Servitization Process Analysis: A Case Study of Automotive Headrest Manufacturing

Abstract

Few papers have dealt with the process of servitization at the firm level. There has been a particular lack of research in manufacturing. Business model innovation through convergence between products and services is an indispensable aspect of a firm’s sustainable strategy. The current paper analyzes servitization as a process innovation by performing a single case study of a manufacturing firm. Extending product value, or servitization, is an archetype of business model innovation. To investigate and identify the real problem through so-called service development in a product-service system, we utilized a single case of a headrest in a car seat. Based on study findings, this paper proposes that a product-service system could be classified into three steps: (1) understanding and discovering the service; (2) discovering service conceptualization and developing a scenario phase; and (3) service prototyping and marketization using an infusion of technological utilities. We argue that the process of servitization can be regarded as one of the processes of service design, which is a process of value creation that comes from the synchronization of customer empathy.

1. Introduction

The most daunting task for enterprises might be incessant growth while maintaining sustainability. Due to global competition in recent years, manufacturing firms have had to ensure that social and environmental performance is related to economic achievement. In that sense, sustainability can be regarded as the sum of economic activities corresponding to ecological support systems. Due to fierce technological competition and overheated market conditions, manufacturing firms face numerous difficulties in maintaining product differentiation. They need to look for new opportunities to generate constant profits through new services.

How value can be created and captured in the market is a key component of manufacturing [1,2,3,4]. When a market matures, firms attempt to seek new value since past glory no longer works in current or future markets. To survive, firms continually need to pursue new ideas, new products, and new services, including the convergence of products and services. With the increasing implementation of services in the manufacturing industry, manufacturers have been trying to discover how to integrate services into their existing products.

The product-service system (PSS) is regarded as a business model that integrates products and services into a system [4,5,6,7]. This product-service combination phenomenon is referred to as “servitization” [8]. A product as a service consists of a product or products accompanied by a service or services.

When faced with a competitive market, many firms pursue new service provision as a new business customer’s value. This can help them achieve sustainable growth [9]. Servitization has been recognized as a phenomenon that is occurring in mature industries [10,11,12,13]. Prior studies have hinted that servitization is an unavoidable phenomenon to catch both existing customers and potential customers. This is because customers’ satisfaction level with products is inclined to increase over time [14]. To meet increasing customer demands, products as a service are considered core activities [4,14]. Recently, some scholars have argued that digitalization can promote servitization through digital networks [15]. In addition, digitalization can serve as a catalyst to boost servitization [14,15,16,17,18]. Digitization plays a role in how to find and what to connect to the essence of service creation [19,20,21]. The utilization of digital technologies (i.e., IoT, AI, and big data) has shortened managerial decision time and reduced mistaken decisions [22]. It has been shown that digital technologies can enhance the quality and quantity of information required for decision-making processes. Similarly, in the process of servitization, AI and big data are driving the evolution of service creation within products [14,15,16]. For this reason, to develop new services, manufacturing firms tend to adopt digital technologies. Digitalization can be an enabler of servitization. In this context, servitization and digitalization have a mutual role in changing business models by adopting new services.

Although many papers have referred to the topic of product service systems related to sustainability, few have dealt with the detailed procedure of service born and guidance about their practical implementation. Prior literature so far has only analyzed necessity and the effect of product service systems on sustainability without providing methods to improve sustainable performance. Furthermore, few studies have proposed sustainable solutions for servitization. This lack of solution brings challenges to the PSS process. This paper describes one of the pioneering approaches to specifically exploring how intangible services are created. Unlike several previous studies, this study suggests solutions regarding how the hidden inner essence of a service is created. In particular, it presents in detail how AI is applied to service design for production.

In order to do that, this paper analyzes the process of servitization at an automotive parts firm in Korea. Korea is one of the strongest countries with regard to manufacturing industrial parts. The reason why a car seat headrest is selected as a single case study is because during the manufacturing process for car seats, the development of the headrest is quite a sophisticated process. It is a part that directly provides services through a reflection of the customer experience. In addition, in digital technologies, AI is utilized in service development, and customer experience is applied to product services.

This study contributes to the current literature in that it provides accurate practical knowledge about the new service creation process for firms seeking to establish product-service systems.

