142
profits from stocks instead of flows, they shift from the Lake Economy, with its
focus on maintaining the stock, to the Performance Economy which focuses on
maximising the value obtained from using the stock. The Performance Economy
demands an internalisation of the costs of waste and of risk over the full service-life
of goods, which in turn are substantial financial incentives to include waste prevention and loss prevention at all stages in the product cycle from design to
decommissioning.
The Performance Economy is primarily driven by competitiveness, the Lake
Economy by long-term operation and maintenance cost optimisation and the Loop
Economy by (environmental) legislation. Some of the business implications of the
shift to the Performance model are explored by Stahel (2010) and in Sect. 4 of this
chapter.
The stock perspective is routine for infrastructure and buildings but less familiar
for other forms of manufactured capital. The shift from a flow to a stock perspective
is enabled when economic actors (companies, consumers and public entities)
assume longer-term ownership or stewardship of, for example, fleets of vehicles or
goods, changing their business approach from the bigger-better-faster-safer model
of an industrial flow economy to the functional view of goods of a Lake Economy.
The motivation for commercial actors is usually to reduce operating costs (for
example, retreading truck tyres by haulage companies, remanufacturing diesel
engines), whereas public actors (armed forces and public administrations like railways, NASA) seek to reduce long-term system costs (mothballing of warships,
“cemeteries” of aircraft for access to spare parts). For consumers, the motivation
may be a personal relationship with goods (the “teddy bear” effect which leads
individuals to keep personal souvenirs such as watches or pens, or family heritage
objects such as paintings or vintage cars). By retaining the ownership of the goods
and their embodied resources, fleet managers gain a resource security with regard to
both future availability of resources and commodity prices. Expected scarcity of
some critical materials therefore provides another driver to take the stock
perspective.
If loops involve professional services, transaction costs occur, adding to the costs
and often influencing the choice of the next owner: for example, sales such as buildings, domestic premises and artworks require fees to individuals or specialist dealers. However, some OEMs take back their own goods, disassemble them and reuse
components as service parts, a strategy pursued by many IT manufacturers, or
remanufacture and remarket them in exchange for faulty products. Such service
exchange systems are used by some European car manufacturers: damaged car
engines and gearboxes which cannot be repaired locally are returned to the OEM in
exchange for an OEM-remanufactured product
1
; Sony Computer Entertainment
Europe offers a remanufactured exchanged product when customers return a faulty
product for repair, in order to reduce the time a customer is without the product.
Further illustrative examples are discussed in later sections.
1 VW annually remanufactures 50,000 engines and the same number of gearboxes in a dedicated
plant located in Kassel.
W.R. Stahel and R. Clift
profits from stocks instead of flows, they shift from the Lake Economy, with its
focus on maintaining the stock, to the Performance Economy which focuses on
maximising the value obtained from using the stock. The Performance Economy
demands an internalisation of the costs of waste and of risk over the full service-life
of goods, which in turn are substantial financial incentives to include waste prevention and loss prevention at all stages in the product cycle from design to
decommissioning.
The Performance Economy is primarily driven by competitiveness, the Lake
Economy by long-term operation and maintenance cost optimisation and the Loop
Economy by (environmental) legislation. Some of the business implications of the
shift to the Performance model are explored by Stahel (2010) and in Sect. 4 of this
chapter.
The stock perspective is routine for infrastructure and buildings but less familiar
for other forms of manufactured capital. The shift from a flow to a stock perspective
is enabled when economic actors (companies, consumers and public entities)
assume longer-term ownership or stewardship of, for example, fleets of vehicles or
goods, changing their business approach from the bigger-better-faster-safer model
of an industrial flow economy to the functional view of goods of a Lake Economy.
The motivation for commercial actors is usually to reduce operating costs (for
example, retreading truck tyres by haulage companies, remanufacturing diesel
engines), whereas public actors (armed forces and public administrations like railways, NASA) seek to reduce long-term system costs (mothballing of warships,
“cemeteries” of aircraft for access to spare parts). For consumers, the motivation
may be a personal relationship with goods (the “teddy bear” effect which leads
individuals to keep personal souvenirs such as watches or pens, or family heritage
objects such as paintings or vintage cars). By retaining the ownership of the goods
and their embodied resources, fleet managers gain a resource security with regard to
both future availability of resources and commodity prices. Expected scarcity of
some critical materials therefore provides another driver to take the stock
perspective.
If loops involve professional services, transaction costs occur, adding to the costs
and often influencing the choice of the next owner: for example, sales such as buildings, domestic premises and artworks require fees to individuals or specialist dealers. However, some OEMs take back their own goods, disassemble them and reuse
components as service parts, a strategy pursued by many IT manufacturers, or
remanufacture and remarket them in exchange for faulty products. Such service
exchange systems are used by some European car manufacturers: damaged car
engines and gearboxes which cannot be repaired locally are returned to the OEM in
exchange for an OEM-remanufactured product
1
; Sony Computer Entertainment
Europe offers a remanufactured exchanged product when customers return a faulty
product for repair, in order to reduce the time a customer is without the product.
Further illustrative examples are discussed in later sections.
1 VW annually remanufactures 50,000 engines and the same number of gearboxes in a dedicated
plant located in Kassel.
W.R. Stahel and R. Clift