Unprecedented economic changes are making significant impacts in economic systems that have led to revision, and creation of new policies and business models. The advent of the industrial economy for instance, has caused both turbulence and growth to businesses which paved the way for experts to develop, improve, and create sustainable business models and principles that we are actually using and adopting today.
The industrial economy in gist
The industrial economy can be categorized into three types – linear, circular, and performance economy. Linear economy is characterized by a straight and close-ended procedure. We extract raw materials from nature, turn these materials into products, sell them, use them, and then eventually throw them away in landfills. This process has led to tremendous environmental problems that have also created concerns on the availability of raw materials and their increasing costs. This became a precursor to the circular economy – the antithesis to the wasteful and environmentally threatening linear economy. Unlike in a linear economy, products and services in a circular economy are designed in ways where materials can be reused in new products or services of equal or higher quality. Going a step further from the circular economy is performance economy which focuses on selling the use of a product instead of selling the product itself.
Performance economy is a strategy?
We’re all likely familiar with the idea of selling a good. However, are we familiar with the idea of selling the use of a good? Performance economy consists of the idea that instead of selling the goods, we sell the usage value of the goods. It focuses on the goal of generating the highest added value possible of goods for the longest time while consuming few materials and little energy as possible. Swiss architect Walter Stahel, the genius behind this notion, came up with this idea as part of his circular economy strategy. The performance economy is basically an extension of his circular economy vision which is about preventing wastage and creating jobs through reusing and extending the service-life of goods.
Performance economy pioneers
Walter Stahel and Genevieve Reday were the brains behind what we now know as economy in loops or circular economy. They created an economic vision that focused on competitiveness, waste prevention, resource saving, employment generation, and economic competitiveness. Industrialized countries were among the first to adopt a circular economy model since it was because of the negative impacts of industrialization that circular economy came to be. In 2014, the executive body of the European Union adopted a zero-waste program that became the legal framework for a circular economy in EU-member countries. Countries in the EU are slowly adopting a circular economy and creating circular economy legislations that projects a savings of around 600-billion Euros. EU members Denmark, the Netherlands, and Sweden are leading in terms of crafting and applying strategies and laws on reusing and recycling wastes. Non-EU member Scotland and Asian economic giant Japan are also among the leading countries that are adopting circular and performance economy practices.
Companies like GE, Elite, 3M, Michelin, Target and Dow are integrating circular and performance economy policies and strategies to address environmental and economic challenges. For instance, Michelin is offering mobile tyre regrooving and replacement services and retreading worn tyres for reuse. Furthermore, when you see a product or service being advertised nowadays, you’ll notice the emphasis on what you’ll get when you get such item or service. Consumers have become more conscious about the products they buy or services they avail hence, the focus is now more on the value you get rather than on the product you just bought.
Employment and Entrepreneurship
Apart from waste and resource management efficiency, the performance economy also envisions providing sustainable and efficient job opportunities. Employment has been greatly affected by the shift in economic policy and the shift has seen improvements in terms of providing job opportunities for more people. Today’s dominant economic paradigm deviates from the take-make-use-dispose feature of the linear economy that once ruled the industrial era. The shift from a linear economy to a circular one enabled the transformation of consumer behavior and production chains – ensuring that resources are enough for all and for future generations. Activities under circular and performance economies are projected to create jobs and reduce unemployment by a significant number. In fact, a joint study by the Waste and Resources Action Programme (WRAP) and Green Alliance reported that improvements in resource efficiency can help improve Britain’s employment situation. The findings also state that by 2030, Britain could require over half a million jobs and reduce unemployment by over 100,000. That’s if Britain is consistent with its circular and performance economy development plans and activities.
World economies have come a long way. The challenges brought about by industrialization has led to countless possibilities and opportunities, including sustainable outcomes. Performance economy has led organizations into thinking smart – by economically profiting while at the same time contributing to sustainable development. Organizations and companies get a big financial benefit by reusing, remarketing, remanufacturing, repairing goods and materials. Consumers on the other hand benefit from reduced costs of goods and services. Both ends also positively impact the ecological systems that’s why in a sense, it’s a win-win situation.
For nearly a century creativity has been understood as a key ingredient of business creation across thousands of design who took shape as product, service, solution and social planning. Participative innovation comes with a new set of values to reinforce the creative potential of organisation. Participative innovation is ether understood as an internal phenomenon of organisation or a manifestation which is happening outside the boundary of the corporate structure. Initially we would have a look to both the aspects. In house participative innovation refers to the fact that workers and managers associate to create new business models and solutions for the consumers. We call participative innovation the point that the workers who are involved in the creative process are not supposed to be in charge of innovation contribution. Participative innovation implies that an organisation would have adopted a politic of democratization of the creative process across its managerial layers to leverage new business opportunities. For the past 3 decades, participative innovation has grown significantly. The company Google who institutionalized this value, made it mandatory to workers to involve themselves in prospective projects a certain amount of time from their schedule. It is believed that number of Google innovation came from this initiative. Giving workers some freedom to problem solving in the ever fragmented industry leads companies to new areas of business development. Today, there is a common acceptance that participative innovation is promising. More recently participative innovation has got a new sense by including public and user participation. Participative innovation advocates the importance of including the user on the conceptualisation of product, service and policy. This second aspect of participative innovation interest us more particularly has it may lead to social entrepreneurship.
