Digital service innovation in SMEs: identifying the barriers for business model evolution

Purpose Digital Service Innovation (DSI) plays an increasingly important role for manufacturing companies. This paper aims to shed light on the particularities of SMEs when addressing DSI, proposing a model to guide its implementation. Design/methodology/approach This study employs an exploratory qualitative approach, using multiple case studies to analyse the integration of DSI into business models of SMEs and larger firms. Data were collected through a combination of secondary sources and semi-structured interviews and analysed thematically using the Gioia methodology to identify key dimensions and themes related to DSI implementation. Findings The results reveal that DSI enhances SMEs’ value propositions by improving their service offerings and operational efficiency. However, challenges remain in areas such as monetisation, organisational alignment and navigating market dynamics which include issues related to brand control and customer data management. Originality/value This research offers a novel framework for integrating DSI into business models, providing a comprehensive yet straightforward model along with valuable empirical insights tailored specifically for SMEs. This framework aids in understanding and addressing the unique challenges faced by SMEs in implementing DSI effectively.