This paper aims to find out how services are created, i.e., how the “servitization process” happens, through a sharp lens analyzing the case of D company. How does D company, which manufactures automotive car seats, remain a first-tier supplier in Korea? D company adopts information and communication technology (ICT) ahead of others and demonstrates distinguishing characteristics of the process of servitization. As such, this paper was motivated by the following questions: First, how does D company find services in the manufacturing process, both from completed car manufacturers (including HYUNDAI and KIA) and from other firms providing after-services? Second, what services does D firm find directly from users? What is the role of digital technologies in the service creation process? A case study has the advantage of analyzing a specific process and offering deeper insight into the process of finding services for a specific company. This paper utilized a qualitative research methodology in the form of in-depth interviews [23] with top managers and some employees involved in research departments. The magazine released by D firm was also used.

Based on the findings of this study, the process of servitization can be classified into three steps. Digital technologies can not only be considered key instruments for finding services but can also ignite service-led growth. Within this framework, the current paper sheds light on the effect of product servitization on moving beyond incremental technological improvements in the automotive parts industry. In particular, since few studies have dealt with this topic, the present work contributes to the elucidation of not only the underlying process of servitization but also the practical exploitation of it for managers. The rest of this paper is structured as follows: Section 2 presents a literature review. Section 3 presents the methodology and a research case. Section 4 presents a discussion. Section 5 describes conclusions and implications.

2. Literature Review

2.1. Product-Service System

As product technology becomes highly mature and demand for services increases, it is difficult for products to differentiate themselves. Therefore, the product-service system (PSS), which integrates products and services, has attracted attention for business model innovation. In general, manufacturing corporations have been considered a necessary evil in the context of marketing strategies [24]. The initial emergence of PSS has been mainly triggered by the innovation activities of manufacturing firms to cope with rapidly changing market conditions and the recognition that services in combination with products can be more profitable than products alone [25].

PSS was originally defined as “a marketable set of products and services capable of jointly fulfilling a user’s need”. Several scholars have argued that services are important sources of revenue. The PSS is a framework that provides a “function, to fulfill customer needs through the integration of products and services” [26,27,28,29,30]. According to a previous study [30], the PSS is not limited to being defined as a business model; it can also decrease the environmental atmosphere as a value proposition that integrates products and services [31,32]. Based on the idea that PSS operates between a pure product-selling model and a pure service-selling model, PSS can be categorized into three types: (1) product-oriented PSS, (2) use-oriented PSS, and (3) result-oriented PSS.

The first type is product-oriented PSS, where services are added after selling the products throughout the product’s lifetime and where customers have ownership of the products. The second type is use-oriented PSS, where use authorities of products are sold and firms have ownership of products. In other words, customers only use them during the period of the contract. Namely, use-oriented PSS is considered to be an arrangement wherein the product is rented and the user has the right to use it for a certain period without restriction. The third type is result-oriented PSS, which guarantees results that a company wants to achieve by using a product. It consists of selling a result or capability instead of a product.

Manufacturers offer a customized mix of services wherein the firm maintains the product’s ownership while the customer pays for the provision of agreed-upon results. PSS has many stakeholders depending on the type of ownership and payment methods of various products. A previous study [33] classified PSS into two types, one of which is a modified form of existing products and services, while the other is a new model that integrates different products and services. That study [33] also asserts that a PSS consists of five patterns: (1) a form in which a service element is added to an existing product; (2) a form in which a product element is added to an existing service; (3) a form in which different services and products are integrated; (4) a form in which the function of a product is replaced by a service; and (5) a form in which the function of a service is replaced by a product.

From prior studies, PSS has various facets. First, through the integration of products and services, PSS is a business model that provides new customer values that cannot be provided with products or services alone. For instance, if some services can be achieved with a specific product performance without stopping, it creates new value. In this paper, PSS can be defined as an incremental innovation that involves searching for business models.

2.2. Digitalization and Servitization

Digitalization has two conceptual meanings that are closely linked and are often used interchangeably. The first meaning refers to digitization as the process of “digitizing, thus, the changing of analog data (e.g., text, video) into digital fit” [34,35,36,37]. One study [38] has defined digitalization as the material process of converting analog streams of information into digital bits. Meanwhile, another study [39] has defined digitization as the material process of converting individual analog streams of information into digital bits. Digital transformation is defined as the process by which many domains of social life are restricted using digital communication and media. Digitalization is an organization involving several diverse social life spheres via digital communication technologies, which involves the conversion of analog information into digital forms [40].

In the context of digitalization, digital tools or digital technologies play key roles in capturing what exists in the physical world and changing what exists in the cyber world into a digital record (e.g., the PDF format). This digital record (e.g., PDF) is then uploaded via the Internet to a cloud service, which can be accessed anywhere at any time. In both cases, the process is digitized. However, the process is also digitalized in the second case, as we take more significant advantage of digitization opportunities. Considering prior studies, this article adopts the concept that digitization is a phenomenon of processing individual analog streams of information into digital bits.

