Available online at ScienceDirect. Procedia CIRP 30 (2015 ) Customer-oriented Framework for Product-Service Systems

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1 Available online at ScienceDirect Procedia CIRP 30 (2015 ) th Industrial Product-Service Systems Conference - PSS, industry transformation for sustainability and business Customer-oriented Framework for Product-Service Systems Danilo Marcello Schmidt*, Oliver Malaschewski, Daniel Fluhr, Markus Mörtl Institute for Product Development, Technische Universität München, Boltzmannstr. 15, Garching, Germany * Corresponding author. Tel.: ; fax: address: schmidt@pe.mw.tum.de Abstract During the last years, several frameworks for developing PSSs arose, which vary in focus. Examples of their focuses are engineering processes, technology, knowledge engineering, services or tangible products. However, just a few frameworks concentrate on the market or, specifically, the customer. As the customer is the key success factor of any product, we have developed a framework for designing PSSs by adapting an existing technology-centered framework. Our framework describes the perspective of increasing customer acceptance using PSS. Increasing customer acceptance means to reduce the effects and influences of customer barriers, e.g. unnecessary high costs of purchase or a lack of trust in the product s reliability. The model consists of three layers and the strategy space. The layers are the customer layer, the barriers layer and the solution layer. The customer layer describes the customers and the target groups of customers, who the PSS aims at. The barriers layer includes all customer barriers that are to be reduced by the PSS. The solution layer describes the PSS and its components; tangible elements, intangible elements and the infrastructure for connecting all elements. This layer shows how the PSS is realized to reduce the customer barriers of the focused target group. As other goals and influences affect the design of a PSS, the strategy includes external factors. Those external factors are generated by the company itself (e.g. other departments, product portfolio) or by external stakeholders or sources (e.g. suppliers, laws). Our model helps designers to understand the proceeding to design a PSS for increasing customer acceptance by reducing customer barriers The Authors. Published by Elsevier B.V This is an open access article under the CC BY-NC-ND license 2015 The Authors. Published by Elsevier B.V. ( Peer-review under responsibility of the International Scientific Committee of the Conference is co-chaired by Prof. Daniel Brissaud & Prof. Peer-review under responsibility of the International Scientific Committee of the 7th Industrial Product-Service Systems Conference - PSS, Xavier BOUCHER. industry transformation for sustainability and business Keywords: "Product-Service Systems, PSS Framework, Customer Orientation" 1. Introduction A Product-Service System (PSS) is a combination of a tangible physical product and an intangible service. However, a PSS is more than a simple combination; it describes the integrated design of both tangible and intangible elements. [1, 2] Even though PSS facilitate advantages and benefits for customers, approaches facing PSS focus on providers perspectives [3] instead of focus on customers perspectives [4]. Researchers outline that PSS have several disadvantages for customers, which prevent them from buying PSSs and decrease customer acceptance [3-8]. Exemplary disadvantages are a lack of trust in the provider or the perceiving of lifecycle costs as too high. However, PSS can also increase customer acceptance, for example, by lowering total costs of ownership [9] or customizing [10]. In a previous paper [11], we defined the research question how PSS can increase customer acceptance, while other approaches focus on how the customer acceptance of PSS can be increased [3, 4, 7, 8, 12]. In this paper, we propose a framework for our research question to demonstrate how customers, customer barriers, the PSS-concept and the corporate strategy are related to each other. For this, we defined a three layered framework, based on [13, 14] and [15, 16]. We first present the result of a literature study that analyzed approaches from literature and how they involve the customer view. 2. State of the art To investigate the state of research for a customer-oriented PSS-framework, we extended a literature study of [14]. The study in [14] concerns the customer view implicitly in the The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license ( Peer-review under responsibility of the International Scientific Committee of the 7th Industrial Product-Service Systems Conference - PSS, industry transformation for sustainability and business doi: /j.procir

