1

MATCH OR MISMATCH: STRATEGY-STRUCTURE CONFIGURATIONS IN THE

SERVICE BUSINESS OF MANUFACTURING COMPANIES

Heiko Gebauer
Associate Professor
Universitt St. Gallen
Institut fr Technologiemanagement
St. Gallen Schweiz
Phone: +41 71 224 72 42

Email: heiko.gebauer@unisg.ch

Bo Edvardsson
Professor of Business Administration
Service Research Center
Karlstad University
651 88 Karlstad, Sweden
Phone: +46 54 700 1557
Email: Bo.Edvardsson@kau.se

Anders Gustafsson
Professor of Business Administration
Service Research Center
Karlstad University
651 88 Karlstad, Sweden
Phone: +46 54 700 1556
Email: anders.gustafsson@kau.se

Lars Witell
Associate Professor of Marketing
Service Research Center
Karlstad University
651 88 Karlstad, Sweden
Phone: +46 73 687 72 72
Email: lars.witell@kau.se

FORTHCOMING IN JOURNAL OF SERVICE RESEARCH

ABSTRACT

A new trend seems to be emerging for multinational manufacturing companies to make a strategic

reorientation into becoming service providers. For some companies such as Kone and IBM, the

revenues from services are 50% or more of their total sales. Despite the increasing interest in

exploring various aspects of the service part of the business in manufacturing companies, existing
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research has not focused on the interdependencies between different service strategies and

organizational designs. This paper studies different service strategies in manufacturing companies

and highlights the organizational design necessary for implementing each service strategy. The

service strategies explored are after-sales service providers, customer support service providers,

outsourcing partners and development partners. Each service strategy is supported by

organizational design factors related to the service orientation of corporate culture, the service

orientation of human resource management and the service orientation of organizational

structures. This research concludes that a specific strategy-structure configuration is needed in

order to succeed with a chosen service strategy.

Key words: Organizational design factors, service strategy, service orientation,

manufacturing companies, corporate culture, organizational structure.

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INTRODUCTION

There is a trend in marketing to break free from the manufacturing-based model of the

exchange of value embedded in units of output (Vargo and Lusch 2004 and 2008a/b). This shift is

also visible in manufacturing companies that are striving to become service or solution providers

(Oliva and Kallenberg 2003; Vargo and Lusch 2008b; Jacob and Ulaga 2008). Becoming a

service provider represents a shift in focus for a company since they aim to generate an increase

in revenue from the service part of the business. Kone and IBM are examples of companies that

have made this shift successfully. These companies report that revenues from services are 50% or

more of their total sales. As stated by Vargo and Lusch (2008b, p.256), The critical and common

theme is rethinking the meaning and process of value creation rather than thinking about how to

market to a different type of customer or how to make a different type of good. In order to

manage the shift from a manufacturing-based to a service-provider model, companies need a

service strategy. Implementing a service strategy is, however, not a straight road to success. There

is a risk that companies may end up in a mismatch between their organizational arrangements and

their strategic market offerings. The implementation of service strategies includes building up an

ability to deliver services, training personnel to become service-oriented and to a certain extent

developing a new organizational culture. There is also a risk that customers may not adopt the

new service or that it will take too much time for the customers to reach the critical mass

necessary for the service to become profitable (Sawhney, Balasubramanian and Krishnan 2004).

Researchers are increasingly interested in different aspects of service offerings in

manufacturing companies. The research effort has been devoted mainly to determining the factors

that contribute to service orientation, such as the service orientation of corporate culture, total

offering, human resource management, organizational structure and relationship initiation (Martin

and Horne 1992; Oliva and Kallenberg 2003; Neu and Brown 2005; Vargo and Lusch 2004;
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Homburg, Fassnacht and Gnther 2003; Edvardsson, Holmlund and Strandvik 2008). There has

been little research, however, that has studied the relationship among components of service

orientation and, in particular, the implementation of different strategy-structure configurations

that transform manufacturing companies into becoming more service-oriented. There are two

logics for understanding the transition from goods to service(s). One is based on a goods-

dominant logic emphasizing value-in-exchange, in which services are viewed as a special type of

good. The other is the service-dominant logic emphasizing value-in-use in the customers

business context, which considers service as a process rather than a unit of output (good) (Vargo

and Lusch, 2008b p. 258). These two logics can be viewed as different but co-existing.

In this study, the focus is not on the goods-dominant or service-dominant logic but on the

strategy-structure configuration chosen by manufacturing companies to develop their service

business. The service orientation of firms can be implemented through different service strategies

in order to develop their service business. By strategy-structure configuration, we mean the

congruence between a specific service strategy (including the strategic market offering) and a

specific arrangement of organizational design factors. The frequency of the changes to the

organizational structures indicates that robust strategy and structure configurations are still in

need (Davies, Brady and Hobday, 2007).

This study will contribute to the discussions of integrated solutions (Davies 2004), the

transition from products to services (Oliva and Kallenberg 2003; Neu and Brown 2005) and the

restructuring of manufacturing companies towards a service orientation (Martin and Horne 1992).

Because the existing discussions contain little knowledge on strategy-structure configurations in

the context of re-structuring product manufacturing companies towards service, the following

research question is addressed: how do different service strategies correspond with different

configurations of organizational design factors? The fit between service strategies and the
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configuration of organizational design factors is tested in a sample of 195 manufacturing

companies. In our analysis, we focus on identifying the internal congruence between service

strategies and organizational design factors. We make a comparison of the configurations of

organizational design factors between companies with "high" and "low" levels of business

performance. By concentrating on the question how different service strategies correspond with

different organizational design factors, we revitalize Bowen, Siehl and Schneider's (1989) early

work on frameworks for analyzing service orientation in manufacturing companies. Our results

show that choosing the appropriate strategy-structure configuration is vital to improving

organizational performance and that many organizations end up in a mismatch between strategy

and structure.
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CONCEPTUAL BACKGROUND

Service strategies in manufacturing companies

The discussion of service strategies is related to service orientation in business strategy.

Traditionally, service orientation in business strategy has been discussed from the perspective of a

manufacturing companys total offering. The notion of increasing the service orientation of a firm

has basically meant adding more services to their total offering (Kotler 1994; Martin and Horne

1992).

