Service Differentiation as a Moderator in Relationships among Market Turbulence, Customer Centricity, Innovativeness and Business Performance

Heiko Gebauer, University of St Gallen
Anders Gustafsson, Karlstad University
Lars Witell, Karlstad University

This paper examines the relationship among the complexity of customer needs, customer centricity, innovativeness, service differentiation, and business performance within the context of companies’ transitions from being product providers to being service providers. The basis for the empirical investigation is a survey of 332 manufacturing companies. One key finding of the study is that a strong emphasis on service differentiation can lead to a manufacturing firm’s strategies for customer centricity being less sensitive to increasingly complex customer needs, and can increase a firm’s payoff for customer centricity. In contrast, the payoff from innovativeness appears to be higher if the firm focuses its resources on either product or service innovations, that is, a dual focus does not work well. This finding illustrates the interrelation among customer centricity, innovativeness and service differentiation as a company transitions from being a product provider to a service provider, and therefore has important implications for both managers and researchers.