Servitization of Small- and Medium-Sized Manufacturing Enterprises: Facing Barriers through the Dortmund Management Model

9th IFAC Conference on Manufacturing Modelling, Management and 9th IFAC Conference on Manufacturing Modelling, Management and Control Available online at www.sciencedirect.com Control 9th IFAC IFAC Conference Conference on on Manufacturing Modelling, Modelling, Management Management and and 9th Berlin, Germany, AugustManufacturing 28-30, 2019 Berlin, Germany, August 28-30, 2019 Control Control Berlin, Germany, Germany, August August 28-30, 28-30, 2019 2019 Berlin,

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Servitization Servitization of of SmallSmall- and and Medium-Sized Medium-Sized Manufacturing Manufacturing Enterprises: Enterprises: and Medium-Sized Manufacturing Facing Barriers through the Dortmund Management Model Servitization of SmallFacing Barriers through the Dortmund ManagementEnterprises: Model Facing Barriers through the Dortmund Management Model Alexander Michalik, Christoph Besenfelder, Michael Henke* Alexander Michalik, Christoph Besenfelder, Michael Henke*  Alexander Michalik, Michalik, Christoph Besenfelder, Michael Henke* Henke* Alexander Christoph Besenfelder, Michael  * Chair of Enterprise Logistics, TU Dortmund University, Leonhard-Euler-Str. 5, 44227, Germany * Chair of Enterprise Logistics, TU Dortmund University, Leonhard-Euler-Str. 5, 44227, Germany (Tel: +49-231-755-5771; e-mail: [email protected]). * TU University, Leonhard-Euler-Str. (Tel:Logistics, +49-231-755-5771; e-mail: [email protected]). * Chair Chair of of Enterprise Enterprise Logistics, TU Dortmund Dortmund University, Leonhard-Euler-Str. 5, 5, 44227, 44227, Germany Germany (Tel: +49-231-755-5771; e-mail: [email protected]). (Tel: +49-231-755-5771; e-mail: [email protected]).

