Vandermerwe and Rada (1988) describe how the emphasis for industry has evolved to not differentiate their offerings as goods or services, but a combination of both, describing this as the ‘servitisation of business’. The emerging service dominant logic, discussed by Vargo and Lusch, highlights how the emphasis on value creation is shifting from tangibles to intangibles, as operant resources such as knowledge and skills become the basis for new value creation (2004). In this environment, the view of services is widened and defined as ‘the application of specialised competencies (knowledge and skills) through deeds, processes and performances for the benefit of another entity itself.’ Physical goods have a role in this view, however rather than being a traded commodity, their value is embodied in the service that they provide to the customer. Such a view supports the emergence of the servitised view for product-based organisations. Schmenner has presented a historical perspective to this, arguing that this has been a natural evolution for manufacturing-based services in order to form increasing links with their customers to gain advantage over competitors (2009).

Vandermerwe and Rada describe the process of servitisation as being on a continuum, moving from products, to supporting services, to self service and knowledge (for the customer). Other definitions of servitisation have also presented it as a continuum, with a pure product focus at one end of the continuum, and a pure service offering at the other. Tukker (2004) refers to these stages as being product oriented, use oriented and results oriented, with the offering moving from being owned by the customer, to the customer paying for use or access. This is referred to as a productservice-system, with particular benefits being in sustainability, as the supplier takes responsibility for reducing the through-life cycle cost and overall consumption. Baines and Lightfoot also refer to a continuum of base, intermediate and advanced services (2013). The product is central to all, but the service range, risk and revenue payment methods evolve throughout the continuum as the focus of provision moves from product only (base services) to ‘outcome assurance’ (advanced services). Further benefits are therefore seen as being better value for the customer and risk reduction (Baines et al 2010). Servitisation has therefore been presented as a potential method of differentiation for manufacturing-based organisations in order to compete with lower-cost global competition (OECD 2007). Nonetheless, it has been recognised that such a business transformation can present a number of challenges to a ‘traditional’ product-based organisation.

In a recent example of research into manufacturing organisations adopting a servitised approach, Peillon et al discussed some of these challenges (2015). They investigated the servitisation path for a manufacturing organisation, creating a concept framework to align both the product and service-oriented production structures and testing it using a case study of a machine tools organisation. With reference to service dominant logic, they concluded that products and services become inseparable, leading them to question the results-based pure service extreme of the servitisation continuum. Consequently, they conclude that the results-based model (advanced services) may not be suitable, or desired by all organisations involved. It is important that the organisation does not lose its product-development related expertise, which could occur should it decide to move to a wholly service-oriented business model. The need for developing a more service-focussed culture, and the development of skills to support this, was also highlighted, although they also acknowledged a split between the servicebased and product-based employees, due to the nature of the work undertaken.

In their original definition, Vandermerwe and Rada acknowledged that a servitised solution can be approached in either direction, from a manufacturer moving to incorporating services, or conversely from a service-based organisation moving towards manufacturing. With the former having been primarily adopted in the research literature as servitisation, the latter is now primarily referred to as productisation.

In their extensive review, Harkonen et al define productisation as ‘the process of analysing a need, defining and combining suitable elements, tangible and intangible, into a product-like object, which is standardised, repeatable and comprehensible’ (2015). They documented evidence of four types of productisation: the productisation of products, services, software and technology. In their findings, they found that ‘productisation of products’ can be differentiated from the usual new product development initiatives by the emphasis on commercialisation and meeting the need of the customer. However, they acknowledge that more cases of this type of productisation are needed in research.

It has also been adopted in the term ‘productisation of services’, applied to a case describe in Baines and Lightfoot (2013) and Baines et al (2011). Here, a repair and overhaul organisation engaged in the provision of advanced services developed a smallscale re-manufacturing capability to improve customer response. However, such ventures are seen as being few, and risky, with few organisations expressing an interest in developing them. Consequently, they have remained outside the main scope of research. That said, here productisation is seen as being a potential contributory element in a servitised approach.

