Risks for Functional Products – Empirical Insights from Two Swedish Manufacturing Companies

Manufacturing companies are increasingly offering add-on services and functional products (FPs) to secure their future competitiveness. For product oriented organizations, this represents a significant transition in their business models, leading to several risks and uncertainties. In this study, we attempt to identify and understand these potential risks that can hinder manufacturing companies from offering FPs. To reach the stated purpose, we have adopted a quantitative research approach and undertaken eighteen explorative interviews in two large Swedish manufacturing companies. Our results show ten potential risks that can negatively affect manufacturing companies. For example, contractual risks, breakdown or technical risk and inappropriate organizational structural risk were found to be the most prominent risks for FPs. These risks are categorized into three specific dimensions related to business models, namely value creation, value delivery and value capture. Thus, the study provides critical understanding towards how manufacturing companies can be better prepared for transforming into a successful FP provider through mitigating of identified FP risks.