There are different facets regarding “digitalization”. One study [41] has defined digitalization as the expansion of the economy. According to another study [40], the term digitalization has emerged as a result of utilizing digitized tools that can affect social life, which leads to globalization. Indeed, digitalization has become a permanent fixture as the Fourth Industrial Revolution keeps evolving and impacting our lives in countless ways [42].

Digitalization technologies also consist of artificial intelligence (AI), robots, automation, the Internet of Things, big data, 3D printing, autonomous vehicles, drones, cyber-weapons, and surveillance [39,43]. Information, communication, and technology (ICT) adoption has generally led to an evolution in the business model of firms. ICT enables the delivery of services and the improvement of a service-oriented strategy [44], thus allowing industrial firms to adopt new business models based on their ability to use and rapidly process real-time data. Digital technologies are leading to disruptive changes across industries, thus blurring boundaries. Digitalization involves using ICT technologies to change a business model. It provides new revenue and value-producing opportunities. It is the process of moving to a digital business.

Many managerial and marketing studies have emphasized digitization, which means transforming analog technologies into digital technologies. Digitization ignites changes in business [45], making it easier to enable new practice differentiations. To succeed, corporations must pursue digitalization, which includes socio-technical processes that accompany digitization [21].

The term digital servitization refers to using digital tools for “the transformational processes whereby a company shifts from a product-centric to a service-centric business model and logic” [35]. Having strategic customer data is a necessary but insufficient condition for servitization [46]. In this context, ICT can play a key role in digital servitization [47]. There is no doubt that data and services have become keywords in digitalization. Recent studies have focused on how digital technology enables the offering of new services [48]. Data analytics has been identified as a major driving force for new services that have triggered customization [46]. Once digital services are in place, the marginal cost of producing and upscaling service operations should ideally be close to zero [49]. In addition, prior studies have argued that PSS involves “market packages or ‘bundles’ of customer-focused combinations of goods, services, support, self-services, and knowledge, i.e., servitization of products” [50,51,52].

Services are important sources of revenue for manufacturing firms, particularly when industries mature and firms can no longer differentiate their products. One study [51] asserts that the process of servitization can be regarded as the development of a firm’s innovation capabilities. Servitization is a changing process that involves satisfying customers’ needs, achieving competitive advantages, and enhancing company performance [53,54,55,56].

2.3. Service Design and Service Innovation

With servitization, neither products nor service forms exist separately in the market [35,47]. Firms’ offerings consist of combinations of intertwined products and services. For firms, service design and service innovation are parts of these product service systems.

Economics traditionally deals with a clear distinction between goods and services. Goods are tangible and consumable products, while services are instantaneous exchanges that are intangible without resulting in ownership. An experience occurs when a customer has used some tangible product offered by a service provider [57]. Each scholar has a different definition of service design. The term service design is one of the methodologies used to describe the whole process, from idea to specification [58]. Service design has been narrowly defined as the specification of service concepts, such as drawing a picture that includes the functions of products or flow charts [58].

According to the definition of service design in a previous study [59], service design plays an important role in driving the generation of ideas in the process of service innovation. Surprisingly, few studies have reported the service concept itself and the important role it plays in service design and development. More recently, several scholars have paid attention to service design as an important tool in creative, human-centered service innovation methodologies [60,61].

In this paper, the service concept can be defined as the first thought about the how and what of service creation. Service design is the first attempt at thought involving innovation for firms by mediating between customers’ needs and the firm’s managerial strategic intention. Enhancing a variety of service design processes by using service concepts can be defined as service innovation. Service design provides firms with a set of tools and methods to implement and apply design thinking. In summary, service design is a process of innovation where research teams, especially designers, create sustainable solutions and optimal experiences in unique contexts for both customers and service providers.

3. Research Methodology and Case Study

3.1. Research Framework

The case study methodology is appropriate for this context [62]. According to a previous study [63], which examined a prior study [23] regarding when to use a case study, the following should be considered: (a) the focus of the study is to answer “how” and “why” questions; (b) the behavior of those involved in the study cannot be manipulated; (c) the study wants to cover contextual conditions because it is believed that they are relevant to the phenomenon under study; and (d) the boundaries between phenomenon and context are unclear.

