Selling Performance instead of Goods
-The Changes in Strategy and 'Solution Design' that Arise in the Move
towards a More Sustainable Service-Focused Economy -
Walter R. Stahel
The Product-Life Inst., Switzerland
'The service economy', in the sense of this lecture, is an economy which
focuses on the optimization of the performance (or utilization) of goods and services, and
thus on the management of the stock of existing wealth (goods, knowledge, nature) in an
'economy in loops'. The economic objective of the service economy is "to create the
highest possible utilization-value for the longest possible period of time while consuming
as little material resources and energy as possible."
Such a service economy, which we call a 'lake economy', is considerably
more sustainable, or de-materialized, than the present industrial economy, which is a
'river economy', focused on production as a means to create wealth, on the optimization of
the production process in order to achieve economic growth, and uses material throughput
(GNP) as the yardstick of its success. Successful economic actors in a service economy
will prosper because they have succeeded in de-coupling income (annual sales) from
resource throughput, through asset management in addition to production management. The
goal is a factor ten or higher -the higher the factor, the higher the competitiveness!
The highest resource productivity can be achieved by sufficiency solutions
(i.e. zero options), followed by efficiency solutions. Sufficiency solutions are only
profitable for economic actors which sell performance or results - not products. Companies
such as General Electric, Coca-Cola or Schindler elevators today already create 75% of
turnover through the sale of services. Efficiency solutions can be separated into system
solutions, a more intensive utilization and a longer utilization of goods.
The lecture will describe such a 'service economy' and its link with
sustainability, resource productivity and social and cultural ecology, and shows why this
development leads to a higher economic competitiveness.
The lecture will explain the objectives of this strategy, its new central
notion of economic value (utilization value instead of exchange value, point of service
instead of point of sale), the concept of a producer responsibility from 'cradle back to
cradle'. Furthermore, the lecture will show how an 'economy in loops' affects economic
solution design (for goods and services), corporate strategies and industrial policies,
and customer / industry relations: it basically leads to a regional economy for material
goods, and a world economy for virtual goods. Services differ from products in that they
cannot be stored, in that they have to be 'produced' or delivered locally where they are
needed and when they are needed, often around the clock. This leads simultaneously to a
globalization and a regionalization of the economy. The lecture will sketch the social,
cultural and organizational change that arises in switching from an industrial economy
towards a functional or service economy.
[Giarini / Stahel, 1993, The Limits to Certainty - Facing Risks in the New
Service Economy, Kluwer Academic Publishers, Dordrecht. To be published in Japanese in
1999]
