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Journal of Cleaner Production 200 (2018) 74e85

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Journal of Cleaner Production

journal homepage: www.elsevier.com/locate/jclepro

Estimating the value of servitization: A non-monetary method based on forecasted competitive advantage

Alessandro Annarelli a, *, Cinzia Battistella b, Yuri Borgianni c, Fabio Nonino a

a Department of Computer, Control and Management Engineering, Sapienza University of Rome, Rome, Italy b Department of Information Engineering and Mathematics, University of Siena, Siena, Italy c Faculty of Science and Technology, Free University of Bolzano-Bozen, Bolzano-Bozen, Italy

a r t i c l e i n f o

Article history: Received 9 February 2018 Received in revised form 4 July 2018 Accepted 23 July 2018 Available online 24 July 2018

Keywords: Product service system Service evaluation Decision-making PSS opportunities PSS drawbacks

* Corresponding author. E-mail addresses: alessandro.annarelli@uniroma

[email protected] (C. Battistella), yuri.borgianni@u [email protected] (F. Nonino).

https://doi.org/10.1016/j.jclepro.2018.07.220 0959-6526/© 2018 Elsevier Ltd. All rights reserved.

a b s t r a c t

The present contribution proposes a decision support paradigm that elucidates factors ensuing from Product-Service System implementations and that might be neglected due to assessment difficulties. These aspects emerge when companies are exposed to new business model scenarios underlying ser- vitized propositions. The outcomes represent the backbone for the creation of a methodology and a quantitative estimation index, named the Servitization Value Correction Coefficient, devised as a reference term to assess and to forecast the economic value obtained by the introduction of a Product-Service System. The proposed methodology introduces an original criterion to give quantification of qualita- tive variables not addressed before. It is based on different factors coming into play in Product-Service System adoption that can bring both benefits and drawbacks. The study was carried out in firms initially unaware of Product-Service System opportunities.

© 2018 Elsevier Ltd. All rights reserved.

1. Introduction

Product Service Systems (PSS) are business models focused on the provision of a marketable set of products and services, and designed to be sustainable (from an economic, social and envi- ronmental point of view). This concept is repeated practically in any literature contribution dealing with the topic. However, in order for benefits to accrue from the industrial and business shifting to PSS fully, many obstacles have to be overcome (Pessôa and Becker, 2017). These hindrances depend on the intensity of the shift from traditional manufacturing to predominantly service provisions. Indeed, the definition and concept of PSS can embrace a consider- able variety of offerings. The most popular categorization of stra- tegies is illustrated by Tukker (2004): there can be cases of extra services added to sold products (Product-Oriented PSS), or even cases of dematerialization where the customer no longer pays for product ownership but for its usage (Use-Oriented PSS) or the final result delivered by the same (Result-Oriented). Different tactics can, in turn, be exploited to implement the three strategies

1.it (A. Annarelli), cinzia. nibz.it (Y. Borgianni), fabio.

successfully (Reim et al., 2015; Rabetino et al., 2017). Despite the variety of these options, which involve different

degrees of change radicalness, there is still a shortage of effective guidelines to support and guide companies in the adoption of PSS (Barquet et al., 2013). Indeed the large number of effective design and management tools that can support this kind of business transformation are not supportive in this case. In this regard, it has to be considered how new PSS propositions are articulated and how they could differ in research or industrial settings (Ryan et al., 2011). Other companies are unaware of this opportunity, also because of the scarce diffusion of PSS in certain market sectors. The present paper is mainly concerned with firms operating in research or international settings. It investigates whether descriptions of potential PSS scenarios can prove to be appealing or, on the con- trary, whether the disadvantages could be seen as outweighing the advantages. The study fills a gap in the literature. Much research on decision-making support tools for PSS has investigated optimal patterns and risk-avoidance measures (Reim et al., 2016) in intro- ducing PSS, but disregarded cases in which the shift towards a PSS paradigm was still under discussion.

The reasons for the above mentioned research deficiency could be ascribed to complex and non-deterministic phenomena that characterize the PSS domain. In particular, service performance cannot be quantitatively measured as in technical artifacts e not

A. Annarelli et al. / Journal of Cleaner Production 200 (2018) 74e85 75

surprisingly, the majority of the empirical research on PSS is qualitative (Xin et al., 2017). This poses a limitation in terms of modeling, and no standard has generally been agreed on (Xavier et al., 2017), in the forecasting and monitoring of PSS.

These issues are more fully discussed in Section 2, which pre- sents the theoretical background for the study. The rest of the paper is organized as follows. Section 3 illustrates how the proposed methodology has been developed thanks to the involvement of a sample of industrial companies that have not currently adopted PSS-related business models. The results presented in Section 4 concern the estimation of the impact of PSS implementations on added economic value. Section 5 discusses the findings, while Section 6 presents some conclusions and possible future directions.

2. Complexity issues and other obstacles to the adoption of PSS: a background

The PSS paradigm originated in the 1990s and is nowadays attracting increasing interest because it addresses concepts like sustainability and the circular economy (Oliveira et al., 2015). Many scholars have contributed to the field through bibliometric studies and literature reviews: Reim et al. (2015) propose a study focused on the three types of PSS (i.e. Product-, Use- and Result-oriented) showing their different industrial applications. Qu et al. (2016) systematically discuss design, evaluation and operations manage- ment issues. Annarelli et al. (2016) highlight how PSS belongs to different scientific areas (e.g. economy and design), focusing on common PSS objectives and fundamental research issues. Although presenting different points of view, these works share a recognition of the multitude of opportunities linked to PSS. Moreover, its intrinsic value is actually overcoming the traditional borders be- tween sustainability and competitiveness. For instance, Schmidt et al. (2016) show the importance of PSS in accelerating cus- tomers’ acceptance of technological innovations.

While the reach of and interest in PSS are expanding, new challenges have arisen and unsuccessful experiences emerged (Linder and Williander, 2017). The literature has shown, for example, how some PSS adoption processes can fail in delivering expected results in terms of both profitability and sustainability (Sutanto et al., 2015). Difficulties in terms of exploiting PSS's full potential have been exacerbated mainly by uncertainties and (non- negligible) capital commitment (Linder and Williander, 2017). However, cultural factors and reluctance to change (both on the manufacturer and customers' side) seem to be the most influential factors hindering the adoption of PSS business models (Nguyen et al., 2014).

