Forming an Ecosystem through an Incumbent’s Strategic Transformation

Technological innovation and competitive pressure push incumbent manufacturers to transform into hybrid service providers making servitization one of the most relevant drivers for value creation. Servitization trajectories affect, however, the long-term prospects of firms as changes in strategic and organizational aspects may become necessary to drive the change. Despite the scale and implications of the phenomenon, literature provides scant evidence of the process and main implications of shifting from a product-based to a solution-based business model. Thus, our work is centered around the question: “To what extent the process of servitization can lead incumbents to form an ecosystem?”. To respond to this question, we qualitatively investigate Philips, the Dutch firm that has been among the first to shift from a product-based business model to a service-centric one study. We investigate the process of formation of an ecosystem in the healthcare industry and we present a set of three strategic choices - each enabled by a set of three factors - that modify an incumbent’s internal resources and external network of strategic partnerships as well as its organizational structure.