Danish University Colleges
How-to Guide: Product-as-a-service Business Modeling Tool
Nielsen, Martin Storkholm
Publication date:
2021
Link to publication
Citation for pulished version (APA):
Nielsen, M. S. (2021). How-to Guide: Product-as-a-service Business Modeling Tool. VIA University College.
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Download date: 10. Sep. 2022
HOW-TO GUIDE
Product-as-a-Service Business Modeling Tool
Author
Martin Storkholm Nielsen,
Assistant Professor, VIA Design & Business
2
This booklet is going to guide you through working with the Product-as-a-Service Business Modeling Tool.
The tool is not intended to be a cure-all or one-stop shop for creating business models based on a Product-as- a-Service pattern. Instead, the model is a support structure in the change process for companies going from a traditional, linear business model towards a more sustainable, circular business model based on a Product-as-a- Service pattern.
Based on recent literature as well as expert knowledge, the model contains 38 questions divided into the 9 building blocks of the Business Model Canvas. Further, these 38 questions have been divided into three phases—Research, Strategy and Implementation—to support the companies in asking, discussing and answering the most relevant questions for where in the process they current reside.
The model is not an exhaustive list of questions to treat in a change process. Based on a canvas style (Business Model Canvas etc.), it provides enough structure to get us on the same page, whether we are from R&D, sales or finance. Yet, it is open enough for us to have rich and meaningful conversations about the various aspects of our company.
If you are in a hurry, go to ”HOW TO USE THE MODEL” on page 8.
Otherwise, please continue...
INTRODUCTION TO THE MODEL
AND THE REASONING BEHIND
As Alfred Korzybski
remarked, “the map is not the territory”. In other words, there is no truth in the
canvas, only landmarks and other pointers to help us find our bearings, set a course and navigate according to those two parts.
We argue that by
providing questions and general awareness points within the structure of a business model canvas, the companies—who are the experts of their own business—can guide
themselves, at least initially.
Therefore, the 38 questions
provide a set of heuristics for companies to explore their territory.
As you might notice, the model is based on the Business Model Canvas (Osterwalder & Pigneur 2010).
On the left-hand side of the model, you will see three modes: 1. Research, 2. Strategy, and 3. Implementation. By dividing the process into these three modes, we get an overview of the system (the business model) and a starting point for designing the change.
SUSTAINABLE BUSINESS MODELLING AWARENESS POINTS
_______________________________________________
CHANNELS CUSTOMER RELATIONSHIPS KEY ACTIVITIES
KEY RESOURCES
COST STRUCTURE
KEY PARTNERS VALUE PROPOSITION CUSTOMER SEGMENT
REVENUE STREAMS
RESEARCH1.
STRATEGY2.
IMPLEMENTATION3.
In this phase internal and external data and information is being
analysed
In this phase the company sets the goals
and directions for the future
After defining the overall strategy more tactical plans are being made for implementing the new initiatives
4
SUSTAINABLE BUSINESS MODELLING AWARENESS POINTS
General model for Product as a Service
CHANNELS
Could you sell remanufactured products under a different brand?
If so, how?
How is product returned at end-of-life?
How can you extend communi- cation platforms to reach new customers and describe the new service/products?
CUSTOMER RELATIONSHIPS
Do you need to apply a more structured and contract-based/
long-termed relationship with your customers?
KEY ACTIVITIES
How can you apply "design-for -repair" or
"modularity" to increase sustainable value (and decrease costs)?
Will you need to offer new (service) activities?
(eg. preventative maintenance) How can you
"design-for-x" to make processes economical?
(Eg. "design- for-remanufac- ture")
KEY RESOURCES
Who owns the IPR for the
"design"?
Does production process need to be altered? (also, see KeyPartners)
Reverse logistics: How is take-back going to be managed? By a partner or internal in the company?
New politics might be needed
Where and how will you source recycled/circular materials?
Who can become your commodity partners?
What partnerships (both suppliers and experts) can help you stay updated on the newest technology and materials?
Is new/updated technolo- gy needed? Who can provide it?
COST STRUCTURE
How would a move to a Product-as-a -service model affect Cost of Customer Aquisition and Customer Lifetime Value?
Do you need to use different materials/re- sources? If so, how does price compare to current cost?
How do sustainable and social responsible initiatives influence your cost structure?
(eg. certifications and audit costs) When control,
maintenance and ownership of key assets/products stays in the company, what might the change in cost structure be?
How does your service/product/price reflect cost-benefit or perceived value to customer?
If a component-based product is offered, which revenue type (transaction, recurring etc.) is most suitable?
Can you provide product- service bundles? If so, how?
How do sustainable and SR initiatives influence your cost structure? (eg. certifications &
audits benefits)
KEY PARTNERS KEY PROPOSITIONS CUSTOMER SEGMENT
REVENUE STREAMS
How can you make a platform/system available to reach customers and maintain contact/a longer-term relationship with them?
