Exploring the role of service modularity in facilitating value co-creation: insights from knowledge-intensive business services

One of the key topics in service marketing and management research has been managing the challenges that arise from the nature of services, particularly in relation to their efficient production and marketing (Hyötyläinen and Möller, 2007). These challenges become critical in the complex environment of knowledge-intensive business services (KIBS), where firms deliver highly specialised, knowledge-based solutions to other businesses and operate under increasing pressure to balance efficiency with customisation (Muller and Doloreux, 2009). KIBS rely heavily on professional expertise and domain-specific knowledge (Den Hertog, 2000). In practice, the diversity of KIBS reflects the breadth of knowledge domains they serve, encompassing a wide range of services such as management consultancy, legal services, software development, accounting and advertising (Den Hertog, 2000; Miles, 2005). Compared to traditional professional services, the KIBS sector includes a broader array of offerings, notably technical design services (Miles, 2005).

KIBS are a vital part of modern economies. In the EU, for instance, they are responsible for approximately 11 million full-time equivalent jobs within the EU-27, accounting for about one-third of overall business services employment and around 5.5% of the total labour force in the European single market. Moreover, KIBS play a crucial role in fostering innovation and digital transformation by delivering high-value-added services such as research and development, IT, legal advice and consultancy, providing significant practical relevance (Brodzicki, 2024).

Value co-creation is recognised as essential in KIBS (e.g. Bednarz, 2018; Figueiredo et al., 2020; Hidalgo and Herrera, 2020; Hochstein et al., 2021; Pathak et al., 2022). In this context, value co-creation has been defined as a collaborative and concurrent process (Galvagno and Dalli, 2014; Osman and Jian, 2023), in which the service provider uses its resources to co-create value with its customers (Rodríguez-Escudero et al., 2023), supported by other network actors. However, despite its importance, effective value co-creation in KIBS is challenging, as it depends on the provider’s ability to navigate complex client needs and dynamic service environments.

While the need for customisation is especially strong in the KIBS sector, delivering customised services remains challenging, as it often involves solving unique problems for individual clients (Aarikka-Stenroos and Jaakkola, 2012). This task is further complicated by the dynamic and variable nature of individual customer value processes (Lähteenmäki et al., 2022). This raises a critical question:

Modularity addresses this challenge by enabling a more structured and flexible approach to service design (Voss and Hsuan, 2009; Storbacka et al., 2013). In general, modularity refers to designing services as combinations of relatively independent modules with standardised interfaces that can be flexibly recombined (Baldwin and Clark, 1997). Service modularisation involves decomposing services into components and modules that can be combined to suit individual requirements, allowing each customer to receive a personalised modular kit (Peters, 2020), which enables providers to balance efficiency with customisation by offering unique combinations of components and modules (Kriegel et al., 2013). Thus, modularity provides a structured yet flexible framework for service design, playing a crucial role in facilitating customer value formation (Lähteenmäki et al., 2022). Overall, it can be seen as a useful cognitive framework for categorising and interpreting diverse economic phenomena (Pohjosenperä et al., 2018).

The modular approach is particularly important for value co-creation in KIBS, as services are typically delivered through project-based work and are thereby highly reliant on close client interaction, which necessitates both co-creation and efficient customisation of the services. Consequently, the concept of modularity has been developed and adopted in KIBS across various empirical contexts (e.g. Vähätalo and Kallio, 2015; Cabigiosu and Campagnolo, 2019). Incorporating modularity into value co-creation in KIBS deepens the understanding of the phenomenon (De Mattos et al., 2019). Nonetheless, despite the recognised benefits of modularisation in KIBS, it has been underexplored in previous studies (De Mattos et al., 2019). Specifically, the role of modularity in facilitating value co-creation in KIBS has not been clearly itemised, highlighting a research gap that this study seeks to address.

Therefore, the main research question (RQ) of this study is:

To answer the main RQ, two more detailed sub-questions are formulated:

We address these questions through theoretical exploration and an in-depth qualitative case study. Case data were collected from an international company specialising in KIBS, focusing on engineering, architecture and consultancy. This research contributes to the existing literature by providing insights into the interplay between modularity and value co-creation in the KIBS sector. More specifically, it identifies and elaborates on the modular components of KIBS and their role in supporting value co-creation between the service provider and the customer. In addition to this study’s theoretical contributions, it offers practical insights for managers seeking to enhance their value co-creation by strategically developing and applying service modularity.

This paper first reviews the existing literature on value co-creation and modularity in KIBS to develop a comprehensive theoretical understanding of the research context. Subsequently, the methodology is described in detail, followed by the case analysis and discussion, where the findings are mirrored against previous literature. In conclusion, these findings are elevated to a higher level of abstraction, and theoretical contributions, managerial implications, limitations and suggestions for future research are presented.