The literature reports on several research efforts that deal with the necessity to model (Alonso-Rasgado et al., 2004), evaluate and simulate PSS. Alix and Zacharewicz (2012) assert that the reasons for the limited presence of the PSS model and simulation tech- niques are related to the intangible nature of services and to the non-deterministic behaviour of customers. This vision is widely shared by other scholars, who stress the problems brought about by uncertainties and dynamic effects concerning customer demand, the supply chain and complex stakeholder networks (Song, 2017). Preference changes are addressed also in the paper of Song and Sakao (2017), where modular designs are proposed to enable customized PSS. Furthermore, again from the perspective of modeling and assessing PSS expected outcomes, Becker et al. (2010) focus on the difficulties in defining PSS value because of the interdisciplinary nature of service design. Value is a focal point also in the modeling of PSS introduced by Bertoni et al. (2013), who note the risks that are associated with the overlooking of this aspect in the early design phases. More in general, modeling problems are due to the many different aspects that have to be considered and

refer to diversified spheres (Kim et al., 2015). With reference to this consideration, the identification of the

factors that have the most impact on PSS success is a further concern in the academic literature. Kim et al. (2016) identified 94 items that should be used to characterize and evaluate PSS per- formance. This gives a view of the complexity connected with PSS. In this regard, another case in point is the research of Lim et al. (2012), which introduces a 45-cell model to describe PSS pro- posals just to target customer needs effectively. As for another dimension also considered above, the nuances of value metrics for PSS are scattered across dozens of contributions and no unified framework has been agreed on (Bertoni et al., 2017).

This level of complexity can be seen as a meaningful limitation for a manufacturer of physical goods who is considering embracing a PSS strategy. The support of decision-making tools tailored for PSS may be seen as critical, also because most of the efforts devoted to modeling PSS have partially overlooked decision problems (Phumbua and Tjahjono, 2012). Geng et al. (2011) suggest balancing the performance of product and service dimensions according to the relevance of customer requirements. The pursued objectives are mirrored by Sharma and Kumar (2017) and Sousa-Zomer and Miguel (2017), in which the use of Fuzzy Analytic Hierarchy Pro- cess and Quality Function Deployment, respectively, is foreseen. These proposals fit the scope of PSS streamlining, but might be inappropriate if the PSS framework has not yet been introduced or decisions have not been made in this regard. Other proposals that facilitate decisions within the PSS domain elucidate how to manage critical factors in PSS design. For instance, customer involvement is a major concern for Schmidt et al. (2015). Dahmani et al. (2016) introduce a tool that monitors enterprise organization and pro- cesses in order to establish their suitability for offering services. Chen et al. (2015) evaluate PSS by considering random effects and uncertainty, but their approach requires a considerable amount of historical data, which are seldom available. Beyond uncertainty, Song and Cao (2017) consider the relationships between multiple PSS requirements in the preliminary design phases. Still with a focus on the early design stages, Rondini et al. (2017) guide the decision-making process for engendering a new PSS model by balancing customer satisfaction and value for companies appro- priately. Dimache and Roche (2013) strive to fine-tune a decision approach for supporting companies in increasing their level of service offering. The method is effective in evaluating the position of the firm along a continuum with traditional manufacturing and service industry at odds and combining different critical factors, as the ones already discussed. However, limitations arise in terms of understanding if the challenges to move towards higher degrees of service contents are worth being faced. Besides, the scholars claim that using multi-criteria decision systems requiring many data is time-consuming and inappropriate for small organizations.

Based on the literature above (summarized in Table 1) the au- thors believe that the existing contributions are unsuitable or difficult to use for decisions concerning the introduction of PSS initiatives. Indeed the methodology proposed in this paper pre- sents an all-encompassing overview on PSS implementation pro- cess, focusing on all aspects coming into play, with also a numerical indicator summarizing all considerations emerging.

The literature demonstrates a gap in terms of operative and practical instruments that help clarify the main challenges of introducing PSS and, in particular, the main advantages and dis- advantages to be expected. In case of a doubtful preliminary eval- uation, the study of opportunities and threats associated with the adoption of a PSS strategy might be further deepened by means of the existing decision-making tools.

The paper proposes an evaluation roadmap and attempts to provide a quantitative estimate of the value of service aspects. In

Table 1 Existing methods and approaches to support PSS design and implementation.

Paper Proposed approach Contribution Limitation

Geng et al., 2011

Systematic decision-making approach for PSS planning.

The model provides an all-encompassing perspective over customer requirements, manufacturing issues and manufacturing services, including business competitiveness.

The model mainly focuses on Engineering Characteristics and technical aspects of PSS design. The proposed approach requires a computational effort that might undermine its applicability.

Lim et al., 2012 PSS Board: a matrix board that crosses PSS process steps with customer activities, state of products, services, infrastructures and partners.

The matrix results in an easy visualization of PSS process and it provides an efficient analysis of PSS components.

The tool does not provide a direct support to decision-making since results require a thorough analysis to serve as a guidance in practice.

Bertoni et al., 2013

Lifecycle Value Representation Approach (LiVReA): color-coded 3D CAD models to visualize value of alternatives in PSS design.

Strong support to PSS design process thanks to visual elements proposed, so as to immediately compare alternatives.

Focus on design issues and technical aspects of PSS implementation.

Dimache and Roche, 2013

Decision support methodology named TraPSS (Transition along PSS continuum).

The proposed methodology provides a strong support to decision-makers in managing the transition toward different degrees along the servitization continuum. This method approaches the problem of PSS design and implementation under different perspectives, recommending various tools and techniques from different disciplines.

The method mainly follows a “manual approach” that undermines its usage in practice.

Chen et al., 2015

Zigzag mapping process to support PSS design for sustainability

The proposed method deals with randomness and fuzziness at the same time. Different PSS solutions can be evaluated thanks to a flexible and variable approach. The method allows to construct a criteria system to support decision- making process for PSS design.

Focus mainly toward sustainability.

Kim et al., 2015 Representation framework of PSS to support design process.

Extensive analysis of “Service Space” and “Product Space” and related elements coming into play in PSS design/ implementation process.

Focus on design issues and technical aspects of PSS implementation.

Schmidt et al., 2015

Decision-making process for PSS planning. The process is designed for multiple iterations and decision points so as to require a limited amount of information for each stage. Iterations also allow changing requirements while designing a PSS. Focus on customer requirements leads to customer oriented decisions.

Focus mainly on customer-related aspects.

Dahmani et al., 2016

Method to support PSS decision-making process: this approach allows reliability diagnosis of decision systems associated with PSS.

Authors propose a structured and generic model of decision-making process for servitization and then a series of reliability indicators to be applied at different levels. Following, a diagnosis procedure to support the management of servitization transition.

The proposed approach focuses only on the reliability of the decision making process, and not on the whole PSS implementation process.

Kim et al., 2016 Evaluation Scheme for PSS models, with evaluation criteria divided in 21 categories and 94 elements.

The tool covers both provider and customer perspective, it can be used in various stages of PSS design, and with each application it benefits from past experiences of PSS design. Furthermore it integrates different work and research streams.

The framework can serve as a repository of characteristics to be taken into account in PSS implementation, but does not provide a direct support to decision-making.

Rondini et al., 2017

Support to PSS design by mean of a two- step method employing Importance Performance Analysis (IPA) matrix

IPA is an immediate and visual method to represent the trade-off between Customer Value and Provider Value in PSS design. Results show the direction that a company should follow in designing a new PSS.

Focus on PSS potentials linked to design- related aspects.

Sharma and Kumar, 2017

Approach adopting AHP to support PSS design by prioritizing and focusing on few quality dimensions aligned to strategy.

The study demonstrates and prioritizes specific quality measures to support managers undergoing through servitization.

