Equipment as a Service: The Transition Towards Usage-Based Business Models
57 Pages Posted: 9 Mar 2021 Last revised: 29 Dec 2022
Date Written: January 9, 2021
“Equipment as a service” is perhaps one of the most drastic examples of usage-based BMI in the field today. To date, a systematic analysis of this phenomenon is lacking. This study aims to close this gap by clarifying (1) why firms move toward usage-based business models, (2) what the main usage-based business model archetypes are, and (3) how shifting to these archetypes affects business model components and innovates the business model. To answer these questions, we choose an exploratory research design and collect data through 26 semistructured expert interviews that are analyzed in an open and axial coding phase. Our analysis systematically presents macro- and firm-level supply- and demand-side drivers and inhibitors which lead to four main usage-based business model archetypes: Leasing Plus, Flexible Contracting, Renting/Sharing, and Performance Contracting. The most radical model in terms of its supply-side risk-return profile is Performance Contracting. Evidence suggests that two groups of firms are particularly drawn to usage-based models: firms in young, tech-enabled industries, and firms in more mature or even declining industries. The former apply usage-based models as a proactive effort to push their products into the market. The latter do so as a defensive move to secure their market position and not lose customers with liquidity problems. Digitalization is likely to reinforce these developments.
Keywords: Equipment as a service (EaaS), usage-based business models, industrial subscription, pay-per-use, business model innovation, Business Model Canvas, Business Model Innovation Typology
JEL Classification: O14, O31, O32, O33, L64, Q55
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