Sustainable Servitization. Good morning and welcome to our OnPoint session on Sustainable Servitization. My name is Merle and I have the honor, together with my fantastic colleague Lars today, to facilitate the session. So we are part of Implement's Sustainable Strategy team. And before we start, we'd like to give you a short introduction about our individual passion, but also the one that we share. Thank you, Merle. Great to be with you here today. First of all, my passion is all about transforming business models, exploring new ways to tackle and facilitate business development, like using all the data we have and gather. And I really like the concept of twin transformation and especially where we combine digital and sustainability. Great things coming in there, I think we are on the first stage, really exploring the huge potential there, combining and twinning things. Like we do here today, talking about servitization and sustainability. So, Merle, what are your passions? What are they all about? I'm super passionate about exploring and finding the right solution for companies and exploring, but also to become more sustainable. So, especially the shift of an organization towards the circle economy is super interesting for me. I really like to explore the bigger picture and then have a deep dive in the organization to actually identify the leverage in the different departments. Because, I mean, sustainability is everywhere and so many departments. And I think that's why I think that's why I'm super passionate about servitization because there are a lot of links in different departments, for example, product development, but also into data management and the pricing. So, here we come to today's topic, sustainable servitization. And what is on our agenda today? Yeah, Mel, let's have a look at the agenda. And just before we start talking about sustainable servitization, we'll try first to define the term of servitization to create a common understanding. And then we'll bring servitization into the context of sustainability and distinguish between usual servitization from a sustainable one. And then we'll bring servitization. And then we'll bring in the term of servitization. And then we'll talk about different fields of application and start a conversation if this approach is suitable for your organization out there. But Mel, talking about where this could apply, you had an interesting interview, right? Yes, I had. I interviewed the head of Blue Movement from the BSH household appliance and we have a deep dive and interview prepared. Okay, that sounds interesting. After that, we'll have a closer look at what's needed to create sustainable servitization. We'll give you an overview of different starting points for the transformation. And at the very end of there, we'll, of course, make sure that we have time for questions. Yes. Okay, but before we actually start, go to the chat because we are really interested who is participating today and who is with us. So, please write your name and also the organization you are from and where are you in the world. And feel free to add some words about your experience with servitization. Super curious who's joining today. Absolutely. Absolutely. Product as a service and all those things that's running around out there. You must have plenty of fantastic examples and you might have some experience that we all could benefit from. So, please feel free to fill in the chat. Let's see who joins in. Yeah. It's interesting. It's interesting. Super interesting. So, just write your message there on the chat. Who you are. Hi. Good to have you. Cecilia from Switzerland. Oh, yes. Yeah. And we have Jonathan. Nice to see you. And Gabrielle. Good to have you in the chat. Thank you very much. From Stockholm. From Stockholm. Yeah. The Netherlands. Yeah. Fantastic. You're all over there in Danfoss. Nice to see you guys again. Yeah. Inaginet is also here. Thank you, Julia. Nice. Fantastic. Also from the Cradle to Cradle NGO. Absolutely. Absolutely. Super nice. And Patrick. And Patrick also from the Louvre. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Hello, Patrick. Nice to have you here. Okay. Great. Okay. Yeah. So, before we actually dive into the sustainability topic, I think we have to first have a look at the term of servitization. So, what is actually servitization? Since the 19th, this term has been a phenomenon, especially in industrialized countries. During that time, a lot of manufacturing companies have faced sensitive or price sensitive markets due to high market saturation and imitators from low wage countries. Adding services have helped a lot of manufacturers to differentiate themselves from their competitors, but also to help to increase the customer loyalty and to generate further revenue after the point of sales. But servitization does not only describe having additional services. It's more than that. just selling services besides having a product. It describes more the transformative path, actually, from a product to service focused business model. And from our perspective, I mean, it's not always about the business model. It's a lot about the people, right? So, it's more the shift in thinking, actually. And