The next phase in servitization: transforming integrated solutions into modular solutions

Purpose: The purpose of this paper is to identify integrated solutions business as the first generation of servitized offerings and modular solution offerings as the second development phase in servitization of original equipment manufacturers. This study examines how the servitized manufacturer, Kone, moves from integrated solutions to modular solutions business and develops the requisite capabilities to design, produce and implement modular solution offerings. Design/methodology/approach: The paper reports a longitudinal case study of a provider of integrated solutions installed in buildings. During the ten years studied, the manufacturer implemented a strategic initiative to modularize its integrated solutions offering. Findings: The firm’s transition to modular solutions progressed through three major capability development phases: solutions based on ad hoc integration, smart solutions based on modular design and through-chain modularity. The modular structure aims at fostering the efficiency of the solution offering and the associated production system. Research limitations/implications: Leveraging the benefits of modularity calls for an aligned combination of strategic, operational and technical capabilities contributing to the integration of resources in a modular production system for the solution providers’ competitive performance. Practical implications: The study reports how a solution provider can develop the operational capabilities to integrate the core and peripheral components into the solution, and orchestrate the modular production system. Originality/value: This study is a rare longitudinal analysis of how a manufacturer builds a modular offering, the solution platform and the required competitive capabilities to provide the solution.