ABSTRACT
Servitization is the practice of manufacturing firms to enrich their offerings of physical products with services. Services offered by manufacturing firms are growing faster than the output of material products in almost all countries where data are available. At the sectoral level, the machinery and transport equipment industries reveal the highest levels of servitization. Servitization is driven by several desires of firms, including: to grow beyond the limitations of traditional goods markets, to search for higher margins, to meet needs for product differentiation and protection against imitation, and to obtain close interactions with and the resulting learning from customers. However, firms that are not fully committed to servitization often find it difficult to move into services; this is known as the ‘service paradox in manufacturing companies.’ New production technologies, in particular ‘Industrie 4.0’ or the ‘Internet of Things,’ are expected to provide new momentum for servitization going forward.
