The Dynamics of Industrial Product Service Systems (IPS2): Using the Net Present Value Approach and Real Options Approach to Improve Life-cycle Management

Companies from industrialised nations are faced with the threat of competition from low-cost countries. We suggest Industrial Product Service Systems (IPS2) as a possible answer. Our paper has two main aims. We establish a framework for designing an initial IPS2 which meets current customer and market requirements. Building on this, we broaden our focus to include requirements induced by subsequent changes. We propose a combination of the Net Present Value Approach and the Real Options Approach as a means of determining the quantified value of an IPS2 for an individual customer over its life cycle.