Keywords

1 Introduction

The growing digital disruption across industries is blurring boundaries and forcing industrial enterprises to improve their agility and responsiveness to gain ability to manage the whole value-chain. Recent research suggests that the application of digital technologies (DTs) can further advance servitization by enabling sophisticated and novel service offerings [1, 2]. In fact, the adoption of digital technologies such as the Internet of Things (IoT), Data and Analytics, Artificial Intelligence can alter the features of the delivered services significantly [3,4,5] and enable novel business models [6], thus, reshaping industry competition [7]. Indeed, DTs shape servitization strategies, structures and activities aiming at increasing the service delivery efficiency and value of service offerings [1]. For instance, KONE, one of the largest global elevator companies, developed, sophisticated condition monitoring and predictive maintenance services together with IBM. Both these services are based on IoT technology and have resulted in lower downtime and speed up equipment restoration [5].

The convergence of DTs and servitization is called digital servitization and refers to the development of new services and/or the improvement of existing ones through the use of DTs by enabling new digital business models, finding ways of co-creating value, generating knowledge from data, improving a firm’s operational performance and gaining competitive advantage over rivals [8, 9] and received lots of attention over the last years from the research community and practitioners. Despite the phenomenon’s growing relevance, the issue of defining how digital servitization changes a company’s strategy, processes, and culture remains unexplored [10].

Evidence shows that organizations often struggle with understanding the impact of digital servitization on their business and industry [9]. One key barrier is their inability to decide where to begin their own transformation process. To date, to the best of our knowledge, the existing research has not provided tools, such as maturity models for practitioners to master this transformation. Specifically, more attention has to be focused on helping organizations to decide when and why they need to take an action to progress and teaching them which actions should be considered. The introduction of such maturity model in the digital servitization, could therefore allow managers to position and compare their current state to the best-practices in related business fields and map their new strategy accordingly, which will increase the firm’s overall performance.

Hence, the aim of our research project is to develop a maturity model (MM) that can ease the decision making, and assess the digital servitization maturity in manufacturing companies based on highly relevant requirements. To achieve our goal, we follow the maturity development process of [11] and aim to answer the following two research questions:

  • RQ1: What are the key requirements for digital servitization in manufacturing?

  • RQ2: What stages can be observed in the process of digital servitization?

In pursuit of answering the two research questions, our paper is structured as follows. Section 2 sets the theoretical background. Section 3 describes the research method, and Sect. 4 presents the maturity model for digital servitization. Section 5 discusses the findings and suggests avenues for further research.

2 Theoretical Background

Technologies and software have been inherently involved in servitization since its infancy [12], shaping servitization strategies and structures. For example, Rolls-Royce has used a variety of sensor-based technologies to facilitate smart solutions [2, 4]. However, the role of technology was neglected in the early servitization literature, and for a long time these issues were investigated separately either focused on the customer value or manufacturing process value [13]. The increasing interest, both from practitioners and scholars, on the convergence of digital transformation and servitization has set the path for a new phenomenon, named digital servitization, to flourish.

Digital servitization refers to the development of new services and/or the improvement of existing ones through the use of digital technologies, by enabling new digital business models, findings ways of co-creating value, generating knowledge from data, improving a firm’s operational performance and gaining competitive advantage over rivals [1, 8, 9, 14, 15]. It is seen as profound and fundamental change that affects multiple business units within the organization, e.g. strategy, processes, organization and culture, etc.

Although, the phenomenon of digital servitization has been of a great interest for researchers of various disciplines the last years [16], its transition and implementation seems far from easy, creating numerous challenges. Since this transformation is not a linear process, there are different courses of actions. Evidence shows that enterprises often struggle to decide where to begin their own digital servitization journey and no tools are provided, such as maturity models, for practitioners to master this change. It would be beneficial for managers to know about these difficulties, in order to make an informed decision about prioritizing between different steps and to lay the foundation for successful change.

Descriptive models (maturity models) for practitioners need to be developed to support companies towards their digital servitization journey by defining how the adoption of digital technologies changes the whole organization in practice [10, 17]. Therefore, we need to know more about how companies actually face such a transformation, what makes them successful, and how organizations approach their transformation. A maturity model provides some guidance in this respect, since it gives an overview of the different areas and maps out typical paths of how organizations go about their digital servitization.

