Sustainable service-based business models - Exploring the potential of digital technologies in industrial companies

Industrial companies are continuously looking for solutions to increase their competitive advantage and become sustainable. Many industrial companies have prioritised economic sustainability as means of success. However, recent decades have revealed many external pressures and these have highlighted the need for more sustainable organisations. The growing interest in sustainable alternatives has shed light on various business models which promote balance and support the path towards a more circular economy. This thesis aims to promote sustainable, service-based business models by identifying the challenges and opportunities encountered in this transition. Further, it explores the methods, tools and frameworks available in the literature and identifies the sustainability-related elements and KPIs. The results showcase a list of challenges faced by industrial companies in developing service-based business models. For instance, there is a lack of consensus on terminology for business models, sustainability and digital technologies. Although the studies included in this thesis are from different industry sectors, the challenges found were similar. The increasing availability of digital technologies and engagement of global organisations may support the development of service-based business models. In addition, new technological opportunities, regulations and incentives can promote collaboration and responsibility in companies. This thesis systematises the existing methods, tools and frameworks and shows the extent to which they support companies as they move towards sustainability. It also provides recommendations and relevant considerations for the future development of new methods and tools. This research contributes to the systematisation of knowledge gained from the different terminologies used to refer to service-based business models. It also captures unprecedented experiences from multiple industries, such as recyclers and service providers in the maritime sector. This thesis’ findings can inform and support companies on their path to understanding and implementing service-based business models

Innovation for a circular economy : exploring the adoption of PSS by UK companies in the baby products sector

Several authors have commented on the relatively slow rate at which Product Service Systems (PSS) have been adopted in B2B networks. Despite some prominent examples, such as the provision of integrated lighting systems to Sainsbury’s (supermarket chain) by Parkersell in the UK, and the ‘pay per copy’ (lease and take back) systems provided by copier companies such as Xerox and Canon, PSS has not been widely adopted even though the business case seems sound. Consequently, the question of identifying and overcoming barriers to PSS adoption has become an important research topic. In this study we explore barriers to the adoption of PSS in the UK baby products industry using a qualitative research design employing in-depth interviews with baby products suppliers (manufacturers) and buyers (retailers). The novelty of the approach adopted in this study is that key concepts from the Industrial Networks Approach are used to frame the analysis. Buyers and suppliers of baby products acknowledge the value of the PSS approach, but PSS adoption is found to require considerable adaptation to conventional patterns of inter-organizational interaction

Customer-centric business model for remote monitoring services

Development of industrial internet has made it possible for industrial manufacturers to remotely monitor and collect data from their installed base and serve their customers with new and innovative services such as condition-based maintenance. Despite some previous research, there is still uncertainty on the most important customer needs for a remote monitoring service and through what kind of business model should the services be offered. Offering services with inadequate knowledge of the customers’ needs has led to ineffective offering and value propositions slowing the spread of these services. Through a single case study of an industrial manufacturer, this thesis aims to discover what the most important customer needs and business model fundamentals of remote monitoring services are to create understanding for further service growth. The empirical part of this research was conducted as a qualitative case study. The primary data were collected with semi-structured interviews and the secondary data consisted of documents originally from a recent internal development project of the case company. The sources for collected material were both internal interviewees and respondents from customer companies operating in process industries. The results indicate that the two main customer needs for remote monitoring services in industrial maintenance are increasing the asset output and reducing maintenance costs. Other important needs were found to be getting access to the service provider’s expertise, adding predictability to maintenance and achieving safety improvements. It was also found that different needs are closely linked with each other. A new business model framework for remote monitoring services was proposed. The developed framework was used to structure elements for a successful remote monitoring service business model. Implementing the business model will require new capabilities in understanding customers’ businesses, new sales capabilities and technological capabilities in order to develop valuable insights from collected data. The results confirm earlier findings of value propositions and value proving as crucial parts of business models in remote monitoring services. Collaboration between customers and the service provider was found to be a potential way to create value in remote monitoring services. However, experiences of value co-creation in deeper level are still behind the examples from literature. Remote monitoring services and collaborative value creation were found to be compatible with outcome-oriented earning logics and there was interest towards it on both customer’s and supplier’s side. To gain more understanding on outcome-oriented earning logics, further research of defining and sharing the achieved benefits, especially in complex multi-actor environments, is proposed

The Financial Consequences of Servitization in Manufacturing Firms: An Empirical Analysis

