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Success strategies for product service systems (PSS)

Development of success oriented planning strategy for Austrian PSS providers based upon an analysis of best practice examples and international systematic PSS development approaches.

Short Description

Status

completed

Summary

Background

The concept of Product-Service Systems (PSS) is not new in the market. It has been known as different names, such as "business propositions", "product promotions", and "services". The remarkable growth of service industries in the last half century indicates the economic paradigm shift from mass production to post-industrial business solutions. In this new era, more and more business activities are based upon immaterial values (e.g. consulting, information technology) instead of relying on material values in primary and secondary industries (e.g. mining, manufacturing). PSS solutions respond to this economic transition. The key claim is that consumer needs can be fulfilled by efficiently employing intangible services. In this project, keeping our focus on Austrian industrial characteristics, we aim to suggest a number of economical and institutional policies, in order to enable clean, profitable and more need-oriented business models.

The state-of-the-art

The boundary of sustainability concerns has been enhanced up to the system level. A series of PSS research projects for systemic innovation in Europe and other countries have been investigated, and PSS types from conceptual and practical approaches have been outlined.

The intrinsic nature of PSS and key interests of this project has composed our working definition that is formulated as follows:

"Sustainable business-to-customer (B2C) PSS are seen as commercial offers of a combination of products and services (or a free offer with the potential of being commercialised) that is able to fulfil consumer demands, INSTEAD of selling the products involved. Sustainable PSS provide consumers with both functional and non-functional values which increase their satisfaction, yet consume less material and energy."

For an overview of available supporting methods and tools that can help companies develop and implement such PSS offers, 14 methods have been analysed and compared. The research shows that the methodologies differ in several aspects such as complexity, level of support and target business areas.

Austrian context

Particular attention has been paid to the Austrian socio-economic situation, in order to be able to suggest contextually fitting guidelines to Austrian companies. Characteristics of Austrian economy were identified with regard to the three domains:

  1. predominant industrial branches
  2. scale of enterprises
  3. consumer market trends

A number of industrial branches showing high resource consumption despite of low economic value creation are figured out based on the material flow analysis (Baud, 2006) and the latest structural business statistics of Austria. Apart from the primary industries mainly dealing with raw materials, a few specific manufacturing industries such as building, paper and printing, food production turned out to have a tendency of high material-consumption and therefore a low resource productivity. The size of enterprise is another distinguishable characteristics. In Austria the number of micro enterprises (less than 10 employees) is predominant. About 86.8% of all enterprises operate with one to nine employees. (Statistic Austria, European Commission)

Considering the business-to-consumer (B2C) market as one of the focal points of the project, we analysed the statistics of average household expenses and results based on a consumer typology. Over 60% of total expenses are spent in four major categories including housing (and energy), transportation, food and drink, and leisure. (Statistik Austria, - Konsumerhebung 2004/05)

As a consequence the results derived from the research indicate Austria as a promising incubator for successful PSS practices.

Case studies

PSS samples currently established in the market can help Austrian companies to understand PSS in a more practical way as well as to learn how to design, implement and operate the systems successfully. International PSS examples have been scanned and classified according to a set of criteria such as industrial branches, PSS types, and market mechanisms (e.g. B2B and B2C). These examples were also qualitatively analysed regarding their environmental, economic and social effects. Among the database of 150 cases collected in the first phase, a number of cases were systematically filtered according to the Austrian situation (i.e.material intensive business sectors, business size, and consumer market trends). Additionally, opinions from the research team members were reflected to include a few exceptional PSS cases that are particularly interesting for further analysis.

The selected cases shown in the table below are taken from different industrial sectors, countries of origin, and various PSS categories. These cases were described in detail within a structured template containing a short description of the system, important stakeholders, market position, key motivation and barriers, functional values, as well as the market status.

Success and failure factors

Concluding from the case investigation, several success- and impediment-factors have been derived. Besides technical and functional aspects, the importance of underlying non-functional qualities such as brand image and aesthetic values were pointed out. Cases were reviewed in order to examine how those rather subtle attributes influence on the success and failure of their market performance.

PSS development phase model

Among the PSS methods investigated MEPSS was taken and adapted in order to establish a method for PSS development in the Austrian market. The MEPSS toolkit has already been tested through several business cases. The cases were evaluated to achieve a remarkable improvement not only in the environmental performance but also in the new value creations (van Halen, et al. 2005). The experience gained from the case development was used to figure out the most relevant phases and tools.

Three phases model of PSS development:

  1. Current System Analysis
    Unterstand better your organisation and current business model as well as market strength and weaknesses
  2. PSS Design
    Find new service opportunities and build up a concrete idea
  3. PSS Implementation and Operation
    Know what factors are critical to lead the idea to a success while avoiding the pitfalls

The basic development procedures are taken from MEPSS. The 5 phase-step-process structure of MEPSS has been simplified into 3 phases, especially to respond to demands of micro- and small-enterprises in Austria.

Along the phases, a series of most practical tools are suggested as shown below.

  1. Current System Analysis
    • Tool 01: List of key issues
    • Tool 02: Stakeholder Identification und priorisation
    • Tool 03: System map I
    • Tool 04: Positives und negatives
  2. PSS Design
    • Tool 05: Idea generation
    • Tool 06: Idea mapping and selection
    • Tool 07: Sustainability checklist
    • Tool 03: System map II
    • Tool 08: Storyboard
  3. PSS Implementation and Operation
    • Tool 09: Feasibility test plan
    • Tool 10: Operation action plan

Windows of opportunities

By analysing the results of the research and with the help of stakeholder workshops "windows of opportunities" have been identified and strategies for their implementation have been derived. Suggestions were given on an economic and political level to establish new PSS offers.

Starting point for these suggestions were the following 3 W-questions:

  • Where to start PSS development among various industrial sectors?
  • What kind of tools can help companies develop successful PSS strategies?
  • What propositions will attract customers to the PSS?

Conclusion

The values in our economy are changing from production of material goods to service offers based on knowledge and information. This transposition requires firms to develop corresponding strategies. Based on the research, PSS seem to be one of the most advanced and promising strategies, as they aim to fulfil our needs by cleverly combining material and immaterial elements. By offering high quality PSS solutions, companies will be able to compete in saturated product markets and to re-oriente the current production and consumption mechanisms into a more sustainable direction.

In order to support the innovation in Austrian micro and small companies, a simplified set of PSS development has been developed on the basis of real-life system development experiences as well as the extensive literature study. In the innovation process, companies will face several challenges such as a change of the organizational mindset and new financial schemes. Therefore, not only methodological support but also political and institutional instruments need to be prepared for SMEs. In this context government organizations have an important role. Their financial and/or institutional incentives will accelerate the successful PSS implementation.

Future research needs to pay more attention to the value of emotion behind consumer behaviour and decisions. More intelligent, user-friendly, socially accepted, and worth showing-off PSS ideas will bring real market success.

Project Partners

Project management

Dr. Robert Wimmer
Gruppe Angepasste Technologie

Project collaborator

Myung Joo Kang
Gruppe Angepasste Technologie

Project or cooperation partner

  • Ass. Prof. Ursula Tischner, Martijn Verkuijl
    econcept, Agentur für nachhaltiges Design
  • Dr. Johannes Fresner, Markus Möller
    Stenum GmbH

Contact Address

Gruppe Angepasste Technologie, TU Wien
Dr. Robert Wimmer
Wiedner Hauptstraße 8-10, 1040 Wien
E-Mail: rw@grat.at
www.grat.at

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