We explain ‘servitisation’ in chapter 14. Had there been enough space in our book, we would have included a whole chapter on it. As it is, we try to blog about it here in order to keep you informed.
So we are most interested to see the recent Journal of Operations Management article by Kastalli and Van Looy – “Servitization: Disentangling the impact of service business model innovation on manufacturing firm performance”. This examines in depth 44 subsidiaries of an international manufacturer, over a six year period, in order to understand the contribution new services made to the overall performance of the firm. What emerges is complex. Short term gains in profit are observed, but as the level of service provision increases, these decline – until the firm is able to put in place some economies of scale.