The high quality of Swedish industrial products entails new business opportunities in an increasingly circular economy. One way of increasing profitability may be, for example, to lease out a product and offer it as a service instead of selling it.
In a linear economy, you make money from your product once – when you sell it. In a circular economy, there are different opportunities for gaining revenue throughout the life of the product. This can be done, for example, by leasing out the product or buying it back, refurbishing it and then selling it on to a new customer.
– “There is substantial and untapped potential here for many Swedish industrial companies, as the quality is generally very high when it comes to Swedish industrial products,” says Josefina Sallén, focus area leader and coach in circular transition at RISE. “Many people are presently giving away business opportunities where there is a secondary market in which they are not participants.”
Manufacture once – Sell five times
During the autumn, she and her colleagues conducted interviews at 26 selected small- to mid-size enterprises to investigate their potential for circular transition. The companies have been active in everything from work apparel and aids for people with disabilities to property development, lifting equipment and marine applications. The common denominator has been that all have had their own business models, offered high-quality products and have designed their products or services themselves.
– “What we have mainly looked at is whether they have products that could be sold as services instead, and this has been the case for nearly all of them. Products and materials that can be reused for many years before they are recycled, instead of being directly recycled, are usually better for the environment. We have seen many examples that suggest that this would provide competitive advantages as well as maintained or higher profitability. It is often better to sell a product five times and only manufacture it once than to have to manufacture it five times and sell it five times,” Josefina Sallén points out.
Many people are presently giving away business opportunities
Talk through customer needs
In addition, accessing a product's benefits without buying is often a better alternative for customers as well. This applies not least to technology-intensive products with a rapid rate of development.
– “In this way, customers do not have to commit to a particular version and can access the latest technology as it is developed,” says Josefina Sallén. A good way to start out can be to talk to your customers about the needs or problems the product currently solves, whether these could be solved in a better way and how the challenges look going forward. You can then open the way for providing a service rather than a product and also strengthen the bond with your customers.”
Something that can be good to keep in mind is that the business ecosystem, that is, the system of customers and suppliers, almost always differs between a circular and a linear economy.
– “If you buy back your products, the customers become suppliers as well. The transition can also entail new needs for materials, technology, logistics and financing, for example. Here, we at RISE can help identify the needed partners and also assist with business intelligence, research and development,” says Josefina Sallén.
Totality in circular economy
RISE also has training courses, methods and tools for all parts of a circular transition that are based on many years of research and developed together with Swedish industrial companies.
– “We’re happy to share this!” says Josefina Sallén. “By having all these skills, we can help with all parts of the journey to a circular economy – and with the whole.”
