The themes of technological innovation, entrepreneurship, and organizing

From Products to Product-Service Systems (PSS)

Innovations are commonly classified into the categories of product, process, organizational, or market innovations (Hausschildt & Salomo,

2007) . The current chapter focuses on product in­novations, and thus on new product development. Within the latter understanding of innovation, people are usually concerned about the technologi­cal dimension of products (and - from a life-cycle perspective - of processes related to manufactur­ing the product). For instance, products can be manufactured with improved eco-efficiency (e. g. they consume less energy; Schaltegger & Burritt,

2005) or companies shift the product portfolio towards addressing environmental challenges
(e. g. clean technologies) or social challenges (e. g. adapted products for people from poor communi­ties/developing countries) (Hart, 1997). Whilst these efforts are very important, they alone can­not solve some of the overarching sustainability challenges. At least three reasons should be men­tioned: first, the increased aggregated resource consumption related to product manufacturing and ownership, i. e. there mere number of prod­ucts. Second, though product eco-efficiency can be strongly increased, rebound effects (Dyllick & Hockerts, 2002) are responsible for that the overall consumption increases might exist. For example, lower maintenance costs entail more intense use (e. g. when switching to a more fuel - efficient car, more kilometres might be driven). Third, more sustainable products may be difficult to introduce and diffuse, simply because the ad­ditional environmental and social characteristics make the products too expensive for consumers.

For all three reasons mentioned, it is important to go beyond the technological level to also con­sider the level ofthe PSSs. A PSS is defined as “[...] a system ofproducts, services, networks ofplayers and supporting infrastructure that continuously strives to be competitive, satisfy customers needs and have a lower environmental impact than tradi­tional business models” (Goedkoop, 1999). This definition shows that the traditional distinction of products and services is nowadays becoming less clear (Wise & Baumgartner, 1999). In general, three degrees ofproduct-service combinations can be distinguished (e. g. Baines et al., 2007; Mont, 2001): Product-oriented PSS add a service to the conventional product. For example, the product take-back service (end-of-life phase) allows the producer to recycle or remake the product and thus contribute to environmental (but also to economic) value. In an extreme case, product service bundles may turn into pure product-based services based on product leasing and contracting rather than sell­ing. A good example is the case of Interface Inc. which originally focused on selling carpets, but later became involved in leasing carpets. Instead of replacing entire carpets, the company only re­places worn tiles. Third, a further increase of the service factor leads to product-service systems in a narrower sense (Mont, 2006). These are systems of shared use, i. e. consumers (or users) use the same products either subsequently (e. g. car shar­ing; public washing machines) or simultaneously (e. g. ride sharing instead of a private car; Hansen et al., 2010). The current chapter focuses on such systems of shared use.

The benefits of PSSs are very thoroughly analyzed in the literature. Pawar et al. (2009) differentiates three major streams of literature: the first stream of “product service systems” highlights the environmental benefits of PSS. The second stream “integrated solutions” analyses financial effects of PSS and the third stream of “experience services” highlights benefits created by consumer interactions and co-created values. In general, benefits of PSSs result from a shift of risks, responsibilities, and costs to the manufac­turer, which are associated with the ownership of products (Baines et al., 2007, Pawar et al., 2009).

This chapter is especially interested in the environmental (and more broadly, sustainability) benefits of PSS, which are described in the follow­ing. By increasing the service content of offers, value creation and resource consumption can be decoupled with the effect of creating sustain­ability effects (Baines et al., 2007; Mont, 2001). For instance, Interface Inc. is now responsible for the maintaining, recycling, and disposal of its carpets and has therefore a high interest in, for instance, prolonging the life cycle of its carpets and recycling old carpets. As a result, providers of PSSs have strong incentives to consider the total life cycle and to optimize their offers and value chain over the complete PSS life cycle (Aurich et al., 2006). This kind of analysis is also referred to as system thinking (Manzini et al., 2001). Furthermore, by retaining the ownership of products, providers of PSS have strong incen­tives of minimizing their resource input to reduce costs and capital expenditures, while keeping the value proposition of their offer on a constant level (Baines et al., 2007, Manzini & Velozzi, 2002) or to even increase the value proposition. In systems of shared use, fewer products are sold and thus the number of products in the end-of-life phase is reduced (Aurich et al., 2006; Mont, 2004). For instance, car sharing services need less cars “in action”, leading to a significant increase of overall resource efficiency of the service system. Hence, PSSs offer the opportunity of dematerializing the value creation (Mont, 2006; Ehrenfeld, 2001).

Bearing those findings in mind, we may state that the higher the service part of a SOI, the higher the consideration of the products’ life cycle and, consequently, its positive sustainability effects. Hence, PSS offer a promising innovation strategy for SOIs. However, sustainability effects have to be assessed carefully, as contradictory effects may arise through PSSs (Manzini & Velozzi, 2002).