When creating value in business-to-business (B2B) relationships, both parties typically aim to produce mutual benefits (Gummerus, 2013). In this context, the customer’s value creation processes (Grönroos, 2011) provide a strong foundation for planning offerings and collaborating with various stakeholders. This is especially important in KIBS due to their dynamic environment (Amancio et al., 2022). For instance, planning services for large and complex construction projects can be affected by changes in the operating environment, such as economic fluctuations, climate variations and evolving customer expectations and quality perceptions (Rahikka et al., 2011).

Co-creating value with customers offers several advantages in KIBS, including enhancing the customer experience and reducing perceived risk, thereby maximising the value of the relationship. Thus, human capital in KIBS firms is their key element and asset (Bednarz, 2018; Zieba and Kończyński, 2019). Moreover, the centrality of value co-creation in KIBS is rooted in interactions between customer and service provider representatives. In these human interactions, value is created together (e.g. Terblanche, 2014; Lassila et al., 2023). However, this is not the only perspective of co-creation. Earlier views focused on customising bundles of products or services for a price. According to Grönroos (2011), the customer is the value creator – a concept central to value-in-use, in which value is created while the customer is using the product or service.

Additionally, value is seen as the product of an ongoing process that emphasises customer experience, and its co-creation requires firms to provide resources for and support the customer’s value formation processes (Grönroos and Voima, 2013; Amancio et al., 2022; Osman and Jian, 2023; Rodríguez-Escudero et al., 2023) This relationship involves various emotional, behavioural and cognitive interactions, in which the customer and the service provider play changing roles as facilitator and creator of value (Grönroos and Voima, 2013). Hence, it is important to note that value and value co-creation perceptions are largely context-dependent and subjective (Corsaro et al., 2013; Lassila et al., 2023).

Therefore, value cannot be created independently; it is developed through resource integration within the firm or with the customer and other stakeholders (Eggert et al., 2018). As such, value can be created during transactions or after an exchange (Lapierre, 1997). This requires firms to educate, prepare and engage customers in value co-creation, demonstrate the value delivered by the solution and provide a channel for customer advocacy within the service-providing firm (Hochstein et al., 2021). Consequently, value co-creation can be a key link between trust, commitment and economic and social satisfaction (Berenguer-Contrí et al., 2020).

As discussed earlier, value co-creation is based on the interactions between the customer and the service provider (Grönroos and Gummerus, 2014; Heikka, 2023). Specifically, according to Grönroos and Voima (2013), value formation occurs in the customer, joint and service provider spheres. In the first sphere, the client and other actors create value, while the service provider facilitates the customer’s value creation in its own. In the joint sphere, the customer and the service provider are enabled to interact – making this sphere vital in value co-creation because it is where the relevant processes of both sides may merge.

Building on this spheres model, Holmqvist et al. (2015) found that in the joint sphere, enhancing the interaction between the customer and the service provider during value co-creation – specifically by reducing the psychological distance between them – is crucial for achieving positive service outcomes (Lassila et al., 2023). Additionally, understanding customers’ needs (Heikka, 2020; Zieba, 2021) and enabling them to define their own requirements further improves value co-creation (McColl-Kennedy et al., 2012).

Value co-creation is often regarded as a broad, holistic concept, typically without a detailed examination of its modules and components (Osman and Jian, 2023). Breaking down the service into modules from various perspectives may help identify key elements that enhance the prominence of value co-creation in KIBS. Accordingly, the next subsection explores the specific modular components in detail.

Similar to the preceding discussion on value co-creation, the KIBS literature typically emphasises the close interaction between parties. This interaction enables service customisation (Cabigiosu et al., 2015; Cabigiosu and Campagnolo, 2019) and supports the development of service modules tailored to diverse customer needs (Shamsuzzoha, 2011; Cabigiosu et al., 2015). Service modularisation involves decomposing services into components and modules that can be combined to suit individual requirements, allowing each customer to receive a personalised modular kit. As such, every customer can be offered a unique combination of components and modules (Peters, 2020). Therefore, service modularity refers to the ability of a service module to be used to deliver various types of services (Rajahonka et al., 2013). However, in KIBS, modularisation presents challenges due to the abstract nature of customer-related knowledge, such as the tacit knowledge held by individual employees (Bednarz, 2018).

The need for service customisation is strong due to the inherent cost inefficiencies of tailoring offerings for each customer. Adapting services to client needs cost-efficiently is particularly challenging for KIBS firms (Tuunanen et al., 2022), as their offerings often involve solving specific customers’ unique problems (Vähätalo and Kallio, 2015). Consequently, KIBS are often delivered in domestic markets, where customer needs are well known and can thus be more easily met (Wyszkowska-Kuna, 2018). A modular approach can address the challenge of inefficient customisation (Voss and Hsuan, 2009; Storbacka et al., 2013). This involves, for instance, reusing elements from previous service concepts to develop new offerings (Hunke et al., 2024), thereby improving both efficiency while reducing costs (Vähätalo and Kallio, 2015). These modularisation processes may be strategic or practice-based, depending on the specific needs and goals of the service provider (Gremyr et al., 2019).

