The Role of Operational Capabilities and Design Decisions in Collaborative Pay-per-outcome Business Models: The Case of the Finnish Indoor Environment Quality Equipment Industry

Purpose: The purpose of this paper is to explore how the operational capabilities for pay-per-outcome business model are deployed in the context of indoor environment. In the past decade, product–service systems have attracted interest from various industries as firms seek new ways to create competitive advantage. The transition towards more advanced services in product–service systems require novel operational capabilities. However, the operational capabilities that have a significant impact on the successful implementation of pay-per-outcome business models have not been studied comprehensively hitherto. Design/Methodology/Approach: To address this gap, we deployed a single case study design involving four firms as embedded units of analysis. The goal of the firms was to provide a range of integrated technologies and equipment designed to monitor, control, and enhance indoor environment by utilizing collaborative pay-per-outcome business models. Findings: The findings indicated that different key design decisions impact ordinary capabilities. The decision to transfer ownership while retaining operational responsibility creates a hybrid model where control over the performance remains with the firms, but financial and legal ownership lies with the customer. Due to these key decisions, three novel operational capabilities were needed: ‘contracting capabilities towards third parties’, ‘capability to train the usage of pay-per-outcome business models’ and ‘remote support capability’. Originality/Value: This research contributes to business model literature by empirically identifying the operational capabilities required to implement collaborative