource liquefaction, resource density, and resource integration. Based on a multiple case study of 24 Danish business-to-business manufacturing small- and medium-sized enterprises and through a fuzzy set qualitative comparative analysis, different configurations of the principles of SDL are analyzed. They describe the paths to radical service innovation. Digitalization appears as a central causal condition in the bulk of the configurations. Big and rich data generated internally within the focal company in combination with for instance customer data can enhance the innovativeness of the service offerings. However, digitalization is not a sufficient condition for launching radical service innovation—it should be combined with an efficient mobilization of resources internally within the focal company and/or collaboration with other organizations within the value system. In addition, the analysis hints to a need to detach from immediate customers as the prime driver of service innovation.</p

BUSINESS MODEL INNOVATION – A GAMBLE OR A MANAGEABLE PROCESS?

Purpose:&nbsp;Any business model innovation process involves a certain level of uncertainty, complexity and, in effect, risk. A sloppy approach towards the management of risk may result in catastrophic, sometimes even fatal, consequences to a company’s core business. Although risk, risk appetite and risk management are relatively well-established concepts, their role in business model innovation is not well understood. The objective of this paper is to investigate how the risk associated with the innovativeness of a business model innovation, an organization’s risk appetite, and its risk management approach interact to affect the success or failure of a business model innovation process. Design:&nbsp;Retrospective case studies of business model innovations undertaken by three industrial companies provide the empirical basis for this paper. These companies were selected based on their relatively successful, yet somewhat different, business model innovation experiences over the years, and focused on the, in total four, cases in which they failed to implement their new business model attempts successfully. The reasons that led to these failures are discussed. Findings:&nbsp;Important factors explaining the business model innovation failure of these cases, appear to be the company’s risk appetite, the risk associated with the radicality, reach and complexity of the business model innovation, the management of risk, and especially the association between these factors. Originality:&nbsp;&nbsp;There are many lessons to be learnt from the aftermath of a failed attempt in terms of what not to do and what to improve a next time. The cross-case analysis produced six testable propositions&nbsp;that enhance our understanding of business model innovation success/failure, with particular focus on: characteristics of the business model innovation; overall innovation management; risk, risk appetite and risk management; and interactions and fit between these constructs. Keywords: Business Model Innovation; Risk Management; Retrospective case studies