The easy way and the hard way

It’s been more than fifteen months since I wrote «But is it really necessary to continue to grow?». In that article I asked myself if the model to pursue was really that of a continued economic growth, or rather it would better to build one based on quality of life and satisfying everybody’s basic needs. My conclusion was that the current system is unsustainable in fact, both because the available resources are still limited, and because that model creates a large and growing economic gap by shifting wealth and power in the hands of fewer and fewer individuals, impoverishing all the others. I think it’s something that you can touch every day now.

In this article I will deal instead with enterprises and with that there is a right way and a wrong way for them to grow. Of course, the right one is the more “difficult” way because it conflicts with the interests of a minority of individuals who holds anyway the majority of the planet’s wealth.

For a company, growing means to increase revenue, profit, market share, to extend the company’s offering of products and services, and to expand the productive and commercial activities in other countries. This, if done correctly, not only enriches the company, but also those who work there and anyone who cooperates with it, creating an induced on the territory. Obviously this implies redistributive policies that take account of the profits of the whole chain of production, and not, as often happens, rewarding only a small managerial class that abuses internal resources and the surrounding area by impoverishing them to its advantage.

To grow in a sustainable manner, it is necessary to continuously innovate the offer to bring onto the marketplace. Innovation means doing research, develop new products and services, streamline processes and organization, stimulate creativity, be more efficient inside and effective outside. This creates value: value for the company, value to employees, value for suppliers, value to consumers. Innovation can be very contagious and often pushes other companies to be innovative in their turn, into a virtuous circle that improves everyone’s life.

A company of this type grows because the market appreciates the continuous introduction of innovation and therefore is available to invest in it. Similarly, consumers buy new products and services because they derive a real benefit from them. In addition, such an enterprise not only uses resources in a sustainable manner but may even generate new ones, thanks to innovation.

Well, what I just described is the right way to make a company grow, but is also the most difficult and in fact less and less companies apply it.

There is also an easy way, that gives an immediate advantage and is more simple to implement, but which has very heavy costs for the society. However, since these costs are payd by everybody whereas only few will benefit of this approach, more and more companies, even the big ones, that is, those that have the resources to be innovative, have recourse to it.

The easy way uses a series of “tricks” that push the consumer to buy again and again the same products. The best known is called planned obsolescence, that is, the product is designed to become obsolete in a very short time, usually shortly after the expiration of the guarantee. This can be done in many ways, even without resorting to sophisticated technologies. If we consider for example an object, it is sufficient to identify a key component and make sure that it breaks or is worn out irreversibly after a certain time. To do this, you have simply to design the component in a certain way or use a material with a specified quality. By performing various tests, you can get to program the break or wear in an almost accurate way. Moreover, if the component is integrated into the product so that it is not easy or convenient to replace it, repair costs are such as to encourage the buyer to withdraw the product and purchase a new one. When the product has also electronic components, you can get to the schedule according to the time in which it must stop working, since the instructions are stored in a microchip that can not be accessed or opened without destroying it.

To make this technique even more effective, it is also sufficient to ensure that the new model has a number of characteristics that are incompatible with the accessories of the old one, so that you do not only trow away the object in question, but also all the accessories and the other products that were purchased to be integrated with the main one, although still fully functional. You can also create in parallel a marketing campaign outlining the wonderful qualities of the new model, so as to create the impression that the old one is no longer suitable to perform the task for which it was purchased. Eventually the consumer buys a new product in which the new features are often of secondary importance, and that does not differ so much in its main features from the product which failed.

Similar mechanisms may also be used for services. Generally there are two methods: one is to bind the service to a physical product, as you do with maintenance. At that point, just make sure that the product fails on a regular basis to justify the service in question; the other is to continuously change the regulations governing the service, obviously adapting accordingly the price. Leveraging unconscionable clauses and relying on the actual needs of the customer, you ensure the renewal of the contract because often in this field companies create real cartels that make difficult, inconvenient, or almost useless, to change the supplier.

It is clear what is the damage that this approach generates: first of all you often pass off a simple remake or reinterpretation of the previous model as innovation. The real innovation is not making a certain product larger or faster, but changing in paradigm, that is, developing a really new one: the innovation can be technological, aesthetic, related to usability or functions… obviously it depends on the type of product. Those who use the “easy way” simply change the perception of the new model or make unusable the old one. It is also a fact that we often use only a part of the features of a product and that sometimes those unused features are really those that convinced us to buy the new model.

Another consequence of the “easy way” is the waste, that is, the fact that we “produce for dumping”: in practice we exploit scarce resources to produce rubbish that is often inconvenient to recycle or that is not reusable. Moreover, in order to keep low the costs of production, we abuse workers in Third World countries or use poorer and poorer materials and worst quality control processes, thus generating poverty outside the company, instead of wealth. This method is so used that companies no longer even fear of losing customers to other companies. In fact almost all enterprises behave the same way so that the number of customers lost are mostly the same than those gained because disappointed by the competition.

Bottom line: there is an easy way and a hard one to grow in the market for a company. The easy way enriches few individuals, impoverishing everyone else, including our planet, often polluting or creating other problems, such as waste disposal. The hard way instead brings wealth to everybody, would use resources in a sustainable manner and not only it does not damage our world but would solve many of the problems that affect the planet. It is a fact that more and more companies are adopting the former way whereas many of those who try to embrace the latter way are increasingly penalized, especially from unfair competition of the others. How we can go on is unknown but I suspect that we will soon get to a point of no return, unless we already reached it.