Abstract: Abstract: The The development development of of industrial industrial product product service service systems systems (IPSS) (IPSS) and and the the associated associated increased increased value value proposition through individual service bundles is becoming highly relevant for manufacturing companies. Abstract: The development of industrial product service systems (IPSS) and the associated increased proposition through individual service bundles is becoming highly relevant for manufacturing companies. Abstract: The development of industrial product service systems (IPSS) and the associated increased value value However, the transformation from productto solution-oriented business models -- called proposition through individual service bundles becoming relevant for companies. However, transformation productto is called Servitization Servitization propositionthe through individualfrom service bundles issolution-oriented becoming highly highlybusiness relevantmodels for manufacturing manufacturing companies.faces a number of challenges, especially for medium-sized enterprises (SME) in manufacturing sector, However, the productsolution-oriented business models called faces a number of challenges,from especially forto enterprises sector,-However, the transformation transformation from producttomedium-sized solution-oriented business(SME) modelsin --manufacturing called Servitization Servitization which positioned differently from due lower and resources as faces aaare number of challenges, challenges, especially forcompanies medium-sized enterprises (SME) in personnel manufacturing sector, which are positioned differentlyespecially from large largefor companies due to toenterprises lower financial financial and personnel resources as faces number of medium-sized (SME) in manufacturing sector, well as organizational differences. The literature is increasingly focusing on Servitization, but special whichasare are positioned differently differently from large companies due to to lower lower financialonand and personnel resources resources as well organizational differences. The literature is increasingly focusing Servitization, but special which positioned from large companies due financial personnel as requirements for SMEsdifferences. are not sufficiently considered. Practically relevant approaches but are special rarely well as organizational organizational The literature literature is increasingly increasingly focusing on Servitization, Servitization, requirements for SMEsdifferences. are not sufficiently considered. Practically relevant approaches but are special rarely well as The is focusing on encountered. purpose, literature reviewconsidered. was conducted to uncover barriersapproaches in Servitization. requirements For forthis SMEs are aanot not sufficiently Practically relevant are Using rarely encountered. For this purpose, literature reviewconsidered. was conducted to uncover barriersapproaches in Servitization. Using requirements for SMEs are sufficiently Practically relevant are rarely identified barriers and considering SME-specific strengths, a first proposal based on the encountered. For purpose, aa literature review was conducted uncover barriers in Servitization. Using identified barriers and considering SME-specific strengths, ato first proposal based on the Dortmund Dortmund encountered. For this this purpose, literature review was conducted to uncover barriers in Servitization. Using The is description of addressing )) is Management Model ((DMM identified barriers considering SME-specific aa first based on Dortmund Management Modeland DMM is explained. explained. The result resultstrengths, is an an aggregated aggregated description of barriers barriers identified barriers and considering SME-specific strengths, first proposal proposal based on the the addressing Dortmund relevant scientific fields (e.g. strategies, digitalization, development) to reveal further research needs. Management Model ( DMM ) is explained. The result is an aggregated description of barriers addressing relevant scientific fields (e.g. strategies, digitalization, development) to reveal further research needs. Management Model (DMM) is explained. The result is an aggregated description of barriers addressing Copyright © 2019 IFAC relevant scientific fields (e.g. strategies, digitalization, development) to reveal further research needs. Copyright © 2019 IFAC relevant scientific fields (e.g. strategies, digitalization, development) to reveal further research needs. © 2019, IFAC (International Federation of Automatic Control) Hosting by Elsevier Ltd. All rights reserved. Copyright © 2019 IFAC Copyright © 2019 IFAC Keywords: Small and medium-sized enterprises, SME, manufacturing enterprises, servitization, Keywords: Small and medium-sized enterprises, SME, manufacturing enterprises, servitization, transformation, industrial product-service system, IPSS IPSSSME, manufacturing enterprises, servitization, Keywords: Small Small and product-service medium-sized enterprises, enterprises, transformation, industrial system, Keywords: and medium-sized SME, manufacturing enterprises, servitization, transformation, industrial industrial product-service product-service system, system, IPSS IPSS transformation,   (Oschmann  (Oschmann 2013). 2013). Furthermore, Furthermore, present present scientific scientific approaches approaches 1. INTRODUCTION 1. INTRODUCTION are generally focusing on case studies based on (Oschmann 2013). Furthermore, present scientific are generally focusing on case studies based on large large (Oschmann 2013). Furthermore, present scientific approaches approaches 1. INTRODUCTION INTRODUCTION Product Service Systems (PSS) have been covered 1. companies (Clegg et al. 2017). Therefore, key results of these in the are generally focusing on case studies based on Product Service Systems (PSS) have been covered in the companies (Clegg et al. 2017). Therefore, key results of these are generally focusing on case studies based on large large literature for more than publications are directly adaptable for SMEs, which two decades. Creating comprehensive Product Service Systems (PSS) have been covered in the et 2017). these literature for more than two decades. Creating comprehensive publications are not not adaptable key for results SMEs,of Product Service Systems (PSS) have been covered in the companies companies (Clegg (Clegg et al. al.directly 2017). Therefore, Therefore, key results ofwhich these value propositions through bundling physical products feature different strategies, capabilities and personal or literature for two publications not adaptable for SMEs, which value propositions through bundlingCreating physicalcomprehensive products and and usually usually featureare different strategies, capabilities personal or literature for more more than than two decades. decades. Creating comprehensive publications are not directly directly adaptable for and SMEs, which services is the pivotal way to counter growing competition in financial resources (Gebauer et al. 2010). As a result, the value propositions through bundling physical products and usually feature different strategies, capabilities and personal services is the pivotal way to counter growing competition in financial resources (Gebauer et al. 2010). As a result, the value propositions through bundling physical products and usually feature different strategies, capabilities and personal or or commoditized goods markets (Baines et al. Gesing Service Paradox intensified for SMEs. Gebauer et al. note services pivotal way counter growing competition in resources (Gebauer al. As the commoditized al. 2007; 2007; Gesing et et al. al. Service intensified foret Gebauer note that that services is is the the goods pivotalmarkets way to to (Baines counter et growing competition in financial financialParadox resources (Gebauer etSMEs. al. 2010). 