A single case study is used to investigate the process of servitization in combination with digitalization. The case study approach facilitates a better understanding of complex internal phenomena such as digital servitization [64]. To examine the process of servitization, the concept of the PSS will be utilized while grounded in a review of previous literature. The PSS can be regarded as the evolution of business model innovation. To analyze the process of servitization in detail, the following research framework (see Figure 1) was created:

This study was conducted from December 2021 to the end of October 2022. One of the interviewees, who was a Master’s student of the author seven years ago, had experience facilitating the Product Service Fusion Laboratory (PSFL), which was established with support from the Korean government in March 2021 to provide a data analysis system. PSFL is part of H University in Korea, where the author is currently engaged. As such, the author can handle the dataset directly. The author personally took part in the process. To garner data on servitization, in-depth interviews were conducted with senior engineers at D company. The required data were obtained via email or in-person on the condition that certain sensitive matters would be kept confidential. The interviewees then agreed to record interview sessions. In this way, a thirty-minute interview was collected for each interviewee [23]. Aside from internal data regarding the subject company, other objective data were obtained through literature reviews.

Table 1. Interview descriptions.

Data Source	Interview Procedure
Interviews	Description of interview	Criteria and Content
	Three engineers with more than 10 years of experience in service design development were individually interviewed multiple times, with each interview lasting 30 min to 1 h 30 min. Email was used to ask additional questions. All interviewees have Master’s or Doctoral degrees in management science and engineering.	For senior engineers, the following sample questions were asked: How can data be used to deliver value for participants and end customers? What do you think about the role of digital technologies in creating services? What factors stimulate the evolution of technology? How do you utilize big data? How do you discover services? What are critical factors that promote technological evolution? What aspects of the service are you working on? What are the biggest challenges facing customers and potential ecosystem players—and how can data generated by the company or others help address those issues? What suite of data-based offerings and services will generate the best payoff for customers? What is the degree of influence of competitors on technological evolution? How do you see the impact of servitization?

shows the contents of questionnaire.

The competitive landscape is being reshaped by ICT, which offers new capabilities. Access to remote control data monitoring enables product servitization, self-diagnosis, and self-coordination. To find new services, all kinds of data and thoughts have been managed. Researchers and employees working at factories can access datasets. D company has been fostering environments where mistakes and errors are not feared and where all thoughts are valued.

3.2. Company Overview

D company was founded as an automotive seat manufacturer in July 1999. One year later, the company joined as a second tier of the Hyundai and KIA automotive group, which is a representative car maker in Korea. Within the first year of its launch, D company was able to meet the five requirements of an automotive maker. Since then, D company has grown rapidly compared to its competitors. D company has achieved fast growth because it has modularized its manufacturing line while considering the characteristics of the automotive industry, which feature seats that differ according to the specific vehicle model. Since the 2000s, D company has gained the trust of automakers by quickly responding to their needs. In 2003, D company established its technology research institute, which has since grown to include car parts. With this momentum, D company began to export its vehicles to European automotive makers. Since the 2000s, the company has been rapidly growing through R&D efforts by strengthening its production and quality capabilities, such as supplying seats for new models to KIA and HYUNDAI. After continuous fast growth, the number of employees grew to more than 800, with total sales of 4.4 trillion won as of 2019.

3.3. The Servitization Process

Automotive technologies are indispensable for modern human life. An automobile is no longer just a means of moving. It has become an emotional human space, providing transportation. Seats should simultaneously satisfy pleasure, safety, and comfort. In that sense, car seats should provide more services beyond functional satisfaction of the necessary aspects of a car. Automotive makers have recently been seeking emotional technologies that can be realized through material parts and components. Car seats play an important role in realizing emotional technologies. Seats are core parts that provide both emotional and multifunctional roles.

Seats can be defined as having been fixed to the floor of the car interior and functioning to keep the driver and passengers secure with good posture. Unlike roles played by other parts of a vehicle, seats play a critical role in that they directly interact with passengers. Therefore, they must be built to subtly satisfy both ergonomic and emotional needs. Technically, a seat is comprised of a headrest that holds the head and other parts (i.e., the seat back and seat cushion). In detail, it has a frame composing the outline of the seat (i.e., the back frame and bottom frame) along with the recliner, slide rail, and bolster. Components should be added depending on the type of car.

The main purpose of this study is to find the servitization of headrests in the manufacturing process, which have functions of neck protection among car seat compositions. Figure 2 shows that the headrest is an essential element in car seat compositions.

Before the 1960s, headrests were optional in cars with a luxurious character. However, since the 1970s, headrests have become a rudimental standard safety feature in cars, playing a key role in preventing whiplash. To fulfill the aim of this paper, we will focus on a brand-new headrest that plays a crucial safety role any time a passenger is in the car seat. It primarily acts as a crucial device that protects against and minimizes the impact of whiplash in the event of a collision. Therefore, the primary function of a headrest on a car seat is to protect the head from outside collisions.

