SAP’s 5 + 1 Strategy to Build SMB Consideration and Adoption of Business One

SAP logoWhen it comes to business management and  enterprise resource planning (ERP) solutions, SAP often isn’t on the radar for small and medium businesses (SMBs). But, while the ERP giant is best known for its large enterprise solutions, SAP Business One is aimed squarely at providing small businesses with a unified business management solution.

In this three-part series, I interview Luis Murguia, who was recently appointed Senior VP and general manager for SAP Business One to discuss how the solution fits into SAP’s strategy, and what makes it a good fit for SMBs.

In this third and final post, Luis talks about SAP’s plans to accelerate consideration and adoption of Business One.

Laurie: Luis, you’re still relatively new to your Business One role. But looking out over the next year or so, what are your goals, and how will you measure success?

pillarsLuis: When I joined the team, we put a plan in place called five-plus-one priorities. Why five-plus-one, why not six? Because this one is very special, so we have five pillars, and one overall priority that is common across all five pillars. The five pillars include:

  1. Continuing to optimize Business One for the cloud is number one. Right now we offer a multi-tenant environment, we want to be able to scale that to serve tens if not hundreds of thousands of customers.
  2. Number two is speeding adoption of the HANA database among Business One customers. HANA provides an incredible source of innovation, helping customers to run much faster in real time.
  3. The third pillar is to accelerate two-tier ERP adoption. Business One is used not only by small businesses, but also in larger companies who use SAP Business Suite at corporate, and use Business One for operations in divisions and subsidiaries.
  4. Fourth is simplification. We are aggressively pursuing simplification if all of our processes. In July we are on target to reduce the number of products on our price list by 70%, to make it easier for our partners and customers to select and configure Business One
  5. The fifth pillar is to raise the dial in terms of volume and building mindshare among small businesses. Our Business One customers are small and maybe not well known, but they are on social media promoting their success so other small businesses can see the value of it.

So those are the five pillars. The plus one is very dear to my heart; I call it people, talent and diversity. Business One will be as good as the people we have working on it. We’re investing a lot of effort in terms of training, developing career paths, and helping employees continually find more challenging more interesting areas to work in to help them grow as individuals and as professionals. So that’s the core pillar that will make Business One stronger. As I said, Business One will be as strong as the people that are a part of the business.

Laurie: That’s very key, but is often not given enough airtime. If your employees are engaged and motivated and able to keep up with new skills, you’re much more likely to get good results! I think you’re right that it’s the glue.

Luis thank you so much, for painting a picture of Business One for us, where it is today, and where you want to take it.

This is the final post in a three-part series examining SAP’s Business One strategy and directions.

Are You Keeping Pace With Your SMB Customers?

The good news for tech vendors: SMBs are bullish on their own growth, and on using technology to help achieve that growth. The bad news: tech vendors may not be doing a good enough job helping SMBs understand, evaluate and buy the tech solutions that will best help their businesses.

SMB Group recently completed our 2015 SMB Routes to Market Study, which provides an in-depth look at U.S. SMB (small businesses: 1-99 employees, medium business: 100-999 employees) technology adoption, the decision-making process, and the buying cycle. Among the findings, we learned that “figuring out how different technology solutions can help my business” is the number one technology challenge for small businesses, and the number three challenge for medium businesses.

Figure 1: Top Three Technology Challenges for SMBs

Slide2

SMBs need tech vendors to provide them with a more informative, consistent purchasing experience to help them punch through the confusions knothole. Though the priority rankings differ a bit between small and medium businesses, the top two asks for both small and medium businesses are for vendors to provide a consistent experience across online, mobile, offline and other channels and to more clearly articulate how the solution helps improve specific business goals. Number three for small businesses is the desire fro better real-time online chat/phone support to answer questions, while for medium businesses, its help in connecting with reference customers with similar needs.

