ASU Center for Organization Research and Design

Servicizing in Supply Chains and Environmental Implications

by Vishal V. Agrawal; Ioannis Bellos

Jun 16, 2016

Recently, a new type of innovative business models hasĀ been developed based on the premise that economic value is not necessarily associated with the production and distribution of products, but rather with the use and functionality that the products can offer. It has been argued that such models, often referred to as servicizing business models, may have a positive impact on the environment because they can enable firms to achieve both economic and environmental sustainability. However, they may also present unique implementation challenges because they require the business-as-usual relationship between the different partners in a supply chain to change from product-based to use- or function-based. In this chapter, we outline a taxonomy of different servicizing business models observed in practice based on different operational characteristics. Based on these characteristics, we also provide an overview of the reasons why servicizing may improve environmental performance. More importantly, we also provide a discussion of why servicizing may backfire and lead to worse environmental outcomes due to the firm and/or consumer decisions. Finally, we identify implementation challenges that may prevent the adoption of servicizing business models in practice.