As mentioned earlier, there are two logics for understanding the differences in

perspectives when focusing on goods compared to service(s): goods-dominant logic emphasizing

value-in-exchange and service-dominant logic emphasizing value-in-use (Vargo and Lusch

2008a/b). An illustration of the emphasis on value-in-exchange is the exploitation of new service

business opportunities through temporal expansion, temporal reconfiguration, spatial expansion

or spatial reconfiguration (Sawhney, Balasubramanian and Krishnan 2004). Adding services to

the existing customer activity chain (temporal expansion) expands the service activities of

manufacturers within the pre-sales, sales and after-sales phases. Introducing adjacent chains

means that manufacturers offer services that are independent of the customer activity chain

associated with the product. Additional business opportunities exist if manufacturing companies

start to reconfigure customer activities in the primary and adjacent customer activity chain.

From the perspective of the service-dominant logic (Vargo and Lusch 2004; Grnroos

2008; Vargo and Lusch 2008a), increasing the service orientation of an organization is more than

merely adding services to existing products. The service-dominant logic suggests that value is co-

created with customers and service denotes a perspective of value creation focusing on value-in-

use in the customers own context (Vargo and Lusch 2008b). Products and services, as well as the

integration of products, services and information, become resources or enablers for the
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customers value co-creation. The locus of value creation moves from the manufacturing

company to a collaborative process of co-creation with the customer where the application of

knowledge and specialized skill(s) play a key role. The service-dominant logic suggests a number

of changes in order to move from a product focus to a service focus: From thinking about the

purpose of firm activity as making something (goods or services) to a process of assisting

customers in their own value-creation processesFrom thinking about value as something

produced and sold to thinking about value as something co-created with the customer and other

value-creation partnersFrom thinking of firm resources primarily as operand tangible

resources such as natural resources to operant usually intangible resources such as knowledge

and skills (Vargo and Lusch, 2008b p. 258). The transitional shift is not only a question of

thinking differently but also of forming and implementing strategy-structure configurations to

develop the service business.

Davies (2004) examines the shift in business strategy towards high-value, integrated

solutions. He develops a framework to identify recent changes in the strategic positioning of

capital goods suppliers. The framework helps to show that rather than simply moving

downstream from manufacturing to services, suppliers of capital goods are either systems

integrators and providers of services that operate and maintain their products, or system

integrators that strengthen upstream capabilities and move further down into services previously

carried out internally by their customers (Davies 2004 p. 752). The systems integration approach

(Davies 2004) is in line with fundamental premise number nine in the service dominant logic

(Vargo and Lusch 2008a) stating, all economic actors are resource integrators.

The strategic positioning is related to the service orientation and distinguishes between

three different service strategies: (1) system integration, (2) operational services and (3) business

consulting. Each of the three service strategies is based on unique skills and competencies
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associated with a specific nature of value co-creation in the collaborative process between

manufacturing companies and customers. Davies' (2004) term integrated solution seems to be

related to Vargo and Lusch's (2008b) argument that organizations exist to integrate and transform

micro-specialized competencies into complex services that are in demand in the marketplace.

Therefore, companies offering integrated solutions probably function as resource integrators.

Conceptualization of service strategies in manufacturing companies

As outlined in the introduction, we do not focus on goods-dominant or service-dominant

logic but on the strategy-structure configuration chosen by manufacturing companies to develop

their service business. Our empirical investigation of strategy-structure configurations in the

service business of manufacturing companies focuses on realized strategies. This means that

service strategies are viewed as consistent patterns of manufacturing companies past strategic

behavior rather than intended strategies (Mintzberg and Quinn 1988). Following acceptance of

their value propositions defined in the service strategies, manufacturing companies must

configure organizational design factors to offer their applied resources for value creation and

collaboratively (interactively) create value.

As illustrated in Figure 1, the conceptualization of service strategies highlights the nature

of the service offering and value creation within the primary customer activity chain (temporal

expansion and reconfiguration). Consistent with related research (e.g., Oliva and Kallenberg

2003; Mathieu 2001; Bowen, Siehl and Schneider 1989; Davies 2004), five different service

strategies have been identified.

The first strategy is defined as customer service strategy and is similar to Mathieu's (2001)

description of customer service. Customer service strategy explores new business opportunities

by adding customer service to the sales phase within the existing customer activity chain. The
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strategic goal is to augment the product offering through supplementary services (Wouters 2004).

Customer service strategy influences overall client satisfaction, strengthens the customers

confidence and strengthens the credibility of a manufacturing company. Typical services required

to implement a customer service strategy include information services, delivery services, billing

services or documentation.

The second service strategy is the after-sales service provider. Similar to Oliva and

Kallenberg's (2003) view of manufacturing companies who provide basic service for the installed

base, after-sales service providers offer basic services such as spare parts, repair, inspections and

basic training to ensure proper product functioning. The strategic goal is to react as quickly as

possible to any product breakdown. Value creation of after-sales service providers is based on

offering products and ensuring proper product functioning.

In contrast, the strategic goal of the third service strategy is to prevent any product

breakdown. To achieve this goal, manufacturing companies offer advanced services including

preventive maintenance, process optimization, training and maintenance contracts (Gebauer

2008). Companies following this strategy are referred to as customer support service providers.

Customer support service providers intend to optimize the efficiency and effectiveness of the

product. After-sales service providers and customer support service providers are consistent with

Kotler's (1994) distinction between repair and maintenance services. According to the value chain

perspective, both strategies focus on the after-sales phase and explore new business activities in

the existing customer activity chain. Customer support service providers co-create value with

their customers during the process of tailoring service offerings to satisfy the unique needs and

preferences of an individual customer. A new set of skills within the business relationship is

created based on customers knowledge of predicting failure rates and suppliers risk assessment

skills (Oliva and Kallenberg 2003).

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The last two service strategies are interpreted as development partner and outsourcing

partner. Both strategies are closely associated with theories such as Kotler's (1994) concept of

business services, Oliva and Kallenberg's (2003) theory of process-oriented services, and Davies'

(2004) description of operational services and system integration. More specifically, outsourcing

partners take over part of the customer processes. Their strategic goal is to assume the operating

risk and full responsibility for the customer's operating processes. The value proposition of

outsourcing partners is based on reducing customers capital employed, managing the

corresponding risks and reconfiguring the responsibilities within the value chain (Gebauer 2008).

This means that outsourcing partners change their position in the value chain towards temporal

reconfiguration by modifying the structure and control of activities in the existing customer

activity chain. Outsourcing partners and their customers co-create an in-depth understanding of

customers operational requirements for the process output. This in-depth understanding makes

value-in-exchange possible based on the skill(s) and knowledge of the operational processes.

