Frame
Circular Economy

Five business models in the circular economy: #3 Product life extension

Burgess COMMENTARY

Peter Burgess

Five business models in the circular economy: #3 Product life extension Quentin Drewell • Accenture • Blog Post • 14 Oct 2014 Research by Accenture has revealed five business models companies can adopt - alone or in combinations. Here Quentin Drewell takes a look at extending the life of products. The 'product life extension' model means being able to easily upgrade products or carry out repairs cost effectively. The 'product life extension' model means being able to easily upgrade products or carry out repairs cost effectively. Circular business practices aren’t just good for the planet. They’re good for business and the consumer, too. Next up on our exploration of the five models we’ve seen leading the circular economy is product life extension. Just as the name implies, product life extension is all about making the useful life of a product as long as possible, maximizing profitability beyond the point of sale. So, instead of intentionally designing products with built-in obsolescence that artificially limits the useful life and locks consumers into rapid replacement cycles, products are developed to endure, using components which can be upgraded, refurbished, remanufactured and resold. Instead of requiring consumers to discard a perfectly functional product in favour of a new one just to get a few new features—or being forced to discard an entire product just because one component needs replacing— products can be repaired by swapping out the desired components or by changing the product’s “skin.” 'Just as the name implies, product life extension is all about making the useful life of a product as long as possible.' But simply lengthening the lifespan of a product isn’t enough. It won’t yield the desired outcomes - a reduction in the use of natural resource and the generation of new revenues - unless the customer has an incentive to engage with the supplier throughout the entire lifecycle. That requires re-designing the product from scratch so that its performance can be easily upgraded by the supplier, or that repairs can be performed cost efficiently through a service or partner network. In the case of a large household appliance, that may mean making it possible to replace components that determine the unit’s energy efficiency. That way the product’s life can be extended to keep its energy and cost performance on par with the latest models. By finding ways to extend the useful life of products, companies from Caterpillar to Wal-Mart are not only helping to keep discarded products out of the landfill, they’re also discovering new ways to generate additional revenue from their products - all without depriving their customers. Through this model, these innovators are weaning themselves off virgin resources by tying revenue generation to longevity instead of volume. Like most of the models we’ve examined, this model changes the customer relationship dynamic dramatically. Consider this: When a company increases the lifespan of its products, the number of potential interaction points it has with customers increases, and the customer relationship deepens. In contrast to a conventional model, where companies do their best to avoid interacting with customers, companies leveraging the product life extension model actually _want_to interact as much as possible. If these stories resonate with you and your own achievements in building circular business models, consider entering The Circulars at www.thecirculars.org . What are they? The first global awards to recognize excellence in the circular economy organized by the World Economic Forum’s Young Global Leaders initiative in collaboration with Accenture and Sponsored by BT, Ecolab, and SABMiller. Winners will be announced at a gala event during the World Economic Forum Annual meeting in Davos in January of 2015. Categories include awards for leaders, cities, digital disrupters, entrepreneurship and pioneers. Enter the awards today . Deadline is October 31.