2010). Asetaaal.result, result, the 2014). Especially in the of in industrial current literature insufficiently investigates SME-specific commoditized goods et Gesing et for Gebauer al. 2014). Especially inmarkets the age age(Baines of digitalization digitalization industrial current literatureintensified insufficiently investigates SME-specific commoditized goods markets (Baines et al. al. 2007; 2007; in Gesing et al. al. Service Service Paradox Paradox intensified for SMEs. SMEs. Gebauer et et al. note note that that sectors, barriers. Therefore, this paper aims to identify those barriers known in Germany as Industry 4.0, industrial PSS 2014). Especially in the age of digitalization in industrial current literature insufficiently investigates SME-specific sectors, known in Germany as Industry 4.0, industrial PSS barriers. Therefore, this paper aims to identify those barriers 2014). Especially in the age of digitalization in industrial current literature insufficiently investigates SME-specific are increasingly the of review. In order to derive further (IPSS) gaining in importance by enabling new sectors, known in 4.0, barriers. Therefore, this aims to identify (IPSS) increasingly gainingas importance enabling PSS new with with the help help of aa literature literature review. to those derivebarriers further sectors,are known in Germany Germany asinIndustry Industry 4.0,byindustrial industrial PSS barriers. Therefore, this paper paper aims In to order identify those barriers and solutions, which are more need for research, the barriers are assigned within the life-cycle customer-oriented (IPSS) are increasingly gaining in importance by enabling new with the help of a literature review. In order to derive life-cycle and customer-oriented solutions, which are more need for research, the barriers are assigned within the (IPSS) are increasingly gaining in importance by enabling new with the help of a literature review. In order to derive further further sustainable, resource-efficient and also strengthen long-term Dortmund Management Model, which focusses specifically life-cycle and customer-oriented solutions, which are more need for research, the barriers are assigned within sustainable, resource-efficient and also strengthen long-term Dortmund Management Model, which focusses specifically life-cycle and customer-oriented solutions, which are more need for research, the barriers are assigned within the the customer relationships. According to Service-Dominant transformation processes of (Henke et 2018). sustainable, resource-efficient and strengthen long-term which focusses specifically customer relationships. According to the the Service-Dominant transformation processes Model, of companies companies et al. al. 2018). sustainable, resource-efficient and also also strengthen long-term Dortmund Dortmund Management Management Model, which(Henke focusses specifically Logic (SDL), additional services increase the customer relationships. According the of Logic (SDL), additional services to the perceived perceived transformation 2. BACKGROUND customer relationships. According toincrease the Service-Dominant Service-Dominant transformation processes processes of companies companies (Henke (Henke et et al. al. 2018). 2018). customer value compared to sole physical products (Vargo and 2. BACKGROUND Logic (SDL), additional services increase the perceived customer value compared to sole physical products (Vargo and Logic (SDL), additional services increase the perceived 2. BACKGROUND BACKGROUND Lusch 2004). Thus, manufacturing companies utilizing the 2. customer value compared to products (Vargo Lusch 2004). manufacturing companies the 2.1 Servitization customer valueThus, compared to sole sole physical physical productsutilizing (Vargo and and potential of IPSS undergo a transformation from a solely Lusch Thus, manufacturing companies utilizing the potential of IPSS a transformation a solely Lusch 2004). 2004). Thus,undergo manufacturing companiesfrom utilizing the 2.1 Servitization product-oriented business model to aa solution provider, which 2.1 2.1 Servitization Servitization potential of IPSS undergo a transformation from a solely product-oriented business model to solution provider, which potential of IPSS undergo a transformation from a solely Baines typically involves the acquisition of digital capabilities to Baines and and Lightfoot Lightfoot (2013) (2013) define define Servitization Servitization as as “the “the product-oriented business model to a solution provider, which typically involves the acquisition of digital capabilities to product-oriented business model to a solution provider, which process of transforming manufacturers to compete through Baines and Lightfoot (2013) define Servitization as develop and implement complex IPSS (Jovanovic 2018, p. 2). process of transforming manufacturers to compete through Baines and Lightfoot (2013) define Servitization as “the “the typically involves the acquisition of digital to develop implement IPSS 2018, p. 2). typicallyand involves the complex acquisition of (Jovanovic digital capabilities capabilities to services integrated with their aacompete transition from process of transforming through This transformation is defined as Servitization (Vandermerwe services integrated with manufacturers their products; products;to transition from process of transforming manufacturers to compete through develop and implement complex IPSS (Jovanovic 2018, p. 2). This transformation is defined as Servitization (Vandermerwe develop and implement complex IPSS (Jovanovic 2018, p. 2). production-centric to services-centric manufacture”. Thus the services their a and Rada 1988; 2013; Neely Baines production-centric services-centric manufacture”. Thusfrom the services integrated integratedtowith with their products; products; a transition transition from This transformation is as and 1988; Oschmann Oschmann 2013; Neely 2011; 2011;(Vandermerwe Baines et et al. al. term This Rada transformation is defined defined as Servitization Servitization (Vandermerwe is closely associated with PSS (e.g. Tukker 2004; production-centric to services-centric manufacture”. Thus 2007). However, Servitization does not seem to be a panacea term is closely associated with PSS (e.g. Tukker 2004; production-centric to services-centric manufacture”. Thus the the and 1988; 2013; 2011; Baines et 2007). However, Servitization doesNeely not seem to be a panacea and Rada Rada 1988; Oschmann Oschmann 2013; Neely 2011; Baines et al. al. Goedkopp et The perspective of PSS term is closely associated with PSS (e.g. Tukker for manufacturing companies in general (Oschmann 2013). Goedkopp et al. al. 1999). 1999). The manufacturing manufacturing perspective of2004; PSS term is closely associated with PSS (e.g. Tukker 2004; 2007). However, Servitization does not seem to be a panacea for manufacturing companies in general (Oschmann 2013). 2007). However, Servitization does not seem to be a panacea leads to the definition of IPSS, which are characterized by the Goedkopp al. manufacturing perspective Several studies that are to leads to theet IPSS, which are characterized byPSS the Goedkopp etdefinition al. 1999). 1999).ofThe The manufacturing perspective of of PSS for companies in 2013). Several studies show show that manufacturers manufacturers are struggling struggling to integrated for manufacturing manufacturing companies in general general (Oschmann (Oschmann 2013). planning, development, deployment, and use of leads to the definition of IPSS, which are characterized by establish profitable services (Benedettini et al. 2015). Even integrated planning, development, deployment, and use of leads to the definition of IPSS, which are characterized by the the Several show that to establish profitable services (Benedettini etare al. struggling 2015). Even Several studies studies show that manufacturers manufacturers are struggling to industrial product-service combinations (Meier et al. 2005). integrated planning, development, deployment, and use though there is clarity about various advantages of industrial product-service combinations (Meier et al. 2005). integrated planning, development, deployment, and use of of establish profitable services (Benedettini 2015). though is clarity variouset advantages of Additionally, establish there profitable services about (Benedettini et al. al. 2015). Even Even IPSS systems, "due to industrial product-service combinations (Meier et al. 2005). Servitization (Crozet and Milet 2017), it is not a guarantee for Additionally, IPSS are are socio-technical socio-technical systems, "due to the the industrial product-service combinations (Meier et al. 2005). though there is clarity about various advantages of Servitization (Crozet and Milet 2017), it is not a guarantee for though there is clarity about various advantages of interdependencies between the immanent product and service Additionally, are to aaServitization positive of investments (Neely 2011). These interdependencies the immanentsystems, product "due and service Additionally, IPSS IPSSbetween are socio-technical socio-technical systems, "due to the the (Crozet and Milet it guarantee for positive return return These Servitization (Crozetof andinvestments Milet 2017), 2017), (Neely it is is not not aa2011). guarantee for shares and the involved persons" (Meier et al. 2010). interdependencies between the immanent product and service unexpected difficulties are known as Service Paradox shares and the involved persons" (Meier et al. 2010). interdependencies between the immanent product and service aa positive return of investments (Neely 2011). These unexpected difficulties are known as Service Paradox positive return of investments (Neely 2011). These shares and the involved persons" (Meier et al. 2010). unexpected unexpected difficulties difficulties are are known known as as Service Service Paradox Paradox shares and the involved persons" (Meier et al. 2010).

