Service, services and products: rethinking operations strategy

Purpose This paper proposes a new approach to operations and supply strategy in the light of recent developments in the analysis of the respective roles of products and services in delivering benefits to customers. Design/methodology/approach Reviews and synthesises concepts from operations management (OM), marketing, economics and related areas. Examples of product and service combinations are considered, drawing attention to the ways in which services may be distinguished from products. An institutional basis for defining services is favoured over IHIP. A corollary of this is how services are made tradable: the modularity theory of the firm is used to do this. The paper then outlines, considers and compares various approaches to the combination of products and services: “service‐dominant logic”, support services, product‐service systems, systems integration, performance‐based logistics, bundling and, finally, the notion of “the offering”. Findings It is found that the notion of the business model is useful as an integrating concept. This focuses on four areas: network structure, how transactions are made, how revenue models and incentives interact and how capabilities are accessed. Implications for future research in OM are considered. Research limitations/implications Hitherto, operations strategy (OS) has concentrated on intra‐firm capabilities, which is only part of one of the four areas identified. Therefore, an extensive agenda for research into inter‐firm capabilities and the other three areas identified is presented. Originality/value This is among the first papers in OM to break completely with IHIP as a basis for service definition and to work through the implications for OS. It is also the first to develop systematically an understanding of how the emerging concept of the business model can inform OM.