The functional economy is fully in line with the transition to a green economy. It consists in replacing the notion of sale of the good by that of the sale of usage of the good, which leads to the decoupling of the added value and the consumption of energy and raw materials.
What is the functional economy?
The functional economy can be defined as a system that favors the use rather than the sale of a product. It aims to develop integrated solutions for goods and services with a view to sustainable development. Thus, economic exchange is no more based on the transfer of ownership of goods, which remain the producer's property throughout its life cycle, but on the consent of users to pay a use-value.
The functional economy is sometimes linked to the cooperation economy. This last concept integrates a transformation of the interactions of activities on the same territory; economic actors (local authorities and companies) cooperate by pooling uses in order to satisfy a need while limiting negative externalities.
Moreover, the functional economy is similar, from certain angles to the collaborative economy where two consumers are linked so that one sells a use to the other.
Principles and modalities of the functional economy
The conceptual engine of the functional economy consists in offering the consumer (individual, business, or other) a new approach to their consumption patterns so as to constantly adapt to their changing needs while preserving their purchase power and meeting today's unavoidable criteria of saving resources and protecting/improving the environment. However, this economy remains part of the laws of the market, with its profitability requirements.
To this end, it develops specific commercial processes based not on the transfer of ownership of goods for use but on the contractualization of the use of these goods, most often via a subscription system.
How is the functional economy a source of opportunities today?
The functional economy model is now presenting big success. We can freely think of businesses that have included a subscription system in their offer. The main idea was for them to better meet the needs of their customers. This is how "classic" merchants were able to solve problems encountered by their customers while imposing themselves on their market.
This is the case, for example, of Japhy (kibbles for dogs) or Le Petit Ballon (wines and spirits), which have been able to meet the need for novelty (via fully customizable and "scalable" boxes) and the need to be directly delivered to the home. In addition, with a subscription solution, these two companies have made life easier for their customers, who no longer want to waste time going to the store for a recurring need; the aperitif and the dog's meal in this case.
Leasing, particularly in the automobile or construction industry, is also booming. It is a solution that is totally in line with the usage economy by meeting the need to be able to use a good without having to pay a large sum to own it.
Moreover, the usage economy is a source of opportunities in both B2C and B2B. These two types of customers agree on their desire to be focused on using the product while having the chance of delegating everything else: delivery, repair, replacement...
On the B2B side, the benefits of renting fleets of usable devices (telephones, computers, CRM, etc.) are well established: it allows you to stay focused on the "core business" without having to worry about buying them, renewing them, and have them repaired. These devices are at the service of profitability. Managing them shouldn't waste companies' time.
Functional economy; two typical examples
Michelin: replacing the sale of tires to road hauliers by setting up a payment system based on the number of kilometers traveled, with a complete life cycle management service (personalized pressure optimization, advice, maintenance, etc.)
Xerox: provision (without sale or rental) of photocopiers on customer premises, and invoicing by the sheet, with monitoring and maintenance service for devices and consumables.
What are the advantages of the functional economy?
The functional economy to reduce costs
Renting photocopiers, computers, software, or even floor coverings… the functional economy significantly reduces the cost of access to many services. Especially since the service provider contractually guarantees to maintain its operation since it is responsible for all contingencies.
Increase your earnings, but not your expenses
The functional economy optimizes both the maintenance of products and their lifespan. Thus, when Michelin charges its tires by kilometer, the brand guarantees products of constant quality. Therefore, the functional economy allows restructuring of financial gains without inducing, however, an increase in the consumption of the flow of materials and energy.
Benefits for the planet
Via the functional economy, manufacturers constantly innovate to offer objects with an optimized lifespan. Therefore, we are far from the concept of planned obsolescence! Value creation is no longer linked to novelty, but on the contrary, to sustainability. A profound revolution that directly benefits the environment. Because it implies a reduction in the consumption of raw materials and energy and generates a reduction in waste production.
Positive effects on employment
Recycling waste creates jobs. It creates six times more than energy recovery and 25 times more than landfill because human judgment remains essential to many manual sorting operations. Remanufacturing, too, is an activity with a strong need for manpower. For example, remanufacturing a Xerox printer requires twice as much work and more skilled labor. But, on the other hand, the remanufacturing of used products requires regional and local jobs. And because the transport of these products is expensive, manufacturers such as Renault, Ricoh, or Canon prefer to locate their factories near the regions of consumption.