2 288 Danilo Marcello Schmidt et al. / Procedia CIRP 30 ( 2015 ) market view. As we are interested in a customer-oriented view on PSS, we analyzed whether the approaches cover the customer view. Table 1 shows the result of our study. We evaluated approaches as a considered customer view if they include it in the process and propose explicit methods to involve them. The customer view is rated as partly considered when it is included in the process but without detailed information on how to determine them. Not considered means the absolute lack of customer view in the approaches. In the following, we describe how the concerned approaches focus on the customers and customer acceptance. Table 1. Customer view in approaches from literature, based on [14]. Legend: considered partly considered not considered Product perspective Meiren & Barth 2002 Oliva & Kallenberg 2003 Aurich et al Egeling & Nippa 2009 Sundin et al Hepperle 2013 Herzberger et al Hussain et al Pezzota et al Sakao & Shimomura 2007 TR 29 Wallin et al Baureis 2013 PROTEUS Schenkl 2014 Meiren & Barth 2002 [17]: This approach is mainly for service engineering and not for PSS. The customer use value is determined in the product model and the customer interaction. Despite the fact that a customer integration is noted to be important for providing successful PSS, they do not provide information on how this should be done. Oliva and Kallenberg [18] claim that changing the productoriented relationship with the customer to a service-oriented relationship increases customer acceptance. However, they do not mention any strategies or methods to increase customer acceptance by doing so. Aurich et al [19]: This approach describes a processoriented way for developing PSS. Involving customers and their needs does not go beyond mentioning their importance and relevance for the service concepts and indicate in which process-phase they should be included. Egeling and Nippa [20] consider the customer from the knowledge perspective. They state that customers have socialcompetences, method-competences, meta-competences and subject-specific-competences. Providers have to possess the same knowledge and competences their customers have. Service perspective Knowledge perspective Product view Process view Technology view Market view Customer view However, no further considerations of the customers and their needs are made. Sundin et al [21]: This Design for PSS -approach mentions the customer demands as drivers for PSS. However, it lacks a detailed consideration of customers and their needs. Hepperle [22] considers the PSS-lifecycle and which processes the provider has to conduct to ensure an integrated development of products and services. However, the customerperspective is not considered at all. Herzberger et al [23] combine a business model canvas, a PSS-life-cycle and a PSS-configurator. All three parts consider the customers and their needs. In their service blueprinting, they mention customer segments for the focused customer group and the customers pain or problems. We want to consider the customer in a similar way; however, our approach shall consider both product and service components of the PSS for the customer view. Furthermore, they keep the description of customers problems very generic and they do not mention customer barriers. The project TR 29 considers the customer as a relevant object in the lifecycle and in their process model. The customer and their needs are the basis for the PSS-development process. Meier [24] suggests a PSS-layer model, which involves the customer view via two layers: the customer needs layer and the customer value/benefit layer. While the customer needs layer describes what the customer needs, the customer value layer shows what the customer perceives as valuable [25]. This approach focuses on the positive aspects of the PSS for the customer and how the PSS should be designed based on the perceived advantages. However, they do not take into account possible disadvantages of a product and how a PSS can reduce those disadvantages. Wallin [26] points towards the importance of customer needs and customer relations in the PSS-development. All phases of the development process have to consider customers and their needs. Even after developing a PSS, new customers can be identified. However, a detailed analysis of customer needs and their integration in the development process is not done by Wallin [26]. Baureis 2013 [27]: Except for the statement that customers should be integrated, Baureis [27] does not consider the customer. PROTEUS [28-30]: PROTEUS focuses on user-oriented servitization and describes the transformation from a provider of pure products to a PSS-provider. It considers different perspectives, like the processes, and PSS tools are proposed. Customers are involved in every step, however, only customers of the maritime industry are in the focus. As the relationship to the customers on the business model level is the core theme, PROTEUS does not mention customer barriers or problems. Schenkl [14] proposes a framework to consider the company s knowledge base and to handle new technologies. For this, he also involves customer acceptance as a relevant factor for the success of technologies. Furthermore, he identifies barriers of customer acceptance of PSS. However, he does not investigate how those barriers can be reduced or eliminated. Hussain, Lockett and Annamalai Vasantha [31] built a framework to improve PSS-design in the conceptual phase by integrating data and information of the usage phase. They