to sum it up, servitization describes the shift from a focus on selling a product, to selling a product. But why are we actually combining that with sustainability, Lars? Why is it so important? Yeah, that's a very, very good question there, Mali. And actually, we think there are three whys for twinning servitization and sustainability. Innovation, resources and affordability. We think there is an innovative potential to combine sustainable solutions with stable revenue and customer loyalty. Not just traditional product development as we see today, but really to try to twin those things as well. We also might build a different ownership of materials to secure, scare resources. You all know we have them or don't have them. And we might create affordability. We might create a different way of our product, especially relevant for expensive products. So, that might be the three major whys, twinning these things together. And the chances of decopying economic growth from resource consumption is increasing here, we think, when twinning these things. But, Mali, what kind of business models could one look at? What business model might apply here? So, let's have a look at that. I was talking about that servitization is actually the transformative path from a product to a service focus. So, we have a whole continuum of possible product and service combination. And the continuum can be distinguished by three categories. The product, the use, and the result-oriented business models. And let's start with going from the left to the right. So, having a high product share. So, having a high product share. So, we have actually, when it comes to product-oriented business models, we have the product-related service. Let's take an example. Let's take the car as an example. What kind of service could it be, having a product-related service? This could be like repair or maintenance, right? Absolutely. And let's look more in the middle, where we have like an equal share of product. And here you have like a product and service. And here you have like the use-oriented business models. And taking the example of a car, it's quite easy to bring that into this field, right? So, everyone knows you can rent a car. You have car sharing most often in cities. And there are some providers actually also providing car pooling solutions, right? When we go now to the right, to the result-oriented business models, it gets a bit more tricky. Absolutely. Absolutely. Because here, you actually have to rethink the product into a service. Taking a car as an example. Hmm. What is, how can we actually transform it into a service? That's a good question. Yeah. The thing is, we have to think about the function of the car. What is the functionality? So, going from A to B or mobility is the function of a car, right? So, there might be more functions like, but the, overall idea of a car is go from A to B. A place to eat. Yeah. True. But having a focus on that function. So, there's a good example from the city of Hamburg, actually. There's a provider offering like the service traveling from A to B, regardless of the means of transportation. So, in this platform, you can actually have access to buses, ferries, also rentals, and a lot of things. So, it's regardless of your means of transportation. Mm-hmm. And here, you see that the role of the product is declining. And this is getting super interesting in terms of sustainability. Yes. Because you somehow decouple that. And the potential of business models to promote sustainability tends to be higher for those with a high level of service. And particularly, the result-oriented business models offer high potential for that, because of the large solution. solution space you have to derive the performance. Okay. But... Sounds quite interesting, Manny. Yeah. Yeah. Thank you for sharing. But maybe we need some real examples, right? Let's look at what people are doing out there. Yeah. Let's look at that one. So, let's look at different examples in which servitization can be applied. I guess you all know the famous example like the power by the hour, the product as a service example, by Rolls Royce, in which the customer pays the engine performance on a fixed cost per flying hour, rather than buying the whole engine and the additional maintenance service. We see that a lot in different industries right now. This service approach creates the need to develop a long-lasting and robust design, right? With less downtown. That's very important. We also see companies like Signify offering light bulbs, light as a service, rather than selling light bulbs. One see that actually in Amsterdam airport. So, when you pass through there next time, please have a look. They service the whole airport there. But if we go to the business to consumer field, we also see great examples now popping up. We see, for instance, we see, for instance, mud jeans, where they offer, yeah. Could you imagine that, Meryl? They offer jeans leasing. Yeah. And swap fields offering bikes for long-term rental. That's also very interesting. So, they are all interesting movements. And we just mentioned a few here. There are plenty of examples out there. But on that topic, Meryl, you had that very