A Mid‐Range Theory of Control and Coordination in Service Triads

• Date: 01 January 2019
• Published date: 01 January 2019
• DOI: http://doi.org/10.1111/jscm.12187

A MID-RANGE THEORY OF CONTROL AND

COORDINATION IN SERVICE TRIADS

MARKO BASTL

Marquette University

MARK JOHNSON

Warwick Business School

MAX FINNE

Aalto University

The increased frequency of the adoption of service-based business models

by manufacturers, such as solution provision, has given rise to service tri-

ads. While there is consensus that actors in service triads are relationally

and performatively interdependent, less is understood about how service

triads are controlled and coordinated. In this study, we use an inductive

case-based approach to build an understanding about the roles,

approaches, and contextual factors that influence how service triads are

controlled and coordinated. We collected and analyzed data from nine

companies forming three service triads, each comprising a customer, a

manufacturer of an asset, and a service supplier. We synthesized our find-

ings in a theoretical framework, where we show that first, both, control

and coordination, are present in service triads rather than just control as

previously posited. Second, controlling and coordinating service triads is

not a single actor’s responsibility but rather a collective effort shared by

two or three actors. Third, we uncovered four contingent factors that influ-

ence the dynamics of how service triads are controlled and coordinated: the

customer’s risk exposure due to the offering’s failure, the subs titutability o f

the offering, the contractual safeguards, and the relationship closeness.

Keywords: control; coordination; service supply chains; triads and networks; qualitative

research

INTRODUCTION

The increasing popularity of service-based business

models, such as the provision of integrated solu-

tions (cf. Tuli, Kohli & Bharadwaj, 2007), combined

with firms’ increasing specialization is giving rise to

a network-centric mode of solution delivery (Karat-

zas, Johnson & Bastl, 2016; Wynstra, Spring &

Schoenherr, 2015). This allows firms to respond to

customer demands through increasingly customized

and complex offerings, often incorporating multi-

vendor technologies, products, and services (Story,

Raddats, Burton, Zolkiewski & Baines, 2017). For

example, IBM in industrial computing or General

Electric, John Deere, and Caterpillar in complex

industrial equipment strongly rely on the existence

of service capabilities in their dealerships or technol-

ogy suppliers to create customized solutions that

address their customers’ needs (Cusumano, Kahl &

Suarez, 2015).

In this arrangement, the three key actors that form a

service triad are (1) the manufacturer of an asset who

typically bundles the asset with services and sells the

offering as a solution to its customer; (2) the service

supplier who supplies the service capability of the

solution directly to the manufacturer’s customer; and

(3) the manufacturer’s customer, which buys the solu-

tion (Karatzas et al., 2016; Wynstra et al., 2015). In

service triads, all three actors are performance and

relationship interdependent (Choi & Wu, 2009a,b;

Choi, Wu, Ellram & Koka, 2002; Lazzarini, Miller &

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Journal of Supply Chain Management

2019, 55(1), 21–47

©2018 Wiley Periodicals, Inc.

Zenger, 2008; Li & Choi, 2009; Wu & Choi, 2005),

which in consequence means that the effectiveness of

the provision of services, and ultimately the cus-

tomer’s satisfaction, is dependent upon how effec-

tively the three actors and the relationships between

them are controlled (Li & Choi, 2009; Van der Valk &

Van Iwaarden, 2011). In addition to relationships

being formally controlled by governance apparatus

such as contracts and performance measures, relation-

ships can also be managed informally (Poppo & Zen-

ger, 2002) through coordination via “information

sharing, decision-making, and feedback mechanisms”

(Gulati, Wohlgezogen & Zhelyazkov, 2012; p. 543).

