Product as a Service and the Passport

Most circular strategies ask a manufacturer to do something that costs more and returns a benefit somebody else captures. Product as a service is the exception, because it moves the benefit onto the same balance sheet as the cost.

What the model actually changes

Under an ordinary sale, a manufacturer’s obligations largely end at the warranty period. Everything after that — servicing, failure, disposal — is the owner’s problem, and the manufacturer’s next revenue comes from selling a replacement.

Retaining ownership inverts that. Every failure is a cost the manufacturer bears, every early replacement destroys an asset the manufacturer still owns, and every extra year of service life is margin.

The third row is where the model does something no regulation achieves. Under a sale, designing for upgrade competes with the replacement business. Under a service model, an upgrade is how you keep an asset earning.

Where it works and where it does not

Product as a service is frequently discussed as though it could apply to anything. It cannot, and the conditions that determine success are reasonably predictable.

• High unit value — the logistics of recovery must be small relative to the asset’s worth.
• Measurable use — pricing needs a meter, whether hours, cycles, copies or output.
• Concentrated customers — recovering units from a thousand businesses is tractable; from a million households it usually is not.
• Service infrastructure that already exists — the model needs field service, and building it from nothing is expensive.
• Genuine residual value — the asset must be worth recovering rather than worth abandoning.

This is why the model is established in commercial aviation, industrial equipment, lighting, medical devices and workplace printing, and struggles in low-value consumer goods where every condition points the wrong way.

The balance sheet is the real obstacle

The reason more manufacturers do not adopt the model is rarely that they dispute the logic. It is that retaining ownership moves assets onto their balance sheet and defers revenue that a sale would have recognised immediately.

Financing structures exist to address this, and they change who bears the residual value risk. That risk allocation is worth resolving before the commercial model is designed, because it determines who needs the product data and how much they will trust it.

Why a per-unit record is a prerequisite

You cannot service, meter, recover or value an asset you cannot identify. Product as a service therefore requires serialised identity and a maintained record per unit, not per model.

The final step is where the record pays for itself. A unit returning from a first contract with complete service history can be priced and redeployed with confidence, while one returning as an anonymous used asset has to be assessed from scratch.

How this interacts with the passport

A regulatory passport and a service record are not the same thing, and conflating them causes problems in both directions.

The passport carries declared attributes for a public and permissioned audience, governed by what a delegated act requires. The service record carries commercial and operational history that no regulator asked for and no competitor should see.

They share an identifier and a data model, and they differ entirely in access control. Building them on one identity with distinct permission scopes is considerably cheaper than running two systems that describe the same physical object.

Starting without restructuring the business

The all-or-nothing framing puts most manufacturers off, and it is not the only option available.

Intermediate models retain some of the incentive alignment at a fraction of the disruption: guaranteed buy-back at a stated residual, extended service contracts priced on outcome rather than on parts, or take-back with a credit against replacement. Each requires the same per-unit record, which means the data work is a shared prerequisite rather than a bet on one commercial model.