What's in it for the Provider? The Case of a Telecom Vendor's Value Capturing from the Transition to Product-Service Systems

AbstractIn adopting highly integrated Product-Service Systems (PSS), incentive structures change and the value attainable for providers throughout the lifecycle becomes an issue of growing complexity. Nonetheless, value for PSS providers has up to now not been considered in a multidimensional fashion. In an effort to move towards a characterization of provider's value, an offering in the information communication technology sector was examined through an investigation with ten staff-members of Ericsson, Sweden. This led to a value-categorization, which can be utilized in the PSS design process to enhance the value captured throughout the lifecycle beyond immediate monetary benefit. In an effort to provide general learnings, the results are discussed with a focus on PSS business models, PSS design and management communication. Overall, the results presented provide a more comprehensive picture of what a provider has to gain from a PSS offering throughout its entire lifecycle

What’s in it for the Provider? : A Lifecycle-Focused Approach towards Designing for Value in Product-Service Systems

Combining products and services into Product-Service Systems (PSS), which are often owned and even operated by the company offering them, is seen as an important element of conducting more sustainable business. The prospective environmental benefits of PSS lie mainly in the improved resource- and operational efficiency. This is achieved by way of a critical shift in incentive structure: If an industrial company assumes responsibility for an offering throughout the lifecycle, the terms on which that company operates are changed substantially in comparison to traditional product sales. Instead of benefiting from a short lifetime through additional sales opportunities or making profit through the sale of spare parts, in highly integrated PSS, each parts exchange, each technicians’ visit and each day the lifetime of the offering is reduced directly affects the bottom line of the provider. Due to that, solely as a result of economic rationality, a provider of these offerings has an incentive to design in such a way that the life of this offering is prolonged, need for spare parts is reduced, service activities are facilitated and simplified, and that the conditions are in place to allow for a second or third life of the offering through remanufacturing. Regardless of this compelling logic, at times, industrial companies fail to establish the preconditions to capturing these benefits as they continue to rely on product and sales-centric design processes even though they provide PSS. This thesis aims to examine this unexploited opportunity from two vantage points. On the one hand, methods conceived in academia to support industry in implementing and executing joint, lifecycle-focused design of products and services, and the use of these methods in practice, are examined. Here, the focus firstly lies on understanding how PSS are designed today, and secondly, on what should change about PSS design methods to improve their implementability and usability in industrial practice, so that they can fulfill their supposed role as facilitators of efficient PSS design and operation. On the other hand, the possible benefits of providing specifically designed and lifecycle-focused PSS as an industrial company are in focus. To this end, the value attained by providers throughout the use phase of PSS is investigated, to then identify possible approaches towards enhancing this value. Eventually, both focus-areas are joined in an effort to examine the interaction between method-supported, lifecycle-oriented PSS design and the value attained by providers of such offerings. As a result of the research, a lacking adaptation of design processes to PSS is identified in the case companies. Further, shortcomings of PSS design methods conceived in academia, e.g. excessive complexity, lacking clarity and rigidity, are found in both literature as well as in a study with an industrial company. To take a first step towards rectifying this issue, six characteristics intended to enhance implementability and usability of PSS design methods, are presented. The value attained by PSS providers has been found to be a complex but important subject. In a case study, value determinants of high relevance to the use phase of the lifecycle have been identified and assessed for their utility as indicators in the evaluation and enhancement of PSS offerings in the design phase. The practitioners involved were supportive of the applicability of the systematic approach presented to capture more value through offering PSS. In joining both the value- and method-oriented approach, the mutual dependency of both aspects is discussed. In order to provide PSS in an economically and environmentally efficient fashion, adapting the existing design processes is imperative. The value attained by the provider can, complementary to existing customer-centric approaches, serve as an important goal for the adaptation of design processes. Ultimately, through understanding the change in incentive structure at the core of PSS, and through implementing a value-driven design process supported by efficient and effective methods aimed at providing both customer value and capturing provider benefits throughout the lifecycle, there is a genuine potential of conducting more sustainable business

Effective and efficient design and provision of product-service systems : challenges, opportunities, and solutions

