The transfer and application of Product Service Systems: from academia to UK manufacturing firms

Abstract

The servicisation of many advanced economies is thought by many commentators to provide opportunities to move society away from unsustainable patterns of production and consumption. The concept of the Product Service System (PSS) has been conceptualised in academic circles to assist in the attainment of such desirable futures. This paper reports the findings of research conducted as part of the SOLiD project which considered the transfer and application of the PSS concept from academia to industry in the United Kingdom. It draws upon theories from evolutionary economics to provide a rationale for the transfer of the PSS concept and the role of this in achieving desirable technological change. The paper also identifies an appropriate methodology to transfer the PSS concept from UK academic circles to industry and the factors which impact upon, and importantly lead to, the successful completion of this process. The combination of theoretical insight with case study research is used to develop a framework that could help UK based intermediaries to complete the transfer of the PSS concept. This is seen as an integral part of public policies aimed at stimulating sustainable patterns of production and consumption.

Introduction

Futures in which service is the dominant mode of production and consumption seems increasingly likely. The service component of most OECD countries expanded rapidly in the last decades of the 20th century to the extent that these now account for between 50% and 75% of jobs and added value [1]. The United States of America was the first nation to become a ‘service economy’ and Fuchs [2] coined the term to reflect the relative state of employment within it. While this worldwide ‘servicisation’ of advanced economies has been partly driven by increases in the supply of traditional services such as financial and legal, research shows that a number of firms have used the service type of transaction to develop a range of new service orientated products [3]. In most instances firms have developed these as a response to competitive pressures and the need to gain additional value [4], [5]. Case study research shows that such products have been used as complements to conventional products as well as substitutes for these. Complements include extended warranties and maintenance contracts, and substitutions include document handling services and voicemail services. In the latter instances, firms do not satisfy demand using conventional material products which they sell through ‘one off’ transactions, but rather use the service type of transaction and associated administrative arrangements and their customers purchase units of service or the use of the product over a given period of time.

This change in production and consumption practices has been conceptualised by many as the ‘shift from products to services’ [6], [7]. Whilst there are some issues concerning nomenclature (service is embodied in the utility of material artefacts and services often need material artefacts to enable service delivery), research has shown that these new services can be more accurately described as Product Service Systems (PSS). These have formed the unit of analysis for much of the research in this field and are based on the notion that tangible artefacts and intangible services are conflated through design processes so that they are jointly capable of fulfilling specific customer needs [8]. They also show that whilst artefacts are a key component of new PSS, they are often subordinate to the service element. Case study research [9], [10] has revealed a spectrum of PSS types which in theory at least may provide opportunities to satisfy demand using significantly fewer resources and reduce the impacts associated with production, use and disposal:

• Product orientated PSS: Within this type of PSS, the ownership rights of the material artefact are transferred to the customer and a service arrangement is provided to ‘ensure the utility’ of the artefact over a given period of time. Typical examples include warranties and maintenance contracts. Improvements in resource productivity are thought to arise from the notion that these services increase the lifetime of the product to which they are attached, e.g. maintenance service for a washing machine.

• Use orientated PSS: The ownership rights of the material artefact are retained by the service provider in this configuration and the customer purchases use of the product over a given period of time or units of service. Typical examples include warrantees and maintenance contracts and possible improvements in resource productivity are thought to arise from the high use intensity of material artefacts used to support these, e.g. mobility schemes require fewer cars per kilometre travelled per person.

• Result orientated PSS: While ownership rights of material artefacts are retained by the service provider, similar to use orientated PSS, the customer purchases utility as an outcome and not the use of a ‘product’ over a given period of time. For example, instead of leasing a washing machine, the customer purchases clean clothes delivered through a washing service. The product is owned and run by the supplier, who is paid for the units of service delivered to the customer and thus gains an economic interest in the functional optimisation of a consumption practice. This economic interest may in turn stimulate technological, organisational and market innovations directed toward service offerings that are optimised over their entire life cycle [11]. Purchase of a result instead of a pre-specified product or service provides more opportunities to improve environmental performance as this can be integrated from scratch [12].

These types of PSS suggest that, in theory at least, servicisation provides opportunities to significantly improve resource productivity, by between factor 4 and 20. Halme et al. [13] state that environmental benefits are thought to arise at the micro-level in a number of ways:

• If the material artefact remains in the ownership of the producer then there is a financial incentive to direct innovatory activities to produce more durable goods and the producer has responsibility for disposal.

• A smaller stock of products is needed to satisfy demand and if customers use these sequentially intensity of use increases as does the probability of a higher service yield before the product becomes outdated due to outdated technological characteristics, e.g. fashion.

• In result orientated services, producers use their competencies to ensure the correct use of material artefacts to provide service as well as to select the appropriate artefact for this purpose.