Modularity offers numerous significant advantages (Nätti et al., 2017), such as enhancing efficiency and flexibility while maintaining low costs (Kriegel et al., 2013; Vähätalo and Kallio, 2015). However, the existing literature also raises concerns about its applicability. For instance, Silander et al. (2017) found that modularity can limit an organisation’s ability to customise its services due to fragmented service delivery and professional autonomy – an issue particularly relevant to KIBS. Elia et al. (2019) argued that modular activities are more likely to be outsourced, as modularity decreases transaction costs and the risks of knowledge leakage. From the customer’s perspective, Sorkun et al. (2022) found that modularity may require them to exert additional effort in communicating their unique needs to service providers. Furthermore, Avlontis and Hsuan (2017) suggested that modularity may increase service rigidity by strictly defining modules, thus reducing the service provider’s – and specifically, the employee’s – task discretion.

In a modular approach, specifying interfaces is essential, as they enable the recombination of modular components, facilitating their interaction and communication (Voss and Hsuan, 2009). In a service context, interfaces can be people, regulations, information or even the flow of information (Bask et al., 2010), as well as planning rules, customer meetings and organisational arrangements (De Blok et al., 2014). Their facilitation of interaction and communication between the modular components not only enhances variety in service provision (Voss and Hsuan, 2009; De Blok et al., 2014) but also ensures that different parts of the system can function independently (Peters et al., 2018). Moreover, it supports customers’ crucial role in co-creating value (Lin et al., 2015) by enabling them to effectively use these components within the system.

The significance of modular components is widely acknowledged in existing research (e.g., Voss and Hsuan, 2009; Pohjosenperä et al., 2018; Peters, 2020). For instance, as a single service module can be used to provide various types of services (Rajahonka et al., 2013), modular services are effective for customising customer segments (Johnson et al., 2021). This modular component, segmentation, involves tailoring services to distinct market groups, to which either customised or standard solutions are offered (Rajahonka et al., 2013).

Other modular components are defined as follows. Categorisation refers to grouping products or services with similar functions (O’Brien, 2015). In retail supply chains, category management is seen as a strategy for implementing lean practices (Piercy and Morgan, 1997). Unitisation is commonly used in logistics services, where smaller product units are consolidated into larger ones for improved packaging, transportation and warehousing efficiency (Simchi-Levi et al., 2008). This type of service packaging is also implemented in various other fields through methods such as service industrialisation, service tangibilisation and service blueprinting (Hyötyläinen and Möller, 2007).

Process differentiation and decoupling enable the integration of independent parts of an organisation’s offering (Rajahonka et al., 2013). Differentiation separates service processes, such as ordering and delivery, to enhance effectiveness and efficiency (Persson, 1995). Decoupling front- and back-office operations in service operations has been found to improve efficiency (Metters and Vargas, 2000), creating opportunities for centralisation of organisations into larger units and their specialisation in certain parts of the decoupled processes (Bask et al., 2010).

By modularising business services, appropriate components can be identified that make value co-creation more prominent.These services can be modularised through their service offerings, processes and organisational dimensions (Pekkarinen and Ulkuniemi, 2008). Service offering modularisation is vital in service provision, as multiple services are often delivered and received simultaneously (Rahikka et al., 2011). Process modules consist of independently designed mechanisms that function as a single entity, pertaining to either information processing or material functions (Shamsuzzoha, 2011). A modular organisational structure enables firms to utilise their core competencies efficiently by using flexible methods for leveraging their internal and external resources (Bask et al., 2010) – including their teams, units, other firms and networks – to allow them to focus on their most critical tasks (Rahikka et al., 2011).

By dissecting the service into modules from various dimensions, such as service offering, process and organisational dimensions, appropriate components can be identified to make value co-creation more prominent.

This study investigates how modularity facilitates value co-creation in KIBS, focusing on how KIBS can be decomposed into components at the modular dimensions of offerings, processes and organisation, and how these components facilitate value co-creation. We approach modularity as a multidimensional concept that can be further divided into components, assuming that these components influence the mechanisms of value co-creation. These guiding ideas informed both the theoretical framing and the empirical exploration, ensuring that the analysis remained anchored in the interplay between modular components and value co-creation. Addressing this focus requires a comprehensive and context-rich understanding of the phenomenon. Consequently, we selected a research design that enables detailed examination within its real-world setting.

Therefore, we adopted a qualitative single-case study approach, which is particularly suited to exploratory research aimed at uncovering and describing key concepts and their interrelationships (Voss et al., 2002). A single case is an appropriate choice for studying nuanced and poorly understood topics because it allows for deep, context-rich insight into the environment in which the phenomenon occurs (Dyer and Wilkins, 1991; Gammelgaard, 2004). Given this study’s focus on modularity and its role in value co-creation, understanding the real-world operational setting was essential (De Blok et al., 2014). The single-case study enabled access to in-depth organisational data, supporting the generation of detailed and multifaceted insights.

This research was guided by the principles of systematic abductive combining (Dubois and Gadde, 2002), a non-linear process involving continuous interplay between empirical fieldwork and evolving theoretical frameworks. Abduction enabled findings from the data to be iteratively compared with theory, thereby enriching conceptual understanding (Kovács and Spens, 2005). This dynamic, back-and-forth process is visualised in Figure 1, illustrating how theory and data co-developed throughout this study.