Figure 2: Top Ways Tech Vendors Can Improve the SMB Purchasing Experience

Slide3

The “SMB market” has always been a tough nut to crack as it actually comprises many different diverse markets. In addition to standard employee size and industry segmentation, SMBs vary widely in terms of business maturity, attitudes about technology, and a host of other variables. Furthermore, it’s a very volatile market: about 50% of new businesses fail within the first five years.

Today, these age-old challenges are compounded by the fact that the digital, social and mobile revolution raising SMB buyers’ expectations of tech vendors’ across solutions, marketing, sales add service.

As competition for SMB mindshare and market share continues to rise, tech vendors will need to work smarter to earn SMB dollars. Vendors need to do a better job of understanding the intricacies of the SMB market so that they can personalize content to nurture buyers along the their journey, providing them with an informative, helpful and consistent purchasing and service experience across channels.

Please contact Lisa Lincoln at (508) 734-5658 or lisa.lincoln70@smb-gr.com for more information about the 2015 SMB Routes to Market Study (including a Table of Contents), or to order.

 

Taking the Plunge: Triggers for Small Businesses to Move to SAP Business One

SAP logoWhen it comes to business management and  enterprise resource planning (ERP) solutions, SAP often isn’t on the radar for small and medium businesses (SMBs). But, while the ERP giant is best known for its large enterprise solutions, SAP Business One is aimed squarely at providing small businesses with a unified business management solution.

In this three-part series, I interview Luis Murguia, who was recently appointed Senior VP and general manager for SAP Business One to discuss how the solution fits into SAP’s strategy, what makes it a good fit for SMBs, and how the vendor plans to move Business One from being one of SAP’s best kept secret onto SMB short lists for ERP solutions.

In this second post, we talk about the triggers that motivate small businesses to move from entry-level accounting to SAP Business One, and how SAP and its partners help them take the leap.

Laurie: So, SAP Business One provides small businesses with more of their industry-specific needs already configured right out of the gate, and getting it in a cloud model means they don’t have to worry about installing hardware and software. But just the thought of moving from an entry-level or lower end accounting to a more robust ERP system can be very intimidating for smaller companies. So what triggers do you see motivating them to finally take the plunge and move up?


bandaidLuis:
I think a lot of us in most aspects of life; we tend to keep putting Band-Aids on pain. But finally someone says I can’t keep putting on the Band-Aids on this, I need something more comprehensive to manage my business with? I remember the story of the largest manufacturer of white boxes, white label PCs in Brazil. They were very successful in selling to schools, and any place that needed a large number of PCs because they were very price competitive. What triggered ERP adoption for them was the day they delivered the wrong PC configuration to a big customer. They lost a fortune scrambling to produce another batch, and they also realized that they almost lost one of their most important customers because of contractual requirements and remedial penalties.

Laurie: Ouch.

Luis: They were trying to do all this with manual processes and Excel files. But when you are using a lot of Excel files that need to be aligned and synchronized. In this case, they only needed one disconnect to get massive mistakes with the customer’s configuration. So they realized they had to bite the bullet and get their house in order to be much more operationally efficient.

Laurie: Okay, so how do SAP and its partners help small businesses avoid pitfalls when they’re ready to take this leap and implement Business One?

Luis: Well, some of our most successful US partners insist new customers pass a week of product training before they implement Business Because when end-users feel comfortable with the application, this helps guide the implementation and ensures users get value from it right away. So attention to end-user training is really making the difference when it comes to successful implementation.

This post is the second of a three-part series. In the third, we’ll explore SAP’s Business One strategy and goals for the future. 

Yes, Virginia, SAP Does Have a Real Small Business ERP Solution

SAP logoWhen it comes to business management and  enterprise resource planning (ERP) solutions, SAP often isn’t on the radar for small and medium businesses (SMBs). But, while the ERP giant is best known for its large enterprise solutions, SAP Business One is aimed squarely at providing small businesses with a unified business management solution.

