Dynamics of digital servitisation transformation in earthmoving equipment dealerships Simon Yaw Osei Darko Dr Manessah Alagbaoso A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, in partial fulfilment of the requirements for the degree of Master of Management in the field of Digital Business Johannesburg, 2024 ii ABSTRACT In the rapidly evolving earthmoving equipment industry, this study investigates the challenges and opportunities stemming from digital servitization transformation. As conventional dealership models face disruption from digital technologies, the necessity for adaptation to maintain competitiveness becomes evident. This research seeks to address the gaps in understanding regarding the transformation process and the implications of digital servitisation within this industry context. Drawing upon a conceptual framework that integrates principles of digital transformation and servitisation, the study examines the critical stages of transformation and the pivotal role of leadership. Qualitative methods, including interviews with 9 senior managers and executives from two earthmoving equipment dealerships, were employed to capture insights into the transformation journey, challenges encountered, and the leadership dynamics driving the process. Key findings underscore the multifaceted nature of digital servitization transformation, emphasizing the importance of strategic alignment, IT transformation, process digitization, organizational change, customer service innovation through artificial intelligence and machine learning and leadership adaptability. The research offers a structured framework to assist industry practitioners in effectively navigating the transformation journey. In conclusion, this study emphasizes the imperative for earthmoving equipment dealerships to embrace digital servitization as a strategic imperative for long-term viability. By providing actionable insights and guidance, the research advocates for proactive adaptation to capitalize on the opportunities presented by digital technologies, thereby ensuring sustainable growth and competitiveness in the digital era. KEYWORDS Servitisation, Digital transformation, digital servitisation, digital servitisation transformation, Digital leadership iii DECLARATION I, Simon Yaw Osei Darko, declare that this research report is my own work except as indicated in the references and acknowledgements. It is submitted in partial fulfilment of the requirements for the degree of Master of Management in the field of Digital Business at the University of the Witwatersrand, Johannesburg. It has not been submitted before for any degree or examination in this or any other university. Name: Simon Yaw Osei Darko Signature: Signed at …………………………………………………… On the …………………………….. day of ………………………… 2024….. iv DEDICATION This research report is dedicated to my children Paul Osei Darko, Timothy Osei Darko and Jessica Osei Darko – a constant reminder to never settle. v ACKNOWLEDGEMENTS I am deeply grateful to my beloved family and friends for their unwavering support, encouragement, and understanding throughout this research journey. Their love, patience, and belief in me have been a constant source of strength and inspiration. Special thanks to my esteemed research supervisor Dr Manessah Alagbaoso for his invaluable guidance, mentorship, and constructive feedback. His expertise and encouragement have been instrumental in shaping the direction and quality of this research. I am indebted to the respondents who generously shared their time, knowledge, and experiences, without whom this study would not have been possible. Their insights have enriched the depth and relevance of my research findings. To my fellow research students at the time, your camaraderie, encouragement, and shared experiences have made this journey more fulfilling and enriching. I am grateful for the friendships forged and the collaborative spirit that propelled us forward. I extend my heartfelt appreciation to my employer Barloworld Equipment Southern Africa for their continuous support and flexibility during this academic pursuit. Lastly, I offer my deepest gratitude to the Almighty God and Creator for granting me the wisdom, resilience, and fortitude to embark on this academic pursuit. His divine guidance and blessings have been my guiding light throughout this endeavor. vi TABLE OF CONTENTS List of Tables .............................................................................................................................. x List of Figures ............................................................................................................................ x Abbreviations and Acronyms .................................................................................................... xi 1. INTRODUCTION .............................................................................................................. 1 1.1 Purpose statement ........................................................................................................ 1 1.2 Background ................................................................................................................. 1 1.3 Research problem ........................................................................................................ 2 1.4 Research objectives ..................................................................................................... 3 1.5 Rationale...................................................................................................................... 3 1.6 Terms ........................................................................................................................... 5 1.7 Delimitations ............................................................................................................... 6 1.8 Assumptions ................................................................................................................ 6 1.9 Chapter outline ............................................................................................................ 7 1.10 Conclusion ................................................................................................................... 8 2. LITERATURE REVIEW ................................................................................................... 9 2.1 Introduction ................................................................................................................. 9 2.2 Defining digital servitisation ....................................................................................... 9 2.3 Stages in transitioning to services and the transformation process ........................... 10 2.4 Challenges in transitioning to digital services........................................................... 15 2.5 Digital servitisation transformation and leadership .................................................. 16 2.6 Theoretical framework .............................................................................................. 17 2.6.1 Use of technology .............................................................................................. 19 2.6.2 Changes in value creation .................................................................................. 19 2.6.3 Structural changes .............................................................................................. 20 2.6.4 Financial aspects ................................................................................................ 20 2.6.5 Procedural aspects of the transformation ........................................................... 21 2.7 Conceptual framework .............................................................................................. 22 2.7.1 Key stages in the transformation process........................................................... 24 2.7.2 Challenges in the digital servitisation transformation process .......................... 25 2.7.3 The role of leadership in digital servitisation transformation ............................ 26 2.8 Conclusion of literature review ................................................................................. 26 3. RESEARCH METHODOLOGY ..................................................................................... 28 3.1 Introduction ............................................................................................................... 28 vii 3.2 Research approach..................................................................................................... 28 3.3 Research design ......................................................................................................... 28 3.4 Data-collection method ............................................................................................. 29 3.5 Population and sample size ....................................................................................... 29 3.6 Research instrument .................................................................................................. 29 3.7 Procedure for data collection..................................................................................... 30 3.8 Data-analysis strategies and interpretation ................................................................ 30 3.9 Possible limitations of the study................................................................................ 31 3.10 Quality assurance ...................................................................................................... 31 3.11 Ethical considerations ............................................................................................... 32 3.12 Timeline ..................................................................................................................... 32 3.13 Conclusion ................................................................................................................. 32 4. PRESENTATION OF FINDINGS ................................................................................... 33 4.1 Introduction ............................................................................................................... 33 4.2 Overview of sample .................................................................................................. 33 4.3 Findings pertaining to Research Question 1: Stages or steps in the digital servitisation transformation. ................................................................................................. 35 4.3.1 Stage 1: Strategic visioning and planning .......................................................... 37 4.3.2 Stage 2: IT (Information technology) transformation. ....................................... 38 4.3.3 Stage 3: Digitisation and organisational change ................................................ 39 4.3.4 Stage 4: Customer service evolution and innovation ......................................... 40 4.4 Findings pertaining to Research Question 2: The logical sequence of the transformation stages............................................................................................................ 43 4.4.1 Organisational evolution and integration ........................................................... 44 4.4.1.1 Initiation: Foundational phase............................................................................ 44 4.4.1.2 Transition: Building foundational capabilities................................................... 45 4.4.2 Strategic innovation and competitiveness .......................................................... 46 4.5 Findings pertaining to Research Question 3: The challenges encountered in digital servitisation transformation .................................................................................................. 48 4.5.1 Strategy-related challenges ................................................................................ 49 4.5.2 Internal and external resistance .......................................................................... 