Development partners concentrate on temporal expansion within the pre-sales phase

through R&D-oriented services in order to achieve outstanding customer performance. Through

R&D-oriented services, development partners design and build products and systems using the

competencies developed in-house and by the customer. Customers benefit directly from

development competencies. These competencies make it more difficult for competitors to catch

up. Both development partners and their customers possess a unique and hard-to-imitate

competency position (Wernerfelt 1984; Davies 2004). Through the collaborative process of co-

creation, customers learn about development partners capabilities, who then advise customers

how to design and construct their processes.

Insert Figure 1 around here

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Organizational design factors

We believe that service strategies are implemented through the configuration of various

organizational design factors. This view encompasses Chandler's (1962) definition of structure as

the design of the organization through which the service business of manufacturing companies is

managed. By concentrating on the question of how different service strategies correspond with

different organizational design factors, we revitalize Bowen, Siehl and Schneider's (1989) early

work on frameworks for analyzing service orientation in manufacturing companies. Bowen, Siehl

and Schneider (1989) use the term configuration to describe a coalescence of the attributes

strategy, structure and environment that are internally consistent, complementary and mutually

reinforcing.

Service strategies associated with a higher degree of service orientation are positively

associated with a service-related culture. This association can be nurtured by using customer data

in assessing organizational effectiveness, integrating service production and marketing,

establishing relational markets, recognizing the importance of intangibles, evaluating

interpersonal skills of customer contact personnel, utilizing unobtrusive control mechanisms at

organization/customer interface, and managing customer participation in design, production,

delivery and consumption (Bowen, Siehl and Schneider 1989). Service orientation of corporate

culture and human resource management mediates the impact of corporate strategy service

orientation on service-related performance outcomes (Homburg, Fassnacht and Gnther 2003).

Furthermore, the transition from products to services affects aspects of corporate culture, human

resource management, financial bonus systems, organizational structures, decision processes and

measurement systems (Oliva and Kallenberg 2003; Neu and Brown 2005).
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In our empirical investigation, we focus on organizational design factors covering three

dimensions: (1) the service orientation of corporate culture, (2) the service orientation of human

resource management and (3) the service orientation of organizational structures. The service

orientation of corporate culture involves two constructs, namely, corporate values of the company

and employees behavior. The two constructs refer to the value of services within manufacturing

companies and the degree to which employees behave in a service-oriented way. The service

orientation of human resource management involves three constructs: personnel recruitment,

personnel training and personnel assessment/compensation (Homburg, Fassnacht and Gnther

2003). The service orientation of the organizational structures captures two constructs. The first

construct refers to organizational distinctiveness, which represents the degree to which the service

business unit is set up as a distinct business unit with the corresponding profit-and-loss

responsibility (Oliva and Kallenberg 2003). It concerns the separation of service from the product

business. The second construct covers the proximity of the service organization to customers, that

is, the extent to which external customers are aware of the service organization and can identify

appropriate points of contact.

Proposition

Despite the variety of research contributions, limited attention has been paid to the

relationship between service strategy and organizational design factors. There is also a paucity of

theories to guide the expectations about the direction of possible effects. We argue that a change

in a firms service orientation can be implemented through several different service strategies. A

successful service orientation can be achieved with any of these strategies, but the organizational

design factors needed to successfully implement the different service strategies may differ.
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The provision of customer service requires increasing the service orientation of the

corporate culture, but there is no general agreement on what changes to pursue (Bowen, Siehl and

Schneider 1989). Oliva and Kallenberg (2003) suggest that companies moving into the field of

relationship-based and process-oriented services should set up an independent business unit for

services, increase the service orientation of the corporate culture and invest in a global service

infrastructure. For our study, this means that after-sales service providers and customer support

service providers correspond with a high level of distinctiveness between product and service

business, a high level of customer proximity, and a high level of service orientation in the

corporate culture. More specifically, Gebauer, Bravo-Sanchez and Fleisch (2008) argue that after-

sales service providers that only offer basic service should integrate the service into the product

organization, whereas customer support service providers should build up a separate service

organization. Conversely, Neu and Brown (2005) suggest that companies positioned as service

providers should have an integrated product and service division in order to fulfill complex

customer needs.

It can also be assumed that a customer service strategy requires behavioral competencies

and communication skills, whereas after-sales service providers give attention to technical

competencies. Customer service providers, outsourcing partners and development partners are

assumed to combine technical competencies, behavioral competencies and communication skills

(Neu and Brown 2005; Bowen, Siehl and Schneider 1989). These contradictions illustrate that

there is still a lack of empirical research to link service strategies and organizational design

factors.

Because of the exploratory nature of this research, a proposition has been developed

rather than a formal hypothesis. According to the contingency view, we argue that different

service strategies require the implementation of different organizational design factors (Hambrick
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1984). Consequently, the link between service strategies and organizational design factors is

proposed to be tested empirically as follows:

Proposition: The success of each service strategy (customer service strategy, after-sales service

providers, customer support service providers, outsourcing partners and development partners)

depends upon the internal congruence between the service strategies and the organizational

design factors

This proposition draws on the idea of "fit as gestalts" (Venkatraman 1989). Fit as

gestalts describes the internal congruence between service strategies and organizational design

factors. A specific fit of gestalts between one service strategy and one arrangement of

organizational design factors is understood as a strategy-structure configuration. This analytical

approach concentrates on the differences in internal congruence of strategic and structural

variables between companies with high and low business performance. This proposition

makes a unique contribution to service management literature because it contributes to the

resource-based perspective on value creation. Manufacturing companies are only able to achieve

the intended value proposition if they form a specific internal congruence in their strategy-

structure configurations (Vargo and Lusch 2004; Vargo and Lusch 2008a/b).
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RESEARCH METHODOLOGY

Given our objective of identifying how different service strategies correspond with

different configurations of organizational design factors, we use fit as gestalts and the

corresponding factor and cluster analyses. The combination of these methods has been recognized

as an appropriate means of knowledge production when strategies depend on specific

configurations of organizational design elements (Meyer, Tsui and Hinings 1993). Our research

methodology is similar to Frohlich and Dixon (2001) or Miller and Roth (1994), in that we do not

primarily focus on the individual factors, but rather seek to develop configurations of

organizational design factors that correspond with different service strategies.

In general, the identification of strategy-structure configurations requires factor and

cluster analyses as analytical approaches (Venkatraman 1989). Service strategies are

operationalized as formative scales (Homburg, Hoyer and Fassnacht 2002) and organizational

design elements are operationalized as reflective scales (Homburg, Fassnacht and Gnther 2003).

Consequently, the measurement development and validation are presented in separate sections.

