PHILIPS SMARTPATH: A Circular Economy Business Model Case

Abstract

This report presents the case study of Philips’ SmartPath business model for MRI scanners. SmartPath for MRI was chosen as the focus for the case study because: MRI systems have been a key focus for the implementation of circular economy models within Philips, and are an important line of business for the company. The SmartPath portfolio of upgrades focus on keeping products at their highest value throughout their lifetime, which is a core principle relevant to the circular economy.

The SmartPath portfolio contains a number of circular business model patterns – some of which have been operational for many years at Philips. Nevertheless it is a model which is improving and evolving, and thus offers insights for Philips as well as other businesses. Insights for business guidelines This case study highlights the following key insights relevant to companies in similar industries or sharing a similar context: Significant value can be created by taking a lifecycle and service-centric approach to serving customers. This requires re-balancing priorities from focusing on new product sales towards maximising the value for customers from products already installed (the installed base). With this new focus, the installed base becomes a key resource to be ‘cultivated’ over its entire lifecycle. This creates the foundation for developing solutions and services that are consistent with the principles of circular economy:

o Enhancing the utility and value of products at different stages of their lifecycle o Enabling the upgrade and life-extension of products o Establishing mechanisms to incentivise the take-back of products at end-of-cycle so that their value can be re-captured – for example through refurbishment and re-sale

Product development and design needs to be consistent with a lifecycle approach, for example ensuring that future solutions are backward-compatible with systems already installed, and that these are equally upgradeable when new hardware or applications become available. This requires additional investment, however creates significant benefits including: o Ensuring systems in the installed base can maintain or enhance their value over the lifecycle o Improving customer experience and satisfaction o Creating opportunities for new and recurring revenue streams

Transitioning from a product focus to a service/solutions focus (a form of ‘servitisation’) is a key enabler for circular business models. Offering products as a service creates a focus on value generation and customer satisfaction based on delivering overall performance and outcomes, rather than on the specifications of a product