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Procedia CIRP 64 (2017) 127 – 132

The 9th CIRP IPSS Conference: Circular Perspectives on Product/Service-Systems

Services Extending Products: a comparative analysis in emerging and

developed countries
Carolline Amaral Paslauskia, Carolina Gazal de Alencastroa, Néstor Fabián Ayalaa, Paolo
Gaiardellib, Giuditta Pezzottab, Alejandro Germán Franka*
a
Núcleo de Engenharia Organizacional, Departamento de Engenharia de Produção e Transportes, Universidade Federal do Rio Grande do Sul, Ave. Oswaldo
Aranha, 99, Porto Alegre, 90035-190, Brazil
b
Departament of Management, Information and Production Engineering, University of Bergamo, Ave. Salvecchio, 19, Bergamo, Italy

* Corresponding author. Tel.: +55 51 3308 3490. E-mail address: frank@producao.ufrgs.br

Abstract

This paper aims to explore the differences on service infusion, technological turbulence and product extension in companies located in emerging
and developed countries. We conducted a survey in Brazilian and Italian companies. The data was analyzed by means of descriptive statistics
focusing on the comparison between these two countries. Our preliminary results show that companies from emerging countries seems to suffer
lower impact of technological turbulence, while they explore higher levels of service infusion and product extension. Complementarily,
companies positioned in developed countries are more related to technological development and are more devoted to a product-centric orientation.
At this moment, we cannot affirm if these results are related to companies’ capabilities or to market demands, but we propose future studies to
go beyond on this subject.
©©2017
2017TheThe Authors.
Authors. Published
Published by Elsevier
by Elsevier B.V.
B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/). committee of the 9th CIRP IPSS Conference: Circular Perspectives on Product/Service-
Peer-review under responsibility of the scientific
Systems. under responsibility of the scientific committee of the 9th CIRP IPSS Conference: Circular Perspectives on Product/Service-Systems.
Peer-review

Keywords: Product extension; Technology turbulence; Service infusion; Emerging and developed countries.

1.
Introduction the servitized offering is introduced and to explore the suitable

strategies to operationalize this strategy [6].
Servitization is a process by which manufacturing The close dependence of servitization on technology favored
companies reinvent their business model to offer a solution its emergence in developed countries [7]. Although the
composed by products and services oriented to the customer’s servitization strategy has been first diagnosed in developed
needs [1]. More than the extension of the offer’s perceived countries, and have been widely studied in this context [e.g. 7],
value [2], the adoption of a servitization strategy aims to developing countries have shown characteristics that place
achieve the adaptability, expandability and customization of them as promising markets for service innovation [8]. This is
products [3]. Consequently, it is expected to retain and offer because servitization helps to intensify the product use,
new products for current customers or even to reach new enhancing immaterial consumption and improving resource
customers with current products [4]. efficiency [9], which are aspects focused mainly at the base of
Since servitization is a strategy oriented to attend customer’s the pyramid as first proposed by Christensen [10]. These
needs, contextual factors are relevant in the definition of its characteristics present in emerging markets also favor the gain
suitability. However, although servitization is considered a of services relative importance to companies as proposed by
consolidated topic in the academic literature [5], a remaining service infusion theory [5] and demands the utility extension of
challenge is to understand the contextual conditions in which products thought for developed countries through service
adding to satisfy customer’s needs [11].

2212-8271 © 2017 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the scientific committee of the 9th CIRP IPSS Conference: Circular Perspectives on Product/Service-Systems.
doi:10.1016/j.procir.2017.03.028
128 Carolline Amaral Paslauski et al. / Procedia CIRP 64 (2017) 127 – 132

