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From ownership to service: A new Fairphone pilot just for companies

Originally published at: https://www.fairphone.com/en/2018/01/08/from-ownership-to-service-new-fairphone-pilot-for-companies/

It’s perfectly normal to rent an apartment. And plenty of people lease cars. But would you ever consider doing the same with a phone? What would the ideal business model be? What are the benefits for Fairphone and our community? That’s what we’re working to uncover with our recent research and a new pilot project.

A circular approach with a focus on service

When we started making the Fairphone 2, we designed it with a circular economy in mind – meaning we considered every part of the phone’s life cycle to use resources as smartly as possible. For example, it’s easy to repair, we have a take back program and we’ve researched the best recycling methods. Some time back we also discussed alternative business models for consumers to incentivize take back.

Community of practice during the research stage for a more resource-efficient business model.

But really implementing a circular economy requires time and experimentation. It demands a change in mindset about ownership, and a different approach to selling our products. Over the last 4 months, Circle Economy and Fairphone formed a community of practice with financiers, accountants, data experts and lawyers to start investigating a more resource-efficient business model: one that ensures the intrinsic value of the phone stays as high as possible for as long as possible.

Our research resulted in one clear idea: Fairphone as a service.

Members of the community of practice involved in the project

From research to pilot project

This week, Fairphone and Circle Economy published a research paper summarizing our findings on this new proposition. It includes a potential business model for Fairphone as a service and how we can shift the concept of value from the product itself to the services that the device offers. So concretely, we would like business customers to move from buying a phone (ownership) to renting a device that allows them to make calls, send texts, use apps and enjoy entertainment (services).

Putting ownership in the hands of the manufacturer (Fairphone) gives us more control over the device and puts us in a better position to take advantage of the circular economy. Because if we lease the phone instead of selling it, we can ensure that all the resources inside are used optimally over the course of the phone’s life cycle, including when it’s time to be used by a another client or recycled.

After completing our research, we now we’re ready to move from theory into practice. So we’re currently setting up a pilot project with PGGM (who have indicated their intention to participate).

Circular phone

Click here to download or read the full report.

Want to try Fairphone as a service?

In the short term, we’ve decided to limit our test to the business market. Besides moving us all closer to a circular economy, our new proposition will help companies:

  • Lower costs (a fixed monthly rental fee instead of buying phones)
  • Easily manage repairs (some done in-house with spare parts; we take care of the rest)
  • Always have working devices (each package includes extra phones to replace those that might be out for repair)
  • Reduce end-of-life worries (we’ll take care of recycling)

We’re still looking for a couple more companies to help us test this concept “in the wild”. If you work for a small or medium-sized organization and are excited to help us refine this idea, please have a look at our research and get in touch: research@fairphone.com. We’re excited to hear from you!

Note from the editor:
We’d like to say thank you to everyone who joined our community of practice and shared their time and expertise. We’re very grateful for all your contributions!

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@iratxe I think that this could be a reason to get in touch with the organizations of the SYNAPSE program.

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Of course Stefan! I’ll let them know…

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Interesting! I was just thinking about a model like this when I realised I’ll probably have to replace my FP1 - I find it kind of ‘risky’ to buy a new FP2 at full price given that it’s two years old, so I wish I could pay for a ‘FP subscription’ that guarantees I will get the FP3 as soon as it’s released this year or the next… I know that’s not what this blog is introducing, but I do like the idea of being on a long-term ‘plan’ that takes away some of the risks of a one-time purchase and changes the consumer-producer relationship.

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To advertise this in the company where I work for the first things should be fixed first (at least): better battery and more reliable and supporting of the frequenties in the USA.

I don’t like the idea of “Fairphone as a service”, especially if it comes out for private users:

  1. It doesn’t encourage you to keep your phone as long as possible. Replacing your phone for a new model doesn’t cost you anything.
  2. If you don’t have money anymore and can’t pay the rental fee, Fairphone will take your FP2 away.
  3. This is one more contract in the big crowd of monthly/yearly payable contracts, where are already things like the flat, power, landline Internet, mobile Internet, public transport, insurances, Soundcloud Go+, etc. And those fees will not go away at one day (I wish it would be the first of the month), but on different days. The more contracts you have, the more confusing the crowd will be and the bigger will be your risk of overindebtedness.
  4. You can get a FP2 even when you can’t afford it. Even higher risk of overindebtedness.
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Thanks Tofra,

You make very good points and this is why this model is now created for Company Procurement and not for final users yet. Company procurement is driven by very different incentives and different product replacement behaviour.

  1. Even if the proposition would be for users, in the report you will read that we propose that clients have the access to “the generally accepted technological level” which is far from referring to state-of-the-art. Customers under a Fairphone as a Service proposition would not get a new device every year, if so, they would only get a new device everytime we develop a new device and as you have seen we have much slower product cycles than what’s standard in the industry and will get slower as we move on in our development as an organization.

