LinköpingUniversity|DepartmentofManagementandEngineeringMaster’sthesis,30hp|IndustrialEngineeringandManagement–StrategyandControl

SpringTerm2019|LIU-IEI-TEK-A--19/03389–SE

ServitizationanditsEffectsontheBusinessModel–TheTransitionfromHardwareProductstoSoftwareServicesinManufacturing

JonathanAxelssonDanielGunnarssonSupervisor:SaraEbadzadehSemnaniExaminer:JohanHoltström

LinköpingUniversity

SE-58183Linköping,Sweden+4613-281000,www.liu.se

ExecutiveSummaryCompanies within the manufacturing industry is undergoing changes in their businessmodelstoadapttochangingexternalenvironmentsandtrends–whereasonegeneraltrendistowardservitization,thetransitionfromhardwareproductstosoftwareservices.Thesesoftwareserviceshaveshown tohavean increasingly impactful role for formerproduct-basedfirmstoensurefuturereliableprofitsandrevenues.Thisthesisaimstocontributetotheacademicalfieldofservitizationandbusinessmodelliterature,withinthecontextofanon-disruptive industry with a slow technological development rate. This is done byaddressing the following purpose: to understand how hardware manufacturingcompaniescanintegratesoftwareservicesintheirexistingbusinessmodel.Inordertofulfillthis thesis’ purpose, the research questions answered address how a hardwaremanufacturingcompany’sbusinessmodelcanbeaffectedbyservitization,butalsohowtheprocessofbusinessmodelinnovationcanbefacilitatedintheorganization.

This master’s thesis is anchored in a qualitative, interpretive case study – where theempirical data has been gathered from semi-structured interviews and internal casecompany documents. The findings from this thesis show that servitization can affectcompany business model in several ways. The first one is the shift towards customer-centricity,bothintermsofthedesignofthevaluepropositionandthewayofworkingwiththecustomers.However,thefindingsshowthatcompaniesinthiscontextmayexperiencedifficultieswithdesigningavaluepropositionthatisdesirabletothecustomer.Problemswith demonstrating the benefits of the servitized value proposition might also arise.Furthermore, this thesis also concludes that there can be issues in translating amanufacturing company’s value proposition into concrete revenue streams and movingfrom traditional cost-based pricing methods to value-based pricing strategies. Also,manufacturingcompanies inthiscontextmightstruggletorealize itsvalueproposition ifthereisnotasufficientamountofdedicatedresources,competencesandactivitiesdedicatedtocompletingthetransition.

Thisthesisalsoconcludesthatinordertofacilitatetheprocessofbusinessmodelinnovationwithintheorganization,thereneedstobeasupportiveculturetotheinnovation,butalsocleargoalsandstrategiesthatfitstheoverallstrategiesofthecompany.Thesestrategiesalsoneed to be appropriately communicated within the organization. Companies mightexperiencedifficultiesinrootingthebusinessmodelintheoverallstrategy,andfailingtodosocanaffecttheinternalperceptionoftheinnovationinanegativemanner.

Thisthesisaimstocontributetotheunderstandingoftheconceptsofthebusinessmodelandinnovationofthebusinessmodelinthecontextofservitization.Thisstudyisperformedas a context-specific study within a non-disruptive industry with a slow technologicaldevelopment,whichdiffersthestudyfromearlierresearchwithinthisresearchfield.

Keywords:Servitization,BusinessModelInnovation,ValueProposition,Customer-Centricity,Value-BasedPricing.

AcknowledgementsFirstandforemost,wewanttosendaresincerestgratitudetooursupervisorSaraEbadzadehSemnaniattheDepartmentofManagementandEngineeringatLinköpingUniversity,Sweden.Additionally,wewanttothankouropponents;EmmaBergandCeciliaJosefsson.Youhavebeenofgreatsupportwhileconductingthisstudy,givinghelpfulandconstructivefeedbacktohelpusimproveourwork.

Thisisamaster’sthesisinStrategyandControl,conductedatLinköpingUniversityundertheDepartmentofManagementandEngineering.Thestudywasconductedduringspring2019.

JonathanAxelsson&DanielGunnarsson5thofJune,2019

TableofContents1 Introduction.......................................................................................................................................................1

1.1 Background...............................................................................................................................................1

1.2 Casecompanyandemployer.............................................................................................................3

1.3 Problematization....................................................................................................................................3

1.4 Purpose.......................................................................................................................................................5

1.5 Researchquestions................................................................................................................................5

1.6 Delimitations............................................................................................................................................6

1.7 Disposition................................................................................................................................................6

2 Frameofreference..........................................................................................................................................9

2.1 Theoreticalbackgroundtothebusinessmodel........................................................................9

2.2 Businessmodels...................................................................................................................................11

2.2.1 Designandcomponents..........................................................................................................12

2.2.2 Framework....................................................................................................................................17

2.2.3 Businessmodelinnovationanditsorganizationalanchoring................................19

2.3 Servitizationinthemanufacturingbusiness...........................................................................21

2.3.1 Driversofservitization............................................................................................................22

2.3.2 Frameworkfortheservitizationdevelopment.............................................................22

2.3.3 Servitizationanditsimplicationonbusinessmodeldesign....................................23

2.4 Summaryoftheframeofreference.............................................................................................27

2.5 Analyticalmodel..................................................................................................................................28

3 Methodology...................................................................................................................................................31

3.1 Scientificapproach..............................................................................................................................31

3.1.1 Approachtodatacollection...................................................................................................32

3.1.2 Reasoningandlogic...................................................................................................................32

3.1.3 Typeofstudy................................................................................................................................33

3.2 Researchprocess.................................................................................................................................34

3.2.1 Pre-study........................................................................................................................................35

3.2.2 Literaturestudy..........................................................................................................................35

3.2.3 Interviewprocessandempiricaldata...............................................................................36

3.2.4 Dataanalysis.................................................................................................................................39

3.3 Qualityoftheresearch......................................................................................................................41

3.3.1 Reliabilityandvalidity.............................................................................................................41

3.3.2 Literaturestudy,analyticalmodelandinterviewtemplate.....................................41

3.3.3 Collectionofempiricaldataanddataanalysis..............................................................42

3.4 Moralandethics...................................................................................................................................43

4 Empiricaldata................................................................................................................................................45

4.1 Thecasecompany...............................................................................................................................45

4.2 CSA.............................................................................................................................................................45

4.3 ThebusinessmodelsurroundingCSA........................................................................................46

4.3.1 ValueProposition.......................................................................................................................46

4.3.2 RevenueModel............................................................................................................................48

4.3.3 Customers......................................................................................................................................50

4.3.4 OrganizationalArrangements...............................................................................................53

4.3.5 OrganizationalAnchoring.......................................................................................................55

5 Analysis.............................................................................................................................................................57

5.1 ValueProposition................................................................................................................................57

5.2 RevenueModel.....................................................................................................................................58

5.3 Customers...............................................................................................................................................59

5.4 OrganizationalArrangements........................................................................................................61

5.5 OrganizationalAnchoring................................................................................................................62

5.6 Synthesisofanalysis..........................................................................................................................64

5.6.1 Importanceofeachbusinessmodelcomponentanditsproperties....................64

5.6.2 Revisedanalyticalmodel.........................................................................................................66

6 Conclusions.....................................................................................................................................................69

6.1 Discussion...............................................................................................................................................70

6.2 Managerialimplications...................................................................................................................71

6.3 Theoreticalimplications...................................................................................................................72

6.4 Limitationsandfuturestudies.......................................................................................................73

7 References.......................................................................................................................................................75

Appendix1–InterviewTemplate..................................................................................................................84

ListofFiguresFigure1.Componentsinbusinessmodelframeworks(Adrodegari&Saccani,2017)..........13 Figure2.TheBusinessModelCanvasasproposedbyOsterwalder&Pigneur(2010).........14 Figure3.Proposedbusinessmodelframeworktobeusedinthecontextofthisthesis.......18 Figure4.Theservitizedbusinessmodeldesignasananalyticalmodel.......................................30 Figure5.Thestagesoftheresearchmethodology.................................................................................35 Figure6.Intervieweesandtheirpositionwithinthecasecompany..............................................39 Figure7.Developedframeworkforcodingempiricaldata................................................................40 Figure8.CSAanditsinherenttoolsAandB.............................................................................................46 Figure9.ThevaluepropositionofCSA........................................................................................................48 Figure10.TherevenuemodelforCSA........................................................................................................50 Figure11.ThetargetedcustomersegmentsforCSA.............................................................................51 Figure12.ThecustomercomponentinregardstoCSA.......................................................................53 Figure13.ThemostcriticalorganizationalarrangementsinregardtoCSA..............................54 Figure14.OrganizationalanchoringofthebusinessmodelofCSA................................................56 Figure15.Revisedanalyticalmodel.............................................................................................................68

ListofTablesTable1.Summaryoftheinterconnectionbetweenbusinessmodelsandstrategy.................10 Table2.Theservitizationprocess(Kindström&Kowalkowski,2009)........................................23 Table3.Ethicprinciplesabidedbythroughoutthestudy(Vetenskapsrådet,2018)..............43

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1 IntroductionThischapterexplainsthebackgroundofthisthesis.Thebackgroundintroducesbusinessmodelsasaconceptandhowcompaniesaredevelopingtheirbusinessmodelsasaresultoftherisetoprominenceofsoftwareandservices. Accordingly,ashortpresentationoftheemployerandcase company follows,which intersects into a problematization that lays the basis for thisthesis’ academical contributions. The chapter ends with a presentation of the purpose,delimitationsandthedispositionofthethesis.

1.1 BackgroundA businessmodel can be referred to as a representation of how an organization createscustomer value (Fielt, 2014;Magretta, 2002;Osterwalder et al., 2005). Other definitionsincludethewaysinwhichanorganizationalongwithitsstakeholderscreatevalueforeachpartyinvolved(Stähler,2002;Anderssonetal.,2006)and“thefirm’sunderlyingcorelogicandstrategicchoiceforcreatingandcapturingvaluewithinavaluenetwork”(Shaferetal.,2005,pp.202).Thecommondenominatorofseveraloftherecognizeddefinitionsisthattheyin some way include the creation of value, often called customer value (Fielt, 2014).However,multiplerecognizeddefinitionsfocusonthecompany,wherethebusinessmodelisprimarilymentionedasameansofgainingrevenue(Chesbrough&Rosenbloom,2002;Mahadevan,2002).Thesebusinessmodeldefinitions(e.g.Shaferetal.,2005)contrastwiththe common perception concerning business strategies, which seem to have a closerconnectiontoattainingacompetitiveadvantagebutdoesnotworkasadescriptionoftheactualbusiness(Magretta,2002;Porter,1996;Richardson,2008;Teece,2010).

Agoodbusinessmodelisessentialtoeverysuccessfulorganization(Magretta,2002).Whentalking about a market where there is heterogeneity among consumers and producers,consumerchoice,transactioncostandcompetition,anorganizationmusthaveabusinessmodelinordertocompetewithitscompetitors(Teece,2010).Thesameideaorproductmaynotalwaysyieldthesamevalueasthebusinessmodelsthatcommercializedtheproductandbroughtittomarketisnotnecessarilythesame(Chesbrough,2010).AccordingtoZottetal.(2011),thebusinessmodelconcepthasgainedsignificantgroundinrecentyearsandisnowaunitofanalysiswhendeterminingbusinesssuccess.

Abusinessmodeloftenfacilitatesasystemicunderstandingofhowtheorganizationdesignsitsprocessesandactivities inorder to createvalue (Massa&Tucci,2013).Thismeansabusiness model description can include explanations of suppliers, partners, distributionchannels but also the value proposition (Chesbrough&Rosenbloom, 2002;Osterwalder,2004;Osterwalder&Pigneur,2010).Forabusinessmodeltobesuccessful,itisimportantthatallthedifferentpiecesofthebusinessmodelarecoherent,thattheyfit(Magretta,2002;Morrisetal.,2005).

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Certain industries are undergoing changes in their businessmodels to adapt to externalenvironmentsandtrends–inthecaseofthemanufacturingindustry,thetrendisincludingsoftwareandservicesinhardwareandproducts(Neely,2009;Wise&Baumgartner,1999).Thisshiftisinpartcausedbythechangeofcustomers'demands,withincreasinginterestinsoftware(Andreessen,2011;Gebaueretal.,2005).Withregardstofinancialperformance,thereareseveralindicatorsthatsoftwareandservicesgetanincreasinglyimpactfulroleforproductandmanufacturingfirmstoensurereliableprofitsandrevenue(Suarezetal.,2013).Neely(2009)andWise&Baumgartner(1999)refertothismatterintermsoftheimportanceof including services as apart of amanufacturingorproduct firm’sbusinessmodel.Theauthors claim that services tend to be amore stable source of revenue as product firmsmature and decline. Massa & Tucci (2013) also provide details about business modelinnovation,asatooltotacklecompanymaturityanddecline,whichinaproductfirm’scasecanbeinitiatedthroughinvestmentsinservicedevelopment.

Tofurtherencouragetheideatheserviceandsoftwaremovement,Suarezetal.(2013)statethatitearlierwasledbyformermanufacturingfirmssuchasIBM,Cisco,Hewlett-Packard,Delletc.–whereIBMderived60%ofitsrevenuefromservicessolelyin2013comparedto35%in1996.However,therearealsoseveralotherpracticalexamplesofcompaniestodaythat promote the idea of software and services over, or integrated with, hardware andproducts(Iansiti&Lakhani,2014).Thisphenomenonhasavastsetofnamesthroughouttheliterature of scholars, among these are servitization (Baines et al., 2009), servicetransformation(Adrodegari&Saccani,2017),transitionfromproductstoservices(Oliva&Kallenberg,2003)andserviceinfusion(Kowalkowskietal.,2012).Theterm‘servitization’is used by Baines et al. (2009) among others, which they refer to as the integration ofsoftwareservicecomponentsintomanufacturingorproduct-basedcompanies.Thisisalsotheterminologythatwillbefurtheronbeusedtodescribethephenomenon.

Andreessen (2011) states that there is a revolution of servitization, with the increasingimpact of software companies over hardware companies as there seems to be greaterpotential for growth in software products and services. Furthermore, in manufacturingbusinesses, digitalization, connections, sensors anddata are revolutionizing themarkets.Iansiti & Lakhani (2014) exemplifies this through the former manufacturing companyGeneral Electric (hereinafter GE) which have now transitioned to be a more software-oriented business. Enabling digital transformation and including software in its valueproposition in a manufacturing business helped GE generate different paths for theirrevenuestreams(Iansiti&Lakhani,2014).OtherformermajorhardwarecompaniessuchasMicrosoft and SAP are also investing heavily in infrastructure to support software andanalytics;substitutingproducttoserviceincome(Ibid.).Yet,Iansiti&Lakhani(2014)statethatthissoftware-orientationclearlypressuresthefirminquestion’sbusinessmodel,wherethey must compete by rethinking and identifying opportunities for revenue and profitthroughnewvaluecreationandreorganization.

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Regarding the matter of integrating business models with a company’s products andservices, Barquet et al. (2013), Schuh et al. (2009) and Tukker & Tischner (2006) arecoherentintheirideaofinitiallyadaptingproductandservicestobusinessmodelsorviceversa.However,Schuhetal.(2009)statethatsuccesscomesfromacompany’soperations,strategyandnetworks.As toldby theauthors,products and services are componentsorresults found in these parts of the company. Schuh et al. (2009) further describe that achange within these ‘success factors’, implies that the business model needs to bereconfigured accordingly to support a new type of offering based on new operations,strategiesornetworks.

1.2 CasecompanyandemployerThe case company of this thesis is a world-leading global manufacturing company ofsolutions for industrial applications. Recently, the case company introduced softwareservicestocomplementitshardwaredominatedproductportfolio.Thedevelopedsoftwareservicecanbeintegratedandusedwithhardwarethatthecasecompanymanufactures.Inbasicform,theservicesoftwaregrantsthepossibilityforcustomerstoanalyzedatathateachpieceofhardwarecanprovide.However,sincedifferentapplicationscanbeintegratedwiththehardware,thedataprovidedcanbecustomized.Theintroducedsoftwareservicealsoincludes a platform which gives the customer an opportunity to develop integrableapplicationsowntheirown,inexchangeforanannuallicensingfee.However,thesoftwareserviceisinmanyregardsislooselyrootedin,andcoupledwith,theexistingbusinessmodel.Thecompanysupervisoralsomentionsthattherevenueprovidedfromthesoftwareserviceisnegligibleasthecasecompanydidnotcarefullyreasonaboutitseconomicvalueandhowto realize thispotential.The software servicehasnotyetbeenproperlyanalyzed fromabusinessmodelpointofviewasthereisnoformalizedbusinessmodeldescription.

Thepresentedcasecompanycanprimarilybeseenasahardwaremanufacturingcompanyactingontheglobalmarket.Thereareseveralexamplesofglobalcompanieswithinthesameindustrythatearlierhavegonethroughtheprocessofservitizationtosupportcustomizationthroughtheintegrationofsoftwareandhardware(Iansiti&Lakhani,2014).Sincethecasecompany’sjourneytowardbecomingamoresoftwareservice-orientedandsolution-basedcompanyisinprogress,thecompanyisseenasanadequaterepresentationofacompanythatfollowsthegeneraltrendofservitizationinthehardwaremanufacturingindustry.

1.3 ProblematizationWhenlookingatthemanufacturingfieldofbusiness,thereareobviouspatternsinpresenttimethatthe industry ischangingtobecomemoresoftware-oriented(Andreessen,2011;Iansiti&Lakhani,2014;Suarezetal.,2013).Moreover,therearealsopatternswithinseveralmanufacturingmarkets that point towards an orientationwhich promotes services overproducts(Ibid.).Furthermore,Neely(2009)andWise&Baumgartner(1999)declarethatthis shift pressures manufacturing product companies to act accordingly – since

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contemporarytrendsshowthatgreaterpotentialforgrowthandamorestableorreliablerevenuelieswithinsoftware(Neely,2009;Wise&Baumgartner,1999).Asanexampleofacompanyworkingwithinthemanufacturingfieldofbusiness,thecasecompanyofthethesisis finding itself following the industry trend of becoming more software- and service-oriented.

Toactaccordingtoongoingtrendstowardservitizationinthiscaseinfersthatcompanieswhicharesetouttoorhasinitiatedabusinesschangefromproducttoserviceorhardwaretosoftware(orthecompleteintegrationofhardware&productsandsoftware&services),needtofocusandadapttheirbusinessmodels(Barquetetal.,2013;Iansiti&Lakhani,2014;Schuhetal.,2009;Tukker&Tischner,2006).Succeedingwithinthesoftwareorintegratedproduct-softwarebusiness lieswithinadaptingthebusinessmodel(Barquetetal.,2013),wherenewfinancialopportunitiesneedtobeconsideredandformalizedinsidethebusinessmodel(Iansiti&Lakhani,2014).

The previously described shift in form of servitization presents several issues forcontemporaryhardwaremanufacturingcompanies(Gebaueretal.,2005).First,theymustconsider if theyhavearelevantproductorserviceofferingconsideringtheheavyshift indemandtowardsoftwareandservices(Ibid.).Secondly,itmightnotbethecasethattheirexistingbusinessmodelissuitedtocreatevaluetotheircustomers,givenachangeoftheirproduct or service offering (Kindström, 2010). If their product or service offering haschangedrecently,theymustconsideriftheiroldbusinessmodelisstillrelevantandprovidessignificantvaluetothecustomer(Ibid.).Ifthecompany’sbusinessmodelisnotsuitedforthetechnology it is combinedwith, the companymight not be able to capture the value thetechnologyisabletoprovide(Chesbrough,2010).Thefailuretocapturetechnologyvaluecouldbeattributedtothenon-coherenceofthebusinessmodel,meaningthedifferentpartsdonotconstitutealogicalandconsistentwhole(Magretta,2002;Morrisetal.,2005).Thecasecompanyinquestionisanexampleofthedescribedphenomenonastheyhavenotyetseemed to find a sound businessmodel in terms ofmaking the best use of their newlydevelopedtechnology.

Thequestiontheproblematizationexcavatesishowahardwaremanufacturingcompany’sbusinessmodelcanbechangedinordertobettersuitanewproductandserviceoffering,ormorespecifically,anongoingservitizationof thecompany.Whenstudying these typesofquestions,itisimportanttoconductthestudyinacontext-specificmanner(Teece,2010).While empirical research also studying the company business model and change of thebusinessmodelexists,Lambert&Davison(2013)foundintheirliteraturereviewthatthisresearch often studies companies acting in industries such as the information,telecommunicationsandbiotechnologyindustry.Thesetypesofindustriesdifferfromtheonethatthecasecompanyisactivein,astheyareconsideredmoredisruptiveintheirnatureasnewtechnologycanrapidlychangetheindustry.Thisisnotthecasewhenlookingatthe

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industry of the case company, which acts on a relatively steady market with fewtechnological disruptions. Furthermore, these industries are also more technologicallyadvancedthantheonethecasecompanyisactingin.Duetothis,itisthereforedeemedthatthe context of these studies differs from the context of the case company in away thatenablesthisstudytocontributetotheunderstandingoftheconceptsofthebusinessmodeland change of the businessmodel. Furthermore, these concepts will be explored in thecontext of company servitization and this thesis therefore, more specifically, aims tocontributetotheunderstandingregardingtheconceptsofthebusinessmodelandchangeofthebusinessmodelinthecontextofservitization.

1.4 PurposeManyscholars, suchasBarquetetal. (2013)and Iansiti&Lakhani (2014), state that thetransition from hardware products to software services (i.e. servitization) can implicatetheremightbecausefornecessarychangesinamanufacturingcompany’sexistingbusinessmodel.Therefore,thisleadstothepurposeofthisthesiswhichcanbeseenbelow;

“Tounderstandhowhardwaremanufacturingcompaniescanintegratesoftwareservicesintheirexistingbusinessmodel."

1.5 ResearchquestionsIn linewith the purpose of this thesis, it is necessary to fully investigate the concept ofservitizationand its relationand interactionswith thebusinessmodel.Asmanyscholarsargue,amongothersBainesetal. (2009), Johnson(2010)andNeely(2007),servitizationaffects manufacturing companies in many senses – e.g. changes the product portfolio,customer interaction and revenue streams. It is therefore also considered necessary tounderstandhowservitizationcanaffectacompany’sspecificbusinessmodel.Thisreasoningleadstothefirstresearchquestionseenbelow;

- Howcanservitizationaffectmanufacturingcompanies’businessmodels?

