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

EPSRC Grant: OMMS - Wireless Micro-Factor that will treat people with Cancer

Nov 14, 2017

OMMS: the wireless micro-factory that will treat people with cancer Building Service Business Model Innovation

November Webinar - A System Perspective on Business Model Evolution

Nov 13, 2017

Webinar by Chander Velu on 'A Systems Perspective on Business Model Evolution: The Case of an Agricultural Information Service Provider in India'

Video - What is the Shift to Services Executive Course all about?

Oct 29, 2017

In this video Florian Urmetzer explains the benefits of attending the Alliance's two-day executive programme - Shift to Services

October Paper - Big Data Analytics Architecture for Businesses

Oct 26, 2017

The October Monthly Paper from the Cambridge Service Alliance, on 'Big Data Analytics Architecture for Businesses, by Mert Onuralp Gökalp, Kerem Kayabay, Mohamed Zaki, Altan Koçyiğit, P. Erhan Eren, and Andy Neely

Article on Service Week 2017 in London Evening Standard

Oct 26, 2017

Anthony Hilton, of the London Evening Standard, attended our Service Week 2017 Industry Day event, and wrote about one of the keynote speakers, from Alibaba, in a recent article.

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