Companies can reap more value from the energy and resources they use with cross-functional collaboration and customer-focused design thinking.
Companies have steadily refined their ability to invent products and produce them efficiently over the past century, by delivering a wide range of goods to their consumers and improving financial return to shareholders.
In other respects, however, this system is far from in its ‘prime’, due to companies’ not considering the waste which occurs after products have been purchased. Once these products have been purchased and the consumer either uses it infrequently or discards of it, it is safe to say that at least some of the energy and materials which have been used to make this product, has been wasted.
However, things do not have to be this way, some businesses are using circular-economy principles to create products which are durable, easy to reuse or recycle and products which are profitable.
This regenerative economic model—the circular economy—is starting to help companies create more value while reducing their dependence on scarce resources.
There isn’t a quick fix or an easy way to put these principles into practice, however, there are two tactics which can most definitely help. The first would be to devise a highly collaborative product-development process which accounts for and helps to, determine sourcing requirements, production methods, marketing, sales and other aspects of how goods are made and handled at the end of their lives.
The second tactic is to use design-thinking, which can help companies discover unexpected ways of meeting customers’ needs with much greater resource efficiency than in the past.
These tactics can help companies capitalise on the opportunities which the circular economy presents, in this article we will firstly discuss how collaboration helps companies develop products fit for an efficient circular economy.
There are only a few companies who take into consideration what happens to their products after they are purchased. The unspoken of assumption is that people will eventually throw them out and buy new ones whilst the local waste collectors will take care of the discards.
Mechanical components, for instance, tend to be designed with ease of manufacturing in mind, because that makes them less expensive. This priority leads to design choices like snapping pieces together rather than joining them with removable fasteners. Making a part easy to manufacture, though, can make it all but impossible to disassemble or repair. Its fate is to be discarded, then replaced.
Now suppose the product-development process were to begin from a different premise, derived from the idea of a circular economy. Instead of considering only functionality and cost, and assuming the products will be thrown out, a company would look at how it might manage the entire life cycle of its products to maximise the value of them and their component materials. For mechanical components, a manufacturer might give customers rebates for returning end-of-life parts so the manufacturer can refurbish them for resale at a lower price or dismantle them for recycling.
Developing a product that a company can manage over its life cycle requires more collaboration than is customary. The product design should be conducive to reuse, repair, and recycling. And the company needs processes and systems for helping customers when products wear out, approach obsolescence, fail, or no longer provide satisfaction.
Since these matters affect procurement, marketing, sales, and other company departments, as well as suppliers, freight carriers, distributors, retailers, and entities all along the value chain, all those departments and organizations need to have a say in product development. This is seldom the case today. Product developers typically receive specifications and design products accordingly.
When product development is, a collaborative process involving the whole value chain, profitable breakthroughs are more likely to occur. At one medical-equipment company, for example, the sales department was given ambitious targets in emerging markets—and a portfolio of high-priced products. Bringing together sales, product development, and other teams revealed this problem and gave product developers a chance to help solve it. They figured out that by refurbishing used medical equipment from developed countries, the company could offer a line-up that would be appealing and affordable in emerging markets.
Now onto, how design thinking reinforces circular-economy principles in product development.
Design thinking starts with observing customers in their everyday lives to learn about their material needs and about how well (or poorly) those needs are met by existing products. Product designers, marketing specialists, engineers, and others involved in making and selling products use the resulting insights on customer needs to rapidly prototype, test, and refine new concepts for products and services, without relying on old assumptions that might constrain their ideas.
With respect to the circular economy, design thinking also means asking how to provide value to consumers using a minimum amount of material. Sometimes the answer is to offer services rather than products: think of how some people choose to store digital files in the cloud rather than on their own devices. If a physical unit is needed, design thinking might suggest that companies make their products more durable by using better materials, or make them easy to maintain with designs that allow critical components to be replaced when they wear out.
Understanding the possibilities associated with circular-economy ideas requires the expertise of many company departments as well as business partners. Design thinking thus relies on the sort of collaboration that is central to developing circular-economy products. In a design-thinking process, the company would start with a one- or two-day working session with all the affected departments and other organizations in the value chain. Participants would discuss customer needs and relevant business operations—particularly manufacturing and service—and come up with ideas for new offerings as well as the business-model changes needed to support them.
Given those concepts, the product-development team would create prototypes. The prototypes would be shared with the same groups from the initial meeting and discussed in another working session. Product developers would then refine their designs for further consideration by the wider group of stakeholders. This process would continue until the product is ready to be made and the business changes required to support it have been defined by the relevant departments. The final decision to bring out the product is also thus a choice about reorganizing the business so it can capture maximum value from the new product over its entire life cycle.
Reorienting business models and practices along these lines requires levels of collaboration and creative thinking that are far from familiar. So why should companies bother? One reason is that they face increasing pressure from consumers and governments, particularly in developed countries, to be better stewards of resources and the environment.
Another reason is to pursue a major financial and economic opportunity. Research suggests that each year some $2.6 trillion worth of material in fast-moving consumer goods—80 percent of the material value—is thrown away and never recovered. In a circular economy, more of this material would be used again in some form. In Europe, the net benefit of applying circular-economy principles could be as much as €1.8 trillion annually by 2030. Companies that successfully design products for a circular economy stand to capture considerable value and create lasting, rewarding relationships with customers.