How can industry create circular products?

What define’s a product as being circular? 

A McKinsey’s article ‘Developing products for a circular economy’ (November, 2016), discusses the challenge’s businesses face in creating circular products. It is known that some businesses are using circular-economy principles to create products that are durable, easy to reuse or recycle—and profitable. There is currently no one framework that can be applied across industry.

McKinsey, outline 2 tactics that can however help: (1) The first is devising a highly collaborative product-development process that both accounts for and helps to determine sourcing requirements, production methods, marketing, sales, and other aspects of how goods are made and how they are handled at the end of their lives. The second is to use design thinking, which can help companies discover unexpected ways of meeting customers’ needs with much greater resource efficiency than in the past.

Figure 1: Circular Operations (Source: nature magazine, 2016)

If an activity of circular occurs in the production of a product, how is it captured and how is that information passed on to the customer? How do they know?

 

Digital sustainability and the opportunities for achieving your SDGs

There’s an opportunity for digital transformation to help all industries meet sustainability development goals, not least their carbon footprints.

While the concepts of green IT and sustainable IT were originally focused on IT operations and the technology product lifecycle, the new call to action as companies undergo digital reinvention is for them to give environmental factors early consideration in their planning and to extend the scope of their sustainability improvements beyond IT operations and across many of their digitally transformed processes.  Done correctly, digital transformation can make a large contribution in helping organizations, cities and nations better meet their sustainability goals — including those laid out by the Paris Agreement on climate change, which has recently gone into force. The agreement is “a global and legally binding agreement to reduce greenhouse gas emissions to limit global warming to well below 2°C.” It’s estimated that information and communications technology (ICT) devices, such as IT-enabled smart grids and buildings, have the potential to deliver a 20% reduction in global carbon emissions by 2030, and over $11 trillion in new economic benefits.

With digital in everything we do, there’s now a far broader opportunity for IT to make a difference — and it spans all industries. The challenge for companies and organizations is to build on the successes of their green IT initiatives and to pursue similar improvements across their new digitally-based business models and processes.

Much of this work involves close industry collaboration with suppliers and partners across the entire value chain, and the development of a circular economy whereby we keep resources in use for as long as possible, extract the maximum value from them while in use, and then recover and regenerate products and materials at the end of their service life.

In addition to these industry collaborations, and new circular economy approaches, it will be vital to look at each of the emerging and enabling technologies within digital transformation initiatives to determine how they can be uniquely leveraged to unlock substantial improvements in sustainability.

The words “digital exhaust” have typically referred to data that’s a by-product of online activities. It’s now time to turn our attention to a different kind of exhaust and, in an era of digital reinvention, think about how we can reduce our environmental “exhaust” through new digitally-sustainable business models and processes.

Next Step in Digital Journey for Burberry and Collaboration with Farfetch

The partnership with Farfetch came as a fillip for Burberry, which was experiencing dwindling sales in its home market. Like-for-like sales in the UK were down by a “high single-digit percentage” in the last three months of 2017, amid revolving doors at the company.

A theme that has emerged over the past couple of years in the retail sector is how high-end, luxury brands should react to the digital disruption of their niche industry. We’ve seen some brands tackle this head on, some attempt to collaborate with ‘the enemy’ Amazon, and others stick their high-margin heads in the sand.

London-based Farfetch is an e-commerce marketplace for upmarket brands that currently hosts items from more than 700 boutiques. Collaborating with Farfetch will allow Burberry to reach online customers in more than 150 countries.

Alongside this partnership, the company is also implementing a new strategy to take the brand further upmarket that is expected to take around two years. It is focusing on selling leather goods, including handbags at higher prices, although it will not change the price of its classic trench coats, which typically start at around £1,295.

One pillar of Burberry’s recent strategy has been to shift to a more retail-led approach to control its brand image. As part of this strategy Burberry closed 34 stores in ‘unluxurious’ areas, including seven outlets last year. Their previous strategy focused on ecommerce leadership and understanding their customer more, which they achieved with great success, utilising an effective CRM system with in-depth analysis data of over 12 million customers.

Online luxury is the fastest growing sector in retail, but brands have historically viewed the internet with suspicion, partly because they believed that the shopping experience could not replicate that of its exclusive upmarket boutiques. Price transparency online is another factor, as it allows prospective shoppers to compare prices.

Last year, the online luxury market accounted for just 9pc, or €23bn (£20.4bn), of the total luxury market, according to Bain & Company. However, it’s widely forecast to reach at least 25pc by 2025. Against this background, Burberry has become a leader of ecommerce and understanding the customer; it’s taken a collaborative approach and mindset towards digital and has brought its full inventory to Farfetch to broaden distribution.

The Collaborative Mindset for Digital

The idea of collaboration in retail isn’t new, but it is changing. The digital age presents opportunities for retailers to bring in greater levels of operational efficiency and customer centricity to their business models. It provides opportunities for retailers to acquire new customers, engage better with existing customers, reduce the cost of operations and improve employee motivation along with various other benefits that have a positive influence from a revenue and margin perspective. Technology giants such as Google and Amazon have largely been the instigators of this collaborative mindset as they are constantly moving into new areas.

