Equipment upgrade service provision in the context of servitization: drivers, capabilities, and resources

Abstract

Building on manufacturing servitization, midlife equipment upgrade services introduce a value-adding alternative to traditional, capital intensive and time-consuming equipment replacement. Midlife upgrades improve the performance of and add new functional capabilities to an equipment during its middle-of-life to satisfy customers’ evolving preferences. Recent explorative studies report a low adoption of this strategy in industry and attribute this to the limited strategic awareness and readiness of manufacturing firms. This study addresses this gap by, (i) revealing three sets of drivers (strategic, market, financial) that prompt manufacturers to offer equipment upgrade services; (ii) identifying distinctive capabilities and resources that are key to generate successful upgrade offerings leveraging the resource-based view as a theoretical foundation; and (iii) integrating the drivers, capabilities, and resources into a framework that manifests different stages of industrial service development process, namely, market sensing, development, sales, and delivery. Our novel framework provides a foundation for researchers to test, refine, and expand on why manufacturers provide upgrade services and how upgrade service offerings can succeed on the marketplace. Our framework can serve as a benchmarking tool to guide managers to identify capability gaps and prioritize capabilities to develop and offer successful upgrade offerings.

Keywords:

• Servitization
• product-service systems
• service innovation
• new service development
• product lifecycle management
• circular economy
• smart manufacturing
• Industry 4.0

Acknowledgements

The authors thank the anonymous reviewers for their valuable and constructive feedback that helped to improve the manuscript significantly.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Muztoba Ahmad Khan

Muztoba Khan is an Assistant Professor of Business at Carroll University. His primary research interests are in topics that arise from the convergence of manufacturing, digital transformation, and business model innovation. He takes an interdisciplinary perspective to study the two emerging trends in manufacturing: (i) servitization, i.e. the shift from selling products to selling integrated Product-Service Systems (PSS), and (ii) industry 4.0 adoption. He has published original research in high impact journals and peer-reviewed conferences—including 17 publications and more than 1100 citations to date. His research appears in the Journal of Cleaner Production, International Journal of Production Research, CIRP Journal of Manufacturing Science and Technology, Journal of manufacturing systems, among others. He is also serving as an associate editor for the IET Collaborative Intelligent Manufacturing journal since November 2020.

Oliver Stoll

Oliver Stoll is a research associate at Lucerne University of Applied Sciences and Arts and PhD student at Glasgow Caledonian University. He researches in the field of digitally-enabled product-service systems focussing on the development of management frameworks to successfully manage such complex systems. His focus is to design and understand industrial value systems in the age of digitalization. His research is in close collaboration with industrial partners involving him in multiple projects related to such systems.

Shaun West

Shaun West gained a PhD from Imperial College in London, then worked for over 25 years in several businesses related to industrial services. He started his industrial career with AEA Technology before moving to National Power, where he developed and sold services to external businesses. After studying at HEC (Paris) for an MBA, he moved to GE Energy Services, modelling and negotiating long-term service agreements. At Sulzer, he drafted the strategy that led to the service division tripling in size over 10 years and executed part of the strategy by acquiring a 220M CHF service business. Now at the Lucerne University of Applied Sciences and Arts, he is the Professor of Product-Service System Innovation. He focuses his research on supporting industrial firms to develop and deliver new services and service-friendly business models. He is a member of the advisory board for the ASAP Service Management Forum and a member of the Swiss Alliance of Data-Intensive Services. He lives close to Zurich with his wife and two children. He climbs, skis, and runs.

Thorsten Wuest

Dr. Thorsten Wuest is an associate professor at West Virginia University and globally recognized as one of SME’s 20 most influential professors in smart manufacturing. Dr. Wuest has co-authored 3 books and more than 150 refereed journal and conference articles gathering over 5,000 citations to-date. In addition to publishing his work in the premier academic outlets of his field, he was featured by Forbes, Futurism, IndustryWeek, WEF, CBC Radio, and WMF. He received several awards for his work incl. outstanding teacher of the year, SME Journal Award, and multiple best paper awards. His research is funded by NSF, NIST, DoE, TJF and others. He serves as Vice-Chair Americas for IFIP WG 5.7, Associate Editor for Robotics & Computer Integrated Manufacturing (RCIM), Smart and Sustainable Manufacturing Systems (SSMS) and the International Journal of Manufacturing Research (IJMR), on the Editorial Board for the Journal of Manufacturing Systems (JMSY) and Production & Manufacturing Research (PMR), as well as the advisory boards of Maven Machines, Veepio, Sustainment, and the WVU Industrial Extension.