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We have already touched upon what characteristics academics [i] think make for a suitable Product-as-a-Service fit (see part 1). However this list of characteristics was already composed in 2002, and a lot has changed since then. Therefore we like to add additional characteristics that are useful for the choice of products as PaaS-propositions. These characteristics are based upon 21 interviews with PaaS-experts and our experience with PaaS over the years.
In this post we'll cover 7 modern product characteristics:
1. Products with rapid technological development
2. Products with temporariness of use
3. Supportive products
4. Non-status items or identity products
5. Products that fit the minimal requirements of clients
6. Smart integrated products
7. Modular and circular products
1. Rapid technological development
If done correctly PaaS can provide tremendous value in products in fields with rapid technological development as well. PaaS can provide ways to counteract the psychological obsolescence associated with most products in the consumer electronic market. With the current rate of technological development (e.g. semiconductors), most electronic appliances get outdated quite quickly.
By implementing a PaaS-propositions in product types with rapid development, the PaaS-providers can assure that either the hardware or software is updated accordingly, and that materials get reused.
Because the ownership of the product remains with the provider, there is no incentive for a customer to always buy the newest product version as they get access to the latest developments anyway. Rather there is an incentive for the provider to upgrade or update the latest version to the most recent needs of the customer. This, in turn, leads to a better alignment of the PaaS value proposition with the needs of the customer.
2.Temporariness of use
Products that are only used for a very short period, most often with a quite intensive usage, can make for interesting PaaS-offerings. This characteristic is different than infrequent use since that relates to the intensity of usage. This temporariness of usage can favor PaaS propositions like; baby prams or strollers or children's clothing (that they outgrow fast).
Other examples could be; chair-lifts for elderly or people that are rehabilitating, temporary e-health appliances, and holiday equipment like; trekking gear or professional photography equipment. Thus, temporariness of use can provide for an interesting starting point for a successful PaaS.
3. Supportive products
PaaS-products that provide convenience, and liberate a consumer from ‘annoying’ tasks, can potentially make for an interesting product characteristic. Consumers want to be unburdened from things like maintenance & repairs and do not want to be bothered with activities or tasks that they perceive as boring or wasteful. Additionally, the end-user is often less qualified to execute these activities than the PaaS-provider.
These types of PaaS can provide support in the customers’ daily life, hence PaaS-companies could provide an interesting value proposition here.
A well known Dutch example is Swapfiets, where you always have a working bike -a use-guarantee- and you don’t have to go around repairing your bike. This offering is providing in replacing something that did not provide the customer any fun; the time and hassle of maintenance and repair. This characteristic works great for products where the outcome is only needed (wanted) and not the matter in which this value is delivered.
4. Non-status or identity products
Some items are still products that people want to own. Sometimes consumers even derive their identity or status from such items. Often these products are strong brands. These types of products are challenging to be put in a PaaS-proposition. A study done by Catulli et al. (2017) [ii], showed that ownership of Harley Davidson motorcycles enables riders to identify with a brand community and to define themselves based on their motorcycle. Owners also appropriated their motorcycles through customization, which made identity an even bigger part of it.
Such types of products will create an emotional attachment to the product and are thus less likely to be put in a PaaS-proposition. There are not many examples of these types of products but for future PaaS providers, it could be interesting to look into sociocultural aspects before putting such products as PaaS-offerings in the market, as they could face serious difficulties doing so.
5. Fit the minimal requirements of clients
For some consumers, a product has to meet at least certain requirements where a customer will base their decision on. These are the minimal requirements that a product should have. For example, a company designed an energy-efficient washing machine where you can only wash at 30 °C. This will not meet most customers' minimal requirements or 'hygiene factor'. All washing machines should at least have several options for the temperature in which you need to wash (ranging from cold up until 90 degrees) to meet the minimal customer demands.
Minimal requirements could differ between markets and consumers, however, looking into general norms in the market remains important. Researching this before launching your PaaS will provide an advantage because you can find out which factors are essential and which are not. As a result of this research, PaaS-providers could also get rid of any unnecessary features as well.
6. Smart integrated products
Products that are connected to the internet have a large competitive advantage in regard to PaaS than those that are not. Utilizing data-sharing, additional insights can be gathered on current usage. This can be used to provide tips that will increase the lifetime of the product. As an example: washing at 90 degrees once in a while is better for the functioning and performance of a washing machine.
With this data companies can also provide advice on how you can wash more efficient and more sustainable. An example of this is Homie pay-per use. They give tips to decrease your electricity bill with your washing, furthermore, they provide data on your usage versus others’ usage; advocating lower use and introducing a gamification element.
Furthermore, connectivity and remote access make it easy to build in a ‘turn-off button' so potential misuse can be counteracted or clients that do not pay their bills can be shut down. Within a lot of industries, there is huge potential for smart and integrated products. In the future physical products will get more integrated with intangible services and software. With these characteristics, almost every product can become a product-service combination.
In the end, it will always be about the benefits that these products offer. When more and more products become available and cheaper through integration with the Internet of Things (IoT), these smart integrated products will become more successful.
7. Modular & Circular Product
Last but not least, to reap the benefits of PaaS, the product design has to be adapted to an extent to which remanufacturing of the product is optimally enabled. Only by having a modular and circular product, a PaaS-company will be able to have the long-term advantages of the PaaS business model.
By designing for reassembly and the circular economy products are made more durable, repairable (modular) and fit for refurbishment and remanufacturing. This way a PaaS-company has access to and control over the materials and resources for the price it bought it for. Since material prices generally rise, this will be a competitive advantage in the future.
Increase the success of your product-as-a-service offering
We at Firmhouse are continuously monitoring PaaS-offerings, to see how the PaaS market is developing. We know that the current list is not exhaustive and that success is never guaranteed. However, product choice can have a huge influence on the success of a product-as-a-service. Using some of these characteristics as guidelines can help you with that!
If you want any help launching your product-as-a-service, or if you want to increase the success of your current product-as-a-service. Get in touch with the team to learn more about how we'll help you launch.
Note: If you have comments or contributions to this article please let us know. For the sake of simplicity of this blog, we have not considered sharing business models characteristics (like for example mobility-as-a-service initiatives). We do agree that these models have a large role to play in making our society more sustainable.
[i] = Tischner, U., Verkuijl, M., & Tukker, A. (2002). Product Service Systems: best practice document: SusProNet.
[ii] = Catulli, M., Cook, M., & Potter, S. (2017). Product service systems users and Harley Davidson riders: The importance of consumer identity in the diffusion of sustainable consumption solutions. Journal of Industrial Ecology, 21(5), 1370-1379.