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[Paper Express] Digital Servitization of Manufacturing Enterprises: Research on the Internal Mechanism of Digital Empowerment Value Creation

Abstract:Digital servitization has become an important part of the research field of servitization and digital transformation of manufacturing enterprises. Digital servitization is an important concept to explain the dual transformation of digitalization and servitization, and there are theoretical gaps and practical necessities in how digital technology enables value creation. Using the case study method to explore the internal mechanism of digital service-based digital empowerment value creation, the results show that: First, digital service-based digital empowerment value creation follows the three-stage path of "digitization of factors of production-digital service capacity formation-digital service value creation. The three digital service capabilities on which the value creation of digital services depends are driven by the enabling mechanism. Second, in the process of platform-based value creation, there is an interdependence between the digital empowerment of the back, middle and front ends of the platform, including the interdependence of the digitization of factors of production and the interdependence of digital service capabilities. Third, the product-service-software system plays a bridging function between digitalization and service, promoting the synergy of value creation between digitalization and service.


Key words:Digital Servitization; Value Creation; Digital Capability; Digital Empowerment; Product Service System;


Abstract: The rapid development of emerging digital technology promotes the transformation of production paradigm, providing opportunities for novel value creation and economic rent capture. However, focusing solely on digitalization does not definitely create enough value to equivalently offset enterprise's investment. The effect of this transformation may be nonlinear, and disturbed by complex variables and conflicts within and outside the enterprise, which leads to the difficulties of resource loss, investment bubble, as well as the lack of reward.Against this background, the coupling of digitization and servitization becomes the key way to create service value from digitization. Digital servitization is considered as an important content in the research field of servitization and digital transformation of manufacturing firms. However, the existing research lacks deep discussions on how to couple digitization and servitization. In addition, digital servitization requires enterprises to combine complementarities through a set of capabilities in order to turn the potential value of digitization into economic income. Because of its digital service-oriented conception, product-service system provides a perspective to observe the servitization of manufacturing enterprises. It contributes to analyzing the value creation based on product-service system from the multi-layer perspective of product, service, software. However, the current literature focusing on the design of value proposition and new business model, ignores the internal mechanism to interpret the enablement of digital technology on PSS value creation.Due to the theoretical gap and practical necessity, the study aims to clarify the digitally-enabled mechanism in the value creation of digital service, in order to theorize the phenomenon that manufacturing enterprises create value from digital servitization toward smart product service software system. Using the case study method, the study selects Guangzhou Shangpin home furnishing Co., Ltd. as the studied case to explore the internal mechanism of digitally-enabled value creation of digital service.The findings suggest that: Firstly, digital enablement on value creation in servitization follows a three-stage path of starting from the digitalization of production factors, then the formation of digital service capabilities, and the value creation of digital service. The three digital capabilities that the value creation of digital services rely on are driven by the digitalization of production factors. In the path, the digitalization of production factors enables the assimilation of digital resources and digitizes firm's value creation based on platforms, and further drives the formation of digital service capabilities, namely, distributed innovation capability, combinatorial innovation capability and hybrid value delivery capability.Then, the creation of complementarity, efficiency and novelty value in PSS business model is ultimately enabled by those digital service capabilities. Secondly, in the process of platform-based value creation, interdependences of digital enablement exist among the back-end, central part and front end of digital platform, including the interdependences respectively existing in the digitalization of production factors and digital service capabilities. Thirdly, digital technology's potential value is captured by the complements between digitalization and product-service system which is tailored by customized needs. Product-service-software system serves as a bridge connecting digitalization and servitization, supporting the effective integration of digitalization and servitization.The study contributes to the understanding of progressive effect mechanisms of digital enablement on value creation of digital service by revealing a clear path of digitally-enabled value creation of digital servitization. It induces three enablement mechanisms for the construction of digital service capabilities, expanding the discussion of resource base of digitalization in the existing digital servitization literature. Moreover, the study discovers the three digital service capabilities and their interdependent logic that contribute to service value creation, promoting the integration and theoretical extension of digital servitization and dynamic capability literature.


Key words: digital servitization; value creation; digital capabilities; digital enablement; product-service system;


Author: Zhang Zhengang, Yang Yuling, Chen Yihua

Author: School of Business Administration, South China University of Technology

Guangzhou Digital Innovation Research Center

School of Management, Hainan University

The full text has been published in Science and Science and Technology Management, Issue 1, 2022.

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