Servitizationoftenimpliesthatcompaniesmoveforwardinthevaluechainandtransformtheir logicofearning,butalso their logicofdealingwith theproductorserviceportfolio(Storbackaetal.,2013).Oliva&Kallenberg(2003)statethatcompaniesinsuchsituationsneed tomanage the transition, or the change ofwhich is implicatedwhenmoving fromproductstoservices.Storbackaetal.(2013)declarethatinsuchsituations,achangeinthebusinessmodelisneeded,asthebusinessmodelspecifiestheunderlyinglogicofearning,the company’s position in the value chain and the company’s internal and externalcapabilities. This can be referred to what Amit & Zott (2012) define as businessmodelinnovation, which relates to activities of which fundamentally redirect the core or theearning logicof thecompany. In thiscase,businessmodel innovationrefers to theactofchanging,addingorre-linkingactivitieswithinthebusinessmodel(Amit&Zott2012;Massa& Tucci, 2013). When a service is integrated into a business model of manufacturing

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companies, certain changes can take place in its different components, in order toaccommodatesuchintegrations–whichconstitutesaformofbusinessmodelinnovation.Inimplementing changes with regards to strategic initiatives, such as business modelinnovations, theempirical findingsofForeman&Argenti (2005) indicate thatcompaniesneed toputeffort intoestablishing internal communication.Cavalcanteetal. (2011)alsostresstheneedforchangesincommunicationandinternalcoordinationuponcreatingorrefiningthecompanybusinessmodel.Cavalcanteetal.(2011)alsostatethatuponachangein the existing business model, there is a need for development of new organizationalstructuresthatfacilitatesthecoordinationofactivitiessurroundingthenewbusinessmodel.Accordingly,itappearsreasonabletounderstandhowbusinessmodelinnovationscanbefacilitatedintheorganization.Duetotheabove-seenreasoning,thethesisherebyaimstoanswertheresearchquestionseenbelow;

- Howcanthebusinessmodelinnovationprocessbefacilitatedintheorganization?

1.6 DelimitationsThis thesis will be delimited to studying hardwaremanufacturing companies or formerhardwaremanufacturingcompaniesthathavebeen,orare,intheprocessofservitization.Becauseofthefeasibilityofthisstudybasedonthecasecompany,thisstudywillbedelimitedto business model innovation with regards to introducing new software services into acompany’sproductandserviceportfolio.Hence,businessmodelinnovationscausedbyotherproductsorservicesotherthantheonealreadymentionedinthebackgroundwillnotbefurtherdiscussed.

1.7 DispositionThefollowingchaptersandtheirrespectivecontentarebrieflydescribedbelow.

Chapter2:Frameofreference

This chapterpresents the result of the literature study thatwasperformed.The chapterstartswithdescribingtheconceptofthebusinessmodelandfollowswithapresentationofabusinessmodelframeworkthatwaslaterusedtoexploreandassessthecurrentcompanybusinessmodel. The chapter continues by describing how servitization has affected themanufacturing business and the reason behind its current prominence. Following, apresentationofhowthecompanyservitizationaffectsthebusinessmodeldesignisshown.Thechapterconcludeswithananalyticalmodelthatistobeusedforanalyzingtheempiricaldatathatiscollected.

Chapter3:Methodology

Thischapterdescribesandmotivatestheresearchmethodologyandprocessofthestudy.Thechapteralsodiscussestheconsequenceofthemethodologychoicesintermsofhowtheyaffectthequalityofthestudy.

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Chapter4:Empiricaldata

This chapter describes the case company, its software service and the business modelsurroundingthesoftwareservice.

Chapter5:Analysis

Thischapterpresentsananalysisofthecollectedempiricaldata.Theanalysisconcludesbyrevisitingtheanalyticalmodelandpresentsarevisedversionofthemodel.

Chapter6:Conclusions

In this chapter, the purpose and the research questions of the study are answered. Thechapter concludes with a discussion of the limitations of the study and suggestions forfurtherresearch.

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2 FrameofreferenceThischapterincludestheframeofreferencethatthisthesisbuildsupon.Thechapterbeginswith defining the approach to business models and the connection between strategy as aconcept and businessmodels. Furthermore, the concept of businessmodels is detailed anddiscussedinordertoformabasisfortheunitofanalysis.Theconceptofservitizationislaterclarifiedwithitsrelationtobusinessmodelliterature.Lastly,aconcludinganalyticalmodelforthestudyisproposed.

2.1 TheoreticalbackgroundtothebusinessmodelThe underlying theories with business models are among scholars seen from differentperspectives.Twomainwaysofapproachingthephenomenonarethestrategicperspectiveand the institutional theory (Barringer & Harrison, 2000). The institutional theoryrepresents the idea that organizations work as an institution, which focuses on socialstructuresandstressescompaniestoconformtolegitimacyandsocialnorms(Ibid.).Duetothecontextinwhichthisstudyissetandduetotheproblempresented,thistheorywillnotberegardedfurther.

Some scholars state that the business model concept is widely regarded to build uponbusinessstrategyandstrategicpositioning(Morrisetal.,2005;Porter,1996).However,theconcept is also considered from other perspectives, such as transaction-cost economics(Morris et al., 2005;Williamson, 1981) and resource-based theory (Barney et al., 2001;Morris et al., 2005).Morris et al. (2005)declare thatononehand thebusinessmodel isassociatedwith the value chain and sets out to drive valuewithin the organization as astrategic incentive for management. Nevertheless, the concept of business models alsoinvolvesfirmtacticsanddecisionsaboutboundaries intransactions(Morrisetal.,2005),which makes it an element in the transaction-cost economics perspective (TCE), firstpresentedbyWilliamson(1981).Thisperspectivewouldratherconsiderabusinessmodeltobetheramificationandtooltodisplayalltransactionswithinthecompany(Morrisetal.,2005; Williamson, 1981). Barringer & Harrison (2000) and Williamson (1981) furtherdescribeTCEasaperspectivethathighlightsusingeconomictransactionsandthecostofeconomic transactions to analyze firms and markets, in order to minimize and put upboundariesfororganizationcosts.Theresource-basedview(RBV)offersanotherviewofthecompany,asaproductofitsresourcesandcapabilities,thattogethercreateacompetitiveadvantage (Barney et al., 2001). Thus, as the business model can address internalcompetencies (Morris et al., 2005), the business model can be seen as a framework tostructurecapabilitiesandresources.

Itisobviousthattheabove-mentionedperspectivesintersectinmanyways,asstrategiesonhighermanageriallevelscanintertwinebothexternalorinternaltransactionsandinternalresourcesor activities (Porter, 1996).However,Magretta (2002) andRichardson (2008)discuss strategy as a way of dealingwith the external environment – a way of creating

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competitiveadvantage.Duetothefactthatthecasecompanyisacompetingcompanywithintheir industry – where a business model is strategically essential to gain competitiveadvantage(Magretta,2002;Richardson,2008),thebusinessmodelconceptwillfurtherononlybediscussedinthelightofthestrategicperspective.

Many scholars state that using strategies as a company is a way of gaining competitiveadvantage(Magretta,2002;Porter,1996;Richardson,2008).Porter(1996)clarifiesthatacompetitive strategy or a strategy, in general, is about being unique and having uniquedefined activitieswithin the company. These activities should also deliberately be set inordertodeliverauniquemixtureofcustomervalue.Teece(2010)statesthatstrategiesarecombined with external competitive forces. Furthermore, Teece (2010) believes thatstrategiesarespecificideasofhowthecompanysegmentsthemarket,providesvaluetoitscustomersanddeliversthatvalue,whichinsuccessfulcompaniesareuniqueandlong-termsustainableactivities.

Thedefinitionoftheinterconnectionbetweentheconceptofstrategyandbusinessmodeldiffers among scholars. Richardson (2008) states that strategy is implemented andformalized through business models and that business models are frameworks used toexecuteorganizationstrategies.Ontheotherhand,Zott&Amit(2008)impliesthatbusinessmodelsandmarketstrategiesarecomplementarytoeachother.BothRichardson(2008)andZott&Amit(2008)claimthatbusinessmodelsexplainthepatternofafirm’stransactionswithexternalstakeholders,whilststrategiesrefer to thepatternofmanagerialactionsofwhichafirmmaintainsandachievesacompetitiveadvantage.Zott&Amit(2008)statethatthetwoconceptsarenotelementsinequivalentlycomposedsets,theyareincomparableintermsofentity–asbusinessmodelsfocusontheexchangewithexternalpartnersandthefocalpointforstrategiesisinternal.Furthermore,Casadesus-Masanell&Ricart(2010)statethatstrategyreferstothewaythecompanychoosesabusinessmodelforitsoperations,andthatthebusinessmodelreferstothelogicofthecompanyandthewayitcreatescustomervalue.ThisideaisonethatMagretta(2002)adheresto,astheauthorstatesthatbusinessmodels reflect the strategic choices of a company, whereas strategy reflects how thecompetition is dealt with. In Table 1 below, a summary of the interconnection betweenbusinessmodels and strategies, basedon four articleswithdifferent approaches to eachconceptispresented.Thepresentedopinionsareconsideredtorepresentaholisticviewoftheconflictswithinbusinessmodelandstrategyliterature.

Table1.Summaryoftheinterconnectionbetweenbusinessmodelsandstrategy

Authors Businessmodel Strategy

Richardson(2008) Internalframeworktoexecutestrategy

FormalizedandimplementedthroughBM,externalwaysofcompeting

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Casadesus-Masanell&Ricart(2010)

Internalfirmlogicforoperations

Thewayofchoosingbusinessmodel,basedonmarketandcompany

situation

Magretta(2002) Internalsystemthatreflectsstrategicchoices

Externalwaysofcompetingonthemarket

Zott&Amit(2008)Externalpatternof

transactionswithexternalstakeholders

Mostlyinternalpatternofmanagerialactionstomaintainandachievecompetitiveadvantage

Thereareclearsimilaritiesandintersectionsbetweenbusinessmodelsandstrategiesfroma business point of view. Although Zott & Amit (2008) claim that business models areexternalpatterns,thereisnonethelessaninterpretationthatitcanbeseenasaframeworkwhich is used internally to understand and commit to all transactions with externalstakeholders.Withthatpointinmind,thisthesiswillherebybuilduponthebasicdefinitionthatbusinessmodelsareinternalframeworks,systems,ideas,setsortemplatesthatreflector execute the company strategy, in terms of operations and activities. This thesis willtherebyreposeontheconceptualizationthatstrategyiscloselyconnectedtothebusinessmodel,sincethebusinessmodeleitherdefinewhatkindofstrategythatwillbeimplementedor vice versa – to achieve competitive advantage (Casadesus-Masanell & Ricart, 2010;Magretta,2002;Richardson,2008;Zott&Amit,2008)andlaybasisforcreationofcustomervalue(Porter,1996).

2.2 BusinessmodelsThe conceptofbusinessmodels is amuch-debated term (Zott et al., 2011).According toseveralscholars,theconceptispoorlydefined(Chesbrough&Rosenbloom,2002;Zottetal.,2011).Therearehowevercommonthemeswhenscholarsdiscusstheconceptofbusinessmodelsandwhattheactualpurposeofabusinessmodelis(Zottetal.,2011).First,manyauthorsseemtoagreeuponthenotionthatadefinedbusinessmodeliscrucialforbusinesssuccess (e.g., Magretta, 2002; Chesbrough, 2010; Teece, 2010). Furthermore, Zott et al.(2011) state that thebusinessmodel is a sourceof competitiveadvantage.Teece (2010)agreeswiththisstatement,butalsoarguesthatasuccessfulbusinessmodelisnotenoughtosecure a competitive advantage. He states that the business model also must bedifferentiatedinordertoprotectfromcompetitorimitation(Teece,2010).ThisstatementisalsosupportedbyZottetal.(2011),statingacompanyneedstodesignauniquebusinessmodeltofullyrealizeitscommercialpotential.

Secondly, aspreviouslymentioned, scholars seem toarguebusinessmodelsdescribe thecompany’s logicof creatingand capturingvalue (e.g.Casadesus-Masanell&Ricart, 2010;

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Fielt,2014;Saebi&Foss,2014).BothOsterwalder&Pigneur(2010)andTeece(2010)alsoputemphasisondeliveringthevaluetothecustomer,inadditiontocapturingsaidvalue(e.g.earningrevenues).AccordingtoTeece(2010),itisnotenoughtoonlydooneofthetwo.Fielt(2014)doeshowevernotagreewithincludingdeliveringvalueaspartofthebusinessmodeldefinition. He instead argues that “the separation of creating and delivering value as asupply-sideperspectivefocusingonproducersaddingvalue”(Fielt,2014,pp.92).

However,defininghowvalue iscreatedandcaptured isnot theonlygoalwithcreatingabusinessmodel.ScholarssuchasTeece(2010)andAfuah&Tucci(2001)alsosignifiestheimportanceofgeneratingprofitswhiledoingso.Magretta(2002)agreeswiththisnotion,aspartofherdefinitionofthebusinessmodelisrevolvesaroundhowthecompanywillmakemoneyinprovidingvaluetothecustomers.Thismightsoundlikerepetitionfromthelastparagraph. However, there is a key difference between simply generating revenue andgeneratingprofits.

Another common theme when scholars discuss the concept of business models is howbusinessmodelsemphasizeaholisticapproachthatoffersknowledgeregardinghowvalueiscreatedwithin thecompany(Zottetal.,2011).Chesbrough&Rosenbloom(2002)alsodenote thevalueof thiskindof systematicdescriptionor representationof thebusiness,wherethebusinessmodelgrantsunderstandingof the internalstructuresandprocesses.Furthermore,Al-Debei&Avison(2010,pp.372)statethatbeingabletoexplicitlydescribethebusinessmodelmakescompaniesmorecompetitiveastheygainaccessto“appropriateandnecessary levelof information that theBMprovides”.Al-Debei&Avison (2010)alsoconsiderthebusinessmodelaversatileconceptasitoffersalignmentofdifferentfunctions.

Dependingonthebusinesscontextofthecompany,thebusinessmodelmaydifferindesignand composition (Fielt, 2014). With the premise of the purpose of the study, furtherdiscussionsaboutbusinessmodeldesignwillbeinaccordancewith,andinconsiderationof,thebusinesscontextofthesinglecasecompanythathasbeenstudied.Thisimplicatesthatbusinessmodeldesignsandcompositionsbeingrelevanttogovernmentagenciesorothernon-profitorganizationswillnotbeevaluatedortakenintoconsiderationmovingforward,asthesearenotdeemedrelevantinthisspecificcontextnorinregardtothepurposeofthethesis.

2.2.1 DesignandcomponentsAs stated previously, the business model offers a holistic approach regarding how thebusinessfunctions(Chesbrough&Rosenbloom;Zottetal.,2011).Thebusinessmodelcanbedescribedasa“simplifiedandaggregatedrepresentationoftherelevantactivitiesofacompany” (Wirtz et al., 2016, pp. 39-40). The business model can also be considered aframework(e.g.Fielt,2014;Richardson,2008)thatcanbeconsideredtoconsistofdifferentbuilding blocks (Osterwalder & Pigneur, 2010), components (Pateli & Giaglis, 2004) or

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functions(Chesbrough&Rosenbloom,2002),dependingontheterminology.Thesesubsetsofthebusinessmodelframeworkarehereonmentionedascomponents.

There are several different frameworks used for describing the business model (e.g.Adredogari&Saccani,2017;Fielt,2014).Theframeworksoftendiffer,evensometimesonlyslightly,inthecompositionoftheincludedcomponentswhichconstitutethebusinessmodelframework (Ibid.). The difference is at times represented by a complete difference ofproperties described by the components, and at others only a difference in terminology(Fielt,2014). However,whenlookingatproposedbusinessmodelframeworks,therearecomponentswhichareincludedmoreoftenthanothers(Adrodegari&Saccani,2017;Fielt,2014). Below, a compilation of business model components included in proposedframeworksisshown.ThecompilationismadebyAdrodegari&Saccani(2017)andbasedonarigorousliteraturestudyintheareaofbusinessmodelframeworks.Figure1displaystheperceivedrelevanceofdifferentbusinessmodelcomponentsamongscholars.

Figure1.Componentsinbusinessmodelframeworks(Adrodegari&Saccani,2017)

OneofthemostcommonwaysofdescribingthebusinessmodeliswiththeBusinessModelCanvas (hereinafter BM Canvas) (Fielt, 2014). The BM Canvas framework includes 9components thateachdescribedifferentpartsof thecompany’sbusiness(Osterwalder&Pigneur,2010).Asistruewiththegeneralconceptofabusinessmodelframework,theBMCanvasoffersaholisticperspectiveofthecompany’sbusiness(Fielt,2014;Zottetal.,2011).InFigure2thecomponentsincludedintheBMCanvasframeworkisshown.

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Figure2.TheBusinessModelCanvasasproposedbyOsterwalder&Pigneur(2010).

Other presented frameworks (e.g. Al-Debei&Avison, 2010; Chesbrough&Rosenbloom,2002;Osterwalder,2004)includeseveralofthecomponents,orsimilarversions,thatarepresentedintheBMCanvasframework.Al-Debei&Avison(2010),asaresultofasystemicliterature study of businessmodel frameworks articles, propose a four-pillar ontologicalstructureofthebusinessmodel.Intheproposedstructure,thepillarsarerepresentedbythecompany’svaluenetwork,valueproposition,value financeandvaluearchitecture. In thiscase,thevaluenetworkintheproposedontologicalstructureconsistsofdifferentactorsinthecompany’snetwork,suchasdistributorsandcustomers(Al-Debei&Avison,2010).Fielt(2014), followinga systemic literature reviewofbusinessmodel frameworkarticles (Al-Debei&Avison’sincluded),proposesasimilarframework.Fielt(2014)proposesthatthecore elements of a business model should in some way address the customer, valueproposition,organizationalarchitectureandeconomicdimensions.ThecompositionoftheseelementsisverysimilartotheonesOsterwalder(2004)proposedinhisoriginalontology-which the BM Canvas framework is based on – then referred to as customer interface,product,infrastructuremanagementandfinancialaspects.

As result of work by previous scholars (e.g. Al-Debei & Avison, 2010; Fielt, 2014;Osterwalder, 2004) and their perceptions regardingofwhich components areneeded toholisticallydescribehowthebusinessfunctionsandthereforetobeincludedinthebusinessmodelframework,thebusinessmodelconceptwillfurtheronbediscussedwithnotiontofourcomponents.Thesecomponentswillnowbefurtherexploredandexplained-andwillhereonbementionedasthevalueproposition,revenuemodel,customersandorganizationalarrangements.

2.2.1.1 ValuepropositionOsterwalder(2004,pp.43)definesthevaluepropositionas“anoverallviewofacompany’sbundleofproductsandservicesthatareofvaluetothecustomer”.AccordingtoFielt(2014),thevaluepropositionconveysthecompany’sofferingmeanttosolvethecustomerproblem,often focusingonpotentialbenefits. Several scholars, suchasZott et al. (2011)andFielt(2014)arguevaluepropositionisatthecenterofthebusinessmodel.Zott’setal.(2011)and

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Fielt’s(2014)perceptionisfurthersupportedbythefactthatthevaluepropositionisthemostincludedcomponentwhenstudyingvariousbusinessmodelframeworks(Adrodegari&Saccani,2017).Oneexample is thebusinessmodel frameworkproposedbyHedman&Kalling (2003), who argue the company’s resources should be configured in a way thatenablesacompetitivevaluepropositioninthemarket.

Furthermore, customer value, value and value proposition are widely researched fieldswithinmarketingresearchandstrategyliterature(Smith&Colgate,2007).Thereareseveralframeworks related to creating customer value (Smith& Colgate, 2007;Woodall, 2003),however,somearemorecomprehensivethanothers.Smith&Colgate(2007)statethatacommon definition that has been accepted after time is that customer value, from acustomer’sownperspective,canbeapproachedfromtwoangles;valueforthecustomerandvalueforthecompanyinquestion.Valueforthecustomeressentiallycoversperceivedandreceivedcustomervalue,whilstthelatterreflectstheactualvalueforthecustomer(Smith&Colgate,2007).

A later adapted concept related to customer value is value proposition (Anderson et al.,2006).Asuccessfulcustomervaluepropositionhasbeenshownbypracticalcasestoderivefromstringentevaluationsofcustomervalueandmadepositivecontributionstobusinessperformance(Andersonetal.,2006;Payneetal.,2017).Also,asmentionedinsection2.2.1,theconceptofCVPorvaluepropositioniskeyinevaluatinganddevelopingabusinessmodel–bythesametoken,Andersonetal.(2006)claimthatitisacoreelementtobeconsideredwithin businessmodels. Early adopters of the concept of CVP state that it concludes thebenefits–atwhatprice,towhatcustomergroup,atwhatcost–thatthecompanyprovides(Payneetal.,2017).Nevertheless,Payneetal.(2017,pp.472)wrapuptheconceptofCVPas “... a strategic tool facilitating communication of an organization’s ability to shareresourcesandofferasuperiorvaluepackagetotargetedcustomers.”.However,Andersonetal.(2006,pp.92)outlinedotherapproachestodefiningCVP;“allbenefits,favorablepointsof difference, and resonating focus”, with regards to a company’s product and serviceportfolio.Rintamäkietal.(2007)addresstheconceptofCVPfromfourdifferentdimensions,namelyeconomic,functional,emotionalandsymbolic.Thisisalsosomethingthatiscloselyresoundingtosomedefinitionsofcustomervalue(Woodall,2003;Smith&Colgate,2007).Inlaterdays,ethicsandenvironmentalvaluesarealsowidelyconsideredasvalidtypesorperspectivesofvaluepropositions(Payneetal.,2017).

2.2.1.2 RevenuemodelMany scholars (see e.g. Afuah & Tucci, 2001;Magretta, 2002; Teece, 2010) highlight, inrelationtothepurposeofbusinessmodels,theimportanceofgeneratingprofits.Theyargueone of the core goals with designing and implementing a business model should be togeneraterevenue.TheiropinionsarefurtherreflectedinFigure1astherevenuemodelisone of the most included components when studying various proposed business model

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frameworksamongscholars(Adrodegari&Saccani,2017).AccordingtoOsterwalder(2004,pp.43),therevenuemodel“describesthewayacompanymakesmoneythroughavarietyofrevenueflows”.Whendecidinguponthecompany’srevenuemodel,decisionvariablessuchassourcesofrevenueandpricingmethodsarehighlyrelevant(Morrisetal.,2005).

2.2.1.3 CustomersAddressingthecustomerwhendiscussingbusinessmodelsisalmostunavoidable(seee.g.Magretta, 2002; Osterwalder, 2004). This is supported by the fact that scholars oftenmentioncreatingandcapturingcustomervalueasthemainpurposeofdesigningabusinessmodel (e.g. Fielt, 2014; Magretta, 2002; Osterwalder et al., 2005).When addressing thepropertiesofthecustomercomponentofthebusinessmodel,Magretta(2002)highlightstheimportance of knowing who the customer is. Osterwalder (2004) also recognizesdeterminingthetargetcustomerasacriticalpartofbusinessmodeldesign,whiledefiningthetargetcustomerastheentitythevaluepropositionisofferedto.

Furthermore, several scholars include the component of customer relationship whenproposingbusinessmodelframeworks(Adrodegari&Saccani,2017;Fielt,2014).Customerrelationshipscanbestrengthenedwiththehelpofdifferenttypesofcustomerinteractions,or mechanisms (Osterwalder, 2004). Being successful in strengthening customerrelationshipswith customersmayyield significant benefits for the company (Kindström,2010).However, establishing good relationshipswith all customersmight not alwaysbeefficient (Kindström, 2010; Osterwalder, 2004). The potential benefits of a deeperrelationshipwiththecustomerneedtobeevaluatedinrelationtothecostofattainingthatrelationship(Ibid.).