The ability to foster a culture of collaboration is a critical enabler for any disruptive transformation in the retail sector. Burberry’s collaboration is a perfect example of a Retailer = Retailer type of relationship, with Burberry benefiting from extended networks and new channels, and Farfetch benefiting from an uptake of customer volume. Initiatives like John Lewis’ JLAB, the Target + Techstars retail accelerator and Tesco Labs are now well-established and are a great way to bring new talent into the industry. Google has emerged as a key partner for many retailers wanting to compete with Amazon’s voice shopping capabilities. Target is one company working with Google in this way. Customers can use Google Assistant’s voice ordering option to place orders with Target through speech. Currently it works through Android TV and the Google Home range of smart speakers, but will soon be an option for iPhone and Android smartphones too.

It is important that e-commerce firms, like Burberry, do whatever they possibly can to reduce the friction between customers and their desired product or service. Businesses working together is only one aspect of this increasingly collaborative economy – consumers are often best served if retailers collaborate directly with another suppliers. Fashion has moved from a one-way conversation where designers and magazines told the consumer what to buy to one that invites the consumer to shape the conversation and empowers them to make their own buying decisions That might sound like sending profit elsewhere, but in fact it’s a win for everyone involved.

It’s no surprise, then, that the nature of competition has changed, driven by companies expanding their offerings along with diversifying and innovating in new sectors. These examples are just the tip of iceberg when it comes to the world of retail collaboration. Almost every week there is news of new tie-ups, acquisitions and partnerships. This blurring of boundaries means that businesses, especially online ones, no longer occupy one sector within a single set of competitors. For tech companies, it’s impossible to forget that retail was the breeding ground for Amazon, which now has fingers in many a pie. Retail is a key segment when it comes to being close to customers and part of their everyday lives. Working with established players means tech companies gain entry to the market. Competition comes not only from the other players in your space, but from those in other sectors who see an opportunity. What new opportunities therefore lie ahead? Extending your resources and capabilities as an organisation, vertically, horizontally (and everything win between) via digital allows for faster rates of growth and a bigger piece of the pie for everyone to have a share of – daily synapses and chunks of M&A.

Digital architecture and the roadmap for transformation

Coming January 2018.

Digital Architecture

The digital architecture of a business often designs or can redefine the business model. It is an opportunity to do so. It is crucial therefore that all business facets are considered as a result.

A cloud based infrastructure allows for the inclusion and interlinking of all departments. An approach to implementing an ERP like system across all departments needs to be taken. Appropriate scaling up and down can be achieved with the cloud as required. Beyond the ERP system further intelligent technologies can be considered. An unprecedented collection of big data can be collected for the company, analytical reviews and certain levels of report writing and predictive modelling can ensure that even a large organisation can be nimble, reactive and agile at all times.

#Optimising operations

#Engaging the customer

The Roadmap for Change

• Reorganising the journey for all employees
• Empowering employees

 

 

 

Start-ups and the digital operating model

Start-ups hold a concentration of ideas and ambitions, frustration and wanting to get somewhere fast. An analogy would be the sprout; a plant in its initial phase of growth. At this point the young organism contains a high concentration of enzymes and nutrients. It is the cultivating of this stage and the stages that follow which determine the successful development and yield of the vegetation.

Yield determination

The ecophysiological basis of yield determination in grain, for instance, could be applied to a start-up in its first 3 years of growth.  Whereas a decided number of major sets of processes are determined and intimately linked to effective yield, it is often not clearly defined in a start-up environment.

The creation of a robust technology platform from the get-go is a propelling opportunity for any small company. It provides a small enterprise with the opportunity to organize their operations, build in a digital marketing strategy if required, collect big data along the journey and create differentiated IP for the organisation.

A technology platform with streamlined operations allows a start-up to remain lean for as long as possible, and to take advantage of a network approach, greater agility and in turn avoiding the strain often seen in a more traditional silo’ed structure.

Growth strategy, scalability and building capabilities

A growth strategy for any size organisation will include targets. Targets of value creation may take the form of revenues, cost savings, in addition to a multitude of performance metrics across the breadth of functions across the business. Planning for this value creation is vital. Future targets need to be understood and considered and taken into account the platform can prepare for the proposed scale.

The exciting part about digital, is that performance metrics are easily captured, with most applications within the platform generating data analytics. This data could be seen as the chrophyll, glucose or sap running through the veins of a plant. A finger on this pulse and quick interpretation of the key metrics will also help with rapid progress.

Scalability and the ambition of founding individuals is often the drive for digital innovation in the first place. It has become another buzz word for all entrepreneurs. If it hasn’t already been considered from the outset, companies may reach the 3 year milestone with revenues of X, and want to successfully double that, then create the hocky-stick momentum of growth. The building of a platform is a chance for a company to look to the future to understand where it wants to be, and re-organising itself, to ensure to will be able to get there more quickly.