In this sense, we aim at exploring the differences of the 2.2.
Service infusion

emerging and developed countries context regarding
technological turbulence, service infusion and product While servitization is known as the change in the business
extension performance regarding the adoption of a servitization model of a manufacturing company to offer solutions, service
strategy. For that, a survey was conducted in Italian and infusion is the process of gain of relative importance by service
Brazilian companies that are facing different levels of service offerings in business strategy [13]. Servitized offers have been
infusion [12,13] and technological turbulence [14]. placed in an evolutionary continuum between service as “add-
The approach of servitization by a joint understanding of on” until tangible goods as “add-on” [28] or in a continuum in
developing and emerging countries is proposed as an open which services evolve from oriented to products, passing to a
challenge to validate, diversify and enrich existing research [15, use orientation until it reaches a result orientation [12].
16]. Different authors have pointed the relevance of the context The more the company advances in this continuum the more
regarding emerging and developed economies related to the intense will be the effort to reconfigure the capabilities,
compatibility with the servitized offer [17] and the industry structures and resource base of a firm [29]. However, a position
technological level relevance in the context of emerging of the company more to the right in this continuum does not
markets [18]. However, the literature lacks a cross-context imply more success [30,31]. As all the innovations, the solution
comparison approach to understand the servitization success it is a matter of adequacy to the market’s needs [32].
phenomena. In Kowalkowski et al. [5] review on service infusion the
measures of number of services offered are proposed as the
2.
Theoretical background number of customer to whom services are offered. Also,
relative emphasis on services [33] and tangibility and centrality
Baines et al. [1] conceptualizes servitization as the process of services in the offer [34] are proposed as measures for the
by which a company transforms its strategy to start offering diagnose of service infusion level. In this sense, not only the
product service systems (PSS) by adding services to its original number of services are relevant, but the service relative quantity
products. While adopting a servitization strategy, the company regarding products offered (portfolio distribution), the service
aims on increasing the utility of the product (product extension) significance in the market (revenue distribution) and the service
[17] through service gain of importance in the company’s orientation (service orientation). The most disseminated
portfolio (service infusion) [5]. classifications of service orientation for servitization were the
Service innovation, instead of manufacturing innovation, ones proposed by Tukker [12]: product orientation, use
sustainable innovation and innovation for wellbeing, instead of orientation, and result orientation.
economic productivity and risk are orientations of servitization
[19] and are opportunities for innovation in emerging countries 2.3.
Technological turbulence
and in low tech sectors [20,9]. The weight of product
perspective is higher in developed countries due to the maturity In technologically turbulent markets, market orientation
achieved by companies in product development skills [21], to loses strength for not being strongly related to business
the relevance of manufacturing in economy (company size, performance [35]. In these contexts, technology push is
employment and competitive advantage) [22] and to the stronger than market pull and technology orientation advocates
product role on technology development pull [23]. a commitment to R&D [23].
Although emerging countries are frequently associated to
2.1.
Extended products low tech industries [18], regarding servitization studies,
technology is a key factor for service innovation in emerging
Originally, Vandermerwe and Rada [24] associated countries [8]. Emerging markets are considered ideal targets for
servitization to the aggregation of goods, services, support, disruptive technologies and innovations implementation [17]
self-service and knowledge to core product offerings. Recent and the diffusion of communication technology is the
studies on servitization have suggested that “firms may have responsible for putting developing countries on the map to
overextended themselves in moving toward service” [18] and access innovative services [8].
early studies on value chain have predicted the risks of The potential of financial, social and environmental aspects
underestimate the manufacturing activity by product-centric in emerging economies turns it into a market receptive for
companies [25]. service offerings [6]. While stronger technological turbulence
Extended products is a product-centric approach that can stimulate a product centric approach in developed countries
advocate that the product share of the offer is a rigid structure [36]. However, the understanding about technology turbulence
that will be flexibilized by service adding [26]. This definition on competitive advantage through service differentiation by
covers the typical motivations for servitization of manufacturing companies is still an open subject in the
manufacturing companies: i) reach new customers with the literature [37].
extant products; ii) facilitate the sales of new products to our
current customers; iii) contribute to the continuous 3.
Method
improvement of our products; iv) retain customers and to
increase their loyalty; v) aggregate value to our customers [4]; Aiming at exploring differences between emerging and
and, vi) contribute to the development of new products [27]. developed countries regarding technological turbulence,
service infusion and product extension performance, we
 Carolline Amaral Paslauski et al. / Procedia CIRP 64 (2017) 127 – 132 129