The case selection was theory-driven (Eisenhardt, 1989) and purposeful (Patton, 2002), aimed at generating new insights rather than ensuring generalisability. The chosen firm had to meet several criteria: it needed to be a KIBS provider, operate both nationally and internationally, serve a diverse range of clients and carry out complex operations across multiple organisational layers.

Following an evaluation of possible firms for study, one firm stood out, as it provided both rich access to organisational data and a promising context for exploring modularity in action. The company (hereafter referred to as “the KIBS provider”) is a large international actor in the engineering, architecture and consulting fields that employs over 10,000 people engaged in sustainability-focused knowledge work. Its services encompass architecture, energy, environment, transport, water and consulting.

Although modularity is not explicitly stated as a guiding principle in the selected KIBS provider’s operations, its complex service environment made it a strong candidate for applying modular thinking, which is known to support flexibility, efficiency and customisation (Simon, 1962; Baldwin and Clark, 1997). This makes the case particularly relevant, as it avoids cherry-picking an “ideal” modular setting and instead allows us to examine how modular principles emerge and are interpreted within a real-world KIBS context. Studying this case provides a realistic picture of the opportunities and constraints associated with modularity in KIBS, where modularity may be applied selectively rather than systematically embedded from the top down. Thus, the KIBS provider aligned well with this study’s aim of generating theory in a real-world setting (Ketokivi and Choi, 2014).

Data collection began with a review of secondary sources to understand the firm’s organisational structure, services and internal processes. This included observations; analysis of the company’s website, intranet content and internal memos; attendance at meetings (eight unit, four sector and four marketing/sales meetings); and examination of job orientation materials. These reviews provided secondary data that both complemented and confirmed the findings from the interviews. They also helped identify key informants across the firm. Participants were then selected using purposive and snowball sampling (Biernacki and Waldorf, 1981) to ensure the inclusion of individuals with in-depth, relevant knowledge and experience.

Next, we collected primary data by conducting semi-structured interviews with these informants. At the start of each interview, we introduced the key study concepts: KIBS, value co-creation and service modularity. The interviewees were asked to describe their work in modular terms – based on its service offerings, processes and organisational structure. They were also prompted to share examples of how modularity supported their value co-creation with their customers.

To deepen and triangulate our understanding of the data, we held focus group discussions. These sessions explored more sensitive and nuanced aspects of the participants’ roles and perceptions. The preliminary findings of our analysis (presented in Table 2) served as the discussion guide, allowing the participants to validate or revise earlier insights. These focus group discussions revealed new layers of meaning, offered rich feedback and helped confirm the reliability of the emerging themes (Stewart and Shamdasani, 2014; Denzin, 2017).

While the initial phase of the study focused on the KIBS provider’s perspective, we later expanded the scope to include the customer’s viewpoint, with particular emphasis on the interaction between the KIBS provider and its customer. To achieve this and broaden the primary data, we conducted interviews with two representatives from a key municipal client, using the initial version in Table 2 as a guide. This client, a major account within a specific geographic area, served as a representative example of the firm’s public-sector partnerships. These interviews provided valuable insights into how modularity is perceived and experienced from the customer’s side, further clarifying the role of modularity in enabling value co-creation. The interactions between the KIBS provider and the customer revealed the crucial role of modularity in shaping their value co-creation.

In line with established qualitative research practices, saturation was used as a guiding principle to determine the adequacy of the sample and the conclusion of data collection (Aguboshim, 2021). Saturation was achieved during the data collection process, when no new insights were generated, and participant responses became repetitive, indicating informational redundancy (Guest et al., 2006; Saunders et al., 2018). Then again, additional data no longer contributed to the development of new themes or theoretical insights, thereby ensuring the credibility and completeness of the findings (Saunders et al., 2018). The research data are presented in Table 1 with their detailed hierarchy and structure.

The interviews were recorded, the recordings were transcribed and the transcripts were carefully reviewed and coded using the NVivo qualitative analysis software according to the dimensions of modular offerings, processes and organisation, along with subconcepts such as segmentation, categorisation and unitisation. These concepts were derived from the reviewed modularity literature and further refined based on the study’s initial findings. Additionally, a new code – partnership building – was introduced to represent a component not previously recognised in the literature.

After the components were coded, separate codes were assigned to instances where value creation and its benefits were mentioned in relation to each component. According to Miles et al. (2020), this type of concept coding is appropriate when the aim is to move beyond the specifics of a study and towards a more abstract or generalisable context – in this case, KIBS. This approach focuses on broader conceptual insights rather than the detailed nuances captured by other coding methods, allowing the analysis to extend beyond the specific contributions of individual participants.

