By Juan Carlos Meade
What began as a health crisis has turned into a financial crisis that is causing a severe economic slowdown worldwide and affecting multiple industries. As things stand, the pandemic will mark a before and an after in the history of our era.
No one knows how long the crisis will last, but what we do know is that life in the “after” will not resemble life as we’ve known it since the First Industrial Revolution. A change of this magnitude will lead to a 180-degree turnaround in our preferences as consumers and will have an impact on how we relate to one another and how we use technology.
Bearing this in mind, it is important companies prepare for what is to come, but where to start? As Darwin said in his Origin of the Species: “only those who adapt best to change survive,” i.e. those who are able to reinvent themselves and exploit forecasts of how individual preferences will evolve. Those who manage to pull this off are guaranteed success. This new, sustainable industrial model is based on three pillars, which are: 1. Economic development that generates new technology intensive business models; 2. Social development that contributes to the creation of quality jobs and, most importantly of all; 3. Environmental responsibility.
Let’s break it down into parts. Firstly, we need to extricate economic development from the exploitation of natural resources. According to the latest Global Footprint Network report, we are using the resources of 1.7 planets to meet our demand for goods and services, which means there is little left for us to exploit. And if we factor in growth in the world population— a study conducted by the McKinsey Global Institute predicts that some 3 billion consumers from the developing world will join the ranks of the middle class by 2030—, clearly, the current “take, make, waste” extractive industrial model is not sustainable.
This linear model depends on a world of cheap and abundant resources; a world we need to understand no longer exists. Today, whoever has the most productive resources will have the greatest competitive advantage. The idea is to adopt a regenerative model like in nature; a circular economic model. According to the Ellen McArthur Foundation, a circular economy is a restorative, regenerative one that aims to ensure products, their components and materials maintain their maximum usefulness and value at all times, with a distinction being made between technical and biological cycles.
The goal is to preserve and optimize the value of the materials, energy and other inputs used to make products and eliminate waste throughout their life cycle. This, however, requires that we change our perception of materials and lend them sufficient value to return them to production cycles. Companies stand to benefit from the maximization of reuse, restoration and remanufacturing cycles, given that these eliminate the cost of materials in the creation of new products.
In this regard, design plays a very important role. What we need are more innovative designs that optimize the use of materials and minimize their variety so it is easier to recoup them for remanufacturing or repair. A concrete example is IKEA, which incorporates the reuse or recycling of its products into the design process and has programs for the repurchase of its furniture, which is either repaired or its materials used to manufacture new items.
This motivates companies to create strategies that ensure materials flow back into their production lines. It’s a win-win situation for everyone involved: the manufacturer benefits from lower production costs and the user pays less for the product. So, from the “value chains” of our existing linear industrial model, we need to make the transition to what I call “value circles”.
This, in turn, will give rise to new business models in which consumers become users. We will no longer “buy–use–waste”, but will “rent”, which is a way of guaranteeing materials are returned to production lines for reuse. An interesting example is Vigga, a Danish company that designs very high quality baby clothes using organic fibers. For a 42 euro membership, the company sends you a suitcase of clothes every month. When your baby outgrows the clothes, these are returned to the company, where they undergo a quality inspection and, depending on their condition, are reused or remanufactured.
As a nation, a more circular industrial model would enable us to gradually reduce our dependence on raw materials and would have an immediate positive impact on the environment, given that this is a regenerative model that maximizes the productivity of resources. The new business models it gives rise to would also be a source of jobs—a report by the International Labor Organization states that the adoption of the circular economy would create some 6 million new job opportunities worldwide—- and would put us ahead in the Industry 4.0 race.
Switching to the circular economy hinges largely on consumer preferences, but it is also a model that makes intensive use of technology and innovation. As Petar Ostojic, an acclaimed promotor of this model, says, “the circular economy and Industry 4.0 are two sides of the same coin.” Robotics play a predominant role in smart factories, helping reduce production costs and improving the efficiency with which materials are used, while the Internet of Things (IoT) enables us to obtain information on product performance remotely and 3D printing makes on-demand personalized production possible. These technologies, along with digitalization, big data and blockchain, which makes it possible for users to trace products, and the use of renewable energies, confirm Petar’s statement.
There can be no denying that readying ourselves for what is to come implies embracing these new technologies. Companies with their sights set on the future will be the ones to lay the foundations of the new industrial era. Putting new ideas into practice is indubitably a risk, but it’s one that’s worth taking. Are you ready to take the plunge? If so, join us this October 7-9 in León, Guanajuato for the 2020 edition of Industrial Transformation Mexico, the Mexican chapter of Hannover Messe and the country’s leading Industry 4.0 tradeshow, where success cases and ways of implementing the circular economy in Mexico are just some of the topics that will be discussed. For more information, visit www.industrialtransformation.mx