How might you improve your relationships with your customers?
How will your interaction with custom- ers change if your service provisioning changes?
How can you target more price-sensitive companies (eg. start-ups)?
Who might be new customers with more eco-friendly approaches/val- ues to whom you can offer new opportunities?
Long-term customers with long-term use of the same product might be most profitable in a PAAS model, who might they be?
Can you create opportuni- ties to work with companies that have new sustainable missions? If so, how?
Do you need new implementation platforms?
How will you accomodate the change in needs as stock/
warehousing of products stays in the company for the lifetime of the product/
service?
How will you accomodate the financial risk of asset/compo- nent staying in the company for the lifetime of the product /service?
How can you offer conveniece/
peace of mind? Through pay-for- performance? (eg. if the product breaks, a replacement can be provided quickly without additional costs?)
How can you allow customers to buy some parts and only rent unique parts (or vice versa)? (Eg.
a component-based product?)
Will you be able to decrease the lifetime cost of your customer’s customer/user?
Are you able to offer opportunities to new customers with more eco- friendly values? If so, what oppor- tunities and values are you creating?
Can you offer new pricing models - perhaps as a result of coupling product with digital technology?
How can you meet sustainability trends and the customers mission/vision? (Eg. environmental sustainability through decrease in material or energy use)
How do you attract/search for new potential customers and what kind of market analysis do you conduct?
MODEL 2
RESEARCH1.
STRATEGY2.
IMPLEMENTATION3.
In this phase internal and external data and information is being
analysed
In this phase the company sets the goals
and directions for the future
After defining the overall strategy more tactical plans are being made for implementing
the new initiatives
AN OVERVIEW OF THE GENERAL MODEL
For each building block of the PaaS Business Modeling Tool, the questions are coloured according to the phase they pertain to the most. Some of the questions could be relevant to ask in two or all three phases. An example of this could be ”Who owns the IPR for the ’design’?” in Key Resources (see page 4 for a model with
questions).
Building on the framework of the Business Model Canvas
(Osterwalder & Pigneur 2010), the tool integrates the concept of circular economy as visualized by the Ellen MacArthur Foundation in the so-called Butterfly Model, as well as the circular business model pattern Product-as-a-Service.
(Smith-Gillespie, A., 2017)
the model is based on two principles :
“ the map is not the territory ”
and
“ asking rather than telling ”
for an elaboration on this
,
please see https://
ecolabnet.
org/
the-
power-
of-
visualization/
Upon initiating a change process, a company begins by discussing the green (research-related) questions. This work either requires the company to “pause” the canvas work and do more initial research or inspires the company to continue to the next phase Strategy.
This process of taking up the questions pertaining to a specific phase repeats itself in the Strategy and Implementation phase.
As you go through the process—learning more about the change journey you have embarked on—you might realize that you need to go back and reconsider questions and aspects from earlier phases.
Pro tip: Use the original Business Model Canvas to record your discussions and findings throughout the process. Get stacks of post-its in three different colors, so you can see which phase your findings relate to.
For the longer version, please turn the page...
HOW TO USE THE MODEL (the short version)
1. RESEARCH
In this phase internal and external data and information is being analysed.
START
The need for a change process has been identified.
2. STRATEGY
In this phase the
company sets the goals and directions for the future.
3. IMPLEMENTATION
After defining the overall strategy more tactical plans are being made for implementing the new initiatives.
If relevant, loop back to reconsider
choices
8
HOW TO USE THE MODEL (the longer version)
If you skipped to this section, please go back to the page before and have a look at the short version of the ”how to use the model”. This will both show and explain the process from a general perspective. And there is a pro tip too!
As stated in the opening section of this guide, the model and process is based on the following two
principles. The first principle, “the map is not the territory”, reminds us that although the model is based on state-of-the-art literature and thinking on the topic, as well as the collective expertise of the development team at VIA Design & Business, it is still just a representation of reality; the details of your (company’s) unique situation can never be contained in the model itself.
The model cannot tell you what to change, how to do it or where to go, as you will (probably) be venturing into unchartered territory.
”Questioning is a uniquely powerful tool for unlocking value in organizations: It spurs learning and the exchange of ideas, it fuels innovation and performance improvement, it builds rapport and trust among team members. And it can mitigate business risk by uncovering unforeseen pitfalls and hazards.” (A. W.
Brooks & L. K. John 2018)
However, the model as a framework for team alignment and exploration can help disclose the peculiarities of your (company’s) situation and change process. This is where the second principle, “asking rather than telling”, comes into play.
Tying into the first principle, the model cannot tell you what to change, since a change process like the one you are about to embark on is a dynamic and unique challenge. Instead, the opportunities must be
uncovered—perhaps even created—through an exploratory process. To help you do so, the model relies on questions.