First, the scale development for the reflective organizational design elements is described by

Churchill's (1979) approach to scale development for multi-item constructs. An exploratory factor

analysis is used to identify the dimensionality of constructs (Diamantopoulos and Winklhofer

2001). Second, measurement development and validation for the formative service strategies

follows the procedure for successful construction of indexes with formative indicators

(Diamantopoulos and Winklhofer 2001; Reinartz, Krafft and Hoyer 2004; Diamantopoulos,

Riefler and Roth 2008). Consistent with the requirements of fit as gestalts, the section ends

with an explanation of the cluster analysis and assessment of the predictive validity of the internal

congruence between the service strategy clusters and the clusters of organizational design factors

for high and low performing companies.

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Sample and data collection

Data were obtained from European manufacturing companies in business-to-business

markets. The units of analysis were company-level as well as Strategic Business Unit (SBU)

level. The SBU level was chosen in cases where a company had at least two SBUs. It was

assumed that SBUs within the same manufacturing firm could follow different service strategies

and implement different organizational design factors (Govindarajan 1989).

Data were collected through questionnaires. Six face-to-face interviews with service

experts were conducted prior to the survey in order to pre-test a preliminary version of the

questionnaire. Different versions of the questionnaire were discussed with service experts until all

interviewees agreed on the items and concrete phrasing of the questions. A sample of companies

and SBUs was acquired from a commercial database provider. Altogether, 202 firms were

contacted. There were 195 positive responses, leading to a response rate of 96.5%. The sample

consisted of 106 manufacturing companies and 89 SBUs. There were no statistical differences

between responses at the firm and the SBU level for any of the measures. To avoid confusion in

using both terms manufacturing companies and SBUs, we will use the term manufacturing

companies.

The quality of the information provided was assessed through questions about three

factors: the amount of time the respondents had worked in the company, the respondents

knowledge about the service business and their work experience in the service organization

(Kumar, Stern and Anderson 1993). The last two items were measured on a three-point scale

anchored by low knowledge and high knowledge. The respondents had an average of 10.14

[std. deviation = 4.87] years of employment with their firm, indicating an adequate amount of

experience and knowledge of the key informants for the purposes of the study. The mean
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responses to the last two items were 2.72 [std. deviation = 0.80] and 2.23 [std. deviation = 0.53]).

It seems reasonable to assume that the respondents had considerable expertise.

The sample characteristics can be described in the following way. The industry mix covers

machine and equipment manufacturing companies (28.6%), analyzing and controlling

instruments (27.5%), electronic and other electrical equipment and components (38.7%) and

others (5.2%). Considering the number of employees, 20% of the participants have than 100

employees, 37.4% have 100 to 249 employees, 37.9% have 250 to 999 employees, and 4.6%

employ more than 1000 employees. The unit of analysis is in 45.6% of the cases a strategic

business unit and in 54.4% of the cases the entire company. The overall performance in terms of

the median on the annual sales is 221 million . The overall profitability [operating margins] is

split into 55.4% of the participants achieving more than 5% in the last three years and 44.6%

achieving less than 5% in the last three years.

Measurement of organizational design factors

Item selection and generation for organizational design factors were guided by theory

(Churchill 1979). We used existing scales or measures adapted from previous studies of service

orientation in manufacturing companies (i.e., Homburg, Fassnacht and Gnther 2003; Oliva and

Kallenberg 2003; Neu and Brown 2005). Table 1 summarizes the operationalization of the

organizational design factors according to the framework presented earlier. The items for the

organizational design factors were measured on a five-point scale (1 = lowest score, 5 = highest

score). Considering the constructs for the service orientation of corporate culture, the orientation

of corporate values was assessed using four items that measured the degree to which managers

and employees understood the value of services. The value of services included financial,

strategic and marketing opportunities (Oliva and Kallenberg 2003). The construct for the service
 18

orientation of employees behavior was operationalized using four items, which referred to the

aspects of employees role understanding. According to Neu and Brown (2005), the employees

must behave as reliable trouble-shooters, performance enablers and trusted advisers in order for

the service business to expand successfully.

The operationalization of the three constructs for the service orientation of human

resource management used three to four items referring to personnel recruitment, personnel

training and personnel assessment/compensation (Homburg, Fassnacht and Gnther 2003). The

items covered various facets of the service orientation of human resource management.

Considering the operationalization of the two constructs for the service orientation of

organizational structures, the organizational distinctiveness and the proximity to customers were

each assessed by three items. For the organizational distinctiveness, the first item measured the

degree of separation of the service business from the product business. The second item assessed

the degree of implementing a separate profit-and-loss responsibility for services (Oliva and

Kallenberg 2003). The amount of resources shared between product and service business was

reflected in the last item. Integration within the service organization is normally associated with

strong intra-business unit collaboration. The service and product organization, therefore, share an

essential amount of resources. In contrast, separating the service organization from the product

organization would lead to little intra-business unit collaboration and few resources would be

shared with the product organization (Neu and Brown 2005). Thus, the degree of shared resources

between the product and service organization was used as the third item.

The existing literature describes a variety of scales for measuring proximity to customers

(Froehle and Roth 2004). In this context, the proximity of the service organization to customers

was operationalized through three items quantifying the degree to which service resources are

established within the market organization. As illustrated in Table 1, the three items reflected
 19

aspects such as the definition of service responsibilities and the empowerment of service

employees (Heskett, Sasser and Schlesinger 1997).

In terms of measurement validation, all multi-item constructs for organizational design

factors were subjected to principal component analysis (PCA) using orthogonal rotation

(VARIMAX) (Hair et al. 2005). There was a large test result for sphericity of 4456.334 and the

associated significance level was lower than 0.001 in both cases. The result of the Kaiser-Meyer-

Olkin measure was 0.87 for organizational design factors, which provided further support for the

factor analysis. The final factor solution for organizational design factors contains seven

interpretable factors accounting for 71.3% of the common and unique variance, as well as 25

items with communalities ranging from 0.63 to 0.86. The Cronbachs alpha value ranges from

0.77 to 0.91, which are acceptable levels (Nunnally and Bernstein 1994). Altogether, the degree

of confidence of the factor solutions is permissible and the interpretation of the factors is

consistent with the previous conceptualization.

Insert Table 1 around here

Measurement of service strategies

The operationalization of service strategy is not without debate and draws on either the

strategic priorities as in traditional strategy management literature or the service offering

associated with different service strategies (Gebauer 2008; Frohlich and Dixon 2001). Previous

research consistently operationalizes service strategies through formative measurement of the

strategic importance of service categories (Homburg, Hoyer and Fassnacht 2002; Homburg,

Fassnacht and Gnther 2003). Unlike reflective indicators, whereby the latent variables cause the

observed variables, formative indicators can be viewed as causing rather than being caused by
 20

the latent variable measured by the indicators (MacCallum and Browne 1993, p. 533). Formative

measures involve the construction of an index rather than a scale (Diamantopoulos and

Winklhofer 2001).

