Product/Service-Systems lecture at the European Innovation Academy 2012, Tallinn

1. Design and Product Development
Guest Lecture at Tallinn European Innovation Academy
Thomas J. Howard
www.thomasjhoward.com
thow@mek.dtu.dk
Unless otherwise stated, this material is under a Creative
Commons 3.0 Attribution–Share-Alike licence and can be
freely modified, used and redistributed but only under the
same licence and if including the following statement:
“Original material by Tim C. McAloone and adapted by Thomas J. Howard,
The Technical University of Denmark”

2. Agenda
09:30 – Integrated Product Development
10:05 – Exercise
10:20 – Break and discussion
10:30 – Product/Service-Systems (PSS)
10:05 – Exercise
11:20 – Break and discussion
11:30 – Open Design
11:05 – Exercise
11:20 – Discussion
LUNCH
13:00 – Protovation
13:45 – Exercise
2 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

3. Products and Services
What is a Product?
What is a Service?
Use the terms Value and Stakeholder in your
definitions
3 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

4. Definitions
Product
• The result of a synthesis process, where value is
created by transferring ownership of the result
from one stakeholder to the next.
Service
• The creation of value when one stakeholder
carries out an activity on behalf of another.
McAloone 2012
4 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

5. What is a PSS?
A Product/Service-System is a system that supports and utilises the product
through an extended (for the company) product life period
Product life cycle
Customer,
Product User
Product development
Service:
- selling use and
functions
Service provider
McAloone & Andreasen 2002
Service only exists when the customer uses it!
5 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

6. Why PSS ?
RAW MATERIALS
MANUFACTURE
MAINTENANCE
INSTALLATION
TRANSPORT
ASSEMBLY
DISPOSAL
SALES
USE
€
Traditional producer ownership Traditional customer ownership
Producer’s traditional responsibility/liability
6 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

7. Product life cycle design
PSS-oriented business strategy
Why PSS ?
RAW MATERIALS
MANUFACTURE
MAINTENANCE
INSTALLATION
TRANSPORT
ASSEMBLY
DISPOSAL
SALES
USE
€ € € € €
Producer’s extended product responsibility, customer contact and
revenue source
7 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

8. PSS as a business strategy
PSS means making a shift of business focus, from:
business based on value creation through the transfer
of product ownership and -responsibility
to:
business based on value creation through the support
and delivery of a service from a product, for the whole
of its lifetime…
8 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

9. Rolls Royce
From airplane engines to ’power-by-the-hour’
In the airline industry, the company does not sell engines - it charges for use of the thrust
they provide, on a 'power by the hour' basis. Where previously the company's aerospace arm
simply sold engines to plane companies, they now offer a fixed-fee maintenance back-up
service for those engines, thus allowing customers to accurately project their maintenance
and part replacement costs.
[www.rolls-royce.com]
Traditional model TotalCare model
Focus on core
Rolls-Royce Airline
business
Core business:
passenger Airline
revenues Rolls-Royce
Overhaul Eng. Health Overhaul Predictive
Base Monitoring Base maintenance
Logistics Logistics
Vendors Vendors
Provider Provider
Non-core business activities Rolls-Royce responsible for
[www.rolls-royce.com] airline’s non-core business activities
9 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

10. Danfoss
From electronic refrigeration controls to cooling in supermarkets
In order to avoid being reduced to a component supplier (where competition is tough and
margins slim) Danfoss has positioned itself as a provider of value added consultant advice to
the food retail industry. By tying a closer link to the retailer Danfoss can increase knowledge
about operational know-how.
[www.danfoss.com] Value
Added End-Users
Supermarkets
Services
System house
Contractors
Networks
Contractors
OEM’s
Systems
OEM’s
Components
Distribution
channel
[Eriksen, Danfoss, 2005]
10 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

11. 11 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

12. Xerox
From photocoping machines to document services
Xerox has worked to turn its product into a service, providing a complete "document service"
to companies including supply, maintenance, configuration, and user support. Customer‟s
don‟t buy photocopy machines anymore, the buy the ability to photocopy.
[www.xerox.com]
12 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