nice interview with Patrick, right? Yes. Let's go to that topic or to the interview. So, as we mentioned, we prepared that interview to have a deep dive and to have a better understanding of such a business model. And we look at Blue Movement now. And this is belonging to the BSH Household Appliance Group. And the business model is offering household appliance on a subscription basis. And, yes, we had the chance to have a great deal. And yes, we had the chance to interview Patrick. Hi, Patrick. Nice to have you also in the session today. And thank you again for the great conversation and taking the time for that. In the interview, we discussed the differences between Blue Movement and the common business model of selling products. And we also had a look at the challenging parts actually to set up such a business model. Have fun to watch the interview. In our case, the core business is selling out home appliances as a one-time sale. And then also offer customer service afterwards. Whereas with Blue Movement, we rent out the home appliances. We have mid to long-term contracts with customers. And this is one of the first advantages of Blue Movement as a servitization concept. So that we have long-term contracts. So that we have long-term relationships. And if you or if we by now get some data, this gets also predictable. So meaning we have predictable revenue. We have an active customer base who is, yeah, they're paying their bills. So I know pretty sure the revenue of next year, even if we wouldn't do any marketing, we have a lot of money. So we have an active customer base. It's predictable and reliable. And second thing is also, I think, servitization is an opportunity to, again, look into the needs and desires of customers. Because at the end, it all comes down to helping customers and solving their problems. And normally the products itself do that. However, with servitization, the idea is how can you kind of augment the product? or enrich the solution itself? So this is, I think, also what many companies and also PSH in their core business do. But again, here with servitization, it's an opportunity to check again. Can we do better? Another advantage, mid to long-term, is really also access to materials. So if we assume that in the future, the cost of resources, the cost of materials will go up. Servitization can be an opportunity to decouple growth from resource consumption. Because with blue movement, we as PSH remain the owner of the appliances. And when appliances are not used anymore, they get back to us. And in most of the cases, we will refurbish them. But with blue movement, we have access to, in some years, in some years, in some years, then older appliances. And we can use components, materials there, do some kind of urban mining. And we're not there yet. That's the visionary part. Unfortunately, home appliances last pretty long. But we believe that it will be an advantage to have access to these materials and components in the future. So here, in our example, blue movement adds another, let's say, learning layer. And this is the refurbishment process. So no one else in BSH does refurbishment on a regular, ongoing basis. And here we gather data points BSH doesn't have. So here's this learning about the product design again also depends on where you start from. And what's also the, what are the elements you want to know. What are the elements you want to know? Our traditional business is used to manufacturing the products and selling them. And in that very moment, when we sell them, we have the revenue in our books. Whereas with servitization, we have to make assumptions about the future cash flows. How will customers behave in three, five, ten years from now? And how much risk do we want to take? And of course, over the time you get more actual data. So you can evaluate that further. But there is, especially at the beginning, also more uncertainty, how these cash flows will develop in the following months and years. I just signed up some weeks ago for on running subscription. So on is a, like a shoe brand focused on running shoes. And they came up with an offering where you pay 30 euros a month for a running shoe. And after six months, you can send it in and get a new one. And the shoe itself is made only out of limited, limited materials. So they take the used shoe, recycle the textiles and build new shoes from it. So really making it, yeah, I think it's a not perfectly closed loop yet, but really close to that. But the point here coming back to the uncertainty and time horizon is I know if I do the normal yearly kilometers, I need two pairs of new shoes every year anyway. And they cost about 150 to 200 euros. Of course, they're cheaper and more expensive ones. But if you say, okay, they'd now charge 30 euros. If you take it per six months, if you take it per six months, it's 180 euros. And they get already after the first, let's say, nine to 12 months, they get quite some solid data. How long will people stay? Do we want to trade in after five months already? Or do most of the people do it after eight or nine months, which makes quite a difference. Whereas, as you mentioned, for washing machines or fridges, many people, many people