Service Orientation in Manufacturing Firms : Understanding Challenges with Service Business Logic

Globalisation and competition from low-cost countries has pushed manufacturing firms towards offering services to remain competitive. However, increasing the service orientation of a manufacturing firm to find new ways of value (co-)creation has presented several challenges, such as the fact that services do not provide the expected revenues, and resistance from both the sales force and from customers towards services. The aim of this thesis is to understand challenges linked to increasing service orientation in manufacturing firms, by means of goods and service business logics. The thesis emphasises the three dimensions of business logics – value perspective, service business strategy, and service offering – and studies them empirically in service divisions in the pulp and paper industry and in the automotive industry. The findings show that firms with inconsistency between the three dimensions face certain challenges. Most often, the firms have a value perspective of goods business logic, but a service business strategy and a service offering of service business logic. Therefore, the most important and most difficult challenge to overcome in order to increase a manufacturing firm’s service orientation is the employees’ value perspective. Three service manoeuvres were key to overcoming this challenge: changing employees’ mind-sets, starting to value services, and separating products and services. Although separating products and services could be assessed as a service manoeuvre consistent with goods business logic, it facilitated an increased service orientation. The fact that goods business logic manoeuvres led to a higher degree of service orientation, whereas service business logic manoeuvres did not always do so, is discussed as a service orientation paradox.