Service orientation and innovation in the strategies of manufacturing SMEs

Abstract

Manufacturing SMEs have an important role in the supply chains of larger firms. When large firms servitize their business, also SMEs may need to consider their strategies concerning services. Limited research attention has been directed at servitization as a strategic choice of SMEs and its different manifestations in service orientation and innovation. The aim of the paper is to increase understanding on the role of services in the strategies of manufacturing SMEs. The focus is on service orientation and innovation, and identification of differences between component manufacturers and equipment manufacturers. A qualitative, exploratory research strategy is employed in the context of nineteen technology-intensive manufacturing SMEs. The findings from SME managers’ interviews show that equipment manufacturers have a stronger service orientation than component manufacturers in terms of share of services, orientation to process-centric services, and service variety. The majority of respondents have experiences with in-house service development primarily, and customer-centric service development took place only in a few companies. Furthermore, companies featured services in their strategies either minimally, reactively or proactively. Equipment manufacturers were more likely to take the proactive approach whereas component manufacturers were more reactive or fully avoided services. This paper offers valuable knowledge about the ways in which technology-intensive SMEs feature service orientation and innovation into their strategies. Besides changes in offerings, capabilities and value networks, servitization can drive changes in the business scope and innovation processes of the manufacturing SMEs.