3 Danilo Marcello Schmidt et al. / Procedia CIRP 30 ( 2015 ) identify dissatisfaction of customers to enhance service processes by optimizing service parameters and structure. Similar to [31], Pezzotta, Pinto, Pirola and Ouertani [32] developed a methodology for service engineering to adapt services to customers. They suggest different methods like the service requirements tree which support designers in handling different kind of requirements. They aim to increase customer satisfaction by adjusting services. Sakao and Shimomura [33] distinguish in their approach between the flow model (process orientation), the scope model (orientation on service-stakeholder) and the view model (relations between customer satisfaction, service and content parameters). They define the receiver state parameter (RSP), which is a measure for customer satisfaction. Adapting a PSS might increase (values for RSP) or decrease (costs for RSP) customer satisfaction (RSP). emerge within and outside of the company. While the technology-oriented approach of [13] includes the layers about technology, solution and goals, our customer-oriented model includes layers about customers (and customer groups), customer barriers and solutions. The customer layer describes the target groups of customers, which the PSS focuses on. The customer barriers layer includes barriers that 2.1. Summary The literature study shows 7 approaches involving the customer view. Even though all authors mention the importance of integrating customers in the PSS-development, only a few lay the focus on the customer. The research project TR 29 considers and investigates the customer on its own layer. This approach considers the effect of a PSS to the customer as follows: The PSS has to fulfill and to bring customers benefits. Other approaches [31-33] integrate customer views only by adapting service parameters or optimizing service processes. Some of them define terms, which are similar to customer barriers, like customer dissatisfaction [31] as the target of the PSS-development or the gap between customer needs and PSS-options [32] or a decrease of receiver state parameter [33]. Those approaches have included the customer view as a measure to quantify the desired state, which is necessary for optimizing service parameters. However, they lack in qualifying customer barriers or customer satisfaction and they focus only on adapting services. They do not consider offering new services or using another business model, e.g. offering a result-oriented PSS instead of a product-oriented PSS. However, we need a framework that considers the effect of a PSS on the customer as follows: The PSS has to increase customer acceptance by reducing the influences of customer barriers. For this reason, our approach has to consider three objects: the customer, customer barriers and the PSS. As PSSdevelopment cannot be seen separated to external factors, we add the strategy space, which influences all three objects. 3. Customer-oriented Framework for PSS Our customer-oriented PSS-layer model, as displayed in Fig. 1, consists of three layers based on [13]. Additionally, we define the strategy-space in this model, which is relevant for all three layers. This strategy includes all external factors that Fig. 1. Customer-oriented Framework for PSS. make customers not purchase a product. A collection of customer barriers is given by [11]. Based on the focused customer groups, relevant customer barriers have to be selected. The solution layer describes the PSS and its components for how the PSS is to be designed to reduce the effects of customer barriers for increasing customer acceptance. The content of this layer is closely related to the solution layer of [13]. As we do not only focus on technologies in our approach, we skip the technology layer of [13]. The goal layer, which describes strategic goals or quality goals of the company, is included in the strategic space Customer Layer The layer on the bottom includes customers or customer groups. On this layer, the PSS-provider selects the customer he wants to target. Furthermore, this layer determines the customer variety for the project. This variety includes different categories of customers on the same level of detail. In B2Bmarkets, this variety includes different industries like the automotive industry, maritime industry or manufacturing industry. Dependent on the focused customer group, customer barriers have to be selected e.g., while security of customer data is a relevant aspect for online businesses, it might be less important for the steel industry. The customer layer determinates the dimension of customer variety, which affects the customer barrier layer and the solution layer. For this, methods for customer selection and segmentation might be helpful [34, 35].

