Product/Service-Systems (PSS)Thomas J. Howardthow@mek.dtu.dkMain Contributions from: Tim C. McAloone, Niki Bey & Krestine Mougaard

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“Original material created for the PROTEUS project and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU”

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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Products and Services

What is a product?

What is a Service?

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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Definitions

Product• The result of a synthesis process, where value is

created by transferring ownership of the result from one stakeholder to the next.

Service• The creation of value when one stakeholder

carries out an activity on behalf of another.

McAloone 2012

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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A Product/Service-System is a system that supports and utilises the product through an extended (for the company) product life period

Service only exists when the customer uses it!

What is a PSS?

Product life cycle

Customer,User

Service:- selling use and functions

Service provider

Product

Product development

McAloone & Andreasen 2002

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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Producer’s traditional responsibility/liability

Traditional producer ownership Traditional customer ownership

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Why PSS ?

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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Producer’s extended product responsibility, customer contact and revenue source

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Product life cycle design

PSS-oriented business strategy

€ € € € €

Why PSS ?

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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PSS means making a shift of business focus, from:

business based on value creation through the transfer of product ownership and -responsibility

to:

business based on value creation through the support and delivery of a service from a product, for the whole of its lifetime…

PSS as a business strategy

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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Rolls RoyceFrom airplane engines to ’power-by-the-hour’

In the airline industry, the company does not sell engines - it charges for use of the thrust they provide, on a 'power by the hour' basis. Where previously the company's aerospace arm simply sold engines to plane companies, they now offer a fixed-fee maintenance back-up service for those engines, thus allowing customers to accurately project their maintenance and part replacement costs.

[www.rolls-royce.com]

[www.rolls-royce.com]

Traditional model

Core business:passenger

revenues

Rolls-Royce

Airline

OverhaulBase

Eng. Health Monitoring

LogisticsProvider

Vendors

Non-core business activities

TotalCare model

Focus on core business

Rolls-Royce responsible forairline’s non-core business activities

OverhaulBase

LogisticsProvider

Vendors

Airline

Rolls-Royce

Predictive maintenance

TotalCare model

Focus on core business

Rolls-Royce responsible forairline’s non-core business activities

OverhaulBase

LogisticsProvider

Vendors

Airline

Rolls-Royce

Predictive maintenance

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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DanfossFrom electronic refrigeration controls to cooling in supermarketsIn order to avoid being reduced to a component supplier (where competition is tough and margins slim) Danfoss has positioned itself as a provider of value added consultant advice to the food retail industry. By tying a closer link to the retailer Danfoss can increase knowledge about operational know-how.

[www.danfoss.com]

Systems

Networks

Components

Value

Added

Services

[Eriksen, Danfoss, 2005]

OEM’s

Contractors

OEM’s

System

house Contractors

End-Users Supermarkets

Distribution

channel

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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XeroxFrom photocoping machines to document services

Xerox has worked to turn its product into a service, providing a complete "document service" to companies including supply, maintenance, configuration, and user support. Customer’s don’t buy photocopy machines anymore, the buy the ability to photocopy.

[www.xerox.com]

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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AarstiderneFrom organic produce to convenient food delivery

Aarstiderne has delivered organic products to the doorsteps of Danish households since 1999. It started out as a small vegetable garden at a farm, Barritskov, in the western part of Denmark. The idea behind Aarstiderne.com is to deliver organic food products directly to the doorstep of the customer who values quality and taste and thereby catalyses the public motion towards healthier food and better environment in Denmark – not by agitating, but simply by enabling everybody to be a part of the good idea. The products are supplied with recipes and stories about growers, production, farms, the company, food products and quality.

[www.aarstiderne.com]

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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Douwe EgbertsFrom coffee bean supplier to coffee systems

Douwe Egberts was originally a coffee supplier. Normally clients in offices would buy a traditional hot plate-based coffee machine, buy consumables such as coffee and filters separately, and make pots of coffee in the traditional way. Douwe Egberts took the advantage by starting to offer coffee systems delivering freshly brewed, good-quality coffee per cup and thereby created a much more powerful position in the value chain.

[www.douweegberts.com]

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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IBMFrom computers to consulting services

Traditionally IBM’s business was in manufacturing computer hardware but over the years they have moved to a more business and software consulting service approach. This was particularly noticeable with the sale of their personal computers to Chinese manufacturer Lenovo in 2004

[www.ibm.com]

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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DuPontFrom paint to painted cars

Payment by paint quality:

Reward: selling more paint

No action concerning painting

Flexible delivery

Quality of painted surface

Cost of painting

Payment per car:

Concern of reducing quantity

Immediate delivery

Quality of the painted surface

Immediate satisfaction

No action concerning painting

DuPont

Ford

DuPont

FordDuPont painting

Ford producing

Ford painting

Ford producing

DuPont

Customer: Long-term interest of qualityfrom satisfaction delivery system [McAloone, 2003]

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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easyJetFrom 3rd party booking to direct booking service

easyJet is perhaps more renowned for its ‘lack of’ or ‘no frills’ approach to service. However, in the late 90’s, airliners were running a very standard business model providing service in a ‘complementary’ form rather than a extra revenue form. easyjet were able to strip this service and translate it to low costs, something a large proportion of the market valued greatly. But more importantly easyjet were able to harness web bookings enabling them to provide a service to their customers that, at the time, was only available through 3rd party travel agents and thus dramatically reduced costs, prompting their slogan “the web’s favorite airline”.

2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU

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In your teams discuss the following scenario:

“You have been developing and selling microwave ovens for many years and

have seen profits steadily falling due to increase competition. How could you add a service dimension to your business and what market segment would you target?