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Successful Servitization enables a former manufacturing company to operate as a solution provider. Since every provider-customer relationship and every company has its characteristics, the composition and relationship of product and service parts of an IPSS also vary (Tukker 2004). In 2011, a study with over 100 participating companies revealed that there is a significant correlation between the service portfolio and the general economic condition of a company. (Geissbauer et al. 2012). However, as mentioned above, Servitization often leads to unfulfilled expectations, which is referred to as the "Service Paradox” (Oschmann 2013). Benedettini et al. (2015) note that the issues of Servitization are strongly linked to the financial risk of new service investments. Manufacturers tend to develop product-related services. Therefore, the return on investment still depends on the success of the traditional products in many cases. Thus, service offerings are built on existing products, which increases financial risk. The Servitization poses special challenges for manufacturing companies and is not at least a question of management (Gebauer et al. 2012), as a rethinking and anchoring of the solution philosophy in the overall strategy is an essential prerequisite (Vandermerwe and Rada 1988). Successful transformation to a solution provider means re-allocating existing resources and building up new resources and capabilities as needed or exploring other ways, such as through partnerships. “Dealing with these internal challenges requires managerial attitudes and approaches that may not be straightforward for a company with a historical focus on goods” (Benedettini et al. 2015), which is especially important for the ambitions of SMEs. 2.2 German SME in the manufacturing sector While in the EU companies with a maximum of 250 employees are classified as SMEs, in Germany companies with up to 500 employees and a maximum turnover of 50 million euros are also classified as SMEs (IfM Bonn 2016). Since studies on SMEs do not refer jointly to one of the two definitions, the definition of the IfM Bonn is assumed in this paper. In addition to quantitative criteria and the distinction according to economic sectors, SMEs have certain other specific characteristics. Immerschmitt and Stumpf (2014) note that an ideal-typical catalog of characteristics for SMEs does not exist. However, medium-sized structures are very individual. Therefore, characteristics often mentioned in the literature in the context of SMEs are considered. Mugler (2008) describes several characteristics for the differentiation of SMEs. For instance, the personality of the company owner shapes the organization significantly. Hence, personal contacts and the entrepreneur’s network play an important role (Mugler 2008; Pfohl and Arnold 2013; Ihlau et al. 2013). Moreover, medium-sized structures are comparatively less formalized, which means contacts between management and employees are close and informal. Also, this leads to more individualized offers in order to meet customers wishes, although SMEs have a less diversified business model (Hildenbrand et al. 2006). SMEs are able to react quickly to environmental changes, which are enhanced by the fact that SME usually are not controlled by a larger company, e.g., in the context of

