Digital Product Service Systems – New Business Models for Manufacturing Companies

Steinbeis experts conduct research into the use of Product Service Systems as part of the Use PSS network

Digitalization is accelerating at an unprecedented pace. Everything regarding digital transformation revolves around the customer, whose expectations regarding products and the companies that supply these products have changed fundamentally. Previously the emphasis lay in providing tangible goods of premium quality, whereas in the future the customer will want solutions that do everything. One good way to provide capture-all solutions is to use a Product Service System (PSS). This is a system consisting of conventional product elements which will typically be expanded on during the product life cycle by adding digital services. The Federal Ministry for Economic Affairs and Energy (BMWi) is backing a consortium project called Use PSS. Its focus lies in the usability of PSSs in small and medium-sized business with the aim of helping SMEs to introduce smart solutions. These could combine tangible products with digital services as an answer to a variety of user requirements. One of the consortium partners is Pforzheim University, where they have developed a model for introducing Product Service Systems. The team at the university has been working with experts at the Steinbeis Innovation Center 2 Digital Business and carrying out testing involving real applications.

The project team aims to develop a best practice model that can be matched to the needs of the target group – SMEs – and then transferred to a variety of sectors of industry. Another planned outcome of the research project is to set up a PSS competence center in collaboration with bwcon GmbH, also an enterprise in the Steinbeis Network. The center would act as a first port of call and provide a networking springboard for all kinds of companies interested in transforming from a product supplier into a solution provider.

To address customer requirements in the long term and avoid lagging behind the competition, companies have no choice but to react to the sweeping developments being brought about by the advancement of digital technology. The only way to survive will be to adapt correctly to each new situation as it arises. For most companies, this transformation is yet to happen. The big challenge these companies will have to face is how to transfer new and innovative business models in a way that makes sense for the tradition or background of the company. To do this, businesses have to carefully examine their existing portfolio of products and services, completely rethink it, and if necessary go back to the drawing board. There must be no delay in discontinuing obsolete products or services to make way for new fields of business and customers.

For the team working on the Use PSS consortium project at Pforzheim University, which was spearheaded by Prof. Dr. Rebecca Bulander and Prof. Dr. Bernhard Kolmel with the scientific support of Alexander Richter and Johanna Schoblik, the starting point was to develop a four-stage model for creating a Product Service System. The four phases are:

  1. Sensitize people to the idea (Sense PSS)
  2. Share knowledge of the methods (Ideate PSS)
  3. Design an initial Product Service System (Create PSS)
  4. Implement and use it (Use PSS)

The model is aimed at individual companies or groups of companies. During the first phase, Sense PSS, people should work out what information they already have and the impact digital transformation could have on the company. The aim is to create awareness of the current situation and the need to take action. People can be made aware of problems by organizing talks and meetings, not just to look at digital trans formation itself but also to highlight the extent of the impact it will have on the company, its products, and its services. It is quite common for people to not realize that something needs to be done now, especially if business is flourishing and products are selling, since this will tend to overshadow everyday activities at the company.

The Ideate PSS phase mainly involves training users in order to share the methods needed to develop a Product Service System. This entails going into more detail with techniques such as Business Model Canvas, Blue Ocean Strategy, and Design Thinking. To develop a Product Service System successfully, it is recommended that at least one external specialist be brought in with sufficient experience of the methods involved. Their task is to coordinate and steer how different methods (or parts of methods) are applied.

During the design phase, Create PSS, the aim is to develop a strategy and one or several new digital business models during workshops. These should be attended by people from different areas, managers, and if necessary even customers of the company. It is essential at this point to look at the company from a variety of angles and take a different view of products. Customer opinions are extremely important, but so are the opinions of senior management and the views of employees at other levels.

During the last phase, Use PSS, the business model that has been developed is adapted to the specific customer, introduced, and if necessary redeveloped. At this point, ongoing operations and continuous improvements to the new Product Service System are the priority. Even after completion of the Create PSS phase, any ideas that are thought of and found to be good after testing are introduced to company development cycles and redeveloped until they are ready for the market. Key factors that need considering during implementation of the development project include ensuring that people focus carefully on developing a PSS that integrates all aspects from start to finish and that a service mentality is reflected in everything that is implemented.

The team at the Steinbeis Innovation Center 2 Digital Business is currently testing the model developed for the project in a series of workshops with the consortium partners involved in the Use PSS project. The feedback and evaluations carried out by these companies help the project team fine-tune the model to meet the needs of the SME target group. The consortium partners are placing emphasis on ensuring the model is as simple as possible to use. This is also to make sure it gains acceptance among the target group and delivers the best possible results.

The increasing number of overlaps between products and services is a door-opener to many opportunities to develop new business models, especially given the options offered by digital technology. Unexploited potential can be tapped into, not just with respect to the company but also in terms of existing products, and this can be translated into additional benefits for the customer. This is where digital Product Service Systems come into their own in mastering the challenges of digitalization.


Matthias Dietel, Prof. Uwe Dittmann, Prof. Alfred Schätter
Steinbeis-Innovationszentrum 2 Digital Business (Pforzheim)