We live at a time of remarkable transformation. The linear throwaway economy of today—where we extract resources, process them, use them barely once, and trash them immediately as we would a cheap plastic fork—is coming to an end. We are, simply put, running out of things to mine and places to trash.
And the market is beginning to recognize it as well: after 160 years of falling costs of raw materials, the first 10 years of the new millennium have seen a whopping 147 percent increase in real commodity prices. Do you happen to be one of millions of managers fighting the ever-rising prices of raw materials, transportation, operations, and more? Welcome to the future! A new economy is being born, one that takes the line and turns it into a circle.
At the end of the life of a product, all of the waste comes back into a production cycle as a valuable resource, infinitely. With that comes a new economic order, where we compete and win using a radically new set of rules. While most of the business world remains in the dark, Bayerische Motoren Werke AG – also known as the global giant BMW – is navigating the murky waters of the resource crunch. The company moved well beyond selling products to selling services – and from a car company transformed itself into a mobility company. Focusing on mobility – a service rather than a product – allows the company to power up radical innovation and open doors to a completely new business opportunity.
Take, for example, the DriveNow car-sharing service, employing BMW i, MINI, and Sixt cars, which allows people in densely populated urban areas to enjoy the benefits of a personal car without owning one. The idea, as BMW explains, is simple: “The mobility concept is based on the motto ‘pick up anywhere, drop off anywhere.’ Billing is per-minute, fuel costs and parking charges in public car parks are included. Users can locate available cars using the app, website or just on the street.
A chip in the driving license acts as an electronic key. Now, that is a leap into the future for a 98-year-old company! But the new world of resource-depravity is also attractive to the newcomers. In a number of European countries, a 2012-born start-up FLOOW2, is making money by allowing businesses to sell their temporary overcapacity – underutilized machines, skills, and real estate – all with the click of a button.
By May 2014, this “sharing marketplace” grew a portfolio of 25,000 materials and services10 that used to be sitting idle, but now make money for the owners while offering a cheaper alternative to users. And FLOOW2 gets a nice commission as well – a much-deserved prize for a solid business model. Puma, a multi-national shoemaker to the fit, has transformed resource crunch into a source for radically simple innovations.
For instance, the company is getting rid of shoeboxes in favor of the remarkable intelligence of the light and reusable Clever Little Bag. The Bag came about as a response to a wasteful practice: a company made boxes, assembled boxes, shipped boxes, stored boxes, and put boxes into a shopping bag only to see both discarded by the customer within a few minutes of arriving home. An alternative? Clever Little Bag is a re-usable package-shopping bag combo that brings additional value to the customers while saving Puma big money on materials and shipping – cardboard savings alone amount to 65%.11 Water, electricity, fuel use are also severely reduced – so bring on the savings! In their unexpected take on resource intelligence, BMW, FLOOW2 and Puma are far from alone.
For the past three years I have worked with and studied the pioneers of a new economic reality, who are transforming the collapsing linear throwaway economy into a more lasting, more abundant, more sustainable version of itself. While the companies, people, and projects pioneering these new rules are still rare, there are enough of them to suggest the first few essential principles that allow managers to innovate their way into a new world. Five new rules of the trade – five essential “secrets” – appear increasingly important for individuals and companies eager to power up a new strategic direction and secure the source of a truly sustainable value.
Together, the principles inspire fundamental change and power up radical innovation across countries and industries – and make up the essence of what I call Overfished Ocean Strategy: the art of transforming today’s depletion of resources into tomorrow’s differentiated long-lasting profits. Here I will speak about three of the five principles. Principle One: From Line to Circle The rapid decline of resources – from coal to tuna to vitamin C in a typical tomato – means that one way or another, all of us will have to find a new path forward.
That path, however, is not new at all – indeed, it has been perfected over the course of millions of years by nature itself. You see, nature does not have waste. Waste of one process becomes food for another, in perpetual cycle. When an animal dies, its body is not thrown into a landfill; instead, it becomes a source of valuable nutrition for millions of bacteria that in turn produce waste products that are essential for the formation of soil. Soil in turn churns out vegetables, consumed by the very animals. So, why not learn from nature and connect the two ends of the global economy and turn the line into a circle? Useless waste becomes a valuable resource that we can circulate indefinitely.
Abundance follows. Principle Two: From Vertical to Horizontal Imagine the global value chain of the industry you’re in. This long line consists of many steps: upstream, reaching to your company, and downstream, touching your customers, consumers, and end-of-life entities. This line is also many layers deep, with different industries feeding and interacting with each other. Growing up in business, we are taught to look downstream, paying attention to our customers and consumers.
We are asked to pay attention to our immediate suppliers – to make sure that we have secured prices and quantities. But even more so, we are asked to pay utmost attention to the vertical cut in this chain – our competitors. Yet, in the world of overfished oceans, risks and opportunities are hiding far away from the home grounds – among the suppliers of the suppliers of the suppliers, and customers of customers of customers.
Move beyond your little vertical slice of the global value chain. Expand your horizons. Principle Three: From Growth to Growth Managers in Atlanta, Delhi, or Copenhagen where their growth comes from, and they will give you a clear answer: selling more. Yet, in a world constrained by every type of resource, including landfill space, only one type of “selling more” is possible. We are taught to look at our businesses in terms of our products – even the financial services industry uses the term “product.” Yet, it is precisely in the service of creating more with less – designing a total solution, a unique experience – where growth lies.
Using these and other principles of Overfished Ocean Strategy allows companies, actors, industries, and continents to move from scarcity to abundance. The collapse of the linear throwaway economy is not a question of if but of when. The change is coming, and the rapidly oscillating prices on everything from rice to gold are a first sign of the new reality.
The question is, will you ride the high tides with mastery and purpose, or will you be swallowed by waves that are unexpected and unnoticed until it is too late? If the endless list of Overfished Ocean Strategy innovations is any indication, we should make it into the new world just fine. I am counting on seeing you there.
