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Services play an important role in the manufacturing industry. A shift in emphasis from selling physical products to offering product–service systems is perceived. Detailed knowledge of machines, components and subcomponents in whole plants must be provided. Installed base management contributes to this and enables services in manufacturing to maintain high machine availability and reduce downtimes. Installed base management assists in data structuring and management. By combining installed base data with sensor data, a digital twin of the installed base results. Following the action design research approach, an integrated installed base management system for manufacturing is presented and implemented in practice. An engineering and manufacturing company is involved in the research process and ensures practical relevance. Requirements are not only deduced from the literature but also identified in focus group discussions. A detailed test run with real data is performed for evaluation purpose using a demonstration machine. To enable a generalization, design principles for the development and implementation of such an integrated installed base management system are created.

We analyze mixed bundling in two-sided markets where installed base effects are present and find that the pricing structure deviates from traditional bundling as well as the standard two-sided markets literature-we determine prices on both sides fall with bundling. Mixed bundling acts as a price discrimination tool segmenting the market more efficiently. Consequently, as a by-product of this price discrimination, the two sides are better coordinated, and social welfare is enhanced. We show unambiguously that platform participations increase on both sides of the market. After theoretically evaluating the impact mixed bundling has on prices and welfare, we take the model predictions to data from the portable video game console market. We find empirical support for all theoretical predictions. This paper was accepted by J. Miguel Villas-Boas, marketing.

Reliability-redundancy allocation, preventive maintenance, and spare parts logistics are crucial for achieving system reliability and availability goal. Existing methods often concentrate on specific scopes of the system's lifetime. This paper proposes a joint redundancy-maintenance-inventory allocation model that simultaneously optimizes redundant component, replacement time, spares stocking, and repair capacity. Under reliability and availability criteria, our objective is to minimize the system's lifetime cost, including design, manufacturing, and operational phases. We develop a unified system availability model based on ten performance drivers, serving as the foundation for the establishment of the lifetime-based resource allocation model. Superimposed renewal theory is employed to estimate spare part demand from proactive and corrective replacements. A bisection algorithm, enhanced by neighborhood exploration, solves the complex mixed-integer, nonlinear optimization problem. The numerical experiments show that component redundancy is preferred and necessary if one of the following situations occurs: extremely high system availability is required, the fleet size is small, the system reliability is immature, the inventory holding is too costly, or the hands-on replacement time is prolonged. The joint allocation model also reveals that there exists no monotonic relation between spares stocking level and system availability.

In this paper, we address the question: \"which conditions enable successful information infrastructure innovation?\". Information infrastructures are characterized by nonlinear evolutionary dynamics. Based on a case study that examines the design, development, and initial use of a web-based solution for patient-hospital communication at a Norwegian hospital over a ten-year period, we trace the evolution of a new II. This longitudinal analysis takes installed base cultivation as its conceptual basis. Specifically, we draw on three aspects of a cultivation strategy: growth process, user mobilization, and learning to cultivate. The analysis shows how the solution started as a bottom-up initiative of a small and motivated team at the hospital IT department, and how it grew gradually in a flexible and evolutionary way. Our findings support the argument that successful infrastructure innovations are based on a cultivation strategy addressing specific users' needs, usefulness, and evolutionary growth. We make three key contributions to information infrastructure research. First, we expose the role architecture plays in the growth of IIs. Second, we provide insights about cultivating IIs, especially in their bootstrap phase. Third, we identify three different but interrelated types of innovation-in, of, on infrastructure-that articulate the critical role of IIs architecture in enabling successful innovation.

New empirical models of consumer demand that incorporate social effects seek to measure the causal effect of past adopter's behavior—the \"installed-base\"—on current adoption behavior. Identifying such causal effects is challenging due to several alternative confounds that generate correlation in agents' actions. In the absence of experimental variation, a preferred solution has been to control for these spurious correlations using a rich specification of fixed effects. The authors show that fixedeffects estimators of this sort are inconsistent in the presence of installed-base effects; in simulations, random-effects specifications perform even worse. The analysis reveals the tension the applied empiricist faces in this area: a rich control for unobservables increases the credibility of the reported causal effects, but the incorporation of these controls introduces biases of a new kind in this class of models. The authors present two solutions: a modified version of an instrumental variable approach and a new bias-correction approach, both of which deliver consistent estimates of causal installed-base effects. The empirical application to the adoption of the Toyota Prius Hybrid in California shows evidence for social influence in diffusion and reveals that implementing the bias correction reverses the sign of the measured installed-base effect. The authors also discuss implications of the results for identification of models in marketing involving state dependence in demand, and incorporating discrete games of strategic interaction.

