Product-Service System
Overview
A Product-Service System (PSS) is a business model that integrates product and service components in a system provided by a single company. The aim is to provide utility and functionality to the customer through a mix of tangible products and intangible services, while also reducing environmental impact.
Definition and Types
The term 'Product-Service System' was first introduced by Goedkoop et al. in 1999. It is defined as a marketable set of products and services capable of jointly fulfilling a user's need. The PSS model can be categorized into three main types: product-oriented, use-oriented, and result-oriented.
Product-oriented PSS
In a product-oriented PSS, the business sells a product and also offers services related to the product. The product remains the property of the customer, and the services may include maintenance, repair, and upgrades. This type of PSS is common in industries such as automobiles and electronics.
Use-oriented PSS
In a use-oriented PSS, the product is not sold but is provided as a service. The customer pays for the use of the product, but the ownership remains with the provider. This type of PSS is common in sectors such as car sharing or leasing services.
Result-oriented PSS
In a result-oriented PSS, the customer pays for the results or benefits obtained from the product-service system, not for the product or service itself. This type of PSS is common in sectors such as energy-saving solutions or waste management services.
Benefits and Challenges
The PSS model offers several benefits, including cost savings, increased customer loyalty, and reduced environmental impact. However, it also presents challenges such as complexity in design and implementation, risk of customer dissatisfaction, and potential for increased liability.
Benefits
The PSS model can lead to cost savings for both the provider and the customer. The provider can achieve economies of scale by offering integrated product-service solutions, while the customer can avoid the costs of owning and maintaining the product.
Customer loyalty can be enhanced through the PSS model, as the ongoing service relationship provides opportunities for the provider to understand and meet the customer's needs more effectively.
The PSS model can also contribute to sustainability by reducing the environmental impact of product use. This is achieved through strategies such as extending product life, promoting product reuse, and optimizing resource use.
Challenges
Designing and implementing a PSS model can be complex, requiring changes in business processes, organizational structures, and customer relationships. The provider must have the capabilities to manage both product and service components effectively.
There is a risk of customer dissatisfaction if the service component does not meet expectations. This can lead to loss of business and damage to the provider's reputation.
The PSS model can potentially increase the provider's liability, as it assumes responsibility for the performance and maintenance of the product over its lifecycle.
Case Studies
Several companies have successfully implemented the PSS model. Examples include Rolls-Royce's 'Power by the Hour' program, Xerox's 'Managed Print Services', and Michelin's 'Fleet Solutions'.
Rolls-Royce
Rolls-Royce, a leading manufacturer of aircraft engines, offers a PSS called 'Power by the Hour'. Under this program, airlines pay for engine power rather than buying the engines. Rolls-Royce retains ownership of the engines and provides all maintenance and repair services. This PSS has been successful in reducing airlines' operational risks and costs.
Xerox
Xerox, a global leader in document management, offers a PSS called 'Managed Print Services'. Under this program, customers pay for document output rather than owning and maintaining printers. Xerox provides all necessary hardware, software, and services. This PSS has been successful in reducing customers' printing costs and improving document management efficiency.
Michelin
Michelin, a leading tire manufacturer, offers a PSS called 'Fleet Solutions'. Under this program, fleet operators pay for mileage rather than buying tires. Michelin retains ownership of the tires and provides all maintenance and replacement services. This PSS has been successful in reducing fleet operators' operational risks and costs.
Future Trends
The PSS model is expected to gain further momentum in the future, driven by trends such as increasing customer demand for integrated solutions, growing awareness of sustainability, and advances in digital technologies.
Digital technologies such as Internet of Things (IoT), Big Data, and Artificial Intelligence (AI) can enhance the PSS model by enabling real-time monitoring of product performance, predictive maintenance, and personalized service delivery.
The PSS model can also contribute to the circular economy by promoting product reuse and resource optimization. This can help companies achieve their sustainability goals and meet regulatory requirements.
See Also
Business model Service economy Circular economy