Thereseemstobeaconsensusthatthecustomerneedstobeaddressedinsomewaywhendoing businessmodel design, considering statementsmade by scholars (e.g. Kindström,2010; Magretta, 2002; Osterwalder, 2004) and statistics presented in Figure 1. LookingfurtherintoFigure1, thecompanynetworkalsoseemstobeof importanceinrelationtobusinessmodeldesign.However,thenetworkcomponent,terminologyaside,inmanywaysaddressthesamepropertiesofthebusinessthatthecustomercomponentdoes(Fielt,2014;Morrisetal.,2005).

Whendiscussingthebusinessmodelcomponentofcustomersfurtheron,thedefinitionislimitedtothepropertiesoftherelationshipwiththecustomerandwhothetargetcustomeris.Withinthedefinitionofthecustomerrelationship,methodsofattainingthatrelationshiparealsoincluded.Thisimplicatestheinclusionofmethodsofmarketingandotherwaysofestablishingnewrelationshipswithcustomersmayalsobediscussedwhenaddressingthecustomercomponentofthebusinessmodel.

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2.2.1.4 OrganizationalarrangementsAsmentionedpreviously,thecompanyresourcesshouldbeconfiguredinawaythatenablesit to provide a competitive value proposition on themarket (Hedman & Kalling, 2003).Osterwalder(2004)andFielt(2014)statethatthisconfiguration,orarrangement,canbedescribedashowthecompanycreatesvalue.Al-Debei&Avison(2010)sharethisopinion,also saying the concept presents a holistic, structural design of the organization.Furthermore, they conclude that within the design, components such as core companyresourcesandcompetencesaredescribed.BothOsterwalder(2004)andAl-Debei&Avison(2010)highlight that thebusinessmodeldesign shouldalsoaddresswhichactivities arecarried outwith the help of the core company resources and competences. Osterwalder(2004) states that the performed activities shouldmake the value proposition possible.LookingatFigure1, thecomponentsdiscussed in thisparagraphcorresponds to internalcompetencesandinternalprocesses.

Whendiscussingorganizationalarrangements furtheron, thediscussion is limited to theactivitiesandresourcesthatareneededtosupport thevalueproposition,revenuemodeland customer related properties for a specific product or service. The activities andresourcesmaybebothinternalandexternal,meaningactivitiesincludeinternalprocessesbutalso,forexample,communicationwithexternalactors.Intermsofresources,internalresourcesmay constitute certain competences held by company personnel butmay alsoinclude competences and resources of external partners, as these can also be deemedcompanyresources.

2.2.2 FrameworkEventhoughtherearediscrepanciesintheworkofpreviousscholarsandtheirproposedbusinessmodelframeworks,therearealsoseveralsimilarities.Asresultofthediscussionandthesynthesisofdifferentbusinessmodelcomponents(seesections2.2.1.1–2.2.1.4)andwithbasis in earlierworkbyvarious scholars (e.g.Al-Debei&Avison,2010;Fielt, 2014;Osterwalder,2004;Osterwalder&Pigneur,2010),aproposedbusinessmodelframeworkispresentedbelow.AsperreasoningofforexampleAl-Debei&Avison(2010)andFielt(2014),theproposedframeworkoffersaholisticandcompletepictureofthecompany’sbusinessand its properties. The proposed frameworkwill be used as a frame of reference in thecontextofthethesismovingforward.

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Figure3.Proposedbusinessmodelframeworktobeusedinthecontextofthisthesis

Morrisetal.(2005)stateitisimportantthatthebusinessmodelisconsistent.Theyarguethatthisconsistencycanbedescribedinbothinternalandexternal“fit”. Intheiropinion,internalfitconstitutesconsistencybetweenthedifferentcomponentsinthebusinessmodel.External fit is instead determined with regard to how the different components of thebusiness model are consistent with the company’s external environment (Morris et al.,2005). Magretta (2002) also highlights the importance of a coherent business model.Furthermore, sheconsiders thebusinessmodelagreat tool for focusingattentionon thedifferentcomponentsofthebusinessmodelmakesforaworkingwhole.However,Morrisetal. (2005) recognize a strong internal fit between thebusinessmodel componentsmightweakenadaptivityofthecompanyandinextensionresultininadequateexternalfit,incaseofafast-changingenvironment.

InlightofthepreviouslypresentedstatementsmadebyMorrisetal.(2015)andMagretta(2002),afavorablebusinessmodelcanbeconsideredfirm-specific.Thereasoningrestsonthe assumption that each companyhas one ormoredistinction(s)when it comes to, forexample,surroundingenvironmentorproductoffering.Ifthatisthecase,agoodbusinessmodeldesignwill,assumingitconstitutesadequateexternalandinternalfit,beunique.TheconnectionbetweenbusinessmodelperformanceanditsuniquenessisalsosupportedbyTeece(2010)andZottetal.(2011)astheyconsideragoodbusinessmodelnottobeenoughtofullysucceed,italsoneedstobeuniqueanddifferentiated.

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2.2.3 BusinessmodelinnovationanditsorganizationalanchoringIfcompaniesconcurrentlychangetheir‘logicofearning’orcreatepossibilitiesforanovelwayofearning,itimpliesusingordevelopingbusinesscapabilitiesthatreflectthenecessarychangesmade to the businessmodel (Storbacka et al., 2013). The term businessmodelinnovationis,amongmanyscholars,adiffusetermwithdifferentsetsofmeaning(e.g.Amit&Zott,2012).Amit&Zott(2012)statethatbusinessmodelinnovationrelatestoactionsofwhichfundamentallyredirectstheactivitiesthatrelatetothecoreorlogicofthecompany,which also relates to the company’sway of dealingwith its business toward customers,vendors or partners. Amit & Zott (2012), supported by Massa & Tucci (2013), furtherpostulatethatbusinessmodelinnovationcanbeachievedinthreeways;(1)byaddingnewactivities;(2)bylinkingactivitiestoeachotherinanewway;(3)bychangingthepartyofwhichperformsacertainactivity.Toconclude,theinterpretationofpreviousstatementsisthatbusinessmodelinnovationinthisstudyreferstotheactofchanginganypropertiesofthecomponentsofabusinessmodelthatstatethelogicofthecompany.Inthiscase,thesecomponents are the value proposition, revenue model, customers or organizationalarrangements.

Thereareseveralreasonstoinvestinbusinessmodelinnovation,amongtheseisthatitcancoverupfinancialopportunitiesthatareunder-utilized(Amit&Zott,2012;Johnson,2010).Furthermore,Johnson(2010)claimsthattheactiontoinnovateanexistingbusinessmodelcan create opportunities for claiming new customer segments, enhancing the valueproposition for existing customers and entering new industries. On the other hand –business model innovation can sometimes be a necessity at different occasions forcompaniesinindustrieswherethetechnologicaldevelopmentrateishigh(Johnson,2010;Massa & Tucci, 2013). In markets where emerging technologies create some sort oftechnologicaldiscontinuitywithradicalinnovations,businessmodelinnovationisnecessaryto support the business to be more uniquely suited to the customer needs and moreinimitabletocompetition(Tucci&Massa,2013).

Massa&Tucci(2013)statethatwhilstservingexistingcustomersinnewways(e.g.throughnewvaluepropositions,productfeatures,etc.),developingnewbusinessmodelscanbeanecessityasaresponsetomarketopportunities.Thatis,ifamarketopportunityinanewofferingisdiscovered,anewwayofrevenuegeneration,businessmodelinnovationcanbea necessary response. One example can be seen in the early cell phone industry, wherebusiness model innovation was essential for companies to prolong their lifetime(Chesbrough&Rosenbloom,2002;Hacklingetal.,2018).Lookingatcompaniesactivewithinthe industry, thevaluewithinthebusinesses ‘migrated’– fromsellingcellphonedevices,calls and messages to weaving customers into an ecosystem of services and mobileapplications (Hackling et al., 2018).Here, companiesnot onlyneeded to claimpowerbyinventing new revenue streams, but also needed to transform theirwholeway of doingbusiness(Ibid.).Aninterpretationisthatasimilartransformationisnowundergoinginthe

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manufacturing,ashardwareisnowbeingembeddedwithsoftwareandintegratedsolutions(e.g. Baines et al., 2009; Kowalkowski et al., 2012; Neely, 2007), i.e. the process ofservitization.

ThefindingsofBuchereretal.(2012)proclaimthatbusinessmodelinnovationandtheideabehindtheinnovationitselffromaprocess-relatedperspectiveneedstobedeeplyrootedandanchoredintheoveralllong-termorganizationalstrategies.Theauthorsstatethisfactas their findings imply that business model innovation is dynamic and not an isolatedactivity. Derived from the findings of Bucherer et al. (2012) and Porter (1996), thesestrategies and the strategic incentives need to be consistent – and consistentlycommunicatedinternallyforemployeestosupporttheclaimofthespecificallyundertakenbusiness model innovation. However, this can turn out to be a problem as there arechallengesinimplementingnewbusinessmodelconcepts,askeyconceptswithinbusinessmodel components are not always translatable into operational decisions (Morris et al.,2005).

Upon the implementationofbusinessmodel innovation– thereare several challenges toconsider. Bucherer et al. (2012) state that businessmodel innovation often involves therestructuring of internal processes and organizational structures. There is a need forcreating independent and specifically dedicated business units,with ownership rights tohandletheimplementationofthenewbusinessmodel(Buchereretal.,2012;Christensen&Overdorf,2000).Buchereretal.(2012)statethatthefundamentalissuetoreacttowithinthisnewdedicatedbusinessunitisnewandemergingmarketsorsegments.

However,allissuesthatarisefrombusinessmodelinnovationinitsimplementationphaseare not provided from the external environment. There are also issues internally, uponanchoringinnovationsofthebusinessmodel(Buchereretal.,2012).Buchereretal.(2012)amongothersstatethatgeneralproblemsinanchoringbusinessmodelinnovationswithintheorganizationarethatemployeeslackwillingnessandknowledgewithinnewbenefitsandvalues that are provided; the inability to leave older routines; and the employeesmisunderstanding of newmarkets or opportunities. Uponmitigating risks with internalanchoringofaninnovation,thereisaneedforinternalpromotersoftheidea(Buchereretal., 2012; Jenssen&Nybakk, 2009). Bucherer et al. (2012) define two different types ofinternalpromoters;(1)specialistpromoters;and(2)powerpromoters.Theformerreferstopeople mitigating resistance based on insufficient knowledge, while the latter refers topeoplemitigatingresistancebasedon lackofwillingnesstoadapttothe innovation itself(Buchereretal.,2012).ThefindingsofBuchereretal.(2012)intheircasestudyinsuccessfulbusinessmodelinnovations,thesetypesofpromoterswerecrucialforimplementingnewbusinessmodelswithintheircasecompanies.However,thetheoreticalstudiesofBocketal.(2012)claimthatthecompanyitselfneedtohaveasupportiveculturefortheinnovationinitiative to succeed.Bock et al. (2012) togetherwithBucherer et al. (2012) state that a

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consistent, collective and creative culture is needed for innovation initiatives. Culturesencouraging innovation becomes crucial in fault tolerance, agility, responsiveness andworkingwith common goals – as new offerings, which can constitute the emergence ofbusinessmodelinnovations,tendtoneedtimetobeacceptedbythemarket(Buchereretal.,2012).

2.3 ServitizationinthemanufacturingbusinessAscompaniesmovetowardsservicesoversimpleproducts,Storbackaetal.(2013)discusstheneed forchangeand innovationof thecompanybusinessmodel. Inmanagementandmarketingliterature,servitizationisaconceptthatrelatestothetransitionfromtransaction-based products to service or solution provision (Kowalkowski et al., 2012; Wise &Baumgartner, 1999). Baines et al. (2009) state that the term is based on the belief thatmoving towardsamoreservice-orientedor service-integratedmanufacturingbusiness ismoredistinctive,long-termsustainableandmoreinimitableinitsnatureinacompetition-basedmarketwith low-cost economies.Neely (2007) states that the industrial sectorby2007had lostproducteconomies in theMiddleEastandsoutheasternAsia,and thatUS-basedcompanieswithinmanufacturinghadtocutproductcostsbyroughly30%tobeabletocompetewithChinesefactories.AccordingtoNeely(2007),akeystrategytotackletheemergingproblemswithinthemarketwastocompetebycombiningproductswithservices,byemployingservitizationwithinthemanufacturingsector.Bainesetal.(2009)alsostatethat a key feature within servitized software companies is their customer centricity,comparedtootherhardwareproductandmanufacturingfirms.Inrelationtothetheoriesofbusiness model innovation (Amit & Zott, 2012; Johnson, 2010; Tucci & Massa, 2013),introducingservitizationinmanufacturingcompaniesmayapplytotheideaofinnovatingthe existing businessmodel. This is because the concept of servitization complies to thetheory of adding or linking new activities (Amit& Zott, 2012) through a combination ofproductandservice,aswellasenhancingofthevaluepropositiontocustomers(Johnson,2010).

In the early days of servitization, companies still tended to view services as a necessaryelement formarketing strategies for products (Baines et al., 2009;Wise&Baumgartner,1999). The main part of the business and value creation still belonged to the physicalcommoditiesratherthanitssurplusservices(Bainesetal.,2009).Laterhowever,Bainesetal.(2009)statethatservicesturnedouttobethedifferentiatorasintegratedproduct-servicesystemsandofferingswereprovided.Furthermore,asforfeaturesofservitization,thevalueaddedtocustomerstendtobecomemorespecificandcustomer-centric–asanintegratedmoduleofproductandservicegenerallyaremoreofa tailoredsolutionforthecustomer(Oliva&Kallenberg,2003).Bainesetal.(2009)andOliva&Kallenberg(2003)declarethatthepossibilityofcustomertailoringisalsoeasiertoachieve.Thisisinonewayconsideredtobeaneffectoftheshiftofcustomerinteractionfromtransaction-basedtorelationship-based(Ibid.).

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2.3.1 DriversofservitizationTheprocessofservitizationforcompaniesismainlydrivenbythreefactors;finance,strategy(asincompetitiveadvantage)andmarketing(Bainesetal.,2009;Oliva&Kallenberg,2003;Wise&Baumgartner,1999).Wise&Baumgartner(1999)suggestthatthefinancialdriversforservitizationderivefromprofitmarginsandincomestability.Theauthorsalsostatethatthemagnitudeofincreasedrevenueswithregardstoservices,insomesectors,istwiceasgreatasrevenuesabstractedfromnewproductsales.Asforpracticalexamplesfollowingthisnotion,Sawhneyetal.(2004)identifiedGE,IBM,SiemensandHewlett&Packardthatenhancedthestabilityofrevenues–notwithstandingthedeclineinproductsales.Withitscustomer centricity, the combination of product and service or the service alone isconsidered to be less sensitive in terms of price elasticity,which later turns into higherprofitability(Bainesetal.,2009;Wise&Baumgartner,1999).

Oliva&Kallenberg (2003), supportedbyBaines et al. (2009),mention that services alsoenhancethedifferentiationofofferingswithinmanufacturing,thuscreatingapotentialforgreatercompetitiveadvantagesandopportunities.Oliva&Kallenberg(2003)alsostatethatthe potential competitive advantage is derived from the services’ increasing level ofinimitability.Bainesetal.(2009)suggestthattheprogressivecommoditizationofproductmarketsisbecomingaproblemforhardwaremanufacturingcompaniesasdifferentiationachieved by the innovation of products and technology aswell as price-based strategiesbecomehardertomaintain.

Asformarketingdriversandmarketingopportunities,Bainesetal.(2009)statethatnewservice offerings in combination with products generally increases product sales.Furthermore,Oliva&Kallenberg (2003) state that this is consideredvastlymore true inbusinesstobusiness(B2B)andmanufacturingmarkets,wherethedemandforservicesisrising.Thereasonforthismatteristhatelementsinservicesprovideincreasingimportanceinpurchasingactions(Bainesetal.,2009).Bainesetal.(2009)alsoindicatethatservices,incomparison to products, support customer loyalty, where customer become more of asubordinatetoitssupplier.Bainesetal.(2009)andMathieu(2001)declarethatthistypeofrelationshipcreatesopportunitiesforupsell–althoughitcomeswiththecostofsupplyingmore tailored service andproduct combinations, and in somecases creating systems forcustomermanagement.

2.3.2 FrameworkfortheservitizationdevelopmentKindström&Kowalkowski(2009)havecreatedafour-stageframeworkforthedevelopmentofnewserviceofferings,whichisdividedintothestages;marketsensing,development,salesand delivery. According to the framework, there are several critical aspects andorganizationalchallengesuponemployingservitizationwithinamanufacturingcompany.Intermsofservitization,theframeworkalsoprovidesdetailsregardinghowtheorganizationneedstoadaptitsroutines,andinextensionthebusinessmodel,toaligntoresultingchanges

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ofcompanyservitization(Kindström&Kowalkowski,2009).TheframeworkbyKindström&Kowalkowski(2009)hasbeenfurtherdevelopedinthisthesiswithsupportingauthorsandadditionalchallenges,aspectsandactivitiesasseeninTable2below.

Table2.Theservitizationprocess(Kindström&Kowalkowski,2009)

Stage Challenges Criticalaspectsandactivities

Othersupportingauthors

Marketsensing

Lackofcapabilityandinsightstoapprehendnew

marketopportunities(innewmarketsegments).

Structuringtheportfolioofservices.Understandthatmarketsensingisacontinuousprocessindialoguewithcustomers.

Day(1994)Kowalkowski

(2008)

Development

Problemsingettingcommitmentandinvestmentdecisions.

Involvecustomersinthedesignprocess(allowcustomization).

deBrentani(2001)

Sales

Adaptingthecompetenceofsalespersonneltoserviceofferings,since

thereisaclearbiastowardproduct

sales.

Changingmindsetsandvaluestowardtheservitization.Developingsalestoolstopromoteservicesales.Focusonvalue-in-useovervalue-in-exchange.

deBrentani(2001)Lapierre(2000)Ramírez(1999)

Delivery

Lackofinfrastructurefortheservice.

Enhancingcustomerrelationshipstoensureservice

qualityandvalue-in-use.

Increasingvisibilityofthenewservicestocustomersthatareaccustomedto

products.

Grönroos(2007)

2.3.3 ServitizationanditsimplicationonbusinessmodeldesignItisobviousthatcompaniesinprocessofservitizationareaffectedinnumerousways–howthey interact with customers, how value is delivered and captured, and how companyresourcesareorganized(seee.g.Bainesetal.,2009;Kindström&Kowalkowski,2009;Oliva

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&Kallenberg,2003).Thereby, severalpartsof thebusinessmodeldesignareaffectedbyintroducing integrated solutions for product and service offerings. The implications ofservitizationforthebusinessmodeldesignwillnowbediscussedfurther,withnoticetothecomponentsintheproposedframework(seeFigure3).

2.3.3.1 ImplicationsforthevaluepropositionAstheintegrationofproductandserviceturnsthecompanyportfoliocomplexintomoreinimitable for competitors (Oliva & Kallenberg, 2003), the clear implication is thatservitizationfavorsdifferentiationofthevalueproposedbythecompany.However,italsopressuresthecompanytounderstandthatthefocalpointforthevaluepropositionwillbemore linked to value-in-use over value-in-exchange (see e.g. Kindström& Kowalkowski,2009).That is,asnewvalue is introducedbythe integrationofproductandservices, thevaluecannotsimplyrelyon,e.g.productquality.Thecustomerinteractionwiththeserviceiscontinuousandtheusageofasoftwareserviceprobesforcontinuousvaluedeliveranceunderongoinginteractionwiththeservice(Kindström&Kowalkowski,2009).Kindström&Kowalkowski(2009)andLapierre(2000)statethatthehardwareproductsanditstechnicalfeaturesbecome“qualifiers”ratherthan“orderwinners”,andantecedentsforcreatingvaluein servitized companies. However, the nature of delivering products is fundamentallydifferentfromthatofservices(Vargo&Lusch,2004).Offeringsalsotendtobecomemorecomplexastheintegrationofproductandservicesappear,whichcanresolveinlongdelivery(andlife)time(Grönroos,2007;Kindström&Kowalkowski,2009).Thiscouldalsoaffectthevaluepropositioninsuchthatthecompanyneedstoassurelong-timesustainabilityintheirnewofferings(Kindström&Kowalkowski,2009).

Andersonetal.(2006)andGrönroos(2007)statethatservitizationprovidesforthevaluepropositiontonotonlycovertechnicalandeconomicbenefits,butalsosocialbenefits.Astheserviceofferingallows forgreater interactionwith customers, itpressures the servitizedcompany to build their business upon trust, inter-firm cohesion and customization(Kindström&Kowalkowski,2009).Incontrasttoproductofferings,serviceofferingsorthecombinationofproductandserviceofferingimpliesgreatercustomizationandcontextualsolutionsbasedoncustomerpreferences(Ibid.).Furthermore,Kindström&Kowalkowski(2014) state that companies in process of servitization need to understand the valueproposedbyanewoffering,aswellastheneedforvisualizationofvaluetotheircustomerstoproveitsvalue-in-use.Thispromptcanstressthecompanyinprocessofservitizationtoconsider making the value proposition comprehensible (e.g. visualizable, measurable,translatable).

2.3.3.2 ImplicationsfortherevenuemodelAs companies are in the process of servitization, they need to be innovative in terms ofcreatingnewwaysofgainingrevenuefromtheirserviceportfolio(Kindström,2010).Beinginnovativeincreatingthesenewrevenuestreamsthatarebettersuitedwiththeirservice-

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based businessmodels should be of primary focus (Ibid.) If services, or other types ofintegrated solutions can be integrated into the existing business model successfully,otherwiseproduct-orientedcompaniescansecuremoreregularrevenuestreams(Sainio&Marjakoski,2009).ThisisexemplifiedbylookingatcompaniessuchasGE,IBM,SiemensandHewlett&Packardwhichhaveall transitionedtobemoreservice-orientedandthereforeenhancedstabilityintermsoftheirrevenuestreams(Sawhneyetal.,2004).Furthermore,introducingandintegratingservicesaspartofthecompanybusinessmodelhasshowntoincreaseupsell(Bainesetal.,2009;Mathieu,2001).Itisalsoshowncustomersseemtobelesssensitivetopricechangeswithinthesetypesofcontexts,asservicesoftenoffermorecustomizability and possibilities for tailored-suit solutions (Baines et al., 2009; Wise &Baumgartner,1999).

