Product-as-a-Service (PaaS) also referred as Product-Service Systems, is a combination of products that are accompanied by services.
Products can have multiple life-cycles.
Over the past years, producers and manufacturers have been focusing on selling their products in one-time transactions. This is what we now call the linear economy. Customers are the owners of that physical product, and producers are no longer responsible for taking care of the product. As these companies are not incentivized to create the best possible product, they gain most benefit by selling as much as they can.
Product-as-a-Service (PaaS) also referred as Product-Service Systems, is a combination of products that are accompanied by services. The product is joined by more features or service contracts to repair or replace. With PaaS, products are offered in subscription models that are offered with services attached.
Customers subscribe to the product and pay recurring fees. PaaS companies have more ongoing engagement with closer customer support. Because ownership is not transferred, there is a large circular economy potential, since the company is now responsible for producing a better product.
The transition from product to an all-inclusive service engagement lifespan ensures that the customer lifecycle is extended and is ensured by the services associated. Physical products are combined with services and software to monitor the customer process.
Instead of paying a one-time fee, customers subscribe to the products and pay a weekly, monthly or yearly fee, and the product is then delivered as an experience or extra service. Most of the products we experience every day come in a sort of form of Product-as-a-Service.
Is this like renting products? Partially yes, but Product-as-a-Service comes with extra benefits for customers. It is a whole different experience. Customers can expect that the producer will take care of the product and take it back to have a new life.
How did everything start?
PaaS is not a new business model. Instead, it has been around for quite some time now, but has not been applied in these new contexts of circular business models that are more enabled by digitalization, IoT and circularity. Product-as-a-service has also increased the interest from manufacturers/producers as a way to boost the profitability of their products, strengthen customer relationships, and launch new lines of sustainable business.
Product-as-a-Service is a completely different economic model than traditional linear models (take-make-waste or dispose). With a linear model, once customers don’t need the product anymore, it ends up on the trash. With a circular model, the product returns to the producer where it can be recycled and given a new life.
This is one way of how Product-as-a-Service is connected with the Circular Economy Model and why it is extra valuable for companies that are looking to become more sustainable.