In response to the interviewee’s request, the new brand and product’s names will not be disclosed. In general, to develop new products, a firm goes through four steps: (1) searching for opportunities; (2) choosing items; (3) discovering technology; and (4) commercialization. These steps do not always follow the same direction over time. When confronting unexpected obstacles, despite having already performed the process step by step, firms have to go back to prior steps. Furthermore, to shorten the process time or solve obstacles, departments within a firm all participate in the process.

3.3.1. Understanding Service Concept

To create value, ideas or concepts for new products can be obtained from both internal and external sources. From an in-house perspective, R&D and marketing divisions within a firm take the initiative. Regarding external sources, customers, rival firms, university research institutes, government policies, and global industrial trends are the main sources of opportunities. The more ideas firms have, the greater their innovation success. Unlike other firms, D company allocates much time to new methodologies by participating in workshops. According to the interview, every division has been aiming to find new opportunities by utilizing its framework.

A car seat is an important part that provides customers with safety and comfort by absorbing various external vibrations and shocks. It also reduces fatigue by correcting the sitting posture. Therefore, car seats should meet customers’ requirements through ergonomics and emotional engineering. Considering this, the manufacturing process for seats is itself a service process. In other words, it is the process of creating a service. In particular, the purpose of the car headrest (see Figure 3) is to reduce whiplash injuries in the event of a rear-end collision.

To find new services, D company offers a differentiated workshop program. Unlike competitors, in which the R&D division dominates the entire procedure when developing new products, employees working in factories, regardless of whether or not they are experts, can participate in the new development process. Mainly, three different factories send groups composed of two or three people to the participatory workshop. The aim of a workshop is to obtain diverse ideas for creating new services.

A workshop is composed of two sessions lasting 40 min and 1 h. A participatory workshop is conducted with three or four teams specializing in data analysis, design, and marketing. In a workshop comprised of a 40-min session, participants try to investigate the overall data for business archetypes at the macro level as well as questionnaire data. Data are collected from manufacturing process data, monitoring data, marketing data, and user complaint data originating from service centers. They are analyzed to derive new services to meet customer requirements. The other workshop is composed of a 20-min session. Participants play various roles in deriving the design or the kinds of materials used for fitting layouts. By considering interview data, the servitization process can be classified as a three-stage process.

Stage 1 is the first phase of data enabling. It involves gathering relevant data regarding customers’ requirements and business archetypes. This phase is a design research step intended to find the problem setting that meets the current customer’s needs. In this stage, the research team should derive the service concept.

Big data encompass a wide range of data types and information obtained in large quantities. Big data are a pivotal resource that provides insights into various customer needs. One of the most important aspects of big data is that it can be used to uncover how decisions are made and who gets to make them. By using big data, a new concept has been implemented, as has product development. Companies can receive more detailed inner thoughts from customers. In other words, firms have tried to find the best answers to their business questions. With the utilization of not only in-house big data but also social network service data, the research team can more easily seek feasible services that customers have desired as headrest features. For members of a workshop, it is crucial to seek the hidden service that can protect the neck.

At first, members analyze the in-house data in two groups. Members also try to analyze data gathered from emails, social network posts, and medical data. To elaborate upon the analysis, a fatal car accident data set from the National Policy Statistics Bureau and auto insurance statistics are Korea is also added. From these data, injured parts of the neck caused by collisions appear in various patterns. Passengers do not realize they have injuries until later, as whiplash pain can take time to appear. In particular, traffic accident data are important for research teams because they provide information about medical treatment around the neck in the event of rear collisions. In hospital treatment, it presents important information, such as the exact location of the neck injury and the treatment period.

Next, the research team should find information that can help determine the trajectory of shock absorption through big data analysis. To verify the relevance and applicability of the derived design requirements, participants ask designers to develop conceptual designs for new products based on discovered data (i.e., marketing data, customer complaint data, and PLC data).

Furthermore, big data regarding customers’ experiences, in addition to Enterprise Resource Planning (ERP) data, are analyzed using Logit regression and association analysis methodologies in the Product Service Fusion Laboratory (PSFL). The research team analyzes big data obtained in real time from PSFL headquarters. They determine changing trends in buyer habits and what services to prioritize. Each research team obtains information using data analysis in this manner for increasing customer acquisition and retention, which is likewise enabled by a better understanding of customer needs and preferences, for optimizing the trajectory of shock absorption and upgrading the service by improving the function of the headrest, for enabling preventive maintenance to improve potential business issues, and for strengthening protection through better design. In this step, the research team creates a service concept based on the customer’s particular nature and values. Figure 4 depicts the servitization procedure using Big data analysis.

