Manufacturing and Digital Transformation: A Business Model Innovation Perspective

When a machine builder starts selling data, it quietly leaves its own industry. This UK–German project examined what digital transformation does to the business models of manufacturing firms – and built a research partnership between Liverpool and Potsdam that outlasts the project itself.

Digital transformation has pushed manufacturing firms into an environment where technologies emerge quickly and industry boundaries blur. A company that built machines for decades suddenly finds that the sensor data of those machines is worth money. Four movements drive this shift: firms leverage their presence in one market into others; they build broader ecosystems that draw new players into the value net; they run multi-sided platform business models that bring together parties who never traded before; and they deploy data and analytics to extract advantage from several industries at once. Each of these movements is an opportunity – and each puts the existing business model under strain, because a firm that sells outcomes instead of machines needs different capabilities, different partners and a different answer to the question of what it actually is.

Research on business model innovation knows these dynamics well; research on AI-based application systems knows the technology that drives them. The two literatures rarely meet. This project was built precisely on that seam: the University of Liverpool contributed its expertise in innovation management, the University of Potsdam its expertise in AI-based application systems – and the question in the middle was how manufacturers innovate their business models when AI changes what a product is.

A Springboard, Used as One

The British Council’s Springboard Programme funds bilateral UK–German partnerships and the researchers early in their careers who carry them, and the project used it exactly that way. It could build on a relationship that already existed – faculty members in Liverpool and Potsdam had been supervising doctoral students together – and set out to widen it into an institutional one. A two-day workshop in Potsdam in May 2024 brought both groups to one table; joint conceptual work mapped how business model innovation and AI-based systems condition each other in manufacturing; and a seven-day visit brought doctoral researchers from Liverpool to Potsdam. Around the funded core grew what matters in the long run: a shared research agenda and the groundwork for larger joint applications, student mobility and co-authored work.

For manufacturing practice, the project offers a vocabulary for a transition many firms are already in – and a realistic account of which capabilities they will need before the first platform goes live. For research, it stands for a conviction of this chair: that AI-based application systems are not only a technical subject but an economic one, and that understanding them takes both disciplines at the table.