4 290 Danilo Marcello Schmidt et al. / Procedia CIRP 30 ( 2015 ) The granularity in the customer layer sets the level of detail for the customer group. Specifying or summarizing sets the focus for the customer group: A summarized level focuses on an entire market or industry, while a detailed level focuses on a department or an individual customer. Fig. 2 shows the customer layer and exemplary customer groups. In this layer, the provider decides which customer is to be focused on and the acceptance of which customer should be increased Customer Barriers Layer Fig. 2. Customer Layer. Customer barriers are the barriers which prevent customers from buying a product. According to the selected customer group, relevant barriers are defined. A collection of existing customer barriers are identified by [11] and allocated to eight categories: complexity, costs, reliability and availability, interoperability, irrationalities, trust, unawareness of need and values and beliefs. On this layer, the customer variety determines which of those customer barriers the PSS-development should consider. The focused customer group defines the relevance and importance of each customer barrier. The customer variety means to select between customer barriers. Customer Barriers Layer customer variety customer variety B2B Costs/Price Complexity OEM Supplier Customer Layer Automoti ves Maritime Electrical Compone nts Constructi on granularity Costs of Purchase and TCO Transaction Costs Usability granularity Fig. 3. Customer Barriers Layer. Company A Company B nt A.1 nt A.2 nt B.1 nt B.1 The granularity in the customer barriers layer defines the level of detail of a customer barrier. The mentioned eight categories of customer barriers have sub-categories. The barrier costs/price has the sub-categories costs of purchase and TCO and transaction costs. The granularity describes how detailed the barriers are considered by and used for the solution layer. To high Costs of Purchase Uncertainty of TCO Costs of Decision Difficulty to Understand Difficulty to Use Fig. 3 shows the customer barriers layer and some of the customer barriers and their sub-categories. On this layer, PSSdesigners decide which of the customer barriers should be reduced to increase customer acceptance, based on the customers being focused on Solution Layer We define the solution layer in a similar way to [13]. It includes a PSS-concept consisting of service-elements, tangible product-elements and the infrastructure. The elements of the tangible products are given on three levels of abstraction (set by the granularity), according to Ponn and Lindemann [15]: product functions, working principles and components. The service-elements are also given on three levels of abstractions: service functions, processes and resources [36]. The infrastructure connects the service-elements and the product-elements. On the highest level of abstraction, serviceand product-elements can be seen as PSS-elements [37], which are a concretization of customer requirements and which are not fixed to be a service-component or a product-component in the final PSS. Customer variety affects the solution layer by developing different PSS-concepts. Changing customer variety might lead to a completely different PSS-concept or an adapted PSSconcept. If only one PSS-concept is not developed but a PSSkit with multiple variants, every customer group might have a best-fitting variant of the PSS-concept. Fig. 4 depicts the solution layer, which includes the PSSconcept. This PSS-concept is developed to reduce the selected customer barriers to increase customer acceptance of the focused customer group. customer variety Services Tangible Product 3.4. Strategy Space Service functions Product functions Solution Layer Processes Working principles granularity Fig. 4. Solution Layer. Ressources Components The strategy includes all external factors in PSSdevelopment, except for the customers and their barriers because they are considered in two layers. Those external factors and how they should be handled are defined by the corporate strategy. As Schenkl, Sauer and Mörtl [13] consider the strategic goals in their goal layer, we include this goal layer in the strategy space. The corporate strategy can be detailed for a functional unit or a department [38]. The strategy influences all three layers. Infrastructure

