Growing with smart products: Why customization capabilities matter for manufacturing firms

Growing with smart products: Why customization capabilities matter for manufacturing firms

Growing with smart products: Why customization capabilities matter for manufacturing firms

Colin Schulz, Sebastian Kortmann, Frank T. Piller, Patrick Pollok

kHUB post date: January 4, 2024
Originally published: May 29, 2023 (PDMA JPIM • Vol. 40, Issue 6 • November 2023)
Read time: 45 minutes

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Manufacturing firms that engage in digital transformation develop increasingly smarter versions of their tangible products to reinvigorate growth in shrinking markets. However, they often struggle with translating their investments in digitalization capabilities into actual returns in the form of sales growth. The associated technological advantages often remain unexploited, and digital product innovations frequently fail. Building on the resource-based view of the firm and the demand-side perspective, we theorize that there is a need for complementary capabilities that integrate heterogeneous customer demands, thus, allowing firms to capture more value from smart products. We empirically investigate the mediating role of smart customization capability on the relationship between digitalization capabilities and sales growth. Moreover, we argue that this relationship is further strengthened by integrating information and data across sales and service channels (i.e., channel integration). We test and find support for our hypotheses based on a dataset comprising survey and archival data of 136 smart product manufacturers in Austria, Germany, Switzerland, and the United States. In doing so, we enhance the theoretical understanding of resource and capability configurations needed for digital transformation in general and smart product success in particular. We further update the traditional concept of mass customization by showing how customization with smart products helps manufacturing firms provide personalized solutions at scale.

Practitioner Points

  • Investing in digitalization capabilities is necessary to succeed with products in the digital age, yet often insufficient to yield sales growth.
  • Successful manufacturing firms invest in their smart customization capability to tailor their service offerings to heterogeneous customer needs, thus capturing relatively more value from the market.
  • Instead of manufacturing physical products that are designed to meet individual customer needs before purchase, performant manufacturing firms customize smart products in the usage stage.
  • Smart products and their digital user interfaces constitute important customer touchpoints that firms need to carefully integrate with existing sales and service channels to leverage the full growth potential of their offerings.

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