expect that these appliances last longer than 10 years, and most of them also do. And so we have to adapt with our pricing structure. And when we then learn about actual behavior, we also have to somehow, of course, predict a bit and do surveys, how long will people stay? But ultimately, there is some uncertainty left. And so here again, it totally depends on the lifespan of the appliance itself. Running shoe for people who run half marathons or marathons lasts just a couple of months, you learn quicker and get more data, whereas other appliances and products might last longer. And there you have to bridge a longer time. Wow, Malle. What a great conversation you two had there. Absolutely. Absolutely. And I love this example, because it really shows that you can start this journey by setting up an entity and just do a lot of testing, for sure, in the beginning. Absolutely. But then to build such a business model. Absolutely. I love it. Yes. Really fine. And we also hope that you have gained some ideas, actually, how this might apply also in your organization or to have some ideas. And now we get into more an interactive part, because we really want to know, how would you approach sustainable servitization now in your organization? You have learned a lot now about the possible business models, and some examples. So think about how would you actually approach this in your organization, or just if you are, maybe from an NGO, think about one example, maybe from an NGO, think about one example, and how you would maybe tweak it to a more sustainable servitization business model. What is Danfoss doing? Yeah. Yeah. So please chip in, guys. Give us your input here. Yes. Yeah. And there's also Dirk Schoening from the Pedersen Group. So you're thinking about servitization. Give some examples. How could you tweak your business model? Absolutely. University of Technology. University of Technology might also chip in here. Yeah. Having some great ideas or some observations. Yeah. So let's see what you have of ideas. So we're... Mayenne, you might also have a few comments here. I'm sure you have. Yeah. Yeah. Yeah. Let's see. I'm super curious about the ideas. Absolutely. Absolutely. Absolutely. Because we have some ideas in our mind, actually. We do have a few steps that you could take where you could start out, at least. So, yeah. So we have one answer from Dirk. So supporting the modularity to reassemble it a bit. Yeah. Yeah. To reassembling. That's interesting. Cross-selling capabilities. Yeah. Yeah. Interesting. Super interesting. Yeah. Christopher. Hi. Hi, Christopher. So experimenting with different ways of capturing value. Do you sell a subscription per performance? Could you monetize non-buying stakeholder? That's interesting. Non-buying stakeholder? Yeah. Yeah. Okay. Okay. Okay. That's interesting. That's a new one. Yeah. And the non-buying. Yeah. That's, of course, also in the segue of this one. You could say the affordability, as we talked about earlier as well. That's on that segue, I could imagine. Yeah. I would like to add sustainability in the procurement departments. Absolutely. Absolutely. Yeah. Way to go there, Cecile. Yeah. Absolutely. So good. Yeah. So I think maybe we should also share some ideas from our side. Some of our viewpoints there. Yeah. It might apply here. Let's see what we did. So we actually had a question. So how or what actually needs to be done to make sustainable servitization happen? And from our perspective, we actually have four conditions for sustainable servitization. First, you actually need to apply a more holistic and more holistic and systemic perspective. Because there are rebound effects. You know, all of them, they often occur after you launch a product and you might have a sustainable performance in the beginning, but then you have those rebound effects. And to try to avoid that, you need to understand the dynamics of your system. So what happens when I increase the service share, for example? Or what happens when you actually sell your product as a product as a service? Will people be gentle to your rental or not? That's a big question, right? So you can start conversation in the organization or to test things to actually get some ideas about the different interdependencies in your system. And this will actually help you to avoid those negative effects. And second, super important is there's a need to decouple the resource concern. So what is the cost of consumption from your profit maximization as you said last? And how can we actually do that? This can be done by bringing the right elements together. As you have learned, there are some types of business models with a higher tendency to unleash a sustainable potential, right? So we think that especially the ownership part is a thing, the pricing, the usage model, but also to think about incentive systems in regards to leverage your sustainability performance. And when you transform your business model, you need really to constantly improve your product and service performance. There are so many product as a service examples out there where you just have the usual product as before. But I mean, that's the starting point to offer like services. But on the long