51 4.5.2.1 Strategies for overcoming resistance ................................................................. 53 4.5.3 Legacy challenges in digital services evolution................................................. 54 4.5.3.1 Legacy business practices .................................................................................. 55 4.6 Findings pertaining to Research Question 4: The role of leadership in the digital servitisation transformation process ..................................................................................... 56 viii 4.6.1 Leadership dynamics in digital transformation .................................................. 57 4.7 Conclusion ................................................................................................................. 59 5. DISCUSSION OF FINDINGS ......................................................................................... 61 5.1 Introduction ............................................................................................................... 61 5.2 Discussion pertaining to Research Question 1: Stages or steps in the digital servitisation transformation .................................................................................................. 61 5.2.1 Stage 1: Strategic visioning and Planning ......................................................... 61 5.2.2 Stage 2: IT transformation ................................................................................. 62 5.2.3 Stage 3: Digitisation and organisational change ................................................ 63 5.2.4 Stage 4: Customer service evolution and innovation ......................................... 63 5.3 Discussion pertaining to Research Question 2: The logical sequence of the transformation stages............................................................................................................ 64 5.4 Discussion pertaining to Research Question 3: The challenges in digital servitisation transformation. ..................................................................................................................... 65 5.5 Discussion pertaining to Research Question 4: The role of leaders in the transformation ...................................................................................................................... 67 5.5.1 Stage 1: Strategic visioning and planning .......................................................... 67 5.5.2 Stage 2: IT Transformation ................................................................................ 68 5.5.3 Stage 3: Digitisation and organisational change ................................................ 68 5.5.4 Stage 4: Customer service evolution and innovation ......................................... 68 5.5.5 Conclusion ............................................................................................................... 69 6. CONCLUSION AND RECOMMENDATIONS .............................................................. 70 6.1 Introduction ............................................................................................................... 70 6.2 Conclusion pertaining to Research Objective 1: Identify key stages in digital servitisation transformation .................................................................................................. 70 6.3 Conclusion pertaining to Research Objective 2: Identify logical sequence of transformation stages............................................................................................................ 71 6.4 Conclusion pertaining to Research Objective 3: Examine challenges faced during transformation ...................................................................................................................... 72 6.5 Conclusion pertaining to Research Objective 4: Examine the role of leadership in transformation ...................................................................................................................... 72 6.7 Recommendations ..................................................................................................... 73 6.6 Contribution of the research ...................................................................................... 74 6.8 Suggestions for future research ................................................................................. 75 7. REFERENCES ................................................................................................................. 76 8. APPENDIX A: PARTICIPANT INFORMATION FORM ............................................... 79 9. APPENDIX B: PARTICIPANT AGREEMENT FORM .................................................. 80 ix 10. APPENDIX C: INTERVIEW GUIDE ............................................................................. 81 11. APPENDIX D: LIST OF CODES - INTERNATIONAL PARTICIPANTS .................... 82 12. APPENDIX 2: LIST OF CODES – LOCAL INTERVIEWEES ........................................ 1 13. APPENDIX F: ETHICS APPROVAL .............................................................................. 10 14. APPENDIX G: PERMISSION LETTERS....................................................................... 11 x List of Tables Table 1: Organisational profile of research participants .......................................................... 33 Table 2: Codes, subthemes and themes related to Research Question 1 ................................. 35 Table 3: Codes, subthemes and themes related to Research Question 2 ................................. 43 Table 4: Codes, subthemes and themes related to Research Question 3 ................................. 48 Table 5: Codes, subthemes and themes related to Research Question 4 ................................. 57 List of Figures Figure 1: Innovation trajectories on Industry 4.0 and servitisation, as adapted from Frank et al. (2019) .................................................................................................................................. 10 Figure 2: Baines et al. (2019) Four-stage servitisation progression model ............................. 12 Figure 3: Chen et al. (2021) three stages of digital servitisation ............................................. 13 Figure 4: Seven-stage service strategy model (Martinez et al., 2019) ..................................... 14 Figure 5: Matt et al. (2015) digital transformation framework ................................................ 18 Figure 6: Conceptual framework ............................................................................................. 23 Figure 7: Stages or steps in the digital servitisation transformation process ........................... 43 Figure 8: Logical sequence of the transformation stages ......................................................... 48 Figure 9: Challenges faced by equipment dealers in digital servitisation transformation ....... 56 Figure 10: Stages in digital servitisation process in dealerships ............................................. 64 xi Abbreviations and Acronyms AI Artificial Intelligence CAQDAS Computer-Aided Qualitative Data Analysis Software CDO Chief Digital Officer CEO Chief Executive Officer CIO Chief Information Officer CRM Customer Relationship Management ERP Enterprise Resource Planning IoT Internet of Things IT Information Technology KPI Key Performance Indicator ML Machine Learning OEM Original Equipment Manufacturer PSE Prioritised Service Event RFMS Recency, Frequency, Monetary and Sensitivity model 4IR Fourth Industrial Revolution 1 1. INTRODUCTION 1.1 Purpose statement This study explores the critical stages involved in implementing a digital servitisation transformation and the role of leadership in facilitating such a transformation. 1.2 Background The earthmoving equipment industry has evolved significantly since the 19th century, with advancements in technology and increasing demand for infrastructure development driving growth. Earthmoving equipment dealers sell a wide range of heavy-duty machinery, including excavators, bulldozers, tractors and trucks, which are used in industries such as construction, mining, agriculture and forestry. The earthmoving equipment dealership model, which has long involved distributing Original Equipment Manufacturer (OEM) products and providing aftersales’ service, is undergoing a significant business model transformation driven by digital technologies (Baines et al., 2019; Goel et al., 2022; Kowalkowski et al., 2017). The rise of e- commerce platforms and online marketplaces has transformed the channels to market (Hoffman et al., 2019), allowing OEMs and suppliers of third-party parts direct access to customers. Additionally, the integration of autonomous technology, telemetry and predictive analytics models is expected to lower owning and operating costs of machines by reducing the frequency and intervals of maintenance and repair activities (Hoffman et al., 2019), thus reducing dealer aftersales’ revenue. Finally, the push for the electrification of earthmoving equipment as alternatives to traditional diesel-powered equipment is expected to reduce dealers' revenue in the future (Hoffman et al., 2019). These alternatives require fewer and minimal moving parts and have extended maintenance intervals, which would further reduce dealer aftermarket revenue. These technologies do not only impact the dealer revenue model; they also introduce new actors into the traditional OEM-dealer-customer ecosystem, changing the structure and dynamics within it (Porter & Heppelmann, 2014). Ecommerce platforms and online marketplaces allow OEMs and third-party suppliers to supply genuine or grey parts respectively to customers, in this way impacting dealer retail revenue and margins. 2 Technologies such as the Internet of Things (IoT) and big data analytics provide technology service providers with entry into the earthmoving equipment ecosystem. There is no end in sight in terms of the proliferation of digital technology, with generative Artificial Intelligence (AI) technologies such as chatbots and ChatGPT also emerging in the fold. Thus, the traditional earthmoving equipment business model will continue to be disrupted and dealers will have to adapt their business models if they are to survive. 1.3 Research problem Academics and practitioners agree that dealers must transform their business models toward digital servitisation by integrating digital technologies to provide innovative products and services (Goel et al., 2022; Kolagar et al., 2022). Digital servitisation is the process by which a company transforms its traditional business model to integrate digital technologies and services into its products or services. This approach not only enables firms to differentiate themselves from competitors but also creates new revenue streams (Goel et al., 2022). For example, a company that offers maintenance and repair services could offer advanced digital services that monitor the performance of the equipment in real time, predict maintenance needs, and optimise the equipment's operation to reduce downtime and improve efficiency. Digital servitisation combines two business models in the form of digitalisation and servitisation (Favoretto et al., 2022). Digital servitisation is a new phenomenon and despite a growing body of literature on the subject, little is known about its nature and how the process unfolds (Chen et al., 2021). The transformation process is often complex (Chen et al., 2021), requiring significant organisational change (Bustinza et al., 2018), investments in technology or platforms, organisational capabilities and ecosystems of partners (Baines et al., 2019; Kamalaldin et al., 2021). Leaders leading a servitisation transformation must navigate significant changes in the organisation's culture, structure and strategy while efficiently orchestrating the ecosystem actors (Sjödin et al., 2022). Digital servitisation is an ambidextrous process where leaders must contend with operating their current businesses efficiently whilst exploring servitisation transformation (Matusek, 2022). Kowalkowski et al., (2017) point to the need for new leadership skills beyond those needed to develop a separate service business within a product firm or to set up a service. These leaders must also drive collaboration and alignment with their ecosystem partners, who have vastly different agendas and trust issues. 