Do business networks eat solution providers for breakfast

Paper in proceeding, 2024

Several studies indicate that greater revenues for becoming a solution provider does not recoup initial investments, and addresses this as the service paradox. The inability to match investments and cash flows leads to servitization failure, and to de-servitization. Several reasons for these shortcomings, or outright failures have been suggested. A common theme relates to insufficient knowledge of the transition process from product supplier to solution provider. Research addresses the myopic perspective on provider transitions and lacking insights into required adjustments of the supplier-customer relationship. Moreover, some contributions stress the necessity of expanding the analysis of the process beyond the provider-customer dyad. We explore the challenges of concurrent provider- network transformation. Previous research indicates certain problems with manufacturers’ transition towards the role as a solution provider. In summary, it is declared that the drawbacks related to the service paradox are due to limited understanding of the process required. Therefore, it is claimed that more attention should be given to (i) the customers´ perspective, (ii) the relationship between customer and provider, as well as (iii) the network context where the parties reside. We promote industrial network theory (INT) as a relevant framework for improved understanding of what it takes to change from being product supplier to becoming solution provider. INT focus on business relationships and how these relationships are connected within a larger network setting. This perspective has potential to expand the knowledge about the intricate transition process in solution business, by analyzing solution business through the features of its activities, resources, and actor layers.