To ensure this study’s reliability, objectivity (confirmability), reliability (dependability/auditability) and internal validity (credibility/authenticity) (e.g. Miles et al., 2020), a series of specific methodological decisions were made. Extensive calibration sessions were conducted among the researchers involved in the coding process to develop a shared understanding among them and ensure consistent application of the coding scheme, strengthening inter-coder reliability. Triangulation was used to enhance confirmability by incorporating multiple primary and secondary data sources and methods, ensuring corroboration of the results and minimising researcher bias (Denzin, 2017). Methodological consistency was maintained through systematic documentation of all research procedures and decisions, reinforcing this study’s dependability and auditability. To strengthen credibility and authenticity, the participants were given the opportunity to scrutinise and provide feedback on the interpretations, ensuring accurate reflection of their views. Thick, rich and detailed descriptions of the research context and findings were developed to facilitate readers’ assessment of the transferability of the conclusions. Finally, the research team practised reflexivity, critically reflecting on biases and assumptions to minimise their impact on the research process and outcomes.

The KIBS provider’s modular dimensions of service offerings, processes and organisation are now analysed to detail the identified modular components. These include segmentation, categorisation, unitisation, differentiation, decoupling, centralisation, specialisation and partnership building. Each component is elaborated in the text and further described in Table 2 at the end of this section. Additionally, this section outlines the role of each component in facilitating value co-creation in KIBS, which is further summarised in Table 2.

The KIBS provider offers services to both public-sector clients and private organisations, addressing a wide range of needs – from planning public infrastructure projects, such as bridges and roads, to supporting private clients with issues related to buildings or industrial sites. Consequently, segmenting customers based on their size and profitability is considered essential:

In addition, purchasing and tendering policies influence segmentation, as public-sector organisations typically adopt more structured approaches than those in the private sector. Moreover, large public bodies may include smaller units that the firm treats as separate customers, while private clients often have greater autonomy in deciding which services they require.Overall, segmentation enables the selection of optimal service modules, allowing tailoring of offerings to client needs across diverse contexts and sectors. One informant suggested that the KIBS provider could benefit more from this approach:

The benefits from segmentation perceived by an industrial operator may differ from those recognised by a municipal agency. Customer segmentation is not inherently visible to the client, but clients do recognise the value of being treated as key accounts, which can, in turn, help ensure a certain level of service availability showing how trust is embedded in the customer expectations:

Segmentation supports value co-creation by clarifying client needs early in the engagement and enabling the delivery of tailored services across diverse contexts. By distinguishing between public and private clients and recognising differences in purchasing practices, the KIBS provider can allocate resources more effectively and design offerings that match the priorities of each segment. This targeted approach reduces uncertainty in the initial phases of a project, when customer needs are often not fully articulated, and creates a foundation for more responsive and collaborative planning. Segmentation also helps balance workloads internally, ensuring that expertise is directed where it creates the most value, while customers benefit from consistent service readiness and clear communication. In this way, segmentation contributes to value co-creation by enhancing mutual understanding and facilitating joint problem-solving, which in turn strengthens both operational efficiency and customer experience.

Efficiently managing offerings for segmented customers and simplifying the sales process require clear categorisation. The KIBS provider’s service categories are structured around technical areas, design types, project life cycle stages and strategic phases:

To visualise these categories, the KIBS provider has piloted a service offering matrix that integrates various technical fields across different phases of construction projects. This matrix serves as a concrete tool for categorisation and supports the efficient tailoring of service kits to meet diverse customer needs:

This form of mass customisation enables cost-efficient and profitable service delivery while also streamlining the tendering process. For the KIBS provider, categorising service offerings not only enhances internal organisation and commercialisation but also benefits clients by clearly specifying which services should be included in invitations to tender.

Categorisation of KIBS according to technical areas, design types, project life cycle stages and strategic phases simplifies and facilitates the organisation and sale of knowledge-intensive work. By structuring services into clear categories and visualising them through tools such as the service matrix, the KIBS provider makes its offering more transparent and easier for customers to navigate. This clarity enables customers to articulate their needs and select the most suitable service combinations, thereby reducing uncertainty and streamlining the tendering process. At the same time, categorisation allows the provider to tailor service kits efficiently, allocate resources effectively and coordinate work across multiple technical areas. These mechanisms enhance communication and mutual understanding, creating a shared basis for planning and execution. In this way, categorisation contributes to value co-creation by improving transparency, facilitating efficient customisation and ensuring that both parties can use their resources more effectively to achieve project goals.

The KIBS provider has introduced modular service kits – combinations of several services bundled into kits that incorporate expertise from various units, including architecture, machinery and electrical engineering. These kinds of unitised offerings can be customised to meet each customer’s specific needs. Further development of the service kits has been recognised as a priority within the firm:

Service kits facilitate sales and reduce the time spent tailoring offerings, thereby improving cost efficiency and profitability. In addition, such modular kits make it easier to introduce customers to the services they need, allowing them to clearly see all offerings relevant to their specific business needs – thus increasing transparency:

Customers from public organisations also recognise the benefits of this kind of unitisation but remain mindful of its limitations, as they cannot always purchase everything included in a kit:

Unitisation of KIBS streamlines sales processes by using dynamic, cost-effective service kits that simplify contracts, thereby reducing the time spent on costing and improving efficiency and profitability. It also facilitates value co-creation by clarifying service offerings and their integration, enhancing transparency in delivery and enabling customers to shape customised services actively. By making service integration simpler and offerings more understandable, unitisation further supports customer participation in co-creating value.

