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15.From 'Ownership' to 'Service'

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15.From 'Ownership' to 'Service'

The President's Green Column

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15.From 'Ownership' to 'Service'

In my previous entry, I wrote about the revolution of resource productivity in order to achieve 'factor 4'. On top of making machines and processes both energy and resource friendly, there is a need to thoroughly exercise the 3Rs. Most importantly, there is a need for transition from 'Ownership of products' to 'Usage of services'.
In this entry, I would like to explain further about this transition.

From 'Ownership of products' to 'Usage of services'

The above can be break into the following 2 views.

(1)From ownership to rental
For consumers, instead of paying for 100% ownership of a certain product, consumers only pay for the usage and rental during the time of usage.
(2)From manufacturer to supplier of service
For manufacturers, instead of getting paid for the manufactured products, manufacturers are to supply services and functions that consumers hope to achieve with the products.

The above explains the point of view of the consumers and manufacturers respectively. The 2 views are in fact talking about the same thing.

Example of transition from 'Ownership' to 'Service'

Private Car → Car Rental/ Car Share

Private cars are in general, operated for only 1 or 2 hours per day. In other words, for 90% of the 24 hours each day, the car is at rest in the parking lot. It is as good as to comment that the car was bought for the sake of parking. However, cost is also being incurred to secure a parking space. At such, for using so much resources in the manufacturing process, isn't this a very wasteful way of using a car?
In order to drastically reduce this wastage, rental and sharing of cars should be implemented. Both require payment only for the time period of actual usage. The difference between the 2 is that car rental is a service provided to many irregular consumers and car sharing is a service provided to registered members only.

Either which, the transition from ownership of a car to payment for a car only when required greatly reduces the total number of cars. Furthermore, the usage of public transport such as trains and buses encourage cost comparison with private cars and thus, discourage excessive usage of private cars and reduce cost burden of consumers. It is also possible that this will lead to the reduction of resource wastage.

Selling of Air-conditioners → Providing heating & cooling service

What consumers of air-conditioners really want are not the equipment itself but the 'cooling' and 'heating' function. People do not buy machineries because they want it. At such, instead of the selling of air-conditioners itself, a business providing 'cooling' and 'heating' services evolves. What are the effects on the transition of payment for air-conditioners to the cooling and heating service?

In the sales of air-conditioners business, one would maximize the number of equipments installed. However, when the business is being changed to payment for service, the supplier of service would strive to minimize number of equipments, running cost and electricity itself to provide cooling and heating services. In other words, the effort of the supplier to minimize equipments and electricity will lead to reduction of resource wastage. On top of this, suppliers can extend to other businesses such as insulator of buildings and lightings that minimize radiation to enhance their cooling and heating services.

In reality, American well-known global air conditioner maker, Carrier, has already made moves to provide 'cooling services'.

Other Examples

Instead of selling organic solvent, Dow Chemicals is providing leasing and recollection of organic solvent after use. There is probably no one interested in owning organic solvent. It's a win-win situation as the consumers need not worry about disposal and Dow Chemicals can recycle the organic solvent.

Interface FLOR from Atlanta, America is working towards the conversion from 'carpet sales business' to 'service of covering the floor with tiled carpets'. The ownership of the carpets remains with Interface FLOR and the consumers pay a monthly sum for cleaning and maintenance of the carpets. Titled carpets are investigated monthly and only those that fall below standards are replaced. The damaged titled carpets are recycled and made into new ones. With the exchange of carpets being minimized and damaged carpets recycled, it greatly improves the resource productivity.

Like the examples given above, majority of the business of sales can be converted into business of service with a change of conception. Such transition contributes to reduction of resource wastage and improvement of resource productivity.

In my next entry, I would like to explain the relationship between Matsui's business and 'factor 4'.

15 Jun 2009 Hironobu Matsui

Related Links

「Natural Capitalism」 Natural Capitalism  http://www.natcap.org/

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