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

High-Quality Prediction Intervals for Deep Learning: A Distribution-Free, Ensembled Approach

Feb 20, 2018

February Paper on High-Quality Prediction Intervals for Deep Learning: A Distribution-Free, Ensembled Approach by Tim Pearce, Mohamed Zaki, Alexandra Brintrup, Andy Neely

Webinar - Digital Business Transformation and Strategy

Feb 12, 2018

Webinar on 'Digital Business Transformation and Strategy: What do we know so far?' by Mariam Helmy Ismail Abdelaal

Wearable Sensor Technology and Business

Jan 25, 2018

Contextually Defined Postural Markers Reveal Who’s in Charge: Evidence from Small Teams Collected with Wearable Sensors by Julius Dietzel, R. Elena Francu, Benjamin Lucas, and Mohamed Zaki

Webinar - Big Data Analytics Architecture for Businesses

Jan 16, 2018

15 January 2018 - Big Data Analytics Architecture for Businesses - Open Source Perspective - Kerem Kayabay, Mert Golkalp, Mohamed Zaki

December Paper - Buyers Dependence and Financial Performance

Dec 14, 2017

December 2017 Paper by Ornella Benedettini and Andy Neely on 'Does buyers’ dependen­­ce translate into financial performance? An empirical analysis of manufacturer-service provider relationships­­'

View all news

Upcoming events

Ecosystems Strategy One Day Course

Feb 27, 2018

IfM, Cambridge

Shift to Services Executive Education Programme

May 09, 2018

IfM, Cambridge, UK

Upcoming events