Ascompaniesservitizefurther,manyoftenimplementmoreinnovativerevenuemodelsandvalue-basedstrategiessuchaspay-per-use,pay-per-outcomeorsubscription-basedmodels(Naor et al., 2018; Rapaccini, 2015). However, it is also seen that companies who areundergoingservitizationstillapplytheoldcost-basedpricemethodsastheydowiththeirproducts(Ibid.).Whenlookingatdesigningrevenuestreamsforservice-orientedbusinessmodels,Kindström(2010)emphasizeshavingavalue-basedapproachratherthanacost-basedone.Hestatesthatthepriceshouldbedevelopedwiththevaluetheserviceprovidestothecustomerinmind.Kindström(2010)alsodeclaresasthecustomerbecomesamorematurebuyerintermsofservicesandthecompanyacquiresabetterunderstandingofthecustomer’sneeds, itopenspossibilities formoreadvancedpricingmethods.Kindström&Kowalkowski(2014)areofasimilaropinion,sayingcustomerproductusageandprocessdataareofsignificancewhendesigningtherevenuemodel.Ifthisdataisusedcorrectly,theydeclare the revenuemodel canbecomemore alignedwith the customer’s value creationprocesses. Oliva & Kallenberg (2003) share this sentiment, stating when undergoingservitization,companiesshouldtransitionfocustotheservice’sefficiencyandeffectivenesswithintheend-user'sprocesses.

Overall,revenuestreamdesignandpricingmethodwheninthecontextofcompaniesintheprocess of servitization is highly dependent on the customer (Kindström, 2010; Oliva &Kallenberg,2003;Rapaccini,2015).Hence, flexibility is requiredwhendecidingupontherevenuemodel componentwithin the businessmodel (Ibid.). Additionally, in relation toservitization,severalauthors(Kindström,2010;Kindström&Kowalkowski,2014;Oliva&Kallenberg,2003)stresstheneedformoreinnovativepricingmethods,movingawayfromthetraditionalcost-basedalternatives.

2.3.3.3 ImplicationsforcustomersAsservitizationiscustomercentric(Bainesetal.,2009;Wise&Baumgartner,1999),thepartof thebusinessmodelwhichaddressescustomers ishighlyaffectedby thephenomenon.Intertwined with what is suggested in section 2.3.3.1 about implications for the value

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proposition,customizationvastlyaffectstheinfrastructurearoundaservice-basedoffering(de Brentani, 2001; Kindström & Kowalkowski, 2009). In fact, Grönroos (2007) andKindström&Kowalkowski(2009)state thatacriticalchallenge indeliveringaservitizedofferingismakingsurethatthereisnolackofinfrastructuretosupportit.Bainesetal.(2009)andMathieu(2001)agreethatthisstressesacompanyinprocessofservitization,astheremightbeincreasedcostsofsupplyingtailoredserviceandproductcombinations–andthatcustomer(relationship)managementsystemsarepreferredtohandlethechallenge.

Servitizationestablishes increasing importance forenhancedcustomerrelationships,andthatthesupplyingcompanyneedstobeawarethatservicesarecontinuouslydevelopedindialoguewithcustomers(Day,1994;Kowalkowski,2008).Thisalsocompliestotheideathatenhancedcustomerrelationshipssupplynotionsforsensingopportunitiesavailableonthemarket (Kowalkowski, 2008). However, Payne et al. (2017) state that in the process ofservitization,animportantelementistheco-creationofthevalueproposition,whichmeansthat there needs to be a substantial mutual understanding of the supplier’s and thecustomer’susagesituationandgoals.

As for target customers, the immediate introduction of a new servitized offering from acompanypaveswayforpossiblenewtargetcustomers.Grönroos(2007)andKindström&Kowalkowski(2009)unisonallydeclarethatthereisaneedforincreasingvisibilityonthemarketingeneral,tomakepossiblecustomers(andclientsaccustomedtoproducts)awareofthechange.Asbusinessmodelsareawayofdeliveringvalueandtemptingcustomerstopayforthisvalue(seee.g.Teece,2010),therearrangementofvalueasaresultofintegratingproductandservicesprovidesforopportunitiesofnewtargetcustomers.Logicallyderived,newtargetcustomerorcustomersegmentscouldbebasedon theirneed forcustomizedproductandsoftwaresolutionsratherthanasimpleproductforconsumption.

2.3.3.4 ImplicationsfororganizationalarrangementsAscompaniestransitionintomoreservice-orientedofferingsandinextentbusinessmodels–theyshouldidentifywhattypeofresourcesandcapabilitiesareneededtocompletethetransition(Adrodegari&Saccani,2017;Kindström&Kowalkowski,2014).Morespecifically,this implicates that companies should identify and develop resources and capabilities tosupporttheirnewvalueproposition,revenuemodelandcustomerproperties(Adrodegari&Saccani,2017;Kindström,2010;Kindström&Kowalkowski,2014;Oliva&Kallenberg,2003).

Asexaminedinprevioussectionsdiscussingimplicationsforthebusinessmodelasaresultofservitization,itisoftenargued(seee.g.Kindström,2010;Oliva&Kallenberg,2003)thatamore customer-centric approach is needed.Kindström&Kowalkowski (2014) argue theimportanceofestablishingnewcompetencestosupportthechangeoftheapproachtothecustomer.Furthermore,Kindström(2010)arguesoneofthecoregoalsofdevelopingthesecustomer developing competences is being able to capture customer needs. These

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competences could for example be created by hiring new personnel, creating a newdedicated business unit or developing capabilities for further establishing customerrelationships(Kindström&Kowalkowski,2014).Whenundergoingservitization,companiesshould also aim to develop capabilities related to sales and delivery (Kindström &Kowalkowski,2009).Thisincludesdevelopingtoolstosupportsalesofservicesandmeanstoconveythevalue-in-useoftheservice(deBrentani,2001;Lapierre,2000;Ramírez,1999),but also establishing sufficient infrastructure to deliver the service to the customer(Grönroos,2007).

Kindström&Kowalkowski(2014)statethattheresourcesandcompetencesofthecompanyshouldbetightlylinkedwiththeactivitiesitcarriesout.Asservitizationrequiresdevelopingcustomer-centriccapabilitiesandcompetences(e.g.Kindström,2010;Oliva&Kallenberg,2003),theseshouldbedevelopedtoenablecarryingoutacertainsetofactivities(Al-Debei& Avison, 2010; Osterwalder, 2004) - meaning the activities carried out by a servitizedcompanyshouldfacilitateacustomer-centricapproach.Hence,customer-centricactivitiesin a servitized company include such as ones that promote capturing customer needs(Kindström, 2010), mechanisms to strengthen customer relationships (Kindström &Kowalkowski,2014)andcreatinginnovativepricingmethods(Oliva&Kallenberg,2003).

2.4 SummaryoftheframeofreferenceTheframeofreferencethatispresentedinthischapterwillbeappliedfortheremainderofthisthesis.Thechapterstartswithadiscussionoftheconceptofbusinessmodelsandwhatimplicationsbusinessmodeldesignhas for thecompany.Thechapter concludes that thebusinessmodeloffersaholisticapproachofthebusinessandthatitcanbeseenasawaytodescribehowthecompanybusinessfunctions(Chesbrough&Rosenbloom;Zottetal.,2011).It has also been made clear that the business model is essential for business modelperformance (e.g. Chesbrough, 2010; Magretta, 2002; Teece, 2010). Furthermore, thechapterpresentsaproposedbusinessmodelframeworktoapplywhentryingtounderstandand study the company business. The framework consists of four components: valueproposition, revenue model, customers and organizational arrangements. The proposedframeworkisbasedonearlierworkbyseveralscholars(e.g.Adrodegari&Saccani,2017;Fielt,2014;Osterwalder,2004)

Theframeofreferencecontinuesbydescribingthetermbusinessmodelinnovation,inwhatcontextinnovationofthebusinessmodelmightbeneededandtheprocessoforganizationalanchoringofnewbusinessmodels.Businessmodelinnovationreferstotheactofchangingthepropertiesofoneorseveralthebusinessmodelcomponent(s)(Amit&Zott,2012;Massa&Tucci,2013).Amongthereasonstoinvestinbusinessmodelinnovation,oneisthattheaction can result in covering up financial opportunities that are currently under-utilized(Amit&Zott,2012;Johnson,2010).Generally,businessmodelinnovationsneedtobedeeplyrooted in organization strategy (Bucherer et al., 2012) and communicated to the

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organization (Porter, 1996). To complete business model innovation, a new dedicatedbusinessunitshouldbeinstalledtohandletheownershipoftheinnovation(Buchereretal.,2012; Christensen & Overdorf, 2000). Furthermore, this section describes how businessmodelinnovationneedstobelinkedwithinternalpromotersoftheideaandtheinnovation(Jenssen&Nybakk,2009),aswellasasupporting,creativeandcollectiveculture(Bocketal.,2012;Buchereretal.,2012).

This chapter also discussed the term servitization and what factors have driven andinfluenced the development of the manufacturing industry towards servitization. Theservitizationseemstobedrivenby increasedcustomerdemandforcustomizedsolutions(Oliva&Kallenberg,2003)whichinturnleadstoincreasedfinancialviabilityforservitizedcompanies (Baines et al., 2009; Wise & Baumgartner, 1999). The chapter continues bydescribing how company servitization affects the different components included in theproposed businessmodel framework. Generally, servitization requires innovation of thebusinessmodel inways that promote amore customizable (Kindström& Kowalkowski,2009),solution-based(Bainesetal.,2009;Kowalkowskietal.,2012;Neely,2007;Storbackaet al., 2013) and customer-centric (Kindström, 2010; Kindström & Kowalkowski, 2014)business approach. This includes actions such as new innovative pricing methods(Kindström, 2010; Kindström & Kowalkowski, 2014; Rapaccini, 2015) and buildingcapabilities to support enhanced customer relationships (Kindström, 2010;Kindström&Kowalkowski,2014).However,beingabletodemonstratetheactualvalueoftheservice,incontrasttoaproduct,alsorequiresachangeinhowcompaniesdemonstratevaluetothecustomer(Kindström&Kowalkowski,2009).

2.5 AnalyticalmodelTheconcludinganalyticalmodelisaframeworkforapproachingservitizedbusinessmodels.Theanalyticalmodelpresentedinthischapter(seeFigure4)representshoworganizations,based on combined theories of different scholars (see sections 2.3.3.1 – 2.3.3.4), shouldmanage the transition fromproduct to service offering (i.e. servitization). The analyticalmodelpresentedinFigure4alsorepresentstheintegrationoftraditionalbusinessmodelliteratureanditscomponents(seee.g.Al-Debei&Avison,2010;Fielt,2014;Osterwalder,2004; Osterwalder & Pigneur, 2010) and literature regarding the implications for thebusinessmodelwhenintroducingserviceandsoftwareintoanorganization(seee.g.Baineset al., 2009; Grönroos, 2007; Kindström, 2010; & Kindström Kowalkowski, 2009).Furthermore, the analyticalmodel takes the organizational anchoring of a new businessmodel intoaccount,asproposedbyBocketal. (2012),Buchereretal. (2012)andPorter(1996)amongothers.Theorganizationalanchoringishencenotanactualbusinessmodelcomponentbutinsteadaddresseshowtheprocessofestablishingtheideaandconceptoftheservitizedbusinessmodelcanbecharacterizedwithintheorganization.

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Upon conducting the empirical research for this thesis, the analyticalmodel is used as aframeworkforunderstandingandanalyzingtheexistingbusinessmodelandlayingabasisforkeyareaswithinthecompanybusinesstofocuson.Thisisdonebyidentifyingpatternsand themes of collected empirical data and categorizing it by what component of theproposedbusinessmodelframework(seeFigure3)theyadhereto.Thepropertiesoftheidentifiedpatternsandthemesarethencomparedtoidentifiedpropertiesoftheservitizedbusinessmodeldesignaccordingtopresentedtheory,alsocategorizedbythecomponentsof theproposedbusinessmodel framework.Bydoing this, the analyticalmodel not onlyenablesanalysisandunderstandingoftheexistingbusinessmodel,butalsolaysafocusonareas which theoretical evidence states are key in servitized companies. The analyticalmodel also embeds the organizational anchoring of a business model, which is used tounderstandhowtheinternalprocessofthebusinessmodelinnovationcanbecharacterizedwithinthecompany.

The analyticalmodel lays abasis for further research in the context of this thesis and isconsidered a backbone when creating the interview template and identifying interviewthemesandquestions.ThesearepresentedintheMethodologychapter.

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Figure4.Theservitizedbusinessmodeldesignasananalyticalmodel

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3 MethodologyThischapterpresentsthegeneralmethodologyandthefoundationsoftheunderlyingresearch.As an introduction, the scientific approach for the research is displayed, followed by thedescriptionsandjustificationsoftheworkingprogress.Furthermore,thischapterincludesadiscussionregarding thequalityandcredibilityof the studyand itsapproach tomoralandethics.

3.1 ScientificapproachThere aredifferent approaches toknowledgeunderstandinganddifferent approaches tocompilingempiricsingeneral.Alogicalwayofapproachingresearchcouldbetothatitisbased on the nature of the phenomenon, subject of examination and earlier theoreticalagreements within the subject matter. Bryman & Bell (2013) claim that there are twosynoptictypesofresearchtoconsider,quantitativeandqualitativeresearch.

In quantitative research, Sale et al. (2002) state that the phenomena of interest and itsinvestigatorareindependentofeachother.Thus,theinvestigationiscapableofnotbeingsubjectivelyinfluencedbytheinvestigator-whichistheapproachinquantitativeresearch(Guba&Lincoln,1994).Onegoalinquantitativeresearchistoanalyzecausalityinbetweenvariablesandconstructswithinframeworkfreefromsubjectivevalues(Denzin&Lincoln,1994;Saleetal.,2002).Therefore,quantitativeresearchbuildsonlargersamplesizes,whichinmanycasesarestatisticallyanalyzedtoproveaphenomenon'sexistence–that inturnbuilds upon randomization, structured templates and protocols (Carey, 1993; Sale et al.,2002).Thisisawaytomakestatisticalmethodsapplicabletothestudy(Carey,1993).Asquantitative research builds upon the concept that the investigator and the study are toseparateanddividedentities,thequantitativeresearchperspectivecanbehardtoapplyifastudyisbasedonphenomenathataresociallyconstructed(Saleetal.,2002).

Sale et al. (2002) claim that qualitative research repose upon the assumption that theinvestigationandthe investigatorare linkedandcannotbeseenasseparateentities.Theontological basis forqualitative research is that results fromqualitative researchare co-createdbytheinvestigator,thepeoplelinkedtothestudyanditscontextualsurroundings(Denzin&Lincoln,1994;Guba&Lincoln,1994;Saleetal.,2002).Furthermore,Saleetal.(2002)statethatrealityandknowledgewhilelookingthroughaqualitativelensarecreatedthroughsocialactions.Knowledgeorrealityisnotindependentofmindsetsandtheintellectofeachindividualthatpassthestudyinanysense(Saleetal.,2002).Commontechniquesand methods while performing qualitative studies are interviews and participantobservation,wherethefocalpointforsamplingisbasedonthesizeofinformationgathered,ratherthanthesizeofpopulationwithinthestudy(Bryman&Bell,2013;Saleetal.,2002).Reid(1996)andSaleetal.(2002)claimthatrespondentsininterviewsarechosenduetotheirrelevanceandimportancetothephenomenainquestion,ratherthanhavingalargersamplesizewithabiggerfocusonachievingrandomizationandobjectivity.

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Upontheformationofthisstudy,severalsetsofoptionsandchoiceswereconsidered,withthe thesis’s purpose as a focal point, its fundamental conditions and discoveries fromscientificresearchabouthowascientificstudyshouldbeperformed.Yin(2003)statesthatqualitativestudiesaretobeperformedupondefiningapurposesetouttoexplore“howandwhy”. Due to the exploratory nature of the purpose of this thesis and the underlyingcontextual conditions, the thesisworkwasdesignedandcarriedwithaqualitative studyapproach.

3.1.1 ApproachtodatacollectionThere are two main paradigms or perspectives to understanding gathered empirics inresearch; interpretivism and positivism (Henderson, 2011). Lin (1998) states that theinterpretive approach places the combination of sampled data into a system, whereinterpretations are made based on its coherence to the specific case being examined.Positivistic studies instead seek to understand data in a hypothesis-driven sense,wherehypothesesandpropositionsaretestedbycomparingtheircoherencewithotheridentifiedcasesofthephenomena(Lin,1998).

Whenconductingresearchandthephenomenainquestionaresubjectivetopeopleanditscontextualsurroundings,theinterpretiveapproachtoknowledgeiswidelyused(Bryman&Bell, 2013). Bryman & Bell (2013) describe the interpretive approach as a strategy forunderstanding the knowledge that takes social actions into consideration – as in thediscrepancybetweensocialcontextandtheoreticalconcepts.

Asforthemanydefinitionsofbusinessmodelsandservitization,togetherwiththefactthatsuccessfulbusinessmodelsareoftenfirm-specificandneedtobeunderstoodinitscontext,the approach to collecting data in this thesiswas two-fold.While creating the analyticalmodelwithabasisintheframeofreference,onecouldarguethatapositivisticapproachwasundertakenandmustbeundertakeninthiscontext.Thisisthecaseastheanalyticalmodelwashypotheticallyproduced through the literature study.However,while analyzing andcompilingdataaninterpretiveapproachwasusedtocreatebettercontextualinsightintothecompany’s business model – as supported by Klein & Myers (1999) theories aboutcombining interpretivism and qualitative studies in the data collection phase. Also, asinterviews underly the findings presented in this thesis, the interpretive approach wasconsidered the easier choice. This is due to the fact that interviewees used differentvocabularyandnotionstoexplainwhattheauthorsofthisthesisinterpretedasthesameopinionsandideas.

3.1.2 ReasoningandlogicIn scientific research, there are essentially three perspectives of reasoning; deduction,induction and abduction (Kudo et al., 2009). Deduction is a top-down logical process ofreasoning, where premises are built and tested, and conclusions can be drawn as allpremises are proven true (Bryman & Bell, 2013, Kudo et al., 2009; Sternberg, 2009).

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Deductionisalsooftencoupledwithreachingconclusionsthroughexperiments(Bryman&Bell,2013).Bryman&Bell(2013)statethatininductivereasoningortheinductiveapproachtologic,knowledgeratherderivesfromobservationofempiricalcases.Inoppositetothedeductiveapproach,inductionbuildsuponprovidinggeneralrulesfromspecificfacts(Kudoet al., 2009). By observing specific facts, general rules can be created if what has beenobservedisadistinctpatternthroughouttheresearch(Ibid.).Amongscholars,abductionisexplainedasatypeofmixturebetweendeductiveandinductivereasoning(seee.g.Kudoetal.,2009;Sternberg,2009).Kudoetal.(2009,pp.1216)statethatabductionisa“...reasoningprocessforprovidingahypothesisthatexplainsafactinthegiventypicalsituation.”.

As the study rests upon a deductive literature study which then builds toward acomprehensibleanalyticalmodel,whichisinductivelyusedthroughqualitativeinterviews–thisstudywascarriedoutwithabductivereasoning.Kudoetal.(2009)statethatoneofthegoalswithabductivereasoningistoestablishgroundworkforhypothesisgeneration.Inlinewiththisstatement,thisthesissetsouttoestablishhypotheseswithintheintersectionofthefieldsofservitizationandbusinessmodelinnovation.

3.1.3 TypeofstudyThere are underlying approaches to qualitative research that should be considered. Yin(1981)state that thereareessentially twoapproachestobeconsidered;surveyandcasestudy (also experimental but that is not applicable to this study). The survey approachrequiresasubstantiveamountofdatafromdifferentsourcesofwhichcanbecompiledintoacoherentnotionofthephenomena(Baxter&Jack,2008;Yin,1981;Yin,2003).Ontheotherhand,Gerring (2004)explains thatacasestudyoften isa researchbasedonparticipant-observationof a field, inwhich the study investigatesproperties of a case related to thesubjectinquestion.Duetothecontextinwhichthisthesiswasset-withanemployingcasecompanyandlimitationsintimeandresources,thestudywascarriedoutasacasestudy.Theoretical concepts such as business models and servitization are each theoreticallyconceptualizedinmanyways,hencecreatingcomplexityindistinguishingtheconceptsfromitscontext.Theapproachtowardaqualitativecasestudywastherebyalsoperformedasitwasdeemednecessarytocollectempiricaldatafromathoroughlyinvestigatedcaseandmapoutitsunderlyingcontextualconditions.

Casestudiesarecommoninresearchsettingssetouttodetailnewtheoryornewpropertiesof theoretical fields (Eisenhardt&Graebner,2007).Furthermore,Eisenhardt&Graebner(2007,pp.25)explainthatcasestudiesfromatheoreticalstandpointinvolvethecreationof“...constructs,propositionsand/ormidrangetheoryfromcase-based,empiricalevidence”.Casestudiesarehighly regardedascanonical theoretical researchwithinacademicwork(Eisenhardt&Graebner, 2007;Gerring, 2004).However,within the field of case studies,therearemultiple-orsingle-casestudiestoconsider(Tellis,1997).Tellis(1997)describesthatthemultiple-casestudyrequiresregardtoreplication,overthesingle-casestudywhich

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reliesonawell-groundedsamplingofthecase.Withmultiple-casestudies,therobustnessoftheresearchisgreaterthansinglecasestudies,howeverthesingle-casestudycanberobustifassessmentandsamplingofthecasearewell-grounded(Tellis,1997).Asthisthesisreliesonone single case company to examine, and its contextual setting is limited in timeandresources,thisstudywascarriedoutasasingle-casestudy.Thisapproachmightimpactthegeneralizabilityof thestudycomparedto ifamultiple-casestudyapproach is taken.Asasingle-case study, scholars are relatively consistent in their perceptions regardinggeneralizability.Eisenhardt&Graebner(2007)andTellis(1997)amongothers,statethattheabilitytogeneralizefromsingle-casestudieslieswithinthesamplinglogic,therichnessof itsdataand its levelofcompleterenderingwithin the text.Nevertheless,asingle-casestudyhasitsboundariesregardinggeneralizingabouttheoreticalconceptsandcreatingnewwell-groundedtheory(Eisenhardt&Graebner,2007).However,asthisthesisreposeonanexploratorypurpose–exploringhowcompaniesintheprocessofservitizationcanintegratesoftwareservices intotheirbusinessmodel– itsacademicalrecordisrathersupposedtogeneratehypothesesandlaygroundworkforfutureresearchwithinthesubjectmatter.

To concludeand summarize the scientific approachand thismethodological section, thisstudyisperformedasaqualitativesingle-casestudy.Theapproachtocollectingempiricswas both positivistic toward creating an analytical model, and interpretivist towardcompiling and collecting data. Furthermore, the reasoning for drawing conclusions andperformingtheanalysisiswithanabductiveapproach.

3.2 ResearchprocessThis thesis work was conducted in five stages; pre-study, literature study, creation ofinterviewtemplate,collectionofempiricaldataanddataanalysis.Mostofthestageswereexecuted chronologically, but the literature studywas carried out on a continuous basisthroughouttheentirethesiswork(seeFigure5below).

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Figure5.Thestagesoftheresearchmethodology

3.2.1 Pre-studyToestablishanunderstandingofcompanyservitizationandhowthephenomenacanaffecttheexistingbusinessmodel,threepre-studyinterviewswereheldwithrepresentativesfromthecasecompanysupervisingthisthesis.Thesecompany-specificpre-studyinterviewswereheldinordertograsptheessentialproblemswithadaptingthebusinessmodelasaresultofservitizationwithinthecasecompany.Asaresultoftheseinterviews,basicknowledgeofwhich theoreticalareas to further investigatewhenconducting the literaturereviewwasgranted.