According to existing literature, we operationalize service strategies through formative

scales. In general, four issues are critical to the successful construction of indexes with formative

indicators: (1) content specification, (2) indicator specification, (3) indicator collinearity and (4)

external validity (Diamantopoulos and Winklhofer 2001). To achieve sufficient content

specification of service strategy, three dimensions were considered to capture the major facets of

service strategies. The three dimensions refer to (1) the number of services offered, (2) how many

customers these services are offered to (broadness) and (3) how strongly these services are

emphasized (emphasis). All three dimensions have previously been used successfully to measure

the service orientation of a business strategy (Homburg, Hoyer and Fassnacht 2002; Homburg,

Fassnacht and Gnther 2003; Gebauer 2008). Using these three dimensions to specify the content

of a service strategy is in line with the focus on product offering as a key strategic decision in the

product strategy (Homburg, Fassnacht and Gnther 2003).

Critical for the design of valid indexes with formative indicators is the indicator

specification. The indicators must capture the entire scope of the service strategies as previously

described. Whereas the broadness of services and the emphasis on services easily captures the

entire scope of a service strategy, the number of services is more critical. In the present context,

the number of services is classified into five service strategies (Bowen, Siehl and Schneider 1989;

Simon 1992; Mathieu 2001; Oliva and Kallenberg 2003; Vandermerwe and Rada 1988). The

number of services in the service strategy is calculated by the sum of the services offered. The list

of customer services, for example, captures five services that are measured on a dichotomous

scale (with 0 = not offered and 1 = offered) indicating whether or not a service was offered
 21

(Homburg, Fassnacht and Gnther 2003). The specific services for each service strategy are listed

in Table 2. The specific services mentioned in Table 2 were considered to capture the entire scope

of the service strategy in terms of strategic marketing offering. Since the number of services is

additive (e.g., 05 for customer service strategy) it was converted to a five-point scale similar to

the one used for the other two items. In addition, our analysis does not include any dependent

variable for the service strategies; we must assume equal weights for the three items. The

emphasis on one service strategy, therefore, is calculated as a mean of the three items.

Insert Table 2 around here

Since formative measurement models are based on linear equation systems, substantial

collinearity among indicators would affect the stability of indicator coefficients. Thus,

multicollinearity is a potential problem for formative indicators and requires tests for indicator

collinearity by obtaining the variance inflation factor. None of the 15 indicators (number of

services, broadness of and emphasis on services for all of the five service strategies) revealed

serious multicollinearity problems. More specifically, the multicollinearity among the 15

indicators listed in Table 2 did not seem to pose a problem because the maximum variance

inflation factor came to 2.177, which is under the common cut-off threshold of 10

(Diamantopoulos and Winklhofer 2001). Therefore, the index for each service strategy retained

the three initial dimensions of (1) number of services offered, (2) how many customers these

services are offered to (broadness) and (3) how strongly these services are emphasized

(emphasis).

The first three determinants for successful construction of indexes are straightforward.

The literature, however, remains fuzzy on how external validity should be established
 22

(Diamantopoulos and Winklhofer 2001; Reinartz, Krafft and Hoyer 2004; Diamantopoulos,

Riefler and Roth 2008). The nature of formative measurement limits the assessment of external

validity to examining how well the formative constructs are related to other (reflective)

constructs. A satisfactory approach to validation, while allowing the assessment of the proposed

indicators and formative scales for service strategies as a set, is to link the index to another

reasonable construct and to estimate a multiple indicator and a multiple cause model

(Diamantopoulos, Riefler and Roth 2008). As illustrated in Figure 2, we estimated a model that

can be described as a formative first-order and reflective second-order model. Validation along

these lines requires (1) that information be gathered for at least one more construct than the one

captured by the indexes, (2) that this other construct is measured by means of reflective indicators

and (3) that a theoretical relationship can be postulated to exist between the constructs

(Diamantopoulos and Winklhofer 2001). Figure 2 shows that the service strategies investigated in

the present study act as predictors of service differentiation. Of particular interest is the sign and

magnitude of the parameter estimates (15) between service strategies and service differentiation.

Service differentiation was assessed by the degree of service differentiation, new service

development, and price level of services (Kim and Lim 1988). These three reflective items were

chosen to represent the effects of achieving competitive advantages associated with implementing

the service strategies. In addition, by focusing on the 115 parameters, we can assess the

contribution and significance of the individual indicators.

Insert Figure 2 around here

Estimation of the model resulted in a good overall fit (2 =379.006, degrees of freedom =

72, p<0.001; RMSEA = 0.046, GFI (Goodness of Fit Index) = 0.91, TLI (Tucker-Lewis-Index) =
 23

0.92, CFI (Comparative Fit Index) = 0.96). The paths between the service strategies investigated

in the present study and service differentiation were found to be significant and consistent with

expectations (1=0.15, p<0.05; 2=0.23, p<0.01; 3=0.38; p<0.05; 4=0.31, p<0.1 and 5=0.20,

p<0.05). Thus, evidence in support of the validity of the service strategy indexes was obtained

(Diamantopoulos and Winkelhofer 2001). The proportion of variance explained by the service

strategies investigated in the present study is at an acceptable level (R 2 = 0.46). Two of the 115,

however, turned out to be insignificant: emphasis on basic services for the installed base and

emphasis on operational services. Perhaps these two indicators should not be included in the

index for after-sales service provider and outsourcing partner.

A comparison of the model that includes all indicators, with a second model that does not

include the two insignificant indicators, showed no significant deterioration in fit (2 = 2.89,

degrees of freedom = 2, p > 0.10). The comparison reveals that both models differ only

marginally in the variance explained (R2) for the latent variable of service differentiation.

Nevertheless, following Diamantopoulos and Winklhofer's (2001) recommendation that indicator

elimination should not be divorced from conceptual considerations, we assume that the

elimination would alter the nature of the construct on after-sales service strategy and outsourcing

partner strategy. Thus, the two indicators were kept in the formatives scales. Overall, the

assessment of the four critical issues (1) content specification, (2) indicator specification, (3)

indicator collinearity and (4) external validity can be interpreted as satisfactory leading to a

robust approach to formative scale constructions for service strategies.