3.3.2. Derivative of Value at Service Design and Service Development

To develop a new service, research teams are given new tasks. Task one is to find design coordinates. The next task is to derive a design that can connect those coordinates well. Service ideation, service selection, and prototype development are key activities in this step. The research team is divided into two groups: One research group seeks customers with experience of a rear collision as a core target, whereas the other group seeks potential customers who have purchased the car as a sub-target. Big data analysis information is given equally to both research teams to find the exact location of the coordinates in the headrest. The research team designs the “Service Scenario” based on problem settings.

The goal is to prevent neck bending, which is one of the biggest causes of neck injuries. After designing the service scenario, service design and architecture are newly required. By using the data and service scenario, the new concept ideation, which is the so-called “Reactive headrest” model, is selected. The reactive headrest is a concept that can effectively alleviate neck injuries solely by changing the mechanical design of the seat back.

Active headrests can effectively protect against neck injuries. They have come to be popularized to the point of being used in almost all automotive seats. Depending on the design principle and mechanism of operation, services can differ in terms of how they are activated. Figure 5 shows how reactive headrest seats work by alleviating the power of collisions through an existing link when power hits the seatback and moves forward to the headrest. At this point, due to the rotation of the headrest, the head, which is moving backward, is struck.

To solve these problems, a new design that connects between the seatback and the headrest is selected. The new services and thoughts of participants responding to problem solving are presented as a scenario method. After confirming various requirements for impact protection and head movement, a new solution is presented. Above all, data selected from the core targets are utilized as critical information for service design creation because they have experience with neck injuries caused by a car accident. The research team knows potential customers’ insights into headrests through the sub-target. Many people refer to the head restraint as a headrest, i.e., as a comfort feature. However, head restraints are installed in vehicles as a safety feature, like seat belts. Service design does not simply involve designing a service. Service design is a tool to determine how an organization gets something done.

It is a human-centered and holistic approach to innovation. A research team creates a design scenario based on coordinate values obtained from big data. To that end, the research team is divided into three small groups composed of three researchers. The role of the first group is to identify the exact location and duration of pain around the neck while targeting patients who have experienced a rear-end traffic collision. In service design, customer experiences play an important role in the creation of new services. The first group is eager to see what customer experiences are made of. Indispensable customer experiences ignite continued seamless interactions with a firm’s products and services. That is why it is important to analyze and optimize customers’ experiences. The first group tries to examine services from a holistic point of view or through personal thoughts and focuses on the entire procedure that experienced customers go through.

The second research team is eager to create new products and services. To create a new service, the second research team investigates each step of the process of making a car seat. Data stored in ERP, including market field data, customer information, and product repair request data, namely external activity data, are analyzed. Afterwards, the information is divided into two levels: (1) the inner world of humans; and (2) the environment inside the car. During the interview, a senior researcher comes close and offers a meaningful sentence, saying “unexpressed emotions never die. If empathetic nature is alive and buried, they will later emerge in an unexpected form.” When considering the quoted sentence, it is essential for a research team to make new services aiming to discover one’s human nature. The research team strives to create open-ended questionnaires to discover hidden intentions.

According to the interview data, steadily interacting with technicians with extensive production line experience is also an important process for a research team because doing so allows them to have many fruitful experiences with the interior of a car. For this reason, regular meetings with technicians and research teams are as important as customer experience to create service development. Namely, the experience of employees gives birth to a holistic approach to process innovation. In the long term, potential customers’ empathetic journey of experience should be mapped with the new scenario that has content dealing with how to optimize the synchronicity of customer requirements and production service design.

3.3.3. Service Creation and Business Model

In stage 3, we aim to determine whether the service design has been produced according to planning intentions. The linkage mechanism to mitigate injuries that typically occur in low-speed rear-end collisions is the core of the design. To analyze the connection mechanism, it is necessary to share ideas among teams about the parts that can affect headrest movements. In this final stage, the research team determines service creation and business modeling according to four self-set criteria: (1) functionality; (2) technical feasibility; (3) quality; and (4) customer requirements. These criteria are made following the requirements of automotive companies. Of them, functionality and technical feasibility are essential so that the headrest can protect the neck in the event of a collision.

As mentioned earlier, the key role of the service scenario (see Figure 6) is composed of service selection, service technology, and a customer journey map, which is divided into a core group and a sub-group to match synchronization with what the customer wants as much as possible. The first functionality, including technical feasibility, is to check whether it has the original function of a headrest, i.e., preventing neck injury in the event of a rear collision.

