To be able to support our customer’s business the best we can, DLL stays on top of global trends. One of the movements we see is the global transition from ownership to usage. Increasingly, customers prefer instant access to services provided by certain products, instead of owning the asset themselves. They don’t want to be bothered with the responsibilities that go along with ownership. This generation prefers easy, accessible, fast and flexible services over ownership of an asset.
The ‘service economy’ with its usage-based business model is the logical answer to customers’ changing needs. However, this new economy is not only the result of changing customers’ needs, it also contributes to the circular economy concept where goods are being designed to be recycled, reused or remanufactured at the end of their first life cycle. Basically, the concept of a circular economy prefers usage-based models. In these models, manufacturers can maintain control of their equipment throughout its technical life and ensure that the equipment or materials are re-used rather than sitting idle or being relegated to a landfill. In fact, the circular economy can be the answer to the growing world population and the pressure on the natural resources of our planet.
However, the circular economy requires a different way of doing business. A recent study conducted by the social enterprise Circle Economy states: “In a circular economy, assets are no longer sold. Rather, the assets are collectively maintained by a network of stakeholders involved in the ongoing functioning of the assets; the circular service (CISE) network. This shifts the responsibility for the functioning of an asset from the end-user to the network. Business processes shift from companies that act episodically across the value chain, to CISE networks that integrally connect life-cycle activities and optimize incentives inherently.” It is all about optimizing the life-cycle performance of the asset. Two elements are instrumental in reaching this outcome: (1) assets are being serviced and (2) this is done collectively.
Although the market seems to be gradually moving toward a usage-based model, the industry appears to not yet be fully equipped to answer this need. Many players refrain from offering or funding services or managed contracts, as many aspects are not yet known.
Same study done by the social enterprise Circle Economy confirms the administrative burden and complexity of circular business processes: “Collective servitization of assets come with significant coordination challenges, high administrative costs, particular financing needs and increasing complexity in division of ownership (FinanCE working group 2016; Fischer and Achterberg 2016; Achterberg and van Tilburg 2016; van Tilburg, Achterberg, and Boot 2018). Additionally, it requests trust and openness among value chain participants”.
Initiated by social enterprise Circle Economy, DLL joined a collaborative team working to develop a decentralized digital Circular Service platform. Key learnings from the proof-of-concept are available in the Circular Service Platform whitepaper.
For more research from DLL on the circular economy, click here.