New University of Washington research can help product manufacturers effectively shift to service-centric business strategies

According to research conducted at the University of Washington, manufacturing firms can increase shareholder value by transitioning to services, but there are some important caveats.

"First, company leaders need to recognize that firm value isn’t positively affected until the level of service sales reaches a critical mass," said Robert Palmatier, assistant professor of marketing at the University of Washington’s Foster School of Business. "And, the effects of service sales are highly contingent on the service chosen and the industry."

In an era of increased product commoditization and global competition, academics and industry experts have both promoted the benefits of shifting from a product-centric to a service-centric business model as a strategy for generating shareholder value. The success of companies such as IBM and General Electric highlights the attractiveness of this strategy. Yet there has been little research to show when and how such strategies work.

Andrew Krueger [email protected]

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