Needed Capabilities in Pay-Per-Outcome Business Model Implementation: Equipment Manufacturing Context

Companies in the equipment manufacturing industry (EMI) are facing increased global competition and are searching for new ways to make themselves stand apart in the market. Result-oriented business models (BMs) have gained interest in recent years as a way of offering sustainable value by providing customers with access to equipment, and the payment for this is based on the usage or outcome of the equipment. However, the feasibility of result-oriented BMs in equipment manufacturing companies is hindered by the tangibility of products, difficulty in monitoring their usage or outcome, high upfront investments, long product life cycles, and the high need for reliability. Result-oriented BMs can be classified into pay-per-use, pay-per-output, and pay-per-outcome BMs, each requiring different capabilities. Researchers have identified various capabilities needed for pay-per-outcome BMs, such as service financing, contracting, customer relationships, value network orchestration, digitalization, and organizational governance. However, a more comprehensive understanding of pay-per-outcome capabilities and how they can be developed and acquired is still needed, specifically in the scarcely studied emerging EMI context.

This dissertation investigates the implementation of pay-per-outcome BMs in companies from the EMI by understanding their characteristics, feasibility, and required capabilities. Specifically, the study focuses on the needed capabilities and how they can be developed and acquired during the transformation process. Therefore, the purpose of this thesis is to increase understanding on the ways in which manufacturing companies can implement pay-per-outcome BMs in systematic manner from the capability perspective.

This dissertation constitutes of synopsis and five peer-reviewed articles: two journal articles and three conference articles. The study adopted an interpretivist approach that acknowledges humans as social actors, with an ontological assumption that the world is a social construction shaped by individuals’ everyday encounters. The research methodologies used in the dissertation are the literature review and cross-sectional case studies, with semi-structured interviews as the primary data collection method. The selection criterion for all empirical case companies is that they should be, specifically equipment manufacturing companies offering unmovable capital-intensive equipment using the pay-per-outcome BM. Based on literature review a capability framework is derived and on top of that, the development and acquisition of these capabilities were studied, first using a roadmap to show how data analytics capabilities are specifically developed in two companies and finally studying how the capabilities can be acquired from ecosystem partners.

The contributions of this dissertation are threefold: First, the dissertation contributes to the discussion on result-oriented BMs by demonstrating how their feasibility varies depending on the industry and equipment. It suggests that the pay- per-outcome BM is more feasible than the pay-per-use BM when the equipment is critical for the customer’s process and when the complexity of their process and end product increases, which calls for developing specific frameworks to analyse and evaluate the effectiveness of pay-per-outcome BMs. Second, this dissertation contributes to the pay-per-outcome capability discussion by unifying scattered results from previous studies, providing a comprehensive view of the critical capabilities needed in these BMs and increasing understanding of how key decisions related to result-oriented BMs impact these capabilities. By identifying and understanding the specific capabilities required for implementing pay-per-outcome BMs, researchers can gain insights into the difficulties and complexities of pay-per-outcome BMs and develop more effective strategies for overcoming these challenges. Finally, this dissertation provides novel insights into the development of the capabilities needed for the implementation of pay-per-outcome BMs used by companies in the EMI. It highlights the importance of identifying bottlenecks, achieving resource efficiency, and developing a more comprehensive understanding of the complexity of capability development in this context.

Additionally, this dissertation has some limitations that should be acknowledged. Firstly, the limited availability of case companies that had implemented pay-per-outcome BMs at the time of the research posed challenges in gathering a larger sample. Therefore, future research should build upon these findings and test the results against a larger sample size. Additionally, the cross-sectional nature of the study restricted the ability to observe the evolution of capabilities over time, suggesting the importance of longitudinal research in understanding capability development. Lastly, although the study examined capabilities comprehensively, it did not thoroughly explore their interrelation, indicating the need for further studies to understand the interconnectedness and prioritize resources effectively in pay-per-outcome BM transformation.