Henry Ford, one of the greatest innovators of all time, once said: “If we always do what we’ve always done, we’ll always get what we’ve always got.”
If we do not adapt when things around us continue to change, we risk paying a very serious price. Just think of the rapid change in digital photography and online streaming and the impact they have on the likes of Kodak and Blockbuster.
To remain competitive and resilient, businesses have to start thinking smarter and challenging ‘business as usual’.
It is of course easy to say so - putting it into practice is a different matter. To help catalyse this kind of change, WRAP is working with companies of all sizes, through the EU-funded REBus project. This helps to reduce the risks associated with trying something new. With our partners in the UK and the Netherlands, WRAP is supporting 30 pilots across Europe to take approaches to business that do not depend on selling large volumes of products and materials to meet market demand.
A great example of this is the recent gadget trade-in scheme introduced by Argos for unwanted mobile phones and tablets. By using evidence outlined in Switched on to Value – WRAP’s look at extending product lifetimes and trading used products – we were able to show the potential opportunities in the electricals sector. We estimate that unused electrical items in UK homes are worth around £1bn. These are valuable assets to both businesses and consumers.
To realise the financial value in these assets we needed to focus on getting them out of people’s drawers and back into stores, where they could be exchanged for cash or vouchers then fed into new markets. But to make this happen there were two main barriers to overcome: consumers wanted to trade in with a reputable retailer; and a reputable retailer needed to see the financial value, brand benefits and operational capability of such a model.
Through REBus we were able develop an idea with Argos. But converting the idea into tangible action and changing the way a business operates cannot be achieved quickly or by one team alone. WRAP initially worked with the Argos sustainability team to facilitate, advise and influence. We drew on our data, knowledge and expertise to prove the idea’s feasibility and worked with the company to develop the business case tailored to its specific requirements.
One of the most challenging parts of this project was to change Argos’s mindset from one-way selling to buying back as well. Not only did we have to prove the commercial viability, we also had to prove the reverse logistics could work. By working through scenarios, trialling and testing, we proved the possibilities and secured the all-important wider business buy-in. Argos recognised the financial, brand and customer satisfaction opportunities this model presented. The result? Over the counter trade-in is now available in all 788 Argos stores across the country.
The scheme is based on the ‘incentivised return and reuse’ model, which is just one of a number of ‘new’ business models we can explore (see box). Perhaps you have heard them called ‘innovative’, ‘circular’, ‘resource efficient’ or ‘disruptive’ business models?
There may be varying descriptions, but the common thread is that they are all about approaching business differently. WRAP has mapped out the key models and with all of them, from ‘hire and leasing’ and ‘product service systems’ through to ‘asset management’ and ‘long life’, the idea is that they extend product life, conserve resources and prevent materials from becoming waste.
They are focused on finding commercially attractive ways of moving up the waste hierarchy, and offer an important route to developing and delivering business growth in a more circular economy.
The concept is gaining momentum internationally. Just take a look at Danish company Vigga – it has recognised that a leasing model for children’s clothes can offer parents money and time savings while being environmentally beneficial. WRAP research into new business models for the clothing sector shows that, from a resource impact perspective, leasing offers significant savings in terms of reduced volume of garments going to waste.
Vigga’s service works by parents paying around £33 a month for a regular package containing 20 items. When the items no longer fit parents return them and a new batch in the right size is sent out. Vigga estimates that, after five years in business, it will have saved at least 320,000kg of chemicals and more than 112 million litres of water. This will certainly be one to watch.
In the short term, reducing waste, increasing reuse and driving recycling is helping us to deliver against the demands of today’s world, but what about longer-term? What about meeting the demands of tomorrow’s world? We will need to consider resource sufficiency and consumption.
These are the key elements of what Walter Stahel, pioneer of the circular economy, calls the ‘performance economy’ – an economy where sufficiency solutions and the minimisation of resource inputs increase profit. It is an economy where we consume goods differently with businesses supplying smart materials, smart goods and smart solutions. It is an economy based on new thinking, new metrics and, critically, new business models.
One model already moving us in that direction is ‘product service systems’. This is a really interesting model where we are already seeing some clever ideas. Philips is now selling service contracts for light, known as Pay Per Lux, which is delivering significant carbon and energy savings. Rather than selling a bulb, they sell the light it produces. Philips retains responsibility for the performance of the lighting over a set period and the customer does not have to worry about managing their lighting, has predictable costs and it comes with the added benefit of contributing to their environmental credentials.
It is more of this kind of thinking that we need to see. It is the future – and to get there we certainly cannot continue to do what we have always done.
- Incentivised return and reuse – encouraging customers to return used items for an agreed value. Customers gain value for unwanted items and return products via a convenient system, while businesses gain access to valuable resource and more footfall from returning customers. Collected products are refurbished and sold for reuse, for example Argos Gadget Trade-in for mobile phones and tablets.
- Asset management – tracking, collection, refurbishment and redeployment of used products within an organisation, which keeps products in use for longer and aims to minimise new purchases where commercially sensible. For example, Carillion has developed an online solution to identify, track and reallocate tools and equipment at the end of a support service contract.
- Hire or leasing – providing temporary access to the use of a product for a fee, driving producers towards a longer term approach to product durability, with longer service life, lower maintenance load and lower use of materials and CO2. For example, Vigga offers children’s clothing on a lease.
- Longer life products – designing products to last longer, provision of longer guarantees and delivery of trusted repair services. For example, Miele designs and engineers products for long service life and markets them on ‘lifetime cost’ with 10-20 year life.
- Product service system – providing a service based on delivering the performance outputs of a product, for example Philips’ Pay Per Lux service, providing light rather than selling lighting equipment.
Marcus Gover is director of WRAP