Sustainable value proposition design in a Product-Service System: A case study at Volvo Aero Corporation

Abstract: Many companies have started to add services to their tangible products in order to defend themselves from increased competition from low-cost economies. Research regarding the transition towards product-service systems (PSS) and how the PSS providers’ business models are affected exists, but there is a lack of research regarding how the suppliers to the PSS providers are affected of the transition towards PSS. Therefore, this thesis studies the situation for a supplier/partner to an OEM that has changed their business model to a PSS providing one. As a first step in a development of a new business model aims this thesis to provide guidelines for how to set up value propositions suitable for a supplier/partner in this new environment.
When technologically complex products, such as aircraft engines, are provided through PSS offerings it is hard to translate customer needs into quality parameters, which makes it hard to sustain the value to customer over time. Therefore, how to keep the value offering sustainable over time is also investigated in this thesis. The aim of this study was to investigate how a sustainable value proposition can be designed for a product and technology supplier/partner to an OEM that offers PSS solutions.
The research has been performed through studying relevant literature and collecting empirical data from a case company through semi-structured interviews and a workshop. The case company in this research is Volvo Aero Corporation (VAC).
The empirical findings show that VAC wants to offer product-service bundled solution, which fit the whole spectra of PSS value propositions, to their partners/customers. To be able to deliver these different types of product-service bundled solutions different value propositions that suit the different kinds of PSS offerings are needed. Requirements that must be fulfilled to be able to offer and deliver the different types of value propositions exist in terms of securing sufficient information access, aligning the incentives of all actors involved and achieving an internal consensus of what is delivered.