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corporate groups (Mugler 2008). Also, SME typically have only a small market share (Hou and Neely 2013; Ihlau et al. 2013). Therefore SMEs are exposed to higher competition and higher risks in the development of innovations (Hou and Neely 2013). Mugler (2008) emphasizes that rarely all these characteristics apply to a specific SME. Further characteristics provide Caldeira and Ward (2003) emphasizing that SMEs in traditional industries have poor financial and human resources than large enterprises and are accordingly less adaptable with regard to significant market changes. SMEs are increasingly offering solutions instead of focusing solely on the product, but the development of new solution-oriented approaches is slowed down by financial, personnel and organizational constraints. Pfäfflin (2008) concludes that SMEs have significant strengths, as structures are relatively manageable, faster decisions are possible due to flat hierarchies, and technical know-how and close customer relationships enable strong adaptability. Summarizing, the author states that SMEs differ significantly from larger organizational forms and therefore require specific attention in relation to Servitization. 2.3 Dortmund Management Model The management of Industry 4.0 has to consider that new (digital) business models will emerge in the near future (Henke and Hegmanns 2017). The transformation of business models through digitalization and the associated targeted corporate development must be accompanied by a holistic management process. A driving role of management can be assumed as a success factor in digitalization (Franziska Blatz et al. 2018). The Dortmund Management Model (DMM) provides a contribution to structure change processes in phases and to explicitly consider the considered dimensions of technology, people, organization and integration of digital information. The management task of corporate development is characterized by a fundamental transformation of the company, which is carried out in small steps, at the same time a gradual migration to new technologies and the integration of the workforce into a change process. These acceleration factors combined with core management tasks and the expanded socio-technical system understanding, the DMM creates a framework to classify the tasks of digital transformation and also addresses the barriers of SMEs. (Henke et al. 2018). With the use of DMM, it is possible to achieve the required holistic management perspective. In contrast to the "Framework for Production and Management" and the St.Gallen Management Model, the DMM focuses on the transformation process of companies and is therefore best suited not only to classify barriers, but also to highlight their necessary consideration in the transformation tasks (Rügg-Stürm & Grand 2014 and Schuh 2014). The identified types of barriers are located in the DMM in the pillars for technology focus, role of man, new organizational models, and integration of digital information. 3. RESEARCH METHOD The research methodology follows the principles of a systematic Literature Review as proposed by Tranfield et al. (2003), who provide the following steps: (1) Planning the review, (2) Conducting a review and (3) Reporting and

