Product-as-a-Service (PaaS) is a business model that allows customers to purchase a desired result rather than the equipment that delivers that result. For example, compressed air is an important medium for transfer of energy in industrial processes, and is used for power tools such as air hammers, drills, wrenches and others, as well as to atomize paint, to operate air cylinders for automation, and can also be used to propel vehicles.
One company, Kaeser Kompressoren, has decided to offer a new product access offering called Sigma Air Utility which is compressed-air-as-a-service. The customer receives a reliable supply of compressed air tailored to their needs. Instead of a large capital expense, customers pay a monthly fee to have clean, dry and energy-efficient air at the ready.
New business models are a feature in the circular economy. In particular, Product-as-a-Service (PaaS) will revolutionise the way we use products. The basic foundation of PaaS is a shift in product ownership via a rental or lease arrangement between a company and the customer. The owner of the product sells the utility or function to the customer. At the end of the contractual agreement, the owner takes back the product to refurbish, repair, remanufacture or disassemble so the materials can be reprocessed and used by a manufacturer to make into a new product.
Three Types of PaaS Offerings
- Product-oriented PSS: Products are sold to the user, but additional services are added, such as maintenance or product-related consultancy.
Use-oriented PSS: The business model is geared toward selling the product function, that is, through leasing or renting and the product remains the ownership of the PSS provider.
Result-oriented PSS: The business model is geared toward selling a result and is as such closest to offering a pure service, where no predetermined product is involved.
(Source: ‘Product Service Systems for a Circular Economy: The Route to Decoupling Economic Growth from Resource Consumption?’ by Louise Laumann Kjaer, Daniela C. A. Pigosso, Monia Niero, Nynne Marie Bech, and Tim C. McAloone. Published in Journal of Industrial Design, Yale University, 2018)
The Product-as-a-Service workshop is a one day workshop that reviews all the aspects businesses need to consider when switching from selling products to selling products as a service.
We have a selection of workshops to choose from, starting with our ½ day mini series for busy people or the deep-dive 1 or 2 day workshops. Visit The Nine Steps Towards a Circular Business® to review the current selection of workshops on offer.
This section includes a wealth of reports, research, infographics, movies, performance-based contracting, presentations, service costing and tools. For information on the core functions of the circular economy, refer to the Functions page.