skip to primary navigationskip to content

Cambridge Service Alliance

developing new understanding and approaches to complex service systems

Studying at Cambridge

 

Why Do Servitized Firms Fail - A Risk-Based Expanation

last modified Dec 16, 2015 11:11 AM
The December paper 'Why Do Servitized Firms Fail - A Risk-Based Explanation' by Ornella Benedettini, Andy Neely and Morgan Swink
Why Do Servitized Firms Fail - A Risk-Based Expanation

December 2015 Paper

'Why Do Servitized Firms Fail? A Risk-Based Explanation’

Ornella Benedettini, Andy Neely, Morgan Swink

A major challenge for product manufacturers that move towards service provision is to understand  the attendant risk consequences in order to manage them appropriately. In this paper, we build on the distinction between ‘environmental’ and ‘internal’ risks (i.e. risks that arise from the business landscape or from decisions made by the company’s management) to investigate how these categories affect the impact of service provision on companies’ risk profiles.

In particular, we concentrate on the risks that may cause product firms to fail in the most extreme sense, those that may lead to bankruptcy. Using data from a sample of 75 servitized and 54 non-servitized bankrupted manufacturers, we find that the presence of a service business increases overall bankruptcy risks for the supplying firm. This is essentially because of greater internal risks, indicating that management abilities have a significant potential for controlling the risk consequences of service transitions. At the same time, environmental bankruptcy risks do not decrease under servitization.

We propose that, although servitization may help firms to secure their market position and achieve customer-centric value, the concomitant exposure to greater demand volatilities, to different customer needs, and to the uncertainties of more operating theatres tends to cancel the potential reduction of environmental risks. Nevertheless, we find that the type of services offered has an influence on the relationship between servitization and bankruptcy risks. Because they require limited technological knowhow, ‘demand chain’ services (i.e. retail and distribution, financial services) are attractive for manufacturing firms in search of new revenue opportunities. However, our findings suggest that firms focusing these services are also exposed to greater environmental bankruptcy risks than other servitized and non-servitized firms. Managers should therefore carefully consider focusing on these services because they also amplify uncertainties and risks associated with the product business.

[paper]

RSS Feed Latest news

Exploring the Journey to Services

Mar 20, 2017

March paper on 'Exploring the Journey to Services', by Veronica Martinez, Andy Neely, Chander Velu, Stewart Leinster-Evans and Dav Bisessar.

Webinar - The Ecosystems Value Framework

Mar 13, 2017

13 March 2017 - The Ecosystem Value Framework: Supporting Managers to Understand Value Exchange between Core Businesses in Service Ecosystems - Florian Urmetzer

March 2017 Newsletter

Mar 01, 2017

March 2017 Alliance Newsletter

ServiceMax Webinar Introduced the Shift to Services Programme

Feb 23, 2017

Introduction to the Shift to Services Executive Programme - Webinar

Risks of Outcome-Based Service Contracts

Feb 21, 2017

February Paper on 'Investigating risks of outcome-based service contracts from a provider's perspective' by Jingchen Hou and Andy Neely

View all news

Upcoming events

Shift to Services Executive Education Programme

Apr 04, 2017

IfM, Cambridge, UK

Cambridge Service Week 2017 - Academic Conference

Oct 05, 2017

IfM, Cambridge, UK

Cambridge Service Week 2017 - Industry Conference

Oct 10, 2017

Moller Centre, Cambridge, UK

Upcoming events