In this three-part series, I interview Luis Murguia, who was recently appointed Senior VP and general manager for SAP Business One to discuss how the solution fits into SAP’s strategy, what makes it a good fit for SMBs, and how the vendor plans to move Business One from being one of SAP’s best kept secret onto SMB short lists for ERP solutions.

In this first post, we discuss Luis’ background, Business One history, and some of the key differentiators it has in the SMB ERP market.

Laurie:  Hi this is Laurie McCabe from SMB Group and today I’m talking to Luis Murguia, Senior VP and general manager for SAP Business One. Business One is SAP’s flagship ERP solution for small and medium businesses. So Luis you’re relatively new in this role, can you tell us a little bit about where you come from, and why you decided to become part of the Business One team at SAP.

luisLuis: Thank you Laurie, and great to catch up. I’ve been with SAP for 9 years, in the enterprise division as well as the partner organization. For the past 6 years, I ran SAP’s European partner organization. Throughout my career I have been involved with the ERP market. I started my career in providing ERP solutions for small wholesale food distributors, working with solutions like Peachtree, QuickBooks. Then I moved into selling HP3000 servers pre-loaded with business management software. So I’ve been involved in helping small business find new ways better ways to run the business and be more successful throughout my career.

Laurie: It sounds like you have a well-rounded history and in terms of small business solutions, which brings me to my next question. Many people think of SAP primarily as a big company a big company that sells sophisticated, high-end business solutions to other big companies. So what’s SAP’s role in small business?

Luis: Great question. Ben Horowitz, a venture capitalist that I admire a lot, was also a CEO of a start-up that became very successful in the dot-com crisis. He describes innovation as a really good idea that initially looks like a bad idea. This because any good idea that looks good off the bat is probably not innovative, as it s likely that many people are already doing it. For example manufacturing a car is a good idea because people need cars, but everybody knows it.

Laurie: So unless you’re like Tesla it’s not necessarily a new idea.

Luis:  Exactly. 10 years ago people thought the idea of making a high performance car that runs 100% on electricity was such bad idea was no one was doing it. But then Tesla did it. Likewise, Business One, which is designed for small businesses, doesn’t appear to be a fit for SAP. But actually, we can leverage many SAP strengths, including industry knowledge and best practices, such as order to cash, and package it for small business. That’s what makes Business One such a novel and successful product. We instill and capture expertise from SAP’s big business ERP to help our smaller business customers be more competitive.

Laurie: Ok, explain a bit of the Business One history for us.

Luis: Business One has about 50,000 customers. The solution has been available for the last 15 years, and we are accelerating growth, adding close to 1500 new customers every quarter. Every day, about 15 new companies in the world choose Business One to manage the business.

Laurie: Why do you think growth is accelerating now?

diversityLuis: I’ve been with Business One for just about four months, and I see two great takeaways to date. Number one is that Business One can be run in the customer’s own facilities, as well as in the cloud. Businesses like having this choice. The second reason, and perhaps more important, it is that more customers are choosing Business One because of the in-depth industry functionality that has been developed by our partner ecosystem.

Laurie: So is the focus for Business One to differentiate with industry specific versions or customizations?

Luis: That is 100% correct. And let’s talk a little bit about customer size segmentation too. We divide the Business One market into three distinct segments: companies with less than 50 employees, those with between 50-200 employees, and ones with 200 to 1,000 employees. The first, businesses with less than 50 employees will usually be running QuickBooks, as a standard off the shelf solution. In the 50 to 200 employee category, companies are probably using Microsoft Dynamics, Sage or another solution that they’ve customized to some extent, but they don’t have the critical mass to afford systems integrators to meet all of their requirements. Business One really fits the bill here, because we have over 600 micro-vertical customizations.

Laurie: So Business One has become a software development platform?