adopted a descriptive statistics approach to summarize and For each of the items of the Product Extension and
describe quantitatively both context [38]. Technological Turbulence constructs, we adopted a crescent
five-points Likert scale of agreement. To measure portfolio and
3.1.
Sampling and measures revenue distribution, the relation between products and
services were categorized by: 1 = only products; 2 = more
A cross-country survey was conducted in Brazilian and products than services; 3 = equal distribution of products and
Italian manufacturing companies that are facing different levels services; 4 = less products than services; and, 5 = only services.
of servitization. The questionnaire was submitted to a group of Service orientation was a variable transformed by the answer
347 companies from an industrial manufacturing network from of respondents regarding the percentage of product-oriented
Southern Brazil and to 216 companies from an industrial (multiplied by 1), use-oriented (multiplied by 3) and result-
manufacturing network from Italy. We obtained a total of 213 oriented (multiplied by 5) [12] services offered.
answers (148 Brazilian and 65 Italian). However, for the
variables used in this work only 154 were complete 3.2.
Data validation and analysis
questionnaires (response rate of 27.35%). Table 1 details the
final sample characteristics. The multiple-item scales were tested through a Confirmatory
Factorial Analysis aiming to verify the interdependence
Table 1. Sample composition (n = 154 companies). between the variables inside each construct [39]. In both cases,
Italy Brazil the variables fitted in one scale according to the criteria
61 (40%) 93 (60%) proposed by Rencher [40] of scree plot and retention of
Main customers
B2B 54 (89%) 69 (74%) components whose eigenvalues are greater than the mean
B2C 7 (11%) 24 (26%) eigenvalues.
P>S 47 (77%) 69 (74%) For data analysis, a univariate approach was adopted to
Companies portfolio
P=S 1 (2%) 4 (4%) consider the variables independently aligned with the
distribution
P<S 13 (21%) 21 (23%) descriptive and exploratory orientation of this work. Each
Local 19 (31%) 49 (53%) construct was represented according to the percentage
Market
Global 42 (69%) 44 (47%)
distribution of respondents through levels (Fig. 1). Each item
Micro 12 (20%) 10 (11%)
was represented according to the central tendency (median) and
Small 19 (31%) 20 (21%)
Companies size dispersion (standard deviation) (Table 2) [38].
Medium 14 (23%) 15 (16%)
The decision limit was calculated to the items that presented
Large 16 (26%) 48 (52%)
Manufacturing 28 (46%) 37 (40%)
difference in the median between countries through the Tuker-
Services 15 (25%) 25 (27%)
Kramer test for unbalanced samples. All the items with
Metallurgy 12 (20%) 5 (5%) difference in the medians were significantly different for the
Sectors Food 2 (3%) 9 (10%) threshold alpha = 0,05.
IT 2 (3%) 6 (6%)
Retailing 2 (3%) 4 (4%) 4.
Results
Construction 0 (0%) 7 (8%)
Brazil and Italy comparison show differences regarding the
Product Extension, Technological Turbulence and Service relative amount of companies that are placed in higher and
Infusion were represented by constructs composed by multiple- lower levels of Technological Turbulence and Service Infusion
item scales, while the context was represented by a and according to the Product Extension from the adoption of a
dichotomous variable regarding emerging (Brazil) and servitization strategy (Fig. 1). While Brazilian companies deal
developed (Italy) countries. Since there is little prior research with lower levels of Technological Turbulence (crescent
on quantitative aspects on servitization [13], we created new distribution until level 3), they explore a higher level of Service
scales based on different suggestions and empirical Infusion (level 4) and stand out in higher levels of Product
investigations from the literature. Extension (levels 4 and 5). In the case of Italy, companies seem
Product Extension considers the service contribution to the to be operating in high dependence on technological
offer flexibilization regarding five items proposed by Gebauer turbulence.
et al. [37], Ordanini and Parasuraman [27] and Raddats et al.
[4]: introduction of new products, market expansion, access to
new markets, custom loyalty, and product improvement.
Technological Turbulence considers technological changing
rate, the applicability of new technologies to new products
offer and changes in the industry regarding the technological
evolution [24]. Service Infusion regards the distribution of
services offered by the company in the continuum proposed by
Tukker [12] combined with the relative importance of products
and services in the company portfolio and revenue distribution
[13]. Fig. 1. Distribution of respondents over constructs levels
130 Carolline Amaral Paslauski et al. / Procedia CIRP 64 (2017) 127 – 132

