Business Model Choice for Heavy Equipment Manufacturers

Technological advances enable new business models for heavy equipment manufacturers wherein customers access equipment without ownership. The authors seek to understand the profitability and environmental performance of different emerging business models in light of salient economic and operational factors. The authors develop a game-theoretic model to identify the optimal choice between a traditional ownership-based business model and two access-based models: servicization and peer-to-peer sharing. After-sales services, equipment characteristics, usage environments, and fuel prices affect this choice. The authors also provide a novel framework to analyze business models’ environmental impact, which incorporates trade-offs between economic value and environmental costs and shows that all models may create win-win situations for the manufacturer and the environment.