Creating value in servitization through digital service innovations

Servitization increasingly requires the use of digital technologies such as the Internet of Things (IoT), cloud computing, and predictive analytics. This paper investigates digital service innovations (DSIs) that use these technologies. Using a service innovation lens, it is distinguished from most prior servitization research through specifying DSIs from incremental to radical modes, rather than measuring service innovation on self-reported scales. Data were collected using expert interviews and secondary sources from 20 manufacturers from four sectors. Using changes from baseline service offerings, the study identified nine DSIs with varying degrees of innovativeness. The paper develops a framework within which each DSI can be placed, with two axes representing innovation mode (incremental, intermediate, radical) and impact of innovation (customer, manufacturer, hybrid). This latter dimension addresses concerns about the lack of focus on customer value in prior service innovation research. The study also develops a new typology of DSI groupings (Business enabler, Service enhancement, Digital service offering) demonstrating that DSIs have mainly enabling or service enhancing roles for manufacturers rather than one that is predominantly designed to create digital service offerings. The exceptions are ‘predictive maintenance’ and ‘process improvement’, which are radical/intermediate DSIs respectively and provide strong value for both manufacturers and customers.