Product-service systems (PSS) are business models that provide for cohesive delivery of products and services. PSS models are emerging as a means to enable collaborative consumption of both products and services, with the aim of pro-environmental outcomes.
Description
Product service systems 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 "a marketable set of products and services capable of jointly fulfilling a user's needs", PSS can be realized by smart products. The Product-Service System (PSS) concept was first developed at the Politecnico di Milano between 1993 and 1996 by Francesco Mauri and Gianluca Brugnoli while they were studying how Design integrates with business strategy . Up to that point, companies usually handled products, services, communication and distribution as separate activities, managed by separate functions. The idea behind a PSS is that companies should combine and orchestrate all of these parts, into one coordinated, consistent, and distinct 'system' so they can compete more effectively and establish better customer interactions. The initial move to PSS was largely motivated by the rise in the 90s of the service economy in saturated markets, and the need of traditional manufacturing firms to cope with changing market forces and the recognition that services in combination with products could provide a more competitive strategy and higher profits than products alone. Faced with shrinking markets and increased commoditization of their products, these firms saw service provision as a new path towards profits and growth. 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 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." Mont elaborates on her definition as follows: A PSS is a pre-designed system of products, services, 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. This view of PSS is similar to other concepts commonly seen in the environmental management literature, such as "dematerialization" and "servicizing". PSS has been used to create value for customers beyond selling products as simple functions. Typically, there are four approaches to PSS design.
Function-based PSS: add new functions to increase product value in the competing market. For example, General Motors added OnStar in 1992 to product emergency services for customers. It integrated GPS with vehicle sensory system for telematics-based on-demand services. Value-added PSS: companies added new features to increase value of a product to expand its value to customers and users. For example, Otis Elevator added Remote Elevator Maintenance (REM) system to its fleet system to monitor their elevators to reduce failures. GE Healthcare (formerly GE Medical Systems) developed InSite to remotely monitor its medical equipment in order to reduce service costs and increase users' benefits. Evidence-based Service: companies use big data analytics to provide the actual saving and further develop a service contract for customer to pay for part of the savings. There are many methodologies on PSS design. Dominant Innovation system uses an Innovation Matrix to identify gaps from customer's fear, not needs based on scenario-based path finding. A new value-chain ecosystem can be further developed to link these gaps between two invisible spaces. For example, John Deere developed Agric Service business based on the customers' worries on soil related issues. It integrates sensors with GPS to develop cognitive site map about soil content to optimize crop yields. Several peer-reviewed scientific articles have reviewed and give an overview of the PSS design research field. In recent years, PSS has been further integrated with big data analytics for accelerated innovation. Other technologies such as prognostics, health management and cyber-physical systems have further created service innovation technologies for PSS. For example, Alstom has been developing Train Tracer technologies since 2006 and is implementing Health Hub system for its transport fleets.
Product Servitization "Product Servitization" is a transaction through which value is provided by a combination of products and services in which the satisfaction of customer needs is achieved either by selling the function of the product rather than the product itself, by increasing the service component of a product offer, or by selling the output generated by the product. The concept is based on the idea that what customers want from products is not necessarily ownership, but rather the function that the product provides or the service the product can deliver. This means that the provider of "servicizing solutions" may get paid by the unit-of-service (or product function) delivered, as opposed to the (more traditional) unit-of-products sold. See service economy for more on product servitization.
Types One type of product servitization solution is based on transactions where payment is made—not for the "product"—but for the "product-service package" (part of PSS) which has been sold to the customer. This servicized purchase extends the buying transaction from a one-time sale (product acquisition), to a long-term service relationship (such as in the case of a long-term maintenance-free service contract). Another type of servicizing may be a strategy for providing access to services for people who cannot afford to buy products outright. For example, in the case where auto ownership is economically unfeasible, creative servicizing offers at least three possible solutions: one in which transportation can be achieved simultaneously (as in car-pooling); one in which transportation can be achieved sequentially (as in car-sharing); and one in which transportation can be achieved eventually (rent-to-own).
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