Walter Stahel's basic message is, lower demand for energy and materials by designing durable and upgradable products with a long-life span. He answers the question, how could manufacturing companies remain profitable? by suggesting they refocus their mission to delivering customer service (selling results, performance, and satisfaction rather than products) and owning the equipment themselves as the means of providing this service.

The concepts of product-life extension and the service economy go beyond all other IE approaches to closing the loop in industrial/consumer systems. They are an essential complement to the work of industrial metabolism, design for the environment, and other IE methods.

Stahel's vision of the service or functional economy are of great importance in evolving a long-term strategy for achieving the vision of The Chinese Circular Economy as well as the German and Japanese Recycling Economy Laws.

Is Stahel's vision useful only in the long-term? Several major companies are now moving in this direction. Stahel's concepts could possibly be used by major entrepreneurs to enter markets now dominated by existing companies.

Summary of Stahel's concepts

Walter Stahel has linked the concerns of industrial metabolism and design for environment with a broader level of design: the basic mission of a business. Stahel, a director of the Swiss Product-Life Institute, argues that closing loops through recycling is only a partial solution. It does not slow the rapid and unsustainable flow of materials and goods through the global, national and local economies.

He proposes product-life extension as the necessary complement to recycling. He suggests business strategies for achieving it and the dimensions of a service oriented economy. While his vision implies deep changes, Stahel identifies major corporations such as Xerox, Schindler (the world's second largest elevator company), Caterpillar, Agfa Gevaert, and Siemens that now demonstrate the concept in practice. The Lingang Industrial Park in Shanghai has reserved a large part of its Heavy Industry and Logistics zone for location of remanufacturing companies. Caterpillar Remanufacturing is building the first major facility at this site. see below

Product-life extension implies a fundamental shift from selling products themselves to selling the utilization of products, the customer value they yield. This change in the source of economic value to firms, depends upon enhancing product life through several key design strategies. Designers would seek to optimize the following product qualities:

• Durable and difficult to damage;
• Modular;
• Multi-functional;
• Sub-components are standardized, self-repairing and easy to repair;
• Easy to repair or upgrade;
• Components can be reused in new systems;
• Units or systems can be easily reconditioned and remanufactuered.

These design strategies are already part of the design for environment toolkit. They would significantly help achieve central industrial metabolism objectives of cutting demand on material and energy resources and reducing pollution from manufacturing.

The Service Economy (also known as, the Functional Economy)

As a company moves from maximizing sales of material products to the delivery of customer satisfaction, its long-term source of competitive advantage will become the ability to provide the needed service. Revenues could come from leasing of equipment with long-life; continuing maintenance and service; major upgrading of systems; parts and supplies; service provider training and licensing.  Or the company might simplify the transaction by offering one, use-based fee.

Stahel argues that if the company is compensated on the basis of service provided, its employees will have strong incentives to minimize materials and energy used in the systems that deliver the service to the customer.

Stahel also considers the larger transition to a decentralized and skill-based service economy that product durability implies. Economic value would be based in utilization (customer satisfaction in the service gained) rather than exchange. Decentralized labor-intensive service centers would create many skilled jobs for workers no longer needed in centralized, automated production units. Resource use would be lowered as products no longer moved rapidly from factory to customer to landfill.

Walter Stahel’s work represents design at the level where a company asks, “What business are we really in?” Wise decisions at this level will have the greatest impact on a firm's environmental performance.

Benefits:

Product-life extension is a strategy that promises to make very large reductions in materials and energy use needed to satisfy growing consumer needs. He estimates that it could increase the productivity per unit of resource used ten fold.

The strategy includes strong economic incentives for achieving these objectives. Improved resource productivity translates to increased profitability and competitiveness.

The service economy concept offers a decentralized means of developing skilled jobs.

Stahel's systems approach could give independent entrepreneurial ventures competitive advantage in entering markets when major corporations who could use it remain focused on selling products.

Challenges

This approach to sustainability requires long-range vision and major organizational and technological redesign on the part of corporations. (Investment markets' present focus on short-term financial performance does not support such fundamental change.)

Product-life extension runs the risk of companies making major investments in technologies for service delivery that may become outmoded. To what extent can modular design for easy upgrading offset this risk?

Consumers have become addicted to inexpensive throw-away products that last as little as one to two years (cell phones) and are rapidly upgraded to new throwaway models. Even major appliances may last no more than three to five years before breaking down, without affordable repair available.

Are there ways that Stahel's concepts could be applied to more transitional products?

Stahel's concepts could guide existing corporations in redefining their mission. In some industries, entrepreneurs could adopt this systems approach in order to compete with established firms. We describe one proposed example of an entrepreneurial transportation system reflecting Stahel's thinking in the page Three Levels of Transportation Design. Our future scenario of Gambit describes a home services firm. The future scenario of Qwanin, a fictional country. applying industrial ecology illustrates applications in telecommunications and transportation.

The mental challenge "Not only are many of our appliances made overseas -- China is a major player -- but the concepts of quality and "service after the sale'' are no longer relevant. Appliances are cheaper and more prone to breakdowns, and we've come to accept the idea that there is no point fixing something when it breaks. Just toss it and buy a new one. 'You can't find anybody who will work on a microwave now," says Steve Cruciani, who runs Steve's Appliance Installations in Berkeley. "What's the point? For $65, you can get another one.''' Disposing with the fix-it guys. San Francisco Chronicle, C.W. Nevius Saturday, July 16, "05

Cases

We can be confident that we can meet the challenges to applying Walter Stahel's sustainable vision of durable products, delivered by companies working in the business model of the service or functional economy. Companies are now successfully working in this model. Here are a few cases to illustrate this fact and links to others.