3 Generally, many large manufacturers have been providing value-added services of varying complexity to customers; however, the emergence of digital technologies has forced them to transform their offerings through digital transformation (Favoretto et al., 2022). Firms are taking different approaches to digital servitisation transformation. Many have started by overlaying digital tools on their existing service offerings, while others have begun by investing in internal Information Technology (IT) systems and core skills development. Currently, there is no systematic approach for implementing digital servitisation transformation. The lack of a clear and logical approach for dealers to use in implementing digital servitisation transformation successfully is a concern, as many practitioners invest in digital technology without fully understanding the value equation or appreciating the challenges ahead (Chen et al., 2021). This lack of understanding of the key concepts of and requirements for implementing digital servitisation can result in the failure of these types of initiatives in the industry. 1.4 Research objectives The objectives of the research are: 1. To identify the key stages or steps involved in the digital servitisation transformation process for earthmoving equipment dealers. 2. To identify the logical sequence of the transformation stages. 3. To examine challenges faced by dealerships during the digital servitisation transformation process. 4. To examine the role of leadership in driving the digital servitisation transformation process in earthmoving equipment dealerships. 1.5 Rationale Literature on digital servitisation has focused on providing practitioners with frameworks related to the core technology, service offerings (Chen et al., 2021), business models (Chen et al., 2021) and ecosystems (Kamalaldin et al., 2021; Kolagar et al., 2022). It has also investigated transformational challenges (Khanra et al., 2021) that practitioners may encounter as they embark on the digital servitisation journey. Kimita et al., (2022) recently developed a maturity model for servitisation that may assist practitioners in measuring the maturity levels of an incumbent firm on the transformation process. This could help a business to identify its 4 current state and develop improvement plans to close the gap between this state and achieving digital servitisation transformation. However, a clear and in-depth process that firms can use to implement digital servitisation transformation successfully is lacking. Baines et al. (2019) have developed a four-stage servitisation progression model which describes the transformation process that takes place as a product-centric manufacturer servitises to compete through advanced services. While such a phased approach is very relevant to the practitioner, it does not define the process within the phases or stages nor their level of importance. Chen et al. (2021), in their examination of a Chinese air conditioning manufacturer, found digital servitisation transformation to follow a structured process that is characterised by both discontinuous and continuous interplay between business model and digital technology. The current study sheds light on the logical process for digital servitisation transformation through a study in a specific industry and geographical context. This research thus provides an understanding of the process in a different industry and geographical context. Discussions about digital servitisation in the country are relevant as most servitisation studies to date have been carried out in mature economies in Western and Eastern Europe and Asia (Chen et al., 2021; Favoretto et al., 2022; Paschou et al., 2020). In addition, the current study explores the role of leadership in digital servitisation transformation. The link between leadership and digital transformation is well documented as captured in the term “digital leadership”. Many studies have focused on identifying the key competencies and behaviours of digital leaders and their role in leading digital transformation initiatives (Kane et al., 2019; Kotter & Schlesinger, 1979). In addition to the attributes included in the classic change management theories, these studies have identified additional leadership attributes such as adaptability, digital literacy, and being transformative and forward looking, as key traits for digital leaders. Only a few studies have suggested links between leadership and servitisation (Antioco et al., 2008; Nie & Kosaka, 2014). More recent research by Kim and Toya (2019) in Japan leveraged the work from classic change management and leadership theories to identify the most suitable leadership styles to advance servitisation effectively in a manufacturing industry in Japan. The study identified charismatic leadership as an enabler, with autocratic and autonomous styles as a hindrance to digital servitisation transformation. Whilst literature links leadership and digitalisation and leadership and servitisation, literature 5 that links leadership and digital servitisation is limited. There is thus a need for research to explore the role of leadership in digital servitisation transformation. In light of the above discussion, this research aims to explore the critical stages involved in the digital servitisation transformation of earthmoving equipment dealerships. The study will contribute to the existing literature by providing insights into the practical implications of digital servitisation for dealerships and the leadership role needed to navigate this transformation. The findings can help dealerships to develop a roadmap for implementing digital servitisation and help leaders to acquire the necessary insights to lead the transformation process effectively. 1.6 Terms The key terms used in the research report are defined below. Aftermarket: The aftermarket can be defined as activities that take place after a product has been sold, such as maintenance, repair and customer support. CRM systems: Customer Relationship Management (CRM) systems are software applications that help businesses to manage their interactions with customers, including tracking customer interactions, managing customer data and automating certain customer-related processes. Digital servitisation: This is a process of transformation in which a company that primarily focuses on producing physical products shifts its business model to a service-oriented approach, supported by digital technologies. This transformation allows the company to reorganise its business processes, capabilities, products and services to provide greater value to customers and improve both financial and non-financial performance (Favoretto et al., 2022). Digital transformation: This involves the integration of digital technology into all areas of a business, resulting in fundamental changes to how the business operates and delivers value to customers. Digitalisation digitalization is a transformation of business processes, operations and interactions using digital technologies 6 Digitisation Digitization is the process of converting analogue information into digital format Earthmoving equipment: Earthmoving equipment is heavy-duty machinery, including excavators, bulldozers, tractors and trucks, that is used in industries such as construction, mining, agriculture and forestry. Grey parts: These are non-genuine parts that are produced by third-party manufacturers and sold in the market. OEMs: Original Equipment Manufacturers (OEMs) are companies that produce and sell products or components that are used in the production of other products by other companies. Servitisation: This is a business model that involves providing services in addition to selling physical products. 1.7 Delimitations This research has the following delimitations: a. The study focuses specifically on the earthmoving equipment industry and does not include other industries or sectors. b. The study is limited to the critical stages involved in implementing digital servitisation transformation and the role of leadership in facilitating the transformation and does not explore other aspects of digital transformation or servitisation. c. The study explores the leadership role in the transformation process and does not include characteristics, traits or styles of leadership. 1.8 Assumptions The study makes the following assumptions: a. The earthmoving equipment industry is undergoing significant disruption and transformation owing to the proliferation of digital technologies. b. Digital servitisation is seen as a viable strategy for dealers to use to transform their business models and remain competitive. 7 c. The current lack of understanding of the key concepts of and requirements for implementing digital servitisation can result in the failure of digital servitisation initiatives in the industry. d. Leadership plays a crucial role in driving the digital servitisation transformation process. 1.9 Chapter outline This research report is structured into the following chapters. Chapter 1: Introduction • Introduces the purpose of the research and its significance; • Provides background information on the earthmoving equipment industry and digital servitisation transformation; and • Presents the research problem and research objectives. Chapter 2: Literature Review • Provides a review of relevant literature on digital servitisation and its implementation in the earthmoving equipment industry; • Discusses the challenges faced by dealerships during the digital servitisation transformation process; and • Examines the role of leadership in driving the digital servitisation transformation process. • Selects a theoretical framework to aid understanding and develops a conceptual framework along with research questions Chapter 3: Methodology • Outlines the research design and approach; • Describes the data-collection methods, including interviews • Discusses the data-analysis procedures. Chapter 4: Presentation of Findings • Presents of findings related to research questions. 8 Chapter 5: Discussion of Findings • Discusses findings related to research questions. Chapter 6: Conclusion and Recommendations • Concludes on research problems. • Offers recommendations for researchers and practitioners. • Provides suggestions for future research. 1.10 Conclusion In conclusion, this introductory section of the report provides background to the industry under study, outlining its evolution, the challenges posed by digital technologies, and the imperative for earthmoving equipment dealerships to leverage digital services to remain competitive in the long term. It emphasizes the need for systematic approaches to navigate the transformation process and highlights the research objectives, which include identifying transformation stages, understanding challenges, and exploring leadership dynamics. The research aims to offer insights into practical implications for industry players and provide guidance for effective implementation. It underscores the urgency of adaptation in the face of technological disruptions and presents a structured framework for inquiry and analysis. 9 2. LITERATURE REVIEW 2.1 Introduction This chapter presents a review of literature related to digital servitisation, beginning with a comprehensive exploration of the theoretical foundations and components of digital servitisation. It examines the underlying processes, stages and challenges encountered in digital servitisation transformation, and the critical role of leadership in this transformation. Understanding these foundations provides insights into their successful implementation and identifies key factors and milestones for organisations to navigate. The review is used to develop a conceptual framework for understanding the complex dynamics of digital servitisation, including factors that impact implementation and potential challenges. 