Thepre-study interviewswereheld inamanner followingthetheoriesofBryman&Bell(2013)aboutsemi-structured interviews.Bryman&Bell (2013)state that these typesofinterviewsareheldinawaytomaketheintervieweeabletoanswerfreely,ontop-of-mind,withlittlerecollectionoffield-specificterminology.Consequently,Bryman&Bell(2013)alsoclaimthatthismethodcanbeconsiderablytrend-settingdependingonthecontextinwhichthe interview was set and the interviewee in question. The setting and context of theinterviewsmighthaveaffectedthequalityofthestudy,sincecompanyrepresentativesmayreactandanswerwithasubjectivebiastotheiremployer(Elwood&Martin,2000).

3.2.2 LiteraturestudyAn initial literaturestudywascarriedout inorder togetagraspofkeyconcepts,earlierinterpretationsoftheseconceptsaswellasopposingviewsoftheconcepts(Bryman&Bell,2013),primarilyintermsof‘servitization’and‘businessmodels’.Theliteraturestudywasbuiltuponaniterativescheme,visualizedinFigure7.

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Figure7.Theiterativeframeworkforconductingtheliteraturestudywithinthisthesis

The authors of this thesis had no knowledge within the field of servitization, with theexceptionof the informationgathered inthepre-study.Thismayhaveaffectedthe initialapproachtothecreationoftheframeofreference,andtherebytheempiricsandanalysis.However, to gain knowledge about the subject at hand, abstracts and conclusions fromrecognized articles were read and continuously documented. As an initial evaluation ofgathered literature, citedarticleswere reviewed to supportqualityandcredibility in theconceptualizationofservitizationandbusinessmodels.Afterevaluation,literaturewasreadandfurtherdocumented.Withinthisphase,newkeyconcepts,terminologiesandreferencewerecontinuouslynotedandreservedtobeinvestigatedfurtherthroughnewevaluationorsearchofliterature.Thiscreatedaniterativeloopofevents,depictedinFigure7.

As the literature study progressed, new types of terminology were introduced, such as;‘serviceinfusion’,‘product-servicesystem’,‘businessmodelinnovation’,‘valueproposition’and‘customervalue’.Thesetermswerededucedfromeitherservitizationorbusinessmodelliterature and deemed relevant for gaining further understanding of the phenomena ofinterest.Used literaturewas essentially basedon its recency, inter-dependenceonothersources of literature, subjective bias to its purpose and type of study performed. Thesecriteriaworkedasabackbonewhenevaluatingtherelevanceofaspecificarticleorsource,howevernocriteriafordiscardingliteraturewassetpriortotheliteraturestudy.

3.2.3 InterviewprocessandempiricaldataTheempiricalcollectionprocessconsistedofcreatinganinterviewtemplateandcollectingempirical data by conducting interviews with selected respondents. These steps aredescribedbelow.

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3.2.3.1 CreationoftheinterviewtemplateTheinterviewtemplatebeginswithashortsummaryofthepurposeoftheinterviewaswellasashortexplanationofthepurposeofthethesisandhowtheintervieweecontributestofulfillingsaidpurposebyparticipatingintheinterview.Theinterviewtemplatecontinueswithafewbackgroundquestionstoensurethattheintervieweeandtheirperspectivewithcertaintyisrelevanttothestudyandthesubjectmatter.

Thefundamentalbasisforthecontentintheinterviewtemplatewastheanalyticalmodeland its inherent components (in this context called themes): value proposition, revenuemodel,customers,organizationalarrangementsandorganizationalanchoring.Notethatthebusinessmodelconsistsoffourcomponents.Theorganizationalanchoringwashowevernotexplicitly askedabout, but conclusions about this areawere insteaddrawnbasedon theconsistency in the answers collected and what the answers indicated regarding theorganizationalanchoring.Theinterviewtemplatewasformedwiththepurposeofinvestinghowthecasecompanyfulfilledthetheoreticalclaimsandconstructsbroughtupundereachtheme.Thesethemesandtheirpropertieswerebasedonthetheorypresentedintheframeof reference. However, as the study is conducted as an interpretive study, the themesthemselveswerenotexplicitlybroughtuporexplainedintheinterviewtemplate.Instead,questionsrelating toeachthemewereoutlined inorder for the interviewers to interpretinterviewanswersandbydoingthisgainapictureofthecasecompany’sexistingbusinessmodellayout.InterviewquestionswereoutlinedaccordingtothetheoriesofBryman&Bell(2013)andSjöström(2016)aboutstartingwithopenandnon-leadingquestions to laterspecifyquestions,whichcreatespossibilitiesforlogicaldigestionofeachtheme.Sjöström(2016) mentions that this method is used in order to minimize misdirection andmisinterpretationofthethemespresentedintheinterviewtemplate.Bryman&Bell(2013)alsopromotesroundupquestions,wheretheintervieweeswouldhavethepossibilitytoaddsomethingthatwasnotbroughtupduringtheinterview.Endingroundupquestionsweretherebyincludedtopromotethecomprehensivenessoftheinterviewtemplate.

Theinterviewtemplatewasrevisedseveraltimesafterinputsfromthesupervisorofthisthesis,butalsoafterconductingthefirstfewinterviews.Theserevisionswerebasedontheoutputfromeachquestion,andrevisionsweremadeifquestionsdidnotserveanymeaningor if theydidnot give a reasonableor specific output.The final versionof the interviewtemplateisfoundin

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Appendix1–InterviewTemplate.

3.2.3.2 CollectionofempiricaldataAftercreatingtheinterviewtemplate,thewordingwasreviewed,apilotinterviewwasheld,andresultswereevaluated.Thiscreatedapossibilitytorestructuretheinterviewtemplatebefore conducting the following interviews. Criteria for eliminating questions from theinterview templatewere essentially if a questionwere too hard to answer, if it deemedreasonabletoanswerandifithadanysortofcontributionforthefulfillmentofthisthesispurpose.

Moreover, interviewswere conducted as semi-structured interviews – asBryman&Bell(2013) claim this approach creates space for the interviewee to speak freely about thecompany situationwithout the need to adapt to field-specific terminology. Furthermore,Klein&Myers(1999)statethatthisapproachfacilitatesaqualitativeinterpretiveresearchapproach.Intervieweeswereaskedforpermissiontorecordeachinterview,whichSjöström(2016)promotesasareasonableactiontotaketoensurethatthecorrectinformationwassupplied.Intervieweesweregivenachancetotakepartinthecompilationoftheempiricaldata from their specific interview to guarantee its inherent quality, also promoted bySjöström(2016).Duetogeographicaldistances,7interviewswereconductedfacetoface,and9viaonlinemeeting–whichcouldhaveaffectedtheoutcomeofeachinterviewandthequality of the study, as Bryman & Bell (2013) and Sjöström (2016) claim face to faceinterviewsaretobepreferred.Theinterviewsessionsthatwereheldlastedfor1-2hours,withanaverageofabout1hourand20minutes.

Thecollectionofempiricaldatawasbasedonprimarysourcesintheformofinterviews,butalsosecondaryresources–i.e.annualreports,officialstatementsmadebythecompanybutalsointernaldocuments.

3.2.3.3 SelectionofrespondentsAll the respondents were currently working at the case company when selected forinterviewing. In order to mitigate biases in the collected empirical data, numerousinterviewees fromnumerous setsofdepartmentswere interviewed for the study, in linewith the theories of Eisenhardt & Graebner (2007) regarding interview quality.Furthermore,itwasdeemedreasonabletogatherdiverseperspectivesofthephenomena,i.e. the company business model. Therefore, the interviewees belonged to dissimilarcorporate levels, functionalareasandgroups.Thisapproachwastakeninordertogainaholisticperspectiveonthephenomenaofinterest.AnexampleselectionoftheintervieweesisvisualizedinFigure6below.

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Figure6.Intervieweesandtheirpositionwithinthecasecompany

Firstly,businessfunctionsthatinsomewayplaysaroleintheservitizationofthecompanywere targeted. Within these business functions, a company representative suggestedinterviewees thatwere deemed relevant to the study. As the study progressedwith theconduction of interviews, more examples of employees to interview were laid out byinterviewees themselves as they recognized these people would have interestingperspectives to examine. The new proposed interviewees were then discussedwith thecompanysupervisor in termsof their relevance to thephenomenonof interestandwerelaterscheduledforaninterviewiftheyweredeemedrelevant.

16interviewswith16differentrespondentswereheld,whichiswithinthelimitofwhatisdeemedfairforqualitativeresearch(Kvale&Brinkmann,2014,pp.156;Sjöström,2016).However,basedonthesizeofthecasecompany,somedivisionsandtheirinherentpersonnelwere disregarded due to the lack of resources or their irrelevancy to the phenomena ofinterest.

3.2.4 DataanalysisEachinterviewwasfollowedbyabriefsessionofidentifyingthemainthemesandtopicsofinterest. Furthermore, all findings were compiled into one document where data wasdocumented. The collected empirical data was also presented to each interviewee, tovalidatewhathadbeenrecordedandinterpretedduringinterviewsessions.Thismaderoomforadditionaldatatobecomprehendedandcollectedaswellastheexclusionofdatathatwasincorrect.Yin(2003)proposesthatthistypeofprocesssupportsvalidatingempiricaldataandsubsequentlytheresultoftheresearch.

3.2.4.1 CodingToindextheempiricaldataset,themeswerecodedinaframework.Itwasdonewiththeintentionofsystematicallydiscoveringanddistinguishingconflictsandcommonalitiesinthe

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informationcollected.Thisprocess issupportedbythe ‘FrameworkApproach’(Ritchie&Lewis,2003;Smith&Firth,2011),whichrepresentsawayofmanagingqualitativedatasets.Smith&Firth(2011)statethatthisapproachissuitedtoqualitativedataanalysiswheretheempiricaldataconsistsofdifferentperspectivesofthephenomenaofinterestsandwhereintervieweeexperienceistobetakenintoconsideration.Thatisanotionthatsupportstheidea of proposed by Eisenhardt & Graebner (2007) about collecting data from differenthierarchical levels within the corporation under investigation. The framework approachresultedinacodingmatrix,wherepatternswithinineachsubjectthemewerecoupledtothecorresponding interviewobjects, asper thecombined theoriesofEisenhardt&Graebner(2007),Ritchie&Lewis(2003)andSmith&Firth(2011).ThisisvisualizedandexemplifiedinFigure7.

Figure7.Developedframeworkforcodingempiricaldata

From the frame of reference, five themes were identified to represent a holisticcharacterizationofabusinessmodelanditsorganizationalanchoring;(1)valueproposition;(2) revenue model; (3) customers; (4) organizational arrangements; (5) organizationalanchoring. This concept can help form the data analysis and support the interpretiveapproachtoaqualitativecasestudy(Eisenhardt&Graebner,2007;Smith&Firth,2011).Patternswereoutlinedindifferentwayswithregardtoeachthemeandinterviewobject,wheresomethemessuggestedcircumlocutorydescriptionsduetotheambiguityincollectedempiricaldata.Patternsinthiscontextareinterpretationsmadebytheinterviewersduringinterviewsandarebasedonopinions,ideasandthoughtsexpressedbyinterviewees.Thistypeofcodingalsohelpedtofullyinvestigatetheorganizationalanchoringofthebusinessmodel, asdissimilarities indata collected fromdifferent interviewees in somecasesmayindicateaninsufficientorganizationalanchoring.

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3.3 QualityoftheresearchTheliteraturestudy,analyticalmodel,interviewtemplate,empiricaldataanddataanalysiswillhereunderbeaddressedintermsoftheirindividualeffectsonthisstudy’squality.Thepurposeofthediscussionistoevaluateifthestudycanbeheldasrigorforfuturestudieswithinthesubjectmatter.Rigorousness,inthissense,willrefertoreliabilityandvalidity.

3.3.1 ReliabilityandvalidityGibbertetal.(2008)highlighttheimportanceofhighreliabilityandvalidity,especiallyincasestudies.Casestudiesareparticularlyvulnerabletolackingrigorintermsofreliabilityandvalidity,evenmoreinfieldsofnewmanagementtheory(Ibid.).Thisisgroundedintheareaofusageforcasestudies,astheyarekeyinsettingandexploringfundamentalvariablesandtheirrelationships(Ibid.).Theobviousproblemisbasicallythatlackofreliabilityandvalidity in early stages of theory development tend to ripple further stages in theorydevelopmentasthetheoryistested(Eisenhardt&Graebner,2007).

Sjöström(2016) states thataprerequisite forhighvalidity isguaranteedhigh reliability,althoughthereverserelationshipdoesnotapply.Highreliabilityimpliesthatwhatthestudymeasures,ismeasuredinareliableandcorrectway,whilsthighvalidityreferstoensuringthat themeasuring unit is valid and correct (Lekvall &Wahlbin, 2001; Sjöström, 2016).Sjöström(2016)statesthattherearetwotypesofvalidity;externalvalidity(generalizabilityinresults)andinternalvalidity(mainlycontent,constructandfacevalidity).Contentvalidityis self-explanatory, construct refers to the validity of proposed constructs and conceptswithinstudiesandfacevalidityreferstoperceivedvalidity,inthiscaseperceivedvalidityandqualityofempiricsfrominterviews(Sjöström,2016).

3.3.2 Literaturestudy,analyticalmodelandinterviewtemplateTo facilitate the general validity of this study, the literature study, analyticalmodel andinterviewtemplateneedtoensurethatwhathasbeenmeasured,ismeasuredinavalidsense(seee.g.Bryman&Bell,2013;Lekvall&Wahlbin,2001;Sjöström2016).Theliteraturestudyanditsinherentconceptsbuildupontriangulatedtheoriesofseveralauthors,toensurethatwhatissaidintheframeofreferencecanbesupportedbymultipletheorieswithineachfieldof research –which Sjöström (2016) claim is a requisite for high content and constructvalidity.Consequently,apre-studywasperformedwithinterviewsofregardedpersonnelatthecasecompanytoensurethattheinitialapproachtotheproblemproposalwaswithinthescope of the sampled theory. The frame of reference essentially builds upon the initialproblemproposalandthepre-studyconductedatthecasecompany.Thiscreatedanembryotoananalyticalmodel,whichlaterwasevaluatedintheframeofreferencewithitscoherencewithcontemporaryresearch.AccordingtoLekvall&Wahlbin(2001)andSjöström(2016),thisapproach isamethodologicalwayofpromotingconstructvalidity.Thepossibility togeneralize about theoretical concepts lies within the grasp of creating a valid analyticalmodelandmeasuringinstrument(Sjöström,2016),thustheanalyticalmodeltoapproach

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thecaseinquestionwasproducedthroughanextensiveandtriangulatedliteraturestudyinordertosupportboththeconstructandexternalvalidityinthisstudy(Lekvall&Wahlbin,2001).However,asthisthesisiswrittenbyauthorsnotparticularlyexperiencedwithintheconceptsofbusinessmodelsandservitizationonbeforehand,thevalidityhasbeenevaluatedwithcautionbecausethismattercanaffectthequalityofthisstudyintermsofcontentandconstructvalidity.

Thecreationoftheinterviewtemplatewasbasedonthetheorypresentedintheframeofreferenceandanalyticalmodel toensure that themeasuring instrument, in this case theinterview template, was valid and credible. This is coherent with theories of Lekvall &Wahlbin (2001) and Sjöström (2016) about high external validity. To further promoteexternalvalidity,theempiricaldatabuildsupon16interviewsof1to2-hoursessionswith16 different respondents, which lies within the interval of a general heuristic aboutgeneralizabilityproposedbySjöström(2016)andsupportedbyKvale&Brinkmann(2014).

3.3.3 CollectionofempiricaldataanddataanalysisTosupportandleverageconstructandcontentvalidityofthisstudy,compiledempiricaldatawasshowntointervieweestoenablefurtherevidencetobeaddedtothematerial,whichreduces vulnerability to distortion of the material (Yin, 2003). If permission was given,interviewswererecordedtoensurethattheinformationgivenwascorrect.Sjöström(2016)andYin(2003)statethatthisfacilitatesconstructvalidity,asinformationcanberenderedwith full transparencymultiple times. Also, the framework approach to interpreting andanalyzingdataisinmanysensessomethingthatsupportsconstructvalidity(Ritchie&Lewis,2003;Smith&Firth,2011).ThisclaimissupportedbyEisenhardt&Graebner(2007)whostatethattheactofmatchingpatternsincollectedempiricaldataisgoodforensuringvalidityandmeasurability –whichwasdone in accordancewith the framework approach to theanalysisofthecollectedempiricaldata.

Uponconductingresearch,orcollectingdatawithaninterpretiveapproach,certainissuesarisedue to itssubjectivenature.Klein&Myers(1999)proposea setofprinciples toberegardedwithinthischoiceofmethodology.Theseprinciplestakeseveralaspectsofhumanunderstanding and interpretation into account. A fundamental principle is thatunderstandingaproblemlieswithininterpretingandobservingcoherentpatterns(Klein&Myers,1999).Tofullyunderstandthebusinessmodelofthecasecompany,itsheritageandpossibleopportunitiesofchange,interviewswereconductedinlinewiththefirstprincipleby Klein & Myers (1999). Klein & Myers (1999) describe the significance of commonunderstanding of the context between interviewee and interviewer, thereby a detailedsetting and reflection on the current situation and the current problematization werepresentedasaninitialapproachtofindingcommongroundwithinterviewees.However,duetointerpretationsmadewhencollectingandcompilingofempiricaldatafrominterviews,

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thetheoriesofKlein&Myers(1999)maysuggestthattherecordfromthisstudymayhavebecomeaffectedthequalityofthisstudyintermsofinterpretivebias.

Furthermore, Klein & Myers (1999) also suggest that preconceptions and previousexperiences of the interview or interviewee are vastly affecting the interpretation ofcollecteddataandtherebytheresult.Astheauthorsofthisthesissharethesameacademicalbackgroundandsimilarprofessionalexperiences,thepreconceptionsofconstructs,notionsandideasmayhavemisguidedtheresultandinterpretationsmadethroughoutthestudy.Due to this circumstance, there was a clear sensibility toward false preconceptions andbiasesthroughoutthethesiswork.

Sjöström(2016)states that, in termsofreliability, there isanecessity forassurance thatsubjectsinterviewedhavetherightcompetenceandexperiencewithinthephenomenaofinterest.Evenifeachintervieweewereemployeesofthecasecompany,thismattercouldnot fully be ensured, which may conflict with the reliability of this study. Although theintervieweeswereexperiencedintheir fieldofworkwithinthecompany,somewerenotexperienced in working with the constructs presented within the concepts of businessmodelsandservitization.However,latitudeforspeakingfreelyduringinterviewswasgiven,hencemakingtheinformationcompiledfrominterviewsmoreaccessibleandtransparent,whichalsosupportstheactofrationallyinterpretingempiricaldata(Ritchie&Lewis,2003).

Tosupportthefacevalidity,i.e.qualityoftheinterviewsandperceivedvalidity(Sjöström,2016),interviewswerecarriedoutanonymously,andeachintervieweewasencouragedtobehonestandunbiasedtowardthecompany.However,asallinterviewswereconductedoncompanyproperty,theremighthavebeenbiasordishonestyingeneralduringinterviews–becauseemployeescanhavetheurgetopromotethecompanyimage.

3.4 MoralandethicsUpon conducting this study, a non-disclosure agreement toward the case company wassignedbytheauthorsthatperformedthestudy.Thus,anagreementofnotdisclosinganysensitivecompany information, thecompanynameornameofemployees isanonymizedthroughoutthisthesistocomplywiththeagreement.Throughoutthestudy,principlesfromTheSwedishCouncilofResearchwasfollowed.TheseprinciplesarepresentedinTable3below.

Table3.Ethicprinciplesabidedbythroughoutthestudy(Vetenskapsrådet,2018)

PrincipleofInformationThepurposeandgeneralconditionsoftheconductedresearcharepresentedto

intervieweesbeforeinterviewsareheld

PrincipleofConsentParticipantsagreetotheconditionsofthe

research

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PrincipleofConfidentiality

Allparticipantshavesignedanon-disclosureagreement,toensurethatanindividualcannotbeidentifiedthroughout

thestudy

PrincipleofGoodUse

Empiricalinformationgatheredthroughoutthestudyisnotusedinanycommercial

purpose,norisdataaboutindividualsusedinawaywhichmayaffecthimorher.

Each of the interviewees was presented with the purpose of the study as well as thegroundworkforthethesis.Allparticipantsagreedtobeinterviewedandagreedtothefactthat the result of the interview was compiled and analyzed in the study conducted. Allpersonnelwere,asearliermentioned,anonymizedinawaythattheycouldnotbesingle-handedly identified through this study. The empirical information that was compiledthroughout the study was solely used for researching the phenomena of interest in thecontextofthisstudyandwillnotbefurtherusedinanycommercializedpurposeorsense.

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4 EmpiricaldataThischapterpresentsthefindingsgatheredaspartoftheinterviewprocessandcollectionofempirical data from interviewsaswell as secondarydata suchas internal documents. Thischapterincludesashortdescriptionofthecasecompanyandthesoftwareserviceitprovides,CSA.Furthermore,thischapteroutlinestheexistingbusinessmodelsurroundingthesoftwareservice, with the components of value proposition, revenue model, customers andorganizational arrangements. Lastly, the organizational anchoring of the existing businessmodelisdescribed.

4.1 ThecasecompanyThe case company is a global manufacturer of industrial hardware applications andsolutions.Thecasecompanyismostlyactiveinthebusiness-to-business(B2B)sectorandprimarilysupplieslargeandmid-rangecustomersindiverseindustriesglobally.Alaterfocalpointforthecasecompanyhasbeenautomationofdifferenttypes,suchasproductionandlogisticsautomation.Thecasecompanyisbuiltuponacorporategroupconsistingofover50affiliatesaswellasco-ownedcompanies.Theaffiliatesandco-ownedcompaniesarelocatedacross the globe. The revenue of the company is above 1 billion euro and the companyemploysapproximately10000employeesglobally.Recently,thecasecompanyintroducedasoftwareservice in theirportfoliowhichcanbe integratedwith its industrialhardwareapplicationsandsolutions.ThissoftwareservicewillfurtheronbeaddressedasCompanySoftwareApplication(hereinafterCSA).

4.2 CSAThecasecompany’scurrentproductportfolioconsistsofseveralhardwareproductsintheformofindustrialapplicationsandsolutions.Theseapplicationsandsolutionsareusedtoachieveautomationwithindifferenttypesofindustries,suchastheproductionandlogisticsindustry. In contrast to its otherwise hardware dominated product portfolio, the casecompanyrecentlylaunchedthesoftware-basedplatformCSAglobally.ThisinitiativewasinlinewiththeconceptofIndustry4.0–whenfactoriesbecomesmarter.Industry4.0basicallymeansthefourthindustrialrevolutionwhichisaconceptaboutautomationandindustrialITwithinmanufacturing(Hermannetal.,2016).