The investigation and identification of organisations engaged in, or moving towards, ‘productisation of services’ in terms of product development and manufacturing therefore presents an interesting research challenge. Who are these companies? What has motivated them to transform their businesses in this way and what are the mechanisms which have enabled them to achieve it? Furthermore, given their service-based history, what can organisations at the other side of the continuum – the product-based organisations aiming to servitise – learn from their experiences?

This paper documents a preliminary investigation in this area. It reports on an initial exploratory case study of such an organisation. The aims of the research are to report on the story of this organisation’s transition and discuss how it fits in with existing research on productisation and servitisation.

Value describes ‘added value’ and it comes from three perspectives: added value according the customer, the organisation, and for partners.

The organisation defines added value as an increased growth in sales, consequently they are seeking opportunities which will maximise this. However, this also has to be seen as added value for the customer – it’s a mutual benefit. Historically, the high level of service-based activities have been one of the main reasons why customers are attracted to the organisation. Although previously much of this increase in sales had been fuelled by trading opportunities, the organisation examined the meaning of added value for the customer beyond the remit of their usual activities.

Added value for the customer therefore came from the recognition that system solutions would fill a niche in the market (rather than individual components), and was something that wasn’t being performed by their competitors. It would also significantly reduce their customers’ labour costs by reducing the time for installation. This was the main rationale for moving into product development. They also saw the move into product development as an opportunity to launch a better quality product. Quality is a driver in this marketplace: reputations (and sales) can be destroyed if a customer has a poor product.

There was also evidence of added value for the external KTP partner, in terms of patents filed and related publications.

Innovation - in terms of both product and process development - has been one critical mechanism for achieving the new added value for the customer as perceived by the organisation. In terms of product development, the organisation identified this opportunity and developed some initial product ideas, whilst recognising that they would need technical input from elsewhere (the KTP project) to realise them. In terms of process development, the organisation had a choice. It could have identified a sub-contractor to produce the products on its behalf. However, it decided to take the alternative route of developing the manufacturing capability and knowledge to produce the systems itself. There were three reasons for this. Firstly, they were limited by what they could achieve in terms of product development without having some facilities in place. They needed the capability to develop. Secondly, in-house development and product was seen as a guarantee of quality and IP protection. Although this project could be perceived as risky, this was seen as a risk mitigation activity. Finally, acquiring the capability was seen as an opportunity. It would increase the scope of what the organisation could do so that it could be used as a springboard to develop new products.

For both product and process development, there was an incremental approach to innovation in both areas, with smaller achievements in both product and process development contributing to the main developments. This was seen as instilling confidence and mitigating risk. Examples of this were the successful introduction of CE marking, the improved design of an existing product and the sequential development of the four main products which contributed to the success of the project. For process innovation, the organisation already had some very basic processes (cutting, slitting and deburring) which it had acquired incrementally in order to provide a manufacturing-based ‘added service’ for customers (cutting to size, removing sharp edges). The acquisition of manufacturing capability was seen as a natural step from this, although it was recognised that it was a much larger (and riskier) investment.

In order to mitigate this risk, it is interesting to notice how the acquisition of both product development and process development knowledge has instilled new confidence in the organisation, and that they are now seeking further product development opportunities, looking at ways in which they can use their manufacturing capability to produce new products.

A scale of innovation is also evident. For product development, it is recognised that slight incremental adaptive improvements are not enough to add value. The customer offering has to be a novel step and offer a definite advantage. An example is some design improvements which were made to the clip which holds the band in place in the installation. Its weight was reduced, but by itself, this development is viewed as being insufficient for a customer solution. It needed to be combined with others into an overall ‘package’ of innovation. For process development, therefore, the manufacturing capability acquired must be able to deal with more than one product range, to maximise innovation potential. Manufacturing capability has therefore been acquired to enable innovation to add value for the customer. It is not a goal in itself.

The innovations have also have a very strong brand, for two purposes – to increase their profile within the industry, and to protect intellectual property. This is demonstrated by the trademark and patent applications.