Because of AHP use, results are indicative and can be used only in a decision tool. Furthermore, the focus on a limited set of characteristics and features does not provide a wide perspective on the whole PSS implementation process.

Song and Sakao, 2017

Design Framework and design process for PSS.

Thorough review of previous design approaches and proposal of an extensive tool for PSS design.

Focus on PSS potentials linked to design- related aspects.

Sousa-Zomer and Miguel, 2017

QFD-based approach to support PSS design process.

The model addresses the key aspect of sustainability in design, overcoming a major limitation of many studies in literature. It also allows prioritization of requirements.

Focus on design issues and technical aspects of PSS implementation. Focus mainly toward sustainability.

Song and Cao, 2017

DEMATEL (Decision-Making and Trial Evaluation Laboratory) approach to support PSS design

The method evaluates and analyses interactions between PSS requirements, helping to determine the weight and importance of each requirement, also in uncertain environments. The method is useful in identifying critical factors to be taken into account in PSS design.

Focus on PSS potentials linked to design- related aspects. Focus mainly on customer- related aspects.

A. Annarelli et al. / Journal of Cleaner Production 200 (2018) 74e8576

the literature there are standard methods for evaluating measur- able product performance, monetary flows (Estrada and Romero, 2016) and costs of PSS (Settanni et al., 2014), but the present pa- per focuses on other characteristics that can play a relevant role. The proposed approach is based on obtaining firms’ feedback on PSS scenarios. Attention has been paid to differentiate between Product-, Use- and Result-oriented PSS, as they clearly represent

different business models (Dimache and Roche, 2013). The need to define PSS scenarios is supported by the literature, e.g. Park and Yoon (2015) e verbal descriptions of PSS articulations were considered clear enough by involved companies, although the Business Model Canvas could have represented a valuable alter- native (Barquet et al., 2013).

As already mentioned, the PSS paradigm is currently

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underdeveloped in several industrial sectors. This is due to many factors (Dimache and Roche, 2013), including reluctance to shift towards innovative offerings, unawareness of what really matters for customers (Cedergren et al., 2012), and unwanted impacts on industrial mission and strategy (Barquet et al., 2013).

3. Research aim and design-science research for methodology definition

The research seeks to fill the previously described gaps, by quantitatively evaluating non-economic advantages and disad- vantages which come into play during PSS adoption. These con- siderations on circumstances supplementing economic accounts are helpful for building a comprehensive decision making frame- work. Therefore, the research question is:

How can Product Service System's value estimation take into account non-monetary factors in quantitative measures?

In accordance with the research question, the study was struc- tured following design-science research guidelines (Hevner et al., 2004; Deng and Ji, 2018):

1. Design as an artifact: research has to provide an artifact in the form of a construct, model, method, or installation. The paper presents one identifiable model, designed as a step-by-step procedure to evaluate PSS alternatives and support decision-making.

2. Problem relevance: research is developed to match relevant busi- ness problems. Evaluation of service components (and related qualitative, non-material, and non-monetary aspects) is an open issue in PSS-related literature (as detailed in Section 2).

3. Design evaluation: the proposed artifact must be rigorously tested/ executed by mean of an evaluation method. In this case, the proposed artifact is the methodology. In light of the RQ, the research has been structured as a field study. This was consid- ered as the most appropriate method to empirically test the proposed methodology by following predefined guidelines and processes. Cases to test the proposed method were selected according to a criterion sampling strategy, so as to maximize the chances of retrieving cases with a high degree of information, together with a stratified sampling strategy, so as to obtain a heterogeneous sample and maximize variance among cases (Patton, 2002). The authors carried out 6 different cases (2 for each PSS category, i.e. Product-, Use- and Result-Oriented) of possible PSS implementation scenarios. The study involved 5 firms of different sizes operating in different markets, with the aim of involving a stratified sample, so that industry-specific aspects would not introduce any bias into observations emerging from the questionnaires. Table 2 summarizes the most important characteristics of the case studies.

4 Research contributions: research must provide a clear and verifi- able contribution in the field. This study proposes a suitable methodology for both practitioners and scholars, employed as an effective tool and/or to constitute the basis for future research in this area. The methodology proposed aims at

Table 2 Cases constituting the field study testing activity.

Business Net sales Channel PSS type

Case_1 Wood Flooring 1,6e5 mln V B2B Product-Oriented Case_2 Wood-fired Ovens <0,5 mln V B2B/B2C Product-Oriented Case_3 Electric Bicycles 1,6e5 mln V B2B Use-Oriented Case_4 3D Printers <0,5 mln V B2B/B2C Use-Oriented Case_5 Wood Flooring 1,6e5 mln V B2B Result-Oriented Case_6 Steel Tanks >5 mln V B2B Result-Oriented

advancing knowledge in the field of service evaluation and giving support to decision-making in PSS adoption.

5 Research rigor: design-science research must rely on rigorous methodologies to build and test the proposed artifact/model. The evaluation model relies on results emerging from PSS-related literature (as detailed in) which constitute the basis of this research effort; furthermore, the methodology employed to conduct tests was rigorously designed (as detailed in point 3 above).

6 Design as a search process: the research path to reach desired goals (while coping with environment-related laws) should be structured as an iterative search process. The search process started from the analysis of the literature related to PSS decision-making and service evaluation (in the context of PSS). Then, a first proposal on the methodology was made, with a first attempt at defining an interview protocol (to identify and track factors involved in the PSS adoption process), the main variables and their evalu- ation. The methodology was then tested and rebuilt through collaboration with partner companies (involved in pilot case studies). Following this, a definitive interview protocol to be employed in the test activities was defined, together with var- iable formulation. Lastly, the conducting of tests through field study provided final insights to refine the model.

7 Communication of research: research content must be well pre- sented to allow dissemination of knowledge, applicability, and re- sults. On the one side, the paper provides enough technical detail to allow practitioners to fully understand and implement the proposed methodology (thanks to a thorough explanation of the model and examples of its application through the tests). At the same time, the rigor of research, literature selection, and explanation of each step in the research provides useful insights for a research audience.

4. Proposal of a methodology to combine monetary terms and other aspects at an operational level

The main aim of the present contribution is to provide a suitable methodology (described step-by-step) that can be replicated whenever the evaluation of a prospective PSS strategy, especially of its qualitative aspects, is required. The first step is linked to the study and the estimation of the advantages and disadvantages involved in each PSS design process. Given the high probability that these pros and cons vary from case to case, this step cannot be generalized and insightful evaluations are required from each company when the possibility of introducing a PSS business model is analyzed.

The proposed methodology is described in further detail. In brief, the main steps of the methodological approach are explained below.

1. PSS scenarios. PSS scenarios were defined with reference to traditional manufacturing industries in which partner com- panies operate.

2. Key strategic areas of investigation setting. Open discussions were carried out in a pilot experiment to identify the main areas to be investigated in order to identify non-monetary factors affecting potential PSS implementations. An interview protocol was developed, based on the key areas identified.

3 Identification and classification of factors for strategic advantage. Within each key area, the aspects that impact on decisions about PSS introductions are pointed out by interviewed companies who were presented with a subset of (the most feasible) PSS scenarios. Each relevant factor is classified as an advantage or disadvantage by the interviewees.