5 Danilo Marcello Schmidt et al. / Procedia CIRP 30 ( 2015 ) The influences on the customer layer describe which customer should be targeted in the future and how they should be handled (e.g., on-face-to-the-customer -strategy [39], a closer relation to customers, Customer Relationship Management). The strategy influences the layer of customer barriers by quantifying the relevance of customer barriers. If a company wants to be known as a low-price company, the customer barrier costs/price is more relevant. For focusing on the customer barriers, not only the relevance of customers should be considered, but also how they fit into the strategy. The influences of the strategy on the solution layer are described by the product strategy [38]. The product strategy is derived from the corporate strategy on a level for the product, in this case for the PSS. It includes how the products will achieve competitive differentiation or which product attributes are relevant for the customer. The PSS-specific goals and quality goals in [13] are included in this product strategy. PSSspecific goals are goals derived from the strategy on a level for the PSS; for example, if the strategy requires a higher customer loyalty. Quality goals involve eight quality dimensions, according to [40], like performance or durability Working Directions The presented framework allows two functioning directions for application in PSS-development. The top-down direction (solution customer barriers customer) identifies new customers for an existing PSS or PSS-concept. The developed solution identifies customer barriers that are reduced by the PSS-concept. Customer groups, which place value on those customer barriers, are potential customers and should be involved in the focused-on customers. Wallin [26] also describes this operation: After the need -phase and the solution seeking -phase, the solution development -phase is intended for identifying new customers. The more useful direction is the bottom-up (customer customer barriers solution) procedure, which the framework was developed for. It describes the already mentioned approach: First, the company selects a relevant customer group that lacks in customer acceptance. This step involves the strategy by concerning the desired relation to the customer. One layer above, the customer barriers layer, identifies relevant barriers of customers not buying a product. The selected customer barriers have to correspond with the goals of the company, which are defined by the corporate strategy. The highest layer, the solution layer, defines a PSS-concept to reduce the influences of customer barriers. This PSS-concept has to correspond to the product strategy. 4. Conclusion In this paper, we present a framework consisting of three layers: the customer, customer barriers and solutions, as well as the strategy space. This framework was developed to demonstrate the mechanism for how PSS can increase customer acceptance by reducing influences of customer barriers to designers. Increased customer acceptance leads to more customers, demanding PSS. Thus, this framework serves as an enabler for customer and provider benefits. Designers get a more detailed picture of their customers, including their individual or group-specific thoughts. As these thoughts are considered in-depth with this framework, PSS makes a wider range of customers accessible.. Moreover, designers can use this framework as a checklist to ensure relevant customer barriers are addressed when serving customers of a specific customer group. This may lead to a problem, as each customer is unique and some individual barriers might be relevant for them, but these barriers are not common in the corresponding customer group. In this case, important barriers stay neglected and customer acceptance is not improved. To examine the relevance for and possible impacts on the real industry as well as for evaluation of the entire method, a case study will follow. Moreover, further research on classification methods for customers to combine them in customer groups is necessary. Other research questions are how to connect the layers in detail, how to collate customers according to their barriers and how to select a PSS-planning process for specific customer barriers. Acknowledgements We thank the German Research Foundation (Deutsche Forschungsgemeinschaft DFG) for funding this project as part of the collaborative research center Sonderforschungsbereich 768 Managing cycles in innovation process Integrated development of productservice-systems based on technical products. References [1] Schenkl, S. A., Behncke, F. G. 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6 292 Danilo Marcello Schmidt et al. / Procedia CIRP 30 ( 2015 ) [10] Cook, M., Bhamra, T., and Lemon, M., 2006, "The transfer and application of Product Service-systems: from academia to UK manufacturing firms," Journal of Cleaner Production, 14(17), pp [11] Schmidt, D. M., Bauer, P., and Mörtl, M., 2014, "Product- Service Systems for influencing customer barriers and customer acceptance," Journal of Economics, Business and Management, 3(11). [12] Mont, O., 2002, "Drivers and barriers for shifting towards more service-oriented businesses: Analysis of the PSS field and contributions from Sweden," The Journal of Sustainable Product Design, 2, pp [13] Schenkl, S. A., Sauer, R. M., and Mörtl, M., 2014, "A Technology-centered Framework for Product-service Systems," Procedia CIRP, 16, pp [14] Schenkl, S. A., 2014, "Wissensorientierte Entwicklung von Produkt-Service-Systemen," PhD Thesis, Technische Universtität München, Munich, Germany. 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