Service transitions of product-centric firms: An explorative study of service transition stages and barriers in Germany’s energy market

Abstract

Although there is a rich body of empirical research that uses specific service offerings (e.g. product-related and customer-related services) as proxies for the extent of servitization, the results are inconsistent. We investigate service transitions from an innovation management and resource-based perspective, assessing the service transition stages through the service offering type, service innovativeness and the extent of invested internal and external resources. We use a qualitative approach based on interviews of managers from 19 energy utilities in Germany and complementary longitudinal secondary data. We identify three service transition stages: 1) service initiation, 2) service anchoring and (3) service extension. The findings indicate that firms concurrently experiment with different service offerings and that their services' innovativeness steadily increases during service transition. We contribute to servitization research by identifying barriers in each of the service transition stages that prevent product-centric firms from achieving a higher service transition stage. While in the service initiation stage, firms may face strategy-related barriers, these are often followed by implementation-related barriers in the service anchoring stage and market-related barriers in the service extension stage. To overcome strategy-related barriers, our results indicate that firms should balance their product-oriented and service-oriented business model and can benefit from developing a clear strategic intent with relevant service offerings. We further find that implementation-related barriers can be overcome by establishing a service-specific innovation process. To overcome market-related barriers, the findings indicate that firms should integrate customers and external partners in the service innovation ecosystem