According to [11], maturity models consist of a sequence of maturity levels for a class of objects and represent an anticipated, desired, or typical evolution path of these objects shaped as discrete stages. Their application enables firms to achieve competitive advantages [18], by generating awareness of the analyzed aspects (their state, importance, potentials, requirements, complexity), and by serving as reference frame to implement a systematic and well-directed approach for improvement, ensuring a certain quality, avoiding errors, and assessing one’s own capabilities on a comparable basis. There are several MMs but in this study, we use the Capability Maturity Model, which defines a set of process areas that reflect organizational capabilities which have to be developed to achieve the maturity goal of the service development process. [19], as the main reference due to its wide acceptance in industry.

The development of a MM entails critical requirements that occur throughout the digital servitization process and should be rooted in both scientific grounding and practical relevance. In the case of digital servitization, these critical requirements also impact the manner that a company relates to the other chain elements such as customers, partners, competitors [20] and internal relationship changes. Hence, this study has identified four main dimensions (strategy, customer experience, business processes, organization and culture) to analyze how they should be considered during the digital servitization process of manufacturers. The four dimensions were defined by using the St.Gallen Business Engineering Map as a guide to group the critical requirements within the same type of relationship. The critical requirements for all the dimensions are obtained from the literature and are used to create an initial concept of the maturity model.

3 Research Methodology

Our research aims at developing a MM for digital servitization in manufacturing. The development of MMs is established [21], and numerous models for a variety of purposes have been developed [11, 22]. In contrast to the large number of MMs, the research on how to develop these models is rather sparse [11]. We identified the two popular development processes [11, 21], as it is indicated by literature, on how to conduct MM design. We decided to apply [11] to develop our MM since they follow a Design Science Research (DSR) development process according to DSR guidelines [23]. Despite [11] propose a seven-step development process, we decided to reduce the complexity of the model by merging three process steps (the conception of transfer and evaluation, the implementation of transfer media and the evaluation) into one, the evaluation step. In addition, we incorporated the “determination of a development strategy” in the second step, the comparison process, because it is based on its results. The procedure applied in our research consists of four steps, and we describe each of them in Table 1 according to the tasks performed and the techniques used.

Table 1. Procedure model.
Full size table

In the first step (Problem identification), we specified the research problem and focus of the MM, provided its practical relevance and justified the value based on an initial literature review and exploratory interviews with experts to get better insights.

Based on the problem identification, in the second step (Comparison of existing MMs), we gather requirements by conducting a systematic literature search using the Scopus database, which is widely acknowledged as a world leading source and provides the best coverage in this research field. We applied the search combination of servitization (“servitization”, “product (-) service system* (PSS/IPSS)”, “integrated solution*”, “service transformation”, service infusion”) and different terms for digital transformation and technologies (“digital technology/ies”, “digitization”, “Artificial Intelligence”, “Big Data”, “Cloud”, “Digital Technologies”, “digitalization”, “Industry 4.0,” Internet of Things”, etc.). The search, between 2000 and 2019, yielded 86 usable articles. These articles were used to derive an initial list of requirements, which was structured according to the four MM dimensions derived in the theoretical background section. For the coding process the software Atlas.ti was used. Moreover, we operated a second literature review (using keywords such as “digital servitization”, “servitization”, “business/enterprise/organizational transformation”, “digital transformation”, “assessment model”, “maturity model”) to identify any shortcomings or lack of transferability of existing MMs, which are devoted to same or similar domains. In particular, 16 studies emerge from the field of servitization, [22, 24] and 11 from digital transformation. Subsequently, we analyzed the MMs according to their domains and functionalities as well as their capability to address the defined research problems.

In the third step (Model development), we used model adoption mechanisms [25] in the rigorous creation of a MM (structure and content). After formulating the model, the study sought expert opinions to confirm support for the model. Emails with a questionnaire to guide open conversations were sent to ten individuals, academics and practitioners involved with digital servitization for over a decade. There were six respondents who provided in-depth feedback through interviews regarding the model, which had a duration of 60-120 min each one. The majority of the responses acknowledged the importance of evaluating manufacturers’ use of digital servitization and supported the overall structure of the model. Comments included suggestions for definition of stages, notes about wording, suggesting the possibility of needing less stages, need for clarifying requirement description, questions about how the model will be measured and by whom, and proposing extra dimensions/requirements. These opinions were taken into consideration and the model was revised accordingly in order to be more precise and complete.

