Philips creates service from lighting within the circular economy

Philips Lighting’s innovative, circular business model is based on service. This has been done in order to participate in various social trends, such as urbanisation and the energy-saving reflexes of their customers. This way the company wants to offer more quality at a better price and specifically to guarantee that their customers can continue enjoying optimal functionality in the years to come. It represents one of the driving forces for innovation at Philips.

The Light as a Service project at Philips has been running for a number of years. The strong link between product design and the business model has driven innovation in products and services. This is shown in the figure above. 

Over the years Philips and also Barco have been accumulating knowledge about the circular economy in various research projects including GreenElec and cycLED. In the cycLED project in which Sirris participated, a number of design criteria were examined in relation to the latest circular business models. Because no general standard was available, Philips defined different elements and brought them together on a scorecard. This has allowed them to test products in order to validate whether they can actually be considered for the sustainable concept.

  

Tools etc., were developed for the cycLED project that can help identify suitable strategies and business models. The criteria were analysed on the basis of a number of issues concerning the company’s aims, the impact on business operations and also the feasibility. The results can be seen as follows:

    

The lighting in the library at Kortrijk in Belgium and also at Schiphol airport represent two striking examples. Philips remains the owner of the lighting systems and the user pays for the amount of light consumed. The principle aim is to keep the products in the marketplace for as long as possible and so the life-cycle is discussed with the customer and other stakeholders. This is a different way of working for most companies. The roles of the installers and the distributors change together with those of the manufacturer, and therefore dialogue is essential. 

These illustrations show that innovation arises mainly by going through a number of steps. Moreover, it also demonstrates that experiments can be conducted which contribute to the accumulation of knowledge. 

Does this mean that all the questions have been answered?     

Absolutely not. There remain many challenges ahead for Philips. This has also caused possible confusion about when a product is actually circular. How do you measure this? Can product maintenance also be circular? What roles are there for other stakeholders such as distributors, wholesalers, installers, etc.? What added value can they bring to the customer and Philips?     

Areas of tension

Important issues given by the ‘hands-on experts’ in the circular economy include:

  • Giving consideration to the customer’s needs: how can you provide a full-service solution for the customer? What sort of problems can you solve for them?
  • The service must result in a win-win situation from both a financial and sustainability viewpoint: what sort of permanent sustainability is attached? Which economical/financial model is suitable? 

Finding such a model that combines both ecological and financial gain while providing a full-service solution for the customer is not easy. Identifying the shared objectives of the customers, the manufacturers and other stakeholders can help to pick out the steps that are feasible.       

Would you like to know more about the circular economy? Learn more here

Are you already experimenting with circular business strategies? Please tell us!

You can read the interview with Gert Roeckx, Country Manager Benelux at Philips Lighting Belgium via this link. (in French/Dutch) 

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