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dissemination. The first step is to identify the field of investigation and to define search criteria to focus search results on the selected topic. The particular focus on barriers for successful Servitization in SMEs delimits the search to the termini shown in Fig 1.

Fig. 1. Keywords for the literature review In order to improve the quota of relevant literature, the combination of Servitization and SMEs, as well as synonyms for barriers or related terms to the topic and SMEs, were searched for separately. This systematic Literature Review utilized Scopus and Web of Science as databases, which are widely accepted as world-leading resources for literature reviews (e.g. Tukker 2015; Baines et al. 2017; Peffers et al. 2006). In the second phase, the research was conducted based on the terms above. The frame of research includes references of the identified papers, which lead to a total of 81 publications. All of them were evaluated based on title, abstract and keywords. In this context, barriers in SMEs had to be explicitly addressed. Publications that only name these topics but do not further discuss them were sorted out. The search resulted in a total of 33 papers, which are relevant to SMEs barriers in Servitization. The third step of this literature analysis - Reporting and dissemination - is outlined in the following chapters. Hence, the barriers are gathered together in chapter 4 and clarified in the socio-technical context on the basis of the four pillars of the DMM. Chapter 5 concludes with an aggregated discussion of the most relevant research gaps. 4. BARRIERS IN SERVITIZATION Hou and Neely (2013) examined the barriers of Servitization and categorized the results into the aspects Competitors, Suppliers & Partners, Society & Environment, Customers, Finance, Knowledge & Information, Products & Activities, and Organizational Structure & Culture. Oschmann (2013) evaluated various barriers from medium-sized manufacturers and concluded that unclear customer needs in IPSS development and a lack of strategic orientation are major barriers for SMEs. Therefore, the author extends the preliminary categorization by the additional aspects strategy and development. Table 1 summarizes all identified barriers, focussing on internal barriers that can be influenced by the company. Oschmann (2013) also conducted a survey which revealed that internal barriers weigh much more than external ones. Consequently, these factors are not taken into account to discuss internal barriers in more detail. Servitization is the transformation of companies. Since the DMM addresses

