Digital Servitization: how Italian SMEs innovate their business model

Abstract

In the recent years Digital Servitization is gaining managers’ and researchers’ attention. 4.0 digital technologies such as Internet of Things and Big Data intersect Servitization in multiple point; digital technologies help designing innovative product-service offerings smoothing and tackling challenges related to Servitization strategy implementation. The present work aims at analyzing the effects that Digital Servitization has on firms’ business models and the innovation that derives from it. To do so, after a literature review, the research focuses on analyzing the case studies of three Italian SMEs (Galdi, Sariv, Technowrapp) that in the recent years have distinguished themselves for their approach on Digital Servitization. The first chapter deals with a literature review on Servitization; the phenomena is defined also encompassing the product-service-system approach. Features and drivers of servitization are described underlining differentiation benefits gained by manufacturers. Business model innovation for Servitization is also described, the effects on value architecture (value creation, value delivery, and value capture) are assessed. In value creation the change in perspective required is described, offerings must be developed considering both product and service design, customer-oriented activities such as needs identification and external coordination are crucial. The effects on customer relationship management are one of the most important aspects in value delivery, here it is underlined the shift from transaction-based to relational relationships with co-creation logics and long-term commitment. Regarding value capture, attention has been given to revenue model design and value retention principles. Lastly, challenges of Servitization are described, cultural hurdles are pervasive among almost all the challenges described, the danger of the service paradox is also analyzed. In the second chapter the roles of digital technologies in Servitization are defined both at the operational and strategic level. In the first section, digital technologies’ features are described as well as the product and service solutions that they enable. Strategic roles and the effects on business model are dealt with in the second section of the chapter, here the concepts of product-service continuum and how firms can position themselves along it are identified. Finally, business model architectures in a Digital Servitization perspective identified by the literature are listed. In the third and last chapter, the case studies of three SMEs located in the north-east of Italy are analyzed: Galdi, Sariv, Technowrapp. For Galdi it was possible to conduct an interview, while, for Sariv and Technowrapp preexisting interviews with firms' management have been used for information gathering. In the research the business model innovation for Digital Servitization underwent by firms are described; the value creation mindset is underlined. It was possible to understand the major challenges faced and measures developed to tackle them, moreover it is analyzed how customer relationships management changed.