Luis: Yes, standard accounting, standard invoicing, management, sales, taxes, and other functionality is in there, and the ISV can build specific micro-vertical functionality on top of it–say for photo copier dealers or microbreweries, which have very different requirements. And in that 50-200 employee segment, that’s exactly what they need, a full solution to manage unique requirements, off the shelf. They can derive more value from a complete micro-vertical solution with Business One as the foundation.

Laurie: And having it available in the cloud probably helps a lot too.

Luis: Yes, in the US, over 85% of all new Business One customers are choosing cloud deployments. Many sign a contract a perpetual license from SAP for financial reasons, because most will stick with an ERP solution for a long time. It is much better, just like its better to own the house than renting the house–the math says you should buy not rent. But they are having partners run and manage Business One for them in the cloud. Say you are a microbrewery in Chicago. You don’t worry about servers, disasters or backups; you eliminate the traditional headaches associated with IT infrastructure. So even though many buy a perpetual license, all the infrastructure and management is in the cloud.

This post is the first of a three-part series. In the second, we’ll examine key triggers and requirements that drive small businesses to move from entry-level accounting solutions to SAP Business One. In the third, we’ll explore SAP’s Business One strategy and goals for the future. 

SMB Spotlight: Empowering A Billion Women by 2020 Teams Up With Xero

canstockphoto13589024Hi, this is Laurie McCabe from the SMB Group. Today, I’m talking to Ingrid Vanderveldt, CEO of a new venture called Empowering a Billion Women by 2020 (EBW2020) and with Russ Fujioka, the U.S. President of Xero, which provides cloud-based financial solutions for small businesses.

Ingrid and Russ, I’m really excited to talk to you about how you guys are teaming up on this initiative of Empowering a Billion Women by 2020.

Ingrid, can you just start by telling me a little about what EBW2020 is and why you started it?

Ingrid: Sure, and I’m so glad Russ is here, too, because I cannot imagine doing the venture without Russ and without Xero.

EBW2020 is about actually empowering a billion women on a global basis worldwide over the next few years, by providing them tools, technology, and resources to empower their success as leaders and as entrepreneurs.

To do that we focus on three areas. One is mentorship, because we found that lack of mentorship is the number one reason why women don’t start, grow, or scale their ventures. Financial literacy is number two, and number three is technology support.

These three pieces together are sometimes the most intimidating pieces of starting, growing, and scaling a business. We want to demystify that entire process, make it super easy, and provide support for women globally to tackle these three areas.

xeroIt ties into Xero on the financial side. We want and encourage women to get on the Xero platform. We’ve selected Xero because, frankly, Xero is the easiest, simplest. They call themselves beautiful accounting software, but it truly is a very easy way for any business owner to gain control and clarity and simplicity over their finances.

And when you team women up with that capability along with support, together we can help strategize on how can you use your financial literacy to empower your growth.

Laurie: In addition to Xero, what other components are in EBW2020?

Ingrid: It entails three things. One is the mentor-matching platform, where we team women business owners coming into the EBW2020 platform with a mentor by industry, by revenue numbers. So, for example, we’d team a woman making $50,000 a year with a woman in $150,000-$250,000 a year category. That’s all free.

Then, we start moving them into our business-in-a-box solutions. Step number one here is get on the Xero platform so together we can examine and strategize over their finances.

We also have a $100 million fund that we provide financing to enable women to grow and thrive.

Laurie: So the Xero piece provides financial visibility and automates a lot of manual tasks.

Ingrid: Exactly. I’ll never forget a meeting I had with Russ last summer, when he started showing me some new things that were coming out at Xero a year ago, which are now out. And I was, like, oh my gosh, this is a dream come true.

Laurie: Yes, Russ, can you give us a little background on how you got together with Ingrid on this?

Russ: Ingrid and I met back in our Dell days, over four years ago when she was Dell’s Entrepreneur in Residence. I was coming out of the venture community and we had a lot in common in the companies that we had worked with and were enabling.

