From selling machinery to hybrid offerings – organizational impact of digital servitization on manufacturing firms

The transition towards services has been imperative for manufacturing firms for years. The change from a product-oriented to a more service-dominant business model affects the organizational structure of firms. However, literature provides limited insights into how manufacturing firms organize themselves in this transition. Even though digital technologies are critical for the transition, it is unclear how to orchestrate digital and traditional Information Technology (IT) resources in manufacturing firms accordingly. We analyze the case of a typical manufacturing firm that has adjusted its structure to reorganize for solution offerings based on product, service, and digital components. Our results describe a hybrid organizational structure that splits front- and back-end units. The back-end units are split along solution components. Digital IT resources are internalized and governed decentrally, with traditional IT resources being outsourced and steered centrally. Our findings contribute to digital servitization research by clarifying the overarching as well as the digital and traditional IT-related organization for manufacturing firms.