  2. On your point about not being able to pay the rental fee, let’s remember that there is a wide array of devices at, very, different prices in the market. Today, you can get a basic smartphone for under 100 euro. But this is the details we will need to develop further if we get this proposition to end-users.

  3. To your point on the number of contracts. This is something that has been bugging me a lot as well. I think the answer will come with bundling services between companies. We have been in active discussion to offer this proposition together with telecom services under one contract. This is a very interesting topic in the transition to the circular economy; how can we elicit chain financing and chain value proposition building? bringing different parties together in a bigger and better proposition to users? Imaging a Home Hardware proposition.

  4. On your last point. That is the catch here, you are not getting a FP2 anyway. You are buying a service which gives you much more liberty to drop when you want/need and it gives us more liberty to make sure we can close the value gap between the economic and the technical lifetime of the device and making real that extension of life to 5 years that we talk about, bringing CO2 emissions down 30%.

All being said, this model is not meant to replace the traditional ownership model completely, but it is especially interesting in some cases. If you are a user that is totally aware of the effect of non-recycling your old hardware and you are committed to keep it as long as possible while working then a more traditional ownership model is definitely a better fit!

I appreciate your comment! lets keep the discussion going.

Thanks Ocra.

Fairphone 2 is not optimized for the US and that is why we only market in Europe. We hope to get there one day.

Thanks for your support.

Regards,

Miquel

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That’s a very interesting statement and while I was aware that Fairphone has a slower product cycle, I didn’t know that the speed of the product cycle is gradually becoming slower. What is the goal? A new phone every 5 years? Every 10 years?

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Maybe disappointing answer, but their is no specific goal :slight_smile:

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Analogous to the growth debate: Can it become slower indefinitely? :wink:

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I find the rent-a-phone idea quite interesting. It all depends on how this is implemented. Having closer relations to the operators also means dealing with their apps on your homescreen. What is FP’s perspective on that?

I’m most interested in this because from an external point of view, the software is where most ‘partners’ will have a say rather than the hardware or the supply chain. Is the fair ethics of Fairphone going to match the software as well?

Finally, what kind of price tag is going to hit our purse: will it cost more than owning the device or less?

With a long product cycle: how do you intend to keep the software up to date? I guess it is quite important in an business environment to deliver latest security patches. At same point google will drop the version of Android which is running on the FP2…

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Well I guess software updates will be the limit to the product cycle for now, but it might not be anymore in the future (Project Treble).

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Have you guys read Doughnut Economics?

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No, but it looks interesting:

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Hi How,

thanks for your questions. As I said, this is now a pilot for companies and we are discussing a price that goes between 24 and 29 euros per month. This is, mind, a draft proposition that depends on a lot of topics as you can read in the annex of our white paper, so please don’t pin us yet on this one. This would include only the hardware and a certain level of repairs (for example first display repair) and all in warranty cases of course.

On your question about operators, you can see we have launched with multiple operators in different countries and yet no new app has been included. We are still commited to our Open Fairphone OS and we provide monthly security updates for both ROMs.
Regards

As of today, we still provide software updates every month. In the long term we are looking at different possibilities, but there is not much we can say yet.

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While I like the general idea (phone as a service), I don’t think this specific offer will attract (m)any business customers. In my experience they are very focused on iOS devices. Android is often seen as an unreliable consumer OS for gaming and entertainment. With the FP2 there are additional issues: @ocramarco already mentioned limited international roaming (because of missing 3G / 4G bands) and poor battery life, which are both big issues for business users. And don’t forget the FP2 is pushing 3 years. I work for a small company and could actually propose this. I’m sure everyone will agree that it’s a great idea to get rid of all the iPhones and replace them with a 3 year old Android phone! :rofl:

Also, you would spend more than 1000 € in four years. You could buy two FP2s (or one FP2 and lots of spare parts) for less. Companies are usually very good at calculating the TCO.

So… good idea, but I think you should wait until the FP3 is out, offer a more attractive price and focus on private customers.

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How much do you pay for owning an iPhone for 4 years? Leasing an iPhone 8 64GB is at 1797,6 € (37,45 € per month according to iphone-leasen.de).

My point is that, from a business perspective, leasing any phone doesn’t make sense if the purchase price is lower than a two year lease (which is the case for the Fairphone offer). You could buy a new one every other year and still pay less.

The iPhone which comes closest to the FP2 is the 6s Plus. You can still buy it for less than 600 €, which is about the same price as a FP2. And unlike the FP2 you can update it to the latest OS.

Just sayin’. I’m not an iPhone fan and never had one. But if you want to convince business customers, only hard facts matter. That’s why I think it would be better for Fairphone to focus on private customers.

They offer TVs, phones and eBikes and all prices include VAT. Looks more like targeting private customers who can’t really afford the latest gadgets but really “need” them to show off.

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Hard facts:

  • monthly security features
  • repaairs included in the lease
  • spare Fairphones included in the lease
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