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Product service system

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A product-service system (PSS), also known as a function-oriented business model, is a business model, developed in academia, that is aimed at providing sustainability of both consumption and production.[1]

What is PSS?

Product Service Systems, put simply, are when a firm offers a mix of both products and services, in comparison to the traditional focus on products. As defined by (van Halen, te Riele, Goedkoop)[2] "a marketable set of products and services capable of jointly fulfilling a user's needs". PSSes can be realized by smart products.

The initial move to PSS was largely motivated by the need on the part of traditionally oriented manufacturing firms to cope with changing market forces and the recognition that services in combination with products could provide higher profits than products alone.[3] Faced with shrinking markets and increased commoditization of their products, these firms saw service provision as a new path towards profits and growth.[4]

While not all product service systems result in the reduction of material consumption, they are more widely being recognized as an important part of a firm's environmental strategy. In fact, some researchers have redefined PSS as necessarily including improved environmental improvement. For example,(Mont)defines PSS as a "a system of products, services, supporting networks, and infrastructure that is designed to be competitive, satisfy customers' needs, and have a lower environmental impact than traditional business models"[5] Mont elaborates her definition as follows: A PSS is pre-designed system of products, service, supporting infrastructures, and necessary networks that is a so-called dematerialized solution to consumer preferences and needs. It has also been defined as a "self-learning" system, one of whose goals is continual improvement.[6]

This view of PSS is similar to other concepts commonly seen in the environmental management literature, such as "dematerialization"[7] and "servicizing."[8]

Types of PSS

There are various issues in the nomenclature of the discussion of PSS, not least that services are products, and need material products in order to support delivery, however, it has been a major focus of research for several years. The research has focussed on a PSS as system comprising tangibles (the products) and intangibles (the services) in combination for fulfilling specific customer needs. The research has shown that manufacturing firms are more amenable to producing "results", rather than solely products as specific artefacts, and that consumers are more amenable to consuming such results. This research has identified three classes of PSS:[9]

Product Oriented PSS
This is a PSS where ownership of the tangible product is transferred to the consumer, but additional services, such as maintenance contracts, are provided.
Use Oriented PSS
This is a PSS where ownership of the tangible product is retained by the service provider, who sells the functions of the product, via modified distribution and payment systems, such as sharing, pooling, and leasing.
Result Oriented PSS
This is a PSS where products are replaced by services, such as, for example, voicemail replacing answering machines.

Impact of PSSes

Several authors assert that product service systems will improve eco-efficiency by what is termed "factor 4", i.e. an improvement by a factor of 4 times or more, by enabling new and radical ways of transforming what they call the "product-service mix" that satisfy consumer demands while also improving the effects upon the environment.[9]

van Halen et al. state that the knowledge of PSS enables both governments to formulate policy with respect to sustainable production and consumption patterns, and companies to discover directions for business growth, innovation, diversification, and renewal.[10]

Research

A number of universities are actively engaged in product service system research including Cranfield University School of Applied Sciences and School of Management. Its work on PSS is funded through the Innovative Manufacturing Research Centre (IMRC).

References

  1. ↑ M.B. Cooka, T.A. Bhamrab and M. Lemonc (2006). "The transfer and application of Product Service Systems: from academia to UK manufacturing firms". Journal of Cleaner Production (Elsevier Ltd) 14 (17): 1455–1465. Template:Citation/identifier. 
  2. ↑ Cees Van Halen, Carlo Vezzoli, Robert Wimmer (2005). Methodology for Product Service System Innovation. Assen: Uitgeverij Van Gorcum. pp. 21. Template:Citation/identifierTemplate:Inconsistent citations 
  3. ↑ M. Sawhney, S. Balasubramanian, and V. Krishnan, “Creating Growth with Services,” MIT Sloan Management Review (Winter 2004): 34-43.
  4. ↑ K. Bates, H. Bates, and R. Johnston, “Linking Service to Profit: The Business Case for Service Excellence,” International Journal of Service Industry Management 14, no. 2 (2003): 173-184; and R. Olivia and R. Kallenberg, “Managing the Transition from Products to Services,” 160-172.
  5. ↑ "Sustainable Services Systems (3S): Transition towards sustainability?". Towards Sustainable Product Design, 6th International Conference, October 2001, Amsterdam, The Netherlands. Centre for Sustainable Design. 2001-11-09. http://cfsd.org.uk./events/tspd6/tspd6_3s_cases.html.
  6. ↑ Bill Cope and Diana Kalantzis|pages=19,26|date=2001|publisher=Common Ground|isbn=1863350713
  7. ↑ Eva Heiskanen (2000). Dematerialisation: the potential of service-orientation and Information Technology; Eva Heiskanen, Mikko Jalas, and Anna Kärnä (2000). "The Dematerialisation Potential of Services and IT: Futures Studies Methods Perspectives". Quest for the Futures Seminar Presentation, Helsinki School of Economics, Organisation & Management, June 2000; Eva Heiskanen and Mikko Jalas (2000). Dematerialization Through Services — A Review and Evaluation of the Debate. Finnish Ministry of Environment. pp. 436. http://www.hkkk.fi/organisaatiot/research/programs/dema/sy436.pdf.
  8. ↑ Rothenberg, Sandra, Sustainability Through Servicizing, Sloan Management Review, January, 2007; White, A., M. Stoughton, and L. Feng, “Servicizing: The Quiet Transition to Extended Product Responsibility.” Tellus Institute for Resource and Environmental Strategies, 1.[Submitted to The U.S. Environmental Protection Agency Office of Solid Waste, May 1999].
  9. ↑ 9.0 9.1 M Cook (2004). "Understanding the potential opportunities provided by service-orientated concepts to improve resource productivity". In Tracy Bhamra, Bernard Hon. Design and Manufacture for Sustainable Development 2004. John Wiley and Sons. pp. 125. Template:Citation/identifier. 
  10. ↑ Cees Van Halen, Carlo Vezzoli, Robert Wimmer (2005). Methodology for Product Service System Innovation. Assen: Uitgeverij Van Gorcum. pp. 21. ISBN 9023241436.

Further reading

Books and papers

Dematerialization


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