When I came to Xero, I called Ingrid to see what she was up to and talk to her about what Xero was doing. And you know, the mission of Xero was very complementary. Xero is also really focused on helping small businesses to thrive and survive.

In particular, I was talking to her about what we call “beyond accounting” capabilities. Because after we had built our robust platform for small business accounting, we started to integrate lots of tools and an insights engine. We call it big data for small business. Our first foray into that is our business performance dashboard.

Xerocon2

L to R: Cristina Garza, Accounting Prose, Russ Fujioka, Ingrid Vanderveldt

I was talking to Ingrid about this, the ability for small businesses and their advisers to look at key indicators so that they can continually monitor their business and help build financial acumen to be successful. That resonated with Ingrid in the sense that it could help women entrepreneurs easily gain financial acumen.

From the beginning, Xero always touted that no small business should be in business without a trusted financial adviser. Our platform is built from the ground up in the cloud to support a two-way view, for the small business and their financial adviser. Or, as we are seeing, also sometimes their funding agents, bringing a lot of transparency into the financials of their business.

So when I first came into Xero, I think Ingrid was pretty psyched about what we were doing, because I think Xero was architected this in with these needs in mind. So it was serendipitous that we had the meeting, and then it resonated really well for what she wanted to enable within her efforts.

Ingrid: Can I add something? Having full transparency is really a big deal. The main reason I went to Dell as Entrepreneur in Residence was to prove out the concept that through technology we could create an instant global platform and, for me personally, pilot that hypothesis towards the goal of empowering a billion women by 2020.

Going back to what I originally said about our three pillars of mentorship, financial literacy, and technology/scalability, I knew how to solve the mentoring issue. But while I was at Dell, I hadn’t figured out how do we could quickly and easily give women financial confidence.

Back at Dell, I started funding a development team to build out what I call Etch-a-Sketch on top of QuickBooks. When Russ called me and he said, you just have to see what we’re doing at Xero, I got goosebumps, literally I almost started crying because I was so happy. It is dream come true for how easy and simple it makes helping entrepreneurs get confident about their finances.

And to see finances and money not as something to be scared of or intimidated by, but instead, something they can understand and can really fuel success.

This is going to revolutionize small business on a worldwide basis, it’s just that good.

Laurie: Just to clarify one thing. To initially sign up before you start using the business-in-a-box and the Xero component, to just sign up and start getting some of your tips and things like that, Ingrid, that part of it is free. Correct?

Ingrid: Yep, that first level is free, and there are three levels of membership.  The community just went live a couple of months ago, but there are over 8,000 people in it and we’re about to add 2,000 from Iceland. So it’s growing very quickly.

Laurie: Last but not least, the third component, the philanthropic part of EBW2020. What does that involve?

Ingrid: EBW2020 has two arms. One is our for-profit, which is what we’ve talked about. Then there’s the not-for-profit, our EBW foundation, which is focused on the exact same things but it takes it a step further.

For example, a woman in Uganda, if we can give her a working cell phone, get her tapped into the EBW a community, find her a mentor, and start teaching them about financial literacy?

So on the foundation side, we start at a different level than where we start with women who are coming from more developed countries.

Laurie: That’s great to know, and I just want to thank both of you, Ingrid and Russ, for joining me to share this information, which I think a lot of people will find very valuable. Best wishes for meeting your goals, and thanks again.

Coming Full Circle: Small Business and the Circular Economy

canstockphoto26603076Today, most businesses take a “take, make and dispose” approach to create their products, without much thought as to where these products will go when we dispose of them. But there is an alternative to this traditional, linear model–one that recognizes the reality that natural resources are limited.

The circular economy takes an end-to-end approach to source, develop and dispose of products. Companies applying this approach design and build products and services to minimize waste while maintaining natural resources. Going beyond recycling, the circular economy brings design, manufacturing, distribution and utilization into the picture as well.

