The Market Potential of Ecoefficient Household Services

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The Market Potential of Eco-efficient Household
Services
15th November 2007 Dr Matthew Cook Lecturer in
Economic Geography and Planning
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Resource productivity

• Factor four the need to increase resource
  productivity
• Energy
• Material
• Technological fixes
• End of Pipe
• Cleaner Production
• Cleaner Products

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Systems of innovation and transitions

• From cleaner products to systems of innovation
  and transitions
• System dynamics rebound effects
• Poor uptake of improved technologies
• Interconnectedness - institutions
• Analysing economic development and associated
  structural change
• Evolutionary not revolutionary thinking
• Analysing changes in the way people buy and sell

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Service economies

• USA first to become a service economy
• State when majority of employment provided by the
  service sector (Fuchs, 1965)
• Service sectors account for two thirds of
  employment and economic activity (measured in
  GDP) in western economies (OECD, 2000)

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Key questions

• Can service economies provide sufficient wealth
  to support a population?
• Could a service economy survive without
  manufacturing employment?
• How might productivity of the service sector be
  improved?

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Key questions

• What are the environmental impacts of service
  economies?
• What opportunities to improve environmental
  performance of economic activity (production and
  consumption) are provided by development of
  service economies?

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Rise of service economies

• Rising per capita incomes
• Demand for health and education services
• Division of labour
• Size and role of the public sector
• Expansion of trade in services
• Externalisation/ outsourcing of service functions
  
• (Bryson, Daniels and Warf, 2004)

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Rise of producer services

• Services as intermediate inputs to production
• Cost driven considerations
• 1 Transaction costs.
• 2 Flexibility.
• 3 Risk reduction.
• 4 Concentration on core skills.

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Rise of producer services

• Non cost considerations
• 1 Lack of expertise.
• 2 New services.
• 3 Third party expertise.
• 4 Growing complexity of management.
• 5 New technology
• 6 New regulations

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Servicisation of manufacturing

• Changes in the make or buy decision
• The more specialised the input the more difficult
  it will be to provide the producer service
  internally
• Variable outputs typically require variable
  inputs, which encourages a buy in approach
• (Coffey, 1994)

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Servicisation of Manufacturing

• Manufactured goods (capital and consumer) are not
  offered to consumers in their own right but
  rather as part of a package that is supplied by
  manufacturers and includes service components.
• (Howells, 2000)

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Services and resource productivity

• Case study analysis of various examples of
  products arising as a result of the servicisation
  of manufacturing
• Chemical management
• Document handling services
• Power by the hour
• Cooling services
• Flooring services

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Services and resource productivity

• Case studies of limited examples in business to
  consumer markets
• Voicemail
• Car leasing

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Types of services

• Product orientated services
• Use orientated services
• Result orientated services

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PSS and resource productivity

• If the material component of PSS remains in the
  ownership of the producer a financial incentive
  is gained to direct their innovatory activities
  to produce more durable goods and thus avoid
  costs associated with repair, maintenance and
  disposal.

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PSS and resource productivity

• A smaller stock of material is needed to satisfy
  demand (a washing service could be a substitute
  for many washing machines) if customers use this
  sequentially the intensity of use increases as
  does the probability of a higher service yield
  before the product becomes outdated due to
  obsolescent technological characteristics, e.g.
  fashion.

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PSS and resource productivity

• In result orientated services, producers use
  their competencies to ensure the correct use of
  material artefacts to provide service and guide
  consumers towards the appropriate artefact for
  this purpose. Consumer tend to over specify
  goods and to under maintain them.

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PSS and resource productivity

• Environmental benefits flow from changes in
  relationships
• Product orientated services factor 2 at best
• Use orientated services factor 2 at best
• Result orientated services factor X
• (Tukker and Tischner, 2006)

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Eco-efficient household services

• Eco-efficient household services are services
  which offer potentially superior environmental
  performance than traditional production and
  consumption methods in which householders apply
  their own labour to household goods they own in
  order to complete various household tasks

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Market potential of PSS
Products
Services
Goods
Capital goods Consumer goods
Consumer services Producer Services
Eco-efficient Household Services
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Market potential of EHS

• Evolutionary so contingent upon supply of and
  demand for household services in a given economy
• Demand side (households)
• Relative price of goods and services
• Time
• Product ownership
• Convenience
• Quality

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Market potential of EHS

• Supply side (service providers)
• Value added
• Competence
• Fragmented low value market
• Ongoing relationship with customer
• Regulatory framework
• Key assumption in literature in service
  economies, the population consume services at the
  margin

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From household services to EHS

• The concept is under developed, many gaps in
  knowledge arising from assumptions in the
  literature
• Services as substitutes and/ or complements?
• Producers keep goods for longer than households
  as they are rational agents?
• EHS and other services are an efficient way of
  improving resource productivity when compared
  with other approaches?
• Environment is not a driver!

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The market potential of EHS

• Any questions?