Ways to Create Environmental Benefits and Customer Value

Service Add-ons

Many companies add service elements to help their customers manage the environmental impact of their products.

Kodak Environmental Services for example helps photo processors manage their environmental regulatory and technical issues. Helping customers recycle and control the fairly toxic chemicals used in film processing generates a stronger partnership between the supplier and customer. This kind of relationship or service adds value and can be particularly beneficial to sales when the service is not standard in the industry.

Product Modification

Most product changes prompted by environmental concerns are modifications. Relatively minor they require few manufacturing changes, no change in customer handling or use, and no change in selling approach. Pro-active companies can make large numbers of fairly small changes at little cost in addition gaining customer support. Larger changes are riskier and often more expensive usually forced on a company by regulations, negative press or customer demands.

E.g. Kodak launched a single-use camera that the customer returns for recycling. The materials in these cameras are re-used up to eight times before disposal, making this one of the most recycled products in commerce. Kodak saves money on materials, and forms a stronger partnership with its photo processors. The single-use camera category is the most rapidly growing segment of the consumer film industry and its success is critical to Kodak's financial health. (The Business and Sustainable Development (BSD) website)

Design for recycling can lower costs:

• Redesigned products increase customer loyalty & save costs
• Customers prefer energy-efficient products
• Advanced design technology improves product performance & lowers costs
• Existing products can be made more environmentally sensitive

From Product to Offering

In essence, every business is a service business, because products are only as valuable as the service they deliver. A service focus can be better for the environment because it sells satisfaction, not product; it can be better for business because it encourages innovative thinking about how to meet customer needs. This is the approach discussed earlier e.g. BP and Shell and their major investment in solar technology. Both companies project much higher growth in their solar businesses than in their petroleum businesses.

From Selling to Leasing

If customers focus on the service a product provides, they have no need to own it. The installed base of a product becomes an asset to the supplier.

E.g. Xerox's Asset Recycle Management (ARM), Xerox recovers copiers from the customer site and reconditions the machine infrastructure, which accounts for most of the material. Xerox turns copiers around through refurbishment for less than it would cost to make entirely new machines.

Moving Toward the Customer

The evolution from product to offering requires that a company knows its customers well. The business benefit of this intimacy can be dramatic. Consider companies that sell paint to the automobile industry. As long as the customer is buying volumes of paint, the supplier's incentive is to sell more paint. Services that help the customer become more efficient in applying paint leads to lower sales. Therefore there is no incentive to become more efficient. However, if the purchasing relationship is changed, so the supplier is paid not for litres of paint but for the number of vehicles painted, then the incentive to reduce material flow through the system increases. The supplier has an interest in reducing paint use through thinner coatings and higher transfer efficiency. Everyone benefits including the environment.