Performance-based business model

The migration to a service-based economy is leading to a fundamental shift in industries toward business models in which the service component of products is becoming dominant based on the value they provide to customers. 

Lets take an example of the chemicals business: The main interest of chemical users is not to buy and possess chemicals products. They are interested in the best solutions for their process or application. Therefore, chemical users are paying attention on the utility of chemicals, and are attracted by services that support their businesses. This strict service orientation leads to a new logic that puts the utility / function provided by a chemical into the centre of the buying process. Following this shift, chemicals suppliers need to change a way of doing business and offer sophisticated solutions that will support their customers’ chemical operations and profitability.

Performance based business model (also called “performance-based contracting”) responds to this demand: the customer pays for the utility of the product and not for its quantity or volume.

Performance based business models related to chemicals can be called and branded in companies differently, not just as Chemical Leasing even if being identical or similar to this model. 

Chemical Leasing is a performance-based business model for sustainable chemicals management. Chemical Leasing aims at a more efficient use of chemicals in the production process by redefining the business relationship between the chemical user and the supplier. In the Chemical Leasing model, the supplier does not sell quantities. The supplier sells the function of the chemical. The model aligns the interests and motivations of partners, and helps achieve a win-win situation for them and the environment. The life cycle of the chemicals is prolonged, waste is minimized and resources are used efficiently. This contributes to the achievement of circular-economy goals.

Example: A producer of automotive parts needs solvents to clean and degrease them. The company pays the chemical supplier for the functions performed by the chemical, that is, the cleaned metal parts. The company does not pay according to the amount of solvent used.

Chemical Leasing model overview: