Service Business Development in Small- to Medium-Sized Equipment Manufacturers

Purpose of this paper This paper explores service business development by small and medium-sized equipment manufacturers (SMEMs). The service business development is investigated according to its underlying dynamic and operational capabilities. Design/methodology/approach The research design is based on case study research with nine companies from Germany, Italy, Sweden and Switzerland. Findings Our findings are two-fold. First, we elaborate phases and capabilities necessary for service business development. Second, we argue that phases and capabilities depend on sales channels (direct sales versus indirect sales through distributors) and customer structures (a limited number of strategic customers versus many end-customers). SMEMs selling directly to a limited number of strategic customers develop organizational capabilities through four phases: (1) consolidation of service offerings, (2) job enlargements in organizational functions, (3) job enlargement in the key account teams, and (4) orchestration of partners to widen the solutions offered to customers. SMEMs selling indirectly through distributors to many customers develop organizational capabilities through the following four phases: (1) rearranging collaborations with distributors, (2) enlarging the service competencies of distributors, (3) modifying distributors into subsidiaries, and (4) enlarging jobs in the sales function of the subsidiaries. Research limitations/implications Research limitations are due mainly to the intrinsic nature of qualitative research. Practical implications Managers can use the described phases and capabilities as guidance for the service business development. Originality/value The study offers a comprehensive framework for assisting researchers in conceptualizing service business development and operationalizing capabilities. The results provide testable hyptheses, which can be used to guide future research.