This two-part blog series examines the drivers for businesses to shift from traditional, linear economy models to the circular economy. The first post, Reimagining Business: The Circular Economy, explains the differences between linear and circular economies, and discusses Dell’s evolution. This second post, focuses on how two small business owners are using this model to build successful, sustainable businesses, and how your small business can put this concept to work.

Blue Avocado: Making It Easy to Be Green

Amy GeorgeAmy George had planned to go to medical school after college. But when her dad died, she took a job with an architectural firm that designed sustainable buildings. As she learned about sustainability, she decided that what she really wanted to do was to create a sustainable business by “turning garbage into great products.”

After attending business school, Amy founded Blue Avocado. Blue Avocado’s goal is to entice new consumers to join the green movement with functional and chic reusable bags that minimize waste from design to production.

The company’s first products were reusable shopping bags, which she launched as cities began establishing plastic bag bans. When the 2008-2009 recession hit, more people wanted to bring lunch to work, so Amy added reusable lunch bags to the portfolio. These reusable bags are made with Repreve fabric, which is certified by the UNFI, Repreve’s parent company’s proprietary U Trust method to ensure that Repreve fibers are truly made from post-consumer plastic.

blueavocadobagsAccording to Amy, “To really grow consumer momentum, products not only have to be green, but be great. To attract each new wave of consumers, you need to create new solutions and new functionality.” So four years ago Blue Avocado added (re)zip® storage bag line, an alternative to disposable baggies. Since then, the company has also introduced reusable produce bags and this year, reusable trash bags.

Amy estimates that by the end of 2014, Blue Avocado had helped consumers avoid 200 million disposable alternatives. The seven-employee company now sells its products through The Container Store, Amazon, Whole Foods, Bloomingdales, Kroeger, Wegman’s, Target, OfficeMax, and Bed Bath & Beyond. Looking ahead, Blue Avocado is expanding distribution through retailers in Asia, Australia and Europe by 2016. In addition, the company forged a new partnership this year with Terra Cycle that allows BlueAvocado to upcycle all of their products into secondary parts or material versus end in a landfill.

Techway: Turning Trash To Treasure

Cathi High Res HeadshotWith a background in hardware sales, Cathi Coan, CEO of Techway Services, Inc., invested in a company to resell used computer equipment. When the lead investor died, Cathi found herself with a warehouse full of equipment. While she could find buyers for some of it, there was a lot of e-waste–from outdated monitors and PCs to toner cartridges and batteries–that no one wanted to buy.

E-waste is the fastest growing segment of the national waste stream. According to a report by the United Nations Environmental Program (UNEP), the amount of e-waste being produced could rise by as much as 500 percent over the next decade. The United States produces the most e-waste in the world at around 3 million tons each year, with China not far behind at 2.3 million tons (2010 estimate). E-waste contains toxic materials which don’t break down naturally and can cause great harm to the environment, groundwater, and ecosystems if not disposed of properly. These toxic materials include lead, cadmium, chromium, mercury, plastics and many others. In 2010, only 27% of this e-waste was recycled in the United States.

techwayCathi decided that in addition to reselling equipment, Techway Services could also break down unwanted hardware to recover metals, plastics and other materials to be repurposed to manufacture new products. According to Cathi, “Most materials can be reused or recycled. We aggregate, hand disassemble, and separate materials into different commodities. The final material is processed by our downstream partners for future use.”

Techway Services is now a nationally recognized Information Technology Asset Disposition (ITAD) company that specializes in end-of-life IT services. Techway Services helps companies with all aspects of IT asset recovery. Techway Services provides secure onsite data eradication for outdated equipment, reverse logistics, IT resale, and certified demanufacturing, which includes responsible recycling. Responsible recycling keeps hazardous material out of landfills. Techway Services is registered with the EPA with R2/RIOS certifications and is ISO certified to ensure streamlined compliance for its customers.