2.2 Defining digital servitisation Digital servitisation transformation has its roots in the broader concept of servitisation (Kohtamäki et al., 2022), which refers to the process of shifting from selling physical products to selling services that provide value to customers (Martinez et al., 2017). The goal of servitisation is to create long-term relationships with customers by offering ongoing services and support that meet their evolving needs. Digital servitisation transformation takes this concept further by leveraging digital technologies and services to create even more value for customers. The convergence of servitisation and digitisation gives rise to four strategic positions for organisations, based on the level of digitalisation and servitisation (Frank et al., 2019). 10 Figure 1: Innovation trajectories on Industry 4.0 and servitisation, as adapted from Frank et al. (2019) Figure 1, adapted from Frank et al. (2019), illustrates these positions and contributes to the understanding of the digital servitisation concept. The level of digitisation focuses on implementing Industry 4.0 technologies and enhancing internal processes (e.g., cost reduction, flexibility and productivity), while the servitisation level considers the importance of service offerings and customer-focused value propositions (Frank et al., 2019). Digital servitisation occurs when these two concepts converge, as depicted in Figure 1. Digital servitisation requires companies to reorganise their processes, products and services with digital technologies to deliver greater value and improve both financial and non-financial performance (Favoretto et al., 2022; Chen et al., 2021; Tewari, 2020). By integrating digital technologies and services, companies can create new revenue streams, increase customer loyalty and gain valuable insights into customer behaviour, driving internal process efficiency (Baines & Lightfoot, 2013; Goel et al., 2022). 2.3 Stages in transitioning to services and the transformation process There are several theories that aim to explain the servitisation transformation process. Lütjen et al. (2017) conducted a study of German utility firms and identified three transition stages to servitisation: service initiation, service anchoring and service extension. Each of the three stages is defined by the complexity of service offerings provided by the firms. Firms in the 11 service-initiation stage offer basic information about their services but maintain absolute focus on traditional product-related services. They are limited to a no-services budget and place a greater emphasis on cost efficiency on the high-volume selling products. In the service- anchoring stage, firms offer not only product-related services but also services that require high customer integration such as smart and digital services. In the service-extension stage, firms focus on innovating and experimenting to expand their services. While this framework helps practitioners with how to transition towards advanced levels of digital servitisation, it does not provide any guidance on how to undertake this transformation process. Baines et al., (2019) propose an aggregated level servitisation model that consists of four stages: exploration, engagement, expansion and exploitation. The exploration stage involves searching and finding out about the concept and opportunity, while the engagement stage seeks to evaluate and demonstrate advanced services until the potential is accepted within the organisation (Baines et al.,2019). The expansion stages involve increasing the scale and speed at which advanced services are innovated and implemented until significant value is demonstrated within the organisation (Baines et al.,2019). This includes the increasing of service budget, resources and development of services process as well as the balancing of service and product business models. The exploitation stage seeks to optimise the innovation and delivery of an advanced services portfolio unless the business is adversely disrupted. Baines et al.’s (2019) first three steps are consistent with Lütjen et al.’s (2017) service-initiation, service-anchoring and service-extension stages; however, Baines et al. (2019) go further by acknowledging contextual factors that drive the transition. 12 Figure 2: Baines et al. (2019) Four-stage servitisation progression model In their research on a Chinese air conditioning manufacturer, Chen et al. (2021) outlined three distinct stages in the process of digital servitisation similar to Lütjen et al.’s (2017) stages. The first stage involves offering standard product services, using an internal activity system to capture value through efficiency gains. The second stage focuses on providing customised solutions through a supply and distribution chain, capturing not only efficiency gains but also accountability and shared customer value. The third and final stage is characterised by the provision of smart solutions through an ecosystem that captures efficiency, accountability and novel customer value. Chen et al.’s (2021) study contributes to the understanding of digital servitisation in several ways. Firstly, they highlight that servitisation and digitalisation evolve in parallel, with digital technology enabling even the most basic service value propositions from the beginning. Secondly, they emphasise the interplay between the business model and digital technology within and across the stages of digital servitisation. Finally, they identify both continuous and discontinuous process features of digital servitisation, with the development of existing business model elements being continuous and the addition of new elements being discontinuous along the digital servitisation trajectory. 13 Figure 3: Chen et al. (2021) three stages of digital servitisation The studies conducted by Lütjen et al. (2017), Baines et al. (2019) and Chen et al. (2021) contribute to the understanding of the digital servitisation process and the stages involved. However, while these studies provide insights into the transition from basic services to complex services, they do not provide a detailed depiction of what a service journey might entail. Martinez et al. (2017) conducted a study on the service journeys of three firms in the context of smart or complex services. They initially identified 12 stages in the service journey. However, they later refined these stages into a service strategy model consisting of seven stages. This model offers valuable guidance for practitioners involved in service transformation programmes. The seven stages in the service strategy model are as follows: 1. Assess the market and internal readiness for the transformation, thus, developing the burning platform . 2. Create strategic and cultural context, thus, defining the service vision, developing the service culture and engaging partners. 3. Develop the structures and governance, including defining the leadership to drive the programme and setting out the organisational structure to execute the transformation. 4. Develop the service processes, i.e., designing the service model, planning, piloting and scaling. 5. Engage and build trust with customers and ecosystem partners and enabling change. 14 6. Define resources and initiate skilling. 7. Optimise and communicate best practices. Figure 4: Seven-stage service strategy model (Martinez et al., 2019) This model provides a more comprehensive and detailed approach to the servitisation transformation process; however, it does not explicitly consider the impact of the pervasive nature of digital technology on the process in respect to agility and adaptation. Sjödin et al. (2020) introduced the agile co-creation model to drive digital servitisation. Their study proposed an iterative and adaptive approach to the digital servitisation transformation process. The model highlights the importance of customer involvement in service design and delivery, the need to embrace agility and adaptability, and the importance of co-creation in generating value for both the customer and the company. This approach provides a more dynamic and flexible perspective of the digital servitisation transformation process, acknowledging the impact of digital technology on the process and the need for ongoing adaptation and evolution. 15 2.4 Challenges in transitioning to digital services The journey towards digital servitisation poses significant challenges, demanding considerable investments in technical, human, and organisational resources and capabilities (Lütjen et al., 2017; Martinez et al., 2017). Lütjen et al. (2017) investigated the various phases of service transition, suggesting that companies encounter distinct challenges that correspond to their specific transformational stage. Through empirical data analysis, the authors identified that companies in the early service-transition phase grapple with strategy-related barriers, whereas firms in the service-anchoring phase struggle with a lack of systematic innovation management. Companies in the service-extension stage have primarily circumvented strategy and implementation impediments but are currently contending with market-associated barriers. Martinez et al. (2010) highlighted the critical role of strategic alignment during the transition to digital servitisation. It is incumbent upon firms to ensure that their digital servitisation strategy corresponds seamlessly with their overarching business strategy and objectives. Moreover, firms are compelled to address the digital servitisation paradox, as postulated by Sjödin et al. (2020), in which companies are required to strike a balance between providing custom services tailored to specific customer needs and maintaining profitability, alongside investing in novel digital technologies and capabilities to meet customer demands. Maintaining this balance requires a clear understanding of the market and customer needs, coupled with careful strategic planning and effective management of competing priorities (Martinez et al., 2010). Vial (2019) recognised inertia and resistance as key impediments to transformation. Inertia relates to entrenched resources and capabilities that pose barriers to radical change, encompassing established relationships, optimised production procedures and inflexible resources that are challenging to reconfigure. Similarly, Martinez et al. (2010) identified the product-service culture that is deeply ingrained in many organisations as a formidable challenge to servitisation. Firms that have been supplying products for decades may find it difficult to make a mental shift towards providing integrated offerings of products and services. Employee resistance, characterised by a reluctance to adopt disruptive technologies, further compounds this challenge (Vial, 2019). Such resistance may stem from innovation fatigue or a lack of clarity about the benefits of digital technologies (Vial, 2019). Overcoming these hurdles calls for cultural changes at the organisational level (Bustinza et al., 2018), facilitated by 16 transformational leadership (Matt et al., 2015), process alterations, stakeholder involvement, and alignment with employees' expectations and organisational culture (Vial, 2019). Another obstacle lies in the provision of integrated offerings (Martinez et al., 2010). Companies must seamlessly integrate their products and services, which necessitates extensive alterations to internal processes and capabilities. To construct integrated offerings and respond appropriately to customer needs, it is imperative to synchronise product and service design processes. Additionally, it is crucial to establish performance metrics to gauge the organisation's collective capacity to deliver integrated offerings efficiently and effectively. Conventional manufacturing-based metrics are unsuitable for measuring product-service provision, as they fail to capture the subtleties of integrated offerings. This means that it is essential to devise novel performance metrics in alignment with digital servitisation goals, to provide a comprehensive view of the organisation's performance. Supplier relationships also play a vital role in the transition to digital servitisation (Martinez et al., 2010). Companies may need to collaborate closely with suppliers that possess complementary capabilities and resources to deliver integrated offerings. This implies ecosystem transformation (Kolagar et al., 2022) and may involve contract renegotiations and the establishment of new relationships with suppliers that are better positioned to fulfil the requirements of a digital servitisation strategy. 2.5 Digital servitisation transformation and leadership Digital servitisation is a business transformation that calls for organisational change (Bustinza et al., 2018). Thus, it requires strong leadership to drive change and ensure successful implementation. Leaders play a crucial role in creating a culture of innovation, motivating employees and aligning resources towards the digital servitisation strategy. Several studies have emphasised the importance of leadership in the digital servitisation transformation process (Kowalkowski et al., 2017; Martinez et al., 2017) journey. Favoretto et al. (2022), Kane et al. (2019) and Tewari (2020) suggest that leadership plays a crucial role in promoting digital servitisation by providing a clear vision and building engaging leadership. This vision should encompass the organisation's customers, products and services (Tewari, 2020). Leaders must communicate the vision and strategy (Kane et al., 2019) effectively and inspire and motivate their teams to achieve their goals through charismatic leadership (Kim & Toya, 2019). 17 Leaders must also possess a deep understanding of the business model and align the organisation’s digital strategy with the overall business strategy. Kowalkowski et al. (2017) highlight the need for leaders to build agile service organisations within product organisations, prioritise service growth routes in the face of new and disruptive technologies, and address business model questions on value creation, delivery and capture to overcome old business model barriers (Sjödin et al., 2022). Since digital servitisation relies heavily on ecosystem partnerships, Foerster (2023) emphasises the need for leaders to assume the role of finding, orchestrating and maintaining the proper alignment structure of the ecosystem of partners. Digital servitisation is rooted in the broad concept of servitisation and digital transformation. Leaders who are responsible for driving digital servitisation transformation may need to possess the ability to lead service transformation and digital transformation programmes, including creating a culture of innovation and experimentation (Kane et al., 2019). In addition, digital servitisation is an ambidextrous process where leaders must contend with the exploitation of their current businesses whilst exploring servitisation transformation (Matusek, 2022). Overall, existing research suggests that leadership plays a critical role in promoting digital servitisation transformation by providing a clear vision, making business model decisions, aligning stakeholders, and building trust and cooperation between stakeholders. 2.6 Theoretical framework Digital servitisation is a relatively new concept, with limited theoretical foundations. To develop a comprehensive understanding of this phenomenon and address the study’s research objectives, existing theories and frameworks were selected from the broader digital transformation literature. Bowersox et al. (2005) introduced the Digital Enterprise Integrative Management framework, which emphasises the importance of digital business transformation for supply-chain excellence. The framework focuses on integrating core processes, real-time information sharing and operational excellence to promote collaboration within the supply chain. However, it lacks detailed guidance on the transformation process and may require updating to align with current practices and technologies. 18 A more recent framework proposed by Nugraha et al. (2022) specifically for creative industries has five stages: readiness assessment, involvement, process, organisation and product evaluation. This framework offers detailed guidance on the actions and steps that organisations should take at each stage. However, the framework falls short in addressing the role of leadership in the transformation. In contrast, Abdallah et al. (2021) propose a framework for manufacturing industries that integrates people, strategy and leadership, business processes and enabling technologies. This framework comprehensively covers critical aspects of the transformation process, including the role of leadership in the process. However, it lacks detail on how the process should unfold. A notable framework proposed by Matt et al. (2015) focuses on four dimensions of digital transformation strategy: the use of technologies, changes in value creation, structural changes and financial aspects. This framework provides a solid starting point for understanding the dimensions of digital transformation. It prescribes a high-level process step in the transformation process and, even though this is not explicitly indicated as a dimension, it acknowledges the role of leadership along the entire transformation. Figure 5: Matt et al. (2015) digital transformation framework Despite extensive research on digital transformation, academic frameworks that address the transformation process are not as prevalent. Business-led frameworks, such as the digital reinvention model proposed by Berman et al. (2016) and the digital compass framework of Wade et al. (2023), provide more comprehensive approaches to digital transformation. However, it is worth noting that these frameworks are not grounded in theory (Nwaiwu & Tomas Bata University in, 2018). 19 From an academic standpoint, the framework proposed by Matt et al. (2015) offers a solid foundation for addressing the study’s research objectives as they relate to digital transformation. The framework is founded on the premise that organisations adopt digital technologies to transform their value-creation paths and maintain competitiveness. This requires implementing structural changes and overcoming barriers that impede the transformation. These changes should have positive impacts on organisations, and the broader ecosystem (Vial, 2019). The following sections explore the various dimensions of this framework. 2.6.1 Use of technology Digital transformation relies on various Fourth Industrial Revolution (4IR) technologies such as AI, IoT, cloud computing, big data analytics and blockchain (Abdallah et al., 2021). These technologies improve efficiency, data collection, security, decision-making and operational processes in organisations. Enterprise Resource Planning (ERP) software facilitates real-time information flow, with cloud ERP offering enhanced privacy and speed compared to traditional ERP systems. However, digital technologies alone do not provide significant value; their value emerges from their context of use (Vial, 2019). The use of technologies in a company depends on the company’s attitude toward and strategic leverage of new technologies to create, capture and deliver value. The use of technology therefore incorporates the strategic role of IT for a company and its future technological ambition (Matt et al., 2015). The organisation must have the ability to select and exploit technologies to develop new capabilities, drive new service offerings and improve its operations. The organisation must also decide if it intends to be a market leader in technology usage or to rely on established standards and use technologies as a means to fulfil business operations (Matt et al., 2015). While being a technological leader can bring advantages, it also carries risks and requires high investments and specific competencies. 2.6.2 Changes in value creation From a business perspective, the adoption of new technologies typically brings about changes in value creation (Matt et al., 2015). These changes pertain to the effects of digital transformation strategies on the value chains of companies, specifically how the new digital activities differ from the traditional, often analogue, core business (Matt et al., 2015). Embracing these deviations presents opportunities for expanding and enhancing the existing portfolio of products and services. This suggests that leaders need to shift their focus towards developing new ways of realising and monetising value, creating innovative business models 20 and financing methods (Berman et al., 2016). Opportunities include, first, that digital technologies enable the creation of new value propositions, including focused-on service offerings rather than solely physical products. Secondly, digital technologies facilitate changes in distribution and sales channels, leveraging social media and algorithmic decision-making (Vial, 2019). Finally, digital technologies enhance organisational agility and ambidexterity, enabling quick adaptation, process optimisation, identification of market opportunities and the integration of digital innovation with existing resources (Vial, 2019). 2.6.3 Structural changes Digital transformation requires organisations to make structural changes (Matt et al., 2015; Nugraha et al., 2022; Vial, 2019) that are essential for promoting agility, fostering collaboration and effectively integrating digital technologies (Vial, 2019). An organisation has the choice of establishing a separate team or cross-functional teams. It is important to assess whether products, processes or skills are the most affected by these structural changes (Matt et al., 2015). If the changes are relatively limited, integrating the new team into existing corporate structures may be more reasonable (Matt et al., 2015). However, for more important changes, it might be preferable to establish a separate subsidiary within the firm. These teams would maintain a level of autonomy while having access to existing resources where necessary. Human capital forms the foundation of any organisational change effort (Abdallah et al., 2021). Digital transformation often requires organisations to develop specialised capabilities in their employees. This can involve acquiring new technical skills, such as data analysis, AI or digital marketing, as well as fostering a mindset that embraces innovation and change. Employees may need to adapt to new technologies, processes or ways of working. In order to enhance an organisation's human capital for digital transformation, it is crucial to identify the gaps in digital capabilities within the organisation (Abdallah et al., 2022). This involves assessing the current skill set and knowledge of employees and comparing them to the skills and capabilities required to support digital transformation initiatives. By identifying these gaps, organisations can develop targeted training programmes, hire new talent or reassign existing employees to roles that align with the digital strategy. 2.6.4 Financial aspects Financial aspects of an organisation are crucial in driving digital transformation, serving as both motivators for and constraints on the transformation (Matt et al., 2015). They include a firm's urgency to act and its capacity to finance the transformation. Lower financial pressure 21 may reduce the urgency to transform, while financial constraints may hinder funding (Matt et al., 2015). Organisations should acknowledge the need for digital transformation, explore options and have open discussions about finances. These should take into consideration the operational efficiency benefits (Vial, 2019), from automation to process improvement and cost savings, as well as broader organisational performance (Vial, 2019) in terms of financial performance, growth, reputation and competitive advantage. Financial aspects also include determining the profit formula or digital revenue model (Linde et al., 2023) to sustain motivation and support the continuation of the transformation process. 