The Servitization revolution for Sustainability

Due to increasing concerns about climate change, overexploitation of the earth’s finite resources, raw material extraction, increasing waste, and pollution, there is an urgent need to shift to economic models that guarantee environmental sustainability. Servitization proposes a paradigm shift of business models that increase value creation for the customers by changing the perspective: from the making of products and the transfer of ownership, to the provision of integrated solutions enabled by those products, through lifecycle services. This paradigm shift also responds to the call for environmentally sustainable business models, as the move to a performance economy (or outcome-based) through servitization, demonstrated a great potential to radically reduce the environmental impacts of business, taking advantage of offering products “as-a-service”. While moving from services that restore an asset’s conditions towards providing support the customer’s value chain processes that rely on that asset. In fact, providers of servitized business models (or product-service systems) take over an increasing share of risk from the customer. This also opens several opportunities for reducing the environmental impact, either incrementally or radically, and to set up truly circular business models. How can these results be achieved? Different factors influence the how (through which mechanisms) and the how much (to what extent) of the environmental sustainability impact of servitization: - The type of business model or product-service system offered, and the circular strategies enabled (Chapters 1, 2, and 3). Different classes of servitized business models enable different circular economy strategies, namely reduce (increasing resource efficiency), reuse of products at the end of the usage cycle, remanufacture of subsystems and components, and recycle to recover materials. - Product-oriented is the more traditional business model, where, besides selling products, a company provides supplementary services such as repair, maintenance, training, and advice/optimisation or end-of-life management. It entails only incremental sustainability benefits, mainly related to operational optimisation, lifecycle extension, or enabling the proper collection and recycling of products. - Use-oriented models, such as the typical “as-a-service” case, do not transfer the product ownership to the customer. Therefore, contractual relationships between providers and customers may incentivise the design of products for circularity, reduce operational costs, facilitate maintenance, intensify the use of materials, increase resource efficiency, and closing the loop. These drivers entail significant sustainability benefits. - Result-orientated business models link the provider-customer relationship and the monetary flows to the achievement of specified outcomes or performance targets from asset usage. In these models, the provider takes over the responsibility for (most of) lifecycle costs. This will trigger great resource efficiency, lifecycle extension, and/or the product and business model design for multiple lifecycles. These mechanisms promise the most radical environmental gains.