Innovation that matters to you
Are we on the cusp of a new economic revolution?
500 years ago, it was widely believed that the world was literally the centre of the Universe. That is, until astronomer Nicolaus Copernicus’s daring theory that Earth and its sister planets revolved around the sun. Copernicus’ unwavering confidence in his own beliefs not only challenged the orthodoxy, they eventually liberated society. I believe that we are at one of those similarly pivotal moments in history when being prepared to think and act differently – however heretical it may seem – will reap extraordinary rewards. The World Economic Forum (WEF), held each year in Davos, Switzerland, proves itself indispensable at providing a symposium where socio-economic patterns are analyzed and future trends are predicted. Perhaps this year we can be brave enough to consider whether these traditional models of growth and prosperity – despite the good they have brought us – are dangerously outdated. Perhaps, like Nicolaus Copernicus, we can be brave enough to challenge the status quo.
At Philips, we believe that the current economic model is in need of a new direction. Our planet’s resources are finite yet our focus is on producing, consuming and then discarding, rather than protecting, improving and sustaining. It is a myopic strategy that puts enormous, perhaps irreparable, strain on our environment simply to satisfy our desires. Alternatives do exist. A ‘circular economy’ is an economic system that encourages businesses to use technology to create products and systems in which materials are reused, recycled or remanufactured. So that, for example, water is recycled, harmful chemicals are restricted and, perhaps most radical of all, society is more geared towards sharing than owning.
Adopting a circular economic system will require a fundamental rethink of what we mean by ‘value’ and ‘ownership’. Perhaps instead of selling products, businesses such as Philips should retain ownership and sell their use as a service, allowing us to optimize the use of resources. By selling the benefits of the products rather than the products themselves, we begin to design for longevity, multiple re-use and eventual recycling. At Philips, we understand that innovation will be crucial in achieving this. A new generation of materials will be required, along with radical production processes. We will need to be just as innovative in defining new business models. And we will need fearless leadership that embraces and rewards the circular economy, a leadership that encourages not only consumers to alter their consumption from owning to using, but also stakeholders to co-design, co-create and co-own. Finally, rather than focus on lowest cost when tendering projects, governments should instead consider the highest value in terms of the health of people and the planet. It makes for not just a strong moral argument but an economic one, too. The Ellen MacArthur foundation estimates that moving to a circular economy will bring with it more than a trillion USD in business opportunities – new jobs, increased productivity, material savings, new geographic areas of growth and even new product categories. It is not easy to stand apart and use leadership to inspire others in such a way but it is ingrained in the Philips philosophy. Rather than fear the consequences of such change, we must embrace its extraordinary potential. Perhaps in 500 years our descendants will look back on today and recognise how the Circular Economy Revolution ushered in a new era of wisdom and prosperity.
Frans van Houten
CEO and Chairman
Dutch-born Frans van Houten started his career at Phillips in 1986 in marketing and sales. He became CEO of Airvision, an in-flight entertainment startup in the United States in 1992, and was appointed Vice President of international sales and operations of Philips’ Kommunikations Industrie in Germany in 1993. In 1996, Frans joined Philips’ Consumer Electronics division, leading the Asia Pacific, Middle East and Africa region from Singapore. Follow Frans van on:
