The Functional Economy – “6 Min. to Understand” with Pierre Léonard. Midoricast: Podcast #231

Transforming Product Sales into Sustainable Value Creation

The functional economy. What if, instead of selling products, we sold usage, service, or even performance?

In this episode of 6 Minutes to Understand, Pierre Léonard, facilitator in circular economy, introduces us to a model that redefines the very concept of ownership: the functional economy.

This model breaks conventions. Michelin no longer sells tires, but kilometers; Xerox no longer sells printers, but printing services; and even in space, companies like Loft Orbital now market the use of data rather than the satellites themselves. The result: a drastic reduction in waste, savings of up to 90%, and sustained customer loyalty.

Pierre takes us even further: towards the performance economy, where one no longer sells an object or its use, but the achieved result! Imagine: a supplier guaranteeing the ideal temperature rather than a radiator, or an aircraft manufacturer charging for flight hours rather than the engine.

This model aligns economic and environmental interests, while putting use value and durability at the core of decisions. A striking and pragmatic episode to listen to for rethinking your economic models in the light of ecological transition.

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Why this segment?

We support companies implementing real and measurable ESG (Environmental, Social, Governance) approaches. Pierre trains and supports them through this transition. Our approaches differ but complement each other: we encourage, he supports.

This choice also poses a real challenge: where to draw the line?

Some companies mentioned in this segment do not meet our current criteria, and we would refuse any collaboration with them unless they initiate concrete change. But this is precisely where Pierre steps in: his role is to initiate this transformation.

This podcast does not seek to judge but to inspire. The goal? To encourage rather than discourage, to support rather than exclude.

Let’s commit together to a circular, sustainable, and inclusive economy. Listen, reflect, act… in 6 minutes.

Listen to this podcast on the functional economy via our YouTube channel (subscribe: thank you!):

French: The full transcript of this podcast is provided as subtitles in five languages: French, Dutch, German, English, and Spanish.
Dutch: De volledige transcriptie van deze podcast wordt als ondertiteling van de video aangeboden in vijf talen: Frans, Nederlands, Duits, Engels en Spaans.
German: Die vollständige Transkription dieses Podcasts ist als Video-Untertitel in fünf Sprachen verfügbar: Französisch, Niederländisch, Deutsch, Englisch und Spanisch.
English: The full transcript of this podcast is available as video subtitles in five languages: French, Dutch, German, English, and Spanish.
Spanish: La transcripción completa de este podcast está disponible como subtítulos del vídeo en cinco idiomas: francés, neerlandés, alemán, inglés y español.

Podcast sequencing – The Functional Economy:

• [00:00:02] “The Functional Economy”, introduction
• [00:00:13] Pierre Léonard, facilitator in circular economy
• [00:00:23] The Functional Economy: changing logic
• [00:00:51] Memorable examples: Michelin and Loft Orbital
• [00:01:27] Rental, service, performance: three levels
• [00:01:55] Deep model change
• [00:02:08] We buy a need, not an object
• [00:02:31] Book example: exclusive or shared?
• [00:02:50] Customer loyalty and knowledge
• [00:03:20] Performance as key offer
• [00:04:10] Investing to reinvent one’s profession
• [00:05:06] Understanding real utility: the key step
• [00:05:30] Real customer expectations
• [00:05:54] Testing, tracking, and anticipating usage
• [00:06:08] Pricing on value, not technique
• [00:06:21] Philosophy: performance and positive impact
• [00:06:38] Closing: business and sustainability united
• [00:06:45] ADSL, an example where technology determines the model
• [00:07:35] Conclusion and closing of the episode

The transcript of the podcast about the Functional Economy:

Jingle Intro: [00:00:00] Your listening to the Podcast Factory Org.

Michel: [00:00:02] Welcome to another episode of “Midoricast”, your podcast on positive environmental initiatives. Listeners, today we’re here with Pierre Léonard for a six-minute look at what he’s up to!

Pierre Léonard: [00:00:13] I’m your circular economy facilitator. And today, I’d like to explore a particularly rich and interesting economic model – the economy of functionality.

Pierre Léonard: [00:00:23] What’s this beast called the functionality economy? Once again, that’s a big word for something quite simple. But it represents a radical change of perspective. So what does it involve? Simply put, the functionality economy means that instead of selling products, you sell the use, service or even performance that these products provide.

Pierre Léonard: [00:00:51] For example, Michelin no longer sells tires but kilometers traveled, Xerox no longer sells printers but a printing service, and so on. There’s an example I like to cite that’s much less well known, and that’s the Franco-American startup “Loft Orbital”, which no longer sells satellite launches, but rather the use of the data they collect. For customers, this means savings of up to 70-90% compared with traditional assignments. Nice competitive edge.

Pierre Léonard: [00:01:27] And so this economy of functionality comes in several variants. We go from simple rental, to the provision of services associated with products, and finally to the ultimate outcome known as the performance economy, where the supplier sells for a measurable and quantifiable result. It’s as if instead of selling you a car, I were selling you a guarantee that you’d arrive at your destination fit and on time.

Pierre Léonard: [00:01:55] So imagine the paradigm shift this implies. In another episode, we talked about changing from type one to type two. This is a fine example of type-two change, structural change.

Pierre Léonard: [00:02:08] Because in reality, we rarely buy a product for its own sake. In general, we buy it more for the service it provides. You buy a drill for the holes it makes, not for the drill itself. And in a world of limited resources, the functionality economy maximizes product use and profitability while minimizing environmental impact.