Managerial practice is replete with challenges to the

delivery of services and solutions (Kreye, 2017), such

as the deservitization of customer offerings (Valtakoski,

2017), to termination of service contracts, such as

Intel’s $150 million web-based service unit shut down

(Sawhney, Balasubramanian & Krishnan, 2004). In

many cases, the difficulties are rooted in the naivet

eof

the complexity of the control and coordination of the

activities of the three actors in a service triad. Thus,

how service triads are controlled and coordinated is of

interest to scholars and practitioners alike.

With few notable exceptions, the extant research on

how to control and coordinate service triads is limited

(cf. Wynstra et al., 2015). It has been argued that the

responsibility for the control and coordination of the

triad lies, depending on the context, with the prime

contractor (e.g., Karatzas et al., 2016) outsourcer of

services (Li & Choi, 2009; Van der Valk & Van Iwaar-

den, 2011), or the seller of the solution (Bastl, John-

son, Lightfoot & Evans, 2012; Karatzas et al., 2016;

Windahl & Lakemond, 2006). Structurally, these are

the same actor, whose key role is to retain control

and visibility over the triadic interactions with the

aim of facilitating the effective delivery of the offering

to the customer.

Contrary to the extant literature, we argue that the

manufacturer of an asset (later on referred to as

“manufacturer” for brevity) is likely not the only

actor in a service triad who has an interest in the

coordination and control of triadic interactions. Cus-

tomers, for example, are not only the providers of

inputs in the service production process (Sampson,

2000), but they also have to develop a range of

capabilities around the internal and external integra-

tion and management of risks associated with depen-

dence on service suppliers to effectively participate in

the provision of solutions (Story et al., 2017). Due

to performance interdependence in service triads, the

failure of the customer offering or a conflict in the

relationship between the manufacturer and its cus-

tomer can have negative implications for the service

supplier, such as difficulties in service delivery, a

decrease in revenues, and reputational damage

(Karatzas et al., 2016). Furthermore, we posit that in

order to advance our understanding of control and

coordination in service triads, we need to move

beyond some of the limited methodological choices

of the extant triadic research, such as the focus on a

single actor (e.g., Li & Choi, 2009; Van der Valk &

Van Iwaarden, 2011) or a single dyad (e.g., Karatzas

et al., 2016) within a triad.

In this research, we aim to understand how and why

activities and relationships are controlled and coordinated

within service triads. We do this, by using an inductive

theory generation approach. We collected and analyzed

data from nine companies forming three service triads.

We captured our findings in nine propositions and

synthesized them in a theoretical framework, which

constitutes the theoretical contribution of this work.

While the extant literature on “managing” triads

focuses almost exclusively on control in service triads

(e.g., Li & Choi, 2009; Van der Valk & Van Iwaarden,

2011), we show that for the effective functioning of a

service triad, both control and coordination should be

present. Related to this, we explicate the role of the

“mediator,” which displays behavioral traits unique to

the context of service triads. Second and contrary to

the extant literature, which focuses only on one actor

managing service triads (e.g., Karatzas et al., 2016; Li &

Choi, 2009), the control and coordination of service

triads is performed by at least two actors. Third and

finally, we uncovered four contextual factors that influ-

ence the dynamics of the control and coordination of

service triads: (1) risk exposure due to the customer

offering’s failure, (2) the substitutability of the cus-

tomer offering, (3) contractual safeguards, and (4) rela-

tionship closeness.

The remainder of the paper is structured as follows.

Firstly, we present a theoretical background on service

triads, interdependence within those and their control

and coordination. We then introduce the methodology

explaining our empirical setting, case sampling logic,

data collection and data analysis processes. Following

this is the within-case analysis and cross-case analysis,

where we formulate our propositions and synthesize

them in a theoretical framework. We continue with the

discussion of our findings and close with limitations

and recommendations for further research.

THEORETICAL BACKGROUND

In this section, we review the literature that defines

the characteristics of service triads and summarizes

the extant theoretical understanding on how to man-

age them.

Service Triads

Service triads have become an important topic in

the supply chain management discipline (Wynstra

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