Economic Principles in a Contemporary

Context

Lectorial 5: Rising to the challenge:

Processes of servitisation;

Dr Peter Bradley
19.11.20

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 Servitisation
• Organisational change is said to occur as an interplay between the
context, process and content (Pettigrew, 1988; Whipp et al., 1989;
Pye and Pettigrew, 2005).

• Context treats with the circumstances of change (internal and

external to organisations), while process treats with how change
actually takes place. Content deals with the actual decisions that
are come to.

• Martinez et al. (2017) make the case that service-driven

transformation requires the reorganisation of fundamental elements
of the product–service offering, organisation and value network,
and that these change processes may unfold over a number of
phases of emergence, development, implementation and diffusion
(Hargrave and Van De Ven, 2006).

Draws mainly on Baines 2020

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 Factors affecting the
transformation
• Lutjen et al. (2017) put forward that early stages tend to be based
on already existing products, resources and technologies (Oliva and
Kallenberg, 2003).

• Later stages require large changes in the underlying technologies

and competences, as well as the customer value and behaviours to
a larger degree.

• Internal factors : (i) organisational structure, (ii) corporate culture,

(iii) power, leadership, (iv) internal political situation, (v) strategic
directions, (vi) level of trust and stage of the board development.

• Whereas external factors include: (vii) political characteristics

externally, (viii) economics, (ix) social context, (x) technology, (xi)
environment, (xii) industry, and (xiii) regulations. (Baines 2020)

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 Factors affecting the
transformation
• Servitization is often seen as a unidirectional and linear shift from
products to product–service offerings and, however, this seldom
occurs so objectively in practice (Spring and Araujo, 2013).

• Based on evidence from some case studies Martinez et al. (2017)

conclude that the servitization process is neither logical nor
structured, but more emergent and intuitive.

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 • When we buy a car, at least a large part of the useful service is
comfortable transportation from point A to point B (that the car and
fuel combined enable). The main useful service is transport. Though
it should be acknowledged that for some customers a particular
form of car that transports them may also (they believe)
communicate an identity.

• For many the end point is the useful service – that’s what the
consumer actually wants and is willing to pay (for many consumers)

• There may be many ways of providing these useful services.

Different forms of provision (and consumption), however changes
can vary the value for the consumer; vary the value for the
producer (profit exchange value) and use value (e.g. facebook likes
of the organisation) and vary the disvalue for the environment and
wider society from production and consumption.

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 Change processes
• Two approaches to change:(i) continuous change and (ii)
punctuated equilibrium.
 
• The continuous change approach - organisations and their people
continually monitor, sense, and respond to the external and internal
environment in little steps as an ongoing process (Luecke, 2003).

• Burnes (2004) - the ability to change continuously in a fundamental

manner. The theory suggests change is not episodic but endemic to
the way in which organisations operate, having a capability to
engage in rapid and relentless continuous change (Langley et al.,
2013).

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 Change processes
• Punctuated equilibrium - long periods of relative peacefulness with
minor, incremental changes that are interrupted by brief periods of
discontinuous and radical change (Tushman and Anderson, 1986).

• Other frameworks also explain change process. In particular, Scott

and Bruce (1987) propose a model of business growth that
somewhat reconciles the differences between linear growth and
radical change.

• They identify five stages which are punctuated by four crisis points
that occur before the advance into the next stage of development.
It is the anticipation of these crises, and the successful management
of the change that ensures the survival.

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 Some questions to think about
• Why is it important to know how change occurs?

• Why is it important to know factors that can influence change?

• You might like to think about changes that are occurring in the external
environment recently….

• The recent announcement of the banning of petrol and diesel cars by 2030 –
what changes may occur due to this shift in a regulatory factor of the external
environment? Brexit and changes in trade policy, coronavirus and fisheries etc.

• Move to electric vehicles and low carbon economy, implications for the
business of electricity generation, supply and distribution. Implication for
businesses and practices around rare earth metals?

• rapid grown in green investment (and government intervention here).

• How are internal and external changes that are occurring in businesses today
going to shape value creation and capture tomorrow (or in the future)?
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 References
Main reference: Baines, T., Bigdeli AZ., Sousa R., Schroeder A.
2020. Framing the servitization transformation process: A
model to understand and facilitate the servitization journey.
International Journal of Production Economics. 221.

• Scott, M., Bruce, R., 1987. Five stages of growth in small business.
Long. Range Plan. 20, 45–52.
• Tushman, M.L., Anderson, P., 1986. Technological discontinuities
and organizational environments. Adm. Sci. Q. 439–465.
• Langley, A., Smallman, C., Tsoukas, H., Van De Ven, A.H., 2013.
Process studies of change
• in organization and management: unveiling temporality, activity,
and flow. Acad.

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 • Manag. J. 56, 1–13.Burnes, B., 2004. Managing Change: A Strategic
Approach to Organisational Dynamics.
• Pearson Education.Luecke, R., 2003. Managing Change and
Transition. Harvard Business Press.
• Spring, M. and Araujo, L. (2017), “Product biographies in
servitization and the circular economy”. Industrial Marketing
Management, Vol. 60, pp. 126-137.
• Martinez, V., Neely, A., Velu, C., Leinster-Evans, S., Bisessar, D.,
2017. Exploring the journey to services. Int. J. Prod. Econ. 192, 66–
80.

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