Walter Stahel's basic message is, lower demand for energy and materials by designing durable and upgradable products with a long-life span. He answers the question, how could manufacturing companies remain profitable? by suggesting they refocus their mission to delivering customer service (selling
results, performance, and satisfaction rather than products) and owning
the equipment themselves as the means of providing this service.
The concepts of product-life extension and the service economy go
beyond all other IE approaches to closing the loop in
industrial/consumer systems. They are an essential complement to the
work of industrial metabolism, design for the environment, and other IE
Stahel's vision of the service or functional economy are of great
importance in evolving a long-term strategy for achieving the vision of
The Chinese Circular Economy as well as the German and Japanese Recycling Economy Laws.
Is Stahel's vision useful only in the long-term? Several major
companies are now moving in this direction. Stahel's concepts could
possibly be used by major entrepreneurs to enter markets now dominated
by existing companies.
Summary of Stahel's concepts
Walter Stahel has linked the concerns of
industrial metabolism and design for environment with a broader level
of design: the basic mission of a business. Stahel, a director of the
Swiss Product-Life Institute, argues that closing loops through
recycling is only a partial solution. It does not slow the rapid and
unsustainable flow of materials and goods through the global, national
and local economies.
He proposes product-life extension as the necessary complement to
recycling. He suggests business strategies for achieving it and the
dimensions of a service oriented economy. While his vision implies deep
changes, Stahel identifies major corporations such as Xerox, Schindler
(the world's second largest elevator company), Caterpillar, Agfa
Gevaert, and Siemens that now demonstrate the concept in practice. The
Lingang Industrial Park in Shanghai has reserved a large part of its
Heavy Industry and Logistics zone for location of remanufacturing
companies. Caterpillar Remanufacturing is building the first major
facility at this site. see below
Product-life extension implies a fundamental shift from selling
products themselves to selling the utilization of products, the
customer value they yield. This change in the source of economic value
to firms, depends upon enhancing product life through several key
design strategies. Designers would seek to optimize the following
Durable and difficult to damage;
Sub-components are standardized, self-repairing and easy to repair;
Easy to repair or upgrade;
Components can be reused in new systems;
Units or systems can be easily reconditioned and remanufactuered.
These design strategies are already part of the
design for environment toolkit. They would significantly help achieve
central industrial metabolism objectives of cutting demand on material
and energy resources and reducing pollution from manufacturing.
The Service Economy (also known as, the Functional Economy)
As a company moves from maximizing sales of
material products to the delivery of customer satisfaction, its
long-term source of competitive advantage will become the ability to
provide the needed service. Revenues could come from leasing of
equipment with long-life; continuing maintenance and service; major
upgrading of systems; parts and supplies; service provider training and
licensing. Or the company might simplify the transaction by
offering one, use-based fee.
Stahel argues that if the company is compensated on the basis of
service provided, its employees will have strong incentives to minimize
materials and energy used in the systems that deliver the service to
Stahel also considers the larger transition to a decentralized and
skill-based service economy that product durability implies. Economic
value would be based in utilization (customer satisfaction in the
service gained) rather than exchange. Decentralized labor-intensive
service centers would create many skilled jobs for workers no longer
needed in centralized, automated production units. Resource use would
be lowered as products no longer moved rapidly from factory to customer
Walter Stahel’s work represents design at the level where a company
asks, “What business are we really in?” Wise decisions at this level
will have the greatest impact on a firm's environmental performance.
Product-life extension is a strategy that
promises to make very large reductions in materials and energy use
needed to satisfy growing consumer needs. He estimates that it could
increase the productivity per unit of resource used ten fold.
The strategy includes strong economic incentives for achieving these
objectives. Improved resource productivity translates to increased
profitability and competitiveness.
The service economy concept offers a decentralized means of developing skilled jobs.
Stahel's systems approach could give independent entrepreneurial
ventures competitive advantage in entering markets when major
corporations who could use it remain focused on selling products.
This approach to sustainability requires
long-range vision and major organizational and technological redesign
on the part of corporations. (Investment markets' present focus on
short-term financial performance does not support such fundamental
Product-life extension runs the risk of companies making major
investments in technologies for service delivery that may become
outmoded. To what extent can modular design for easy upgrading offset
Consumers have become addicted to inexpensive throw-away products that
last as little as one to two years (cell phones) and are rapidly
upgraded to new throwaway models. Even major appliances may last no
more than three to five years before breaking down, without affordable
Are there ways that Stahel's concepts could be applied to more transitional products?