The KIBS provider recognises that different types of processes can be differentiated depending on their complexity and standardisation level. The firm uses both routine and complex processes in planning and implementing projects. Tailored elements of large-scale schemes are often separated from standardised core processes, such as automated design phases or plan preparation and finalisation. Templates are used for more straightforward tenders. Well-aligned process modules enhance cost efficiency and service quality by allowing personnel to focus on their core tasks:

The benefits of this kind of differentiation primarily relate to operational and economic efficiency, ultimately enhancing the KIBS provider’s ability to offer more competitive pricing and strengthen its market position. While differentiation primarily benefits the provider, it also supports the customer – who may receive the completed project more quickly and at a lower cost:

Differentiation of demanding customer projects from standardised processes yields significant practical and financial benefits for KIBS providers. It enhances operational and economic performance by optimising resource allocation, thereby increasing service delivery effectiveness and efficiency. During the observation phase, the KIBS provider’s representatives also explained how differentiation ensures that routine processes are handled not only efficiently but also by the right people or equipment to achieve the best possible outcome, while more complex project phases receive the closer attention they require. In this way, differentiation can strengthen customer trust in the provider’s ability to solve business-related problems and complete projects by clearly defining scope and requirements and allocating the right resources in the right amount. Therefore, differentiation enhances trust through a clear definition of project complexity and requirements, aligning resources and expectations while ensuring adaptability in service delivery to meet evolving customer needs. This, in turn, supports value co-creation between the KIBS provider and its customer by aligning service complexity with customer expectations. It enables providers to focus on high-value tasks while maintaining responsiveness, which strengthens trust and perceived quality.

Efficient service processes require the effective separation – or decoupling – of support process modules from core business activities, followed by their resequencing to address diverse and parallel needs. For the KIBS provider, this involves first decoupling core planning modules from associated support tasks. For instance, it means distinguishing technical illustration from planning and management:

Sales-related activities can also be decoupled from the planning process, forming two distinct process modules. Ideally, salespeople manage the selling process, while consultants focus on planning. A decoupled sales process enhances value co-creation by allowing sales professionals to address their specific starting points and better meet customer needs by leveraging the expertise of various specialists across the company:

Decoupling facilitates value co-creation by clarifying roles and improving coordination across service processes. By separating support tasks from core planning and distinguishing sales from consulting, the KIBS provider can allocate expertise more effectively and reduce overlaps that slow down delivery. This clearer division of responsibilities enables consultants to focus on complex planning work while sales professionals maintain active communication with customers, ensuring that needs are understood and addressed promptly. At the same time, decoupling creates flexibility to adapt processes to changing project requirements and seasonal variations, which strengthens the provider’s ability to respond quickly without compromising quality. These mechanisms make collaboration more efficient and predictable, supporting both operational performance and the customer experience. In this way, decoupling contributes to value co-creation by combining process clarity with adaptability, ensuring that specialised teams work together seamlessly to deliver integrated solutions.

Within the KIBS provider’s organisation, specific types of expertise, functions, operations and personnel have been centralised into larger units, reflecting the firm’s available competencies and service offerings. These larger, distinct organisational modules facilitate the execution of more extensive projects, leveraging volume advantages and operational efficiencies gained through economies of scale. Customers also perceive this as beneficial:

A centralised organisation enhances service delivery while also expanding opportunities for employees to develop their skills and advance their careers – key benefits for social development. In addition, a large, centralised organisation with multiple departments strengthens the company’s resilience to staff changes and seasonal fluctuations:

Centralisation also creates opportunities for organisational modules to specialise, underscoring the importance of knowledge sharing and competence development by integrating all key individuals to meet customer needs:

Therefore, centralisation facilitates value co-creation by improving coordination and ensuring that all necessary service modules can be delivered within one organisation. This structure enables the KIBS provider to integrate expertise across divisions, thereby reducing complexity for the customer and ensuring that different service elements align effectively. At the same time, centralisation strengthens organisational resilience to staff changes by enabling resources to be shifted between units when demand fluctuates, maintaining continuity and responsiveness. These capabilities not only improve efficiency but also create a more predictable and reliable service experience, which supports collaborative problem-solving and long-term relationships. In this way, centralisation contributes to value co-creation by combining operational stability with the flexibility needed to meet diverse and changing customer needs.

As mentioned, larger centralised units enable the formation of more specialised modules within the organisation. This means that different business units are specialised either regionally or based on their specific areas of expertise. Within these units, various expert teams handle different project modules – namely, subphases or subprojects:

Although most knowledge-intensive work is not restricted by geographical boundaries, regional expertise plays a key role in value co-creation between the KIBS provider and its customers. Customers also perceive the KIBS provider’s local expertise as beneficial:

This explains the KIBS provider’s decision to maintain specialised organisational modules close to its clients. Specialisation allows it to develop deeper knowledge within its business units and enables its employees to effectively leverage their core competencies.

