The document discusses Product/Service-Systems (PSS) and provides examples of companies that have shifted from a traditional product-focused business model to a PSS model by extending their product offerings with value-added services. Specifically, it discusses how companies like Rolls Royce, Danfoss, Xerox, Aarstiderne, Douwe Egberts, IBM, DuPont, and easyJet have transitioned to PSS models through strategies like pay-per-use plans, maintenance services, and direct delivery of products or functions to customers.

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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?