7.01 Pay-per-x: developing servitized business models for circularity in machinery sectors

Giuditta Pezzotta, Federico Androdegari
Giugno 2023
Maggio 2025
Università degli Studi di Bergamo

Università degli Studi di Brescia, Università degli Studi di Firenze, Cavanna S.p.A. 

7.01 Pay-per-x: developing servitized business models for circularity in machinery sectors

In the current global economy, manufacturers can no longer rely on traditional product-focused business models. An increasing number of companies are therefore shifting from selling products to providing solutions to gain competitive advantage and increase revenues, margins, customer satisfaction, and retention. In recent years, this transformation has also strongly affected traditionally product-centric sectors, such as machinery, where customers increasingly demand a shift to more customised, sustainable and flexible business models instead of one-off payments, leading companies to adopt innovative business models. Smart Connected Products and new digital technologies such as cloud computing, big data analytics, AI and blockchain, are seen as both critical challenges and enablers of this transformation. In fact, these technologies are exploited to enforce the connections with the customer installed base, monitoring their behaviour and assets conditions, and to enable new ways for value co-creation through the provision of data-driven services such as remote control and predictive maintenance.
These models (e.g., everything-as-a-service, rental, sharing, pay-per-x, reuse, …) are therefore defining a new competitive paradigm for this sector, no longer based on the traditional product and service sales but on offering sustainable ‘product-service’ solutions in ‘as-a-service’ and/or “sharing” models. Practice confirms that the biggest share of manufacturing firms is undergoing servitization however only a small share has completed its transition from a goods dominant “product sales” business model to a service-dominant “as-a-service” business model.
Moreover, the introduction of these servitized business models, where the use or the function of a product is sold instead of the product itself, has been acknowledged as a key enabling factor of the Circular Economy paradigm, as they can increase resource productivity, extend the lifecycle and facilitate end-of-life collection and recovery.
Although there has been considerable interest in the implementation of business models that involve smart product service offerings, recent studies have shown that their adoption is primarily limited to large-sized companies in the machinery sector. However, manufacturing firms that have adopted such models can realize various benefits, including the attainment of operational excellence in service provision, the creation of customer-centric offerings, and the transition to new value propositions.
Nevertheless, the development of these business models presents significant challenges, including the need to reconfigure organizational structures, human and financial resources, competencies and skills, risk management, partnerships, and ecosystems. Companies often face difficulties in addressing these challenges and adjusting their processes and offerings accordingly
Moreover, the economic and environmental impacts of adopting such a business model are unclear due to the unavailability of established assessment models and tools.
This project aims, therefore, to develop practitioner-oriented approaches and guidelines to support machinery companies in effective adopting these business models by supporting the development and assess of new advanced and sustainable product-service-systems offerings that can be delivered in “sharing” and “pay-per-x” mode.


R1: Research report on the state of the art of servitized business model for circularity
The purpose of this first activity is to investigate the phenomenon of digital servitization and digital services within the machinery sector by conducting research to provide a comprehensive understanding of the current situation and future trends. The research will include an analysis of the diffusion of servitized business models in the sector, focusing on the actual offerings, business models, organizational structures, and assessment approaches. To better understand this phenomenon, exemplary case studies of companies that have successfully adopted circular initiatives will be examined. The ultimate goal is to provide insights into the potential benefits and challenges of digital servitization in the machinery sector and to identify key strategies and best practices for achieving success in this area.

R2: Research report on Servitized business model template for machinery
This report will provide an analysis of different service business models for successful circular economy in machinery sector (e.g. rental, sharing, pay-per-x, reuse, remanufacturing..). The report will therefore discuss also the business, environmental, technological, financial, and operations characterization of the different archetypes. This will led to the identification of key structural weaknesses in machinery sector and possibile actions aimed at fixing them.

R3: Set of approaches to support companies in implementing and assessing the new business model.
Building upon the advancements achieved in R1 and R2, a comprehensive set of valuable approaches will be developed to facilitate machinery companies in effectively adopting new business models. These approaches will encompass a diverse range of methodologies, including service-oriented management methods, which aim to enhance service strategies as well as service operations efficiency. Additionally, models such as total cost of ownership will be utilized to evaluate different service-oriented offerings and assess their feasibility.
Moreover, the project will employ analytical methods to assess the economic, financial, and environmental implications of these business models, allowing companies to make informed decisions that balance financial considerations with environmental sustainability.
Furthermore, the requirements for digital technologies (i.e. IoT, Cloud, AI, and Blockchain) to enable and optimize these business models, providing greater efficiency, scalability, and flexibility will be analysed.

R4: Proof of concept and small-scale prototype in industrial settings
To provide practical guidance for companies looking to implement servitized business models that prioritize circularity, in-depth case studies will be conducted to define a comprehensive set of guidelines to support the introduction of the abovementioned approaches. The approaches developed in previous tasks will be put into practice and tested through small-scale prototypes or with real data, allowing for fine-tuning and optimization. Through this iterative process, the effectiveness and feasibility of the proposed approaches will be evaluated, and any necessary adjustments or refinements will be made.

R5: Policy and managerial recommendations for scaling up
Overall, the project aims to provide tangible and actionable support for companies seeking to adopt sustainable and circular business models, leveraging cutting-edge methodologies and technologies. The insights gained from the case studies and prototyping efforts will help to refine the proposed framework and ensure its practical relevance and effectiveness in real-world settings. A final report reporting the managerial recommendation to properly use the approaches to implement the new business models.