A refined typology of product-service systems based on functional hierarchy modeling

The Product-Service System (PSS) concept has been proposed as a promising avenue to achieve sustainable consumption and production patterns and to improve the competitiveness of industrial manufacturers. The adoption of a PSS involves an orientation toward selling product functionality instead of selling products. Two aspects in the available PSS literature need to be refined. On the one hand it is crucial to achieve a systematic treatment of the notion of function, which is of central importance to the PSS concept. On the other hand the common PSS typology that distinguishes between product-oriented, use-oriented and result-oriented PSS needs to be revisited, as this categorization fails to capture the complexity of PSS examples found in practice. In this article a new functional decomposition technique, termed Functional Hierarchy Modeling (FHM), is proposed. This technique allows to analyze and represent the function(s) of an investment good within the customer's environment. It gives rise to a novel PSS typology based on the level of integration and the performance orientation of the dominant revenue mechanism within the PSS. Both FHM and the new PSS typology contribute to PSS theory by offering a framework instrumental in understanding the essential characteristics of a particular PSS and in designing a varied set of PSS options for a manufacturer of investment goods. Throughout the paper, this is illustrated with industrial examples. (C) 2013 Elsevier Ltd. All rights reserved.