Abstract

Servitization is a strategic option available to manufacturing firms that consists of shifting from producing and selling tangible products to offering «product-service systems» that combine a tangible product with services and knowledge that help the customer better extract value from the physical good. This strategy allows manufacturers to break the cost-differentiation dichotomy, increase margins, and create new, long-term revenue streams with existing customers. However, it requires the full commitment of strategic leaders and the development of a whole new set of competencies in customer relationship management, technology, partnership management, and finance. The development of such competencies is more challenging in small and medium enterprises (SMEs) due to their more limited resource base. This study examines the project of an Italian SME operating in the professional cooking appliances industry, aimed at introducing a new business line based on servitization and, in particular, on a pay-per-use revenue model. In addition to illustrating the technological and organizational capability requirements of this model (which coexists with the traditional one), the case highlights an often overlooked dimension of the servitization strategy, namely the financial one. Indeed, servitization shifts the burden of financing the capital good from the customer to the manufacturer; however, the manufacturer can use the data on the actual use of the good, collected in real time through the Internet of Things, to accurately estimate the residual value of the asset. Using this information, the manufacturer can securitize its credit by partnering with specialized financial companies. By examining the interface between strategy, organizational design, and finance, this case highlights the challenges that SMEs face in making the transition to the fifth technological revolution leading to the «Age of information age».