Abstract
This paper examines innovation in product-service systems. Using the lens of the general modular systems theory (Schilling, 2000), the research examines the factors that influence whether a product-service system would benefit from an increasingly modular, or an increasingly synergistic specific (or integrated) state in a servitized context. The paper presents results from an in-depth case study of an OEM of military vehicles. The OEM provided design services to reconfigure military vehicles based on the requirements of the end-user (military personnel), and were based on real-time need from active overseas engagements. The research design uses a mixed-methods approach. Given modularity is a directly observable configuration of structure, design structure matrices (DSMs) were used to inspect the modular structure of vehicles each time a customer-requested design change was integrated. To supplement the DSMs, thematic analysis was conducted on 29 in-depth interviews with the organisation’s employees, as well as on texts, documents and secondary data. In applying the general modular systems theory to the context of an outcome-based product-service system, the research finds four additional factors that push a system toward or away from modularity. These factors arise from the diversity of the customers’ use-contexts that were not included in the original Schilling (2000) framework. These factors include requirements based on contextual variety, emergence, actor agency, urgency in use. The paper contributes to the innovation management and service modularity literature by updating and refining the general modular systems theory, and provides guidance to managers when designing and innovating outcome-based product-service systems.