Value-capture in digital servitization

TL;DR: In this article , the authors explored the role transparency plays in the perceived value of digital servitization and found that value-capture-related flexibilities introduced by digital offerings, namely price fluctuations and longer contract lengths, are perceived to deliver more value to customers than standard offerings with known conditions.

Abstract: PurposeDigital capabilities in operations and delivery through constant data acquisition and future predictions have accelerated digital servitization through reduced uncertainty. New flexibility in value-capture concepts like dynamic and value-based pricing is introduced, which was impossible before. This paper explores two things. Firstly, how embracing contractual flexibility of price-variance and contract lengths influences customer perceived value in artificial intelligence (AI) enabled digital offerings. Secondly, the role transparency plays in the perceived value of such offerings.Design/methodology/approachThe paper uses an experiment-based survey and quantitative assessment within a business-to-business setup with 137 respondents across a couple of industrial manufacturers in the Nordic region.FindingsThe authors observations indicate that value-capture-related flexibilities introduced by digital offerings, namely price fluctuations and longer contract lengths, are perceived to deliver more value to customers than standard offerings with known conditions. The authors findings indicate that introduced flexibilities are perceived as opportunities rather than uncertainties leading to higher perceived value by customers. The increased value perception can be explained by the transparency of these offerings provided by data-driven digital technologies'.Originality/valueThe paper is an original work to understand the value-capture implication of digital servitization. The authors discuss the possibilities of different value-capture strategies that companies can adopt within digital business models.