Digital technology is available now for low cost implementation of strategies like these, and is essential to the future of your company. The first step is to start small and conduct an assessment of your business, focussing on the type of goods and services you sell, and your customers’ journey.
Here are some ideas and questions to begin a simple assessment:
- Re-examine the raw materials you use and the flow of products created.
- What service do you sell that could even be more important than owning the product?
- Think about the prolonged life of your products.
- What products do you sell that could be refurbished or maintained, or could be re-sold to the next user?
- Consider consumer loyalty programs.
- Could your customers pass on used products to other users?
- Could your used products be returned to be processed into raw materials that can be sold?
- Do you have products that consist of valuable materials that can easily be taken apart, and reused or refurbished?
- What design, technology and logistics are currently available for adopting these changes?
Of course there are many other questions and step-by-step methods of assessment for you to review your business by using the principles of circular economy, by optimizing your customer relations, and by adopting digital technologies. Your aim in this first phase is to find out what materials and future resources can you control to reduce the risk of price volatility, and guarantee supply. These types of solutions will require digital technology for tracking where your products go, how to get them back, and how to benefit from the residual value of after-use products. There are many good outcomes, including more touchpoints with your customers, maximizing what you already have, and partnering with other businesses to support real revenue while leveraging circular economy principles.
Miele, a German manufacturer of high-end domestic appliances and commercial equipment, is working with a start-up, Bundles. The aim is to sell more washing machines and service them better. Bundles created a device, which is attached to each washing machine in the customer’s home to monitor its use. This app provides statistics to the customer about how much water, energy and detergent they are using. Tips are given on reducing costs through altering settings that also extend the lifetime of the washing machine. Customers are rewarded by a reduced monthly fee when they use the machine optimally. Bundles is the service contractor for Miele, and does the installations, maintenance and repair of the machines, as well as replacing the machines when they are broken or outdated. Bundles offers their services at different price points to small, average-size and larger households. If we apply some of our earlier assessment questions to Miele, we note its washing machines are weighted by cast iron rather than concrete, which is a material that can be reused. Currently Miele does not take back the used washing machines. Could they manage this recycling in-house or work with other parties to recapture material and refurbish used machines? Residual value could be generated by an end-of-life program.
Another reveal from the assessment is that it’s unusual for customers to lease consumer goods. More information can be shared about the actual value they would receive if a machine was well-made and properly maintained. A selling point to the customer could be the ‘game’ element that they would be getting the most out of their washing machine through remote monitoring. A fun feature that could be added would be to tell the customers the optimal time to do laundry, based on when the sun is forecast to shine (using solar energy). The real revenue would be taking back the washing machines, or partnering with another company to guarantee any residual value. There could also be a partner selling refurbished machines to those who could not afford a new Miele washing machine. Another strategy could be to expand to other Miele products, and have these types of benefits across multiple products. There is also the concept of the “whole house” where a manufacturer is thinking about how to be the “go-to” company for all of the customers’ appliances. Again this customer relationship will be enhanced by using digital technologies for tracking, giving useful advice, and selling full service packages to gain customer loyalty and greater revenue.
This first phase of assessment is a way to review your company with fresh eyes and see resources that you may have overlooked in the past because of the prevailing linear take-make-dispose model. In circular economy, physical waste can also be financial waste. Some non-renewable resources will become prohibitively expensive for manufacturing consumer products. Regulations are likely to force a more sustainable approach in the near future. In a world where disruptive businesses are using new technologies, the global middle class is growing (from 1.8 billion in 2009 to 3.8 billion in 2018), and an urgent awareness of environmental challenges has become wide spread, circular economy and applying digital technologies are ways to profit in this new era.