Agfa-Gaevert

The Swiss photocopier company, Agfa-Gevaert , demonstrates a systems shift in business mission that reduces demand on material and energy resources. AGt leases copiers in Switzerland with a long-term flexible agreement (selling system utilization) which covers all consumables in a price per copy. The company assumes responsibility for product quality and utility over its lifetime. Therefore designers have a strong incentive to use long-life components, standardize components and systems, lower costs of supplies, and aim for ease of repair and reconditioning. “Agfa-Gevaert’s interest in product durability is evident: the longer its products can be rented out and the cheaper their operation is, the higher its profit.”
( see Borlin, 1990 Chapter 4 in references below/)

Xerox Asset Recycle Management program

The ARM initiative at Xerox Corporation reflects the equipment design strategies recommended by Walter Stahel. The mission: "Asset Recycle Management provides the leadership, strategy, design principles, operational and technical support to maximize global recycling of parts and equipment, resulting in a major competitive, as well as environmental advantage for Xerox."

This mission has been built into the company's global organization with an ARM Vice President responsible for achieving 100% recyclability of all manufactured parts and assemblies. Remanufacturing to high quality standards and resale to new users will extend the life of equipment several fold and reduce demand on virgin resources. "Xerox chooses to evaluate products on the basis of quality and performance, not on the degree of virgin material used . . ." The initiative is designed to streamline the process by which returned machines are reconditioned, thus increasing return on investment.

The company estimates it has added hundreds of millions of dollars to its bottom line since ARM was formally started in 1991. (Xerox 1995)

Acer

Stan Shih, co-founder and Chairman of Acer, the major Taiwanese compuer manufacturer said,  "We would like to leverage our PC brand name and global sales network and migrate into IT services. Right now, we're introducing the E-Office service in Taiwan. With E-Office, you can have e-mail and a local-area network, but managed by Acer. We build the infrastructure -- including equipment on the customer site. It all belongs to Acer." Q & A STAN SHIH OF ACER Computing Success Taiwanese exec discusses PC industry, links to Bay Area Carrie Kirby, Chronicle Staff Writer Monday, March 25, 2002 ©2002 San Francisco Chronicle
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2002/03/25/BU214749.DTL

Acer's e-Enabling Servicehttp://global.acer.com/products/mm/index.htm

Walter Stahel case studies

• 3 Case Studies, Power tools -  Washing machines - Personal Computers
• Langzeit-Kostenanalyse von Fahrzeugen (PKW und LKW) / A long-term Life-Cycle Analysis of cars and trucks
• Case Study on Caterpillar Remanufactured Products Group 1995
• The Take-back of nylon carpets in the USA - Dupont

Resources:

Walter R. Stahel is Directeur, Institut de la durée Genève, or Product-Life Institute, 18-20 chemin Rieu, CH-1208 Genève, Switzerland.  Product-Life Institute

UNEP Activities in Sustainable Consumption http://www.unep.org/themes/consumption/

Borlin, M. 1990. “Swiss case-studies of product durability strategy,” Product-Life Institute,. Genève.

Cooper, Tim. 2005. “Slower Consumption: Reflections on Product Life Spans and the "Throwaway Society"”, Journal of Industrial Ecology, Winter/Spring 2005, vol. 9, no. 1-2, pp. 51-68(18), MIT Press, Cambridge MA.

Giarini, Orio and Stahel, Walter, The Limits to Certainty: facing risks in the new service economy. 1989/1993. Kluwer Academic Publishers, Dordrecht and Boston, MA.

Stahel, Walter. 1994. “The Utilization-Focused Service Economy: Resource Efficiency and Product-Life Extension,” in Allenby and
Richards, Greening of Industrial Ecosystems, National Academy of Engineering, Washington DC,. Available through the National Academy Press Office (202-334-3313)

Stahel, Walter R. 1995 "The functional economy and cultural and organizational change," in Richards, Deanna J. 1996. The Industrial Green Game: Implications for Environmental Design and Management.. National Academy Press, Washington DC, 1994. Available through National Academy Press Office (202-334-3313 or 1-800-642-6242)

Walter R. Stahel. “The functional society”, in Bourg, Dominique and Erkman, Suren. 2003. Perspectives on Industrial Ecology. Greenleaf Publishing, Sheffield, UK
also as paper on Proceedings, Industrial  Ecology Conference, Troyes University, France, 2001. published as a CD-ROM

Stahel, Walter and Reday, G. 1981. Jobs for Tomorrow, the Potential for Substituting Manpower for Energy, Commission of the European Community. Vantage Press, NY.

Stahel, Walter, "Product-life as a variable: The notion of utilization," Science and Public Policy, 13(4) August, 1986.
Victory, Katherine. 1995. "Focus Report, Why Smart Companies Will Take Part in the Debate on Sustainable Production and Consumption," Business and the Environment, August, Vol. 6, No. 8. Lexington, MA.
The Chinese Circular Economy |
Xerox. 1995. CSS/ISC Asset Recycle Management. June. Revision 2.0. For information on this program write Asset Recycle Management, Xerox Corporation, 455 West Commercial St., East Rochester, NY 14445.