To address our times environmental challenges, new production and consumption models are emerging in all countries throughout the world. In this respect, the service economy is a concept that is gaining more and more prominence in the B2B (Business-to-Business) market in all sectors of activity. This model favours usage over ownership, with a sustainable development perspective. It thus offers an innovative and sustainable alternative to traditional economic models. To apply it in your company, it is essential to understand the concept, the fundamental principles and the advantages.
What is the service economy?
The service economy, or service industry, consists of providing integrated solutions of goods and services. In other words, this involves selling a usage performance or use, rather than the ownership of a good. This concept is also found under the name of usage economy or performance economy.
The service economy is based on the principle that the consumer is more interested in a product functionality, i.e. the use they will make of it, rather than the product itself. The transaction is based on the customer’s consent to pay a usage value and no longer on the transfer of goods ownership. This is why the solution offered fulfils the same functions as the good, or even offers extended functions. The idea is to replace the volume logic with a service logic, by committing to product efficiency.
This new economic model is part of a circular economy perspective, as it separates growth from the consumption of natural resources, energy and raw materials. Its competitiveness now lies in quality and performance. Because manufacturers retain the ownership of the goods throughout their life cycle, maintenance and repair are an integral part of the contract. This is the opposite of planned obsolescence! This therefore encourages sustainability by improving waste management and optimising the use of resources.
Lastly, this provision of services promotes cooperation between stakeholders, i.e. between customers and their service providers, to maximise the value created. In this sense, it echoes the circular economy and the collaborative economy. With the service economy, the "one shot" transactional relationship gives way to a sustainable partnership based on trust.
The service economy advantages
The service economy has undeniable advantages for all stakeholders. For the customer, it is the promise of accessing efficient, economical, flexible and sustainable solutions.
Efficient solutions
With the service economy, companies outsource part of their value chain to an expert. All this, with a guaranteed result since the supplier’s remuneration depends on it. This guarantees them to purchase high-performance, durable and quality solutions, allowing them to focus on their core business.
Cost-effective solutions
By opting for the service economy, companies have access to cost-effective solutions, without necessarily having to invest in expensive products. They can thus benefit from quality services while reducing their expenditure.
Flexible solutions
This economic model also offers customers the possibility to customise services according to their specific needs. They can choose options and functionalities that perfectly meet their requirements, which contributes to improving the user experience.
Sustainable solutions
Through the service economy, companies are promoting the circular economy. Manufacturers are redoubling their innovation efforts to maximise the value in use and optimise the lifespan of the products they own. Value creation is therefore directly linked to sustainability.
Service economy: Three key examples
More and more companies in the tertiary sector are embracing the service economy to launch advanced, innovative and differentiating offers in their market. Like Michelin, which no longer sells tyres but charges its customers for the number of kilometres travelled, here are three exciting examples of service industries.
Xerox and printer provision
Xerox, an American company known as the world’s leading printer manufacturer, is attracting more and more businesses with its Managed Print Services solutions. The principle is simple: it involves leasing printers and associated services, instead of buying the equipment.
Today, the company even offers tools to help its customers better manage their CSR (Corporate Social Responsibility) policies. This can involve, for example, a data visualisation portal that quantifies the equivalent of printouts in terms of the number of trees consumed, volume of water used or carbon footprint… There are now even carbon offset contracts that involve planting a tree as soon as the company reaches a certain number of printouts.
Signify and lighting as a service
Signify (formerly Philips Lighting) offers lighting solutions where customers pay for the light they consume. Throughout the life of the lighting system, the company guarantees maximum reliability and efficiency as well as reduced operating costs.
This model of service economy includes a whole range of associated professional services such as:
- A tailor-made lighting plan;
- Customised design;
- Preventive and immediate maintenance;
- Remote assistance;
- Guaranteed lighting performance;
- Professional training;
- Expert advice;
- Financing of the lighting system.
BASF and buying healthy acres
The BASF group, a world leader in the chemical industry, has launched its xarvio™ HEALTHY FIELDS offering. This offers cereal farmers the opportunity to purchase healthy crop acres, in a guaranteed way.
The supplier manages and implements its fungicide protection for a fixed price, through an optimum and specific strategy. It optimises the application, the product and the dosage, by combining different factors such as location, weather conditions, previous crop, variety grown… If the result obtained does not meet the initially defined expectations, the farmer is compensated.
The service economy is fully in line with the ecological transition approach, but also the energy transition. By favouring the provision of solutions rather than the purchase of products, the service economy allows companies to benefit from a better user experience, while improving environmental and social performance. As you can see, this model, in a way, reconciles the economy and sustainable development.
