Servitisation is the ‘posterchild’ for the circular economy, says Veolia

EXCLUSIVE: Companies looking to accelerate the transition to a resource-efficient future by adopting closed-loop principles should take advantage of servitisation - dubbed the "posterchild" of the circular economy by Veolia's head of circular economy at edie Live today (17 May).

Forbes McDougall told a packed edie Live audience in Birmingham that retailers should be doing more to enable customers to operate with a “renting mindset”, citing a growing middle-class population that is hungry for technology and the natural acceptance of millennials towards renting as reasons to drive closed-loop practices through servitisation.

“Some of the challenges that surround the circular economy are simply a process of moving from products to services,” McDougall said. “The mobile phone has been a great enabler for people to move from a product model to a service model.

“The critical aspect in all of this is that the younger generation are coming into markets with a much more open mind towards using services rather than products. To enable this mindset, design will play a critical role. There is little way to harvest the value from products without essentially destroying it; shredding and extracting is not getting the best value out of the items.”

McDougall noted that the way that consumers interact with mobile phone contracts and the movement in the printing industry to move away from selling printers to charging for copies, were two examples of how the public can eventually accept servitisation as a social norm.

With a growing population considered one of the global ‘megetrands’ that businesses should account for, McDougall claimed that this rise would also increase the number of people who have enough disposable wealth to purchase technology previously unavailable to them, such as laptops, televisions and tablets.

But, with companies in the technology sector offering such a wide array of similar products, McDougall believes that businesses could be missing out on increased revenue streams by failing to offer renting options.

“Why wouldn’t you be renting TVs at this point when there’s so much choice, and why wouldn’t the retailers enable that so they could capture the economic value,” McDougall said. “These models will eventually come in and they will extend across most goods. The public just have to accept it.

“It seems like a step back, but the younger generation will make it second nature. You’ll probably rent your car so that you don’t have something rusting on the driveway while you’re on the train.”

‘Don’t be a Blockbuster’

The concept of servitisation is steadily growing traction within the private sector. The world’s largest electronics manufacturer Samsung is already utilising the concept in a bid to cut back e-waste, while DIY retailer Kingfisher and flat-pack furniture maker IKEA have both indicated a strong desire to move towards the sharing economy and servitisation, as a “natural progression” of their business models.

With WRAP calling on SMEs to take a leap of faith and embrace servitisation as part of the circular economy, McDougall – who has previously suggested that companies should utilise closed-loop waste and heat models –  warned that accelerating growth through the concept would only prove viable once companies had their in-house operations in order.

“To move forwards in this space you need to get your own house in order and build on a strong foundation,” McDougall added. “You need to consider the risks and opportunities of going circular and being an early adopter.

“There are opportunities to win in this market, but you can either become a Blockbuster or a Netflix. Don’t be a Blockbuster.”

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Matt Mace

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