The world manufacturing companies operate in is changing. In the past, these companies relied on the design and sale of products. Today, this linear model of business is becoming increasingly insufficient. As customers are more and more focused on their core business, buying and operating machinery and other goods becomes unattractive to them. In response to this, manufacturing companies are expanding their value capture into additional stages of the product lifecycle by providing integrated offerings of products and services — Product-Service Systems (PSSs). Designing and providing PSSs is fundamentally different from traditional product sales. Expanding to become a PSS provider is, therefore, challenging for companies with a history of designing and selling products. Departing from this, it is the aim of this thesis to support manufacturing companies in their expansion to effective and efficient design and provision of PSSs. The research reported has both descriptive and prescriptive properties, reflecting the goals of understanding the status quo in manufacturing companies’ practice and providing support based on this. To establish a point of departure, the current design and provision of two manufacturing companies expanding their business towards PSSs was investigated. From this, an in-depth understanding of the status quo and a number of challenges emerged. Based on this, the research had the goal to contribute to identifying and developing solutions to these challenges, with an initial focus on methods supporting PSS design and provision. However, although methods fitting to the challenges identified exist, they appear to receive limited uptake in manufacturing companies’ practice. In order to improve their practical utility, a structured method is proposed to assist users in both academia and practice in developing methods in a requirements-oriented fashion. The utility of methods in improving the efficiency and effectiveness of PSS design and provision is thereby to be enhanced. A particular challenge for manufacturing companies expanding to become PSS providers is the change in how value is captured: Resulting from the extensive involvement throughout the lifecycle, a need for a broader, multidimensional understanding of value capture was identified. However, the manufacturing companies investigated have been found to experience challenges in grasping this change, with a focus on a product sales-centric understanding of value capture remaining prevalent. To support companies towards reaping the benefits of the expansion to PSS design and provision, methods to explore how value is currently created and captured in the use phase and how to enhance the future value capture based on that information in the design phase have been developed and applied. As a result, broadly relevant value dimensions were attained, aiming to facilitate a lifecycle-focused, effective, and efficient design and provision of PSSs. Eventually, to broaden the understanding of effective and efficient design and provision of PSSs in practice today, the potential contributions of real-world PSSs to a circular economy were investigated based on an existing framework. The result was ambiguous, indicating both advancements compared to traditional sales and substantial room for improvement, particularly with a focus on the absolute decoupling of economic activity and resource use. Based on the synthesis of the research results, manufacturing companies are supported in their expansion to effective and efficient design and provision of PSSs — and towards a promising future

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

Evaluation and optimization of Product/Service Systems within the development process

We live in a world that is evolving and changing faster than ever. Paradigms are set, and revoked the next day. One of these paradigms, that have fueled the prosperity of market economies all around the world in most of the 20th century, is growth. More production leads to more consumption and an increased standard of living. Today, hardly anyone in academia or politics sees a future of prosperity through the growth of production and sales of physical products alone. Scarcity of resources is a fact we are faced with today and even more so when looking ahead to the next 30 years or so. Different ways of creating value without destroying the very base of our existence must be contrived while attempting to maintain the standards of living in the developed world and providing emerging countries with a fair chance for prosperity in the future. Product-Service Systems (PSS) are one possible way of creating added value and thus growth, but disconnecting this growth from an increase in material consumption and therefore resource depletion (as discussed e.g. by Manzini et al., 2001). This issue will be discussed further in chapter 2.4. By combining products and services, developing them in an integrated manner and approaching their design and operation from a life-cycle perspective, offerings can be conceived that reduce the strain on the environment through different effects but allow for new sources of revenue, growth and prosperity to be discovered. As mentioned by Meier et al. (2010), the portion of the GDP created through service activities in Japan (69%), Germany (70%) and the USA (75%) surpasses that of the industrial sector by a large margin. Combining the two and making use of the resulting synergies is a main objective of the research on Product-Service Systems in roughly the past decade. Current research will be examined in the following chapter to fully explain PSS and why it holds such great potential, both from an environmental as well as an economic perspective. One of the main focuses of research in the field of PSS is PSS development. Since an integrated approach of product and service development is the explicit aim of most PSS design strategies (e.g. Lindahl et al., 2006), traditional means of product development known and successfully applied in engineering design do not apply to the world of PSS or must be altered and adapted to do so. This issue is discussed in detail in chapter 3 of this thesis. The PSS-design method SPIPS (Toward Solution Provider - Through Integrated Product and Service Development), introduced in Sakao et al. (2009) and extended in Sakao and Lindahl (2012) is one possible approach to PSS design that is introduced and related to this thesis in chapter 3.5. At this point, although possessing a verified method for consumer-value assessment (Sakao and Lindahl, 2012), the method is lacking an approach toward the assessment of the producer-value of PSS components and offerings. This thesis aims to fill this void. The primary aim of this thesis is to provide a structured method to assess the producer value (PV) of components and combinations of components (offerings) of Product/ Service Systems. This goal is intended to be reached through answering the following sub-questions or completing these tasks: Provision of an introduction to PSS and current research as well as definitionsfor the most important terminology Discussion of traditional product development, interfaces with PSS and review of literature relevant to this Review of methods of producer value assessment and extraction of useful issues Discussion of uncertainty, interdependency and cost within the scope of producer value evaluation in PSS design, derivation of possible solutions and issues for further research Finding a way to quantify producer value Describing the structure of the method proposed Outlining the possible realization of the method in a software environment Applying the findings to an example of realistic natur

