Enhancing Servitization in SMEs: The Role of Cost and Performance Measurement Tools

The servitization process in manufacturing firms involves transitioning from a product-centric approach to one that emphasizes services and integrated solutions. This shift has garnered increasing attention from both practitioners and academics in recent years. The advancement of digital technologies is expected to support and enhance this transition, potentially increasing the creation of value. Despite this, the role of cost and performance measurement in enhancing servitization, within Small and Medium-sized Enterprises (SMEs), remains underexplored. Given the significance of SMEs to economic growth, it is crucial to examine how these enterprises can be assisted in overcoming common challenges, such as inadequate management accounting and control systems. This research aims to explore the relationship between servitization strategies and the adoption of cost and performance measurement tools, interpreting these tools as internal organizational resources that shape and support the strategic transition toward service-oriented business models. The study is grounded in the theoretical frameworks of the Resource-Based View (RBV) and Dynamic Capabilities Theory (DCT) and it is based on a multiple case study of 38 SMEs in Italy, utilizing structured interviews. The results indicate that cost and performance measurement tools could aid in the shift toward a service-oriented model, and there is a pressing need for the development of new accounting capabilities alongside organizational and operational advancements. Further, this study addresses the underexplored intersection between servitization and cost & performance measurement tools (C&PM) in SMEs. It offers a novel servitization strategy matrix that classifies SMEs based on both current and future service orientation. This matrix enhances our understanding of how managerial control systems evolve across different stages of servitization and contributes to bridging the gap between strategic management and accounting practices in small businesses.