As mentioned throughout this guide, the model and process is a framework that eventually fades into the background as your team (and company) builds momentum in the change process. Somewhere along the process, you will start to ask questions that are not included in the model. This is where it gets really interesting! You have now taken the controls and started flying the plane. On a concluding note, Linus Pauling (Nobel Prize winner) is believed to have said “The best way to have a good idea is to have lots of ideas”.
So turn the page, assemble your team and start asking some questions!
10
As you can see on the next page, we will start by focusing on the first phase: Research
By now, you should have assembled a team preferably comprised of people from various parts of your company. As the changes you are about to explore and (hopefully) implement will affect all parts of your company—and perhaps even beyond your company—it is important to have all parts of the ”system” represented.
If you want to be a text-book example, reach out to suppliers, customers, competitors/colleagues etc. in your industry and have them join the process. Circularity requires the linear lines to loop back and connect to the value chain. To do so, partnerships are required! We should therefore start seeing these people as partners, not just suppliers, customers and competitors/colleagues.
You are free to choose a starting point on the image to the right. Perhaps you are talking to suppliers and you already have an idea of which product you would like to turn into a service, then focus on the question under Key Partners, Key Activities and perhaps Key Resources. This could lead to a conversation about a change in costs of materials, customer aquisition and warehousing (Cost Structure). Do you have the needed information at hand regarding these questions? If not, list all the potential opportunities, challenges and pitfalls that your team needs to research.
Alternatively, you might want to take a customer-centric approach. Then start with the questions under Customer Segment and Value Propositions. As you discuss these questions from the various perspectives represented from within and perhaps outside your company, you might need to ask whether new technology is needed (Key Partners) or how design and production might need to change to make processes economical (Key Activities). Or perhaps your conversation focuses on how to attract and build a lasting relationship with the new customer segment (Customer Relations, as this might be paramount to a succesful Product-as-a-Service business model.
This phase might take a long time to get through, or perhaps you find yourself wanting to push on. In any case, once you think you are ready to move on, please continue to Strategy. As shown in the process model on page 7, you can always loop back to an earlier phase.
1. Research
SUSTAINABLE BUSINESS MODELLING AWARENESS POINTS
General model for Product as a Service
CHANNELS CUSTOMER RELATIONSHIPS KEY ACTIVITIES
How can you apply "design-for -repair" or
"modularity" to increase sustainable value (and decrease costs)?
How can you
"design-for-x" to make processes economical?
(Eg. "design- for-remanufac- ture")
KEY RESOURCES
Who owns the IPR for the
"design"?
Does production process need to be altered? (also, see KeyPartners)
Is new/updated technolo- gy needed? Who can provide it?
COST STRUCTURE
How would a move to a Product-as-a -service model affect Cost of Customer Aquisition and Customer Lifetime Value?
Do you need to use different materials/re- sources? If so, how does price compare to current cost?
When control, maintenance and ownership of key assets/products stays in the company, what might the change in cost structure be?
How does your service/product/price reflect cost-benefit or perceived value to customer?
KEY PARTNERS VALUE PROPOSITION CUSTOMER SEGMENT
REVENUE STREAMS
Who might be new customers with more eco-friendly approaches/val- ues to whom you can offer new opportunities?
How can you meet sustainability trends and the customers mission/vision? (Eg. environmental sustainability through decrease in material or energy use)
How do you attract/search for new potential customers and what kind of market analysis do you conduct?
RESEARCH1.
In this phase internal and external data and information is being
analysed
12
2. Strategy
Next up is Strategy. It is time to make some decisions about goals and directions for the future.
Having spent time doing initial research, you might find that you are entering this phase with several ideas—for the products to be offered as service; for the restructuring of your operations; for who your (new) customer segment might be; and so forth. You could break out your ideas into several canvases to allow for more potential futures to be explores in parallel. Perhaps your ideas are complementary, but can only be implemented in sequence. If so, by dividing the ideas into several canvases, you get an overview that allows you to prioritize the initiatives.
Like in Research, you can start wherever you see fit and progress into whichever direction you find suitable. By now, you should be comfortable with not only taking up these questions but also raising questions of your own. Or perhaps you have realized that you need more (diverse) voices in your conversation. If so, why don’t you call up Lars from Sales, Vicky from Finance or Erika from the Production and invite them in?
You exit the Strategy phase when your plan seems coherent and ready to be taken to the Implementation phase.
Remember, you can always come back to this phase or the Research phase.
SUSTAINABLE BUSINESS MODELLING AWARENESS POINTS
General model for Product as a Service
CHANNELS
Could you sell remanufactured products under a different brand?
If so, how?
CUSTOMER RELATIONSHIPS
Do you need to apply a more structured and contract-based/
long-termed relationship with your customers?