Specialisation of units and teams, whether regionally or based on expertise, enables the development of more profound knowledge within business units and allows employees to use their core competencies, thereby improving service quality effectively. Customers value the KIBS provider’s local expertise, which enables the provider to focus on its strengths and effectively develop and apply knowledge resources. This supports value co-creation by enabling deep contextual understanding and tailored solutions, improving the relevance and impact of service delivery.

Representatives of both the KIBS provider and the customer emphasised the importance of building partnerships:

Together with trust, the KIBS provider benefits from its ability to quickly respond to changes in its customer’s service needs and to build a close partnership with it, while enhancing its own profitability. Simultaneously, the customer benefits from the KIBS provider’s swift response to emerging issues through personal contact. This illustrates that, due to the KIBS provider’s effort to build close partnerships with its customers, it could be considered “one organisational module within its customer’s organisation”, enabling its customer to easily order services from it and perceive mutual benefits:

Moreover, within a project, an established, module-like close partnership enhances value co-creation. One of the most hands-on practices reflecting this partnership is the use of “Big Room” days organised by the KIBS provider, especially in large alliance projects with customers. During the sessions on these days, value co-creation becomes highly tangible and meaningful from the perspective of both the KIBS provider and the customer:

Therefore, partnership building is an important component of organisational modularity, allowing the KIBS provider to function almost as an extension of the customer’s organisation. Naturally, trust is essential in these partnerships, as it fosters open communication and collaborative problem-solving. Furthermore, when customers have unique needs or require tailored services, the KIBS provider must be ready to respond quickly. This ability to adapt – combined with trust and collaborative practices – helps create a modular setup that is both flexible and rooted in strong relationships.

Partnership building between KIBS providers and their customers function as a modular component that enables value co-creation through several interconnected mechanisms. By embedding the provider within the customer’s processes, these partnerships create stable interfaces and shared routines that reduce coordination challenges and make interdependencies transparent. Practices such as Big Room days exemplify this integration by providing a structured setting for real-time problem-solving and joint design, which accelerates decision-making and ensures that solutions remain aligned with customer objectives. Over time, continuity in collaboration deepens contextual knowledge, allowing the provider to anticipate needs and adapt services swiftly when circumstances change. Trust underpins these interactions by fostering openness and reducing the perceived risk of joint commitments. Together, these elements make co-creation tangible: they transform partnership building from a relational ideal into an operational capability that enhances responsiveness, improves solution relevance and strengthens mutual outcomes.

Modular components and their role in facilitating value co-creation in KIBS is described in Table 2.

This study examines how modularity facilitates value co-creation in KIBS by firstly identifying eight components of three modular dimensions: segmentation, categorisation and unitisation of offerings; differentiation and decoupling of processes; and organisational centralisation, specialisation and partnership building. Secondly, this identification helps to understand how the modular components facilitate value co-creation in KIBS.

More specifically, in the offerings dimension, segmenting customers clarifies client needs early, reducing uncertainty and supporting collaborative planning. Categorisation, in turn, improves transparency, enabling customers to articulate their needs and the provider to align resources for efficient customisation. Unitisation streamlines integration and increases transparency, inviting customer participation in shaping solutions. In the process dimension, differentiation clarifies project complexity and aligns resources, enabling routine work to be handled efficiently. At the same time, complex phases receive focused attention − strengthening trust and aligning expectations − while decoupling reduces overlaps and clarifies roles, allowing specialists to focus and the organisation to remain flexible and responsive in delivering integrated solutions. In the organisational dimension, centralisation integrates expertise within a single business unit and provides resource flexibility to handle demand fluctuations for a reliable service experience. Specialisation deepens contextual expertise for more relevant, tailored solutions. Finally, partnership building embeds the provider in customer processes through open communication and continuity, with trust reducing perceived risk and enabling joint problem-solving.

Rather than functioning as separate design choices, examples from the data also illustrate how these components interact. For instance, at the offering dimension, segmentation and categorisation provide the foundation for unitisation, enabling modular service kits tailored to specified customer segments and reconfigurable as needs evolve, thereby supporting mass customisation (see e.g. Rajahonka et al., 2013). Such modularity creates structured opportunities for provider–customer interaction, enhancing value co-creation. At the process dimension, differentiation and decoupling separate routine tasks from complex, knowledge-intensive activities, clarify responsibilities and improve coordination − enhancing both efficiency and responsiveness (see Metters and Vargas, 2000). This, in turn, facilitates value co-creation by enabling more targeted collaboration and smoother interaction between the provider and the customer, particularly in managing complex service delivery. At the organisational dimension, centralisation and specialisation reinforce each other by pooling resources while maintaining deep expertise, enabling expert units to be deployed across diverse, geographically dispersed or multidisciplinary projects (see Bask et al., 2010). As a result, the right expertise is available where and when needed, supporting effective collaboration and tailored problem-solving in KIBS, and ultimately facilitating value co-creation.