4. Summary and Discussion

Headrests are made to reduce whiplash during a rear collision. To find detailed services for headrests, the research team mainly investigated and scrutinized customers who experienced car accidents, especially rear collisions. To find new services, D firm journeyed through three steps. The first step involved understanding and discovering the service phase. The first thing a research team must consider is “what services customers want the product to be in”. This is the stage where the research team seriously thinks about “who” customers want to be and “what” services customers want to be in. This phase is a design research step intended to find the problem setting that meets the current customer’s needs. In this stage, the research team should derive the service concept. For that to occur, the research team examined what types of injuries customers had based on preliminary findings. Two allowance levels for the amount of impact when involved in a rear collision, along with the accurate coordinates indicating the location of the headrest, are first obtained from big data. A data mining process takes place at the Product Service Fusion Laboratory (PSFL). In addition to ERP (Enterprise Resource Planning) data, customer experience data were collected from an insurance firm, and event log data were acquired to obtain more fruitful results. These two types of metrical data play a key role in the manufacturing and service design processes to create functionality. This shows how real-time data obtained by digitization are used in the manufacturing and service design processes.

The second step is discovering the service conceptualization and developing the scenario phase. This step is an essential process in the PSS. In this phase, a “service scenario” is created. Thus, this step is the process by which service scenarios are composed and embodied using both internal and external sources. In particular, the research team was divided into two groups. One research group sought customers who had experience with rear collisions as a core target, whereas the other group sought potential customers who purchased the car as a sub-target. Big data analysis information was given to both research teams equally to find the exact location of the coordinates in the headrest. Through this step, products and services are integrated. According to the statements of a research team leader, the firm intends to adopt service levels created during this phase. Of course, firms try to elaborate on the level of services and sophisticated solutions for customer problem-solving. The prime quality of a headrest comes from a user-friendly design that is usable, simple, and empathetic. For example, a headrest that automatically adjusts to fit the neck according to a free outline of the body would be ideal.

The final step is service prototyping and marketization using an infusion of technological utilities. At this stage, it is decided “whether the products can provide the functions and services expected by users and generate stable profits for firms”. Through three steps, an automatic tension service based on weight and neck size is created. If one leans back, weight is placed on the backrest. When one stops at that angle, the neck protection position of the headrest is determined accordingly. This service was created to enable the estimation of the amplitude range of the coordinate value of the headrest according to the backrest position through big data analysis. It is a valuable service because rear collisions occur in a short time and customers are not likely to be aware of them. In other words, in most cases, rear collisions occur in unconscious situations. The reason why this service is crucial for customers is because protection of the neck is provided immediately upon occurrence. A headrest provides not only neck safety but also comfort, even for a long sitting time. Providing a comfortable sitting position for long car journeys is an important requirement for most automotive makers. From the findings of an in-depth interview, new services of familiarity, such as home chairs that use soft and cozy textured materials, play an important role in determining customer purchasing power. Therefore, natural and soft leather is preferred as a car seat material. Recently, considering environmental issues, softly reused natural materials have been inclined to be used.

In summary, service creation as the ultimate goal of producing a new design of a headrest is achieved through the following steps: First, a service concept is derived. Second, a research target is set, and the ideation process is carried out accordingly. Third, a service scenario is created in which the product will be provided. In this process, key services are determined among alternative services. Fourth, a service design is created as a form of service prototyping. Finally, business modeling determines different models for each customer’s requirements. Figure 7 shows that D firm has an extent the business partners e.g., automotive manufacturing firms through the incessant service creations.

4.1. Theoretical Implications

The ultimate goal of pursuing a product service system is to seek sustainability by providing incessant new services. The fast evolution of technology (i.e., AI, big data, and IoT) has been identified as a key enabler for seeking new services. In this study, Al and big data played crucial roles in finding the pinpoint location of service design. This study makes two theoretical contributions to servitization studies and the business model innovation aspect by (1) exploring the service design archetypes and (2) articulating and highlighting how digital technology (i.e., AI and big data) can be utilized to create servitization and innovation in manufacturing enterprises. First, the findings of this study shed light on service scenario methodology adaptation. This study reveals important architypes of new service creation, namely a system that underpins the development of servitization by categorizing core service design methods based on affordance for reflexivity [65]. Customer’s journey scenarios are supportive of core service design affordances. By adapting scenarios, service design methods have varying affordances for the characteristics of services, particularly reflexivity. Second, the findings of this study contribute to our understanding of the role of digital technologies in creating service innovation. The utilization and deployment of digital technologies may influence the servitization of manufacturing enterprises. Furthermore, the rise of the digital economy, or so-called platform business, may lead to the dependence of servitization on advanced technologies. In this perspective, our findings can further tow innovation research through juxtaposition between servitization and innovation research. Digital technologies are closely related to the pathway of servitization studies in terms of disruptive business strategies [66].