Cluster analysis

According to the requirements of fit as gestalts, the results of the factor analysis of

organizational design factors and formative index of service strategies were used as input for two
 24

independent cluster analyses. For both cluster analyses, we initially used a K-means cluster

analysis. A K-means cluster analysis requires the researchers to specify the desired number of

clusters in advance. Determining the number of clusters in advance is not without bias (Ketchen

and Shook 1996). To reduce this bias, our initial decision of the number of clusters was guided by

four criteria. First, the number of service strategies and organizational design factors were used as

indicators for the potential number of clusters. Second, the number of clusters was limited to

between n/30 and n/60, where n is the sample size. Only models with three to six clusters,

therefore, were considered. Third, the pronounced increases in the tightness of the clusters, as

measured by the R2 and pseudo-F statistic, were used as an indicator. Fourth, managerial

interpretability of the clusters using ANOVA tables was used to substantiate the number of

clusters (Miller and Roth 1994). This significance test in ANOVA evaluates the between group

variability against the within-group variability when computing the significance test for the

hypothesis that the means in the groups are different from each other.

Finally, as suggested by Ketchen and Shook (1996), confidence in the number of clusters

is greater when multiple methods converge. To ensure the reliability of the derived clusters, the

results of the K-means cluster analysis were verified using a hierarchical cluster analysis while

changing the agglomeration coefficient and observing breaks in the dendrogram (Ketchen and

Shook, 1996).

Assessment of predictive validity

The final step of analysis, fit as gestalt, contains the assessment of predictive validity.

Predictive validity means that high and low performance businesses probably differ in their

internal congruence between service strategies and organizational design factors. To ensure

predictive validity (Venkatraman 1989), the sample was divided among respondents who were
 25

highly successful and those who were less successful in their alignment between strategy and

structure, leading to an overall profitability [operating margins] of more than 5% in the last three

years. The 5% level was selected because it represents the average operating margin in European

manufacturing industries. A total of 108 respondents achieved an operating margin of more than

5% and 87 respondents achieved less than 5%. By using a cross-classification table, we illustrate

that the high-performance respondents and low-performance respondents belong to different

configurations between service strategy clusters and clusters of organizational design factors. We

used t-tests to test for differences in performance between companies with a good strategy-

structure fit and those with a poor strategy-structure fit.

RESULTS

Service strategy clusters

As illustrated in the corresponding ANOVA table (Table 3), only four out of five service

categories discriminate among the four clusters. The customer support service strategy does not

discriminate among the four clusters. This explains why customer service strategy was not

indicated as a strategy cluster among the 195 manufacturing companies. The corresponding

cluster means are illustrated in Table 4. The first cluster consists of 61 members and it can be

interpreted as after-sales service providers because it is dominated by basic services for the

installed base. This cluster achieves only low scores for maintenance, operational and R&D

services. Cluster 2 consists of 77 members and it can be interpreted as customer support service

providers because its mean is the highest for maintenance services, while operational and R&D

services are of low importance. Additionally, the mean for basic services is significantly lower for

customer support service providers than for after-sales service providers. Cluster 3 is interpreted

as outsourcing partners and has 24 members. It achieves the highest degree of operational
 26

services. In terms of basic services for the installed base and maintenance services, the means are

on an average level. R&D services are of little importance. Finally, cluster 4 represents a group of

33 members that can be interpreted as development partners. This cluster is dominated by a high

level of interest in R&D-oriented services, whereas the interest in operational (outsourcing)

services is low. The interest in basic service for the installed base and maintenance services is on

an average level.

Insert Table 3 around here

Organization design clusters

Interestingly, the results of the cluster analysis confirm our previous specification of the desired

number of clusters. Four distinct clusters emerge among the organizational design factors. The

ANOVA table suggests that all seven organizational design factors discriminate among the four

clusters. The four clusters contain 98, 56, 20 and 21 cases respectively. Table 3 illustrates the

corresponding ANOVA table with the different configurations of organizational design factors,

while Table 4 depicts the configuration of organizational design factors for each cluster. Each

cluster represents a specific configuration among individual organizational design factors. Cluster

5, for example, is characterized by low service orientation in the organizational design factors for

employee behavior, personnel recruitment, personnel development and personnel assessment.

Only service orientation in corporate values is on a medium level. In addition, cluster 5 is

described by low organizational distinctiveness and customer proximity. As illustrated in Table 4,

similar descriptions can be formulated for the remaining clusters 6, 7 and 8. The most distinct

feature of cluster 6 is high service orientation across all factors, whereas cluster 7 is characterized

by high service orientation across all factors, except for personnel recruitment and training.
 27

Cluster 8 is characterized by high service orientation across all factors, except for organizational

distinctiveness and personnel compensation assessment.

Insert Table 4 around here

The relationship between service strategy and organizational design clusters

Compared to the conceptual framework, four out of the five suggested service strategies and four

configurations of organizational design factors could be identified. The four strategy clusters are

consistent with the conceptual framework and substantiate the proposed strategic service

offerings. To explore the present proposition of the relationship among the various clusters, a

cross-classified table was created for the four service strategy clusters and the four organizational

design factor clusters. As illustrated in Table 5, the four clusters on service strategies are shown as

columns and the four clusters on organizational design factors are shown as rows.

Table 5 depicts the results of the classification matrix and the percentage of companies

correctly and/or incorrectly classified is illustrated in the notes. In total, 89.7% of all

manufacturing companies are correctly classified. Our research confirms the ability of the

explained relationship between service strategy and organizational arrangement to predict

performance better than random chance. Furthermore, a t-test confirms that the performance of

the four combinations on the diagonal from the top left to the bottom right is higher than the

performance of other potential combinations (t=2.27, p< 0.05).

Insert Table 5 around here

Interpretation of results
 28

According to the initial proposition, each service strategy corresponds with only one specific

configuration of organizational design factors. A general pattern about configurations between

service strategies and organizational design elements is emerging. After-sales service providers

are most likely to be successful if they implement the set of organizational design factors

associated with cluster 5 (low service orientation across all factors, except medium emphasis on

the service orientation of corporate culture and proximity to customers). Customer support

service providers are most likely to be successful if they implement the organizational

arrangements described in cluster 6 (high service orientation across all factors). Outsourcing

partners success depends on implementing the organizational arrangements in cluster 7 (high

service orientation across all factors, except for personnel recruitment and training). Finally,

development partners are most likely to achieve success if they focus on the organizational issues

of cluster 8 (high service orientation across all factors, except for organizational distinctiveness

and personnel compensation assessment). The more specific implications of these four strategy-

structure configurations are discussed later in managerial implications.

