Product-Service Systems Providers Research Articles

Value Leakage in Product–Service System Provision: A Business Model Alignment Perspective

To stay competitive, manufacturing companies offer product–service systems (PSS) to avoid commoditization of their products. The potential to create value through PSS offerings lies in a company's ability to successfully implement the PSS business model. However, many companies are unable to realize the benefits because PSS represents significant changes to all the business model elements, which comprise value creation, value delivery, and value capture. This leads to misalignment among the business model elements, which is a topic of interest within PSS and business model literatures. This article aims to provide empirical insights into the business-model-element alignment problems and conceptualize their consequences, which manufacturing companies face during PSS implementation. This article utilizes an abductive multicase study of three Swedish manufacturing companies with long-term experience of PSS provision to provide novel insights by identifying six alignment problems that companies face as a consequence of the interaction among the three business model elements. Furthermore, we contribute to both the PSS and business model literature by conceptualizing the consequences of business model element alignment problems, explaining the three value leakages that occur as a result of inappropriate resource and capability utilization, unattractive offer configurations, and inefficient service network processes in PSS provision.

A model-based Approach to assess the Circularity of Product-Service Systems

The principles of circular economy (CE) are widely recognized as a solution for the challenges arising through climate change and shortage of resources. Product-Service Systems (PSS) are expected to have a higher degree of circularity compared to standalone products. To exploit the potentials of PSS towards circularity, different CE strategies need to be considered. Those CE strategies, such as remanufacturing or reuse, can have large deviations in their resulting effects for PSS providers. To quantify the possible impacts of different circularity strategies for PSS, a novel assessment method based on system dynamics modelling is presented in this paper.With the proposed method, the effects of different CE strategies on material demands, unavoidable waste and PSS longevity can be quantified. Thereby, CE strategies for PSS become comparable and their benefits can be measured. The method is directed to scholars as well as PSS providers to assess the circularity of PSS and support decision making in PSS design and realization.

A Vulnerability Assessment Framework for Product-Service Systems Based on Variation Mode and Effect Analysis

In recent decades, the product-service system (PSS) has been spotlighted due to its innovation and sustainability. As a novel business system, PSS provides additional value for products through the addition of service, which effectively upgrades the traditional manufacturing industry. For realizing a successful PSS, a robust and reliable operation stage is extremely important for users to stay satisfied and loyal. Thus, designers need to ensure that this system is not sensitive to any influential perturbation. Namely, they must achieve the desensitization of PSS to vulnerability. However, the current PSS design field still does not provide an effective method to assess the vulnerability in the whole life stage of PSS. This would lead to less time for the PSS provider to respond to various events. Furthermore, the tremendous loss could be caused due to the immaturity of the system. Therefore, this research has developed a vulnerability assessment framework based on variation mode and effect analysis (VMEA) for PSS. This developed framework has the ability to identify the potential noise factors and assess their severity based on multiple steps of analysis. This method has proved its effectiveness through an application example, and it is also expected to enable PSS researchers to design a robust PSS.

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

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.

Industry 4.0 Driven Result-oriented PSS: An Assessment in the Energy Management

Sustainability is a current challenge and all sectors, including the buildings one, are being called upon to provide a solution to mitigate climate change. The state of the art of energy management using ICT technology in building systems industry is characterized by a traditional monitoring approach which could assess the energy consumption of the building but that cannot manage and act the required action to improve the energy management according to a demand side approach. The aim of this paper is to overcome this traditional monitoring approach, presenting Simon, a new model proposed by Evogy, enabling a result-oriented Product Service System (PSS) for buildings through Cyber-Physical Systems, Artificial Intelligence, and Internet of Things adoption. The main findings highlight the benefits associated with the Simon model by virtue of digital-based predictive maintenance on the real system. In addition, its adoption allows the PSS provider to aggregate energy demand from the plethora of buildings and, according to digital technologies, not only monitor consumption but also implement equipment. Finally, the application case highlights the benefits are different and thus stands as a best practice for combining sustainability and digitization.