13. Aarstiderne
From organic produce to convenient food delivery
Aarstiderne has delivered organic products to the doorsteps of Danish households since 1999.
It started out as a small vegetable garden at a farm, Barritskov, in the western part of
Denmark. The idea behind Aarstiderne.com is to deliver organic food products directly to the
doorstep of the customer who values quality and taste and thereby catalyses the public
motion towards healthier food and better environment in Denmark – not by agitating, but
simply by enabling everybody to be a part of the good idea. The products are supplied with
recipes and stories about growers, production, farms, the company, food products and quality.
[www.aarstiderne.com]
13 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

14. Douwe Egberts
From coffee bean supplier to coffee systems
Douwe Egberts was originally a coffee supplier. Normally clients in offices would buy a
traditional hot plate-based coffee machine, buy consumables such as coffee and filters
separately, and make pots of coffee in the traditional way. Douwe Egberts took the advantage
by starting to offer coffee systems delivering freshly brewed, good-quality coffee per cup and
thereby created a much more powerful position in the value chain.
[www.douweegberts.com]
14 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

15. IBM
From computers to consulting services
Traditionally IBM‟s business was in manufacturing computer hardware but over the years they
have moved to a more business and software consulting service approach. This was
particularly noticeable with the sale of their personal computers to Chinese manufacturer
Lenovo in 2004
[www.ibm.com]
15 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

16. DuPont
From paint to painted cars
DuPont Payment by paint quality:
Ford producing Reward: selling more paint
DuPont
No action concerning painting
Ford painting
Flexible delivery
Quality of painted surface
Ford
Cost of painting
Payment per car:
Concern of reducing quantity
DuPont
Immediate delivery
Ford producing
Quality of the painted surface
Immediate satisfaction
DuPont painting
No action concerning painting Ford
Customer: Long-term interest of quality
from satisfaction delivery system [McAloone, 2003]
16 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

17. easyJet
From 3rd party booking to direct booking service
easyJet is perhaps more renowned for its „lack of‟ or „no frills‟ approach to service. However,
in the late 90‟s, airliners were running a very standard business model providing service in a
„complementary‟ form rather than a extra revenue form. easyjet were able to strip this
service and translate it to low costs, something a large proportion of the market valued
greatly. But more importantly easyjet were able to harness web bookings enabling them to
provide a service to their customers that, at the time, was only available through 3rd party
travel agents and thus dramatically reduced costs, prompting their slogan “the web‟s favorite
airline”.
17 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

18. In your teams discuss the following
scenario:
“You have been developing and selling
microwave ovens for many years and
have seen profits steadily falling due to
increased competition. How could you
add a service dimension to your business
and what market segment would you
target?
18 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

19. Product/Service Orientation
19 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

20. Product Life & User Activity Cycles
PRODUCT’S LIFE CYCLE
RAW MATERIALS
MANUFACTURE
MAINTENANCE
INSTALLATION
TRANSPORT
ASSEMBLY
DISPOSAL
SALES
USE
Tan, A., McAloone, T.C., Andreasen, M., “What
happens to integrated product development Models
with product/service-system approaches?”, The 6th
Integrated Product Development workshop, 2006
SUPPORT OF
CUSTOMER’S
ACTIVITIES
CUSTOMER’S
ACTIVITY
CYCLE
20 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

21. Strategies of Service Design
Customer Business
Product life activity supporting
Product use services services services
services •Training •Consulting
•Supplies
•Maintenance •Planning •Financing
•Installation
•Repair •Designing •Managing
•Auxiliary input
•Spare parts •Specifying •Partnering
•Upgrade
Product •Warranty •Operating •Outsourcing
•Disposal
•Measuring
Design for Serviceability
[Dewhurst 1994]
Design for Supportability
[Goffin, 2000][Takata et al. 2004]
Design for Service
[Harrison, 2006]
21 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

22. PSS can be an effective way to bring
suppliers closer to customers while
responding more to the customer’s
real needs.
Services should be integrated into
the design of products where
valuable.
22 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark

23. Questions
?
23 Original material by Tim C. McAloone and adapted Thomas J. Howard 2012
The Technical University of Denmark