Abstract Distributed Manufacturing Systems (DMS) and collaborative, decentralized production networks are enablers to establish sustainable and high-competitive value chains. To support the diffusion of DMS, the systematic development of new business models for DMS should be considered in an early stage of forming such value chains. This paper introduces an engineering-based approach to develop and design new business models based on a distinction of four business model elements and using a three level model for designing, planning and managing operations to achieve production excellence in each production unit and ensure strategic probability to enhance implemented DMS to the next evolutionary stages.