exactly this topic and the complexity becomes more manageable by the division into partial scopes. The four columns of the DMM are used to categorize barriers of Servitization. These four pillars are: Technology, Role of man, Organization, Digital information. This reduces the complexity of IPSS as a socio-technical system in a more descriptive form. In addition, some barriers are relevant across all four pillars and clearly show the interdependencies between the servitisation barriers, but also between the pillars that are addressed by the overarching tasks in the DMM. Most barriers can be assigned to the area of the organization. Furthermore, the role of man is a crucial factor, since internal resistance, low competence or no service-oriented mindset is often present. Barriers at the technological level are less of a concern for most authors. However, the author emphasises that hardly any barriers have been investigated in the field of leveraging digital information. Further, it can be noted that knowledge & information, the integration of customer and corporate strategy play a significant role in Servitization. Accordingly, in addition to the corporate culture, there is a lack of knowledge about customer-oriented business models and a high degree of uncertainty in the strategic planning of IPSS, which prevents long-term investments. The author states that aspects influence each other. Thus, a long-term strategy cannot be implemented without necessary understanding of value of sustainable and integrated solutions. The lack of specific knowledge and information prevents a goal-oriented and successful Servitization, because customer needs are not sufficiently analyzed and the progress of the transformation process cannot be measured reasonably. Gebauer et al. (2010) state that Servitization is not a short-term project, instead has to be conducted in certain successive phases, because specific skills are required at different stages of development. Further, an incremental transformation allows necessary investments to be allocated over a more extended period. That, in turn, requires a long-term strategy and measuring instruments to prevent uncertainties during transformation (Franziska Blatz et al. 2018; Pieroni et al. 2016). Pfäfflin (2008) notes that risks related to investments can be reduced by prioritizing the use of resources and therefore emphasizes the importance of an incremental process. To summarize, financial resources are only partially a reason for failing in Servitization. SME-specific strengths (see 2.2) are not leveraged due to the lack of strategic orientation, development processes and insufficient knowledge in the business model area. These shortcomings lead to hesitant investments and further product developments that are not accepted by the market. Through a long-term strategy and incremental transformation, the SME gains necessary time to successively build up needed know-how (Gebauer et al. 2010). Baines et al. (2017) note that Servitization is rarely articulated holistically and consistently. Once a change of mindset and a holistic, long-term strategy is in place, further barriers in SMEs can be more effectively addressed and eliminated (Dubruc et al. 2014).

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Table 1. Identified barriers in Servitization for SMEs

Development

Products & Activities

Finance & Resources

Competitors, Suppliers and Partners

Customers

Organizational Structure and Culture

Knowledge & Information

Strategy

Aspects

Barriers Technology Strong technology orientation which inhibits the Servitization process (Martinez et al. 2010)

Role of man

Origanization No strategic focus (Oschmann 2013; Pieroni et al. 2016; Klein et al. 2018), No holistic view (Baines et al. 2017) Lack of strategic planning (Kuo et al. 2010; Neely 2008) Lack of technical Shortage of skilled No performance metrics equipment & of personnel (Meyer 2013), (Kuo et al. 2010; adopting new Lack of competencies Martinez et al. 2010; technologies (van Hemel and Cramer Clegg et al. 2017), (Caldeira and Ward 2002; Brax 2005; Lack of experience in 2003; Meyer 2013) Hildenbrand et al. 2006) IPSS-organizations (Baines et al. 2007) Unaware of the installed base (Oschmann 2013) Internal barriers and no Lack of service culture alignment of mindset (Oschmann 2013; Clegg (Martinez et al. 2010; et al. 2017; Hou and Baines and Lightfoot Neely 2013; Mont 2002) 2013; Meyer 2013; Kuo et al. 2010)

Digital Information Necessity of an additional data strategy (Schüritz et al. 2017)

Lack of an ideal management information system (Martinez et al. 2010)