The term ‘partner’ is used in this paper to denote a knowledge partnership rather than a contractual partnership (although both could be the case). The organisation has shown a particular strength in establishing long-term partnerships with external organisations. These partnerships fall into four categories:

1. 1. 1) Customers and suppliers of other products, specifiers and engineers - to better understand the market and particular challenges, enabling them to define where they can add value. This is reciprocal, as the organisation has informed them of progress and invited feedback on developments.

   2) Suppliers of their own products - to understand the way they work and where they can do something different, adding value to the customer (and to themselves).

   3) Suppliers of coatings - forming partnerships to develop process technology and testing resources.

   4) External resources - the technical expertise in order to move into product development has been ‘bought in’ through the KTP scheme and has been embedded in the organisation. Additionally, the organisation has now started to form partnerships with external funding organisations for future resource allocation.

These partnerships have been instrumental in enabling the organisation to acquire new knowledge and expertise, branch out from its remit of historical activities and achieve the innovation acquired to add customer value.

The organisation has been very market-driven in its approach to innovation, proving itself to be adept at seeking out the customer need and establishing the type of innovation – service and more latterly product – to fulfil this. The most interesting aspect of this case is that, having established their new market direction, the organisation decided to move into a new area of expertise and acquire the capability itself. They also proved to be extremely adept in forming external partnerships to enable them to achieve this capability.

Both of these strengths may stem from the customer focus that the organisation has developed, being traditionally service-based. Perhaps the size of the organisation has also played a part in this. Arguably it has a stronger need to identify customer needs and innovate to satisfy them, as this may impact on its survival more strongly than the larger production companies with whom it competes. It is interesting to note that the opportunity to develop the jacketing systems existed in the marketplace, but this organisation took the decision to be the innovators, rather than their larger, production-oriented competitors, who arguably may have been in a less risky position.

As the organisation has adopted a more product-focussed approach, the scope of activities it undertakes in order to add value has also widened, shown in table 1. Many of the ways in which value has been added is through the additional of operant resources such as additional skills and knowledge.

From one perspective, this case could be interpreted as a case of a service organisation which is re-inventing itself as a productbased manufacturing organisation. However, the move to product development could be interpreted as an example of the productisation of products. This is particularly evident given the emphasis on the added value to be achieved by the innovation. The nature of the product itself is also important. The organisation developed an integrated product which presents value to the customer by eliminating the need for a manual assembly operation, thus reducing labour costs. Following the principles of service dominant logic, this product therefore also performs service for the customer. The additional acquisition of knowledge and skills resources as the organisation has transformed also supports this approach. This is the main goal of the organisation – the acquisition of manufacturing capability has been seen as the means to achieve this, not the main objective. This business transformation is equally as significant in terms of service provision as well as product provision. It must therefore be questioned if and how, this could fit within the defined servitised approach.

Table 1
Changing scope of value-adding activities

The development of a systems solution to add mutual value for both the customer and the organisation has commonalities with characteristics of organisations which have engaged in servitisation. When compared to Baines and Lightfoot’s range of service activities (2013), it could be said that before this project, the organisation was involved in some base services activities – order processing and delivery, with some additional cutting to size and problem solving (which could move them into intermediate services). As a consequence of the project, it could be argued that they are now performing more intermediate services activities because their product has replaced some of the customer’s installation activities. The organisation could arguably develop their service offering further in addition to product development to move into intermediate or advanced services. However, they have no current plans to do so. Their focus is on ramping up to full production and launching the products in the marketplace. This would be an interesting area to explore with the organisation in the future.

Figure 3 summaries these findings. It is a diagram of the transformation for the organisation when compared against the servitisation process as described in Baines and Lightfoot (2013). From this, it is suggested that, for this case, the productisation of products has been a route to developing further services (when viewed in terms of a service dominant logic) - in this case, base and intermediate services.

Figure 3
BS Stainless transformation vs. Servitisation process (after Baines and Lightfoot 2013)

These findings therefore raise the question: can servitisation for physical, manufactured products be approached from either direction - i.e. by a manufacturer adopting services, or by a service provider adopting productisation of product (i.e the reverse of the current services continuum)?