Guest article by Katrien Verleye, Lisa Antonissen, Marie-Julie De Bruyne, and Arne De Keyser.
Service and other scholars have robustly embraced servitization, identifying it as the adoption of service-based strategies within product-centric organizations and sectors (Kowalski et al. 2022; Kurtz et al., 2023). Presently, there is an amplified focus on servitization due to the pivotal transition towards a more circular economy.
Numerous manufacturing organizations are deploying circular business models, aiming to maximize material and energy efficiency by developing products with enhanced durability and/or utilizing recyclable materials (Verleye et al. 2023). Such business models, exemplifying low levels of servitization, manifest across diverse sectors, such as the automobile industry (see Circular economy : re-cycle, re-use, Re-nault! – Renault Group) and the fashion industry (see Patagonia Outdoor Clothing & Gear). While these business models may foster more sustainably produced products, they necessitate minimal to no behavioral change from customers, who can purchase, use, and eventually dispose of the product, even when manufacturers integrate take-back schemes and engage in material reuse and recycling processes.
When organizations opt – as visualized in the figure below – for higher levels of servitization, the creation of value is decoupled from products and emerges from the services that are being added to the products (Khitous et al. 2022), such as repair and maintenance services. Think about global sports equipment retailer Decathlon which now offers repair services (see Atelier – Decathlon). Though this kind of servitization is commonly associated with prolonging product lifespan, it also necessitates a more substantial impact on customers. To co-create value, customers must return or ship products back to the store for repair, entailing a more significant level of behavioral change to derive benefits from the organization’s offerings.
Peak levels of behavioral change among customers are observed when organizations embrace the highest levels of servitization, transitioning to access-based and/or sharing services (Hazée et al. 2017; De Bruyne & Verleye, 2023). With access-based services, organizations retain product ownership, granting customers temporary access in exchange for a fee, necessitating the return of these products. Consider Decathlon’s subscription-based model, where customers access sports equipment, which must be returned when no longer in use (see We Play Circular – Decathlon). As illustrated by this example, this business model inherently implies customers to invest effort in retrieving and returning products to the organization in a clean, dry condition.
For sharing services, organizations typically provide a platform for sharing services, enabling their customers – encompassing providers and consumers – to connect and resell or swap products. Examples include organizers of clothing swap events like Swap Society (www.swapsociety.co) and organizations that encourage neighbors to share their cars (Autodelen – Dégage! – autodelen en fietsdelen (degage.be) or other tools and materials (Peerby – rent goods from neighbors – Borrow tools, party gear, electronics, bikes and lots more) with one another. For this type of sharing services to exist, customers must collaborate both with each other and the organization, linking these business models to collaborative consumption (Benoit et al., 2017).
In summary, business models that involve higher levels of servitization – inspired by among others the work of Tukker (2004) – are associated with the transition to a more circular and sustainable economy. Higher levels of servitization namely require not only engagement from the organization but also behavioral changes among customers. Therefore, several governments encourage organizations to experiment with access-based and sharing services. Think about the Green Deal Renting and Sharing that has been launched in Flanders, Belgium (Green Deal Renting and Sharing – Detail – Vlaanderen Circulair (vlaanderen-circulair.be)).
When organizations engage in innovating their business model and experiment with higher levels of servitization, the Motivation—Opportunity—Ability (MOA) framework comes into play (Verleye et al., 2023). Recent research suggests that organizations can only propel the transition to a circular economy when they manage to: (1) motivate their customers to adopt their business model (cf. motivation), (2) ensure apt circumstances for their customers (cf. opportunities), and (3) ascertain that customers are capable of engaging with their business model (cf. ability). To realize this, organizations can – as recommended by Verleye et al. (2023) – adopt for motivation-related, opportunity-related, and ability-related practices:
Motivation-related practices involve highlighting the potential benefits of engaging with the business model of the organization (signaling) or directing customers’ attention to specific financial and/or pragmatic measures (convincing).
