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Great potential with performance-based business models

Published: 10 November 2016

On the 23rd of November ten years of research and trend analysis in the field of performance-based business models will be summed up. Researchers from Luleå University of Technology, industrial partners and decision makers give perspective on how tomorrow's business can be more sustainable.

Lena Svendsen, secretary at the Ministry of Enterprise and Innovation, is one of the key note speakers at the conference. She recognizes the description that it is becoming more important for companies to consider sustainability, circularity and resource efficiency.

– The government's goal is to be a leading in this development and become one of the world's first fossil-free welfare state. We need to find solutions to major societal challenges, while providing export opportunities for Swedish companies. We have had that perspective in the research proposal that will be presented in November, but also when we have influenced the EU programs, she says.

In addition to dealing with the global objectives of Agenda 2030 and Sweden's industrialization strategy, the government has recently launched a procurement strategy.

– We need to make greater use of performance contracts in the public sector. Local governments are major customers and they have an important role in how the strategy will be implemented, says Lena Svendsen.

Ten years of research will be presented

Within the Faste Laboratory at Luleå University of Technology the researchers have produced results that show how performance-based business models can contribute to resource efficiency.

– At the conference we will summarize ten years of research that has shown significant improvements in sustainability when companies supply function. If industries do business with this type of innovation and that these are developed in the right way, it can have a global impact, says Magnus Karlberg, head of the Faste Laboratory.

The basis is a completely new theory which includes a definition of a life cycle that looks different for a functional product. Looking ahead there is a need for research in areas related to organizational issues, law and contract design. There are also details left to sort out in the processes for development, operation and recycling. But even now, several companies have taken significant steps towards delivering function.

– We notice a trend where there is no value in owning a piece of hardware but so far no company delivers an option. Therefore there is a great potential for companies to own the market in this area, he says.

Potential to take place in the market

Volvo Construction Equipment is one of the partners who have been involved from the start in the Faste Laboratory and they saw this potential at an early stage.

– The participation has given us a venue to discuss with other industrial partners. We have been able to build research projects on relevant issues and the long-term funding from VINNOVA has been a driving force, says Rikard Mäki, director and responsible for technology planning and public funding at Volvo CE.

Volvo CE has seen the importance of looking at the whole process and not just focus on the hardware. It is about support systems, how and in which process the machine is used and the client application. Today their customers  are demanding contracts based on availability rather than hardware.

– We risk losing the deal if we cannot offer that. Availability contracts also means that we need to customize solutions based on the customer needs and expectations more than when we sell hardware. We see a potential in the development because we can build a better understanding of the customer's application, he says.


Magnus Karlberg

Karlberg, Magnus - Professor

Organisation: Machine Design, Product and Production Development, Department of Engineering Sciences and Mathematics
Phone: +46 (0)920 492418