By Amy Konary, Chair of the Subscribed Institute
Earlier this summer, GE sold its light bulb division to smart home company, Savant Systems. It would have been just another business news story if it wasn’t for the fact that the GE brand has become synonymous with the light bulb.
The two have been intertwined for over a century. 129 years to be precise. Thomas Edison, the inventor of the modern light bulb merged his company, Edison General Electric Company with Thomson-Houston Electric Company in 1892. And since then, GE has been the leader in lighting and credited with advancements such as inventing the fluorescent bulb, the halogen lamp, and the LED. Interestingly, some experts blame the invention of the long-lasting, energy-efficient LED for GE’s downfall. The argument is that they’ve resulted in a reduction of recurring maintenance purchases and hence, fewer bulbs are being sold.
But, here’s the thing — it didn’t have to be this way. In fact, history shows us that the light bulb industry wasn’t always a product-based industry measuring success solely by profit margins. In the 19th century, when light bulbs were relatively new, product longevity was a competitive advantage. Most manufacturers sold to regional electric companies who then sold the entire package (electricity and light bulbs) to individual customers as a lighting solution. The electric companies handled installation and maintenance, and when a light bulb burned out, customers would call the company and a repairman would be sent to fix it.
It was in the interest of the electric companies, and thus, in the interests of the bulb manufacturers, to make sure that the bulbs lasted as long as possible. It made business sense. As simple as that.
In 1924, the world’s largest lighting companies, including Phillips and GE, formed Phoebus, a cartel to control the manufacture and sale of incandescent light bulbs. They determined that the long life spans of bulbs negatively impacted sales. So, the cartel chose to scale back lamp life from 2500 hours and standardize it to 1000 hours. Writing for The New Yorker, J. B. MacKinnon says that “the effort is today considered one of the earliest examples of planned obsolescence at an industrial scale”.
I wonder how many light bulbs ended up in landfills over the last hundred years due to planned obsolescence? Millions? Billions? Recycling programs help, but wouldn’t it be even better for the lighting industry to go retro here, and start thinking about longevity as a competitive advantage again?
With the advent of the X-as-a-service business model and the rise of the Subscription Economy, this is exactly what’s happening — lighting-as-a-service (LaaS) is making a comeback. Schiphol airport’s remodeled Lounge 2 is a great example. Schiphol strives to be a sustainable airport and has made it a top priority to reduce energy consumption. When it was time to remodel Lounge 2, it decided to work with Signify Managed Services (formerly known as Philips Lighting) for its lighting needs.
Signify worked with Thomas Rau, and Founder of Turntoo, a visionary and consultant in the circular economy field to create a new approach to lighting where ‘ownership’ is replaced by ‘pay as you go’. “The principle is simple: instead of buying a luminaire (a complete electric light unit), you buy light,” says Rau. At the end of the contract period, the customer can choose to extend it by upgrading the existing lighting or opt for new lighting. And the luminaires can be returned to Signify for reuse or recycling.
At Schiphol, Signify Managed Services handles the maintenance, replacements, product upgrades, and continued optimization of lighting the lounge. From an economic perspective, Schiphol avoids investing in any of the equipment or the physical products that serve as a conduit for the solution. So, no CAPEX or maintenance or replacement costs. Instead, it pays a monthly service fee which includes energy and maintenance costs.
The business model incentivizes Signify to manufacture high-quality, long-lasting, sustainable lighting systems, which are modular in design and easier to repair, reuse, or recycle.
“These light sources consume 50% less power than their predecessors. In addition, the new luminaires have a 75% longer lifespan compared to the luminaires that were previously in use here,” says Floor Felten, Director Asset Management, Schiphol.
The luminaires have been specifically designed to allow fast and easy repair and replacement. In the past, if one light failed, it might be necessary to replace the entire system — just like an old-fashioned string of Christmas lights. With a modular system, it’s easier for the Signify team to identify the component that needs to be repaired or replaced and take care of just that one.
It’s no surprise that Schiphol values the outcomes of the service over owning and managing the lighting infrastructure. Today, the world is witnessing a confluence of changing consumer preferences that value access to services and outcomes over ownership of products, the threat of climate change, and the growth of the circular economy which are leading to the reemergence of an outcomes-based business model like lighting-as-a-service.
The economics of the old product-based economy which thrived on planned obsolescence is making way for the new Subscription Economy which thrives on customer relationships and delivering outcomes as a service. In the U.S. alone, several companies have adopted the LaaS model including Signify, Sparkfund, Stouch, and Urban Volt. The global market for LaaS is expected to grow to $4.74 billion by 2025 as more and more companies adopt the service-based business model.
It’s time for manufacturers to switch to newer business models (or revive service-oriented models) that provide outcomes and solutions to customers’ needs versus continuing to merely push the sales of products.
It’s not just a question about the longevity of the products, it’s increasingly becoming a question about the longevity of manufacturing as we know it.
For more on how subscription companies can change our world for the better, check out Usership Saves the World by Zuora CEO Tien Tzuo and Grundfos: Pioneering Water-as-a-service Solutions for Sustainability by Amy Konary, Chair of the Subscribed Institute.