Developing a performance measurement system for organizations offering product-service systems

Abstract

Modern manufacturing is increasingly characterized by ‘servitization’, a strategic shift whereby companies transition from selling products to offering comprehensive solutions in the form of Product-Service Systems (PSS). This paradigm shift, aimed at enhancing customer value and securing a competitive edge, has been well-documented in the literature, with notable examples such as Rolls-Royce’s “Total Care” service illustrating the potential for improved profits, customer loyalty, and environmental sustainability. However, the journey towards a successful PSS model is not without its challenges, particularly in the realm of performance measurement, a critical yet underexplored component in the literature. Despite the recognized key importance of performance measurement systems (PMS) for PSS, there is a notable gap in research addressing the development of PMS for PSS offerings. Unfortunately, current methods for PMS development are largely designed for product-centric organizations and do not align towards serving the needs of the end customer, failing to capture the complexity of highly integrated PSS offerings.This study aims to address this limitation by proposing a method for developing a PMS for result-oriented PSS offerings in the use-phase, through the case of Vanderlande, a global leader in material handling systems with its TUBTRAX solution. With this method, Vanderlande and other organizations should be able to define a set of performance indicators, enabling the measurement of their PSS solutions’ performance in service delivery. Thereby, this method will aid Vanderlande and other organizations in the servitization journey. Furthermore, the study poses several avenues for further theoretical exploration and empirical investigation, ultimately contributing to the broader discourse on strategic business transformations and management. This research project uses design science methodology at its core. A systematic literature review of 43 references is performed alongside 20 semi-structured interviews with industry experts, which are combined with findings from an external case study of a long-time successful PSS supplier in the domain of industrial printing solutions. All data are coded thematically using CAMO logic to formulate a set of design principles and requirements, which are then used to inform the solution design. The solution design is evaluated through an alpha test, applying the solution in real life for the case of Vanderlande to validate its functioning and through a beta test, using a role-playing simulation with other product managers to ensure the solution’s reproducibility. This research project develops a method to develop a PMS for result-oriented PSS offerings in the use-phase, consisting of an actionable framework and process to generate a set of metrics suitable to such offerings. The framework is a novel adaptation of a model proposed by Baines & Lightfoot (2013b). It suggests the usage of two sets of metrics: external measures to reflect effectiveness or customer outcomes, and internal metrics of the PSS supplier to show efficiency. To create a PMS, measures of effectiveness need to be cascaded throughout the service delivery process into internal metrics to create a pyramid-like structure. This way a causal model of performance is created. An accompanying process is derived that explains the steps to develop a PMS in detail.