Dealing with privacy concerns in product-service system selling: Value-based selling as fair treatment practice

Privacy concerns are an important aspect of business-to-business customers' adoption decision of advanced product—service systems and a significant inhibiting factor. However, empirical evidence on its effect is scarce and anecdotal. Based on the observation that customers assess the “privacy vs. service/benefit” trade-off in a calculative way, this study examines how customers' privacy concerns affect their price sensitivity and in turn, the provider's profitability. Specifically, we propose value-based selling as an approach for providers to alleviate the potential negative effects of customers' privacy concerns. The results of a sample of 250 US firms confirm value-based selling's power to disable the privacy concerns–price sensitivity mechanism and mitigate the negative effect of price sensitivity on product-service system provider profitability. However, value-based selling's positive impact on performance is dependent on the level of contract specificity. Thus, value-based selling and contract specificity are complementary arrangements.

Exploring the governance mechanisms for value co-creation in PSS business ecosystems

This paper explores the governance mechanisms for value co-creation when product–service systems (PSS) providers move into PSS business ecosystems. The PSS providers in our study applied both internal and external governance mechanisms to regulate value co-creation. Internally, they relied on formal organisational setups and informal coordination between product, service and digital divisions. Externally, they had strong relational governance mechanisms supported by appropriate contractual governance mechanisms. As frontline (field) interactions became an important factor for realising value co-creation, PSS providers also attempted to develop individual-based psychological governance to complement group-based relational governance. Our findings reveal five challenges in managing the governance mechanisms: (1) orchestrating all digital resources and capabilities, especially managing the incompatibility and isolation of different digital tools in product and service divisions; (2) managing all relations in one platform that can embrace customer relationship management (CRM), supplier relationship management (SRM) and form relations with emerging actors such as authorities; (3) designing appropriate contractual governance to measure co-created value from economic, societal and environmental perspectives, and govern data ownership and security; (4) managing the interplay between contractual and relational governance mechanisms during PSS agreement implementation; and (5) developing psychological governance for frontline staff. We direct PSS providers towards essential aspects that require attention when developing governance mechanisms by identifying these challenges. Moreover, identifying such challenges will allow policymakers, practitioners, and scholars to jointly develop standards, policies and guidelines in these increasingly prevalent ecosystem business arrangements.

Towards territorial product-service systems: A framework linking resources, networks and value creation

While many models for sustainable product-service systems (PSS) integrate the multi-actor perspective, few provide insights on how the territory in which actors implement the system influences its sustainability. This paper explores the implementation of a territorial PSS at a city or regional scale as a means to structuring value networks and enhancing its sustainability potential. The research combines a multidisciplinary literature review with two exploratory sustainable PSS cases in packaging and cloth baby diapers. The paper proposes a framework explaining how sustainable PSS providers develop territorial networks that consider a diversity of actors from civil, industrial, and public spheres to mobilize resources for value creation at organizational, network, and territorial levels. It identifies contextual factors, such as proximity, social embeddedness of relations, and the visions that influence the consolidation and sustainability of the territorial PSS networks. The empirical cases show the development of territorial networks enhances embed social relations among actors and enables the sustainable PSS concept to adapt to locally articulated sustainability principles and priorities. The paper discusses the implications of this approach for PSS for sustainability managers and designers. The study fills a gap by showing the importance of integrating a diversity of territorial actors as a pre-condition for PSS to contribute to the sustainability transitions and resilience of territories. Future research may validate the proposed framework and focus on identifying opportunities and barriers for the territorial PSS approach in different contexts such as industries and company sizes.

Dynamic Contract Design of Product-Service Supply Chain considering Consumers’ Strategic Behavior and Service Quality

With increasing market competition and rapid development of service economy, more and more enterprises are shifting from providing products or services to providing product-service systems (PSSs) that integrate products and services, in order to improve competitiveness and profitability. Meanwhile, consumers have strategic delayed purchasing behavior when purchasing the PSS and high requirements for service quality. This paper investigates the two-period pricing and service quality decisions of product-service supply chain (PSSC) considering consumers’ strategic behavior under decentralized and centralized scenarios. The equilibrium results are compared in two scenarios. In order to eliminate performance loss under the decentralized scenario, we design two-period dynamic contracts to coordinate the PSSC. Furthermore, numerical simulation is provided to verify the feasibility of the contracts. The following conclusions can be drawn: (1) the higher the service input-efficiency, the more beneficial for alleviating consumers’ strategic purchase behavior under two scenarios, but this mitigation effect is more obvious under the centralized scenario. (2) Compared with the centralized scenario, the service quality is lower, the two-period PSS sales prices are higher, and the two-period profit is lower under the decentralized scenario. The proportion of service valuation (accounts for the valuation of PSS) will promote the widening of the service quality gap under two scenarios, but in some cases, the service input-efficiency will weaken the promotion effect of the proportion of service valuation. (3) The design of the two-period combined contracts depends on the proportion of service valuation. When the proportion of service valuation is high, the “two-period revenue sharing + service-cost sharing” combined dynamic contract can achieve PSSC perfect coordination. However, when the proportion of service valuation is low, it is necessary to design complexity combined dynamic contract which can achieve PSSC perfect coordination.