As regulatory concerns have increased, and businesses have become more environmentally conscious, the business has grown. Companies risk stiff fines if they do not safely dispose of these outdated assets. Techway Services works with large Fortune 500 clients, universities and towns, not only to provide services, but also to raise awareness about sustainability and technology recycling. The company has even developed revenue share models with some of its clients to resell their used equipment in secondary markets.

Making the Circular Economy Work for Your Small Business

How can you put the circular economy approach to benefit the environment and your business? Here are some tips:

  • Establish holistic economic, environmental and social goals for your business. By reducing waste and your carbon footprint, you run your business more efficiently, and save money.
  • Look at how you can extend the impact via your networks; whether with your customer, suppliers or through the community you do business in, and how can you help them start this journey.
  • If you’re starting a new business, remember that green alone doesn’t sell a product. Start with a great idea for an innovative product or service, and then look for opportunities waste can offer.
  • If you’re an established business, apply your existing expertise to create a new, green product line.
  • Check out waste brokerage sites to source waste to use in your products, and/or work with a consulting firm such as Brightworks, which focuses on helping companies build a circular economy business model.
  • Aim to make the B Corp list, which certifies companies that meet rigorous standards of social and environmental performance, accountability, and transparency standards.
  • Remember services companies can get on board too. For example, Green Mountain Power, a Vermont energy company, is bundling new energy products and services to help people save money, and use less energy and fossil fuels. SEEDS offers environmentally friendly green printing services from initial concept to final delivery and distribution.

Finally, remember you can’t do everything all at once. The important thing is to get started and set incremental goals to get your business moving in the right direction.

This is the second in a two-part series sponsored by Dell that discusses the circular economy, Dell’s role in it, and how small businesses can transition to and benefit from it.

Reimagining Business: The Circular Economy

Closed Loop RecyclingToday, most businesses take a “take, make and dispose” approach to create their products, without much thought as to where these products will go when we dispose of them.

But a movement is underway to redesign traditional business models for the reality that resources are limited. The alternative, circular economy, which takes an end-to-end view of how materials are sourced and used to build products, is taking shape among businesses of all sizes. In a circular economy, products are designed and produced to minimize waste. As this model gains traction, more people are realizing that it can benefit the environment and contribute to business growth.

In this two-part blog series, we discuss how and why businesses are transitioning from the traditional, linear economy to a more sustainable circular economy. In this first post, I look at the differences between linear and circular economies, and discuss Dell’s goals for and journey to a circular economy. In the second, Coming Full Circle: Small Business and the Circular Economy, I discuss how two small business owners are applying this model, and how your small business can put this concept to work.

Where the Buck Stops: The Linear Economy

landfillThe traditional, linear economy is about taking resources, making products and disposing of them. Not much thought goes into where these products will go when we dispose of them, or whether materials can be recovered and reused.

For example, think about all those bright and shiny objects that we all love–from PCs to fitness bands, tablets to TVs, servers to phones. To produce these products, manufacturers source the raw materials that go into these devices, such as copper, mercury, gold, silicon, platinum and petroleum, from around the globe. The journey continues with stops at refineries and smelters, chip fabrication plants, and assembly lines, where products are assembled and shipped.

An amazing journey to be sure, but what happens to the old stuff when we trade it in for brighter, shinier new models? Unfortunately, the answer is not a pleasant one. Most of the trash we create goes to landfills and dumps, creating environmental and health hazards. In many cases, we are also depleting a finite supply of non-renewable resources.

Today, the linear economy is the norm: The United Nations University reported that only one-sixth of the 46 million tons of electronics that were discarded last year were recycled or reused. However, as resources are exhausted and the population grows, the linear model isn’t sustainable.

Bringing the Economy Full Circle

In contrast, the circular economy takes an end-to-end view of how materials are sourced and used to build products. It requires companies to take a fresh look at their business models, product planning and design, materials sourcing and management, and supply chain collaboration. In this model, products are remade, repaired, resold, or recycled.

