Transitioning to Digital Services: Assessing the Impact of Digital Service Efforts on Performance Outcomes and the Moderating Effect of Service Promotion

Manufacturers have been increasingly digitizing their products, processes, and services in the last decades and the COVID19 pandemic has further accelerated this digital shift. B2B-customers nowadays strongly demand digital solutions and require online sources where they can do research about their suppliers and their offerings. Prior empirical studies examining the impact of servitization on firms’ financial performance have drawn an incoherent and inconclusive picture. Product-based companies not only struggle to leverage the financial potential from service business models but fail to realize the expected revenue enhancement potential of digitalization (co-called “digitalization paradox”). In this empirical, cross-industry study we investigate whether investments in digital transformation result in an increase of digital services, and further, affect financial and non-financial performance. In this study, data was collected data on 124 companies from two different sources, company representatives (company-level survey) and objective data harnessed from firms’ websites. The webpages of the surveyed firms were examined using a machine learning tool developed specifically for identification of different types of services. The results of the study indicate positive direct effects of digital investment on financial and non-financial performance and indirect effects through the extent of digitized services being offered to customers. Further investigations allow us to conclude that the transformation to digital services leads to a stronger increase in financial performance only if the promotion of digital services is high.