A. Annarelli et al. / Journal of Cleaner Production 200 (2018) 74e8578

4 Servitization Value Correction Coefficient. According to the rele- vance of factors, a quantitative index, named the Servitization Value Correction Coefficient (SVCC), was created as a reference term to discern whether, overall, the advantages outnumber the disadvantages, a fact which can support decision-making. At the operational level, a transformation of the above index is pro- posed that can serve as a multiplier of the economic value added and which is expected to be associated with the candidate PSS- oriented business model.

Table 3 Categorization of factors’ priority.

Business Strategy Operations Strategy

Low High

Low Minor Significant High Focused Critical for success

4.1. PSS scenarios

In order to lay bare the potential strengths and weaknesses of PSS implementations, the authors deemed it necessary as a first step to define alternative PSS scenarios. Of course, these can differ (at least) according to the categories discussed (Product-, Use-, and Result-oriented), which usually characterize the implementation of PSS-related strategies. Accordingly, scenarios were firstly formu- lated for pilot studies, which were conducted with two partner companies, operating in the apparel and household appliance in- dustries. With reference to their current business, all the alternative scenarios underpinning the three categories of PSS were presented to both companies. It is worth pointing out that, on the one hand, the two companies have never committed themselves to intro- ducing more service-oriented businesses, and, on the other hand, not all the scenarios seemed completely plausible. Through un- structured interviews and extensive dialogue between the authors and the entrepreneurs, the participants analyzed each of the three scenarios and considered the benefits and pitfalls ensuing from their potential implementation. Furthermore, in line with the research goal, considerations about potential profits or financial difficulties were omitted.

4.2. Key strategic areas of investigation setting

The involvement of the two companies in this pilot study allowed the authors to identify key areas of investigation, which clearly emerged from the open discussion and which are listed in the following.

� Technical and design considerations: this includes, for instance, design issues, players participating in the design process, product life cycles, considerations of product components and their (re) usability.

� Market response: considerations linked to PSS0 market poten- tial, in its capability of attracting new customers and enlarging the current customer base.

� Organizational aspects: this part is mainly concerned with the analysis of needs for reprocessing and/or reconfiguring existing production plants and resources, together with the possible need for new resources, competences and skills.

� Considerations of price changes and effects: this is mainly focused on the current customer base, and considerations here are linked to price sensibility, customer loyalty, and how changes in price structure will affect them.

� External environment: considerations of factors like suppliers' bargaining power, sensibility to price change, customer bargai- ning power, competitors, incumbent firms in the market and new potential entrants.

In the present study, these items represent strategic areas, or more practically, lenses under which the multi-faceted PSS phe- nomenon can be deconstructed and analyzed into its elements. The individuation of the recurring key areas facilitated the articulation

of an interview protocol to be used in new studies. In addition, another relevant change was brought about with respect to pilot case studies. Instead of presenting a scenario for each of the three alternative categories of PSS, interviewees were asked to analyze only the most promising and feasible scenario(s).

The design of the interviews according to a semi-structured protocol was a key decision in this research activity, since one of the main concerns of the authors was to avoid interviewer bias arising from their previous experience. It was believed that a semi- structured form of an interview would be able to point the dis- cussion towards a large number of positive/negative repercussions of a PSS scenario without the interviewers' manipulating the companies’ standpoint.

Therefore, the interview protocol was divided into five sections, in line with the identified key areas, to provide interview guide- lines, and enable a more open discussion of the interviewees’ point of view. Of course, interviewees were in charge of defining whether the described PSS scenario would affect their business in the designated areas. In more detail, they were expected to define which aspects, within each key area, could be affected by the pro- posed service-oriented scenarios. This explains the differences among the items reported in the tables contained in the next section.

Such a structured interview approach allowed researchers/in- terviewers to identify a list of factors affecting PSS development and introduction, with a degree of detail and completeness that was considered satisfying according to their previous experience in the field. Since PSS adoption may span different areas of business, with different characteristics and needs, we decided to rely mostly on interviewees’ experience and knowledge of their context, so as to ensure a thorough identification of all relevant factors. Subse- quently, company representatives were asked to classify as ad- vantages or disadvantages the factors that were found to affect the possible PSS introduction and that emerged from the interviews.

4.3. Identification and classification of factors

Factors can be classified through a matrix (as schematized in Table 3) that assigns priorities according to effects involved in PSS introduction. Factors are therefore categorized according to the degrees of two variables, obtaining a set of four types. The first represents the impact of a specific advantage/disadvantage on business strategy; the second (in Table 3) accounts for how much a factor can impact a firms’ operations strategy.

This proved to be a key step in quantifying the identified factors, given that each advantage and/or disadvantage was identified as more or less relevant for the company and to what extent it would be affected (according to what emerged from the interviews).

According to this categorization and the internal/external na- ture of factors (compared to a firm's boundaries), a scale of prior- ities was defined. Quantitative scores of strategic priority were proposed for each category, as shown in Table 4. The assignment of the scores is arbitrary, although based on common sense and substantially agreed with by the involved partner companies. To the authors' best knowledge, no standard practice exists that as- signs weight to different factors involved in business model shifts.

Table 4 Scale of factors’ priorities.

Factors Score

Critical factor for success 1 Significant factor 0,7 Focused 0,4 Minor factor 0,1

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Moreover, the transformation from qualitative to quantitative in- dicators, although not mathematically and statistically rigorous, has been employed also in some of the most acclaimed decision- making frameworks concerning PSS, e.g. Dimache and Roche (2013).

Each time an aspect positively (negatively) affects the intro- duction of a PSS strategy, this is considered as an increase of the score for the advantages (disadvantages). Thanks to this, it was possible to give an estimation of non-monetary factors (advantages and disadvantages) coming into play in PSS implementation. By assigning to each advantage a “plus” and to each disadvantage a “minus” sign, it is possible to evaluate the Strategic Advantage (SA) of PSS introduction as the sum of internal factors of each PSS sce- nario, which will be exploited as the main input for the formulation presented in the next section. While SA addresses internal factors, the sum of external factors was defined as Competitive Context (CC), and their sum (giving a measure of the total impact of internal and external factors) was called Competitive Advantage (CA). This distinction was a key point in the formulation since, in the authors' opinion, internal advantages/disadvantages, unlike external ones, are closely linked to a whole set of actions and decisions directly under the companies’ control. The provided overall framework of pros and cons (from a qualitative viewpoint) and the corresponding score (from a quantitative viewpoint) can represent an additional variable for making decisions about the opportunities behind the design of PSS propositions.

4.4. Servitization Value Correction Coefficient

From a company's perspective, SA should constitute a base for the estimation of a moderator or multiplier of expected economic benefits. Indeed, there is a logical connection between sums calculated as in Section 3.1 and this multiplying coefficient, which was named the Servitization Value Correction Coefficient (SVCC). In particular, the coefficient is meant to amplify or reduce economic values and/or indicators commonly employed in decision-making processes. The indicators that can be used in combination with SVCC are those commonly involved in decision-making processes, in particular the Economic Value Added (EVA).

