Theorizing Servitisation for SME Performance

Abstract

Introduction: Over the last three decades, servitisation has progressively become a key strategic choice for manufacturing companies. Recognizing the increased emphasis on services with traditional product offerings, the term servitisation refers to the innovative increase in value a company can achieve by creating a viable amalgamation of products and services. Furthermore, their reasons to pursue servitisation could be similar to those of large firms. As such, understanding how servitisation works in SMEs is of tremendous economic importance.

Methodology: This paper is a qualitative in nature and aiming to understand the practice of integrating services into products via added value and its importance to SMEs in Malaysia by theorizing the concept of servitisation for SME performance. The clear understanding of the concept could contribute to better development of SME sector in Malaysia. Careful analyses of fifty articles with different themes on servitisation yields some insights on issues prevalent in the matter.

Results: Current servitisation research suggests that transitioning to a broader servitisation model for a firm that operates a traditional product model requires a significant amount of assets. However, many SMEs do not have an expendable amount of resources to refit their firms for a progressive servitisation model. Additional elements that act as barriers in SME servitising strategies involve overwhelming competition from wealthier and better-known organizations and an inherently diminished range of influence on the market.

Conclusion/- and Recommendations: Absence of servitisation research in SMEs establishes an important area for extended study as SMEs represent the largest margin of all firms. Additionally, SME organizations’ servitisation efforts warrant examination because their access (or lack thereof) to important organizational resources manifest in manners distinct from larger firms.