Product servicing the new green business model

TORONTO–As the price of natural resources grows with mounting demand, one York University professor predicts the emergence of a new business model where vendor will shift from manufacturing to servicing products.


The business model will be one of product servicing where vendors not only build and sell a product but they’ll recycle it and give you a new one when an old product is traded in, said Irene Henriques, professor with York University’s Schulich School of Business.


“They’re going to go to the customer and close the loop so you actually have a relationship with the customers,” said Henriques. “It’s going to be a really fascinating model.”


Henriques spoke at a panel hosted by mobile device manufacturer Nokia about environmental sustainability in the business world. 

In an interview with ComputerWorld Canada, Henriques said taking on a product service provider role changes a vendor’s responsibility in the vendor-supplier ecosystem. Once a vendor has decided what type of service provider it wants to be, Henriques said it must then build business social relationships with other vendors to champion those ideas.


“If you want to give loyalty points, you may want to network with a loyalty point company,” said Henriques. “This creates a dynamic where you’re looking to other companies to partner with.”


Panel moderator, David Conrad, Irving, Tx.-based senior manager of environment operations & logistics with Nokia, told ComputerWorld Canada he’s observed that the product servicing model works best for those vendors whose products are becoming a commodity and so must move to services as the next step.


“At Nokia that means application and support, it means making that device more important to you,” said Conrad.


“If I can influence some of that one billion user base with an application that helps someone to make a more sustainable choice in what they do, then I can make a huge impact,” said Conrad.


One issue is that environmental sustainability and financial sustainability were long perceived as mutually exclusive when in fact they are mutually dependent – albeit that’s changing, said Conrad.


At Nokia, Conrad said environmentally friendly choices are treated like business choices by way of business cases for instance. The outcome may not just be tangible bottom line results, but the intangible kind as well. “The recognition of that is starting to be a big piece of it,” said Conrad.


Another panellist, Merril Mascarenhas, a partner with Toronto-based Arcus Consulting Group Inc., said he’s observing green innovation currently happening in the manufacturing and procurement side of businesses, which he jokingly called the “boring side of the business.”


“We need more investment in manufacturing because right now innovation is a cost item,” said Mascarenhas.


He’s observing activity among Canadian companies in the wireless product arena like Waterloo-based Research in a Motion Ltd. that are using recycled materials in products.


Other companies making strides in their manufacturing processes are retailer Wal-Mart and General Electric Co., said Mascarenhas.


Another panellist, Nelson Switzer, director of corporate responsibility with energy provider Direct Energy, noted that despite vendor marketing of green initiatives, users may still not buy into them for three reasons. One, there’s the assumption that there’s a premium attached to being green. Two, they don’t believe the green version is as of good quality as the original. Third, loyalty and culture are hard to change.


Currently, it is the vendors that are demanding users adopt the green products and services they put to market, said Switzer. But the real push, he said, will be government regulation that will drive businesses to much more aggressively build, market and raise awareness about green products.


Follow Kathleen Lau on Twitter: @KathleenLau