Short answer
When designing products or services that are part of a larger supply chain, consider how digital transformation and the addition of services might shift power. Focus on creating unique, defensible digital service components for your offering.
- Field
- Innovation & Design
- Source
- Industrial Marketing Management (2016)
- Method
- Literature review and empirical analysis
- Evidence
- Strong effect
The shift towards digital business models and servitization in supply chains can empower downstream firms, necessitating upstream suppliers to develop unique, hard-to-imitate digital services to maintain their strategic position and capture value. This innovation & design research insight is drawn from a 2016 study published in Industrial Marketing Management. Using Literature review and empirical analysis, researchers explored how this design variable affects real-world outcomes. The key design takeaway: When designing products or services that are part of a larger supply chain, consider how digital transformation and the addition of services might shift power. Focus on creating unique, defensible digital service components for your offering.
Digital Servitization Empowers Downstream Firms, Demanding Unique Value from Upstream Suppliers
The shift towards digital business models and servitization in supply chains can empower downstream firms, necessitating upstream suppliers to develop unique, hard-to-imitate digital services to maintain their strategic position and capture value.
Industrial Marketing Management · 2016
Key Findings
- 01Digital disruption and servitization can lead to a dematerialization of physical products, altering firm positioning in the supply chain.
- 02Downstream firms may gain power due to reduced production and transport costs and new customer engagement methods.
- 03Upstream firms can retain value through digital services, provided these offerings contain difficult-to-imitate elements.
- 04Upstream firms must deploy unique resources to avoid diminished strategic positions during digital servitization.
Application
Design takeaway
When designing products or services that are part of a larger supply chain, consider how digital transformation and the addition of services might shift power. Focus on creating unique, defensible digital service components for your offering.
How to apply
When developing new products or services, analyze the potential for digital servitization to alter supply chain relationships. Identify opportunities to embed unique digital services that provide a competitive advantage and cannot be easily replicated by competitors or downstream partners.
Project actions
- 01When researching a product, consider its place in a larger supply chain and how digital services might change things.
- 02Think about what makes a digital service 'hard to imitate' – is it the technology, the data, the user experience, or something else?
Method & Evidence
Variables
Strengths & Limitations
Strengths
- +Addresses a timely and relevant topic of digital transformation in business.
- +Combines theoretical synthesis with empirical investigation.
Limitations
The publishing industry example might not directly apply to physical product manufacturing. Consumer willingness to pay can be influenced by many factors beyond just imitability.
Reliability & validity
The study's reliance on literature review and a specific industry context might limit generalizability. The empirical validation of 'difficulty to imitate' could be strengthened with broader market data or direct competitor analysis.
Think critically
To what extent does the 'difficulty to imitate' argument hold true for all types of digital services, and what are the ethical implications of creating intentionally hard-to-replicate services?
Design Principles
"Innovate digital service offerings with unique, inimitable features to maintain strategic value in evolving supply chains."
This insight is crucial for businesses navigating the digital transformation. It highlights a fundamental power shift within supply chains, urging companies to proactively innovate their service offerings rather than relying solely on traditional product-based value.
What This Means for Your Design
Imagine a company that makes phone cases. If they start offering a digital service, like an app that tracks your phone's location, they become more valuable. But if another company can easily make the same app, the phone case maker doesn't gain much power. The research says that if the app is really special and hard to copy, then the phone case maker can stay important in the market, even if other companies are making the basic phone cases.
How to use in your project
- 1.Reference this study when discussing the impact of digitization on product value and supply chain dynamics in your design project.
- 2.Use the findings to justify the importance of unique digital service components in your proposed design solution.
Add to My Project
Quick Cite
Paragraph starter
The research by Vendrell-Herrero et al. (2016) highlights that in an era of digital servitization, upstream firms face a challenge as downstream partners gain leverage. To maintain their strategic value, upstream suppliers must focus on developing digital services that possess unique and difficult-to-imitate characteristics, moving beyond commoditized offerings to secure their position in the evolving supply chain.
Source
Industrial Marketing Management
Servitization, digitization and supply chain interdependency
journal · 2016
View sourceQuestions About This Research
- What does the research say about digital servitization empowers downstream firms, demanding unique value from upstream suppliers?
- When designing products or services that are part of a larger supply chain, consider how digital transformation and the addition of services might shift power. Focus on creating unique, defensible digital service components for your offering. Evidence: Industrial Marketing Management (2016).
- Why does "Digital Servitization Empowers Downstream Firms, Demanding Unique Value from Upstream Suppliers" matter for design?
- This insight is crucial for businesses navigating the digital transformation. It highlights a fundamental power shift within supply chains, urging companies to proactively innovate their service offerings rather than relying solely on traditional product-based value.
- How can designers apply this research?
- When designing products or services that are part of a larger supply chain, consider how digital transformation and the addition of services might shift power. Focus on creating unique, defensible digital service components for your offering.
- What were the main findings?
- Digital disruption and servitization can lead to a dematerialization of physical products, altering firm positioning in the supply chain.. Downstream firms may gain power due to reduced production and transport costs and new customer engagement methods.. Upstream firms can retain value through digital services, provided these offerings contain difficult-to-imitate elements.. Upstream firms must deploy unique resources to avoid diminished strategic positions during digital servitization.
- What research method was used?
- Literature review and empirical analysis.
- How strong is the evidence?
- Evidence strength is rated Strong effect, based on a 2016 journal from Industrial Marketing Management.
- What should I do differently in my next project?
- When developing new products or services, analyze the potential for digital servitization to alter supply chain relationships. Identify opportunities to embed unique digital services that provide a competitive advantage and cannot be easily replicated by competitors or downstream partners.
- What are the limitations?
- The study's empirical context was limited to the publishing industry, and the consumer perception analysis focused on eBooks versus print, which may not generalize to all industries or digital product types.