Thus research highlights certain changes in production and consumption practices that hold great potential to improve their environmental performance. On the supply side, as a result of competitive pressures, manufacturing firms are moving away from their traditional focus on conventional material ‘products’ and developing a solution and result orientation, while on the demand side, customers are becoming increasingly amenable to consuming results provided by services instead of material artefacts. Research would also seem to indicate that the role of consumer durables may diminish over time. Firms satisfy demand using a stock of capital items to support PSS and new customer demands are met by re-configuring this and service innovation [14]. In theory at least, these changes therefore provide opportunities to significantly improve resource productivity in the short run and to move society towards a dematerialised functional future in the long run [15]. However, it has been recognised that such benefits will not occur automatically, as the result of economic restructuring shaped by competitive forces, and government interventions will be required to realise them [16], [17], [18], [19].

Interestingly, the need for government intervention is implicit in the research completed to date in this field. Much of this has been financed from European R&D framework programmes that are concerned not only with the accumulation of knowledge but also more specifically with the accumulation of knowledge that will stimulate economic development. This has resulted in a number of product concepts that have been developed within the research community. These include, inter alia, the concepts known as Product Service Systems (PSS), Eco-efficient Producer Services (EPS), Eco-efficient Services and Eco-services [5], [10], [11], [19]. For example, a definition of Eco-efficient Services is given by Meijkamp [11] as:

“all kinds of commercial market offers aiming at fulfilling customer needs by selling the utilisation of a product (system) instead of providing just the product. Eco-efficient services are services, relating to any kind of product, in which some of the property rights are kept by the producer.”

These concepts can be thought of as a special and distinct category of services that has been developed for the specific purpose of improving resource efficiency. In general terms, it may be observed that the generic PSS model provides the foundation for these. According to Mont [20] these can be thought of as PSS which has been designed deliberately to not only improve the financial performance of a product but also to “minimise the environmental impact of consumption by:

• Closing material cycles

• Reducing consumption through alternative scenarios of product use

• Increasing overall resource productivity and dematerialisation of PSSs

• Providing system solutions seeking the perfection in integrating system elements along with improving resource and functional efficiency of each element.”

It is therefore observed that the PSS concept in this guise and associated concepts such as Eco-services are prescriptive in nature. A knowledge set comprising design methodologies, decision support tools and marketing knowledge has been developed within the research community to enable firms to minimise these environmental impacts.

Eco-services and similar concepts such as Eco-efficient Producer Services have been coined in academic circles as interventions to assist in the long-term transition to dematerialised functional economies and for the attainment of significant short-term improvements in resource productivity. These are exogenous concepts that have been developed through case study research and are external to the firm [18], [21], [22]. This was also recognised by Wong [4] who stated that the term PSS and its associated field of study is only known among the Industrial Sustainability Community and even then, it is not well known. There is growing frustration in the research community that while firms have developed new service orientated products for commercial reasons, and these may or may not have improved resource productivity, there is little evidence of concepts such as PSS, Eco-services or EPS being adopted as the result of work undertaken by academic circles [4], [16], [17], [18], [22]. This frustration therefore extends to the concern that, in theory at least, the potential that this research and associated concepts' offers for improving the environmental performance of production and consumption systems is being lost [17].

The need for government intervention to address these concerns has been recognised by the research community and analysis has been conducted to identify requisite policy models [5], [17], [18], [19]. As part of this process, Bartolomeo et al. [5] identify a number of factors that will influence the development of Eco-efficient Producer Services in business-to-business markets. These include supply side factors such as organisational fragmentation, skilled personnel, organisational commitment, infrastructure and labour costs; and demand side factors such as short-term decision making frameworks, transaction costs, level of control and flexibility for users. Similarly a number of studies [4], [19], [23] have identified a number of drivers and barriers to the development of PSS in industry. These include external drivers such as legislation, competition, green consumerism; external barriers such as lack of market demand for PSS, high labour prices; internal drivers such as top management commitment, opportunity to reduce risks and liabilities, availability of information and communication technology (ICT); and finally, internal barriers such as organisational resistance to change, the need to prevent over-diversification and the bounded rationality of some firms.

However, neither the necessary methodology to enable the transfer of the PSS concept, from academia to industry, nor the factors which lead to the successful completion of the prescribed process have been identified in the literature. This paper reports the results of research conducted as part of the UK based SOLiD project [17] as well as subsequent work conducted by Cranfield University to address these gaps in the literature. It draws upon theories from evolutionary economics to provide a rationale for the transfer of the PSS concept and examines the role of this in achieving desirable technological change. This paper suggests a methodology for transferring the PSS concept from UK academic circles to industry and identifies the factors that might affect the completion of this process and the resultant move towards more sustainable patterns of production and consumption.

The remainder of this paper has been structured to facilitate this task. The next section details the theoretical rationale of, and methodology employed for, the research reported in this paper. It also considers the knowledge/technology transfer methodology selected to transfer the PSS concept. The results of the case study research are then reported in Section 3. These show the factors found to impact upon, and lead to, the successful completion of the transfer process. The transfer framework developed from these findings as well as the paper's conclusions are presented in Section 4.