Finally, partnership building amplifies the interaction of the other components by functioning as a relational interface that fosters trust, which emerges as a reinforcing element sustained by collaborative routines and the shared understanding developed through long-term cooperation. For example, individuals who have worked together over time are familiar with each other’s working methods and can rely on one another to respond effectively to the customer’s specific needs. These relational practices are essential for value co-creation (Berenguer-Contrí et al., 2020), particularly in knowledge-intensive settings where co-creation depends on close interaction and mutual adaptation.

Building on Avlonitis and Hsuan’s (2017) conceptualisation of modularity as a structural principle in service architectures, the findings of this study demonstrate that modularity is not merely a structural approach but also a relational one. This principle extends prior literature by encompassing dynamic interactions among components. Specifically, we observed that modularity is a dynamic, co-creative process where components can be recombined as project complexity and customer expectations evolve. The benefits of modularity, therefore, depend on how these components are combined in response to contextual demands. In this way, modular components not only support value co-creation processes; they also actively structure the conditions under which value co-creation becomes effective.

By clarifying how modularity facilitates value co-creation, this study provides a more nuanced understanding of how organisations can design modular services that effectively accommodate diverse customer needs. This aligns with prior research emphasising that value co-creation in KIBS is inherently interactional and shaped by ongoing exchanges between customers and service providers (Terblanche, 2014; Lassila et al., 2023). The findings deepen the understanding of co-creation by showing how modularity facilitates customers to participate in value formation actively. In doing so, modular design shapes the joint sphere (see Grönroos and Voima, 2013) where provider and customer create value together, further highlighting the importance of understanding these interactions for organisations to optimise their service offerings and enhance value co-creation with their customers. This type of interface facilitates the interaction and combination of service elements, reinforcing earlier insights into the role of modularity in enabling flexibility and responsiveness (Voss and Hsuan, 2009; De Blok et al., 2014).

This study examined how modularity enables value co-creation in KIBS. First, we explored how KIBS can be decomposed into components across offerings, processes and organisational dimensions. We identified eight components: segmentation, categorisation and unitisation of offerings; differentiation and decoupling of processes; and organisational centralisation, specialisation, and partnership building. Second, we analysed how these components support value co-creation. Our findings (see Table 2 and Discussion) show that they enhance transparency, flexibility and collaboration by clarifying client needs, enabling efficient customisation, fostering active customer participation, aligning resources and roles and integrating specialised expertise to reduce risk and enable joint problem-solving.

All eight components contribute to value co-creation both individually and through their interactions. Rather than functioning as isolated design choices, these components interact across the dimensions. Thus, modularity does more than structure services − it expands the joint sphere where providers and customers co-create value. While rooted in structural design, modularity also operates as a relational mechanism that shapes collaboration and trust. By clarifying these dynamic interactions, this study offers a nuanced understanding of how modular service design can accommodate diverse customer needs and enhance value co-creation.

Theoretically, we advance service and marketing management research by identifying modularity in KIBS as a relational approach rather than a purely structural one. Based on the eight components and their interplay, we recognise modularity as dynamically enacted through ongoing combinations and recombinations that adapt to project complexity and evolving customer expectations. We also introduce partnership building as a component that amplifies these interactions. In this view, modularity does not merely facilitate value co-creation; it actively configures the joint sphere in which providers and customers co-create value by actively structuring the conditions under which value co-creation becomes effective.

From a managerial perspective, the findings of this study offer a practical tool for identifying and leveraging modular components to facilitate value co-creation. It supports the strategic alignment of offerings with diverse customer needs, encouraging internal collaboration and knowledge sharing to strengthen modular service delivery. Managers are also encouraged to view long-term client relationships not merely as outcomes but as integral, designable modules within the service system. At the same time, managers should recognise the potential downsides of modularity, such as increased rigidity and fragmented delivery. These challenges underscore the need for flexible module design, robust internal knowledge flows and supportive tools that facilitate client participation without overburdening them.

Socially, the findings suggest that modular service design can contribute to more responsive and inclusive infrastructure solutions, aligning business strategies with sustainability goals and enhancing societal well-being. The ability to co-create value through modularity has implications that extend beyond business, offering insights for public services and policy design aimed at improving everyday life. These benefits extend not only to the direct customers of KIBS providers but also to the end-users − such as city residents − who ultimately rely on the infrastructure planned and delivered through collaborative efforts between KIBS firms and their clients. Whether it involves bridges, water systems or urban planning, modularity enables the creation of solutions that are more attuned to the needs of society at large.

Since the findings of this study are exploratory, more research is needed to examine the dynamics among the components and the potential hierarchies between them. In addition, future studies could explore how modularity adapts over time in response to changing customer needs, technological developments or institutional constraints. The role of interfaces and relational elements − such as trust and responsiveness − also deserves closer attention, especially in multi-actor service environments. Further research might investigate how modularity contributes to or challenges sustainability and social value creation, particularly in public–private collaborations where service outcomes affect broader communities. Altogether, these avenues offer exciting opportunities to deepen our understanding of modularity and its evolving role in service and marketing management research.