CSAisasoftwareserviceplatformconsistingoftwosoftwaretools.ThefirstoneiscalledCSAAandisusedtodevelopsoftwareapplicationsthatcanbeinstalledonhardwarethatthecasecompanyhascreated.Developingandusingtailoredsuitapplicationsenablesuserstomodifythehardware’sfunctionalitytosuittheuser'sneeds.TheothertooliscalledCSABand supports service technicians with installation, implementation and management ofsoftwareapplications.SoftwareapplicationscreatedwiththehelpofCSAAcanbeusedonseveraldifferentautomationtechnologiesthatthecasecompanyprovidestoitscustomers.

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CSAA isbothsoldtocustomers, lettingthemdevelopsolutionsthemselvesandsellingtotheirowncustomers,andusedasaninternaltoolforthedevelopmentofsolutionsthatthecase companysellsdirectly to customers.Asof today,CSAAhasnotyetbeen financiallysuccessfulasasoftwareserviceonthemarket,norhasCSAAfoundasignificantvolumeofcustomers.CSAanditsinherenttoolsarevisualizedinFigure8below.

Figure8.CSAanditsinherenttoolsAandB

4.3 ThebusinessmodelsurroundingCSAThe business model surrounding CSA will now be described. The presentation of theempiricalfindingsgatheredwillbepresentedwithregardstothestructureoftheanalyticalmodel(seeFigure4),i.e.withseparatesectionsforthevalueproposition,revenuemodel,customers,organizationalarrangementsandlastlytheorganizationalanchoring.

4.3.1 ValuePropositionAllrespondentsansweredthatCSAoffersflexibilitytotheircustomers.Thisisthecaseasthesoftwareenablesuserstobothdevelop,sellandusecustomizedapplicationsandsolutionstosolvespecificproblems.TheserespondentsalsostatethatthisisoneofthemainreasonswhyCSAisagoodconceptandwhatdifferentiatesCSAfromtheirotherproducts–itshighflexibilitytocustomizetoeachspecificcustomer’sneeds.Whenaskedaboutsocialbenefits,

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about60%oftherespondentsansweredthatCSAmayincreasecommunicationbothwithinthe company between different divisions but also between different customers of thecompany.ThecustomertocustomerinteractioniscausedbythedifferentcustomersusingCSA A sharing knowledge regarding the platformwith each other. However, this type ofdevelopercommunityhasnotyetbeensteadilyestablished.50%ofrespondentsstatethatCSAofferseconomicbenefitstotheircustomers,bothtotheonesthatdevelopapplicationsandsolutionstosellbutalsothosethatusetheapplicationsandsolutionsintheirfacilities.Thisisduetothefactthatthecustomizedsolutionscansolveveryspecificproblemsthatwouldotherwiserequiremorecomplexsystemsofhardware,whichissomethingthatmakesCSAeconomicallybeneficialforbothdevelopersandend-usersofthecreatedsolutions.Allrespondentsstatetechnicalbenefitsinclude,aspreviouslymentioned,theplatformofCSAwhichmakesitpossibletodevelopcustomizedandflexibleapplicationsandsolutions.About60%oftherespondentsalsosaythattheuniquesellingpointofCSAisitswideapplicability–asanapplicationcreatedwiththeCSAplatformcanbeusedonallthedifferentautomationtechnologies the case company provides. According to these respondents, no othercompetitoroffersthistypeofflexibility.

About90%ofrespondentsstatethatthedevelopingtoolinCSAistoocomplicatedatthemoment.Accordingtothem,thecomplexityofdevelopingapplicationsandsolutionsistoohigh,makingithardtoattractcustomerswhowishtodevelopcustomizedapplicationsandsolutionsandthensellthemtoend-customers.Furthermore,theystatethatiftheprocessofdevelopingwouldbeeasiertounderstandandcomplete,CSAwouldbemoreattractivetothesetypesofcustomers.

RespondentsstatedifferentmeansinwaysthatthecasecompanydemonstratesthebenefitsofCSA.ThemostcommonanswerincludesdemonstratingthedirectconceptofCSAtothecustomer,howitworksandwhatitcanaccomplishintermsofvalue-addedorfunctionality.However,about60%ofrespondentsalsostatetherearetoofewconcreteexamplesofCSA-createdapplicationsandsolutionsthathavethepossibilitytodemonstratethebenefitsofCSA. This includes both the economic benefits and the technical benefits of CSA. Asmentionedearlier,about90%ofrespondentsalsostatethatitishardtodemonstratethebenefitsofCSAduetothefactthattheplatformistoocomplicatedtouseformostcustomersat themoment.This results indifficulties for thesalespersonnel tomarketandsellCSA.Accordingtoabout60%ofrespondents,thisfacthasledtocustomersnotbeingawareofallthebenefitsofCSAandtheflexibilityitoffers.However,90%ofrespondentsalsostatesalespersonnelarenotsufficientlytrainedinhowtosellCSAorsoftwareingeneral,makingithardtodemonstratethebenefitsinaneffectiveway.

AsummaryoftheempiricalfindingsregardingthevaluepropositionofCSAcanbefoundbelowinFigure9.

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Figure9.ThevaluepropositionofCSA

4.3.2 RevenueModelTheonlydirectrevenuestreamderivedfromCSAisadevelopmentlicensingfeeforCSAA.ThefeeappliesonanannualbasisforcustomersintendingtouseCSAasadevelopingtool.However,thislicensingfeedoesnotapplytocustomerswhopurchaseanofferingbasedonacombinationofhardwareandCSA,wheresignificantchangestothefunctionalitycannotbemade. 63% of respondents state that specific software applications createdwithCSA Acannotbesolddirectlybutneedtobebundledwithahardwareproductinordertocreateanarticlenumberforaproductthatthecasecompanythencansell.Around50%oftherespondentsmentionthatCSAisnotsupposedtobeadirectincome-driver,butratherthatthepurposeofthesoftwareistodriveupsellofexistingproductsthatcanbeintegratedwithCSA.

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Therearenoofficialcoherentpricingstrategiesormethodswithregardsto thesoftwareserviceotherthanthedevelopmentlicensingfee.However,therearerenewaldiscountsforalicenseafteroneyearofusageofCSA.Accordingto69%oftherespondents,thepricingmethodsfortheofferingsintegratingCSAaresolelypriceduponthecostofthehardwareplusafixedmargin.38%oftherespondentsstatethatthisneglectstheincreasedbenefitsorvalue by integrating CSA into the hardware products. However, when creating offeringstogetherwith customers, the case company does charge a consultancy fee based on theamountoftimespentdeveloping.Withinthegroupofrespondents,thereareseveralideasofhowtopricecustomizedCSAsolutions,however,thesehavenotyetbeenimplementedortested.Theseideasspanfrompricingtheofferingsbasedonthehoursusedtodevelopthemto create a system that uses customer-specific parameters tounderstandwhat value theofferingprovidestothecustomerandthenbasethepricingfromtheinformationgathered.50%oftherespondentsmentionthatsomesortofvalue-basedpricingwouldimprovetheprocessofsellingsoftware,meaningthatthecasecompanycouldputadifferentpricetagonanofferingdependingonwhatvalueitsuppliestoitscustomers.

Thecommongroundonchallengeswith regards to the revenuemodelofCSAwithin thegroupofrespondentsisthatthereneedstobeaseparationofpricingbetweenthehardwareandthesoftware, inadditiontotheexistinglicensingfee.About50%oftherespondentsstate the need for usage- or runtime-based licensing fee instead of the fixed annualdevelopmentlicensingfee.However,theserespondentsalsostatethatmanycustomersarenotwillingtoprovideprocesseddatafromtheirproductlinetothecasecompany,duetopossible contraction on security. Furthermore, 25 % of the respondents see risks incompetitivepricingwithregardstoCSAandsoftwareservicesingeneral.Theserespondentsproposethatpricingthesoftwareservicemaycannibalizeonthehardwareprice,orthattheexisting hardware development costs can be too high to even consider pricing softwareservices.

A summary of the empirical findings regarding the revenuemodel ofCSA is depicted inFigure10below.

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Figure10.TherevenuemodelforCSA

4.3.3 CustomersAcompilationoftherespondents’answerstogetherwithinternaldocumentsindicatethatCSAservesalltheindustriesthatthecasecompanyingeneralserves-i.e.companiesworkingwithin industries suchasproductionand logistics.However, apattern in segmenting thecustomersseemstobebuiltuponinwhatmannerthecustomerisusingCSA.About50%ofthe respondents state that there are two customer segments, developing customers andconfigurating customers.Developing customersare thosewhoareusingCSA as a toolorplatformtodeveloptheirownapplications,thuspurchasingadevelopmentlicensefee.Thelatter,configuratingcustomers,arethosewhodonotdevelopapplicationsusingCSA.ThesecustomershoweveruseofferingscreatedwiththeCSAplatform,buttheymightnotbeawarethatCSAispoweringthesolution.Thesecustomersarenotpurchasingadevelopmentlicensefee.

Theother50%oftherespondentsusethesegmentationofend-users,systemintegratorsandmachinebuilders.End-usersarecustomersbuyingthesolutionspoweredbyCSA,andarethusnotpayingthedevelopmentlicensefee.Systemintegratorsbuydevelopmentlicensefees to add value to solutions themselves, by configurating the actual code within thesoftware. Lastly,machine builders are usually original equipmentmanufacturers (OEM),who create larger systems and use or configurate CSA-powered solutions or offeringsprovidedbythecasecompanybyadaptingittotheirownsystem.Thesecustomerscouldeitherbe thosewho justuse the solutionandarenot awareof thatCSA is powering thesolution, or be developers themselves, altering software code and therefore needing topurchasedevelopmentlicenses.Oneinterpretationmadeisthatend-usersareconfiguratingcustomers,whilesystemintegratorsaredevelopingcustomers,andmachinebuilderscouldserve as both configurating and developing customers – however, moving forward, the

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segmentation of end-users, system integrators and machine builders are used. ThesesegmentationsarevisualizedinFigure11below.

Figure11.ThetargetedcustomersegmentsforCSA

No official data were given regarding the exact distribution of customers within thesesegments,however63%oftherespondentsstatethatthegroupofend-usersisthelargest.Thesamegroupofrespondentsalsostatethatthisstatesafuturerisk,asthissegmentdoesnot explicitly or knowingly interact with CSA, thus creating difficulties in branding andvisualizingthevalueofCSA.Consequently,theentiregroupofrespondentsisrathercoherentin their opinions about the fact that the company needs to extend its targeting towardssystem integrators and machine builders. However, according to about 25 % of therespondents,CSAshouldbeintendedonlyfordevelopingcustomers, focusingonbuildingcompleteofferingsandapplicationswithintheplatformforindependentsales.

Mostoftherespondentsdonotworkinapositionthatimplicatesregularinteractionwithexternal customers. However, the 44 % of the respondents that engage in customerinteractiondescribethattheprocessofinteractingwiththecustomerinitiateswithfindinga customer problem, at an existing or new customer. Customers are then contacted,whereupon a visit on-site is scheduled to create a requirements specification. Either theproblemcanbesolvedbythepersonnelcurrentlyon-site,orbyanotherdivisionwithinthecase company. If additional support is needed from another division, that division is

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contacted.Thesolutionsthatsolvecustomerproblemsaremostlyinco-creationbetweenthe customer and the case company. According to most respondents, these customerrelationshipsaretightlybondedwhereasdevelopersandengineersfromthecasecompanyareindirectcontacttosupportthecustomer.Inthecaseofdevelopingcustomers,supportis also provided in terms of giving leads in regard to end-users that require customizedsolutions. However, according to about 50% of the respondents, the business unitwithownershiprightstoCSAlackpropercustomerinteractionandknowledgeofcustomerneeds.

From a marketing perspective, CSA is according to about 50 % of the respondents notnecessarilypromoted in itself asa serviceoraproduct–but rather indirectlypromotedthroughthespecificapplicationswithinCSA.Whilemarketingtheseapplications,thecasecompany sometimes does not mention that CSA is powering them. About 50 % of therespondentsalsodonotknowofanymarketingwithregardstoCSA.Accordingto38%oftherespondents,themarketingmessageofCSAdoesnotaddresstheend-usersegment,orthosewhodoesnotdirectlyinteractwithCSA.

Thecustomerrelationshipsandmarketing inregardtoCSAaresummarized inFigure12seenbelow.

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Figure12.ThecustomercomponentinregardstoCSA

4.3.4 OrganizationalArrangementsThe respondents’ answers differ in what organizational resources they consider mostimportanttosupportCSAanditsfurtherdevelopment.SomerespondentsstatethatthereisaneedfordedicatedpersonnelworkingwithCSAthathasaproperunderstandingofCSA,something that is missing at the present time. All respondents state the need for moreinternalapplicationengineerswhocandevelopapplicationsandofferingswhichcanbeusedbytheend-customers.Amajorityofrespondentsalsostatetheneedforsalespersonnelwhoarecompetent insellingsoftwareandcommunicating thebenefitsofCSA.About30%ofrespondentsstatethatthereisalackofinfrastructuretodeliverapplicationsandofferingstothecustomerthatarecreatedwithCSA,sayingthedeliveryprocessisnotintuitiveandsimpleenoughforthecustomer.

IntermsofcriticalactivitiestosupportanddevelopCSA,severalrespondentsstatetheneedforpropercommunicationbetweendifferentdivisionsofthecompany.Accordingtoseveral

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respondents, there is a lack of communication between company divisions, leading todifferent company divisions performing activities related to CSA in a non-optimal way.Several respondents also state the need for research and development of both the CSAplatform and applications that are createdwith the platform. Amajority of respondentsconsidercurrentresearchanddevelopmentinsufficient.SomerespondentsalsomentiontheimportanceofmarketingCSAwiththerightmessageandmakingiteasyforcustomerstouseCSA,forexamplebycreatinginstructionvideosshowingproofofconcept.

Inlinewiththecriticalactivitiesandresourcespreviouslymentioned,allrespondentsstatetheneedformoreinternaltechnicalcompetence,bothfordevelopingtheCSAplatformbutalso the applications for the end-user. Respondents also state the need for competenceregardinguserexperiencedesignintermsoftheCSAplatformdevelopment.Amajorityofrespondentsalsostate theneed forpropersalescompetence, something theyconsider ismissingasofnow.

ThedistributionoftheanswersintermsofthemostcriticalorganizationalarrangementsregardingCSAisdepictedinFigure13below.Thepercentageamountshownnexttoeachresource,activityorcompetenceisthepercentageofrespondentsthatstatedtheresource,activityorcompetencewascriticalregardingCSAanditsfurtherdevelopment.

Figure13.ThemostcriticalorganizationalarrangementsinregardtoCSA

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4.3.5 OrganizationalAnchoringTherearenoofficialstrategydocumentsthatembedCSAorthebusinessmodelregardingCSA. Respondents working at different divisions postulate and communicate differentopinions about the purpose and the overall strategic intents with regards to CSA as acompany software service in the overall portfolio of products and services. 50 % ofrespondentsseeitexclusivelyasaninternaldevelopmenttoolforthecasecompanytouseinordertodevelopcustomer-specificofferings.Theother50%alsolayfocusontheexternalcustomersandhowCSAcouldbedevelopedtoperformbetteronthemarket.Furthermore,respondents state that the business model surrounding CSA differs depending on thegeographicallocationofthecustomer.Additionally,25%ofrespondentsstatetheneedforthecasecompanytoclearlydefinestrategyandgoals inrelationtoCSA,as theyconsidercompany-wide strategies and goals to be missing as of now. The case company does,however, have dedicated employees to handle the creation and implementation of newbusinessmodels.ThisprocesshashowevernotbeencompletedwithregardstoCSA.

ThereisabusinessunitholdingproductownershipforCSA.Thisbusinessunitisalsotheonethat isresponsible for thedevelopmentof theCSAplatformintermsof, forexample,platform functionality. However, 50% of respondents state that the business unit lackscustomer communication and an understanding of what the customer and companydepartmentsusingCSAvalues.Accordingto theserespondents, thebusinessunitholdingproduct ownership does not prioritize development tasks that are most important toincrease the business value and improve the benefits provided byCSA. The respondentsexpressingthisdiscontentarenotalloriginatingfromthesamecompanydepartment,butseveral different ones. Furthermore, 75 % of respondents state there is a lack ofcommunication concerning the CSA subject. They state that there is no consistentcommunicationregardingCSAthatiscarriedoutonaregularbasis.

All respondentsstatedifferentproblems inrelation toCSAand thesurroundingbusinessmodel,asstatedintheprevioussub-sectionsof4.3.However,allrespondentsalsostatethatCSAhasthepotentialtocontributetocompanysuccess,providedthemostcriticalproblemsCSAandthesurroundingbusinessmodelareremoved.About70%ofrespondentsstateoneof the great benefits with CSA is that it can be used on several different automationtechnologiesthatthecasecompanyprovidestoitscustomers.However,asnotallcompanydepartmentsareworkingwithCSAintheirimplementationofautomationtechnologiesasofnow,oneofthestatedbenefitswithCSAisnotcurrentlytakenadvantageof.Inaddition,50%ofrespondentsstatethatthereisanunwillingnessamongemployeesofthecompanytoworkwithCSA,sayingthishasresultedinalackofdedicatedpersonnelthathassufficientknowledgeoftheplatform.TheserespondentsstatethattheunwillingnesstoworkwithCSAis due to the fact that the technical side of the platform is not currently up to sufficientstandards. Furthermore, 50%of respondents state that the company lacks a supportingculturewhenitcomestosoftware.Theystatethatasthecasecompanyhasalwaysprimarily

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been a hardware manufacturing company, the introduction of CSA presents a problemconsideringpeoplewithinthecompanyareusedtoonlyworkingwithandsellinghardware.

AsummaryoftheempiricalfindingsregardingtheorganizationalanchoringofthebusinessmodelofCSAcanbeseenbelow,inFigure14.

Figure14.OrganizationalanchoringofthebusinessmodelofCSA

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5 AnalysisThischapterincludestheanalysisofeachseparatecomponentinthebusinessmodelofthecasecompany: value proposition, revenue model, customers and organizational arrangements.Furthermore, the analysis of the organizational anchoring of the business model is alsopresented.Theanalysisbuildsuponacomparisonbetweenempiricaldataandthe frameofreference,withadditionalregardstothecontextualsituationatthecasecompany.

5.1 ValuePropositionRespondentsidentifyoneofthecorebenefitsofthevaluepropositiontobetheflexibilityofCSAandbeingabletocreatecustomer-specificofferings.Beingabletocustomizeofferingsthatarecustomer-specificiscrucialinordertoremainagreaterinteractionwithcustomers,somethingthatscholars(e.g.Kindström,2010;Kindström&Kowalkowski,2009)claimisanimportant factor tosucceedwhenprovidingaservice.Whencompared tomoreproduct-orientedofferings,service-basedonesshouldnotonlyaddressthetechnicalandeconomiccomponents,butalsothesocialcomponentoftheoffering(Andersonetal.,2006;Grönroos,2007). Looking at the value proposition of CSA, respondents identify that the offeringprovides all three types of benefits. Looking at social benefits, one is the increasedcommunicationwiththecustomers,whichrespondentsidentifyasaresultoftheincreaseofflexibilityoffered in theproposition.The flexibility,both in termsofbeingable to createcustomer-specificofferingsbutalsobeingabletouseCSAtoimplementdifferentautomationtechnologies,isthemostcriticaltechnicalbenefitthattherespondentsidentify.Lookingattheeconomicbenefitsoftheoffering,respondentsstatethereareeconomicbenefitsforalltypesofcustomersegments.

However, CSAwas also created with the thought of establishing a community betweencustomersthatdevelopend-userofferings.Thishasnotbeenachievedduetonotbeingabletoattractenoughdevelopingcustomers,whichrespondentsidentifyasaresultofnotbeingable to demonstrate the benefits of CSA. This can be seen as an example of failing tocommunicatethevalue-in-useoftheoffering,whichKindström&Kowalkowski(2009)stateis criticalwhen providing a service. Respondents identify that theCSAplatform used todevelopapplicationsandsolutionsisnoteasyenoughtouse,makingithardtodemonstratetheactualtechnicalbenefits(Andersonetal.,2006;Grönroos,2007)ofCSA. Respondentsalso state that the lack of already created applications and customers who use theseapplicationsmakes it hard todemonstrate the economicbenefits (Andersonet al., 2006;Grönroos,2007)ofcontinuouslycreatingapplicationswiththehelpoftheCSAplatform.Asaconsequenceoflackingandnotbeingablet(Kindström,Kowalkowski,&Nordin,2012)odemonstratesomeofthebenefitstheofferingisintendedtoprovide,respondentsidentifythe case company has also had problemswith visualizing the value of the offering, alsocritical when providing a service offering (Kindström & Kowalkowski, 2014). However,visualizing thevalueof a service-basedoffering ismoredifficult compared to aproduct-

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based one – which is caused by the intangibility the service performance constitutes(Kindströmetal.,2012).Inordertosucceedinvisualizingthevalueofaservice,thecasecompany could aim to implement visualization strategies or ways to make the serviceperformancetangible(Ibid.).Inthecaseofthecasecompany,onewayistodemonstratehowCSAinteractswiththehardwareproductstheyareintegratedwith.ThistypeofvisualizationwillresonatemorewiththecustomersandmakeiteasierforthemtograsptheintangibleservicevalueCSAoffersasit isthenassociatedwithatangibleproduct(Kindströmetal.,2012).

To summarize, the case company has issues with demonstrating to the customer thedifferentbenefitsthataserviceofferingshouldprovide(Andersonetal.,2006;Grönroos,2007). This has led to the company having troublewith demonstrating the value-in-use(Kindström & Kowalkowski, 2009) but also visualizing the value (Kindström &Kowalkowski,2014)oftheoffering.RespondentsidentifythatthiscanbeconsideredaresultoftheofferingpartlylackingsomeofthebenefitsCSAisintendedtoprovide.

5.2 RevenueModelTheonlydirectrevenuestreamderivedfromCSAisthedevelopmentlicensingfeechargedforCSAA,ofwhichcustomersdesignatedtofurtheralterthefunctionality(suchassystemintegratorsandmachinebuilders)payfor.ThedevelopmentlicensingfeeinitselfforCSAAservesasasubscription-basedmodelasproposedandexemplifiedbyNaoretal.(2018).Incontrast to the traditional cost-basedmodels,onecouldargue that this servesasamoreinnovativepricingmodel–asitisanannualfeeofcontinuouspayments.However,salesofcustomizedofferingsprovidedtotheend-usersarebasedontraditionalhardwareorcost-basedpricingmodels.Kindström(2010)andOliva&Kallenberg(2003)encouragetheideaof more innovative pricing models. Accordingly, the development licensing fee is notnecessarilyaproblem–butsellingthecustomer-specificofferingwithoutconsiderationofthevalueaddedbythesoftwareserviceis.