By recycling products, components, untapped resources and materials back into relevant value chains, a circular economy enables economic growth with less wasted resources. It reduces toxic waste in dumps and landfills, and helps address the problem of the increasingly scarce supply and growing costs of raw materials.

While economic considerations are a key driver for the circular economy, businesses are also seeing more demand from consumers for sustainably produced goods and services.

Dell’s Circular Journey

Dell has taken a proactive stance to transition to a circular economy for over 20 years. In 1994, Dell began its “Design for Disassembly, Upgradeability, Serviceability” initiative, and became a founding member of the U.S. EPA’s Energy Star Program, integrating energy efficiency into every product line.

Ten years ago, Dell established a partnership with Goodwill to offer consumers a free, easy way to recycle electronics. Consumers simply drop off their unwanted electronics, regardless of brand, at Goodwill. Goodwill determines whether a device can be resold or refurbished. If not, it sends the product to Dell’s third party electronics recyclers to recover precious metals, plastics and other components.

Legacy of GoodTwo years ago, Dell significantly upped its commitment when it announced its 2020 Legacy of Good Plan. Among the 21 corporate responsibility goals outlined in the plan, Dell has set 12 goals specific to environmental sustainability. Building on existing initiatives, these 12 environmental goals focus on three areas: reducing the environmental impact of company operations, driving social and environmental responsibility in the industry and supply chain, and promoting technology’s role in addressing environmental challenges.

Dell’s goals are far-reaching and specific, and include plans to reduce the energy intensity of its product portfolio by 80%, decrease greenhouse gas emissions from facility and logistics operations by 50%; and reduce Dell’s use of fresh water in water-stressed regions by 20%. Other goals include ensuring 90% of waste generated in Dell-operated buildings is diverted from landfills, to source 100% of product packaging from sustainable materials, and to recover 2 billion pounds of used electronics.

Getting Results

Dell’s commitment to minimizing waste is evident throughout the company. For instance, Dell is designing its products with fewer screws and more snap in pieces to make it easier for recyclers to dismantle them. It has free electronics recycling programs for consumers in 78 countries, and provides commercial asset recovery to businesses in 44 countries. Through its closed loop approach, Dell also reuses about 2 million pounds of recycled plastics in fifteen products.

WheatStrawPackagingThe company is innovating in packaging as well, using renewable products such as bamboo, mushrooms and most recently, wheat straw. Wheat straw is what’s left over after wheat grain is harvested. In China, the wheat straw is often burned, leading to air pollution. Dell is now using about 200 tons of Chinese wheat straw to manufacture boxes for its products, reducing an estimated 180 tons of CO2 emissions.

Dell is also extending sourcing standards to its suppliers to help design out waste in the supply chain. For instance, in 2013, the company added social and environmental (SER) criteria to its global supplier selection process, including criteria for clean water and air discharges.

Moving beyond products, 20% of Dell’s workforce now telecommutes, saving an estimated 13 million kWh of energy, and 6,785 metric tons of greenhouse gas emissions–and save $14 million annually on facilities expenses.

Finally, Dell is helping customers build proactive, sustainable IT strategies that not only benefit the environment, but save money and streamline operations. Dell Services helps customers assess current technology practices and determine options to green up existing practices, and/or develop new approaches to meet sustainability and fiscal goals.

Perspective

Dell is playing a leadership role in transitioning to the circular economy. But the circular economy can be as compelling for small businesses as it is for Dell and other big companies. Small businesses can apply the same principles to build more sustainable, differentiated and profitable businesses. In fact, understanding and transitioning to a circular economy can open the door to new opportunities that will help you to future proof your business.

In the next post in this series, I share the stories of two entrepreneurs that have created successful circular economy businesses, and their insights as to how other small businesses can head for greener pastures.

This is the first in a two-part series sponsored by Dell that discusses the circular economy; Dell’s role in it, and how small businesses can transition to and benefit from it.

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