4.2. Practical Implications

The findings of this study have some practical implications for manufacturing enterprises and industrial practitioners. First, manufacturing firms should pursue servitization in the production process. Although the process of servitization has a risk of failure, manufacturing firms should face challenges and uncertainties when making new services. In doing so, they can be sustainable in the market by creating new values. More importantly, with globalized market competition in recent years, sustainability has become a challenging issue. To survive, manufacturing firms should implement the triple bottom line [67], that is, social and environmental performances related to economic achievements. Specifically, sustainability for a firm refers to economic performance, environmental performance, and social performance.

In that respect, a firm’s survival may depend on not only financial rewards through business model innovation but also social and environmental performances. From these findings, D company uses natural or recycled leather to provide comfort and convenience to customers according to the end user’s requirements. Specifically, industrial practitioners who deal with servitization have the capability of using service design methodology and AI. By utilizing them, enterprises can keep both existing customers and potential customers. In times of worsening economic market conditions and rapid digitization, servitization is a key innovation process to meet future market demands.

5. Concluding Remarks

With rapid digitization, the adoption of products as a service is inevitable for a firm’s survival. Unless firms implement a proactive response to rapid changes in the digital transformation era, sustainable growth for a firm is not guaranteed for manufacturing. As markets become increasingly mature, process innovation for products as a service has become desperate over time. The so-called service era has arrived. Servitization is an inevitable and sustainable tool for keeping and acquiring customers. This paper aims to analyze the innovation process, the so-called service design implementing how to seek services, and the provision of practical information and knowledge for many manufacturing firms. For these purposes, this paper utilized a single study methodology.

Based on the findings of this study, this paper proposes that the process of producing products as a service can be classified into three steps: (1) understanding and discovering the service; (2) discovering service conceptualization and developing the scenario phase; and (3) service prototyping and marketization using an infusion of technological utilities. In the first phase, a variety of data, including big data, are used to seek a feasible service. By using big data, a new service concept is implemented and services are conceptualized, such as the exact location in coordinates of the headrest working to protect the neck in the event of a rear collision. It is used in final product development. Furthermore, big data regarding customers’ experiences and in-house ERP are used to make headrest features with neck protection functions. Through the workshop program, the research team seeks a service design.

In phase 2, the main goal is to create service ideation and decide upon the development of service prototypes based on the business archetypes of the service scenario in phase 1. As a service prototype, a reactive headrest that provides effective alleviation of neck injuries is selected. The new services and thoughts of participants attempting to solve a problem are presented as a scenario method. After a variety of needs for impact protection and head movement are confirmed, a new solution direction is appropriately presented. The interesting finding in phase 2 is that the service prototype consists of the sum of results from both the exploration of the core-target customer’s experience and the exploration of the sub-target customer’s experience. Phase 3 is the final stage, where the proposed product as a service is suggested. Mapping new services is critical for new car models. To that end, research teams must overcome difficulties, such as meeting the strict criteria of end users, which are automotive car companies. Based on the illustrative single case, this paper ascertains that servitization can be regarded as the evolution of technology-service convergence.

This paper contributes to our understanding of the overall process of servitization for small and medium enterprise manufacturing. The practical contribution of this paper is that it shows that digital technologies can be used to create new services by using AI, which enables the discovery of the essence of a service. Based on the information given by Al, the service scenario becomes more complete. Consequently, a service design experience involves considerable context, big data, multiple-channel sharing of information, intuitive perception data, and individual experiences. This case study shows that methodologies for service design have been changing according to the digitization process [68]. Finally, this paper provides thoughts on innovative strategies and business model innovation. From these findings, we argue that the process of servitization can be regarded as one of the processes of service design, which is the process of value creation that comes from the synchronization of customer empathy.

This study has some limitations in explaining the servitization process of manufacturing industries because only a single case study is used. In fact, the process of creating a service may vary depending on the characteristics of the product and its industrial facets. Furthermore, in reality, even if this case is universal, it is difficult to generalize depending on the essential characteristics of the service, i.e., immediacy and occurrence. Further research should examine the model in the context of a wider set of experience-centric cases. Secondly, to complement its limitations, an econometrical approach is needed to examine whether the number of customers has increased or decreased due to product innovation. In other words, since the process of servitization may vary in degree by firms and attributes of technologies in the industry, this study is unable to generalize the servitization process of manufacturing firms. Notwithstanding these limitations, this study has implications in that it presents a meticulous process of new service creation through detailed analysis of a single case.