Perception value of product-service systems: Neural effects of service experience and customer knowledge

Digital trends in product-service system (PSS) development focus on developing win-win solutions for both companies and customers, particularly when considering human behavior issues. It is useful for the PSS provider to know the PSS value creation mechanism when customers are buying and utilizing a PSS, particularly in the service-dominant logic (SDL) and cognitive neuroscience perspective. This study solved the PSS implementation that satisfied the demands of both customers and manufacturers and the value cocreation mechanism during product and service configuration with the impacts of consumer learning and the service experience. The proposed neuroscience methodology is based on an ERP (event-related potential) experiment using PSS stimuli, representing the perception value creation process during customer decision making and the PSS configuration process. The effectiveness of the service experience is more important than customer knowledge during PSS value perception due to positive emotions with pleasant memories for the service experience and the conflicting cognition process of customer learning. The combination of service science and neurology may measure and observe human behavior and psychology through the brain science method and effectively solve the human factors in service science. The findings suggest a more objective and personalized understanding of PSS value perception, particularly the practical requirements of a resulted-oriented PSS and an application-oriented PSS.

An Advanced Operation Mode with Product-Service System Using Lifecycle Big Data and Deep Learning

As a successful business strategy for enhancing environmental sustainability and decreasing the natural resource consumption of societies, the product-service system (PSS) has raised significant interests in the academic and industrial community. However, with the digitisation of the industry and the advancement of multisensory technologies, the PSS providers face many challenges. One major challenge is how the PSS providers can fully capture and efficiently analyse the operation and maintenance big data of different products and different customers in different conditions to obtain insights to improve their production processes, products and services. To address this challenge, a new operation mode and procedural approach are proposed for operation and maintenance of bigger cluster products, when these products are provided as a part of PSS and under exclusive control by the providers. The proposed mode and approach are driven by lifecycle big data of large cluster products and employs deep learning to train the neural networks to identify the fault features, thereby monitoring the products’ health status. This new mode is applied to a real case of a leading CNC machine provider to illustrate its feasibility. Higher accuracy and shortened time for fault prediction are realised, resulting in the provider’s saving of the maintenance and operation cost.

Product-service systems evolution in the era of Industry 4.0

Recent economic transformations have forced companies to redefine their value propositions, increasing traditional product offerings with supplementary services—the so-called Product-Service System (PSS). Among them, the adoption of Industry 4.0 technologies is very common. However, the directions that companies are undertaking to offer new value to their customers in the Industry 4.0 have not yet been investigated in detail. Based on a focus group, this paper contributes to this understanding by identifying the main trajectories that would shape a future scenario in which PSS and Industry 4.0 would merge. In addition, future research directions addressing (a) the transformation of the PSS value chain into a PSS ecosystem, (b) the transformation inside a single company towards becoming a PSS provider, and (c) the digital transformation of the traditional PSS business model are identified.

Design of a Methodological Framework for Adaptive Remanufacturing-based Business Models

As manufacturing companies face a globally increasing consumption of resources and the associated environmental impact, sustainable solutions are gaining in importance for manufacturing companies. In this context, the life cycle extension of capital goods offers a promising approach to increase the resource efficiency. On this basis, a proactive, intelligent maintenance strategy is being developed as part of the research project Adaptive Remanufacturing for Life cycle Optimization of Capital Goods (ReLIFE). The associated preservation of a predefined machine performance level enables the realization of new business models. This paper provides a framework for the development of the theoretical and methodological foundations for a business model based on Adaptive Remanufacturing, derived from the current state of the art in the field of remanufacturing- and maintenance-based business models. The development process consists of the four steps - Status Quo, Business Context, Value Architecture and Business Model Characteristics - and is supported via the adoption of the Business Model Canvas as well as the St. Gallen Business Model Navigator. The Value Architecture, in which the focus is on the implementation of a Product Service System (PSS), represents the core of the business model. Instead of selling the product, only its usage is provided. The manufacturer, as PSS provider, retains ownership and is responsible for maintenance, remanufacturing and other services in order to keep control of the product. Moreover, the idea of ownerless consumption and a transparent financing model opens the market for new customers and enables economic potential by extending the use phase of the respective capital good.

