Four Scenarios for Future of Outcome-Based Contracts

Abstract

This paper identifies and analyzes future scenarios for Outcome-Based Contracts (OBC) in the context of industrial production equipment. Given the extended life cycle of both the equipment and OBCs, external and internal changes can significantly affect their viability and profitability. The aim of this study is to provide insights into the future landscape of OBCs in this context and offer guidance on how to make OBCs resilient in a changing world. This paper uses data from 28 industry practitioners and academics from a systematic Delphi process, focusing on the impacts of various business environment changes on OBCs. This paper identifies a range of potential future scenarios that could shape the evolution of OBCs. The scenarios encompass diverse factors, including market and societal changes, regulatory shifts, technological advancements, changes in industrial trends and strategies, as well as changes in sustainability expectations. Each scenario is analyzed to understand its implications on the business model as well as contractual arrangements. The findings reveal a variety of potential future scenarios for OBCs. The different scenarios indicate a need for different OBCs to be resilient in a changing world. By presenting these scenarios, this research provides industrial equipment manufacturers with insights for anticipating and adapting to potential changes in their contractual agreements and business models. This analysis contributes to a broader understanding of future OBC challenges and opportunities, helping manufacturers design and implement resilient OBC business models.