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Going circular – who really can?

10 Jul 2017
Going circular seems to have gained momentum on the agenda of governments and companies, certainly in the Netherlands. But why would a manufacturer take on the hassle to actually go circular, while traditionally their focus has been on one-way selling?

Last year, the Dutch government proudly presented “Netherlands Circular in 2050”. VNO-NCW, the Dutch employer’s lobby puts it on the list of 10 NL Next Level topics. And examples like ‘Light as a service’ from Philips – with a focus on sustainable use of materials and long-term maintenance – got a fair share of publicity.

What is new? Some industries already went circular in the 80’s and 90’s

Philips attracts buyers of light by offering an excellent, small carbon footprint service without the hassle of disposal while reducing the one-off cash out for the purchaser. It is, in fact, a model some hardware and consumable industries apply since decades called pay-per-use.

Printer and coffee vending machine producers have already adopted pay-per-use models in the 80’s and 90’s. Including running hardware return and refurbishment chains. They have incorporated all the digital customer centricity that a pay-per-use model enables them to. So really, what is the novice we see these days and what can we learn from the first movers?

Circularity can be a source of competitive advantage for undisputed quality leaders

Brands like Miele, Auping, Mercedes-Benz and Rolex stand out as high-quality leaders in their markets. These brands produce innovative products that simply perform better and last longer than others.

Their consumers are highly satisfied loyal buyers. Yet, their audience is limited as their products are premium priced, even though the products might have a lower cost of ownership.

If your company is an acknowledged quality leader, going circular with pay-per-use strategies is a potential source of competitive advantage. Your premium priced products become affordable to more customers because of circularity.

Recognised quality leaders are well positioned to make the product better accessible to a broader target audience as well as expedite installed base renewal with existing consumers.

To do so successfully, the design, marketing and branding capabilities and the set up of a return supply chain are sources of a competitive advantage these companies can tap into.

The journey of circularity

So circularity can be a source of competitive advantage for undisputed quality leaders. Would you consider moving on that same journey if it would broaden your consumer audience and would lift installed base renewal? That sure sounds attractive, but how about the cost and value of adapting your product designs and supply chains to deal with return flows economically?

Three actionable activities can set you up on that inspiring journey, or fasten the journey you’re already on.

Boost working in integrated teams

If product quality and performance is paramount in what you do, circular thinking can inspire your teams in design, marketing, sales and supply chain to work together on an inspirational journey towards circular designs, pay-per-use market strategies and circular supply chains.

Learn from pay-per-use first moving manufacturers

Take an outside-in perspective and learn from early pay-per-use hardware industries. The recurring revenues of consumables like toner and coffee have enabled printer and coffee machine manufacturers to move to pay-per-use models. Salesforce in these firms actively promotes early churn to a newer, better product. Their supply chains take care of the return and refurbishment or recycling of used hardware. Initially, these firms even went as far as to establish their own banks to finance pay-per-use.

Leverage your design, marketing and supply chain strength towards partners

Take an inside-out perspective, leverage your unique design capabilities to select materials, reduce parts, ease disassembly and choose the right market channel partners and supply chain partners to work with you.

“Going circular” can build on the legacy of your brand in the 21st century

As an undisputed quality leader, circularity can make your brand and product stand out once again. And by doing so, it brings you the looming perspective of a bigger consumer base and a quicker replacement of the installed base.

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