This is the fifth in a seven-part series on what author Gregory Unruh calls the
‘Biosphere Rules.’ Read
parts one, two,
three
and
four.
Biosphere Rule #4: - Leverage your power autonomous value cycle as a product platform for scale, scope, and knowledge economies.
Biosphere Rule #4 is about taking your value
cycle,
built on a parsimonious materials
palette
and a power-autonomous energy
system;
and using it — not to produce a single product, but as a production platform
upon which you can build a whole suite of products. By doing so, you leverage
your value cycle platform to produce profit-amplifying economies of scale and
scope.
When most people think of economies of scale, they think of Henry Ford and
his very standardized Model T. Through mass production, Ford spread the
costs of building his initial assembly line over an ever-increasing number of
Model Ts, driving down his per-unit costs. Nature similarly uses economies of
scale: Just think of a hillside covered in thousands of yellow daisies. Here the
biosphere is mass producing the flower, maximizing the return on its investment
in the initial clover design. Economies of scale are valuable, but nature steps
it up with economies of scope — where the biosphere takes an initial design,
such as “flower,” and uses it as a platform upon which to produce a diversity of
variants. Just think of a hillside covered by a riot of different-colored
flowers in the spring. That’s economies of scope; and it is gained through the
biosphere’s platform strategy.
The concept of product
platforms
is not new to industry and can be defined as “a set of subsystems and interfaces
that form a common structure from which a stream of derivative products can be
developed and produced.” There are many modern examples of product platforms,
but one of the most successful in history is the Volkswagen Beetle. Between
1938 to 2003, over 21 million Volkswagen Beetles were produced, leading to
massive economies of scale. But VW also used the Beetle as a platform, known as
the Type 1, and exploited it for economies of scope. There were several variants
that came from the Type 1 platform — including a Beetle and Beetle convertible,
the Karmann Ghia and a Ghia convertible, and the eccentric VW Thing. But
VW wasn’t the only one that saw value in its platform. Third-party kit car
manufacturers also exploited VW’s innovation, leading to a plethora of dune
buggies, hot rods and classic car replicas, all assembled using the Type 1
platform.
A Capilene hat — one of a line of extra products created from Patagonia's polyester value cycle | Image credit: Patagonia/Outdoor Brands
Circular economists can take a similar approach by utilizing their value cycles
as sustainable product platforms upon which to build entire lines of products.
Outdoor apparel brand Patagonia illustrates how this can be done: As part of
its Common Threads
Initiative,
Patagonia partnered with the Japanese chemical firm Teijin to create a value
cycle for its high-performance Capilene Baselayer
underwear.
Using Teijin’s trademarked ECOCIRCLE™ recycling system, Patagonia could recover
worn-out baselayers and cycle them back into new polyester (PET). This deep-loop
value cycling was a sustainability advance, but to generate scale economies and
grow profits, Patagonia need to sell more and more baselayers. However, by using
its polyester value cycle as a platform to make a diverse clothing lineup that
included gloves, jackets, shorts, pants and hats, the company was able to
generate economies of scope, as well.
Companies can build their own proprietary sustainable product platforms, but it
is also possible that economy-wide platforms might emerge that at are adopted by
many industries. 3D printing, for example, where an infinite variety of
objects can be made from a single material, may serve as the foundation of a
sustainable production platform that is used across the economy. The online
craft site Etsy, for example, has thousands of items — everything from
tiaras to trash cans — that are 3D-printed using the same plastic materials. The
sustainability challenge will be to ensure that future 3D printing-based
companies build their businesses following the Biosphere Rules.
Dr. Gregory C. Unruh is the Sustainability Editor for the MIT Sloan Management
Review and author of the new book, The Biosphere Rules: Nature’s Five
Circularity Secrets for Sustainable Profits. For a limited time, Sustainable
Brands subscribers can download a complimentary digital copy of the book
here.
Get the latest insights, trends, and innovations to help position yourself at the forefront of sustainable business leadership—delivered straight to your inbox.
Sustainability Editor
MIT Sloan
Dr. Gregory C. Unruh is the Arison Professor of Values Leadership at George Mason University in the Washington DC Metro area, and the Sustainability Editor for the MIT Sloan Management Review.
Published Nov 14, 2019 1pm EST / 10am PST / 6pm GMT / 7pm CET