In Italy, the importance of technological competition can be applied to emerging economies as product sharing and pay-per-
favoring the trading model based on quality to the detriment of use [9]. Besides, the search for cost reduction through
efficiency [36]. This is aligned with an orientation to product commoditization of products demands flexibilization to reach
quality, compatible with medium to high rates of product new markets. One example are multinational companies that
extension and lower rates of service infusion explored by a high centralize its design centers in developed countries and requires
percentage of Italian companies. the tropicalization of its products to be competitive in emerging
In Brazil, the perception of value is different. Emerging economies.
countries based multinationals do not stand on technology as Although we cannot affirm that product extension in these
their competitive advantage in the global economy comparing different contexts is associated to an ability or a need of product
to developed economies companies [41]. While in developed flexibilization at this point, its higher compatibility with
countries companies still perceive as the main sources of value emerging countries context is suggested. But, once extended
for the customer the product-related aspects [42], in emerging products are defined as “a physical product extended by
countries, companies can rely on market size and in the services aiming at the provision of a customer oriented
privileged access to its customers to have their share in global solution” [44] we suggest that this occur because of the lack of
value chains [41]. This easy access to the customers benefits a control of emerging economies companies over the product
strategy with higher service infusion and even to explore design [21] and for their proximity with the users [41].
products in new forms based on customer’s feedback through Regarding services as inputs for product development,
its extension. improvement and/or marketability, we support on the unified
To compare these findings in detail, Table 2 presents the services theory that declares that a service will occur from at
median and the standard deviation (in parentheses) by item for least one input of the customer [45]. From this our results
each of the investigated dimensions. This analysis allowed us advocate in favor of customer-orientation for the offer’s
to deepen the understanding of the differences related to each success and reinforce the role of emerging countries as source
construct in each context. of service innovation knowledge [8] due to their proximity to
customers [41].
Table 2. Items analysis.
Product Extension Italy Brazil 4.2.
Service infusion
Our services allow us to reach new customers
3.4 (1.0) 4.0 (1.2)
with the extant products of our portfolio*
Although the majority of companies investigated in both
Our services help us to retain customers and to
increase their loyalty
4.0 (1.2) 4.0 (1.1) contexts still are aiming to offer predominantly products in
Our services represent an aggregated value to our detriment of services in the portfolio and revenue distribution
4.0 (1.0) 4.0 (1.2)
customers (Table 2), in terms of service orientation, Brazilian companies
Our services facilitate the sales of new products
3.0 (1.1) 4.0 (1.2)
have advanced further in the continuum of service orientation.
to our current customers* Table 2 shows that, by the analysis of the construct items,
Our services contribute to the development of
3.0 (1.1) 4.0 (1.2) services are more oriented to use and result in Brazilian
new products*
Our services contribute to the continuous
companies than in Italian’s. In this sense, we could say that
3.0 (1.1) 3.0 (1.1) Italian companies are worried on providing ownership for their
improvement of our products
Service Infusion Italy Brazil customers and Brazilian companies in offering functionalities.
Service orientation* 1.9 (1.3) 2.5 (1.3) This proposition is aligned with the PSS typology proposed
Portfolio distribution 2.0 (1.0) 2.0 (1.0) by Androdegari et al. [42] of: i) ownership oriented: product-
Revenue distribution 2.0 (1.4) 2.0 (1.4)
focused and product and process-focused; and, ii) service
Technological Turbulence Italy Brazil
oriented: access-focused, use-focused and outcome-focused.
In our industry, the technology changes quickly 3.0 (1.3) 3.0 (1.2)
The technology changes enable new This study also finds out that, in developed economies, “the
4.0 (1.1) 4.0 (1.0) adoption of service-oriented business models is low in
opportunities for our industry
A big number of ideas for new products were particular in the sectors addressed by the project, namely:
concretized in my industry because of the 4.0 (1.2) 3.4 (1.1) machinery, transportation and automation” [42], which
introduction of new technologies*
suggests a dependence on the companies’ sectors.
*Significate difference in the median between countries
Complementarily, some strategies that can be observed in
multinational companies that aim at entering the Brazilian
4.1.
Product extension
market has been observed in other studies on servitization is the
change of the product position in the value chain [46]. For
Although companies in both countries associate service
example, a product that is sold in Germany for the final user
aggregation to the incensement of customer perceived value
(B2C) started to be sold for service providers (B2B) that would
over the offer [2] and customer retaining [43], in this matter,
sell the result for the final user, for whom the high price and
the differences between the two contexts are associated with
quality of the product was justifiable for the intention of high
reaching new customers with current products and with the
usage. In this case, the Brazilian unit of the company started to
development, improvement and marketability of products to
operate in a demand chain management approach [47].
current customers.
However, both contexts still present low levels of service
The first item (reach new customers with current products
infusion according to the median of values observed. This
through service adding) is a practice operationalized on circular
could mean that servitization strategies are not reaching the full
economy through product use intensification and is deeply
 Carolline Amaral Paslauski et al. / Procedia CIRP 64 (2017) 127 – 132 131

potential expected [48] or merely that not all manufacturing presented the lower rates of recent service industries
companies should aim at high service infusion levels to achieve employment regarding G7 countries [52].
a better performance [13]. As a suggestion for future studies we propose the
verification of the effect of the technological turbulence and
4.3.
Technological turbulence service infusion in contexts with different economic
development levels as so as its cross-effect in the product
The results show an equivalent level of Technological extension capacity. Complementarily, we propose the
Turbulence for both contexts because the agreement with the investigation of the impact of the industrial sector, company
statements “In our industry, the technology changes quickly” size, market and customers type as control variables. Although
and “The technology changes enable new opportunities for our samples have similar distributions regarding customers
industry” are at similar levels according to the median values attended and portfolio distribution, Italian selected companies
and vary little among them regarding the standard deviation. are positioned mostly in global markets, what could be
However, the application of new technologies for new products reinforcing its dependence on technological turbulence and its
seems to be more compatible with the median values of product orientation. While Brazilian companies in the sample
companies in the Italian context. are majority acting in local markets, what favors service
Italian companies historically have had their capacity for provision.
product innovation related to their trade competitiveness in
global markets [49,36]. Sectors with intense design and Acknowledgements
engineering activities and higher percentage of product
innovativeness have also been related to increasing The authors thank to the Brazilian Education Ministry
employment due to technological change in the Italian context (CAPES) and to the Brazilian National Council for Scientific
[22]. and Technological Development (CNPq) for the financial
Even though Brazilian companies have shown a high support received to conduct this research scholarships.
agreement to the implementation of new technologies in new
products, it was significantly lower than the agreement of References
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