EVA is a financial measure that bridges the gap between finance and strategy, and is considered by many scholars and practitioners as a measure that comes closer than any other to capturing the true economic value of a business (Coles et al., 2001; Presutti, 2003). Nevertheless, as regards its application for the evaluation of future business models, this indicator is often criticized. According to Resource-Based Theory (or Resource-Based View) of the firm, a company's growth and performance are influenced by its resources and capabilities (Penrose, 1959; Wernerfelt, 1984). Sources of competitive advantage and value (creating future cash flow) are rare, non-imitable and firm specific resources (Barney, 1991; Teece et al., 1997) and the creation of new knowledge is useful to constantly further the existing competitive advantage (Grant and Spender, 1996). EVA usually fails in predicting the real economic success of new business models because it is not explicitly related to the potential contribution of intangible resources (Bontis et al., 1999) and to the potential evolution of the competitive context,

as it is focused on measuring short-term business performance rather than long-term investments. The EVA of long-term in- vestments cannot be measured objectively, because future returns can only be subjectively estimated (Grant, 2003).

Following the considerations above, we decided to create the Servitization Value Correction Coefficient to adjust the EVA indicator by considering the competitive context and the tangible and intangible resources which are sources of competitive advantage. In the case of a positive value of EVA, PSS introduction corresponds to a profit. This means that the presence of a positive (negative) value of CA results in boosting (moderating) the prospects of a positive outcome. The authors assume that the lowest value of SVCC should tend to 0 when the disadvantages are largely predominant and they can undermine the (eventual) positive prospects of a PSS intro- duction. Of course, when CA ¼ SA þ CC is equal to 0, the value of SVCC has to be 1 e in these circumstances economic forecasts are not affected at all by equal advantages and disadvantages. To give a meaningful formulation in order to evaluate SVCC, authors considered as a starting point the constraints given by limited values of CA ¼ SA þ CC and expected corresponding values of SVCC, with EVA acting as a proxy for the implementation context (ac- cording to its sign). The differentiation according to the value of EVA was necessary to provide an all-encompassing and meaningful employment of the proposed indicator SVCC in the decision- making process: in the case of positive EVA, SVCC acts as an amplifier (in case of predominant advantages) or a limiter (in case of predominant disadvantages) of expected economic results; on the other hand, in the case of negative EVA, SVCC is intended to minimize the loss (in case of predominant advantages) or to amplify the value-destruction effect (with disadvantages out- weighing advantages). Since obtaining financial data to estimate EVA was a main barrier to this study, the authors built two different indicators for positive/negative EVA so as to take into account all possible cases that could occur:

� For EVA > 0, we have the following constraints: � For SA tending to -∞, and for a given value of CC, SVCC tends to

0. � For SA þ CC ¼ 0, SVCC ¼ 1.

� For EVA < 0: � For SA tending to þ∞, and for a given value of CC, SVCC tends

to 0. � For SA þ CC ¼ 0, SVCC ¼ 1.

With these constraints we considered as the main independent variable SA since, as already explained, this variable represents the set of decisions under a company's direct control. On the other hand CC synthetizes external factors that are, by definition, out of com- pany's direct control.

According to the considerations above, the formulation of SVCC is the following:

SVCCþ ¼ � eSAþCC SA þ CC � 0 lnðSA þ CC þ eÞ SA þ CC � 0

SVCC� ¼ � e�SA�CC SA þ CC � 0 lnð�SA � CC þ eÞ SA þ CC � 0

With SVCC þ representing the case of positive EVA, and SVCC e of negative EVA, Figs.1 and 2 depict the trends of SVCC functions in the two scenarios.

5. Results

For each company involved, the contacted figures were all at

Fig. 1. Trend of SVCC þ, EVA > 0.

Fig. 2. Trend of SVCC -, EVA < 0.

Table 6 List of disadvantages, Case_1.

Environment Business Strategy Operations Strategy Factor Score

Short product lifecycle External High Low Focused �0.4 Loss of customer retention External High Low Focused �0.4 Product not designed for reuse/recycle Internal High Low Focused �0.4 Difficulties in maintenance planning Internal Low High Significant �0.7 Higher costs deriving from the need of higher stocks Internal Low High Significant �0.7 Need for new competences Internal High Low Focused �0.4 Need for new machinery Internal Low High Significant �0.7 Price sensitivity External High Low Focused �0.4 Total disadvantages �4.1

A. Annarelli et al. / Journal of Cleaner Production 200 (2018) 74e8580

least at a managerial level: for Case_1 and Case_5, the interviewed person was a commercial director, a sales manager for Case_3, a country manager in the company of Case_6, the owner of the or- ganization involved in Case_2 and a chairperson for Case_4. The results of the interviews were used to estimate the number of ad- vantages and disadvantages, and, subsequently, the SVCC coeffi- cient, as shown in the next subsections.

5.1. Case_1: wood flooring

The company's business model focuses on selling parquet and wood flooring, and is based on a traditional model: relationships with customers are limited to product selling, delivery and instal- lation. The proposed PSS scenario (Product-Oriented) foresees an expansion of the offering through a set of services covering the overall life cycle of the product: delivery, installation, maintenance, end-of-life collection, dismantling and disposal (possibly recy- cling). Tables 5 and 6 show the advantages and disadvantages individuated by the firm involved. The nature of the factors is determined as well, as in all the other case studies. Issues in italics are the aspects that the company considers would be impacted by PSS introduction.

In this case, the value of SA is �2.5 and CC is �0.1, depicting a negative situation for PSS implementation. The corresponding

Table 5 List of advantages, Case_1.

Environment Business Strategy

Operations Strategy

Factor Score

Easiness of entry in the market External High High Critical for success 1 No need for process re-engineering Internal High Low Focused 0.4 No changes in relationships with suppliers External Low Low Minor 0.1 Total advantages 1.5

value of SVCC þ is 0.07, almost nullifying an eventual positive value of EVA, while SVCC e is 1.67, increasing the unfavorable effects of a potential negative EVA.

5.2. Case_2: wood-fired ovens

The company produces and sells wood-fired ovens in B2B (mainly) and B2C markets, being one of the major players in the central-southern part of Italy. Given the high quality of the products offered and their wide useful life span, PSS implementation in a Product-Oriented form could offer interesting insights for renewing the company's business model.

The proposed PSS scenario focuses on an expansion of the cur- rent offering by adding extra services of maintenance, product customization, and financial services for customers. Tables 7 and 8 report the results emerging from the interview.

In this case, we have SA ¼ 1.1 and CC ¼ -1.7, with a negative context but a series of positives related to the company's direct range of action. The value of SVCC þ and SVCC e are respectively 0.55 and 1.20, with the value of CC strongly discouraging the outcomes of a potential PSS implementation.

5.3. Case_3: bike sharing

The company (founded in 2006) produces and sells electric bi- cycles, thanks to a solid technological basis and know-how that has enabled the employment of high quality components in the field.

