Structuring Servitization-Related Capabilities: A Data-Driven Analysis

Abstract

The existing literature investigates organizational capabilities for servitization in exploratory studies based predominantly on interviews with managers. This has led to classification frameworks that tend to reflect managerial perceptions regarding key capabilities (rather than actual firm capabilities) and in which associations and connections between capabilities remain anecdotal. This study examines the servitization-related capabilities existing in manufacturing firms that have taken strategic service initiatives and adopts a data-driven approach to explore their underlying structure. A quantitative study based on secondary data from annual report narratives is used to assess the servitization-related capabilities of 79 firms from the aerospace and defense sector and to identify the underlying factors through exploratory factor analysis. The study identifies seventeen capabilities structured into five factors: (i) management of production/delivery operations; (ii) development of valuable and sustainable offerings; (iii) identification of incentives; (iv) planning for uncertainty and change; and (v) relationship management. The study provides evidence of servitization-related capabilities in practice. By examining gaps between existing (current) capabilities and the capabilities identified in our five-factor model, business managers of aerospace and defense firms can assess the status of servitization-related capabilities at their firms and set objectives to develop such capabilities further. The study contributes to the systematic development of a reasonable and parsimonious representation of organizational capabilities for servitization, which is statistically supported and validated through empirical data.