– EXAMPLE: London Christmas Tree Rental that direct potential customers’ attention to the number of Christmas trees that enter landfill every year
– EXAMPLE: The Swap Shop offering vouchers to customers who bring in clothes
Opportunity-related practices entail the creation of an interactional and institutional context that enables customers to embrace the business model of the organization, for instance by normalizing access-based and sharing services.
– EXAMPLE: COSH! providing an overview of local and sustainable shops to buy or rent clothes
– EXAMPLE: Groover normalizing rental services by launching a website that is in terms of its look and feel comparable to global e-commerce platforms
Ability-related practices encompass the provision of financial and infrastructural resources (supporting) and the development of knowledge and capabilities (empowering).
– EXAMPLE: Library of Things offering physical lockers with corresponding software to organizations that offer rental and sharing services
– EXAMPLE: WeWork investing in market research to better understand what customers care about
Utilizing motivation-related, opportunity-related, and ability-related practices, organizations can engage customers in access-based and sharing services. However, customers may – like organizations – engage with access-based and sharing services in an unsustainable manner. This can include scenarios where customers treat rented sports equipment with less care than their own or utilize a car more frequently when participating in a car-sharing initiative. Given these unintended consequences – also termed as rebound effects (Carlborg et al., 2023), there is a significant need for in-depth academic research on the circular potential of business models with varying levels of servitization. This should include, but not be limited to lifecycle analysis studies, and should be paired with continued business model innovation and experimentation in the field.
Katrien Verleye
Professor of Service Innovation
Center of Service Intelligence, Ghent University
Lisa Antonissen
Researcher
Center of Service Intelligence, Ghent University
Marie-Julie De Bruyne
PhD Candidate
Center of Service Intelligence, Ghent University
Arne De Keyser
Associate Professor of Marketing, EDHEC Business School
Affiliated Researcher, Center of Service Intelligence, Ghent University
References
– Benoit, S., Baker, T. L., Bolton, R. N., Gruber, T., & Kandampully, J. (2017). A triadic framework for collaborative consumption (CC): Motives, activities and resources & capabilities of actors. Journal of Business Research, 79, 219-227.
– Carlborg, P., Snyder, H., & Witell, L. (2023). How sustainable is the sharing business model? Toward a conceptual framework. R&D Management, forthcoming.
– De Bruyne, M. J., & Verleye, K. (2023). Realizing the economic and circular potential of sharing business models by engaging consumers. Journal of Service Management, 34(3), 493-519.
– Hazée, S., Delcourt, C., & Van Vaerenbergh, Y. (2017). Burdens of access: Understanding customer barriers and barrier-attenuating practices in access-based services. Journal of Service Research, 20(4), 441-456.
– Khitous, F., Urbinati, A., & Verleye, K. (2022). Product-Service Systems: A customer engagement perspective in the fashion industry. Journal of Cleaner Production, 336, 130394.
– Kowalkowski, C., Bigdeli, A.Z., & Baines, T. (2022). Guest editorial: the future of servitization in a digital era. Journal of Service Management, 33(1), 59-69.
– Kurtz, J., Meyer, P., & Roth, A. (2023). Decoding the context of servitization: socio-technical pivots on the journey to service-oriented business models in manufacturing firms. Production Planning & Control, 1-18.
– Tukker, A. (2004). Eight types of product–service system: eight ways to sustainability? Experiences from SusProNet. Business Strategy and the Environment, 13(4), 246-260.
– Verleye, K., De Keyser, A., Raassens, N., Alblas, A. A., Lit, F. C., & Huijben, J. C. (2023). Pushing Forward the Transition to a Circular Economy by Adopting an Actor Engagement Lens. Journal of Service Research, 10946705231175937.
– Vijverman, N., Henkens, B., & Verleye, K. (2019). Engagement and technology as key enablers for a circular economy. Handbook of research on customer engagement, 97-113.
Image credit: Jeremy Perkins.