Prior body of servitization research falls short to fully capture the financial consequences of servitization. This paper aims at investigating the financial consequences of servitization in listed manufacturing companies in four countries, namely UK, USA, Germany and China. By means of secondary data obtained from Worldscope database, regression models will be developed to compare servitized and non-servitized manufacturing firms in the aforementioned countries. This study contributes to the current understanding of the financial consequences in the transition towards service provision and aims to enhance managerial decision-making processes regarding servitization by comparing different contexts and countries

A value-driven method for the design of performance-based services for manufacturing equipment

Industrial services are increasingly becoming more relational and customer-oriented, due to manufacturers' adoption of servitisation approaches and product service system offerings. Challenges remain regarding the effective design and delivery of these new offerings, and the understanding of their actual value for both providers and customers. This work focuses on one specific type of product service systems in the context of manufacturing equipment: result-oriented or performance-based services, which aim at delivering an outcome rather than selling the equipment to the customer. A proposal of a value-driven method for their design that engages the customer in the process is presented. This new method has been applied to a real industrial life setting through an application case, involving the service provider and its customer, and targeting manufacturing equipment within customers' plant. Results indicate the effectiveness of this prescriptive approach. Reported benefits from participants refer to its flexibility, adaptability and applicability for different types of equipment, as well as its potential to help providing a modular service portfolio adequate to equipment specific context and requirements

Strategies For Cross-Company Collaboration From An OEM's Perspective In The Context Of Digital Ecosystems

The mechanical engineering industry is facing significant challenges due to digital transformation. Business model innovation, such as service-oriented business models, is required to maintain competitive advantage. These innovative business models require capabilities that traditional manufacturing companies may not possess. These capabilities can be developed through cooperation in ecosystems. This paper examines the development of ecosystems and cross-company cooperation in mechanical engineering. The aim is to develop a strategy for cross-company cooperation within the framework of a practical example, which presents capability development framework for an OEM. A scenario analysis compares different alternatives to the cross-company collaboration strategy. The paper compares the approaches of the platform economy and the federative data space in the context of research projects. The methodology is based on a design science research approach and expert interviews to generate practice-oriented findings, as well as a literature review for theoretical insights

The impact of the Internet of Things (IoT) on Servitization: An exploration of changing supply relationships

This research paper explores the emerging potential of IoT technology as an enabler for manufacturers seeking to exploit opportunities for new production, business and operating models. Following an analysis of extant literature and exploration of four in-depth cases, the paper presents four dominant pathways to servitizing the business model through IoT implementation. This first finding is extended in the cross-case analysis, through a categorization of cases into the four pathways, comparing different levels of supplier integration and information exchange. Using this data and categorizations, the paper arrives at certain theoretical propositions regarding the wider impact of IoT technology implementation on information exchange and relational rents through self-enforcing safeguards, risk and financial incentive sharing and lastly transaction cost economics. These propositions lead to the recommendation for suppliers to adopt a servitization pathway of ‘operational service’ models, in order to reap maximum competitive benefit and return on specific investments. This suggests a dependence on the servitization pathway chosen by the supplier, implying that there is no single solution to deal with buyer-supplier relationships in IoT servitization environments

Circular economy business models and consumer acceptance in the electrical and electronic equipment sector: a comparative study of Singapore and South Korea

ChangHee Kim investigated consumer acceptance of Product-Service Systems for refrigerators and washing machines in Singapore and South Korea. His results revealed that both countries shared similar value requirements but showed slight differences in value-in-experience and value-in-use. Household appliance producers are leveraging his results to shift towards a circular economy society

Literature review on micro and macro factors of change in servitization - How could companies facilitate the change towards digital servitization?

Research and literature on servitization have expanded greatly in the past years. This study focuses on providing systematic literature review of the micro and macro factors of change in servitization to find solutions for companies to facilitate the change towards digital servitization. This systematic review classifies equally environmental and organizational qualities from the servitization research and is conducted from descriptive sample of 95 articles covering digital servitization and organizational change. The review results indicate that extensive investments required for digital servitization demand substantial growth of value creation and appropriation. Furthermore, the implementation of digitalization obliges to invest in additional capabilities and resources. There are also various micro and macro level factors that need to be acknowledged and taken into consideration as they may all affect the servitization change process in different ways. To facilitate the digital servitization change process, attention needs to be paid to value creation, planning and analysing, management, capabilities and resources, monitoring, network, and stakeholders with the additional factors concluded in this research. These findings have potential to provide beneficial insights both for the companies in the path of servitization and for the research community by providing a novel literature review with perceptive future research ideas of the field and beyond