The Servitization of Manufacturing: An Empirical Case Study of IBM Corporation

Servitization is one of the most key strategic choices for manufacturing firms in developed economies. Today, manufacturing firms, especially high-tech industries are under massive pressure and realize the difficulties to achieve desired profit from only selling goods, which forces them to respond by moving up value chain, seeking to innovate and create more sophisticated products and services so that they do not have to compete on the basis of cost alone (Porter and Ketels, 2003). In these circumstances, many leading companies, such as GE, IBM, Rolls Royce, Fujitsu, Siemens, and so on have already started to sustain themselves on the basis of value delivered by shifting their market share from manufacturing to more product-service-oriented systems. This value chain concept, first introduced by Vandermerwe and Rada in the late 1980s, is now widely recognized as the process of creating value by adding services to products (servitization). But, servitization is not an easy strategic choice that a manufacturer needs to carefully design its services. In order to succeed with servitization, manufacturer is likely to need some new and alternative organizational principles,

structures, and processes. Wise and Baumgartner (1999), Oliva and Kallenberg (2003), and Weeks (2009) claimed that to implement a servitization strategy successfully, organizations are required to change their strategies, operations and value chains, technologies, peoples for supporting cultural shifts in the organizational blueprint, and system integration capabilities. However, commentators have strongly recommended that companies need to maintain a constant flow of innovation, not only in terms of what is offered to the customer, but also in how products and services are designed, produced, delivered, and marketed (Bititci and Martinez, 2003; Martinez and Bastl, 2010). Therefore, when engineers design products try to design services, they encounter difficulties such as a lack of organizational resources. Thus, the transition from a product-centric vision to a product-service-centric or customer-centric vision is still poorly understood and remains a new and complex concept.

In this paper, we have discussed the general concept of servitization and provided an idea of process transition how a pure manufacturing company can engage in product- service operations even there is no actual journey process for achieving those opportunities. However, there are many literatures and theoretical discussion available in the general field of strategic organizational change, but there are no models specific to the issue of servitization as a change process.

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(Author: Zahir Ahamed, Takehiro Inohara, Akira Kamoshida

Published by Sciedu Press)