To demonstrate the potential of participative innovation I shall dress a parallel with design thinking that is most of the time a non-inclusive discipline. Bruce Nussebaum has demonstrated that failure in design thinking is due to monopolistic approach by most companies and political groups towards the society with regards to value creation. Rather than wanting to “change the world” through design thinking and business it should be like society leaders support people in making the world as they want using participative innovation. In short, it is questioned that shifting the power of design thinking from the designer’s hand to the common man’s hand could lead to a more effective way of producing innovation. In this research I try to demonstrate that social changes lead people to be increasingly reactive to systems and solutions presented to them. We witness a re-appropriation of the industry, the politic and the social.
At the lecture of sociological concepts of identity, and essays from notorious designers, philosopher and business mam we assume that our economy could be at the beginning of a new economic order that would give power to consumer as a democratic necessity to balance the corporate lobby. This approach sometimes referred as ‘prosumerism’ would radically transform the purpose of design in the corporate environment. It is therefore believed that corporate would be re-elected to the role of social enabler rather that been the creative think- tank of the consumerist society has it has been the case since the Second World War. However, participative innovation leads to large questioning in time of economic recession and environmental instability. Participation is negatively associated to “working for free” with concerns in terms of intellectual properties. Today’s businesses are facing the issue of associating with the consumer through participative innovation while maintaining a climate of fair exchange.
By stimulating participative innovation business and society put themselves at risk that a large part of the creative potential slip from their hands and get developed by third party individuals and organization. However participative innovation requires the nest of a cybernetic environment for business development what make it mandatory for businesses to concede part of its intellectual production. As Prahalad and Krishnan mention in the New Age of Innovation; “"No firm is big enough in scope and size to satisfy the experiences of one single consumer" and that is the whole challenge of a participative innovation approach. User requirement get so fragmented that no business can have the capacity of responding to all the facet of the consumer experience. This statement also implies that ultimately, firms would depend on individual and/or start-up to generate the value necessary to respond to the needs of unique consumers.
The New Economy Called Sharing Economy
Exclusivity is out. Collaboration is in. Working together is the new way of doing business which brings us to the concept of sharing economy. What does sharing economy mean? As kids, we were taught early on that sharing is an essential part of being. The definition of sharing that we knew back when we were starting to learn about numbers and ABCs is no different to the idea of sharing when referring to the sharing economy.
Uber, Airbnb, Grab, ebay, Fon, HomeAway, and Elance – do any of these companies ring a bell? These are just some of the growing number of sharing-focused businesses that are shaping today’s industries and economies. Companies built on collaborative ecosystem and sharing management culture are transforming businesses and the way people deal with daily life and work situations.
The rise of social media
Admit it or not, social media has become a part of the daily lives of most people. Unlike traditional communication tools, social media offers a two-way communication stream that allows people to be proactively engaged in discussions and the decision-making process. Social media is a tool aimed at collaboration and sharing. Imagine how easy it is to order food, look for a job, shop, book trips and appointments, join organizations, and even set-up a date right at your fingertips. Years ago, we were stuck with lengthy paper processes, charged with exorbitant fees, and even traveled miles away just to do such things. And today, social media has become a fundamental element of the sharing economy as witnessed in the companies mentioned earlier. The advent of social media has changed people’s perception and attitude towards others. Since then, people have become more willing to open up about their lives to strangers as seen on a lot of vlogs and social media posts. People are more engaged and unafraid to share their opinions and recommendations. Subconsciously, these are behaviors that can very well be attributed to the idea of sharing. What started out as a simple idea of sharing information turned into something even bigger – the sharing of resources.
If you don’t evolve, you dissolve
Why do we need to understand the sharing economy? Why does it matter to us? If we are just mere consumers and not into the business and technical side of the sharing economy, then why should it matter to us? The answer is simple. Life is chemistry. Everything around us affects us. And if we don’t evolve and adapt to changes, we will get left behind and stop growing. We need to understand the basic principles of sharing economy because we are a part of it. Our contributions, no matter how small, make all the difference collectively. A deep understanding of this emerging economy can lead us to better opportunities, allow us to reach new horizons, and provide us foresights that will allow us to make strategic decisions. We can’t just always be on the receiving end all of the time. It would be an irony to benefit from an industry that capitalizes on sharing but could not receive its fair share of time, resources, and efforts from the people it caters to.