During the last step (Model evaluation), we evaluated the comprehensiveness of the model, validity in self-assessment and the capability of supporting the future development of a roadmap with the same experts, discussing the final version of the MM. Table 1 describes the steps according to the tasks performed and the techniques used achieved in complementing our research.

4 Proposed Digital Servitization Maturity Model

4.1 Dimensions and Requirements of Maturity Model

The identified requirements both from literature and expert interviews were summarized in four dimensions. For each dimension, the corresponding maturity criteria were defined, which describe the fields of action. Activities in these fields show the penetration of digital servitization maturity. Hence, we employed “Strategy”, “Customer Experience”, “Business Processes” and “Organization and Culture” as dimensions that serve not only as a conceptual basis but for collecting the exploratory identified requirements but also as a theoretical lens for the MM (see Table 2).

Table 2. Identified dimensions and maturity criteria in the individual steps of the study.
Full size table

The Strategy of digital servitization is embedded within the overall business strategy and focuses on how the business transforms or operates to increase its competitive advantage through digital initiatives in service. “Strategic Orientation” was identified as an important prerequisite for digital servitization and it refers to the exploitation of the overall growth strategy aiming at developing digital service offerings and innovating the company’s portfolio by keeping its heritage [26, 27]. “Business Model”, another critical requirement, refers to the different technology-enabled business models that facilitate firms to achieve a competitive advantage by providing customer knowledge-based digital service offerings during the entire product life cycle [27, 28]. In addition, “Digital Service Offering” applies to the enrichment of the existing but also the creation of totally new service offerings enriched by digital technologies that bring digital and physical systems together creating customer value and revenue streams [20]. The last requirement of this dimension is the “Digital Service Ecosystem” and makes reference to the relationship between the company and business partners (R&D organizations, technology incubators, startups), enabled by platforms, which aims at gaining access to resources such as technology intellectual property, or people to increase the organization’s ability to improve, innovate and grow, balancing security and privacy needs with the ability to flex capacity according to business demand [9, 29].

Customer Experience focuses on the necessity of considering customers’ needs and interests as the basis for developing digital service offerings. The first requirement, that we identified is the “Customer Centricity” and deals with a set of procedures and practices for assessing closer customers’ preferences and continuously evolving needs on digital service offerings, to enhance the competitive position and strengthen customer relationships [13]. Experts stressed the “Customer Trust”, which refers to how the customer’s trust is build and how the perceived risks (functional, psychological/safety, privacy) are evaluated by them [30].

The dimension of Business Processes contains the way of executing and evolving a company’s operations by using digital technologies aiming at driving strategic management and enhancing service business efficiency and effectiveness. The first requirement is “Production” and indicates the way processes are executed, monitored and managed. It consists of internal processes (the way inputs are transformed to outputs, products and services are integrated through digital technologies to create value for the customers and end users), supply chain orchestration (the way the firm employs digital technologies to manage the value network of all actors and individuals that interact to deploy resources and applied competences in order to create value) and digital innovation (practices based on digital technologies that support research, design, and development of new product-service offerings) [8, 10]. “Marketing” requirement include the pricing, the process whereby a business sets the price at which it will sell its digital service offerings and value co-creation, which occurs through interactions among providers and customers by integrating resources and applying competences [31]. “Human Resources” requirement depicts to services provided by an HR department to business operations. HR operations include administrative services, recruitment, job analysis, and employee relationship management [15].

Organization and Culture dimension defines and develops an organizational culture with governance and talent processes to support progress along the digital servitization maturity curve, and the flexibly to achieve growth and innovation objectives. “Digital Service Business Mindset and Culture” describes the diffusion within the companies of a mental model that is oriented towards digital service culture: the company needs to change mental model to view digital service offering as a business logic and perspective on value creation [15]. Furthermore, “Governance and Leadership” refers to the efficient and effective decision making processes which define the expectations, systems and management of projects related to digital servitization [8]. Another significant requirement is the “Organization Design and Talent Management” and cites the transformation of the internal organizational structures by establishing dedicated team/roles/persons for the development of digital service offerings in light of new competitive pressures [15]. The final requirement is the “Competences”, which treats higher and diversified competences that employees need to develop by acquiring new knowledge and ways of working to encounter increasingly interactive tasks, take data-driven decisions, understand customer’s problem and interpret its real needs [32].

