NEW BUSINESS MODELS - A LEAP OF FAITH OR A STEP IN THE RIGHT DIRECTION?

  • by Dr Richard Swannell, Director of Design & Resource Minimisation, WRAP
  • Sep 23, 2013
  • 0 comments

Mother Earth thinks we’re all doomed, according to the Friday night comedy on BBC Radio 4 “What sort of world should we leave for future generations” (see what does the future hold). More importantly, if sustainability is the subject of Radio 4 comedies then it’s definitely becoming an issue which is beginning to resonate with people across the country.

 

Many businessman, academics, journalists and comedians are talking of the need to change the way we do things, to deliver a more sustainable future. Part of the solution is undoubtedly changing the way we do business towards approaches that are substantially more resource efficient, that build resilience in the supply chain and that deliver both financial and environmental benefits. Many organisations and businesses, WRAP included, feel that moving to a more Circular Economy could help deliver this future. For example, even relatively simple steps such as trading pre-owned TVs and clothing could add almost £2 billion per year to the national economy by 2020. The challenge is: how to get started and make the transition?

 

It may seem a tall order, but it’s about working out how to turn the challenges into opportunities. One thing is certain that adopting a new business model can involve disruptive changes and shouldn’t be taken lightly. It’s this barrier that stops many businesses from starting to change. How can such a change be delivered? Are there smaller, more measured changes that can be implemented to make the journey easier? Can the risks be managed by setting up a separate business unit to develop and deliver the new approach?

 

Let’s focus on the benefits of acting: WRAP’s already working with a range of retailers and brands to assess how a change in business model can reduce costs and benefit the environment. This work has already shown:
•  there are significant cost savings available within businesses through more efficient asset deployment;
•  consumers say that that they are interested in new services like product trade-in, repair and rental;
•  many products keep a high value after the original sale - this value can be realised by sale to secondary or alternative markets e.g. through export;
•  many suppliers are keen to engage in new business models; and
•  beyond turnover, cost savings and environmental improvements these models can substantially improve a brand’s image for service, quality and values.

 

The benefits are there. So why isn’t more apparently happening? I think it is because the scale of change appears too great, especially when compared with the other more conventional investments. Businesses need to be able to take more manageable steps towards new business models that reduce the risks and don’t feel quite so daunting.

 

That’s why WRAP provides resource to businesses to identify and assess the business case for smaller changes as a first step. The businesses can then realise these benefits and work out how to move forward from there. There are a number of good examples of these simple steps some of which are already being used particularly in the B2B sector, and that could be more widely applied, for example:
•  buying back technology and fashion products from customers to encourage new transactions and extend the effective life of products economically;
•  managing assets better - keeping depreciated assets that still work effectively and sharing them with other parts of the business (or even with other businesses);
•  remanufacturing products for sale to secondary markets;
and, the “back to the future” idea of providing rental and repair services on a larger scale.

 

This approach works because it reduces the risk of change management. WRAP is providing assistance by providing resources to carry out the initial business case assessment tailored to your business. This helps businesses identify options then understand the pro’s and con’s before investing in the change. Once new approaches have been tested and found to work, businesses can then consider some of the more radical ideas that are being discussed and used by some pioneers, like moving to the provision of services by products, rather than product sale.

 

So, there is no need to take a leap of faith when developing new business models. By taking a few simple steps, businesses can work out the best way to make a start without investing large amounts of resource or cash, and put you on a path towards a more resource efficient, resilient and sustainable business.

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