Product-service system

Product-service systems (PSS) are business models that provide for cohesive delivery of products and services. PSS models are emerging as means to enable collaborative consumption of both products and services, with the aim of pro-environmental outcomes.

Product service systems, put simply, are when a firm offers a mix of both products and services, in comparison to the traditional focus on products. As defined by (van Halen, te Riele, Goedkoop) "a marketable set of products and services capable of jointly fulfilling a user's needs". PSSes can be realized by smart products.

The initial move to PSS was largely motivated by the need on the part of traditionally oriented manufacturing firms to cope with changing market forces and the recognition that services in combination with products could provide higher profits than products alone. Faced with shrinking markets and increased commoditization of their products, these firms saw service provision as a new path towards profits and growth.

While not all product service systems result in the reduction of material consumption, they are more widely being recognized as an important part of a firm's environmental strategy. In fact, some researchers have redefined PSS as necessarily including improved environmental improvement. For example,(Mont)defines PSS as "a system of products, services, supporting networks, and infrastructure that is designed to be competitive, satisfy customers' needs, and have a lower environmental impact than traditional business models" Mont elaborates her definition as follows: A PSS is pre-designed system of products, service, supporting infrastructures, and necessary networks that is a so-called dematerialized solution to consumer preferences and needs. It has also been defined as a "self-learning" system, one of whose goals is continual improvement.

This view of PSS is similar to other concepts commonly seen in the environmental management literature, such as "dematerialization" and "servicizing."

PSS has been used to create value for customer beyond selling products as functions. Typically, there are four approaches for PSS design. 1. Function-based PSS: add new functions to increase product value in the competing market. For example, GM added OnStar in 1992 to product emergency services for customers. It integrated GPS with vehicle sensory system for telematics-based on-demand services. 2. Value-added PSS: companies added new features to increase value of a product to expand its value to customers and users. Some earlier work on teleservice system has been done during the 1990s. For example, Otis Elevator added Remote Elevator Maintenance (REM) system to its fleet system to monitor their elevators to reduce failures. GE Healthcare (formerly GE Medical Systems) developed InSite to remotely monitor its medical equipment to reduce service costs and increase users benefits. 3. Evidence-based Service: companies use big data analytics to provide the actual saving and further develop a service contract for customer to pay for part of the saving. For example, GE Aviation Power By The Hour On-Wind Support system to reduce the fuel of aircraft engine and reduce maintenance costs through a Long-Term Service Contract (LTSC).

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