Developing Capability for Product-Service System Innovation: An Empirical Study in the Aerospace Industry

Abstract: The manufacturing industry is transforming in order to meet global competition and offer greater value to customers. The companies are not only selling products, but also increasingly adding various types of industrial services (e.g. maintenance services, monitoring systems, engineering services, leasing etc). These product-service systems (PSS) are integrated offers that include both products and services. Such combinations are viewed as a way to increase customer value, increase profit, create closer ties with the customers and increase sustainability by taking responsibility for the product throughout its lifecycle. However, for manufacturing companies increased focus on service integration means new challenges because customer value is not only created through the physical products, but also with services, software and new business models. Thus, PSS innovation challenges organizations that have traditionally focused on product innovation. Successful transition into PSS innovation calls for development of PSS innovation capabilities such as improved ability for customer co-creation and facilitation of cross-functional innovation. The development of PSS innovation capability require a coordinated change of established practices, involves new ways of working, new collaborations and new methods, since service innovation principally differs in character from product innovation. This research has studied how to do this and how to develop the capability for PSS innovation. This research is based on longitudinal empirical studies at GKN Aerospace Engine Systems, where a four year industrial PhD project has been undertaken. Through the use of qualitative methods such as interviews, observations and workshops, empirical data has been collected from both the military business side (where the company is engine OEM) and the commercial business side (where the company develops components in partnership with the engine OEM). The importance of collaboration between different areas and with customers is well reported in PSS literature; whereas this research provides insights on how to support collaboration for PSS innovation. In particular it describes how the different time perspectives related to products versus services affects the collaboration for PSS. Also described are the methodologies to use in PSS development that systematically support the creation of new PSS innovation offers. The establishment of a collaboration network and supportive methodology leads to the development of capability in the company. This research presents how PSS innovation capability develops through the establishment of routines and activities in early phases of PSS development.