2.6.5 Procedural aspects of the transformation The procedural steps involved in digital transformation strategies are as follows: • Assigning clear responsibilities (Matt et al., 2015; Nugraha et al., 2022): It is crucial to designate someone with sufficient experience in transformational projects as the operational leader responsible for the digital transformation strategy. The leader’s incentives should align directly with the strategy's targets and progress. • Determining senior management role (Abdallah et al., 2022; Matt et al., 2015): There is no definitive answer as to which senior manager should be in charge of the digital transformation strategy. Candidates may include Chief Information Officers (CIOs), Chief Executive Officers (CEOs), dedicated business transformation managers or Chief Digital Officers (CDOs). Consistency in this role is preferred as transformational processes can take a long time. • Obtaining top management support (Matt et al., 2015): The support of top management is essential throughout the entire transformation process since digital transformation strategies affect the entire company. Resistance from different areas of the company may arise, and effective leadership skills is required to address and overcome such resistance. • Ensuring adequate staffing and external expertise (Matt et al., 2015): Firms need to make sure that they have the right staffing and expertise for formulating, implementing, evaluating and adapting digital transformation strategies. Additional support from experts both within and outside the company may be necessary. • Continuously reassessing the strategies (Matt et al., 2015): Digital transformation strategies should be subject to continuous reassessment. This involves evaluating 22 underlying assumptions and assessing the progress made at various stages. Given the swift changes in digital technologies, there is often high uncertainty, and reassessment helps identify the need for corrective actions. • Defining clear procedures and measures (Matt et al., 2015): Clear procedures and measures should be established to evaluate intermediate progress and set thresholds for corrective actions. This ensures management credibility and avoids decision-making biases, especially when the organisation is faced with high sunk costs that may hinder necessary adjustments. 2.7 Conceptual framework The proposed conceptual framework for digital servitisation is based on the existing knowledge of digitisation and servitisation, incorporating elements from the digital transformation framework by Matt et al. (2015) and insights from the servitisation literature. The proposed framework consists of five dimensions: strategy and leadership, the use of technology, the financial aspects, changes in value creation and structural changes. The dimensions of the framework, apart from strategy and leadership, align with the theoretical framework developed by Matt et al. (2015). These dimensions reflect the key areas that need to be considered during the digital servitisation process. Matt et al. (2015) acknowledges the importance of these dimensions in formulating the transformation strategy and recognise the role of leadership in driving the transformation. However, the proposed conceptual framework explicitly includes strategy and leadership as a distinct dimension, highlighting its significance in guiding the digital servitisation journey. By incorporating strategy and leadership as a separate dimension, the conceptual framework recognises the need for a strategic vision and effective leadership to navigate the complexities of digital servitisation, as highlighted by much of the literature consulted (Favoretto et al., 2022; Tewari, 2020). Strategy and leadership encompass activities such as envisioning new possibilities (Berman et al., 2016), setting servitisation as an organisational ambition, defining a new business model, allocating resources and orchestrating (Wade et al., 2023) a transformation programme. This dimension emphasises the crucial role of strategic thinking and leadership in driving the overall transformation process. 23 At an aggregate level, both a digital transformation framework and a digital servitisation transformation framework address similar dimensions. However, there are key variances in terms of the specific sub-activities and focus areas within each dimension. For instance, in the proposed conceptual framework for digital servitisation, the dimension of structural changes has been expanded to include activities related to resourcing and training, in line with recommendations by Abdallah et al. (2022) and Martinez et al. (2017). Under the dimension of changes in value creation, ecosystem development (Foerster, 2023) and agile and co-developing methods (Sjödin et al., 2022) have been introduced. The inclusion of the latter methods is in line with Sjödin et al.’s (2022) findings, which highlight the significance of adopting agile methodologies and engaging in co-creation processes with customers and partners to develop and refine service offerings. These methods enable organisations to be more adaptive, iterative and customer-centric in their approach to value creation. Adopting these methods recognises the importance of building and orchestrating a network of suppliers and customers to support the servitisation process. Figure 6: Conceptual framework These variations in sub-activities and focus areas introduced by the conceptual framework proposed for this study reflect the specific considerations and challenges that arise in the context of digital servitisation. While the overall dimensions align with a broader digital transformation framework, the expansions and additions in the proposed framework for digital servitisation address the unique requirements and complexities associated with the 24 transformation of traditional product-oriented businesses into service-oriented ones. By incorporating these specific sub-activities and focus areas, the digital servitisation framework provides a more tailored and comprehensive approach to guide organisations through the intricacies of transforming their business models, operations and value-creation processes to embrace digital servitisation successfully. Additionally, the conceptual framework draws upon the four-stage servitisation progression model proposed by Baines et al. (2019). This model includes the stages of exploration, engagement, expansion and exploitation. The exploration stages within the framework encompass the strategy and leadership aspect, while the engagement stages incorporate the financial considerations, use of technology and structural changes. The expansion and exploitation stages are encapsulated within the changes-in-value-creation dimension of the framework. By adapting this servitisation progression model, the conceptual framework provides a comprehensive structure for examining the different stages and dimensions of the digital servitisation transformation process. In summary, the proposed conceptual framework provides a multidimensional approach to digital servitisation. It requires strategic leadership to envision new possibilities, define a business model, allocate resources and drive transformation. The financial dimension necessitates clear business objectives and goals, operational efficiency, budgeting, funding and effective portfolio governance to underpin the servitisation efforts. Use of technology is critical, requiring IT strategic ambition and the adoption of suitable technologies to facilitate and enhance the process. Structural changes are also imperative, encompassing the appointment of a person to the position of transformation lead, the creation of a transformation team (integrated or separate), employee training and governance setup. Finally, the transformation also necessitates changes in value creation, involving the design of service processes, implementation of agile co-creation methods, orchestration of a supplier and customer ecosystem, and development of solutions through pilot testing and scaling. The subsequent section explores gaps in literature that leads to the formulation of research questions. 2.7.1 Key stages in the transformation process The extant literature, including works by Baines et al. (2019), Chen et al. (2021) and Lütjen et al. (2017), principally underlines the stages of transition to servitisation. While these models offer valuable insights into the overall stages of servitisation, it is important to note that they 25 operate at a higher level of aggregation and do not outline the specific steps or actions within each stage. Martinez et al.'s (2017) seven-stage servitisation strategy model, for example, offers foundational insights but does not comprehensively address crucial dimensions such as technology adoption, financial aspects or the implementation of agile and co-creation methodologies. Current literature, therefore, provides fragmented perspectives on the digital servitisation transformation process, leaving a comprehensive overview wanting. This gives rise to the following research question: Research Question 1: What are the key stages or steps involved in the digital servitisation transformation process for earthmoving equipment dealers? The research by Chen et al. (2021), Baines et al. (2019), Lütjen et al. (2017) and Martinez et al. (2017) points to the fact that the process of transitioning to advanced services is neither linear nor strictly ordered; it involves iterations and reciprocations. Martinez et al. (2017) specifically identified the service journey as intuitive and emergent rather than logical or structured. However, it is important to note that while this may be true for the service journey itself, it is unclear whether the overall transformation process, including strategy and leadership, financial aspects, use of technology, structural changes and changes in value creation, also lacks structure and logic. This leads to the second research question: Research Question 2: What is the logical sequence of the transformation stages? 2.7.2 Challenges in the digital servitisation transformation process While extant literature on the process of digital servitisation transformation underlines the challenges that companies face and the strategies for surmounting these challenges, the majority of these studies primarily focus on large manufacturing corporations in developed economies. As a result, the specific challenges faced by earthmoving equipment dealers in emerging economies, as they navigate towards digital servitisation, are unclear. It is particularly important that this research gap is addressed, considering the impact of manufacturer-dealer alignment (Kumar et al., 2020) on the transformation process, along with the well-known characteristics of emerging economies such as insufficient infrastructure, skill gaps, market immaturity and lack of technological readiness (Lambrechts et al., 2020). Consequently, the third research question is developed with the aim of shedding light on these specific challenges, considering the aforementioned factors and their influence on the transformation journey of earthmoving equipment dealers in emerging economies. 26 Research Question 3: What are the challenges faced by equipment dealers during the digital servitisation transformation process? 