FROM SELLING PRODUCTS TO PROVIDING FUNCTIONS/SERVICES

In order to sustain economic growth without damaging our finite global
environment, the world must move beyond the twentieth-century model in
which mass production and mass marketing supported economic and
corporate growth.

Under the old model, economic growth inevitably required shorter product
lives, encouraged repeated purchasing to replace old goods, and promoted
throw-away products to consumers. It is now obvious that the old model
cannot be sustained, given the planet's limited resources, energy and
capacity to handle waste and emissions.

In this context, an increasing number of Japanese companies have started
to develop and implement a new business model. What they now want to
provide is functions and services, instead of the products themselves.
In the past, these companies focused on manufacturing and selling
physical goods. Today, however, they are beginning to realize that what
consumers want is not products per se, but rather the functions and
services that the products provide.

Such new business opportunities have been promoted by recently-enacted
recycling laws (for example., the Law for Recycling of Specified Kinds
of Home Appliances).
http://www.japanfs.org/japan/laws.html

Also, changing mindset of consumers in Japan has contributed to the
emerging new businesses. An increasing number of consumers have become
interested in and concerned about global environmental problems, as well
as local waste-related issues. An increasing number of people are also
realizing the difference between "ownership" and "happiness," believing
that owning many goods doesn't necessarily mean happiness or
satisfaction.

This kind of emerging mindset of Japanese consumers could be attributed
to the fact many people are now somehow materialistically satisfied.
Some people might have been forced to think of their own true happiness
because of the lingering economic recession in Japan.

Many people used to regard owning something as a symbol of status. But
in recent years, increasingly, people tend to believe that true
convenience and "coolness" exist in "emotional freedom from physical
goods" meaning that they can use what they want to use when and where
they want it, without being plagued by their own used-goods.

One of the typical businesses in this trend is the rental business.
Duskin, old establishment in the rental industry, introduced a "cleaning
cloth that requires no water" first in Japan. And they created a new
distribution system for their rental service in order to make their
product economically available to many consumers.

Duskin delivers cleaning mops and mats to individual households and
offices and takes back the used ones. After being cleaned at the factory,
mops and mats are delivered to customers again. This rental model
decreases environmental impacts when compared to individual ownership
and throwaway. They also add that mops and mats they collect from
customers are cleaned in bulk, reducing water, detergent and electricity
needed for cleaning to about one twentieth (according their estimate).

They have many items in the line-up of their rental service, including
small vacuum cleaners. You can have the "cleaning function" of this
small cleaner for only 150 yen (about U.S.$1.20) per month.

Nihonkai Gas. Co., Ltd., a medium-sized company in Toyama Prefecture,
started a new business that sells "warmth" during the winter, instead of
the usual gas heaters with fans. This business is very popular their
customers. Click here to read more:
http://www.japanfs.org/db/database.cgi?cmd=dp&num=120&UserNum=&Pass=&AdminPass=&dp=data_e.html

Toshiba Techno Network Co., a subsidiary of Toshiba, Japan's major
electronics manufacturer, started in October 2001 to offer "home
appliance rental packages" that allow users to rent out a set of home
appliances typically needed by those who live alone, such as students
and workers away from home. The number of users of the service has been
on a rise, they say.
Click here to read more:
http://www.japanfs.org/db/database.cgi?cmd=dp&num=164&UserNum=&Pass=&AdminPass=&dp=data_e.html

Ito Yokado, a major supermarket chain, in February 2003, started to
offer home appliance rental packages to families, as well as to people
who live alone.

Other companies have started rental businesses that include furniture
and interior goods. Meanwhile, Matsushita Electric Industrial Co., Ltd. ,
targeting companies, started a service in April 2002 called "Akari
Anshin Service" which sells "lighting" as a service to factories and
office buildings. Customers no longer buy fluorescent lights themselves,
but rather the lighting provided by them. Click here to read more:
http://www.japanfs.org/db/database.cgi?cmd=dp&num=84&UserNum=&Pass=&AdminPass=&dp=data_e.html

In such rental service schemes, customers don't buy physical good (such
as fluorescent lights or refrigerators). They only use their functions
(such as lighting or cooling), and in return pay a fixed monthly fee.
When the customers don't need the services any more, they just return
the items to the service provider without any effort or extra cost.

It is interesting to note that in these schemes, title and ownership of
the products remain with the service provider. This arrangement gives
the providers the incentive to design products with longer product lives
and greater ease of collection and recycling.

Matsushita says that "the hardware-oriented business model is a legacy
of twentieth-century." Many applications of innovative
twenty-first-century business models will appear in various sectors in
the market. Japan for Sustainability will continue to report new
developments. Keep an eye on the JFS website for updates!

Historical period: 21st century

Date of creation or issue: 2003.

Target audience: entrepreneurs

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