So, you want to be a part of the sharing economy?
What does it take to be a part of this emerging economy? Just like in any other business or venture, we set values and traits that help us succeed in our undertaking. The values and attributes required in a typical business are no different with the values and traits one needs in the sharing industry. Sharing-focused businesses operate on trust, transparency, accountability, cooperation, open-mindedness, and the willingness to adapt to changes, innovate, and constantly feed your mind with knowledge. Apart from these values, it’s also necessary to come up with a strategic plan for your planned shift to a sharing-centric economy. How will a sharing economy affect your existing business model? Are you well-prepared for disruptions and the transition? Have you thought about the mindset of your market? You need to consider these questions on your planned economic shift. And you need to integrate all the values mentioned earlier in answering and creating solutions for such questions.
Entrepreneurship that creates opportunities for all
The sharing economy is empowering entrepreneurs and reshaping how they do business. Entrepreneurship is evolving because of peer-to-peer marketplaces. Pooling together, sharing resources, and reducing overconsumption or unnecessary purchase of things are redefining the concept of community-building in the perspective of a sharing economy. What sets the sharing economy apart from the traditional economy is its ability to provide business opportunities for all. In a traditional set-up, only those who have enough capital to build or buy apartments or condo units can actually sell or rent out these places. Imagine having an unused room in your apartment that’s just building up dusts and cobwebs. Thanks to the sharing economy, you can now have your room easily rented.
Is it sustainable or not?
This leads us to the question on whether this kind of economy is sustainable or not. Yes and no. Like all things, the sharing economy has its own pros and cons. When it comes to sustainability, it will depend on how we treat and view it today and in the future. It could be sustainable because it creates jobs for people and reduce the unemployment rate but it’s not sustainable for governments because of loss of tax revenues. Will sharing-centered enterprises last long if the number of similar businesses rises? Will it still be sustainable socially and environmentally speaking? The answer will depend on how a business sees the opportunities in challenges. Again, it all boils down to the values mentioned earlier, especially one’s open-mindedness, and willingness to adapt to changes, innovate, and constantly feed their mind with knowledge. These are what will make the sharing economy successful and sustainable.
Companies and organizations need to give back more than what they take from the environment and the society. For a company to be net positive, it needs to outweigh all the negative impacts on society and the environment with positive impacts. Net positive is a way of transforming businesses by having them innovate their products and services in a way that helps consumers have more sustainable lifestyles and restores the environment.
Why the Need to be Net Positive?
Nothing in this world is permanent. We live in a time of profound disruptions, rapid changes and unprecedented social, economic, and environmental challenges. These factors have made significant impacts on our lifestyle and the way we view our environment. When a business or an organization fails to positively respond to these changes, adapt and adopt appropriate measures, it usually leads to failure and eventually, closure of business. This is why becoming net positive is important. Net positive aims to encourage organizations and businesses to leave a positive impact to the environment – you put more resources into the environment than you get. Is it achievable? Yes, it is.
The 12 Principles
Through the 12 principles of a positive net approach, organizations and businesses understand net positive better which in turn help them adopt this new approach more efficiently. Here are the 12 principles of a net positive approach:
Net Positive Leaders
A lot of companies are already geared towards a net positive plan. Companies like IKEA, Coca-Cola, Capgemini and Kingfisher are among the key organizations making a positive impact to the society and the environment. These companies go beyond doing less to zero harm to the environment. What they do is they set clear guidelines and common set of principles to increase their sustainable practices while innovation. The net positive principle is a great way to avoid companies from greenwashing since in going net positive, you don’t just simply label your products or services as eco-friendly. In net positive practice, you show proof that you are indeed returning more than what you get from the environment. Coca-Cola, for example, returns and restores the water it uses in its products. They’ve set a concrete goal with a definite timeline in replenishing all the water they use in making beverages.
This goes beyond just merely restoring the water they use. Coca-Cola incorporates social responsibility through launching community water projects all around the world. These projects range from protecting watersheds to improving access to potable water. Meanwhile, IKEA’s net positive strategy focuses on generating renewable energy. Energy-saving initiatives such as installation of wind turbines and solar panels on their stores and distribution hubs have helped IKEA reduce their energy use globally. Their strategy is also encouraging consumers to change their mindset regarding energy consumption.
Gearing towards a net positive impact will not only drive a restorative economy. More importantly, it will create societal and environmental values that drive sustainability and help build community resilience.
Patrick Roupin is an expert in innovation, design, strategy & entrepreneurship.
Ashrefunisa Shaik is an expert in organizational transformation & sustainability.