Thereisalackofdirectsoftwareservice-relatedrevenuestreamsderivedfromend-users,wherethepriceofanofferingiscurrentlysolelybasedonthehardwareanddevelopmentcostplusafixedmargin.Asearliermentioned,value-in-useishardtodemonstrateinCSA’scurrentstate,thereforealsocreatingissuesuponapplyinganyvalue-basedpricingmodels.Anotherissueinapplyingvalue-basedpricingisthatcustomersneedtobematureintermsofbuyingservices,asitisseeminglymoreadvancedinitsnature(Kindström,2010).AsthepricingmethodswithregardtoofferingscreatedwiththeCSAplatformbelongstotheoldtraditional cost-based pricing, theories from Kindström (2010) and Oliva & Kallenberg(2003)amongothers,statethatthisareastressesforrevision.Thereby,thelargerproblemisthatend-usersarenotnecessarilypayingforthesoftwareservicesprovidedbyCSA,andin extension not paying for the software service-based value added by integratingapplications created in CSA into the case company’s hardware. Furthermore, different

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customers also receive different value from the offerings they purchase from the casecompany.TheoriesbyKindström(2010)emphasizethatinsuchsituations,thepricingoftheserviceneedtobedevelopedwiththespecificcustomeranditspurchasedofferinginmind.However,thisrequiresthattheincreaseinvaluecanbedemonstratedandvisualizedtothecustomer.

To summarize, the case company follows theories by Naor et al. (2018) in regard tosubscription-based revenue models, at least in terms of those customers that intend todevelop their own applications with CSA A. However, the case company has no directsoftwareservice-relatedrevenuestreamsfromend-usersandthosecustomersthatdonotalteranysoftwarecodewiththehelpofCSAA.Therevenuederivedfromend-usersissolelybasedonthehardwarecostofanoffering.Ononeside,therecouldbeaneedforrevision,asKindström (2010) andOliva&Kallenberg (2003) reject cost-basedpricingmodelswhenlookingataservitizedbusinessmodel.However,asthepurposeofCSAandthepurposeofeach customer segment has not been outlined officially, it could be that this customersegmentshouldonlysatisfythemeansofcreatingpossibilitiesforupsell–whichBainesetal.(200)andMathieu(2001)supportintheirtheories.

5.3 CustomersBylaunchingCSA, thecasecompanydirecteddedicationtowardcreatingmorecustomer-centric relationships, where co-creation of offerings togetherwith customer is common.These customer relationships are also tightly bonded, as developers and applicationengineersareindirectcontactwiththecustomerswhentheyrequiresupport.

Kindström&Kowalkowski (2014) state thatageneral challenge forheavilyengineering-driven firms in servitization contexts is to prioritize the market and customer overtechnologywhendevelopinganofferingoraservice.Althoughthereisamarketsidetothecasecompany’swayofdealingwithco-createdofferings togetherwith thecustomer, thechallengestillseemstobeapparentwhenlookingatthecasecompany.Thebusinessunitwith ownership rights seems to lack customer interaction, thus creating problems inunderstandingtheactualneedsofspecificcustomersandpossiblyalsothemarketingeffortneededtosupportthesoftwareservice.Asthecasecompanyco-createssolutionstogetherwith the customer, the concern is to solve the problem for the customer – withoutconsideration of what additional technical, economic and social benefits are provided.However,whileco-creatingofferingsatcustomersites,thereshouldbeopportunitiesforco-creating the actual value proposition with the customer, thus making it possible tounderstandusagesituationsandcommongoals–asproposedbyPayneetal.(2017).This,couldinextensionmakeitpossibleforthosethatco-createcustomerofferingstounderstandthe value added by the software. Consequently, one could argue that the co-creation ofofferingscouldenablethecasecompanytounderstandandvisualizeordemonstratevalue,

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whichisaproblemthatthecasecompanystruggleswith(seesection5.1).Withthatinplace,thecasecompanycouldbeabletoputapriceonsuchavalue,asdiscussedinsection5.2.

Thebiggestcustomersegmentseemstobetheend-users,whichdonotexplicitlypayorareawareofthesoftwareservicesandbenefitsprovidedbyapplicationswithinCSA.Logically,this could create future problems as system integrators and machine builders from afinancialperspectivearemorelucrative,assumingtherevenuemodelstaysthesamewiththe development licensing fee as only direct revenue stream. However, there areopportunitiesforupsellofotherproductswhilesellingofferingsbasedonCSA.

Fromamarketingperspective,themarketingmessageseemstobeinconsequential.ThereseemstobelittlemarketingdirectedtoCSAitself,whilemostofthemarketingisdirectedtoapplications created with the CSA platform. Another problem is also that the biggestcustomersegmentsbenefitingfromCSAarenotaddressedbytheofficialmarketingmessage,and theyarenot evennecessarily awareofCSA and its role in creating their customizedofferings.Grönroos(2007)andKindström&Kowalkowski(2009)statethatinordertomakecustomersawareofthechangetowardservitization,thereneedstobeclearandincreasedvisibilityonthemarket,focusedonexplicitlydemonstratingthechange.Thisissomethingthat has not yet been implemented in the case company, neither has the change towardsoftware services been coherently demonstrated internally or externally. There is a risk,according to somerespondents, that customerswithin these typesof industries thatCSAtargetarenotyetmatureforpurchasingsoftware.Thesamerespondentsalsomentionthatthesecustomersmightnotappreciateorevaluatetheprovidedsoftwareservicesinawaythatisdesirableforthecasecompany.However,thiscouldalsobeappliedtothecontextandthespecificindustryingeneral,asthecompetitorstothecasecompanypossiblyalsointeractwiththesametypesofcustomers.Thiscouldinextensionmeanthatthecontextinitselfdoesnotprovideplainopportunitiesofprofitingfromonlythesoftware-sideofanoffering.Yet,possible mitigation of this risk – considered in the theories of Grönroos (2007) andKindström (2010) – is to develop more advanced customer partnerships. This couldessentially infer that the customer co-creation that is in place as of today needs to bedevelopedinawaytomakepotentialcustomersawareofthebenefitsofaddingsoftwareservices to a hardware product offering. In that way, the customer might get a deeperunderstandingofwhattheyarepurchasingandgainingfromthatpurchase.

Tosummarize,thecasecompanyco-createsofferingswithcustomers,withtightlybondedcustomer relationships – as supported by Day (1994) and Kowalkowski (2008) amongothers. There is nonetheless an issue in the responsible business unit’s way of puttingtechnology in the driver seat when developing the offerings, as they lack customerinteractionandmarketunderstanding.ThiscouldalsoberelatedtothetheoriesofmarketpullorpushstrategiesbyHorbachetal. (2012),wherethisrepresentsusingmarketpullstrategiesover technologypushstrategies.Furthermore, issuesappearwhenactuallyco-

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creating value propositions and acting on profiting on this matter. The change towardservitizationforthecasecompanyisnotexplicitlydemonstratedonthemarket,whichisamatterthatGrönroos(2007)andKindström&Kowalkowski(2009)highlightasessential.One example coupled with this idea is that the official marketing message is notcomprehensiveenoughtocoveralltargetedcustomersegments.

5.4 OrganizationalArrangementsScholarssuchasAdrodegari&Saccani(2017)andKindström&Kowalkowski(2014)declarethatwhenthecompanyistransitioningintomoreservice-orientedofferingsandinextentservice-oriented business models, resources and capabilities needed to complete thetransitionshouldbeidentifiedandacquired.Lookingatthecasecompanyandtheempiricalfindingsofthestudy,thishasnotbeenthecase.Statementsfromallrespondentsindicatethat from themoment the case company launched CSA, it has notmanaged to dedicatesufficientresourcestotheCSAproject.However,failingtodedicatesufficientresourcestodevelop service offerings when historically having been a product company is not rare(Kindström&Kowalkowski,2014).Companiesinthispositionshouldmaintainalong-termfocus and create internal awareness of the service offering and its potential, in order tomitigatethelackofdedicationofresourcestothedevelopmentoftheserviceoffering(Ibid.).

Furthermore,scholarssuchasdeBrentani(2001)andLapierre(2000)claimthatitiscrucialtodeveloptoolstosupportthesalesoftheserviceoffering.However,respondentsstatethatthereisalackofsalescompetencewhenitcomestosellingtheserviceoffering–statingthatsalespersonnelhavenotbeentrainedtodealwiththetransitionfromproducttoservice.Tofurther support the argument of the lack of company resources dedicated to CSA,respondentsstatepropercommunicationpathsandprotocolshavenotbeeninitiated,andthatthereisalackofpeoplethataresolelydedicatedtoworkingwithCSA.Thecasecompanydoeshoweverboastdedicatedsalesunitsthatareinclosecontactwiththecustomerswhendevelopingend-usersolutions,enablingaverycustomer-centricapproachwhichscholarssuchasKindström(2010)andKindström&Kowalkowski(2009)promotewhenprovidingserviceofferings.ThecasecompanysalesunitsexistedbeforethelaunchofCSAbutsincethesalesunitsnowalsoemployapplicationengineers,itcanofferveryspecificcustomizationstoeachcustomer,workingcloselywiththemalongtheway.

Theresources,activitiesandcompetenceswithinthecompanyshouldbestructuredinawaythatenablesthecompanytosupportthevalueproposition,revenuemodelandcustomerproperties (e.g. Adrodegari&Saccani, 2017;Kindström&Kowalkowski, 2014; Oliva&Kallenberg,2003).Lookingatthevalueproposition,itcanbesaidthatthiscriterionisnotfulfilled.ThiscanbesaidtoduetothefactthatCSAhasnotbeendevelopedinawaythatenablesittoprovidethebenefitsthatitisintendedto,andrespondentsstatethereisalackofcompanyresourcesdedicatedtoworkingwithCSA.However,itisnotclearifthelackofresourcesisaresultofthecompanyundervaluingandnotprioritizingCSAdevelopmentas

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aconsequenceoftraditionallyhavingbeenahardwarecompany,orifitmisevaluatedthecustomersandtheirpreferences.Eitherway,thisdemonstratesalackofresourcesintermsof gathering sufficient information regarding capturing new customer needs, whichKindström(2010)claimiskeyifthecompanyistosucceedinprovidingaserviceoffering.

Theempirical findings indicate that there isanabsenceofsufficient,simpleand intuitiveinfrastructuretosupportsalesanddeliveryofthesoftwareservicesprovidedbyCSA.ThisidentifiedproblemisamatterthatauthorssuchasdeBrentani(2001),Grönroos(2007)andLapierre(2000)stateiskeyinconveyingthevalue-in-useofnewlyintroducedservices.Thiscouldalsoadvert to the issueof lackingsufficientresources thatenables thecompanytoespecially support the value proposition and customers, which Adrodegari&Saccani(2017)andKindström(2010)claimisof importanceupondesigningand implementingabusinessmodel.

To summarize, the case company has not been able to dedicate and structure sufficientresources,activitiesandcompetencesinordertoadequatelysupporttheothercomponentsof the business model, something which scholars (e.g. Adrodegari&Saccani,2017;Kindström&Kowalkowski,2014;Oliva&Kallenberg,2003)stateisthepurposeoftheoftheseproperties.Thisphenomenonisnotrarewhenlookingatproduct-centriccompaniesthatnowofferservicesaswell(Kindström&Kowalkowski,2014).

5.5 OrganizationalAnchoringWhenintroducingabusinessmodelinnovation,scholarssuchasBuchereretal.(2012)andPorter (1996)highlight the importanceofhavinga consistent and clearly communicatedstrategythatisundertakenbyallcompanyemployees.RespondentsstatethatthereisalackofpropercommunicationregardingtheCSAsubjectandwhattheoverallstrategyandgoalsareandthatthereisaneedfordefiningthese.Thesestatementscoupledwiththelackofofficial strategic documents in relation to CSA, one could argue that the communicationregardingCSAanditsoverallpurposeandstrategyhasbeeninsufficient.Thisisreflectedinthe answers of many respondents when asked about the purpose and general strategyregarding CSA, as the properties of these answers differ among these respondents. Inaddition, several respondents claim that the dedicated business unit responsible fordeveloping the CSA platform does not prioritize the most critical development tasks toincreasethebusinessvalueof,andbenefitsprovidedby,CSA.ThisalsoindicatesthatthereisadiscrepancyinwhatdifferentcasecompanyemployeesconsideristherightwayforCSAmoving forward. Furthermore, these statements also indicate that an initiation of closercollaboration between the business units could be beneficial, as it would help the casecompany better address customer needs while also preventing conflicts between thebusinessunits(Gebauer&Kowalkowski,2012).

As of now, not all company departments have integrated CSA in their process ofimplementing their respective automation technology. This is the case even thoughrespondentsidentifyoneofthegreatbenefitswithCSAisitsflexibilitytobeusedwithall

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typesofautomationtechnologies.ThereasonforsomecompanydepartmentsnotusingtheCSAplatformintheirdevelopmentprocessisnotclear.However,respondentsidentifyalackofpeoplewithknowledgeandwillingnesstoworkwithCSAasaproblem,inpartcausedbythetechnicalpartoftheplatformnotbeinguptostandards.ThisempiricalfindingisinlinewiththefindingsofBuchereretal.(2012),whostatethatoneofthegeneralproblemsinanchoringbusinessmodelinnovationswithintheorganizationisthattheemployeescanlackwillingness toworkwith the initiative. However, lackingknowledgeofnewbenefitsandvaluesthatareprovidedasaresultoftheinnovationisalsoacommonissue(Buchereretal.,2012).

Respondentsstatethatthereisalackofsupportingculturewhenitcomestosoftware,whichCSAcan,besidesbeingaservice,bedefinedas.LookingatstatementsmadebyBocketal.(2012)thelackofasupportingculturecouldconstituteaproblemastheseauthorsstatethatasupportingandcreativecultureisneedediftosucceedwithaninnovationinitiativeastheone CSA constitutes. However, the empirical findings of the study are in line with thestatements made by Kindström & Kowalkowski (2014), saying that many companiesstruggle with the cultural element. In order to create a supportive culture for services,companies should increaseawarenessof the service initiativeand thepotential it grants(Kindström&Kowalkowski,2014).Hence,beingabletovisualizethevalueoftheofferingisnotcustomerexclusive,itisalsoimportanttodosointernally.Companiesshouldalsoaimtodevelop service leadership capabilities and maintain a long-term orientation whenevaluatingtheresultsoftheinitiative,assuccessderivedfromtheservicemightnotcomedirectly(Kindström&Kowalkowski,2014).

In general, as there is a positive perception regarding the possible opportunities withregardstoCSAamongrespondents,resistancebasedonwillingnesstoadapttotheconceptof CSA cannot be determined to be significant. Respondents instead identify, as earliermentioned, that the resistance to work with CSAmight be caused by the fact that thetechnical aspect of the platform has previously not been up to par. However, theunwillingnesstoworkwithCSAcouldalsostemfromthelackofasupportingcultureoftheinitiativeandthepotentialitgrants.FindingsbyBuchereretal.(2012)andJenssen&Nybakk(2009)indicatethatwhenfacingthesetypesofresistancesofthenewinnovation,internalpromotershavebeencrucialinordertosucceedinimplementingthenewbusinessmodel.Morespecifically,astheresistanceisnotcausedbyinsufficientknowledgeofCSAbutinsteadbythepropertiesofCSA itself,powerpromoters(Buchereretal.,2012)couldbeusedtoovercometheresistance.

The case company have a dedicated business unit holding ownership to CSA withresponsibility for furtherdevelopingtheCSAplatform.There isalsoadedicatedbusinessunithandlingtheimplementationofnewbusinessmodels,whichBuchereretal.(2012)andChristensen&Overdorf(2000)claimisneededwheninnovatingthebusinessmodel.Thisbusinessunithashowevernotcompletedtheprocessofthebusinessmodelimplementationwithregards toCSA,andthere insteadexistsmultiplebusinessmodelsdependingon thegeographicallocationofthecustomer.

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To summarize, there is no company-wide consistency in terms of goals, purposes andstrategies inregardtoCSA.There isa lackofwillingness fromcompanyemployees tobeworkingwithCSA,whichcouldbehelpedwiththeuseofinternalpromoters(Buchereretal.,2012;Jenssen&Nybakk,2009).Furthermore,thereisalsoalackofasupportivecultureofthe innovation. However, there is a designated business unit for handling theimplementationofcompanybusinessmodels,butthisprocesshasnotyetbeencompletedforCSA.

5.6 SynthesisofanalysisAcomparisonbetweenthepresentedanalysis(seesections5.1-5.5)andtheinitialanalyticalmodelanditsproperties(seeFigure5)willnowresultindiscussionsregardingtherelativeimportanceofeachcomponentwithinthebusinessmodel.Thecomparisonwillbediscussedinlightofcompanyservitizationandresultinananalysisofwhatpropertiesofthebusinessmodel that has shown to bemost critical for the case companywhen launching theCSAproject.Thissectionendswitharevisedanalyticalmodelwhichisbasedontheempiricalfindingsofthestudyanditsfollowinganalysis.

5.6.1 ImportanceofeachbusinessmodelcomponentanditspropertiesLookingattheempiricalfindings,thecasecompanyfollowstherecommendationofseveralscholars (seee.g.Day,1994;Kowalkowski,2008;Payneetal.,2017) in theway theyareworkingtogetherwiththeircustomers,withtightlybondedcustomerrelationshipsandco-creationofofferings.Despitethis,ithasnotyetledtoaphasewhereCSAsucceedingonthemarket.Thismattercandependonanumberofthingswithinthebusinessmodelframeworkor the anchoring of thebusinessmodel in the organization.Respondents have identifiedseveralproblemswithregardstothevalueproposition,morespecificthebenefitsofCSA.Respondentsmention, among other things, that the complexity of usingCSA is too high.Althoughthebenefitsasoftodayseemtobepartiallylacking,thedemonstrationofthevalueisalsoatroublingissue–asthevalue-in-useandthevalueofferedwithCSAbecomeshardtocomprehendforthecustomer.Respondentsidentifythatapartofwhythevalue-in-useand the value offeredwith CSA is due to the fact that the benefits are partially lacking.However,theCSAplatformandthebenefitsitisintendedtoprovideifdevelopedcorrectlydoesaddressalltypesofbenefitsthatscholars(seeAndersonetal.,2006;Grönroos,2007;Kindström&Kowalkowski,2009)claimavaluepropositionshould.Tobeclear,itisfirstandforemostthebenefitsofCSAthat is lackingasofnow,making ithardtodemonstratethevalue-in-useofCSAtothecustomer.

The empirical findings regarding the value proposition show that value-in-use,customization,benefitsandthevisualizationofvaluearecriticalfactorswhenassessingaservitizedbusinessmodeldesign.Althoughsustainabilitymightbeafactorthatcouldhavesubstantial importancewhen evaluating the value proposition, the findings of the studyindicatethatthishasnotbeenacriticalfactorwithinthiscontextwhenlookingatintegrationofsoftwareservicesintothebusinessmodel.

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Lookingatthecustomercomponentofthebusinessmodel,thepropertiesintheanalyticalmodel are enhanced customer relationships and increased visibility on themarket. Bothparts areof importance for the case companyasof today, as customer relationships, co-creationofofferingsandmarketingareexhaustedtopicsintheempiricalfindings.Althoughincreasedvisibilityonthemarkethasbeenbroughtupasanissue,theproblemforthecasecompany has rather been that the marketing message is not comprehensive enough toaddress all target customer segments. Thereby, there is an enhanced relevance of themarketingmessagewithinthemarketingsub-component–whichisincludedintherevisedanalyticalmodel.

Lookingfurtherintotheempiricalfindings,therevenuemodelcouldalsostateaproblemforsucceedingwithCSAonthemarket.Nevertheless,scholarssuchasKindström(2010)andOliva&Kallenberg(2003)recommendinnovativepricingmodels,whichthecasecompanyonlypartiallyhasimplementedintotheirbusinessmodel.Inregardtoend-usersandthosemachinebuilderswhodonotpurchaseadevelopmentlicensingfee,thesoftwareservicesprovidedbyCSAarenotchargedfor.Therefore,thiscouldnotbeconsideredasaninnovativepricingmodelwhenlookingatCSA-assoftwareservicerevenueisnotderivedfromthesecustomersegments.However, forsystemintegratorsandthosemachinebuilderswhodopurchaseadevelopmentlicensingfee,thereisaseeminglyinnovativepricingmodelwithannualsubscription-basedpayments.Itcouldbethatthegeneralideabehindtheexistingrevenuemodel, with subscription-based pricing of services, is not suited for any of thecustomersegments–however, thishasnotbeen identified in theempirical findingsasaproblemwhenitcomestoattractingcustomers.

Lookingatthefindingsofthisstudy,therearenoevidencethatanysub-partoftherevenuemodel is of higher importance than another. However, as gathered from the empiricalfindings,itisdifficulttoevaluatetheinterdependenceofthesesub-partsortheireffectsonthesuccessofthebusinessmodel,asthereareproblemsinotherpartsofthebusinessmodelwhich could set back the evaluation of the revenuemodel (e.g. not being able to deliverbenefits, visualize these benefits etc.). Although value-based pricing has not yet beenimplemented at the case company, it has however been deemed important for the casecompanyasafutureimplementation.Theempiricalfindingstherebysupporttheusageofvalue-basedpricing,whichdeemsitrelevantasasub-componentoftheanalyticalmodel.

The organizational arrangements within a company should be structured in a way thatenables the company to support the value proposition, revenue model and customerproperties (see e.g. Adrodegari&Saccani, 2017;Kindström&Kowalkowski, 2014; Oliva&Kallenberg,2003).The issuingareasconstituted intheempirical findingsthatembraceorganizational arrangements are a lack of infrastructure to support sales and delivery;lacking resources dedicated to working with CSA; lacking sales competence and lackingcommunication paths and protocols concerningCSA. At a glance, these issuing areas areaffectingthevaluepropositionasitinvolvestherealizationofthevaluepropositionofCSA

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aswellasthedeliveryofthatvalue.Nevertheless,thelackinginfrastructuretosupportsalesand lackingsales competencecouldalsoaffect thecustomercomponent in termsofhowvisibleorprominentCSAisonthemarket.

As the goals, strategies and purpose with CSA have not been clear and company-wideconsistent,conflictsregardinghowCSAshouldbeutilizedandfurtherdevelopedhasarisen.RespondentsidentifythatthishasledtoCSAnotprovidingthebusinessvalueandbenefitsthey identify it can and should. As a result of this, there is also a lack of willingness ofpersonneltobededicatedlyworkingwithCSA,whichhasresultedinalackofresourcesandcompetences regarding theCSAproject. The conclusion drawn is that the organizationalanchoringoftheCSAinnovationanditsbusinessmodelhasdirectlyaffectedthestructureoftheresources,activitiesandcompetencessurroundingCSA,inawaythatdoesnotenableitto support the other business model components. However, there is also a lack of asupportivecultureofsoftwareservicesaswellasconsistentcommunicationregardingtheCSA project within the organization. It is therefore not possible to draw conclusionsregardingwhichofthesepropertiesthataremostcrucialtoproperlyanchortheinnovationinitiative within the organization. However, each one is identified as important whenintegratingsoftwareservicesintotheexistingbusinessmodel.