One interesting discovery from the four emerging strategy-structure configurations is that

many of the companies that fail with their service strategies, such as customer support service

providers outsourcing partners or development partners, keep their set of organizational design

factors associated with after-sales service providers. Companies aim to work with preventive

maintenance, process optimization, advanced training and maintenance contracts without

focusing on the service orientation of employees behavior, personnel recruitment and personnel

training. Consequently, adopting a new service strategy is not a straight road to success since

companies seem to get stuck in a mismatch between strategy and organizational design factors.

The most common mismatch is the implementation of the customer support service provider,

outsourcing partner and development partner strategy through the configuration of the
 29

organizational design factors of cluster 5. A second common mismatch can be identified for

cluster 7. The outsourcing partners only fit with configurations of organizational design factors

beyond cluster 7. Cluster 7 differs mainly from the other three clusters by its high level of

emphasis on distinctiveness between products and services as well as its high level of proximity

to customers of the service organization. The ensuing implication is for outsourcing partners to

set up an independent service organization and locate service units on the customer side. These

organizational configurations are counterproductive for the implementation of an after-sales

service provider strategy or a development partner strategy. This argument is similar to the third

common mismatch. No other service strategy such as customer support service provider and

outsourcing partners can be implemented successfully if the managers strongly distinguish

between product and service business or emphasize the proximity to customers.

DISCUSSION

Theoretical implications

This empirical investigation of manufacturing companies highlights how the service strategies

investigated in the present study correspond with the configuration of organizational design

factors. In general, the findings contribute to the discussions of integrated solutions (Davies

2004), the focus on the transition from products to services (Oliva and Kallenberg 2003; Neu and

Brown 2005) and the restructuring of manufacturing companies towards a service orientation

(Martin and Horne 1992).

We suggest four specific configurations between service strategies and organizational

arrangements, which extends the previous research on the strategic restructuring of

manufacturing companies towards service orientation. We argue that the change in focus of

manufacturing companies can be viewed as steps taken towards service orientation, and service
 30

orientation can then be translated into different service strategies based on a companys specific

situation. The service strategies investigated in the present study represent different avenues for

developing a service orientation in a manufacturing company. The identification of the four

strategy-structure configurations helps to shift the basis for value exchange, using skill(s) and

knowledge to achieve competitive advantages.

More specifically, our empirical investigation makes four specific contributions. First, it

contributes to Davies' (2004) missing link between organizational structures and strategies for

high-value-added services. The requirements for implementing service strategies contribute to the

emerging resource-based perspective on value creation. Only if manufacturing companies form

one of the four successful strategy-structure configurations will they be able to achieve the

intended value proposition (Vargo and Lusch 2004 and 2008a/b; Grnroos 2008). The four

service strategies investigated in the present study and their corresponding organizational

configurations are not intended to be exhaustive, but rather to highlight potential directions for

strategic management research in the context of service orientation.

Second, the findings offer guidance to the contrasting views of Oliva and Kallenberg

(2003) who suggest separating service and product business, as well as Neu and Brown (2005)

who propose integrating product and service business. The decision of whether to integrate or to

separate the service business should take into consideration the type of service strategy used to

move along the transition line from products to services. If manufacturing companies try to

implement their service strategy through providing customer support services or operational

(outsourcing) services, it is better to separate the service business. In the case of following the

service strategy of a development partner, parts of the service should be integrated into the

existing product organization (specific R&D team in the R&D organization), whereas the average
 31

level of customer support services for DP also suggests separating these services from the product

business.

Third, the findings extend the existing knowledge about how manufacturing companies can

move from the total offerings of products and services dominated by products, to total offerings

dominated by services (Kotler 1994). Because the different items of customer services no longer

discriminate among the strategy clusters, Mathieu's (2001) service avenue (specifity) of customer

service is part of all of the four service strategies. Product services can be further distinguished

into services for ensuring the proper functioning of the product (after-sales services) and for

optimizing the efficiency and effectiveness of the product within the customer process (customer

support services). The bundling of operational services and R&D-oriented services into the

service strategies of outsourcing partners and development partner extends Mathieu's (2001)

concept of service products. Both service strategies highlight the service products that

manufacturing companies should emphasize in order to achieve a total offering dominated by

services.

Fourth, the findings implicitly suggest mediation effects. The mediation effect can either be

that service strategy mediates the relationship between organizational design factors and

performance or that organizational design factors mediate the relationship between service

strategy and performance. The results do not comprehensively suggest which mediation effect is

relevant for the strategy-structure configuration, but the existing literature on fit as mediation in

strategic management consistently describes the mediation effects as structure that mediates the

relationship between strategy and performance. Prajogo and Sohal (2006) investigate, for

example, how total quality management mediates the relationship between organization strategy

and organization performance. Because this type of mediation effect has been substantiated in the
 32

literature (e.g. Venkatraman 1989), it could be assumed that the configuration of organizational

structures mediates the relationship of service strategy and performance.

Managerial implications

The four specific configurations serve as managerial guidance for implementing various

service strategies. Only if managers understand the characteristics of the company's service

strategy will they be able to implement the right organizational design factors. More specifically,

managers who consider an after-sales service provider strategy should focus on the

implementation of service orientation in corporate values. Consequently, the service orientation

of employees behavior, personnel recruitment, personnel training and personnel

assessment/compensations are less important. By implementing an after-sales service provider

strategy, they do not need to make a distinction between product and service business. Proximity

to customers is of average importance for implementing an after-sales service provider strategy.

Managers implementing a customer support service provider strategy should be

conscientious about the service orientation of personal recruitment, training and assessment.

Similar to outsourcing partners and development partners, the customer support service provider

strategy requires implementation of high levels of service orientation in the corporate values. In

contrast, the implementation of the service orientation of employees behavior is less important

for outsourcing partners and development partners, but more important for after-sales service

providers. The degree of organizational distinctiveness is high and differs partly from the other

three clusters.

Furthermore, managerial efforts to implement an outsourcing partner strategy requires a

high level of organizational distinctiveness between products and services, a high level of

proximity to customers, and a high level of service orientation of corporate values and
 33

employees behavior. For this cluster, the three factors capturing the service orientation of human

resource management are only of average importance.

The implementation of the development partner strategy is characterized by a high level in

the five factors reflecting the service orientation of the corporate culture and human resource

management. The degree of proximity to customers is also high and only the organizational

distinctiveness is on an average level.

The various fits and misfits between strategy and organizational configurations also lead

to the most important managerial implication. Instead of concentrating on increasing the service

orientation of individual organization elements, managerial actions must focus on configurations

among organizational factors and service strategies. An adequate configuration among

organizational factors and service strategies leads to coalescence, therefore they are internally

consistent, complementary and mutually reinforcing. This union enables managers to achieve

above-average company performance.

