Leveraging AI for Sustainable PSS: Co-Evolution of Capabilities and Business Models

Abstract

AI capabilities and PSS have both garnered attention in recent years as important developments in the trend toward more sustainable business models. This chapter uncovers how organizations can explore these trends to achieve sustainability values. We draw on the emerging literature on AI capabilities and take a capability-as-bundles-of-routines view to come to an understanding of the “DNA” of an organization out of which AI-enabled servitization business models can develop. Further, we take a capability development perspective and draw on Levitt’s diamond as an underlying guide to structure the routine bundles into capabilities. We uncover four AI capabilities and their constituent routines that are crucial for sustainable PSS—people, task, technology, and structure. Moreover, we present a framework to conceptualize the integration of AI through the three stages of AI initiation, AI integration, and AI consolidation. The findings of the chapter are synthesized into an evolutionary framework for AI-enabled sustainable PSS business models. The framework shows that, as organizations move from AI initiation to AI consolidation, AI routines become more and more integrated into organizational activities to guide value creation, delivery, and capture activities. The managerial and academic implications are discussed further.