To summarize, even though the case company does in part apply a customer-centricapproach (see e.g. Kindström, 2010) and an innovative pricingmethod (see e.g. Oliva &Kallenberg,2003), thishasnotgrantedfinancialsuccessorhelpedtoattractasignificantnumber of customers. Instead, the most prominent factor identified for it not to havesucceeded in themarket has been identified to be the fact that the value proposition islackingintermsofthebenefitsitprovides.However,theideaandthoughtofthebenefitsCSAcould provide is in line withwhat scholars (see Anderson et al., 2006; Grönroos, 2007;Kindström&Kowalkowski,2009)promote,withitshighflexibilityandeconomic,socialandtechnicalbenefits.Thereasonforthebenefitsofthevaluepropositionnotbeingprovidedhavebeenidentifiedtostemfromthelackofresources,activitiesandcompetencesdedicatedto the CSA project. However, this has been identified to be caused by an insufficientorganizational anchoring of the CSA innovation and the surrounding businessmodel. Interms of the customer-component of the business model, it has been identified thataddressingthetargetcustomerswithaspecificmarketingmessageiscritical.Whenlookingattheorganizationalanchoringofthebusinessmodel,ithasbeenidentifiedthatconsistentcommunication, a clear strategy and a supportive culture is of extra importance whenmovingtoaservitizedbusinessmodel.

5.6.2 RevisedanalyticalmodelThefindingsofthisstudysupportargumentsmadebyscholars(seeAdrodegari&Saccani,2017) thatstate there isaconnectionbetweentheresources,activitiesandcompetencesdevotedtotheinitiativeandtherealizationofthevalueproposition.Failingtodedicateandstructuretheorganizationalarrangements(i.e.theresources,activitiesandcompetences)ina sufficientmannermay directly cause the realization of the value proposition to falter.

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However, a common issue with innovating the business model is the employees’unwillingnesstoworkthebusinessmodelinnovation(Buchereretal.,2012).AsalsostatedbyBuchereretal.(2012),thefindingsofthisstudyindicateitiscriticaltoproperlyanchortheinnovationinitiativewithintheorganizationinordertobeabletodesignatetheproperorganizationalarrangementstotheproject.Moreover,inlinewithfindingsbyscholars(seeAdrodegari&Saccani, 2017;Kindström,2010;Kindström&Kowalkowski, 2014;Oliva&Kallenberg,2003),theresultsofthisstudyshowthattheorganizationalarrangementsalsoaffectthecustomerandrevenuemodelcomponentofthebusinessmodel.Thisisalsotrueviceversa,butthecustomerandrevenuemodelcomponentratheraffectthedesignoftheorganizationalarrangements,whiletheorganizationalarrangementsconcerntherealizationoftheothertwo.Additionally,itisfoundthatthevaluepropositionandcustomercomponentarerelatedtoeachother,asvaluepropositionswithhighfocusoncustomer-customizableofferingswillleadtoenhancedcustomerrelationshipsandviceversa.

Withbasisinearlierdiscussions,arevisedformoftheanalyticalmodelispresentedinFigure15 below, showing that the most critical factor identified when assessing a servitizedbusinessmodeldesignisthevalueproposition.Thesustainabilityofthevaluepropositionhasbeeneliminated,whilstboldedandhighlightedpartsarenewlydevelopedmattersthathavebeenalteredfromtheinitialanalyticalmodel.Theunderscoredpartsshowninboldwithineachcomponentaretheretosignifyitsimportanceinrelationtotheotherpropertiesofthesamebusinessmodelcomponent,nottheotherpropertiesoftheothercomponents.No changeshavebeenmade to thepropertiesof theorganizational arrangementsor therevenuemodel.Theinter-relationshipsbetweeneachcomponenthasalsobeenalteredduetotheabove-seenreasoning.Thepurposeoftherevisedanalyticalmodelisthatitcanbeused in future studieswith similar contextual surroundings, in order to evaluate criticalfactorswhenassessingaservitizedbusinessmodelandtheorganizationalanchoringofsaidbusinessmodel.

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Figure15.Revisedanalyticalmodel

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6 ConclusionsThroughouttheresearchprocess,actionsweretakentowardunderstandinghowhardwaremanufacturingcompaniescanintegratesoftwareservicesintheirexistingbusinessmodel.Thiswasdonebyansweringthetworesearchquestionspresentedinsegment1.5.Inthischapter,theresearchquestionsareansweredwithbasisinacombinationoftheempiricalfindingsinchapter4andtheanalysispresentedinchapter5.

It is not safe to draw complete generalizations when answering the research questionsinvestigatedwithinthisthesis.Thisisduetothefactthatthisisacontextualstudywhichresults are based on the empirical findings from one specific case company. However,companiesinasimilarsituationcanexperienceandperceptthesameeffectsandchallengesfromservitizationwithintheircompanyandtheirbusinessmodels.Onecouldarguethatthisisbasedonthepremisethatthetheoreticalbackgroundofthisstudyisgroundedingeneraltheories in the manufacturing industry, which is later validated, discarded or furtherdeveloped with empirical evidence found within the context of the case company.Furthermore,theseconceptswhicharediscussedandinvestigatedinthisstudyaregeneralconceptscommonlyexaminedinstudieswithinthefieldofservitizationandbusinessmodelliterature.Thisfurtherpromotestheideathatcompanies ingeneralcouldexperiencethesameeffectsandchallengesinrelationtointegratingsoftwareservicesintotheirexistingbusinessmodel. The research questions investigatedwithin this thesis are outlined andansweredbelow.

- Howcanservitizationaffectmanufacturingcompanies’businessmodels?

The empirical evidence brought forward throughout this research has shown thatservitizationcanaffect thecompanyandtheexistingbusinessmodel inavastamountofways.Companiesinthiscontextmightaddressflexibility,socialbenefitsandcustomizationintheirvalueproposition.However,companiesinthiscontextcouldalsostrugglewithissuesindesigningandrealizingavaluepropositionthatisdesirabletothecustomer.Ithasalsobeenshownthat thevisualizationofsuchbenefits isasomewhat laborioustask.Anothermatterofwhichcompanies in thissettingcouldexperience is theshift towardcustomer-centricity.InearlierresearchbyKindström&Kowalkowski(2014),thereseemtobeamajorchallengeinputtingthemarketandthecustomersinthedriver’sseatinsteadoftechnology.This also applies to the context of this study, as the responsible business units for thesoftwareservicecanstruggletofocusonthemarketoverinternallypromotedtechnology.Inanothersense,servitizationcouldaffectcompaniesinthiscontextinwaysofhowtheircustomerrelationshipsareformed–astheempiricalfindingspointtohavingtighterbondswithitscustomerscanfacilitateco-creationofofferingswithsaidcustomersandsupportofthe customer. This finding rather supports the idea of adapting to the market and thecustomersoverputtingtechnologyinfirsthand,relatedtotheideaofprioritizingmarketpull

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strategiesovertechnologypushstrategies(Horbachetal.,2012;Kindström&Kowalkowski,2014).

The empirical findings and the analysis also imply that servitization might affect thecompanyintermsoftheirrevenuegenerationmethods.Oneexampleisthesteptowardsmore innovativepricingmethods.However, companiesmight find issues in transitioningfromcost-basedpricingmodelstovalue-basedpricingmodels,incaseswherevaluedeliveryand the visualization of that value is hard to apprehend for the customer. The empiricalfindingsshowthatcompaniesmightalsobeaffectedbyservitizationthroughthewaytheystructuretheirresources,activitiesandcompetences.Companiesmightstruggletorealizetheir value propositions as there is not a sufficient amount of dedicated resources andactivities to the task. Also, internal communication paths and protocols could betroublesome to implement.Companies in a servitized contextmight experience issues infindingtherightsetofinfrastructurestosupportdeliveryandsalesofthenewoffering.Inadditiontotheinfrastructure,anotherissuecouldalsobetoestablishnewsalescompetencefocusedonpromotingandsellinganewservitizedoffering.

- Howcanthebusinessmodelinnovationprocessbefacilitatedintheorganization?

Ithasbeenshownthattheprocessofbusinessmodelinnovationcanbetroublesomeforanorganization.Thishasatleastbeenprovedtobethecasewhentheorganizationhistoricallyhave been solely focused on selling hardware and is now integrating software servicesthroughinnovationsinthecompany’sportfolioofofferings.Wheninnovatingthebusinessmodel,theorganizationshoulddefinecleargoalsandstrategiesoftheinnovationthatfitstheoverallstrategyofthecompany(Buchereretal.,2012;Porter.1996).Thesegoalsandstrategiesshouldbeclearlycommunicatedtoassurethattheyarewidelyacceptedacrossthecompanystaff(Ibid.).Itisalsodeemedimportanttoproperlyrootthebusinessmodelintheoverallstrategyofthecompany.However,organizationsmightexperiencedifficultiesindoingthis.Failingtoproperlydefineandcommunicategoalsandstrategiescouldresultinconflictingviewsofhowthe innovation initiativeshouldbehandled. Inextent, thiscouldaffecttheoverallinternalperceptionoftheinnovationinanegativemanner.Thismightleadtoanunwillingnessforcompanyemployeestodedicateresourcestotheinitiative,makingithardertofurtherdeveloptheinitiative.Furthermore,thefindingsofthisstudysupportthefindingsofBocketal.(2012)regardingtheimportanceofdevelopingasupportingcultureof the innovation initiative. However, as shown in this study, and in accordance withstatementsmadebyKindström&Kowalkowski(2014),thiscouldproveadifficulttask.6.1 DiscussionThepurposeofthisstudywas:

“Tounderstandhowhardwaremanufacturingcompaniescanintegratesoftwareservicesintheirexistingbusinessmodel."

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To understand how that could take place in manufacturing companies, one needs tounderstandtheeffectsofservitizationontheexistingbusinessmodel–asservitizationisdirectlylinkedtotheintegrationofsoftwareservicesintoanexistingportfolioofofferings(see e.g. Baines et al., 2009).When understanding how servitization affects the existingbusinessmodel,intermsofcriticalfactors,challenges,risksandissuestoconsider–itseemsreasonabletosaythatitisalsoeasiertounderstandhowtheintegrationcantakeplace.Thefirstresearchquestionanswershowservitizationaffectstheexistingbusinessmodel,whichalso indicates how amanufacturing company can adapt their organization and businessmodeltothetransitionfromhardwareproductstosoftwareservices.

Tofurtherdeepenthestudy,thesecondresearchquestionanswershowthebusinessmodelinnovation could be facilitated in the organization, which is considered needed asmanufacturingcompaniesbecomeservitized(Cavalcanteetal.,2011;Foreman&Argenti,2005; Storbacka et al., 2013). This provides deeper insights into the process ofimplementationoftheintegrationofsoftwareservicesintotheexistingbusinessmodel.Theanswer to the second research question also considers potential intra-organizationalchallengeswhenintegratingsoftwareservicesintoanexistingbusinessmodel.Amongotherthings,thisimpliesunderstandinghowtheculture,communicationandstrategyaffecttheintegrationof software services into the existingbusinessmodel. This could support theunderstanding of how the integration can be made, facilitated or obstructed withinmanufacturingcompanies.

Thisstudyoutlinesonewayofunderstandinghowhardwaremanufacturingcompaniescanintegratesoftwareservicesintheirexistingbusinessmodel.However,thepurposecouldbeansweredinseveraldifferentwaysdependingontheoutcomeoftheempiricaldatagatheredorthetheoreticallensusedthroughoutthequalitativestudy.Therefore,theconclusionsthathave been drawn cannot be considered to cover all aspects of all critical factors andchallenges when integrating software services into the existing business model of amanufacturingcompany.

6.2 ManagerialimplicationsThe results of this study suggest thatwhen going through the transition fromhardwareproductsandservices,managersshouldaimtodefinecleargoalsandstrategieswithregardstothetransition.Theresultsofthestudyalsoindicatethatitiscrucialtocommunicatethesetotheemployeesofthecompanyandassurethattheentirecompanyisworkingtowardsthesamegoal.Furthermore,thereseemstobeaneedtodevelopasupportiveculturefortheinitiativeandcommunicatingandmakingemployeesawareof thepotential the initiativebrings. The results also suggest that it is important for the company to apply consistentcommunicationregardingtheserviceinitiative.Itisthereforerecommendedtoimplementcommunication protocols among other measures to enable close collaboration betweencompany business units. If there are conflicting views regarding the overall goals andstrategies of the transition, results suggest that company employeeswill gain a negativeperceptionoftheinitiativeanditmightalsocreateanunwillingnesstodeveloptheinitiative.

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Whendesigningaservice-orientedoffering,theresultssuggestmanagersshouldaimtokeepthecustomerinmindaswellastheirneeds.Managersshouldalsofocusonbeingabletovisualizeandcommunicatetheactualbenefitsgrantedbytheofferingandhowitsolvestheirneeds. However, the results indicate managers should also aim to dedicate a sufficientamountofresourcestobeabletorealizeanddelivertheserviceoffering.Iffailingtodoso,theresultsrevealthatthecompanymightfinditdifficulttofindthereturnoninvestmentoftheofferingtobesatisfactory.

Bylookingattherevisedanalyticalmodelpresentedinthisthesis(seeFigure15),managerscangainanunderstandingofimportantareastoaddresswhengoingthroughthetransitionfromofferinghardwareproducttosoftwareservicestotheircustomers.Althoughnotalloftheseareasnecessarilydohavetobeaddressedinthetransition,thefindingsofthisstudyandearlierconductedstudieswithinthesubjectmatterindicatethatdoingsowillfacilitatethecompanysucceedingwiththetransition.Furthermore,therevisedanalyticalmodelalsohighlightstheinterrelationshipsbetweenthedifferentcomponentsofthebusinessmodel.Hence,lookingattherevisedanalyticalmodelwillallowmanagerstogainanunderstandingofhowchangingoneofthecomponentswillrequirealignmentofthepropertiesoftheothercomponentsofthebusinessmodel.

6.3 TheoreticalimplicationsThere is already an extensive pool of theoretical knowledge regarding the concepts ofbusinessmodelsandtheintegrationofserviceofferingsintoanexistingbusinessmodel.Thisresearch validates many of the findings previous scholars have been within the subjectmatterwhilealsoshowingtheirfindingsandconclusionscaninmanywaysbeappliedtothecontext which this research was carried out. However, the research also granted newfindingsthatcanbeaddedtotheexistingpooloftheoreticalknowledgeregardingthesubjectmatter.

Theresults,intermsoftheoreticalimplicationsofthisstudy,isacontributiontotheexistingsets of frameworks used to evaluate and map out servitized hardware manufacturingcompanies’ business models. However, in this case, it is limited to be used within non-disruptive industries with low technological development rate. Nevertheless, this is acontextandanindustryofwhichlacksignificantacademicalrecords.Theresultscanalsobeused to understand how different components of the business model affect each other.Thereby,theresultscreateopportunitiestounderstandhowfuturechangesandinnovationstoonecomponentwithinthebusinessmodelcouldpressurethecompanytoadaptrelatingcomponents accordingly. The results also indicate that the anchoring of businessmodelinnovations,i.e.changing,addingorre-linkingactivitieswithinthebusinessmodel(Amit&Zott 2012; Massa & Tucci, 2013), is a critical factor to take into consideration whenapproachingtheintegrationofsoftwareserviceofferingsintoanexistingbusinessmodel.

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6.4 LimitationsandfuturestudiesAs any academical study and scientific research, this study and its results come withlimitations.Below,theselimitationsarediscussedtogetherwithapropositionofhowfuturestudiescouldbedesignedinordertoaugmenttheresultofthisresearch.

Onelimitationoftheresearchprocesswasthatthecustomerperspectivewasexcluded.Allempiricaldatathatwascollectedcamefrominternaldocumentsorinterviewswithinternalpersonnel.With the customerperspective inplace, anothernuance to theproblemcouldhavebeenanalyzed,asthemarketsituationforthenewofferingandtheperceivedcustomervaluecouldbeportrayed.Forfuturestudies,thecustomerperspectivecouldalsobeincludedin order to depict a more holistic view of the servitized offering and its properties.Furthermore, this study did not consider or examine any competing companies on themarket. Thismatter could be analyzed in future studies to create either amoremarket-centricstudyoramorecomprehensiveanalysisoftheproblem.

Anotherlimitationtothisstudywasthetimelimitoffivemonths.Itcouldbeaninterestingfactor to study this type of problem for a longer period, in order to get a deeperunderstandingoftheprocessofwhichthecasecompanywasundergoing.Byperformingthestudy for a longer period, one could also apprehend a closer insight into the furtherdevelopment of the state of each component within the business model and itsorganizationalanchoring.Thiscouldpossiblyresultinacloserinsightintothecommitmentittakestoundergotheprocessofservitization.Inthecaseofnotbeinglimitedbytime,theproblem that this study examined could also be examined in a more concrete manner,depictingtheimplementationphaseofthebusinessmodelbutalsoitseffectsandoriginality.

Asthisstudydoesnotembraceservicesingeneral,butonlysoftwareservices,therevisedanalyticalmodelandtheconclusionsthathavebeendrawnare limitedtoonepartoftheservitizationspectra.Thisisthecaseasonecannotdirectlyimplythatsoftwareservicesandservicesingeneralactunanimously.Hence,infuturestudies,aninterestingperspectivetoexamine is to apply this research to companies undergoing servitization, without thepresence of software. That could also make this study more generalizable in terms ofservitization.

This study was also limited to one specific case company in one specific industry. Aninteresting future study could be to find possible discrepancies in servitization betweenindustries,meaningthatyoucouldperformthesametypeofstudytowardanotherindustry.By performing more comprehensive research toward different industries, it could bepossibletofindabetterunderstandingoftherelationshipsbetweendifferentcomponentsin the businessmodel, but also gain amore significant analysis of the emphasis of eachcomponent.

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Appendix1–InterviewTemplateTheinterviewtemplatewasformedasafundamentalpartofcollectingempiricstoconductthisstudy.Thetemplatewasformedwithabasisintheanalyticalmodelandthebusinessmodelliterature,inordertounderstandthelayoutoftheexistingbusinessmodelatthecasecompanyandfuturepossibleopportunities.

IntroductionWearetwostudentsconductingaqualitativestudyandamasterthesiswiththepurposeof:

“understandinghowahardwaremanufacturingcompanycanintegratesoftwareservices

intheirexistingbusinessmodel.”

WearebothstudyingIndustrialEngineeringandManagementatLinköpingUniversitywithamaster’sprofileinstrategyandcontrol.Wesetouttounderstandthelayoutofyourbusinessmodeltodayandthereasoningbehinditsdesigninordertoimproveitbyfillinggapswhereopportunitiesarefound.ThedelimitationforthisthesisisthatitwillonlyincludethebusinessmodelrevolvingtheCompanySoftwareApplication(CSA).Therefore,whenyouthinkofansweringquestions,youshouldconsiderideasandnotionsrelatingtoCSA.

Allanswersinthisinterviewareanonymizedandnoneofyouranswerswillbepresentedinawaythatmakesitpossibletoassociatethemwithyouoryourcompanyposition.

Backgroundquestions1. Couldyoudescribeyourcompanyrole?2. Whatamountoftimehaveyouspentworkingforthecompany?3. WhatworkingrelationdoyouhavewithCSA?

ValueProposition1. WhatproblemsdoesCSAsolve?2. WhatarethegeneralbenefitswithCSA?3. WhatarethesocialbenefitsthatyouofferbyprovidingCSAtoyourcustomer?4. WhataretheeconomicbenefitsthatyouofferbyprovidingCSAtoyourcustomer?5. WhatarethetechnicalbenefitsthatyouofferbyprovidingCSAtoyourcustomer?6. WouldyouchangethebenefitsprovidedbyCSAinanywayifyoucould?

a. How?7. Howdoyoupresent,demonstrateorcommunicatetheabove-mentionedbenefitsto

thecustomer?a. Howwouldyousuggestthispresentation,demonstrationorcommunication

canbeimproved?

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8. ArethereanybenefitsofCSAtoday,thatyouthinkcustomersarenotawareof?a. Couldit,initsup-to-dateform,solvemoreproblemsthancustomersare

awareof?9. Whatdoyouproposeisthesinglemostimportantthingthatdiffersyourproduct

andthebenefitsitprovidesfromothercompetingcompanieswithintheindustry?a. Doyoureckonthispointofdifferentiationneedstobechanged,noworinthe

future?

RevenueModel

1. WhataretherevenuestreamsforCSAtoday?a. Howdoyouearnmoneyfromtheoffering?

2. Doyouhaveanyspecificpricingmethods?a. Whatareyourpricingmethods?

3. Howwouldyousuggestthatyourrevenuemodelcouldbeimproved?4. Arethereanyfutureopportunities/risks/challengesthatwillcreateaneedfor

restructuringyourrevenuemodelthatyoucanseetoday?

Customers

1. Whoareyourprimarycustomers?Segmentations?2. WhoareyourtargetcustomersegmentsforCSA?3. WhatarepossiblefuturecustomerssegmentsfortheCSA?4. Areyourelyingonexistingcustomersorareyoucontinuouslysellingyouroffering

tonewcustomers?5. Howdoyouworkwithyourexistingcustomers?

a. Howdoyouinteractwithyourcustomers?b. Doyouinanysenseco-createsolutionswithyourcustomers?c. Doyouhaveanycustomermanagementsystem?(verbalinteraction,

platformsforcommunication,ERP,ordersystem,CRM,etc.)6. Howareyourcustomerrelationshipstoday?Iftherearedifferenttypes,describeall

ofthem.7. Doyouthinkyourcustomerrelationshipsandhowyouworkwiththemneedstobe

changedinanyway?8. DoyoumarketCSA?

a. Inwhatchannels?b. Withwhatmessage?

9. Howwouldyousuggestthatthewayyouworkwithyourcustomerscouldbeimproved?

a. Targetcustomersi. Howtotarget?ii. Whototarget?

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10. Arethereanyfutureopportunities/risks/challengesthatwillcreateaneedfordealingwithcustomersinanotherwaythanyoudotoday?

OrganizationalArrangements

Withinthissegment,youshouldonlyanswertakingyourowndivisionintoconsideration.

1. Whatresources(physical,infrastructure,server,client,inter-firm,social,relations)aremostimportanttosupportCSA?

a. Example:humanresources,communicationplatformwithcustomers2. WhatperformingactivitiesaremostimportanttosupportCSA?

a. Example:Weeklymeetingsaboutprogress,R&D,Customersupportcalls3. WhatcompetencesaremostimportanttosupportCSA?

a. Example:Specificknowledgewithinaspecificprogramminglanguage,salescompetence

4. Withinyourdivision,doyouseeanylackofanyofthesethreecomponents?5. Arethereanyfutureopportunities/risks/challengesthatwillcreateaneedfor

restructuringwithanyresource,activityorcompetencethatyouseetoday?

Concludingquestions1. WhatdoyouthinkofCSAingeneral?2. WhatarethepossibleopportunitieswithregardstoCSA?3. WhatdoestheinternalcommunicationregardingCSAlooklike?

a. HowistheideaofCSAbeenpromotedinternally?4. HowhastheideaofCSAbeenestablishedinthecompany?5. Inyouropinion,whatisthepurposeofCSA?6. Doyouhaveanythingtoadd,thatyoufeelthatwehavenotyetasked?