Service innovation in manufacturing

Purpose - The purpose of this paper is to report on nine in-depth case histories of manufacturing firms introducing significant new service innovations. Manufacturing firms are under increasing pressure to diversify into lines of business that offer unique contributions to long term profitability and this paper increases understanding of how incumbent firms successfully accomplish this transition. Design/methodology/approach - Using analytical induction the authors sample published announcements of significant new service offerings by well-established manufacturing firms. An example of this type of service innovation would be General Motor's offering of OnStar remote driver support systems (not included in this sample). A total of nine cases (43 percent of the companies contacted) participated in this case study approach. Findings - The paper identifies two primary strategies pursued by these firms development and launch of significant new service innovations representing important diversification moves for the firm. Both require CEO/President sponsorship, but are founded on different corporate cultures. The engineering culture path to commercialization tends to nurture concepts new to the firm, requires multi-functional strategy making, and does well with champions from operations that have deep knowledge of the conversion process in the respective industry context. The entrepreneurial orientation path to commercialization tends to nurture concepts new to the industry or new to the world paired with sole champions from R&D or Engineering. Either strategy works well depending upon development culture and available resources. Research limitations/implications - Generalizations here are limited to incumbent manufacturing firms. Innovative service offerings by new entrants in manufacturing and services as well as incumbent service firms like banks and hospitals have yet to be explored for their corporate culture patterns and sponsorship tendencies. Practical implications - For manufacturing firms considering making the transition to significant service offerings, the findings here indicate at least two viable approaches to commercialization, but both depend significantly on the chief executive sponsorship regardless of the initial conditions and context. Originality/value - The identified patterns of corporate culture alternatives and innovation roles, given initial contextual conditions, is a novel contribution in the field. It comes at a time when manufacturing firms are ripe for strategic change and leveraging of core competences to transition to important new service businesses.