Limitations and future research opportunities

Although this study has its merits as indicated earlier, it also has some limitations. Our

results express how the success of each service strategy depends on the implementation of

specific configurations of organizational design factors. The results of the cluster analysis,

however, do not reveal to what extent individual organizational design factors contribute to the

success of each service strategy. In line with Bowen, Siehl and Schneider's (1989) framework on

internal harmony between strategy and structure, we proposed that organizational performance

depends on the fit between service strategy and configurations of organizational design factors.

The configuration of organizational design factors is believed to be a significant factor in

organizational performance, along with the individual contribution of each design factor to the
 34

success of each service strategy. The contribution of each organizational design factor to the

success of service strategies is considered to be beyond the scope of this research goal and its

corresponding methodology. Understanding how individual factors contribute to the success of

each service strategy offers interesting future research opportunities. Future research could draw

on fit as mediation or fit as moderation using structural equation modeling (Venkatraman 1989).

These promising research approaches for understanding individual impact, require broad data sets

on each service strategy in order to deal with methodological issues reported in the relevant

literature (Baumgartner and Homburg 1996).

All of the four service strategies can also be interpreted as offering different degrees of

integrated solutions. By providing integrated solutions, companies following these service

strategies act somewhat as resource integrators where value is defined by the customer in the

context of interactions and networks (Vargo and Lusch 2008b). Thus, the service strategies

support the relational nature of value creation, but future research should concentrate more

explicitly on investigating integrated solutions in order to understand the link between services

and the nature of value creation better.

Our empirical investigation concentrates on service strategies associated with moving

downstream in the primary customer value chain. Spatial expansion and reconfiguration of the

adjacent customer activity chain (Sawhney, Balasubramanian and Krishnan 2004) are considered

to be beyond the scope of this paper, that is, only service strategies addressing the primary

customer activity chain are considered. In view of the increasing importance of services for the

adjacent customer activity chain (Sawhney, Balasubramanian and Krishnan 2004), service

strategies concentrating on this activity chain should provide promising research prospects.

Integrating service strategies from the supplementary customer activity chain would also lead to a

re-consideration of the integration of products and services. If the complexity of the total offering
 35

increases by adding services to the supplementary customer activity chain, then the argument can

be substantiated for managers to integrate the responsibilities of multiple value chain activities in

order to provide a complex total offering (Neu and Brown 2005).

The service strategies investigated in this study are not meant to be exhaustive, but rather

to highlight potential strategic directions for manufacturing companies moving into the service

business. Alternative strategic directions might be reached through understanding that in the

service dominant logic, manufacturing (1) is just another service and (2) it results in output that

has value only if it results in service. Thus, future empirical studies should include strategic

directions in outsourcing manufacturing or selling service flows from the manufactured goods,

such as General Electric selling jet-engine usage rather than the jet engines themselves, or

manufacturers of digital entertainment equipment who eliminate their goods and start selling

digitized entertainment.

Furthermore, the service strategies are conceptualized as realized strategies. The findings

do not offer guidance on whether the service strategies are following the path of emerging or

intended (deliberate) strategies, nor do they predict whether the strategy-structure configuration

functions through strategy-follows-structure or structure-follows-strategy paradigms (Chandler

1962). Both questions may provide promising research prospects.

Acknowledgement

The authors would like to thank the editor and two anonymous reviewers for helpful

comments to improve the quality of the manuscript.

 36

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 40

TABLES and FIGURES

Figure 1: Service strategies.

 41

Figure 2: Formative first-order and reflective second-order model.

 42

Table 1: Results of the exploratory factor analysis [organizational design factors].

 43

Number of services for different service

strategies List of services
Information services
Basic advice services
Customer service
Customer service strategy Documentation
Transport to client
Installation/commissioning

Product-oriented training
Help desk
Basic service for the installed base
Inspection services
After-sales service provider
Diagnosis services
Repair services

Maintenance services
Customer support service provider
Preventive maintenance
Full maintenance contracts
Annual maintenance activities
Service-level agreements on maintenance
Process-optimization through continuous maintenance

Process design
Process-oriented engineering (tests, optimization, simulation)
R&D-oriented services
Development services
Development partner
Construction (design) services
Business consulting in product and process development

Managing the whole maintenance function

Operating the product
Operational services
Outsourcing partner Managing spare parts logistics
Operating repair teams for customers
Managing the training and personnel development

Table 2: Measurement of the number of services for each service strategy.

 44

Table 3: ANOVA tests associated with both cluster analyses.

 45

Table 4: Cluster means of discriminating variables [n = 195].

 46

Strategyclusters

Cluster1 (n=61) Cluster2 (n=77) Cluster3 (n=24) Cluster4 (n=33)

Aftersalesservice Customersupport Outsourcingpartner Developmentpartner
provider serviceprovider
Cluster5:Lowservice Aftersalesservice
orientationacrossallfactors, provider
exceptofmediumemphasison
serviceorientationofcorporate
cultureandproximityto
customers
(n=98) 40 3 31 9 15
Cluster6:Highservice Customersupport
orientationacrossallfactors serviceprovider

Clusteron
organizational (n=56) 8 10 31 4 3
designfactors Cluster7:Highservice Outsourcingpartner
orientationacrossallfactors,
exceptforpersonnelrecruitment
andtraining
(n=20) 4 12 4
Cluster8:Highservice Developmentpartner
orientationacrossallfactors,
exceptfororganizational
distinctivenessandpersonnel
compensation/assessment
(n=21) 4 3 13 1

Notes:
1) Thegreycellsindicatethefourstrategystructureconfigurations.
2) BoldhighperformanceSBUs;italicslowperformance
3) Tobereadas:96(40+31+12+13)highperformingmanufacturingcompaniesarecorrectlyclassifiedintothefour
strategystructureconfigurations(88.8%).Incorrectlyare12(8+4)highperformingcompanies(10.2%).Correctly
classifiedare79(31+9+15+10+3+4+4+3)forlowperformingmanufacturingcompanies(90.2%),whichdonotbelong
tothefourstrategystructureconfigurations,whereasninelowperformancemanufacturingcompanies(8.8%)are
incorrectlyclassifiedinoneoftheourstrategystructureconfigurations.Intotal,thisleadsto175(89.7%)correctlyand
20(10.3%)incorrectlyclassifiedmanufacturingcompanies.
 47

Table 5: Strategy-structure configurations.