Lack of understanding Fear of absorbing risks Lack of leveraging of customer need (Mont of the customer customer data 2002; Aminoff and (Baines et al. 2007), (Michalik et al. 2018) Hakanen 2018; Klein et Lack of customer touch al. 2018; Paslauski et al. points (Martinez et al. 2016; Meyer 2013) 2010) Perceived risk for IPSS offers (Gesing et al. 2014), Difficulty of measuring value of solutions (Dahmani et al. 2014; Brax 2005) Inadequate management of the service network (Oschmann 2013; Clegg et al. 2017; Hou and Neely 2013; Mont 2002; Martinez et al. 2010) Lack of financial & Unable to translate PSS human resources into successful growth (Oschmann 2013; (Coreynen et al. 2018) Meyer 2013) Long amortization time, high costs, high market risk (Meyer 2013; Clegg et al. 2017; Hou and Neely 2013; Ottman 1998), Service paradox (Hou and Neely 2013) Replace Product-centric Spread responsibilities offerings with servicefor service (Hildenbrand centric et al. 2006; Maxwell et (Martinez et al. 2010) al. 2006) Difficult to price services (Steinberger et al. 2009; Baines et al. 2007), Lack of maintenance strategies (Brax 2005; Kuo et al. 2010), Services depend on success of traditional products (Benedettini et al. 2015) Alignment of product Difficult to create new and service design digital business models processes (Martinez et (Michalik et al. 2018) al. 2010), No dedicated innovation process (Meyer 2013) Lack of accurate development processes (Oschmann 2013; Aminoff and Hakanen 2018; Coreynen et al. 2018; Baines et al. 2017) 2379

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5. CONCLUSION This publication covers a wide range of barriers to Servitization in small and medium-sized manufacturing companies. In addition to a large number of barriers, the comprehensive literature review has also identified business areas that have a significant influence on the success of the transformation to a solution provider. In summary, organizational, strategic and personnel factors are important aspects in Servitization. In particular, the need for a holistic view of Servitization emerges to address aspects such as mindset, internal resistance and organizational change. Since the authors assume that a holistic perspective also increases the complexity of the methods to be developed, there is a significant tension between manageable and at the same time comprehensive approaches. Furthermore, the literature research revealed that, currently, the area of digitalization in the context of Servitization is not the focus of scientific research. The authors point out that there is huge potential in this area, as digitalization and the possibilities it offers pose both special opportunities and challenges, especially for SMEs. Nevertheless, it must be noted that the barriers identified are also known from studies of large companies in many cases. Therefore, a conclusion can be drawn that similar barriers in SMEs are perceived more strongly due to their smaller size. This emphasizes the need for a purposeful Servitization strategy and the precise acquisition of necessary capabilities. This leads to a need for further research on how SMEs in particular can unerringly identify lack of knowledge, capabilities, resources or information. However, the resulting methods are highly relevant for SMEs, but could also provide added value for larger companies due to the more efficient allocation of resources. On the other hand, in the context of SMEs, methods need to take into account the specific advantages - such as less complex organisational structures in order to leverage their potential. REFERENCES Aminoff, Anna; Hakanen, Taru (2018): Implications of product centric servitization for global distribution channels of manufacturing companies. In Int Jnl Phys Dist & Log Manage 48 (10), pp. 1020–1038. Baines, T. S.; Lightfoot, H. W.; Evans, S.; Neely, A.; Greenough, R.; Peppard, J. et al. (2007): State-of-the-art in product-service systems. In Proceedings of the Institution of Mechanical Engineers, Part B: Jnl of Engineering Manufacture 221 (10), pp. 1543–1552. Baines, Tim; Lightfoot, Howard (2013): Made to serve. How manufacturers can compete through servitization and product service systems. Chichester, West Sussex: Wiley Baines, Tim; Ziaee Bigdeli, Ali; Bustinza, Oscar F.; Shi, Victor Guang; Baldwin, James; Ridgway, Keith (2017): Servitization: revisiting the state-of-the-art and research priorities. In Int Jrnl of Op & Prod Mnagemnt 37 (2), pp. 256–278. Benedettini, Ornella; Neely, Andy; Swink, Morgan (2015): Why do servitized firms fail? A risk-based explanation. In Int Jrnl of Op & Prod Mnagemnt 35 (6), pp. 946–979.

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