Stahel's concepts could guide existing corporations in
redefining their mission. In some industries, entrepreneurs could adopt
this systems approach in order to compete with established firms. We
describe one proposed example of an entrepreneurial transportation
system reflecting Stahel's thinking in the page Three Levels of Transportation Design. Our future scenario of Gambit describes a home services firm. The future scenario of Qwanin, a fictional country. applying industrial ecology illustrates applications in telecommunications and transportation.
The mental challenge
"Not only are many of our appliances made overseas -- China is a major
player -- but the concepts of quality and "service after the sale'' are
no longer relevant. Appliances are cheaper and more prone to
breakdowns, and we've come to accept the idea that there is no point
fixing something when it breaks. Just toss it and buy a new one.
'You can't find anybody who will work on a microwave now," says Steve
Cruciani, who runs Steve's Appliance Installations in Berkeley. "What's
the point? For $65, you can get another one.'''
We can be confident that we can meet the
challenges to applying Walter Stahel's sustainable vision of durable
products, delivered by companies working in the business model of the
service or functional economy. Companies are now successfully working
in this model. Here are a few cases to illustrate this fact and links
The Swiss photocopier company, Agfa-Gevaert , demonstrates a systems
shift in business mission that reduces demand on material and energy
resources. AGt leases copiers in Switzerland with a long-term flexible
agreement (selling system utilization) which covers all consumables in
a price per copy. The company assumes responsibility for product
quality and utility over its lifetime. Therefore designers have a
strong incentive to use long-life components, standardize components
and systems, lower costs of supplies, and aim for ease of repair and
reconditioning. “Agfa-Gevaert’s interest in product durability is
evident: the longer its products can be rented out and the cheaper
their operation is, the higher its profit.”
( see Borlin, 1990 Chapter 4 in references below/)
Xerox Asset Recycle Management program
The ARM initiative at Xerox Corporation reflects the
equipment design strategies recommended by Walter Stahel. The mission:
"Asset Recycle Management provides the leadership, strategy, design
principles, operational and technical support to maximize global
recycling of parts and equipment, resulting in a major competitive, as
well as environmental advantage for Xerox."
This mission has been built into the company's global organization with
an ARM Vice President responsible for achieving 100% recyclability of
all manufactured parts and assemblies. Remanufacturing to high quality
standards and resale to new users will extend the life of equipment
several fold and reduce demand on virgin resources. "Xerox chooses to
evaluate products on the basis of quality and performance, not on the
degree of virgin material used . . ." The initiative is designed to
streamline the process by which returned machines are reconditioned,
thus increasing return on investment.
The company estimates it has added hundreds of millions of dollars to
its bottom line since ARM was formally started in 1991. (Xerox 1995)
Borlin, M. 1990. “Swiss case-studies of product durability strategy,” Product-Life Institute,. Genève.
Cooper, Tim. 2005. “Slower Consumption: Reflections on Product Life
Spans and the "Throwaway Society"”, Journal of Industrial Ecology,
Winter/Spring 2005, vol. 9, no. 1-2, pp. 51-68(18), MIT Press,
Giarini, Orio and Stahel, Walter, The Limits to Certainty: facing risks
in the new service economy. 1989/1993. Kluwer Academic Publishers,
Dordrecht and Boston, MA.
Stahel, Walter. 1994. “The Utilization-Focused Service Economy: Resource Efficiency and Product-Life Extension,” in Allenby and
Richards, Greening of Industrial Ecosystems, National Academy of
Engineering, Washington DC,. Available through the National Academy
Press Office (202-334-3313)
Stahel, Walter R. 1995 "The functional economy and cultural and
organizational change," in Richards, Deanna J. 1996. The Industrial
Green Game: Implications for Environmental Design and Management..
National Academy Press, Washington DC, 1994. Available through National
Academy Press Office (202-334-3313 or 1-800-642-6242)
Walter R. Stahel. “The functional society”, in Bourg, Dominique and Erkman, Suren. 2003. Perspectives on Industrial Ecology. Greenleaf Publishing, Sheffield, UK
also as paper on Proceedings, Industrial Ecology Conference, Troyes University, France, 2001. published as a CD-ROM
Stahel, Walter and Reday, G. 1981. Jobs for Tomorrow, the Potential for
Substituting Manpower for Energy, Commission of the European Community.
Vantage Press, NY.
Stahel, Walter, "Product-life as a variable: The notion of utilization," Science and Public Policy, 13(4) August, 1986.
Victory, Katherine. 1995. "Focus Report, Why Smart Companies Will Take
Part in the Debate on Sustainable Production and Consumption," Business
and the Environment, August, Vol. 6, No. 8. Lexington, MA.
The Chinese Circular Economy |
Xerox. 1995. CSS/ISC Asset Recycle Management.
June. Revision 2.0. For information on this program write Asset Recycle
Management, Xerox Corporation, 455 West Commercial St., East Rochester,