Revenue Mode Innovations for Product-Service Systems: Overcoming the Service Paradox

Abstract

Industrial manufacturers aim to increase competitiveness by innovating their business model and offer product-service systems (PSS). However, firms often fail to exploit sufficient profits from PSS business model innovation (BMI). The role of revenue models to create and capture val-ue from innovating revenue streams for PSS is often neglected in practice and theory. The innova-tion literature has a profound understanding of the PSS concept and its value proposition design. However, it lacks knowledge and insights on how revenue model innovation (RMI) impacts the success and competitiveness of a PSS business model. From a perspective of the resource-dependence theory (RDT), we assume that RMI is a source of competitive advantage by reducing uncertainty and increasing interdependencies between economic actors of a PSS. Our research ap-plied a qualitative multiple case study with semi-structured interviews of leading PSS providers. We identified three dimensions of RMI-enabled customer value creation and provider value capture, reducing customer uncertainty and increasing dependence according to the RDT. Our research im-plies from the RDT perspective that PSS providers create a joint competitive advantage from RMI by giving additional value to their customers, which supports the power balance between both par-ties by a positive increase in interdependence. Our study contributes to the theoretical understanding of the role of RMI for PSS business model success. The study results will extend the theoretical knowledge about successful servitization through PSS and address its problem of exploiting reve-nues from the service business – the service paradox.