Product service bundles: no simple solution

Abstract

Purpose

The purpose of this paper is to examine the strategic and organizational difficulties of multidivisional corporations with solution business (product service bundles). Most large multidivisional corporations are organized in a way that supports independence and market orientation of their organizational units. Solutions, however, require a high level of interaction and cooperation between corporate units. The authors collect evidence for this contradiction and resulting difficulties and propose a shift in the value creation strategy towards corporate headquarters having a stronger steering influence.

Design/methodology/approach

The authors analyze the economic performance of the largest semiconductor suppliers and relate these results to their product and solution focus. They then derive initial strategic recommendations based on the findings and organizational strategy literature.

Findings

Multidivisional companies that just add solution business onto their existing product‐based strategy experience difficulties. To overcome these, strategic adjustments are proposed that will lead to a stronger steering influence by corporate headquarters.

Practical implications

This paper shows the necessity of adjustments to corporate strategy when solution business is pursued. Companies need to actively support the interaction of their corporate units in the light of solution business.

Originality/value

It is recognized that solely solution‐focused companies require a different business model to product‐focused companies. However there has been little discussion on strategic adjustments by companies that supplement their existing product business with solutions.

Citation

Hahn, A. and Morner, M. (2011), "Product service bundles: no simple solution", Journal of Business Strategy, Vol. 32 No. 6, pp. 14-23. https://doi.org/10.1108/02756661111180096