The feasible PSS scenario for this company contemplates the implementation of a bike sharing business model, based on pay- per-use payment formula: the ownership of products would stay with the company and this would allow for an easier management of product maintenance and reuse/recycle of components. The PSS

Table 7 List of advantages, Case_2.

Environment Business Strategy Operations Strategy Factor Score

Reusable/Recyclable product Internal Low High Significant 0.7 No need for new competences Internal Low High Significant 0.7 No need for process re-engineering Internal High Low Focused 0.4 No changes in relationships with suppliers External Low Low Minor 0.1 Total advantages 1.9

Table 8 List of disadvantages, Case_2.

Environment Business Strategy

Operations Strategy

Factor Score

Price sensitivity External High Low Focused �0.4 Loss of customer retention External High Low Focused �0.4 Higher levels of competition External High High Critical for

success �1

Difficulties in maintenance planning Internal Low High Significant �0.7 Total disadvantages �2.5

A. Annarelli et al. / Journal of Cleaner Production 200 (2018) 74e85 81

offering could easily be developed in tandem with the traditional business model of the company, instead of replacing it. The ad- vantages are shown in Table 9, while the disadvantages are dis- played in Table 10.

The scenario is barely favorable, with CC ¼ 1.3 but SA ¼ -2.6, showing a negative internal situation concerning PSS adoption. According to these values we have SVCC þ ¼ 0.27 and SVCC - ¼ 1.39.

5.4. Case_4: 3D printers

The company involved was the first company in the world to develop 3D printers capable of printing stones. The firm developed a tridimensional plotter that could be used to print buildings and sculptures using stones. In this case, the firm, while still main- taining the original business model focused on selling the printers,

Table 9 List of advantages, Case_3.

Environment Business Strategy

Operations Strategy

Factor Score

Chances for expanding customers base External High High Critical for success 1 Positive impact on customers satisfaction External High Low Focused 0.4 Higher visibility for the company External High Low Focused 0.4 Gain in customer retention External High High Critical for success 1 Re-enforced relationships with suppliers External Low High Significant 0.7 Total advantages 3.5

Table 10 List of disadvantages, Case_3.

Environment Business Strategy Operations Strategy Factor Score

Difficulties in maintenance planning Internal Low High Significant �0.7 Need for parking spaces (for bikes) External High Low Focused �0.4 Installation of charge stations External High Low Focused �0.4 Need for process re-engineering Internal High High Critical for success �1 Need for new studies on the product Internal Low High Significant �0.7 Need for new competences Internal Low Low Minor �0.1 Threat of potential new entrants External High High Critical for success �1 Legal constraints External High Low Focused �0.4 Total disadvantages �4.8

would develop a PSS model focused on pay-per-use formulas or even renting/leasing formulas, so as to ensure access to their products among a larger consumer base. Tables 11 and 12 report the advantages and disadvantages acknowledged by the interviewee.

In this case, PSS implementation should be highly encouraged, since CC ¼ 2.5 and SA ¼ -0.8. Indeed values of SVCC þ and SVCC e are respectively 1.49 (strongly amplifying a positive EVA) and 0.18 (with a consistent reduction of a negative EVA).

5.5. Case_5: wood flooring

The company and its offering are the same as considered in Case_1 (production and selling of parquet and wood flooring). In this case, in the proposed PSS scenario, the company no longer sells its product, but rather offers a solution. It makes a commitment to deliver a result/objective for a considerable time span (e.g. 10e20 years) to the customer: the result would be, for instance, a flooring supply agreement with pre-determined quality standards in which the company should undertake all the necessary measures to deliver the expected results. The payment could consist in a fixed amount to be paid at the beginning and a fee to be paid periodically. The results of the analysis are shown in Tables 13 and 14.

This is the second worst scenario, with SA ¼ -2.4 and CC ¼ -0.4, SVCC þ ¼ 0.06 and SVCC - ¼ 1.71 respectively.

5.6. Case_6: steel tanks

The company (located in Austria) is market leader in the pro- duction and installation of steel tanks employed in various in- dustries. The proposed PSS scenario is centered on a Result- Oriented offering, in which the company provides customers with steel tanks/silos for a considerable number of years (15e20), ensuring high quality standards, possibly adopting co-design so- lutions with customers. The payment could be structured in a fixed

Table 11 List of advantages, Case_4.

Environment Business Strategy

Operations Strategy

Factor Score

Chances for expanding customers base External High High Critical for success 1 No need for process re-engineering Internal High High Critical for success 1 Gain in customer retention External High High Critical for success 1 No changes in relationships with suppliers External Low High Significant 0.7 Higher visibility for the company External High Low Focused 0.4 Positive impact on customers satisfaction External High Low Focused 0.4 Total advantages 4.5

Table 12 List of disadvantages, Case_4.

Environment Business Strategy

Operations Strategy

Factor Score

Difficulties in maintenance planning Internal Low High Significant �0.7 Logistics constraints Internal Low High Significant �0.7 Higher levels of competition External High High Critical for success �1 Need for new competences Internal High Low Focused �0.4 Total disadvantages �2.8

Table 13 List of advantages, Case_5.

Environment Business Strategy

Operations Strategy

Factor Score

Easiness of entry in the market External High High Critical for success 1 No need for process re-engineering Internal High Low Focused 0.4 No changes in relationships with suppliers External Low Low Minor 0.1 Total advantages 1.5

Table 14 List of disadvantages, Case_5.

Environment Business Strategy

Operations Strategy

Factor Score

Short product lifecycle External High Low Focused �0.4 Loss of customer retention External High Low Focused �0.4 Product not designed for reuse/recycling Internal High High Critical for success �1 Difficulties in maintenance planning Internal Low High Significant �0.7 Higher costs deriving from the need for higher stocks Internal Low High Significant �0.7 Need for new competences Internal High Low Focused �0.4 Need for new machinery External Low High Significant �0.7 Total disadvantages �4.3

Table 16 List of disadvantages, Case_6.

Environment Business Strategy

Operations Strategy

Factor Score

Short product life cycle External High Low Focused �0.4 Loss of customer retention External High High Critical for success �1 Product not designed for reuse/recycle Internal High Low Focused �0.4 Changes in agreements with suppliers External High Low Focused �0.4 Total disadvantages �2.2

Table 17 Summary of results.

Case SA CC CA SVCC þ SVCC -

_1: Wood Flooring �2.5 �0.1 �2.6 0.07 1.67 _2: Ovens 1.1 �1.7 �0.6 0.55 1.20 _3: Bike Sharing �2.6 1.3 �1.3 0.27 1.39 _4: 3D printers �0.8 2.5 1.7 1.49 0.18 _5: Wood Flooring �2.4 �0.4 �2.8 0.06 1.71 _6: Steel tanks 0 �0.8 �0.8 0.45 1.26

A. Annarelli et al. / Journal of Cleaner Production 200 (2018) 74e8582

(subscription) fee plus a regular (annual or monthly) fee. Tables 15 and 16 show a summary of the advantages and disadvantages.

This is another case in which the company faces a negative context (CC ¼ -0.8) and a null effect of the internal environment (SA ¼ 0). The negative context and the difficulties for the company to cope with it penalizes the scores, resulting in SVCC þ ¼ 0.45 and SVCC - ¼ 1.26.

