HOW TO BOOST PROFITABILITY BY SELLING LESS
Ever since the American industrial Henry Ford introduced his assembly line, we have seen massive increase in industrial efficiency. Today we live in a world where production is pushed to the limit; growth is religion. But is more always better?
That depends on how we define growth. If you tell me that it is all about increase of sales, then my answer would be ‘no’. If you say growth is increasing value for the consumer and the producer, then we can talk.
Let me clarify.. Selling more will definitely boost short-term profitability. But in a world where resources are becoming scarcer and material prices are volatile, it may not be a sustainable business strategy for the future. So, how do we increase economic growth by selling less?
To do that, we should re-evaluatie the true added value that our products have for the customer. Products are a means to an end, not the end itself. Say that someone buys a lamp to read a book. Does he or she really care about owning the lightbulb? Or is it just the light that they’re after?
Wouldn’t they prefer a lightbulb with 10.000 burning hours over one with only a 1000? However, nowadays it’s not in (most) companies’ interest to make products that last. Think about your smartphone that breaks down every two years and the set of knifes you just bought at Xenos are already squeaking before you even unpacked. It keeps our demand high.
So, what if companies would start making products that last? They would sell less, yes. But what if they would change their business model from selling to leasing? The company maintains ownership of the goods, while the customer gets the best possible product. Shifting the focus from ownership to access will incentivize manufacturers to sell better quality, not more.
Revenue can be made out of a service model, keeping the product in its best shape at all time. After the product life it could be retained, refurbished and re-sold in another market. At the end of the life-cycle the valuable parts could be harvested and the rest of the materials recycled into new resources for next use.
This way, the company offers a better value proposition, increases resource efficiency and reduces its environmental footprint. Changing your business model from linear to circular requires guts. But no guts, no glory. Adopting the circular economy is a solid strategy for Future Proofing your business. That is what Workprocess is all about.
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