Pierre Léonard: [00:02:31] The most basic example is a book. You can either buy it in a bookshop and be the only one to use it, or borrow it from a public library, in which case its environmental impact, and also its cost, will be shared by all those who borrow it. And that’s the beauty of this model.

Pierre Léonard: [00:02:50] There are many examples of the functionality economy. On the revenue side, you create an ongoing relationship with your customers rather than a one-off sale, generating predictable, recurring flows. You’ll naturally build customer loyalty and develop an intimate knowledge of their needs. It’s also an intelligent response to the changing expectations of consumers and businesses, who are increasingly favoring use over ownership, especially for expensive, rapidly obsolescing equipment.

Pierre Léonard: [00:03:20] But I’d like to take a closer look at the performance economy, which is still little-known, but is particularly promising in this ultimate model. You no longer sell a piece of equipment, or even its use, but directly the result obtained. Let me take another example. A manufacturer of heating systems that guarantees 20 degrees in your office rather than selling radiators. What does it mean to him? And what will that change? First, it radically differentiates its offering, making it impossible for competitors to copy its price, since it sells performance, not hardware. When Rolls-Royce sells flight hours rather than aircraft engines, it captures a much larger share of the value created. And last but not least, you develop a unique expertise in optimization that becomes a real competitive advantage.

Pierre Léonard: [00:04:10] Of course, this transition requires a substantial initial investment: you need to finance equipment inventory, develop a service infrastructure and train your teams. It’s a bit like opening a restaurant after being a baker: even if you’ve mastered the food business, it’s not the same. But the returns on investment can be spectacular, as we saw a moment ago with the example of Loft D’orbital. By offering space “As a service”, rather than selling satellites, they reduce their environmental impact, notably in terms of the number of launches and space waste by 96%, while offering unbeatable rates. Why? Because they optimize usage, reduce resource consumption and build long-term customer loyalty. In the pure performance economy, the gains are even greater, because beyond what your product costs, you capture the value actually created for your end customer.

Pierre Léonard: [00:05:06] At this stage, you’re probably keen to adopt the functionality economy. So how do you go about it? Well, first you need to understand what your products actually do for your customers. Next, identify the associated services you could develop: maintenance, training, usage optimization, even pooling between several customers.

Pierre Léonard: [00:05:30] To move towards the performance economy, ask yourself and, above all, your customers this question: what measurable results are they really looking to achieve? Think of the simple example of the drill. How many holes do I want to make with my drill? If you’re a lighting manufacturer, you won’t be selling lamps, you won’t even be selling lighting, you’ll be selling optimal visibility at the workstation.

Pierre Léonard: [00:05:54] Start by testing with a few volunteer pilot customers, and gradually develop your remote monitoring and service capabilities. For example, the Internet of Things and data analysis will be your best allies in monitoring usage and anticipating needs.

Pierre Léonard: [00:06:08] And finally, rethink your pricing model. Move from a purchase price to a price per use or performance. And don’t forget to train your sales teams to sell value rather than technical features.

Pierre Léonard: [00:06:21] The functionality economy, and particularly the performance economy, is not just a business model, it’s a philosophy that aligns economic performance with positive impact. By selling results rather than products, you increase added value for your customers while preserving our natural resources.

Pierre Léonard: [00:06:38] Thank you for listening for six minutes to understand. See you soon for a new concept that will revolutionize your vision of sustainable business.

Michel: [00:06:45] This model has been around for a very long time, but in a different way and not thought out in this way. I’ll take a silly example, everyone knows it, everyone has ADSL at home, or many people have ADSL. Well, I’ve worked in ADSL for fifteen years in the telecom business, as you know. As it happens, we don’t sell it like that, but we do sell you an Internet connection, and you pay a price for the ADSL modem, but that leaves two margins. Firstly, technological evolution and the modernization of the hardware structure are implicit, so inevitably at some point you get an e-mail from your supplier saying “You need to change the modem, you need to upgrade”, but what they’re looking at is the fact that it’s the Internet connection that has to work. But what I mean by this is that this approach allows us to keep up to date with the latest technology, and to keep coming up with new solutions. So here, it was all about technological evolution, but what will be interesting is: technological evolution in support of the environment.

Pierre Léonard: [00:07:35] Indeed, thank you Michel, because this is an excellent example of the economy of functionality, and even of performance. You’re not selling me a modem, you’re selling me a connection speed.

Michel: [00:07:43] Exact.

Pierre Léonard: [00:07:44] Perfect!

Michel: [00:07:45] Open to technology and evolution. See you soon

Pierre Léonard: [00:07:47] See you soon.

Michel: [00:07:47] This podcast project is an initiative created and proposed by the ASBL “The Podcast Factory Org”, with the sponsorship of “transforma bxl – Innovation Playground”, a coworking space in Evere. Since January 2025, and for five years, we have also been sponsored by “Plugin Company”, our preferred charging station and card operator. The Podcast Factory Org” is proud to be a member of “KAYA – Coalition des Écopreneur” and “Écopreneures”, and to collaborate with the “Love Health Center”. You can find all the episodes of all our podcasts on the “What’s Your Story point be” website. Don’t forget to subscribe to our YouTube channel @thepodcastfactoryorg, where we offer the podcast in video format with subtitles in several languages.

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