Moving from products to solutions: Strategic approaches for developing capabilities

SummaryThe move being made by manufacturers of capital goods from offering products to solutions implies that they must make a decision as to whether the capabilities necessary for providing solutions should be developed internally or externally. However, research has often implied an internal capability development option, and focused mostly on multinational companies. Through multiple case studies, this paper provides a deeper understanding of the strategic decisions about the “make or buy” of capabilities. A framework is proposed for classifying the different approaches adopted by firms, consisting of two dimensions. The first one encompasses the service components driving the move from products to solutions, whilst the second one describes whether the capabilities are developed internally, externally or in a mixed way. The empirical application of the framework suggests four distinct strategic approaches relating the service components and the development of capabilities. They are named “selling after-sales services”, “integrating after-sales solutions”, “selling life-cycle solutions” and “orchestrating total solutions”. The description of these approaches enriches the understanding of the ways in which firms move towards the provision of integrated solutions. Finally, the inclusion in the sample of smaller firms allows to extend the discussion about the transition from products to solutions to contexts different from those of multinational enterprises generally studied.

► The paper addresses manufacturers moving towards the offer of solutions. ► Important decisions concern the service offer and capability development. ► A framework is developed and applied to cases of capital goods manufacturers. ► Four different strategic approaches are pointed out. ► They combine in different ways service extension and capability development choices.