Evaluation of value-based business models: Case study in industrial equipment manufacturing

Abstract

Value-based business models can create value for industrial equipment manufacturing companies and their customers. The models are derived from business model, servitization, product-service system, and pricing literature. However, the transition toward value-based business models introduces risks for industrial equipment manufacturers. Moreover, customer value creation, value capture, and overall success of value-based business models depend on many factors. These factors include the value-based business models themselves, their implementation, and other internal and external factors. This research develops a value-based business model framework from relevant academic literature, most notably product-service system literature and relevant frameworks. These value-based business model options are then evaluated through an empirical case study in an industrial equipment manufacturing company. This evaluation aims to determine what value-based business models are viable and how these models should be implemented to create and maximize value for customers and the case company. This case study indicates that the viability of value-based business models is heavily affected by the nature of offerings. Result-oriented models have higher value creation and capture potential but also introduce more risks. For digital solutions, result-oriented models are the most viable for the case company. For services, value-based business models can be viable but require significant development actions from the case company. For equipment, value-based business models create significant risks and, therefore, should be considered with caution. Furthermore, customer value is heavily affected by factors such as efficiency, risk management, and financial reasons. The case company must consider these value drivers when designing value-based business models. In addition, the case company should develop new capabilities and consider organizational incentives and structures for successful value-based business model implementation. Further research and testing are needed to better understand the requirements of different offerings and the customer perspective, enabling the case company to successfully implement value-based business models.