Recently, firms have begun to handle the design, manufacturing, and maintenance of capital goods through a consolidated mechanism called the integrated product-service system. This new paradigm enables firms to deliver high-reliability products while lowering the ownership cost. Hence, holistic optimization models must be proposed for jointly allocating reliability, maintenance, and spare parts inventory across the entire value chain. In the existing literature, these decisions are often made fragmentally, thus resulting in local optimality. This study reviews the extant works pertaining to reliability-redundancy allocation, preventative maintenance, and spare parts logistics models. We discuss the challenges and opportunities of consolidating these decisions under an integrated reliability-maintenance-inventory framework for attaining superior system availability. Specific interest is focused on the new product introduction phase in which firms face a variety of uncertainties, including installed base, usage, reliability, and trade policy. The goal is to call for tackling the integrated reliability-maintenance-inventory allocation model under a nonstationary operating condition. Finally, we place the integrated allocation model in the semiconductor equipment industry and show how the firm deploys reliability initiatives and after-sale support logistics to ensure the fleet uptime for its global customers.

We study the strategic benefits of mergers and acquisitions (M&As) when competing information technology vendors sell different generations of the same product with different quality. We assume the new product arrives unexpectedly when an installed base of the old product exists. We show that the combination of consumers’ purchase history and heterogeneity leads to new demand complexity that gives rise to innovative product strategies. We find that shelving the old product is an important motivation for M&A. The acquirer may exercise static or intertemporal price discrimination depending on whether it can exercise upgrade pricing. M&A may speed up or slow down new product consumption, and it can lead to delayed new product introduction in some markets. However, it always increases the acquirer’s profit and can sometimes help maximize social welfare. We discuss relevant managerial and policy implications. The online appendix is available at https://doi.org/10.1287/isre.2016.0659 .

PurposeThe purpose of this paper is to examine how installed base information could help servitizing original equipment manufacturers (OEMs) forecast and support their industrial service sales, and thus increase OEMs’ understanding regarding the dynamics of their customers lifetime values (CLVs).Design/methodology/approachThis work constitutes a constructive research aiming to arrive at a practically relevant, yet scientific model. It involves a case study that employs statistical methods to analyze real-life quantitative data about sales and the global installed base.FindingsThe study introduces a forecasting model for industrial service sales, which considers the characteristics of the installed base and predicts the number of active customers and their yearly volume. The forecasting model performs well compared to other approaches (Croston’s method) suitable for similar data. However, reliable results require comprehensive, up-to-date information about the installed base.Research limitations/implicationsThe study contributes to the servitization literature by introducing a new method for utilizing installed base information and, thus, a novel approach for improving business profitability.Practical implicationsOEMs can use the forecasting model to predict the demand for – and measure the performance of – their industrial services. To-the-point predictions can help OEMs organize field services and service production effectively and identify potential customers, thus managing their CLV accordingly. At the same time, the findings imply new requirements for managing the installed base information among the OEMs, to understand and realize the industrial service business potential. However, the results have their limitations concerning the design and use of the statistical model in comparison with alternative approaches.Originality/valueThe study presents a unique method for employing installed base information to manage the CLV and supplement the servitization literature.

Installed base management is the policy in which the manufacturer leases the product to consumers, and bundles repair and maintenance services along with the product. In this article, we investigate for the optimal leasing price and leasing duration decisions by a monopolist when the production and servicing capacity are constrained. The effect of diffusion of consumers in the installed base is considered, with the ownership of the product resting with the monopolist during the product lifecycle. The monopolist operating the installed base jointly optimizes the profits from leasing the product/service bundle along with maintenance revenues and remanufacturing savings. We formulate the manufacturer's problem as an optimal control problem and show that the optimal pricing strategy of the firm should be a skimming strategy. We also find that the effect of remanufacturing savings on the pricing decision and the length of the leasing duration changes significantly depending on the duration of the product's lifecycle. If the product lifecycle is long and remanufacturing savings are low, the firm should offer a shorter leasing duration, whereas if the remanufacturing savings are high, the firm should optimally offer a higher leasing duration. In contrast, if the time duration of the product lifecycle is low and remanufacturing savings are low, the firm prefers to offer a shorter leasing duration, whereas if the remanufacturing savings are high, the firm should optimally have a longer leasing duration. The article also shows that if the production capacity is small, the manufacturer increases the leasing duration. If the production capacity is very small, the manufacturer sets the leasing duration to be equal to the product lifecycle and does not use remanufacturing.

Network effects and standards competition introduce significant market uncertainty, creating a substantial challenge to the success of innovating firms. Although the literature has highlighted the importance of establishing a large installed-user base (the number of users adopting the same product) in such markets, the authors draw attention to a different, but potentially important, market force: the supporting-firm base, which they define as the number of firms supporting the same technological standard. They test their proposed hypotheses using data from two markets: the floppy disk drive and personal digital assistant markets. Their results show that (1) consumer product valuation is positively affected not only by the installed-user base but also by the supporting-firm base, (2) the two positive effects interact with each other and the nature of the interaction changes over the evolution of the market (i.e., they strengthen each other's impact in the early stage but weaken each other's impact in the late stage of the product life cycle), and (3) not all supporting firms are equally valuable to the innovator—specifically, consumers are affected more by firms exclusively supporting a single standard than by firms supporting multiple standards and by incumbents than by new entrants.