Join the revolution. Create new business models. Share. Change the game.
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Have you ever asked yourself why you buy things you seldom use when you could easily have access to them only when you do need them? Incongruous as it may sound this question embodies numerous business possibilities.
Being successful in business no longer means selling as many products as possible. It is all about creating value for customers.
Dax Lovegrove, Head of Business and Industry at WWF-UK, encourages companies to rethink current consumer behavior and ways of doing business.
“I think the value people place on owning a lot of things and investing money in expensive commodities is decreasing. People instead want ease and unique solutions.”
The world’s biggest car sharing company, ZipCar, is a prime example of a company where the necessity of sustainability meets opportunity. The biggest macro trend shaping the market is urbanization. At the moment 50 percent of the world’s population lives in cities. That figure is forecast to climb to 70 percent in just a few decades. In China alone, approximately 400 million people are expected to move from rural areas to cities over the next 15 years. This mass urbanization will change not only the cities but also the modes of transportation.
The change has actually already begun. ZipCar carried out a survey in November 2012 that shows 18 to 34-year-olds are more dependent on mobile phones than cars. More important than owning a car is to have access to one. And this is what ZipCar offers to its clients: instead of selling steel with a hood and a trunk, it sells the possibility of using a car only when needed.
Some years ago ZipCar was a hip and cool startup among the trendsetters in Boston. Now, as the biggest car sharing company in the world, it has redefined the whole concept of private transportation. Earlier this year Avis Budget Group purchased ZipCar for 500 million dollars.
Keep an Eye on the Small Businesses
“A good sustainable innovation should be replicable by other companies, allowing entire industries to move to more sustainable business models. This is what is happening in the rental car industry,” Lovegrove says, citing Hertz as another example.
Hertz is a large international car rental company that not long ago launched a new concept similar to ZipCar. Hertz On Demand car sharing operates in six countries, providing customers 24/7 access to cars by the hour or day, and offering users access to a car when they need it without taking on the costs of car ownership.
A case example from Finland shows how car sharing is changing the way of using a car during the business day. The business-to-business market is growing fast.
“Using a shared car in Helsinki is approximately 50 percent cheaper for companies than using a taxi. Car share is also a good alternative for a traditional company car. In Finland, employees must pay taxes on their company car, but this is not the case for car sharing services,” says Sami Astala, partner and CEO of Finnish car sharing service City Car Club.
City Car Club has 4,000 users and around 100 vehicles from a Lexus to a Smart in 110 pick-up locations in the greater Helsinki area in Finland.
If a new service is easy to use and creates benefits, it is more likely that people will opt for it. For car sharing it means easy access and fair pricing. People can join City Car Club online. The car doors open and lock with a single call from the user’s mobile phone at a cost of 10 euros per hour, including fuel.
“In order to keep the prices low we have combined the car sharing business and media space by selling advertising space on our cars. The adverts on the cars allow us to keep the hourly rental price at 10 euros,” Astala says.
Apart from the local car dealership, a shared car solution seems to benefit everyone. The biggest challenge lies in people’s minds. Owning a car has been an important status symbol for a very long time.
“This mindset is changing. It will just take some time.”
The Sharing Society
There are strong signals suggesting that at some point the sharing society will trump the ownership society. The first weak signals telling us things are going to change are usually very small and very local.
It pays to keep an eye on the smaller companies since the game-changing business models are typically adopted by small firms first. For larger businesses the paradigm shift usually takes slightly longer.
“Large corporations can learn a lot from small startups, but at the same time the small innovative businesses need to partner with the bigger businesses to obtain further resources and strategic knowledge,” says Lovegrove, from WWF-UK.
The power of sharing and sustainability can create profitable business for big corporations. Two-thirds of managers think that sustainability is necessary to being competitive in today’s marketplace, according to research published in MIT Sloan Management Review in 2012.
Companies are actively integrating sustainability principles into their businesses, for example, by systematically managing their value chains. Retail giant Walmart expects to generate 12 billion dollars in global supply chain savings by 2013 through a packaging “scorecard” that could reduce packaging across the company’s global supply chain by 5 percent from 2006 levels.
Caterpillar, a global manufacturer of construction equipment, successfully scaled up a business unit devoted to remanufacturing and repurposing machinery otherwise considered to be at the end of its lifespan. Cat Reman rebuilds and restores worn out Cat equipment back to their original performance and life expectancy levels. It also provides remanufacturing services to other original equipment manufacturers.
One of the largest businesses in Central America – food and beverage company Florida Ice & Farm – took big steps in sustainable practices. The company succeeded in dropping the average of 12 litres of water per litre of beverage it produced to 4.9 litres of water and at the same time had a compound annual growth rate of 25 percent.
Caterpillar’s clients can minimize their ownership and operating costs. At the same time Caterpillar protects itself against rising resource costs: remanufacturing a component requires 85 to 95 percent less energy and material than manufacturing the same component new. Revenues increased by 205 percent between 2001 and 2011.
All these examples point in the same direction: sharing based and sustainable business models offer various ways to generate profit. In this game sustainable wins.
PROFILE MAGAZINE 2/2013, page 13