Managerial contributions

All the studies included in the current dissertation were designed to be of practical relevance for managers. In particular, the practical implications of this dissertation are useful for managers who work in manufacturing industries and are contemplating the opportunities provided by and the strategic role of OBSs. Taking the perspective of this kind of manager, the managerial contributions of the dissertation follow a seemingly straightforward logic.

First, the manager is likely to be naturally interested in the fundamentals; that is, what are OBS offerings? One may refer to the concept literature stream (Schaefers et al., 2021) in regard to aspects such as those above. However, soon after, the manager may become baffled by the terminological variety endemic to the literature. In this respect, Article 1 aims to provide some clarity and explanations.

For example, the “performance-based” prefix in PBCs is rooted in PBL services in the defense sector. The given terminology reigned in the associated literature from the early 2000s but was accompanied by an alternative OBC (or OBM) term in the second decade of the current century. The term “outcome” is more prevalent in the literature pertaining to public administration, marketing and business model innovation. An important managerial implication of Article 1 is that from a legal-technical point of view, the term “performance” should be reserved for describing the manner in which a mechanism works to avoid ambiguity. As a prefix to the word “contracts”, “outcome-based” should be preferred due to its univocality.

Second, while familiarizing oneself with the OBS concept, one cannot help but come across the notion of increased provider risks (Datta & Roy, 2013). Because taking more risks makes no sense if the respective rewards or risk premiums cannot be expected, the manager is likely to next seek financial rationales for the given service strategy. In this respect, Article 2 provides empirical evidence of the profit disposition of OBS offerings that extends beyond the extant case-specific evidence (e.g., Jain et al., 2013). Not only does Article 2 advocate the profitability of OBSs, but it also warns managers that capitalizing on and scaling up complex and advanced OBS offerings necessitate investments in R&D. Specifically, remote monitoring technology, condition-based monitoring and preventive maintenance are highlighted as potential targets for investments due their ability to forestall shortcomings in outcome production (Grubic & Jennions, 2018b; Öhman et al.,

2015). Furthermore, solution modularization has been dubbed the next phase in the servitization journey of industrial manufacturers (Rajala et al., 2019).

Platform-based design can also add value for OBS offerings since it enables the provider to configure different service elements into coherent wholes, thus reducing customization-induced issues. Moreover, platforms make it possible to bring together multiple actors such that participants work towards common outcomes. When participating in such ecosystems, the provider must also consider which strategy to follow: will the provider be an orchestrator, a dominator, a complementor or a protector (Kamalaldin et al., 2021)? The different approaches and roles may further guide investment decisions.

Third, after learning about the financial potential of OBS offerings, the manager may become further interested in the requirements of successful OBS deliveries, as suggested above. Because OBS delivery entails closer collaboration between the provider and the customer, the relationship between the partners ought to change compared to transactional exchange relationships. Indeed, extant research has emphasized that a high-quality relationship and the presence of relational assets can contribute to OBS successfulness (Ng et al., 2013; Sjödin, Parida, Jovanovic, et al., 2020). However, the features characterizing relationship quality are often quite limited in OBS research, pertaining to factors such as regular exchanges, congruent expectations and trust. This leaves multiple qualities unexplored, with one of them being legitimacy. Legitimacy is the perception of whether the actions of an actor are desirable, proper, or appropriate (Suchman, 1995). In Article 4, it was found that a customer may cease to regard the provider’s involvement as desirable/appropriate if he or she is able to learn the operational capabilities for which he or she initially hired the provider. Moreover, as elaborated in Article 3, the customer may intentionally leverage system ownership to “gain access to the core”, as elaborated by one of the interviewees. Thus, to avoid the dissolution of the OBS relationship, OBS providers must find other ways in which they can legitimate their involvement in the customer’s processes. In Article 3, it was found that the providers can either accept the consultative nature of the OBS relationship or become active shareholders in the given projects. In article 4, on the other hand, it was found that the provider may follow four discursive legitimation strategies (trustification, rationalization, authorization and normalization) to defend and regain legitimacy. These findings communicate to managers the importance of relational assets in OBS relationships.

On a more general level, the current dissertation suggests that managers should not oversimplify OBS offerings by looking at the phenomenon in question through only one lens, such as transaction cost economics (Williamson, 1981). This is not to say that one should refrain from utilizing certain perspectives; rather, one

should keep an open mind regarding alternative viewpoints that may contribute to a comprehensive understanding of the topic. For example, despite the dominance of functionalism and (to an increasing degree) interpretivism in OBS research, the empirical soil from which all branches of the given literature have grown is rich in critical nutrients, metaphorically speaking. For example, the underlying ideology behind OBS offerings derives from critical perspectives on traditional time-and-materials-type services, thus reflecting the sociology of radical change (Burrell &

Morgan, 1979). In time-and-materials-type services, it is in the provider’s interest not to avoid breakdowns and to inflate resource consumption because both contribute to the revenues of the provider. OBS offerings, on the other hand, encourage providers to generate service outcomes as resource efficiently as possible. This is in alignment with the circular economy and sustainable PSS movement (Tukker, 2015). Accordingly, the extant structures—that is, the old service contracting models—must be challenged (i.e., radical structuralism) for the sustainable service innovation of OBS offerings to prevail.

However, managers interested in matters pertaining to OBS sustainability should also be reasonably concerned with the Jevons paradox found in environmental economics. In 1865, an economist named William Stanley Jevons proposed that although coal-use efficiency gains should intuitively lower coal consumption, the very opposite was true instead (Alcott, 2005). The reason is that efficiency improvements naturally decrease production costs, which in turn decreases prices and ultimately increases demand. This phenomenon is called the “rebound effect”

in modern energy economics (Grubb, 1990), and it is often counterbalanced through tax policies that aim to keep the cost of resource use the same regardless of the efficiency gains (Wackernagel & Rees, 1997). Another perspective, that of the environmental footprint, emphasizes individuals’ crucial role (i.e., radical humanism) in initiating radical consumption change (see, e.g., Borrello et al., 2017). In this respect, much remains unexplored in the context of OBS offerings.

For example, end customers (such as energy off-takers) rarely have a transparent overview of utility companies’ supply chains, at least in terms of the contracting types endorsed. Thus, they may have relatively restricted knowledge to guide their decision-making with regard to the resource efficiency of the seller. Alternatively, ecologically driven consumers may not even be aware that they should be concerned about the differences in contracting types in industrial services. The aspects discussed above not only highlight the broader societal importance of industrial OBS offerings but also show that a profound comprehension of the given multilateral phenomenon requires further multiperspectival approaches.