Servitization meets sustainability

Abstract

Companies that have traditionally sold physical products have begun to increase “services” offered alongside the product.  Sometimes businesses have even gone to the extreme of selling only the “benefit” of the physical good as a service, while retaining ownership of the service-supporting good, such as the Xerox copier in your office. This movement is frequently referred to as “servitization” (Baines et al. 2009), which is sometimes illustrated by the popular saying: “people don't want to buy a quarter-inch drill. They want a quarter-inch hole.” We argue that, with servitization, because the supplying company retain ownership of the physical good supporting the service provided, the company is incentivized to put increased efforts, from design to disposal of the physical good, into designing in processes that will maximize the value that can be recouped from the good after the end of its economic life. This would be consistent with efforts toward increased sustainability in supply chains. In the traditional transactional sale of physical goods companies does not have an incentive to make decisions aimed at keeping the value of the product throughout its economic life. Companies would not be interested in extending its economic life either, or even being concerned about how reusable, remanufacture-able, refurbish-able or recyclable the product is. This has implications for the level of environmental sustainability achieved.