Stakeholders responsibilities in reverse logistics of product-service systems: towards circular economy in the healthcare industry

Reverse logistic system is essential in Product-Service Systems (PSS), which have been labeled as a means to achieve the circular economy. Multiple stakeholders should be involved in the design and operation of the reverse logistics system, but their responsibilities are not clearly consolidated yet. The identification of stakeholders and their responsibilities is even more important in complex sectors that involve the regulation of products and unique services, such as the healthcare industry. This paper aims to consolidate the reverse logistics services and the stakeholders' responsibilities based on two PSS cases in medical devices companies in the context of circular economy. Based on case studies, two maps of stakeholders' responsibilities are presented to support the operation of reverse logistics networks. The companies should have a systemic perspective of the several stakeholders instead of focusing only on limited relationships based on the customer and the PSS provider. Also, take-back activities should be considered since the middle-of-life of products, and all products should be part of the reverse logistics system to lead to the circularity of materials.

An active preventive maintenance approach of complex equipment based on a novel product-service system operation mode

The product-service system (PSS) business model has received increasing attention in equipment maintenance studies, as it has the potential to provide high value-added services for equipment users and construct ethical principles for equipment providers to support the implementation of circular economy. However, the PSS providers in equipment industry are facing many challenges when implementing Industry 4.0 technologies. One important challenge is how to fully collect and analyse the operational data of different equipment and diverse users in widely varied conditions to make the PSS providers create innovative equipment management services for their customers. To address this challenge, an active preventive maintenance approach for complex equipment is proposed. Firstly, a novel PSS operation mode was developed, where complex equipment is offered as a part of PSS and under exclusive control by the providers. Then, a solution of equipment preventive maintenance based on the operation mode was designed. A deep neural network was trained to predict the remaining effective life of the key components and thereby, it can pre-emptively assess the health status of equipment. Finally, a real-world industrial case of a leading CNC machine provider was developed to illustrate the feasibility and effectiveness of the proposed approach. Higher accuracy for predicting the remaining effective life was achieved, which resulted in predictive identification of the fault features, proactive implementation of the preventive maintenance, and reduction of the PSS providers’ maintenance costs and resource consumption. Consequently, the result shows that it can help PSS providers move towards more ethical and sustainable directions.

A product-service-system proposal for municipalities in developing countries with tight budget to convert the organic waste in energy to eliminate dumps

In developing countries, organic waste is commonly dumped in untreated landfills. Brazil has around 3,000 landfills distributed in 1,600 cities. The Brazilian government instituted the National Solid Waste Policy (PNRS), which set the goal of ending the dumping grounds in 2014. However, it was not accomplished. Municipal governments do not have the resources to fund the existing treatment technologies. Thus, there is an urgent need to propose low-cost alternatives to solve this problem. This work proposes a low-cost Product-Service System (PSS) solution that enables the proper treatment of organic waste using the current municipal budget, based on the renting of household biodigesters. It was outlined from a model built on various proposals for the PSS design, published between 2011 and 2018. A feasibility simulation of the proposal conducted for the scenario of the Brazilian city of Porto Amazonas has demonstrated that, by adopting the proposal, the administration could comply with the PNRS and save part of its actual budget. It also showed 75% of probability of financial viability for the PSS provider, in a scenario of reduction of up to 20% in the current municipal costs for organic waste collection and transportation, and up to 40% off in cooking gas costs for the equipment-hosting households. The proposal is a potential solution for the Brazilian municipalities with more favorable scenarios to comply with the PNRS, as well as other countries’ municipalities with budget constraints to eliminate their dumps.