4.2 Maturity Levels

To define the digital servitization MM phases we used as main reference the MM processes of [19]. For simplicity in this study, we use three maturity stages (see Tables 3a, b and c), which were deduced from the items in each dimension.

Table 3. Maturity model for digital servitization.
Full size table

Level 1

– Beginner is a maturity level where a company has some pilot strategy initiatives and offers base services. The usage level of digital technologies in business processes (production, marketing, HR) is low. Flexibility, integration and collaboration with partners are at low level as well. The customer interaction is distant, while there is a low attitude towards digital servitization. The organization structure and people are not prepared enough for this transformation.

Level 2

– Experienced is a maturity level where a company is implementing digital servitization and offers intermediate services. Digital technologies are used in a moderate level in the different business processes the ecosystem is getting digitized while the collaboration is becoming closer. The customer is integrated in the design phase already and the general attitude is encouraged towards the new transformation. The organization structure is suitable for initial projects and people for specific units that have digital servitization projects have the necessary competences.

Level 3

– Leader is a maturity level where a company has implemented digital servitization, has a comprehensive vision and offers advanced services. The usage level of digital technologies is high both in the business processes and business models. There is a fully digitized, integrated partner ecosystem built on a flexible and integrity architecture. There is an intimate relationship and personalized communication with the customer while the attitude is comprehensive and promotes digital servitization. The organization structure is well structured and digital competences are prevalent in the whole company.

5 Discussion and Conclusion

Although, evidence show that manufacturing companies struggle with comprehending the impact of digital servitization and how to master it, little attention has been devoted so far in developing a tool that can be used from practitioners. This study presents the development of a new maturity model, that based on specific requirements identified in digital servitization literature and expert interviews, can be used as a management instrument to analyze the current set-up, by assessing the maturity level of strategy, business processes, customer experience, organization and culture. Three levels of maturity have been outlined, and the model constitutes the main contribution of our research, since, to the best of our knowledge, no such kind or model exists for digital servitization in manufacturing.

Coping with the challenges of digital servitization is of considerable interest to both researchers and practitioners. Initially, it provides a theoretically grounded, methodologically rigorous development of a maturity model for digital servitization in manufacturing companies. The value of the presented model, in research, resides in the combination of scientific rigor, practical relevance, and direct applicability. The tool is also directly applicable because of its extensive documentation and it describes its scope, purpose of use, and structure (maturity levels, dimensions, requirements). Even if the model has little normative power, it can favor the identification and prioritization of the improvement actions, as they emerged from literature and interviews.

The developed maturity model for digital servitization can be used by managers to inspire, establish trust, build consensus and communicate. First, managers can use the model by asking what they could learn from the others’ experiences in different organizational contexts. The objective is to avoid mistakes already made by others and benefit from accumulated experiences identified in literature. The maturity model, in this way, supports managers to identify their requirements with low maturity that they need to be improved and provides them with inspiration on how to incrementally improve digital servitization. Second, the development of digital servitization requires significant high investments, for which the approval of top management is mandatory. To receive such approval, it is essential to convince decision makers that these investments are urgent and will pay off. Therefore, the model can help to create trust, that investments in digital servitization will pay off, and gain top management’s support. Third, the success of fundamental business transformation depends on the existence of a strong consensus and a clearly defined and well-executed digital servitization strategy. The basis for consensus and a shared assessment of the as-is situation is a shared language and consolidation of diverse perspectives. The maturity model encompasses a number of dimensions and requirements, along with their definitions. Hence, it provides a shared language that facilitates the structure exchange of perspectives. Finally, tangible evidence of the current state of digital servitization is needed both at the corporate level but also by those who are responsible for developing this phenomenon. By capturing the maturity stages at different times, the model provides the means for continuously communicating any improvements. Consequently, the developed maturity model is a tool which enables internal awareness not only for the strengths but also the areas that need improvement. The model shows what has already been achieved and allows to track back success to understand the contributions of each individual.

Although this paper produced some interesting and useful finding, we would like to point some limitations that need to be considered when interpreting the results. The maturity model was developed to be applied in manufacturing sector. Thus, it cannot be applied across various industries. Furthermore, it is based exclusively on literature and a number of expert interviews, which makes it conceptual and for that reason, further research could involve more experts, divided into academics and practitioners, aiming at completing the requirement list considering different perspectives. We also acknowledge that even though the maturity stages have been carefully developed, based on literature and interviews, a testing and final evaluation of the tool with empirical cases are missing.