An exploratory expansion of the concept of product-service systems beyond products and services

Product-Service Systems (PSS) are seen as an important part inmoving towards increased environmental sustainability within the holisticconcept of a circular economy. While PSS are increasingly prevalent inindustry and a multitude of methods and tools have been developed to aidtheir implementation and use, this paper argues that the concept may bemeaningfully extended beyond the design and provision of products andservices alone to include large technical systems. Through a literaturereview and the analysis of four case studies, commonalities anddifferences between PSS and large technical systems are identified. Whilethis only constitutes a first step into the expansion of the scope of PSSand additional, more applied research is required, the PSS concept isdiscussed as a key facilitator of improved environmental performance ofindustrial activities and consumption if applied on a system-level

An exploratory expansion of the concept of product-service systems beyond products and services

Product-Service Systems (PSS) are seen as an important part inmoving towards increased environmental sustainability within the holisticconcept of a circular economy. While PSS are increasingly prevalent inindustry and a multitude of methods and tools have been developed to aidtheir implementation and use, this paper argues that the concept may bemeaningfully extended beyond the design and provision of products andservices alone to include large technical systems. Through a literaturereview and the analysis of four case studies, commonalities anddifferences between PSS and large technical systems are identified. Whilethis only constitutes a first step into the expansion of the scope of PSSand additional, more applied research is required, the PSS concept isdiscussed as a key facilitator of improved environmental performance ofindustrial activities and consumption if applied on a system-level

ProVa – Provider Value Evaluation for Integrated Product Service Offerings

Through the provision of integrated products and services, solution providers have more to gain than solely profit. This paper introduces the concept of provider value, which is novel in the area of integrated products and services. Further, a method is proposed (ProVa) to identify and evaluate the provider value of an integrated product service offering (IPSO) during the development process. ProVa allows for an assessment in terms of monetary value, but also with respect to other categories such as information and customer relations. In addition, aspects such as uncertainty and experience curve effects are considered.The functionality of ProVa is shown by application to a case in IPSO design

Creating service modules for customising product/service systems by extending DSM

Customising offerings effectively for customers’ needs and wants, yet maintaining the provider’s efficiency, is a challenging task. Modularisation is a key to achieve this, but insight on how to create modules for customising product/service systems (PSSs) is limited. This article proposes a new practical method that supports designers to create service modules by extending the DSM (Design Structure Matrix). The method has been applied to existing PSSs by an elevator manufacturer. It was found effective because it reduces complexity in customisation, and thus response time in service provision, as well as increases the chance of reusing previous designs.Funding agencies: Swedish research council Formas [2013-293]; Linkopings Universitet; FormasMistra REE

A Method for Remanufacturing Process Planning and Control Using Loosely Coupled Systems

Remanufacturing is a crucial component for our societies to move toward a circular economy. Compared with new manufacturing, the distinctive nature of remanufacturing is found to have high variability, high uncertainty and, thereby, complexity. Therefore, remanufacturers need to be able to adapt to the complexity and to flexibly adjust their processes. Especially, the ability to remanufacturing process planning and control is important. However, few practical methods supporting that are available so far. Therefore, this paper aims to propose a method for designing teams and processes in remanufacturing based on the concept of loosely coupled systems. In the proposed method, design structure matrix (DSM) is applied to identify loosely coupled sub-systems that enable to localize impacts of changes within themselves. These sub-systems are also regarded as cross-functional teams that reduce coordination efforts among line departments and, therefore, increase the adaptability against uncertainties. As a preliminary validation, the proposed method was applied to a real case of remanufacturing, and then found to be effective for creating teams and processes for remanufacturing process planning and control depending on given uncertainties.Funding: Stiftelsen for Miljostrategisk Forskning (Mistra) [2014/16]; JSPS KAKENHIMinistry of Education, Culture, Sports, Science and Technology, Japan (MEXT)Japan Society for the Promotion of ScienceGrants-in-Aid for Scientific Research (KAKENHI) [20K12082]</p