New Business for Old Europe

Product-Service Development, Competitiveness and Sustainability

Arnold Tukker, Ursula Tischner

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351280587
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Explores the business drivers for embarking on product-service development and its relation with sustainability and competitiveness. This book reviews toolkits and approaches, selects best practice, analyzes gaps, examines what opportunities there are in a variety of key areas and translates the lessons into suggested approaches for companies.

Part I
Product-services: the context

1
Introduction

Arnold Tukker
TNO, The Netherlands

1.1 From products to solutions or product-services

Selling products used to be the standard way of doing business. A company makes a product, sells it to a user, receives compensation, and that is it. It is up to users to finance their purchase, learn how to use it, arrange maintenance for it, insure it if needed, buy any consumables and auxiliary materials the product needs to be operational, discard it after its useful lifetime and, above all, apply the product for a useful purpose. In one sentence: it is left to the user to transform the purchase of a product into something that fulfils effectively a final user need.

Two streams of research, which normally have very distinct perspectives on the world, in the last two decades surprisingly converged to a common conclusion: selling products is old-fashioned business. Companies should switch their focus to selling need fulfilment, satisfaction or experiences (e.g. Pine and Gilmore 1999). Or, in other words: sell integrated solutions or product-services.

Which two knowledge streams are we talking about? The first is of course the business management literature. ‘Go downstream’ stated Richard Wise and Peter Baumgartner (1999). ‘Skate where the money will be’ suggest Clayton M. Christensen and colleagues (2001). ‘Deliver integrated solutions’, is the message of Andrew Davies et al. (2003). ‘Turn ordinary products into extraordinary experiences’ is the advice of Diana LaSalle and Terry Britton (2003). All these messages have one thing in common. With a true focus on the integrated, final client needs, and delivery of integrated solutions fulfilling these needs, companies will be able to improve their position in the value chain, enhance added value of their offering and improve their innovation potential. In a business world where many products are becoming equally well-performing commodities, this strategy is one of the ways to avoid a competition on price alone—a type of competition that Europe can never win against emerging and low-cost economies such as China (Manufuture 2003). In that sense, product-services can mean new business for old Europe.

The other knowledge stream has a totally different starting point. In the early 1960s it became increasingly clear that human production systems could be a significant threat to the health of ecosystems. Initially, the focus in this debate was on toxic emissions to water and air (including the use of certain pesticides; e.g. Carson 1962). However, over the years it has become clear that the sheer mass of resource flows through our economy is an important driver for the volume of emissions and waste flows (e.g. climate change-causing CO₂; Adriaanse et al. 1997; Matthews et al. 2000). Additionally, it was realised that most (80%) of these materials were used by just a small percentage (20%) of the world population (i.e. in the USA, Europe and Japan). The combined effect of the world’s population growth from 6 billion to 9 billion people in 2050, and wealth growth in the still under-developed world, could increase the volume of the world economy four- to tenfold. Without a change in production and consumption systems, resource use and emissions would rise by similar factors. This, it is believed, will cause a near-certain disaster. Hence, ways have to be found to de-link economic growth and environmental pressure: ‘doubling wealth, halving resource use’ (von Weizsäcker et al. 1997). Many authors in this essentially environmentalist-driven arena quickly understood that, if one could really take final consumer needs (rather than the product fulfilling the need) as a starting point, the degrees of freedom to design need fulfilment systems with Factor 4–10 sustainability improvements are much higher.¹

The idea that need-focused solutions could be inherently more sustainable than products was born. Product-services would offer the value of use instead of the product itself, such as a ‘clean clothes service’ versus a washing machine, or a ‘mobility service’ rather than a car. Making the value of use the centre of business could decrease its environmental load in two ways. First, companies offering the service have all the incentives to make the (product-)system efficient, as they get paid by the result. Such a company would probably use an efficient washing machine, or a light and economical car. On the other hand, consumers would alter their behaviour as soon as they gain insight into all the costs involved with the use. For each kilometre in a car from a car-sharing company, one would pay the actual costs. With one’s own car, this is much more difficult, as the purchasing costs, taxes and fuel costs all add to the total costs. Fuelled by these ideas, a string of research activities by mainly environmental scientists and (eco-)designers on this theme followed suit (e.g. Schmidt-Bleek 1993; Stahel 1998; Meijkamp 2000; Charter and Tischne...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Foreword
• Part I: Product-services: the context
• Part II: Fundamentals concerning competitiveness and sustainability
• Part III: Product-service development
• Part IV: Potential for product-services in five need areas
• Part V: Reflections and conclusions
• Annex 1 A practical guide for PSS development
• Annex 2 Tools, alphabetical
• References
• Abbreviations
• About the contributors
• Index