Predicting consumer adoption of branded subscription services: A prospect theory perspective

AbstractDrivers of and barriers to consumer adoption of product‐service systems (PSS) deviating strongly from the current consumption paradigm remain unidentified. This study quantitatively investigates purchase intentions of a hypothetical branded fashion subscription service. This service features use‐ and result‐oriented PSS attributes in a lack of ownership, newness, and choice, and is investigated from a Prospect Theory perspective using a mixed method design combining an experiment with a survey (n = 524). Results show that even if the PSS provider is highly trusted by consumers, this only mitigates some of the worries consumers have about wearing used clothing and being held financially liable for product damage. The only driver of adoption is the opportunity to save money. Additional specific product information is also explored and shows that PSS providers have scope to change consumer perceptions. Overall, it appears that fashion ownership and choice are lesser issues than the literature suggests, although financial incentives are important. Furthermore, having a trusted brand allows a potential PSS provider to alleviate only some of the concerns consumers have. The contribution of this paper lies in its empirical findings as well as in its validation of Prospect Theory as a valid approach to enquiring into reasons for or against consumer adoption of complex PSS such as subscription services.

A service-oriented dynamic multi-level maintenance grouping strategy based on prediction information of multi-component systems

The development of product-service-system (PSS) urges the emergence of service-oriented maintenance mode (SOMA), which leads to the shift of maintenance manners from traditional high-cost in-house maintenance to the performance-based proactive service offerings for complex multi-component systems. In this case, a novel and adaptive maintenance grouping strategy that considers service responses, service interactions and dynamic prediction requirements is desired to implement the predictive maintenance planning. Thus, this paper presents a service-oriented dynamic multi-level predictive maintenance grouping strategy. It involves component level, dynamic grouping level and system level to fulfill the individual optimization and grouping optimization. Firstly, the individual service time based on real-time remaining useful life (RUL) distribution information is optimized and obtained with the minimum average cost. Secondly, considering the existing economic and resource dependence in predictive and corrective services, this paper dynamically groups the predicted optimal individual services from rolling planning horizon at each calculated service planning time. The penalty costs and grouping service costs are both constructed. Then, a modified k-means method is designed to find out the optimal short-term grouping execution strategy from medium-term prediction information where the average cost savings and relative availability improvement degree are regarded as the optimization objectives. Finally, some numerical examples with three predictive grouping scenarios show that our grouping strategy could provide a feasible and effective long-term dynamic maintenance planning for proactive OEM or PSS providers. It is adapted to the SOMA on complex multi-component systems.

Customer-pulled and provider-pushed pathways for product-service system

Purpose The purpose of this paper is to investigate distinctive pathways for product-service system (PSS) development. Moreover, it investigates the contingent effect of the business ecosystem (BE) in terms of being provider-pushed or customer-pulled. Design/methodology/approach The study adopted a case-based research, performed in the Brazilian and Danish healthcare industries in order to explore the subject. Findings The results reveal that the capital available for investments influences the pathway. The customer-pulled PSS fast evolved to become result-oriented and connected to a complex resource-dependent network in the BE. The provider-pushed PSS showed a slow evolutionary pathway, limited to product-oriented offerings with low dependence among actors in the BE. Originality/value The research offers various managerial implications for PSS providers, policymakers and customers of the healthcare industry.

Unintended Circularity?—Assessing a Product-Service System for its Potential Contribution to a Circular Economy

Product-service systems (PSSs) are seen as valuable facilitators of a circular economy (CE) on a business level. However, that PSSs contribute to a CE is not a given and is determined by the chosen PSS business model and strategy applied throughout the entire lifecycle. Thus, in order to support companies in implementing circular business models such as PSSs, an increasing number of frameworks and methods have been proposed in prior research. This article hypothesizes that many industrial companies are expanding to become PSS providers with neither such support nor a strong sustainability focus. There is a gap in the literature regarding the potential contribution of such PSSs to a CE. Thus, the research reported aims to provide initial insight regarding whether unintended circularity, i.e., an unintended contribution to a CE, may occur when becoming a PSS provider. Applying and adapting an existing framework for the assessment of PSSs’ potential contribution to a CE, the use-oriented PSS of an industrial company was assessed in-depth. Results regarding the relative resource reduction and the prospect of achieving absolute resource decoupling are reported and discussed. While relative improvements over product sales are identified, e.g., resulting from end-of-life efforts on reuse and remanufacturing, opportunities for additional enhancement are found, e.g., in adjustments of the PSS design process. Concerning absolute resource decoupling, a fundamental challenge lies in the use-oriented PSS’s dependency on an increasing number of physical components as the company’s business expands. This article advances the discussion on PSSs’ potential contributions to a CE with an in-depth empirical study. For practitioners, the results reported expand on important aspects of efficient and effective PSS provision throughout the lifecycle.