Home 🎓 Blockchain as a Solution to Collective Servitization

🎓 Blockchain as a Solution to Collective Servitization

The circular economy is an economic system that aims to replace the linear economy and the accompanying take-make-dispose mindset. It is an economic system that decouples economic growth from finite resource consumption. The Sustainable Finance Lab (SFL) identified two requirements for a high state of circularity. 1) Products are serviced instead of sold and 2) the entire life-cycle of products must be considered. As a solution, the SFL came up with the idea of collective servitization (CS). It meets the previous requirements by aligning the incentives of all the value chain participants involved in a product-service system by compensating each of them as long as the product is in working condition. However, the SFL predicted four implementation barriers related to CS. The SFL expects 1) a need to share innovation costs, 2) high administration costs, 3) increasingly complex devision of ownership, and 4) a need to directly handle micro-transactions. To help overcome CS challenges, the SFL conceptualized the Circular Service (CiSe) platform. It is an administration tool for collectively serviced pay-per-access and pay-per-use products. It aims to use the novel technologies blockchain, cryptocurrency, and smart contracts to overcome these challenges. 1) The CiSe platform reduces transaction costs by automatically handling product use and access payments without an intermediary. 2) The CiSe platform stores the transactions of use and access in a distributed database that is publicly accessible. By viewing all the payments and costs, the SFL expects that companies can better decide on responsibilities. At last, 3) micro-transactions are made possible with the Micro-Euro cryptocurrency. From an Industrial Ecology (IE) perspective, the use of blockchain technology is fascinating. IE is a scientific discipline that takes a systemic approach to sustainability problems. Engineering, environmental, and social perspectives are crucial for the successful and sustainable implementation of new technologies. Blockchain technology has a wide range of technical applications. The question is if these technologies are effective in overcoming CS. In order to get initial insights into the effectiveness of blockchain technology in implementing collective servitization, this master thesis focuses on the company Bundles and their combined pay-per-access and pay-per-use washing machines. The following research question will be answered: “How effective could the Circular Service platform implement collectively serviced Bundles washing machines?” To address this question this thesis used a threefold structure. It consisted of a literature study that identified 51 blockchain designs in the literature and multiple papers oriented on both blockchain and the circular economy and blockchain and product-service systems. These provided insights into the problems and need for CS, insights into the solutions of the CiSe platform and their technical viability, as well as insights into additional challenges for the CiSe platform. Moreover, a business analysis identified 33 blockchain companies. These provided more insights into the technical viability of the CiSe platform. Finally, a case study explored collectively serviced Bundles washing machines on the CiSe platform. The primary stakeholder Miele and Vonk en Co were included in the CS business model. The case study helped identify additional opportunties and challenges of CS and the CiSe platform. The results of this study are not straightforward and mainly raise questions for additional research. This is largely because of the conceptual nature of CS and the CiSe platform, the majority of researched papers being conceptual, the majority of researched companies being in the experimental phase, and the explorative nature of the case study. There are some promising results and some challenges related to the effectiveness of the CiSe paltform. There is some economic potential by including Bundles, Miele, and Vonk en Co in a collectively serviced business model. This is for three reasons. Firstly, the transactional relationship and the cost for added value dissapear between each of the members in the collective servitization business model. Secondly, the CiSe platform further reduces the administration cost related to distributing revenue. Finally, by spreading the initial investments amongst multiple stakeholders the barrier for entry for Miele and Vonk en Co can become lower. However, It is improbable that a collectively serviced Bundles washing machine with Miele and Vonk en Co will happen. It is for four reasons. Firstly, Bundles will lose their role as risk-taker. Moreover, Bundles does not provide any additional value. Furthermore, Miele has the resources available to do the washing machine service themselves. Finally, Miele and Vonk en Co currently have a profitable collaboration with Bundles without long-term risks. Additional challenges are related to the use of blockchain technology. First of all, there is a problem with the flexibility of blockchain systems. Once live, blockchain systems and their smart contracts can not be altered. It can become problematic with a collectively serviced washing machine that is intended to be long-term. Moreover, the vulnerability of the system moves to the sensors. Due to the autonomous and automatic nature of the CiSe platform, a faulty or hacked sensor can wrongfully activate transactions. Furthermore, blockchain systems can generally only handle low transaction volumes. The CiSe platform’s scale is dependent on the number of products and the types of products that are going to be serviced. The main limitation of this study is in its conceptual and explorative nature. It is due to four reasons. Firstly, there is no support of the definition of CS in literature. Secondly, no direct comparison could be found of the CiSe platform concept either. Moreover, the results from the two systemic literature reviews were mainly conceptual papers. Finally, the case study is explorative. All in all, this means that these results are not final. They are indicative and more research is necessary to determine the effectiveness of the CiSe platform in overcoming CS barriers. To move the development of the CiSe platform forward, it is essential that the need for and problems of CS are researched more thoroughly. The case study revealed that CS is not for every value chain. If there is no need for CS, then the CiSe platform is irrelevant. If the CiSe platform does not address the right barriers of CS, the same fate awaits. It is advised to prioritize research into CS before developing the CiSe platform further.

Master Thesis: TU Delft repository

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