5.7. Summary of results

Table 17summarizes the total scores for each case, together with the estimated value of SCC.

6. Discussion

6.1. Target values and analysis of choices

The model proposed to evaluate SVCC allows us to effect cal- culations in order to estimate the target values of SA, and further support the decision-making process through considerations linked to feasible implementation scenarios. It is possible to determine objective values with the aim of obtaining a certain amplification/reduction of estimates coming from EVA: this can be

Table 15 List of advantages, Case_6.

Environment Business Strategy

Operations Strategy

Factor Score

Easiness of entry in the market External High High Critical for success 1 No need for process re-engineering Internal High Low Focused 0.4 Total advantages 1.4

done, first of all, by identifying theoretical cases that match specific needs. Suppose, for instance, we have the specific aim of identifying the implementation context that can lead to SVCC þ ~2 (increase of 100% of EVA original estimate) and SVCC - ~0.01 (reduction to 1% of negative outcomes). With a fixed value of SA ¼ 0 (to evaluate exclusively the impact of context), the model returns a value of CC ¼ 5: this is the value corresponding to a theoretical (ideal case) of a very positive context. Hence, this provides a target value of CA ¼ 5 to be pursued in real application cases. Considering that CC acts as a constraint that can only be modified with difficulty (at least in the short term), by imposing the desired value of CA it is possible to evaluate the target SA, according to the contexts of cases involved in the study. The following table summarizes the calcu- lation of target SAs in line with the argument developed above.

Table 18reports the target values (and distances from targets) that should be pursued by companies in order to reach the fixed strategic goals (SVCC þ ~2, and SVCC - ~ 0.01). As can be seen, except for Case_3 and Case_4, the cases analyzed are far distant from ideal PSS implementation contexts. Indeed, negative competitive contexts demand a higher implementation effort from companies, also considering the challenging goal of doubling EVA estimates.

Similar considerations can be made for a more realistic goal, as for instance gaining an increase of 50% in EVA (SVCC þ ~1.5) and a reduction of 80% of negative results (SVCC - ~ 0.2). In this case, as can be seen in Table 19, the objective CA is equal to 1.7, and calculation of target values follows accordingly.

The introduction of more realistic goals in terms of SVCC (and then CA) leads to estimates of target SA and distance to SA that are

Table 18 Evaluation of target SA (to obtain SVCC þ ~2, and SVCC - ~0.01).

Case SA CC Target CA Target SA Distance to SA

Theoretical case 0 5 5 e e _1: Wood Flooring �2.5 �0.1 5 5.1 7.6 _2: Ovens 1.1 �1.7 5 6.7 5.6 _3: Bike Sharing �2.6 1.3 5 3.7 6.3 _4: 3D printers �0.8 2.5 5 2.5 3.3 _5: Wood Flooring �2.4 �0.4 5 5.4 7.8 _6: Steel tanks 0 �0.8 5 5.8 5.8

Table 19 Evaluation of target SA (to obtain SVCC þ ~1.5, and SVCC - ~0.2).

Case SA CC Target CA Target SA Distance to SA

Theoretical case 0 1.7 1.7 e e _1: Wood Flooring �2.5 �0.1 1.7 1.8 4.3 _2: Ovens 1.1 �1.7 1.7 3.4 2.3 _3: Bike Sharing �2.6 1.3 1.7 0.4 3 _4: 3D printers �0.8 2.5 1.7 �0.8 0 _5: Wood Flooring �2.4 �0.4 1.7 2.1 4.5 _6: Steel tanks 0 �0.8 1.7 2.5 2.5

A. Annarelli et al. / Journal of Cleaner Production 200 (2018) 74e85 83

not so distant from the real cases. Furthermore, considering Case_4, target SA assumes negative values, indicating that companies operate in favorable competitive environments, and PSS imple- mentation should be highly encouraged.

By jointly considering actual values of SA and target SA (and consequently distance to SA) companies could thoroughly evaluate all facets of PSS implementation contexts.

6.2. Reflections on PSS implementation in new contexts

What immediately comes out of the empirical application of the methodology is the predominance of disadvantages in five cases out of six, and most of the time they have a higher impact than the advantages. This could be explained by uncontrolled conditions in case selection, even if there are some regularities that can be retrieved. Indeed, the only case with predominant advantages is Case_4 (Use-Oriented). This result can broaden knowledge of PSS, since the study was mainly based on how PSS (and its potential) is seen and judged by possible implementers rather than by users.

The two cases with the worst values of SVCCs are derived from the same company producing and selling Wood Flooring. A considerable gap first emerges between the advantages and dis- advantages, comparing their total number (3 vs. 8/9) and the “magnitude” of their effect on the firm's business. Unlike similar cases (e.g. Ceschin, 2013) the product is not designed to be reused and/or recycled, and this is a major limitation since it does not allow the company to “close the loop” of a Circular Economy, which literature claims to be one of major benefits ensuing from PSS implementation (Mont, 2002; Sousa-Zomer et al., 2018). Indeed, from a close analysis of the two cases (_1 and _5) and of the cor- responding emerging factors, almost all the disadvantages can be linked to negative spillovers in an environmental perspective.

As a matter of fact, all cases showing an unfavorable SVCCs experienced drawbacks in terms of PSS dismantling and disposal of products at the end of their useful life cycle, as well as difficulties linked to preventive maintenance and its organization.

The latter aspect is counter-intuitive, as it contrasts with find- ings in the literature. Indeed, the literature widely agrees on the important role played by maintenance in ensuring a successful implementation of a PSS-related business model. Its capability is deemed critical in prolonging product and component life cycles, with a consequently more sustainable perspective in environ- mental and economic terms. Prolonging product (and component) life cycles can help reduce material and energy consumption, and, at the same time, it can ensure a longer relationship with customers and a higher level of consumer satisfaction. Furthermore, main- taining and preserving products during their useful life can increase the percentage of reused components, or, on the other hand, it can simplify processes of remanufacture and/or recycling, while reducing product turnover. Thus, it can be stated that in some cases among those analyzed, the distinction between PSS disadvantages and advantages is not given per se and is closely linked to the en- trepreneurs’ perception of the benefits of imminent changes. In

other terms, the results can be seen as biased by a low degree of “readiness” for PSS implementation, or, more in general, for a limited propensity to innovation.

In different cases among those illustrated, resistance to change emerges as one of the major hindrances to PSS introduction. This issue can arise either from outside or inside a firm's boundaries, showing to a certain extent a reluctance to embrace new business models. This is however not surprising, because there are several examples in the literature stating that acceptance by stakeholders and internal reluctance to change are critical elements that come into play in PSS implementation (e.g. Mont, 2002; Sakao et al., 2013; Hannon et al., 2015).

On the other hand, many benefits identified through the in- terviews have a considerable impact on companies’ supply chains, indicating that suppliers and customers are a source of positive outcomes when implementing a PSS (Saccani et al., 2014). As for suppliers, for instance, five cases report “relationships with sup- pliers” as a source of advantages, proving that partners play a key role in ensuring the success of a PSS offering, as already highlighted in the literature, e.g. (Cook et al., 2006; Azarenko et al., 2009). Companies showed a significant degree of awareness of this point.

