Network positioning and risk perception in servitization:evidence from the UK road transport industry

Abstract

For manufacturing firms, the integration of advanced services into their customer offerings has become a crucial decision. Such commercial decisions require weighting the risks and rewards of implementing a business model based on advanced services. While academic experts acknowledge uncertainty of returns on investment despite potential advantages, research generally fails to address the challenge of calculating the actual risks involved in ‘servitization’. This paper seeks better understanding of managers’ risk perception and of servitization implications for strategic partnerships and network positioning, while considering the impact of factors such as entry barriers, technological knowledge and position in the supply chain (SC). Qualitative evidence is drawn from an industrial case study involving firms in the UK’s road transport industry: fourteen in-depth interviews with senior executives from seven companies (manufacturers, operators, technology providers). During interviews, a payment card exercise measured risk perception and willingness to take strategic ‘make-or-buy’ decisions. Results suggest that implementing advanced services is perceived as a high-risk strategy, especially when firms lack in-house technological knowledge. However, collaborative strategic partnerships within supply chain networks can mitigate this risk and prove crucial to building entry barriers against external competitors. Based on these findings, implications for network positioning are developed.