2.7.3 The role of leadership in digital servitisation transformation The role of strategy and leadership in driving digital servitisation efforts has been highlighted in the literature (Kowalkowski et al., 2017; Martinez et al., 2017). Leaders are tasked with establishing a clear vision and setting strategic goals that align with the organisation's transformation into a service-oriented digital business (Kowalkowski et al., 2017; Martinez et al., 2017). Business-led research (Berman et al., 2016; Wade et al., 2023) and academic theories (Chen et al., 2021; Matt et al., 2015) acknowledge the importance of leadership in the digital servitisation context, including activities such as conceiving, resourcing and orchestrating the transformation while managing barriers to change (Berman et al., 2016; Matt et al., 2015). However, some of these leadership activities are outlined in generic terms that fail to specify the key roles or actions demanded of leaders to provide actionable guidance to the transformation. These observations lead to the question: Research Question 4: What is the role of leadership in the digital servitisation transformation process in earthmoving equipment dealerships? 2.8 Conclusion of literature review The primary objective of the literature review as set out in this chapter was to gain a comprehensive understanding of the theoretical foundations of digital servitisation transformation. This was undertaken in order to address research objectives concerning the stages, sequence, challenges and leadership role in the transformation process for earthmoving equipment dealerships. The review provided a clear definition of digital servitisation as the integration of digital technologies into traditional businesses to offer value-added services. The review also highlighted the potential benefits of digital servitisation for organisations. The review identified a convergence of literature on service transition models within the context of servitisation transformation. However, it also recognised the focus of previous studies as being primarily limited to the stages of service transition, leaving gaps in understanding other crucial dimensions such as strategy, finance and structure in the broader digital servitisation transformation process. 27 Challenges encountered during the transformation process were explored, including the need for strategic alignment, overcoming inertia and resistance, delivering integrated offerings and managing supplier relationships. These insights shed light on the complexities that organisations face in their digital servitisation journey. However, there is a lack of clarity regarding potential contextual factors that could impact the successful implementation of services, particularly within emerging economies. The literature also emphasised the vital role of leadership in driving the digital servitisation transformation process. Leaders are responsible for providing a clear vision, aligning resources, making strategic decisions, and fostering a culture of innovation and change. They play a critical role in overcoming challenges, navigating transformation stages and ensuring successful implementation. However, the existing literature presented a fragmented view of leadership roles, lacking a comprehensive perspective. In reviewing several theoretical frameworks proposed by Bowersox et al. (2005), Nugraha et al. (2022), Abdallah et al. (2021) and Matt et al. (2015), the study identified Matt et al.'s (2015) framework as the most comprehensive. This framework encompasses the use of technology, changes in value creation, structural changes and financial aspects. As such, it served as the foundation for the study. A conceptual framework for digital servitisation was proposed, incorporating five main dimensions: strategy and leadership, use of technology, financial aspects, changes in value creation and structural changes. This framework offers a comprehensive view of digital servitisation transformation, emphasising the significance of strategic vision, technology adoption, financial aspects, value-creation processes and organisational changes. To validate and further refine the proposed framework, in-depth interviews were conducted with senior executives in earthmoving equipment dealerships with the aim of providing valuable insights and contributing to the practical application of the framework in real-world contexts. The results of these interviews are presented in Chapter 4 of this research report. Overall, the literature review enhances the understanding of digital servitisation by examining its various aspects. It establishes a foundation for the research and provides valuable insights for the digital servitisation journey. 28 3. RESEARCH METHODOLOGY 3.1 Introduction In this chapter the methodology used by the study is presented. The chapter begins with a description of the research approach and design. It then presents an account of the methods used for data gathering and analysis. Lastly, steps taken to ensure the quality of the study and ethical considerations are discussed. 3.2 Research approach The study used a qualitative research approach to investigate the subjective experiences and interpretations of individuals engaged in digital servitisation processes. This choice of research approach was motivated by the limited knowledge surrounding the concepts of digital servitisation and its transformation process as revealed by the literature review conducted for the study. Currently, there is no established means of quantitatively assessing the dimensions and interrelations of digital servitisation and its impact on other factors. For this reason, a qualitative research approach was deemed the most suitable approach for facilitating a comprehensive and detailed understanding of the practices along with the complexities and challenges associated with digital servitisation transformation. This aligns with Sofaer’s (1999) perspective that qualitative research enables a nuanced exploration of complexities. 3.3 Research design An exploratory research design was chosen for this study with the aim of conducting a thorough investigation into the process of digital servitisation transformation within two earthmoving equipment dealerships. The rationale for selecting an exploratory research design stemmed from the limited existing knowledge and understanding of digital servitisation within these particular contexts. Adopting an exploratory research approach allowed for an in-depth exploration and understanding of the transformation process in real-world settings. The exploratory nature of this design facilitated the collection and analysis of diverse forms of evidence, including documents, interviews and observations, in this way ensuring a comprehensive and holistic examination of the phenomenon under investigation. This research design was particularly suited to the study’s research questions and enabled flexibility in 29 adapting the research process according to emerging findings. It also facilitated the identification of patterns and trends across the selected cases. Ultimately, the exploratory research design provided a valuable foundation for generating insights in the realm of digital servitisation transformation. 3.4 Data-collection method Data was collected through semi-structured interviews. Semi-structured interviews were chosen as they allowed for in-depth exploration of participants' experiences and perceptions while providing the researcher with the flexibility to probe interesting areas that emerged during the interviews. Data was collected from managers and senior executives in earthmoving equipment dealerships who had been directly involved in their organisation's digital servitisation journey. The interviews were conducted through video conferencing platforms owing to logistical constraints particularly to accommodate participants residing in Türkiye. The interviews were audio-recorded, transcribed verbatim, and anonymised for analysis. 3.5 Population and sample size The population for this study consisted of earthmoving equipment dealerships undergoing digital servitisation transformation at the time of the study. The sample size was determined through purposive sampling, with organisations that represented a diverse range of characteristics such as location and level of digital servitisation implementation selected. Two organisations, one in South Africa and the other in Türkiye were chosen to enhance diversity. Given the qualitative nature of the study, data was collected through semi-structured interviews with CEOs, executives and digital leads from these organisations. The sample size for the interviews was nine participants. This sample size was considered sufficient to ensure that a comprehensive range of perspectives was captured across the dealerships. These senior executives were chosen because of their direct involvement and crucial roles in the digital servitisation transformation process, making them valuable sources of insights and experiences. 3.6 Research instrument The main research instrument was an interview guide developed on the basis of the proposed conceptual framework and research questions developed for the study, as set out in Chapter 2 of this report. The interview guide included open-ended questions to encourage participants to 30 provide in-depth insights and share their experiences on the research topics, including the stages of digital servitisation transformation, challenges faced and the role of leadership during implementation. Refer to Appendix C for the interview guide and interview questions. 3.7 Procedure for data collection Data collection began after the researcher had been granted ethics approval by the Wits Business School Ethics Committee to conduct the research and had received informed consent from the participants to participate in the interviews. Participants were contacted via email and invited to participate in the study. The interviews were conducted using video conferencing tools, recorded with permission of the participants and transcribed verbatim. With the participants’ consent, the interviews were recorded for transcription and analysis purposes. 3.8 Data-analysis strategies and interpretation As its data-analysis strategy, the study employed thematic analysis to examine and interpret the data obtained from the interview transcripts. Initially, the data was segmented into manageable categories through the process of coding. This initial coding involved identifying meaningful units of data and assigning descriptive labels to them. The codes were refined and developed into themes, which represented patterns and connections within the data. These themes were further analysed and interpreted in relation to the research questions. To enhance the credibility and efficiency of the data analysis, ATLAS.ti, a Computer-Aided Qualitative Data Analysis Software (CAQDAS), was utilised. The CAQDAS aided in organising, sorting and managing the large volume of data collected. It facilitated the coding and thematic-analysis process by allowing for systematic data exploration, coding and retrieval. The software enabled the researcher to track and compare codes and themes across different transcripts, ensuring consistency and accuracy in the analysis. Throughout the analysis, the researcher engaged in constant comparison, examining similarities and differences within and across the data. This iterative process helped refine and validate the identified themes and ensured that the interpretations aligned with the data. The final step of the data analysis involved synthesising the themes and findings to generate a coherent and comprehensive interpretation of the data. This interpretation is presented in the findings section of the report, in a way that is consistent with the research questions and supported by evidence from the data. 31 3.9 Possible limitations of the study One possible limitation of this study was the potential for bias in participant selection and self- reporting. Purposive sampling has the potential to introduce selection bias, and participants' responses may be influenced by their own perspectives and experiences. 