Building capabilities to ensure the company grows sustainably is vital. It might be that the founding individuals who have grown the company to a particular level, and may have become for a better word, generalists as a result– need to quickly decide which area they need to specialize in. Gaps need to be accounted for and further individuals with expertise will need to be recruited  to drive each embryonic business function, albeit with a network approach to doing so. Each individual will need to be able to think on their feet and be reactive with a finger on the daily pulse of every day activities.

Digitising the operating model

With start-ups there is an opportunity to build an organisational model of the future and from scratch, in doing so surpassing competitors too heavy to achieve the same results.  The key aim being to generate impressive top-line revenue, from the customer, and quickly. Each touch point of the customer journey needs to be fully supported by the internal organisations with data collected where possible.

# The customer journey and front-end development

How do we get consumers to engage more, with the visuals, content and to take action on the site? The digital marketing strategy is key to ensure interest and traffic is generated, the journey then commences. Via which channel and why did they click through? How can the consumer best be steered towards the areas that will be of most relevance, how can the site best provide for them? Examples of customer journeys include a cable-TV subscriber signing up for a premium channel, or a shopper looking to buy a gift online.

Focusing on customer journies and the flow of data from the CMS frontline, can ensure the internal team react quickly, making any changes needed daily. An ecosystem requires companies to think holistically about how their operations and allows to greater cultivation of a distinctive customer experience.

# User journeys of the internal team to build the operating model

Change has to occur within the heart of any organisation with every individual taking full responsibility to be more instantaneous in their approach. A network effect of working between employees helps with the new height of transparency as a result of interconnected applications across disciplines. Understanding how each individual currently works, ‘their journey’, and ensuring onboarding to the new process will be a natural step. The community dashboard helps with the general navigation. Examples of an internal user journey would be the finance director, communicating only relevant parts of the PnL to specific members of the team. The feed of report would need to run from the connected accounting package, to the individual, in an automated manner and ideally not not via email.

Pricing structure and financial modelling

Strategically selecting the best combination of revenue streams for an organisation dictates the culture, brand presence and in turn the ecosystem. This can however change and evolve over time.

From a general product purchase, possibly subscription access to content, even pay per view, revenue via CPM, CPC advertising – the aim should be to build a culture online. Larger organisations with a strong brand presence, lifestyle culture have the advantage here. Revenue streams are simply extensions of that company. For a start-up, however they have to understand they are creating the culture of the company largely online and therefore the revenue model in turn shapes the company.

Considering price as a factor purchasing online, 20% of eCommerce website traffic originating from various price comparison websites. It can be used as a marketing tool, as on the high street, more importantly a conversion rate optimizer. With 12million eCommerce sites worldwide it is important to review the respective market.

Varying pricing strategies can be considered. Along with market-orientated pricing, dynamic pricing could also be considered with certain competitive pricing software available for the more established business. For a start-up however, understanding the consumer, their expectations and purchasing capacity, allows for a responsive pricing strategy. Financial modelling can help, from the moment the costs are realised, market prices known and consumer purchasing behaviour understood – scenario analysis’s can be run to understand the optimal pricing point. I am a large believer in value based pricing, with the aim of delivering a quality product, service start high, it is afterall better to bring the price down rather than increase it over time.

Potential barriers to growth

People

People and the behaviour of adoption can often be slow; in a start-up everyone has a voice! Is it possible to please everyone, yes, in time. Communication of how the re-organisation and aid in making their job easier will help with adoption. Improving the 360degree view of employees is crucial and encouraging them to think more of their feet and to remain as mobile as the company needs to be.

Information and data

Data creates value for a company, over the long term. It can also generate continual iterative  improvements in the company. As long as the internal team are able to utilize the data and to respond positively, accelerated progress can be made. The shared dashboard and increased transparency between functions presents the opportunity for employees to learn across multiple functions, in turn, realizing hybrid and new opportunities for the business – without which the company will only evolve at the usual steady rate.

Shaping the future growth trajectory of the business

Digitisation should be an enabler for a company. The process of using tools and technology to automate a business, improving process, journeys not just for the customer but those supporting the organisation should accelerate progression.

A transition is often not smooth, however it should start to achieve simplification in the long run, yield optimal results and allow more instant and exciting innovation as the company evolves. The evolution of the company will depend on how holistically in tune individuals are with the busienss.  It should be up to the individuals to have a hold on the enterprise and to shape and scale the company accordingly, in line with the ecosystem in which it has created or is part of.  If you are a good parent, this should stand you in good stead.

In Summary

The confluence of new technologies, consumer expectations, the pressure on cost and performance could put off start-ups from originating in the first place. Reinventing a more established company from the core can cause disruption, dissuading it from which becoming a potential disruptor in the market.

However once a company has been re-organised from the inside out, and rebuilt with the platform at its base, the opportunities for scalability arise. The digital enterprise is a living and moving organism, employees need to be responsive to ensure optimal results. The goal of effective crop management is to optimise the physiological condition of the produce, often characterised by impressive yield, and when done effectively – makes it good enough to eat!

 If at any point you feel the pressure, or feel dismayed, don’t be. Progress often results in taking a few steps back along the road, to move 100 steps forward. Relax, remember to balance the strategic thinking ahead with being in the moment and the here and now to create optimal fruition.