42629 lecture 2 pt3

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Product/Service-Systems (PSS)
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42629 lecture 2 pt3

  1. 1. Product/Service-Systems (PSS) Thomas J. Howard thow@mek.dtu.dk Main Contributions from: Tim C. McAloone, Niki Bey & Krestine Mougaard Unless otherwise stated, this material is under a Creative Commons 3.0 Attribution–Share-Alike licence and can be freely modified, used and redistributed but only under the same licence and if including the following statement: “Original material created for the PROTEUS project and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU”
  2. 2. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 2 Products and Services What is a product? What is a Service?
  3. 3. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 3 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
  4. 4. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 4 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
  5. 5. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 5 TRANSPORT RAWMATERIALS ASSEMBLY MANUFACTURE SALES DISPOSAL INSTALLATION MAINTENANCE USE Producer’s traditional responsibility/liability Traditional producer ownership Traditional customer ownership € Why PSS ?
  6. 6. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 6 Producer’s extended product responsibility, customer contact and revenue source TRANSPORT RAWMATERIALS ASSEMBLY MANUFACTURE SALES DISPOSAL INSTALLATION MAINTENANCE USE Product life cycle design PSS-oriented business strategy € € € € € Why PSS ?
  7. 7. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 7 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
  8. 8. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 8 Rolls Royce From 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 Overhaul Base Eng. Health Monitoring Logistics Provider Vendors Non-core business activities TotalCare model Focus on core business Rolls-Royce responsible for airline’s non-core business activities Overhaul Base Logistics Provider Vendors Airline Rolls-Royce Predictive maintenance TotalCare model Focus on core business Rolls-Royce responsible for airline’s non-core business activities Overhaul Base Logistics Provider Vendors Airline Rolls-Royce Predictive maintenance
  9. 9. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 9 Danfoss From electronic refrigeration controls to cooling in supermarkets In 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
  10. 10. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 10 Xerox From 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]
  11. 11. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 11 Aarstiderne From 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]
  12. 12. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 12 Douwe Egberts From 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]
  13. 13. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 13 IBM From 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]
  14. 14. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 14 DuPont From 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 Ford DuPont painting Ford producing Ford painting Ford producing DuPont Customer: Long-term interest of quality from satisfaction delivery system [McAloone, 2003]
  15. 15. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 15 easyJet From 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”.
  16. 16. 2012Material provided by Tim C. McAloone and adapted for course 42629, Innovation and Product Development Department of Mechanical Engineering, DTU 16 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?

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