The impact of the Internet of Things (IoT) on servitization: an exploration of changing supply relationships

Abstract

This research paper explores the emerging potential of IoT technology as an enabler for manufacturers seeking to exploit opportunities for new production, business and operating models. Following an analysis of extant literature and exploration of four in-depth cases, the paper presents four dominant pathways to servitizing the business model through IoT implementation. This first finding is extended in the cross-case analysis, through a categorization of cases into the four pathways, comparing different levels of supplier integration and information exchange. Using this data and categorizations, the paper arrives at certain theoretical propositions regarding the wider impact of IoT technology implementation on information exchange and relational rents through self-enforcing safeguards, risk and financial incentive sharing and lastly transaction cost economics. These propositions lead to the recommendation for suppliers to adopt a servitization pathway of ‘operational service’ models, in order to reap maximum competitive benefit and return on specific investments. This suggests a dependence on the servitization pathway chosen by the supplier, implying that there is no single solution to deal with buyer-supplier relationships in IoT servitization environments.