KEY ACTIVITIES
KEY RESOURCES Where and how will you
source recycled/circular materials?
Who can become your commodity partners?
What partnerships (both suppliers and experts) can help you stay updated on the newest technology and materials?
COST STRUCTURE
How do sustainable and social responsible initiatives influence your cost structure?
(eg. certifications and audit costs)
If a component-based product is offered, which revenue type (transaction, recurring etc.) is most suitable?
Can you provide product- service bundles? If so, how?
How do sustainable and SR initiatives influence your cost structure? (eg. certifications &
audits benefits)
KEY PARTNERS VALUE PROPOSITION CUSTOMER SEGMENT
REVENUE STREAMS How will your interaction with custom- ers change if your service provisioning changes?
How can you target more price-sensitive companies (eg. start-ups)?
Long-term customers with long-term use of the same product might be most profitable in a PAAS model, who might they be?
Can you create opportuni- ties to work with companies that have new sustainable missions? If so, how?
Are you able to offer opportunities to new customers with more eco- friendly values? If so, what oppor- tunities and values are you creating?
Can you offer new pricing models - perhaps as a result of coupling product with digital technology?
STRATEGY2.
In this phase the company sets the goals
and directions for the future
14
3. Implementation
You have made it to Implementation! Are you ready to move from strategy to tactics; from ideas to action?
Perhaps you are reading this guide before commencing your change process. If so, have a look at the questions on the opposite page. These questions relating to the nitty-gritty everyday operations might be beneficial to consider while still being in the other two modes
SUSTAINABLE BUSINESS MODELLING AWARENESS POINTS
General model for Product as a Service
CHANNELS
How is product returned at end-of-life?
How can you extend communi- cation platforms to reach new customers and describe the new service/products?
CUSTOMER RELATIONSHIPS KEY ACTIVITIES
Will you need to offer new (service) activities?
(eg. preventative maintenance)
KEY RESOURCES
Reverse logistics: How is take-back going to be managed? By a partner or internal in the company?
New politics might be needed
COST STRUCTURE
KEY PARTNERS VALUE PROPOSITION CUSTOMER SEGMENT
REVENUE STREAMS
How can you make a platform/system available to reach customers and maintain contact/a longer-term relationship with them?
How might you improve your relationships with your customers?
Do you need new implementation platforms?
How will you accomodate the change in needs as stock/
warehousing of products stays in the company for the lifetime of the product/
service?
How will you accomodate the financial risk of asset/compo- nent staying in the company for the lifetime of the product /service?
How can you offer conveniece/
peace of mind? Through pay-for- performance? (eg. if the product breaks, a replacement can be provided quickly without additional costs?)
How can you allow customers to buy some parts and only rent unique parts (or vice versa)? (Eg.
a component-based product?)
Will you be able to decrease the lifetime cost of your customer’s customer/user?
IMPLEMENTATION3.
After defining the overall strategy more tactical plans are being made for implementing
the new initiatives
16
This is just the beginning...
Congratulations on making it this far. Whether you started out with a dream, a concept or just curiousity, you have moved forward. As mentioned earlier in the guide, the framework is meant as a scaffolding to support the emergence of your own change process and initiative(s). Like the trellis supporting the growth of vines or climbing roses, the Product-as-a- Service Business Modeling Tool is designed to eventually fade into the background as your company’s change initiative gains momentum and starts supporting itself.
To continue the gardening metaphor, the vine might outgrow its trellis but still need guidance and direction. Perhaps the vine finds some structure nearby that was not intended as support structure for growing vines. We acknowledge and celebrate the seredipitous and emergent nature of new ideas; you never know what needs, opportunities or ideas lie around the corner. As a result, the Product-as-a-Service Business Modeling Tool is also an ever-changing, continously evolving entity. If you have ideas, comments, challenges or ammendments, please reach out to us.
If you do need further support than this guidebook and the Product-as-a-Service Business Modeling Tool provides, please contact us at VIA University College or any of our partners in the ECOLABNET network.
Good luck!
The ECOLABNET team at VIA University College
18
References
The Surprising Power of Questions, Alison Wood Brooks and Leslie K. John, 2018 (https://hbr.org/2018/05/the-surprising- power-of-questions)
Fischer, A., Achterberg, E., 2016. Create a financeable Product-as-a-Service business in 10 steps (White paper).
Retrieved from https://www.circle-economy.com/ financing-circular-business
Smith-Gillespie, A., 2017, Defining the Concept of Circular Economy Business Model.
Retrievet from http://www.r2piproject.eu/wp-content/uploads/2017/04/Defining-the-Concept-of-Circular-Economy- Business-Model.pdf
Osterwalder, A., Pigneur, Y., & Clark, T. (2010). Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Wiley. https://books.google.dk/books?id=Bjj8G3ttLWUC