term, you really have to think about how to maybe adjust your products. Some products are super fine just for having it as a service. But you might have to tweak also the design to the different or the change in user behavior. And last but not least, we have the thing with actually that you have to integrate sustainability into your organization to the core. And it's a lot about the mindset. As we said in the beginning, it's a lot about changing the thinking. And you can start conversation actually to also bring those sustainability aspects into your organization. Yeah. So I think there are a lot of things to keep in mind. Absolutely. Four very relevant areas, so to speak. And you could say it sounds a bit abstract. I don't know, maybe one or two of you out there feel the same. And that's why we have prepared, right? And try to prepare a slide with possible starting points to change and create impact with the twinning of sustainable servitization. That's what it's all about. So maybe we should have a look. Yeah. As you can see, we looked into each of four conditions for sustainable servitization. And just to give you some examples, to understand the dynamics in your system, you could possibly start to list all the impacts of your current offering on environmental or the socioeconomic system. Then you can make some assumption and do testings with a pilot. When looking to sustainable business modeling, it's all about to go back to your drawing board and think about the functionalities of your product. And what is the customer actually willing for? What is the performance at the end? Absolutely. And then there are also some other examples. Exactly. And you say, okay, we have created four paths here. And the data path could start where you gather the product and service related data. You do a kind of assessment of the product lifecycle of your product. And you might identify hotspots and adjust the design according to the performance of the performance of your product. And last but not least, I would say, is the rethinking where you can start understanding the impact we have on our products. Our products have on people and planning, so to speak. And then start defining desired goals. As mentioned before, what kind of goals do we have entering a new version of our business model? That's the very interesting one here. So those four paths or streets you could explore and dig into. Okay. Perfect. So I already see that our time is finished. But if you want to join or stay a bit longer, you are more than welcome. We are done with our presentation. We will just do like the wrap up and then a small Q&A if you like. For all the people who are interested in the slides. We can send it to you. Please reach out just to implement. But for the people who want to stay, just stay. We have like the wrap up. And I think it will be uploaded to the one participating. So you can catch up. Yeah, absolutely. Absolutely. Okay. So yeah. So the OnPoint is coming to an end. And in the session, we actually learned about servitization, how it can be linked with sustainability. How it can be linked with sustainability. And we also had this great examples and a deep dive with Patrick and the Blue Movement business model. And we had a closer look actually to start or to have some ideas about to start the journey, right? And how this can be approached. Okay. So if you have some questions. Yeah. Yeah, absolutely. We hope that we could give you some inspiration here on the topic, twinning, servitization and sustainability. And we're looking forward to your questions. Perhaps not now as time is running very fast. But please come back to Mel and I. You have our contact information here in the presentation as well. So just come back to us and we'll be happy to answer any questions running in from here. So I guess that's more or less that for today. But if we have one or two questions now, we could take them. Otherwise, we'll skip it and save them for later. But there's actually a super interesting note from Beverly Leger. What I noticed during research was that we need to create a circular ecosystem of value-adding actors that mutually complement each other in terms of complement each other in terms of services as well. Collaboration plays a big role. Yes, definitely. It's a very important part, especially when it comes to circular business models, because you need this ecosystem to close all the loops. That's a good hint, Beverly. Thank you. A very fine one there. We see that popping up a lot now. That is that combination of value chains and how they connect. So absolutely a valid and strong point. Thank you. Thank you. Okay. Okay. Okay. I think we'll skip the questions for now. Time has run out. So just come back to us. You have the contact data and we'll be happy to answer as much as we can. Yeah. Thank you very much. Thank you. And if you need more such events, there's one actually on next Tuesday. Sustainable Reimagined. So this is super interesting. So this is super interesting. Sign up for that too. So it's super nice. We will also join. I mean, I will. Yeah. Yeah. Definitely. Yeah. So thank you, Mary. It was nice to be here with you today. Okay. Have a great day. Bye for now. Bye.