Add-on Business Model
Two distinct ‘recipes’ can lead to high performance for SMEs adopting an 'add-on' primary business model. These organisational factors are particularly suitable to manufacturers of complex products with a strong service culture. However, the first approach applies specifically to SMEs operating in challenging business environments characterised by high competitive intensity and technological turbulence.
In contrast, the second approach is independent of the external environment and emphasises the significance of organisational factors. Namely, high-performing SMEs demonstrate digital maturity and may have separated their service-related activities from their product-related ones. Both ‘successful’ paths indicate potentially mature manufacturers of complex products that became servitized, and then progressed to an add-on digital servitization business model.
Usage-Based Business Model
There are four distinct approaches that can lead to high performance for SMEs adopting a 'usage-based' business model, reflecting the diverse applicability of this model across different contexts. The common factor among all these approaches is the presence of relatively complex products.
The first approach combines product complexity with an intensely competitive environment, where the organisation has successfully nurtured a strong service culture.
The second path involves SMEs operating in an environment with unpredictable demand but relatively stable technology. In this scenario, the SMEs choose to integrate their product and service-related activities while leveraging digitalization.
The third configuration stands out as it involves limited digitalization. This lack of digital maturity may be justifiable in industries with stable technology, where SMEs with separate service organisations can compete based on price or by enhancing the product's accessibility and service features.
On the contrary, the fourth approach is almost the opposite of the third one. It involves SMEs operating in technologically turbulent environments that have invested considerably in digitalization. These organisations possess a strong service culture, which permeates their integrated product-service business.
Overall, these four approaches demonstrate how SMEs can achieve high performance in diverse contexts by leveraging different organisational factors.
Solution-Oriented Business Model
There are two distinct yet closely related configurations that lead to high-performing SMEs adopting a solution-oriented business model. Both configurations align with the context commonly associated with integrated product-service solutions, characterised by complex products and rapidly changing technology within the industry.
Unsurprisingly, both configurations require a strong service orientation among employees to be successful. Another shared characteristic is the absence of demand unpredictability, indicating a predictable demand environment for high-performing SMEs. This can be attributed to two possible reasons.
Firstly, due to resource constraints and the need for investment in the buyer-supplier relationship, SMEs may be hesitant to pursue a solution-oriented approach unless they can anticipate a predictable demand from potential solution customers.
Secondly, the absence of demand unpredictability may be a result of the tailored nature of most solutions, which requires a deep understanding of customer business, thus enabling SMEs to predict demand more effectively.
The configurations differ slightly in the following manner: the first configuration encompasses permutations involving a highly competitive environment and either a separate service unit or a digitally mature organisation. In contrast, the second configuration exclusively consists of SMEs with high levels of digitalization maturity.
In summary, it is important to recognise that a solution-oriented business model is not universally applicable and can lead to high performance only among specific SMEs within limited contexts.
Platform Business Model
Two distinct and contrasting configurations are linked with superior performance of SMEs adopting a platform business model.
The first configuration involves SMEs characterised by a strong service culture, operating in a technologically turbulent industry. Both of its permutations involve a predictable demand and weak competition. In this scenario, the market is relatively stable, and advancements in technology, such as sensors, software, and the Internet of Things (IoT), might have enabled service-oriented SMEs to continuously gather customer data and provide valuable information and services through a platform.
On the other hand, the second configuration involves a relatively complex product, and an unpredictable demand coupled with strong competition. This configuration may apply to products that have become commodities, like standard household goods, where SMEs compete against large and powerful firms.
In this case, the configuration suggests that these SMEs require a separate service unit to achieve strong performance. Additionally, they either need to establish a service culture within the organisation or have a digitally mature setup to effectively compete in the market.
Non-DS Business Model
The high performance of SMEs that have adopted a servitized approach but have not transitioned to a digitally enabled business model is associated with two significantly distinct configurations.
The first configuration comprises two permutations, where manufacturing SMEs of a complex product have an established a strong service culture. These characteristics are complemented by either a predictable demand or a relatively stable technology (and a separate service organisation).
In the second configuration, SMEs also exhibit a developed service culture; however, they have not separated their service from their product business and have not made substantial investments in digitalization. The product they offer is simple and does not involve any ground-breaking technological advancements.
Both configurations seem to depict SMEs that might be content with their competitive position within their business environment. Consequently, they may consider a move towards digital servitization as unnecessary or impractical, given their current circumstances.
Non-Servitized Business Model
Only one configuration has been found to be associated with high performance among pure product providers.
The key factor in this configuration is the presence of digitalization maturity, emphasising the value of investing in digitalization even if SMEs do not adopt a digitally enabled servitized business model. Interestingly, digital maturity is complemented by a strong service orientation among employees, as well as a tendency to consider service activities separately.
Given that these SMEs do not follow a servitized business model in their primary line of business, this configuration might initially seem paradoxical or raise concerns about data collection. However, this is not necessarily the case, as these high-performing SMEs may be experimenting with (digital) servitization business models in secondary lines of business.
Thus, what we observe here could be spill-over effects. It is important to note that, relatively speaking, these SMEs that have not adopted a digital servitization business model perform significantly worse, on average, compared to those who have, as shown in the descriptive analysis section of the report.
Therefore, the identification of a single configuration is not surprising. Non-servitized SMEs can indeed achieve success, but their avenues for success are more limited. The analysis suggests that one consistent pathway to superior performance involves attaining digital maturity and fostering a service culture.