In the case characterized by a prevalence of advantages and with a positive effect of SVCCs (and in the other Use-Oriented case, which shows a very limited prevalence of disadvantages), cus- tomers play a crucial role. Indeed, the capability of attracting new customers and a positive impact on customer satisfaction and customer loyalty proved to be important discriminants in deter- mining positive performance.

With regard to a company's internal environment, the results show that it supposedly creates more disadvantages and obstacles than advantages. This can be observed even if, in almost all the cases, the chance of implementing a PSS and giving rise to an improved market offer could be exploited without any need for process re-engineering.

7. Conclusions

The main outcomes of the study are reported as follows. First, for a large variety of industries, the possibility was verified

of describing PSS scenarios differing according to the three acknowledged categories.

Second, a standard list of business areas that are affected when putting PSS proposals into practice was compiled. The non- monetary aspects commonly surfacing when these areas are investigated relate to very different expertise domains within an organization, ranging from design issues (e.g. necessity of co- creation practices) to managerial problems (e.g. relationships with suppliers), from technological factors (e.g. new machinery) to market outlooks (e.g. customer fidelity) and legal/regulatory as- pects. It should be noted that, considering the difficulties in pur- suing an effective evaluation and consideration of the above aspects, there is a tangible risk for companies that overlook them. This might result in undesired effects, especially when dealing with underestimated negative aspects, which played a key and pre- dominant role in the majority of cases considered. The five areas we concentrated on are reported in Section 4.2 and were used to construct semi-structured interviews.

Third, the methodology is original in that it quantifies qualita- tive variables in a way not addressed before. It is based on the ty- pologies of factors coming into play in PSS adoption that can lead to benefits or drawbacks. This allows us to estimate whether the considered aspects give rise to greater advantages or disadvan- tages. The emerging differences, addressed by SA and CC (and synthetized in CA), can be used as a metric for making decisions about shifts towards PSS business models. Concerning this aspect,

A. Annarelli et al. / Journal of Cleaner Production 200 (2018) 74e8584

for example, one of the firms involved faced two feasible PSS sce- narios (respectively Product- and Result-oriented). In this case, to establish which PSS scenario is the most suitable, beyond economic forecasts, the company could employ SA, CC and CA as decisional metrics.

Fourth, at an operational level, the SVCC factors are introduced to “adjust” indicators like EVA to highlight the predominance of non-monetary factors in PSS adoption. It is based on an assumption that establishes the relationship between the values of SA, CC, and SVCC. The employment of the SVCC factors should provide new insights and applications to support the decision-making process concerning PSS adoption. For instance, a thorough application of the proposed tool/methodology could follow a sort of reverse logic: first of all, SVCC indicators might provide an immediate guidance on whether to invest or not in the adoption of PSS, while a second-step analysis of the other indicators composing SVCC (CC and SA) can give more detailed information about the strengths and weak- nesses with respect to the internal and external context of adop- tion. A further analysis based on the nature and magnitude of identified factors can suggest to decision makers the most inter- esting directions on future (dis) investments in organizational areas affected by an eventual adoption of PSS.

Nonetheless, the limitations of this contribution have to be acknowledged. As already evidenced, there is a need for additional case studies to test and validate the model, also by studying the realities of effective PSS implementation (with an eventual esti- mation of its ensuing effects). Furthermore, the use of ordinal variables (advantages and disadvantages) as addends introduced a bias in the model, beyond the above mentioned assumptions.

Additionally, the choice of involving a single manager for each case might have introduced a distortion in the study; considering PSS is a multi-faceted concept, future studies should overcome this limitation by involving a greater number of participants (at different hierarchical levels) so as to avoid any potential source of distortion.

However, these limitations have not undermined the applica- tion of the proposed decisional model in different industrial con- texts that can potentially benefit from the shift towards PSS in the future.

Insights emerge also from the application results, which can contribute to general knowledge about PSS, as illustrated in Section 5. Two points are considered particularly valuable by the authors. On the one hand, Use-oriented business models emerge as the most promising opportunities, even if this consideration basically emerges from the analysis of advantages and disadvantages. This conflicts with approaches attempting to introduce service di- mensions gradually into manufacturing organizations, which would suggest starting with a Product-oriented strategy. On the other hand, sustainability was identified as a good predictor of predominant advantages. Some PSS scenarios, although feasible, were characterized by a limited chance of re-using the currently marketed physical goods and were eventually shown to be rather uncompetitive. These considerations somehow confirm the close link between PSS and sustainability, particularly in its environ- mental form, although they also show how increasing service in- tensity does not necessarily overcome ecological problems.

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Alessandro Annarelli is a Post-doc Researcher at Sapienza University of Rome. After receiving his Master Degree at the Sapienza University of Rome, he obtained a PhD in Sustainable Energy and Technologies at the Free University of Bolzano-Bozen (Italy). He has been a visiting PhD student at Luleå Tekniska Universitet (LTU) in Luleå, Swe- den. His interests are on innovation management, operations strategy and product- service systems. His main publications appeared in Omega e The International Journal of Management Science, and Journal of Cleaner Production. He is currently involved in the research project “Industry 4.0 for SMEs” in the EU Horizon 2020 RISE program.

Cinzia Battistella (PhD) is Associate Professor of Innovation Management at the University of Siena (Italy). She received her Doctoral Degree at the University of Padua, and worked as a Researcher and Lecturer at the University of Udine and as an Assistant Professor at the Free University of Bolzano-Bozen. Her scientific interests are in the fields of innovation and strategic management, with focuses on the themes of fore- sight, business models and open innovation. Her main publications appeared in Tech- nological Forecasting & Social Change, Journal of Business Research, Journal of Engineering and Technology Management, Journal of Technology Transfer. She is member of the editorial board of The Learning Organization.

Yuri Borgianni has obtained the Master Degree in Mechanical Engineering at the University of Florence, Italy (2005) and the Ph.D. in Industrial Engineering at the same Institution (2014). He is currently a Contract Researcher at the Free University of Bozen-Bolzano, Italy, where he teaches Technical Drawing, Reverse Engineering & Rapid Prototyping, Design Creativity. His research interests include value innovation, ideation within engineering design, creative development of new products, re- engineering of industrial processes, non-standard employment of problem-solving techniques, Computer-Aided Innovation, intellectual property. He is author of about 50 publications in scientific journals and international conferences.

Fabio Nonino (PhD) is Associate Professor of Business Management and Project Management at the Sapienza University of Rome. He carries out his research activities in the field of Management focusing on Operations and Service Management, Inno- vation Management and Organizational Behaviour development. His main publications appeared in Supply Chain Management: An international Journal, Production Planning & Control, Omega e The Journal of Management Science, International Journal of Production Research and Technological Forecasting and Social Change. He is a Member of the editorial board of Kybernetes e The International Journal of Cybernetics, Sys- tems and Management Sciences and the International Journal of Information Systems and Supply Chain Management.