3.10 Quality assurance To ensure the robustness and trustworthiness of the study, in line with the qualitative research approach adopted, various measures were implemented for quality assurance. These measures included the following: • Reliability: To enhance the reliability of the study, the research interviews were conducted using a structured approach with standardized questions. Each interview session followed a predetermined protocol to ensure consistency in data collection. Additionally, the interview transcripts were carefully reviewed for accuracy and completeness, and any discrepancies or ambiguities were addressed through follow-up inquiries or clarifications with participants. This meticulous approach aimed to minimize potential biases and errors in data interpretation, thus contributing to the overall reliability of the study findings. • Transferability: The transferability, or generalisability, of the research was addressed by providing rich descriptions of the research context, participants and data-collection procedures. This aimed to enable other researchers to apply the findings to other contexts or settings. Detailed documentation of the research process allowed for potential transferability and comparison to similar studies. • Validity: To enhance the validity of the study, member-checking was employed. This involved sharing a summary or interpretation of the findings with participants to ensure accuracy and alignment with their experiences and perspectives. Participant feedback and verification helped to establish the credibility and validity of the data interpretation. In addition, triangulation of data sources and researcher reflexivity contributed to enhancing the validity of the study. 32 • Researcher reflexivity: The researcher's reflexivity was maintained throughout the research process. This involved recognising and addressing potential biases, assumptions or preconceived notions that the researcher might bring to the study. Reflexivity allowed for transparency and reduced the potential influence of the researcher's subjective viewpoints on data collection, analysis and interpretation. • Detailed documentation: Comprehensive documentation of the research process, including the research design, data-collection methods and data-analysis procedures, was maintained. This ensured transparency and allowed for the replication and verification of the study by other researchers. 3.11 Ethical considerations Ethical considerations were used to guide the research process. Informed consent was obtained from all participants, ensuring their voluntary participation, confidentiality and anonymity. Participants were assured of their right to withdraw from the study at any time without consequences. The research adhered to ethical guidelines and regulations regarding data protection and privacy. The participants were assured of the confidentiality of their information, and all data was stored securely. 3.12 Timeline The research took place over a nine-month period. The first month was dedicated to planning and gaining ethics approval; the following four months were devoted to the collection of primary and secondary data, with the next four months focused on data analysis, and finally the writing up of the findings. Regular check-ins were scheduled with the researcher’s academic supervisor to ensure steady progress and address any issues that might arise. 3.13 Conclusion This chapter presented the research methodology that was adopted to explore the digital servitisation transformation process within earthmoving equipment dealerships. The study aimed to bridge the gaps in the literature and contribute to both theory and practice. The next chapter presents the findings from this investigation. 33 4. PRESENTATION OF FINDINGS 4.1 Introduction Chapter 4 presents the findings of the study. This research took the form of a qualitative study, where nine participants who worked for earthmoving equipment dealers were interviewed to obtain their insights concerning the research topic. The investigation was guided by four research questions that focused on the key stages in the digital servitisation transformation process; what constitutes the logical progression; challenges encountered during the digital servitisation transformation; and how leadership influences the digital servitisation transformation process. This chapter begins by providing an overview of the sample characteristics, which is important for its relevance in a qualitative study. This section is followed by the findings regarding each of the research questions, based on the content analysis of the data and presented as codes, subthemes and themes. 4.2 Overview of sample The profiles of study participants are summarised in Table 1, which sets out their organisational roles and geographical locations. Table 1 also highlights the diverse range of expertise and experience that the participants brought to the study. The inclusion of participants from both South Africa and Turkey introduces an international dimension to the research, offering a broader perspective of and diverse insights into the digital servitisation process in the earthmoving equipment industry. See Appendix D for codes from international (Turkish) participants and Appendix E for codes from local (South African) participants. Table 1: Organisational profile of research participants Participant ID Role Organisation Region Experience RPT 1 Executive – Customer Fulfilment and Technology Organisation A South Africa 7 years 34 Participant ID Role Organisation Region Experience RPT 2 Head of Technology Organisation A South Africa 10 years RPT 3 Executive Construction Industries Organisation A South Africa 8 years RPT 4 Chief Executive Officer Organisation A South Africa 10 years RPT 5 Executive – Digital Organisation A South Africa 7 years RPT 6 Head of Digital, Machine and Artificial Intelligence Organisation B Türkiye 3 years RPT 7 Chief Executive Officer Organisation B Türkiye 7 years RPT 8 Manager – Digital Commerce and Marketing Organisation B Türkiye 3 years RPT 9 Head of Digital Technology Organisation B Türkiye 5 years The participants represented a mix of local and international expertise, adding significant diversity to the study. The inclusion of CEOs from both regions indicates that high-level decision-makers were involved in the research, providing strategic insights into the digital servitisation process. Participants from Organisation A (South Africa) brought a wealth of experience primarily in industry and product-related roles, while those from Organisation B (Türkiye) held positions that were more focused on technology, particularly in the digital and AI domains. This contrast in focus between the two organisations added depth to the study, as Organisation A’s journey in digital servitisation began in the early 2000s but had yet to advance to more sophisticated services at the time of the study. In contrast, Organisation B, starting its journey in 2017, had rapidly moved into more advanced stages of the process and at the time of the study was regarded as a benchmark in the Caterpillar (An American multinational corporation that manufactures construction, mining and agricultural equipment) dealership world. 35 The diverse roles of the participants, ranging from executives to heads of technology and digital departments, offered a comprehensive view of the digital servitisation process from multiple perspectives. This diversity was considered to be crucial as it would contribute to a richer and more holistic understanding of the digital transformation taking place in the earthmoving equipment industry. The study’s approach in selecting these participants, based on their direct involvement and expertise in digital transformation initiatives, ensured that the findings were grounded in practical experience and provided real-world insights. Overall, the participant profiles underscored the study’s commitment to capturing a wide range of perspectives, ensuring a well-rounded and thorough exploration of the digital servitisation process in the earthmoving equipment industry. 4.3 Findings pertaining to Research Question 1: Stages or steps in the digital servitisation transformation. Research Question 1 reads: What are the key stages or steps involved in the digital servitisation transformation process for earthmoving equipment dealers? Table 2 presents the codes, subthemes and themes obtained from the data analysis that related to this research question. All the codes, subthemes and themes were derived from the interview transcripts of the nine participants. Table 2: Codes, subthemes and themes related to Research Question 1 Codes Subthemes Themes Lack of Organisational Strategy Strategy Formulation Strategic Visioning and Planning Lack of Unified Digital Strategy Fragmented Approach Lack of Vision Leadership OEM Interest-Driven External Influence ERP Platform Implementation 36 Codes Subthemes Themes Establishing Technology Platforms Develop Foundational Capabilities IT Transformation Focus on Foundational Capabilities Data Integration Technology Implementation Digitisation Digitisation Establishing Organisational Structure Organisational Setup Silos Organisational Barriers Digitisation and Organisational Change People-Centric Focus Organisational Culture Lack of Responsibility Business Integration Cross-Department Collaboration Collaboration Transitioning into Advanced Services Service Evolution Customer Service Evolution and Innovation Building Customer Connections Product-Centred Product Focus Predictive Technologies Technology Advancement AI & ML Expertise Capability Development The empirical data analysis explored the steps or stages of the digital servitisation transformation process for earthmoving equipment dealers, examining and developing the themes and subthemes: Strategic Visioning and Planning, IT transformation, Digitisation and organisational change and Customer Service Evolution & evolution (Table 2). By exploring these stages and steps, the study aimed to gain valuable insights into the overall strategic 37 direction guiding this transformative journey, the external influences encountered and the challenges faced. The stages identified by the participants are described below. 4.3.1 Stage 1: Strategic visioning and planning The interviews revealed that the digital servitisation transformation process for earthmoving equipment dealers involves several stages and steps. The first stage of the transformation process involves the formulation of strategy for the transformation. In reflecting on this, participants from Organisation A acknowledged the first step of the transformation to relate to strategic visioning. “Let's start first with the vision regarding the end state, defining what that end state looks like for us and our customers … and engineer it back to say from where we are now, do we have the right leadership to take us there. Start with the leaders to understand what it takes for people within the organization to think about digital and the end state.” [RPT 4] “What we have done is not started with the end in mind, so we haven't said this is what the business needs to do, or this is what the business looks like 2-3, five years from now and this is what digital transformation journey we're going to take or undertake or strategy to get us to that point.” [RPT 1] Despite recognising the need for strategic visioning, RPT 4 characterised Organisation A’s approach as fragmented, indicating a lack of cohesion in the organisational strategy for digital transformation. The acknowledgement of being driven by external pressures, such as those from the OEM, suggests a reactive rather than a proactive strategy, as expressed below. “I would describe it as fragmented. We know that we need to drive digital transformation, but we're not driving it as an organisational strategy. We're driving it in silos and in response to pressure from Caterpillar.” [RPT 4] In contrast, Organisation B showcased a more proactive approach to transformation, with a clear vision of the future and a plan to go with it. “We thought that if we could digitalize everything and involve the customer inside the process, we could monitor, measures and then manage process and find the gaps and improvement areas. So that's how