Digital servitization: why products are turning into services
One of my core research interests: how firms move from selling products to selling outcomes, and what digital technologies change in that shift.
Digital servitization is one of the topics at the centre of my PhD work at the Digital Empowerment Lab, National Cheng Kung University. This post is not a summary of results. It is an introduction to the idea and to the questions I keep coming back to.
From products to solutions
The term servitization was introduced by Sandra Vandermerwe and Juan Rada in 1988. It describes firms, often manufacturers, that move from selling a product on its own to offering bundles of products and services, and eventually complete solutions. Instead of only selling a machine, a company might also sell maintenance, training, monitoring or a guarantee of how well the machine performs.
The logic is easy to follow. Services can bring steadier revenue, closer relationships with customers and something that competitors find harder to copy than a product specification.
What "digital" adds
Digital servitization is the same shift, made possible or reshaped by digital technologies: connected sensors, data platforms, remote monitoring, analytics and software that sits on top of physical products. Data from the product in use lets a firm see how customers actually use it, offer services at the right moment, and in some cases charge for results rather than for ownership.
The service paradox
The literature has also described a service paradox: firms invest in services, yet the expected financial returns do not always follow, at least not quickly. Moving into services changes how a company is organised, how it sells, how it prices and what skills it needs. Adding digital technology on top can make the change larger, not smaller.
For me this paradox is the interesting part. It suggests that the question is not only whether to servitize, but how, and under which conditions it pays off.
Questions I am working on
These are the questions that guide my reading and research. They are open questions, not conclusions:
- Which capabilities does a firm need before digital services start to create value rather than cost?
- How do digital technologies change the relationship between a firm and its customers once the sale becomes an ongoing service?
- How can we compare firms that are at different stages of this shift in a fair way?
- What does digital servitization mean for competitiveness, especially for firms in emerging markets?
Why it connects to my background
Before research, I worked in digital marketing and business development. I saw first-hand how much a customer relationship is shaped by what happens after the first purchase: content, community, support, retention. Servitization research gives me a structured way to study the same relationship from the firm's strategic side.
I will share findings here as they are published. Until then, this page is a map of what I am curious about.
Photos: mpmpix on Pixabay, used under the Pixabay Content License. These are not my photographs.
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