Servitization through outcome-based contract – A systems perspective from the defence industry

Abstract

This paper provides a viable systems perspective of an outcome-based service initiative involving major manufacturers in the defence industry. The viable systems perspective allowed a coherent structuration of the complex servitization context involving provider and customer organizations. It also unveiled critical relationship mechanisms that enable synergy and facilitate the achievement of co-capability by the organizations involved. Through a case study approach, the research finds that interventions in the customer system reduce variability in the provider system as well as in the service system as a whole. The systemic interventions are implemented via key provider/customer relationships the study identifies. The relationships deal with the high level of internal variety in outcome-based service systems. A typology for the identified relationships is developed, offering a helpful basis for the purposeful planning and design of interactions aimed at developing co-capability. The paper also offers theoretical propositions defining fundamental features of outcome-based service systems. The unique characteristics of these systems addressed in this paper provide particularly useful insights concerning the implementation of this type of servitization initiative not only in the defence industry, but also in other industrial sectors where servitization initiatives involve complex configurations of provider and customer organizations.