A Beginner’s Guide to Making Circular Products

We’ve all heard of several services that let you share products that you already own or lend your time to others via a peer-to-peer services. But how about all those new products that are being built every day? Everything that you buy, only to use for a couple of months and then throw away? All the fitness trackers that you bought — with the hope to change the course of your life? How about that compact digital camera your aunt bought you 4 Christmases ago?

Contrary to the loud media buzz, circular practices are still not driving the mainstream economy. Buying-using-discarding cycle is still the dominating business model for most things we buy. Let’s be clear, even with the enormous success of sharing economy, the AirBnBs and Ubers of the zeitgeist, the premise is still to make money by sharing something that people already own. None of them is addressing the millions of new products hitting the shelves every day.

On the other hand, Xerox, Rolls-Royce, Philips are all companies that challenged the limits of the classical product cycle. They all introduced pay-as-you-go products as services that transformed their respective industries. As an example, Rolls-Royce charges airlines a maintenance fee for jet engines based on the number of hours they are used. Philips will change all the lightbulbs in your office for free and only charge a flat fee. Typically, all these companies offer these services mainly within a Business-to-Business setting. When it comes to consumer-facing businesses, the examples of creating new products and offering them as innovative services or sharing systems, are much more rare and elusive.

One of those rare specimens is a tyre company that aims to reduce the carbon footprint and waste of tyres by offering a subscription service for €4.99 a month. Instead of the buying-using and discarding tradition, Z Tyre is introducing a new model where you pay as you go. This monthly fee includes all tyre-related costs including installation, rotation, maintenance, etc. The result is a hassle-free transaction that leaves a steady stream of income to the dealer and brings peace-of-mind to the customer.

Some other examples are usually pilots or trials but very hopeful ones. Swedish white goods giant Electrolux has offered 7000 washing machines for free to homes in Gotland where the residents paid a fee of €1 per wash. The usage was monitored through connected power plugs that the electric company Vattenfall provided. For these families, the new scheme led to better planning of laundry cycles and it also meant a gentler impact on the environment where a pair of socks won’t be worth a whole wash cycle.

These rare examples go beyond a typical car leasing system where the value of a product is hijacked by the need to maintain a pristine condition. When a company is leasing a car, neither the environment, nor the customer is in focus. The main objective is higher revenue and profit for the company.

Recently, we all started hearing that the Sharing Economy will offer the perfect solution to all the problems that we humans and our mother earth have. However, the model does not hold when it comes to smaller, and faster-evolving products. For lower-cost products that are mostly destined to die in landfills or toxic waste dumps, we need other ways. We need new ways that can shape our economy so that waste is not a given.

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Dear CEO. Change your KPI from sales to utilization. Now.

The first step in this transformation is to push the leaders of product companies to change their Key Performance Indicators (KPIs). Traditionally, a company produces a good using valuable natural resources, sells the goods, collects the money and goes on it’s merry way. But every product has an extended lifecycle where it is used, abused, misused, discarded, resold, repaired, returned, dismantled or recycled. No corporation or startup can ignore their responsibility in this extended lifecycle anymore. This responsibility will be pushed onto companies by legislation eventually so we better get in shape before that. Make your main KPI product utilization. Not product sales.

One man’s trash is another’s treasure. This saying implies that said trash can find it’s way to another person’s possession to be used again. We can only wish that it were true. Electronic products spend a very good chunk of their golden years in drawers, waiting to be used again, only to be discovered as useless waste during a move and thrown away.

When we were kids, we were all told that recycling is the ultimate solution. Sorry to say, but recycling is pretty much the last resort in sustainable practices since it requires so much energy that it almost competes with starting from the raw material.

Thankfully, there are a few ways to avoid generating heaps of waste when it comes to products, all the-while keeping a healthy business running.

Start Your Second-Hand Shop

The most simple is to start your own second-hand shop. If you are a company that is aware of the waste it creates due to poor product utilization, make sure that you have an online marketplace where your customers can resell their goods. A good entry-level example of this is IKEA in Sweden that offers free ads for anyone willing to sell an IKEA product on Blocket, a very popular second-hand marketplace.

Refurbish Your Products

The next level is to own your own second life cycle and offer refurbished products at a reduced cost to new customers. Every time you lose a product to a landfill you are also losing the natural resources and labor that made it happen. Or even worse, you risk the product being dismantled by unqualified people and exposing them to hazardous waste. Refurbishing will also give your company a unique insight into the way you make your products. As a bonus you get to connect with your customers on a whole new level.

Lease Your Products

If you would like to get serious, you can start with subscription services like Z Tyre. A lot of traditional CEOs will reject this model outright claiming the sales numbers will suffer since everyone will get exactly what they need and nothing more. The advantage of a steady revenue stream will quickly overcome any worry. And the idea of getting “exactly what you need and nothing more” lies in the heart of circular practices anyway.

Make Your Products Work Better as Services

Going all-in is the natural next step. Turn your products into real services by making them connected. By making them repairable and longer-lasting. By making them upgradable and streamlining your value chain to deliver your best product anywhere. Without unnecessary overhead and complicated logistics.

Can you imagine how much we can save by utilizing all products fully — from start to finish? The gains will be incredible — both for humanity and for the environment. It is never too late to start.How do you feel about that 4-year-old digital camera now?

Co-Authored by Johanna Tunlid — Sustainability Manager @ Above

Originally published on A View from Above