Hybrid Offerings: How Manufacturing Firms Combine Goods and Services Successfully

Abstract

This article examines key success factors for designing and delivering combinations of goods and services (i.e., hybrid offerings) in business markets. Goods manufacturers, unlike pure service providers, find themselves in a unique position to grow revenues through hybrid offerings but must learn how to leverage unique resources and build distinctive capabilities. Using case studies and depth interviews with senior executives in manufacturing companies, the authors develop a resource–capability framework as a basis for research and practice. Executives identify four critical resources: (1) product usage and process data derived from the firm's installed base of physical goods, (2) product development and manufacturing assets, (3) an experienced product sales force and distribution network, and (4) a field service organization. In leveraging these specific resources, successful firms build five critical capabilities: (1) service-related data processing and interpretation capability, (2) execution risk assessment and mitigation capability, (3) design-to-service capability, (4) hybrid offering sales capability, and (5) hybrid offering deployment capability. These capabilities influence manufacturers’ positional advantage in two directions: differentiation and cost leadership. The authors propose a new typology of industrial services and discuss how resources and capabilities affect success across categories of hybrid offers.