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Japan for Sustainability Newsletter #178
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June 30, 2017

Japan for Sustainability (JFS) is a non-profit communication platform to
disseminate environmental information from Japan to the world, with the
aim of helping both move onto a sustainable path.

See what's new on our web site: http://www.japanfs.org/en/
E-mail: info@japanfs.org

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In the June 2017 issue of the JFS Newsletter:

- Let's Enjoy Walking for the Benefits of Better Health --
Smart Wellness Point Project

- Selling Services, Not Products: 15 years of Efforts and Achievements
by Nihonkai Gas

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Let's Enjoy Walking for the Benefits of Better Health -- Smart Wellness
Point Project
http://www.japanfs.org/en/news/archives/news_id035856.html

Japan leads the world in terms of longevity. It is also the fastest
aging country in the world. According to data from the Ministry of
Health, Labour and Welfare (MHLW), the proportion of elderly aged 65 or
over among the overall population was 26.7 percent in 2015, and has been
increasing each year. In line with this trend, national medical
expenditures have been rising year by year as well, reaching 40.807
trillion yen (about US$364.35 billion) in FY 2014.

Under these circumstances, Japan is seeing a movement to create a
sustainable, prevention-oriented society in which people can lead happy
and healthy lives regardless of the population's advancing age. The aim
is to build Smart Wellness Cities where residents are encouraged to walk
voluntarily. Local governments together with industry and academia have
established "Smart Wellness City Comprehensive Special Zones to Achieve
Health and Longevity." By doing so, they aim to facilitate behavioral
changes among residents, including those indifferent to health promotion.

In this newsletter, we introduce the Smart Point Project in which even
people who are not interested in health can have fun participating by
walking to promote health. This was conducted as an experimental project
in the comprehensive special zones.

Overview of the Project

Tsukuba Wellness Research Inc., a company that analyzes health measures
and policies based on medical science data, took the lead in conducting
the "Six-City-Partnership Smart Wellness Point Project," collaborating
with six cities participating in the Smart Wellness City Comprehensive
Special Zone from December 2014 to March 2017. These cities were Date in
Fukushima Prefecture, Ohtawara in Tochigi Prefecture, Mitsuke in Niigata
Prefecture, Urayasu in Chiba Prefecture, Takaishi in Osaka Prefecture,
and Okayama in Okayama Prefecture.

In this program, people received points for participation and continuation
in the health promotion programs offered by each city, and for daily
health promotion efforts toward better health. It was possible to gain
as many as 24,000 points a year, equivalent to 24,000 yen (about
US$ 214.29).

Here are some examples of points given. "Doing My Best" points were
given at a rate of 800 points a month when a participant's number of
steps increased by a certain amount compared with the standard number of
steps or when it reached the recommended number of steps. "I Did It"
points were given according to the number of days participating in
designated programs. Participants received 20 points per day, up to 200
points a month. Also, 500 points were given each six months if the
participants' body-mass index (BMI) and muscle percentage measured each
three months had improved, or if they stayed within the standard range.

The points saved could be exchanged for Ponta points (another reward
point system with cards that can be used nationwide), community
certificates or social contributions (donations). The incentive system
was aimed at motivating people who did not exercise regularly or enough
to promote health.

Participants needed to be over 40 years old and live in the municipality.
Provided with pedometers, they could earn points calculated by an algorithm
constructed from the viewpoint of health promotion efforts and achievements,
based on the number of steps accumulated on the pedometers and body
composition data measured by equipment installed at centers.

Outcomes of the Project

Over the course of three years, the project achieved three successes.

1. Many people with no interest in exercising participated.

Of the approximately 12,600 participants, 76 percent were people with no
interest in exercise, such as those who did not exercise regularly (no
exercise group) or who had participated in health promotion programs but
failed to exercise enough (insufficient exercise group).

The participants' step count increased by about 2,000 steps per day.
From an average of 6,473 per day during the first week of the program it
climbed to over 8,000 per day -- the national recommendation for
physical activity -- six months later. This increase was not temporary.
Participants maintained an average of 8,647 steps, above the recommended
activity level, even 18 months later. Even those who lacked interest in
exercise increased their step count by nearly 3,000 from 4,800 at the
start of program to 7,500 18 months later.

The project showed that providing participants incentives, health workshops
and exercise programs suitable to them could motivate them to exercise
more and promote behavioral changes among those with no interest in
exercise, resulting in increased and ongoing physical activity.

* The "no exercise group" in this pilot project was defined as people
not meeting the national recommendation for physical activity before the
project started, who had never participated in municipal or private
sports or exercise programs. The "insufficient exercise group" was
people who did not meet the national recommendation for physical
activity before the project started but had participated in municipal or
private sports or exercise programs.

2. Health Improvements in BMI and Metabolism

As the volume of physical activity increased, 26 percent of the
participants whose initial BMI exceeded 25 before the project started
improved their BMI to below 25 in 18 months. Also, 35 percent who had
suffered or were likely suffer from metabolic syndrome before the
project started improved their health and were diagnosed as free from
metabolic syndrome at their health check-up two years later. The effect
of ongoing exercising on health was clearly demonstrated.

3. Medical Cost Control and Spillover Effects on the Local Economy

According to surveys of Japanese National Health Insurance program
members conducted before and after the launch of the project, the total
annual medical costs of the six participating cities were reduced by
43,000 yen (about US$384) per person in their 60s, and 97,000 yen (about
US$866) per person in their 70s and over. The spillover effects on the
local economy amounted to 120 million yen (about US$1.07 million). The
net profit for the entire project (total decrease in medical spending
plus spillover effects on the local economy minus total annual project
costs) is estimated to be 470 million yen (about US$4.2 million).

Participants surveyed in Ohtawara, one of the participating municipalities,
replied that the points system served as an impetus and that it was fun
to join health classes with many friends. Many of them were satisfied
with the project and wanted it to continue.

This is because their efforts and the results of exercise were visibly
demonstrable, including numbers and points. At the same time, they saw
their own physical condition improving. This has also contributed to
each participant's continued exercising.

Actions after the Pilot Project

The project ended in March, 2017, but five of the six municipalities,
Ohtawara, Mitsuke, Okayama, Date and Takaishi plan to continue the
project with their own budgets. Even outside the special zones, more and
more municipalities are conducting their own Smart Wellness Point
programs.

In the private sector, some companies have decided to expand the results
of the pilot project, aiming to provide services to more than 1 million
residents by FY 2020 through information communication technology (ICT)
systems. Others have started in-house initiatives to promote employee
health.

In this rapidly aging society, achieving health and longevity is an
important challenge for both individuals and society. On the other hand,
many feel that actions to promote health are hard to establish as
personal habits. We hope that this initiative can expand nationally,
leading to better health for more people.

Written by Yuka Kume

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The project succeeded in reaching people who are otherwise uninterested
in health promotion. What can we learn from this project?
Please share your ideas and leave comments!
http://www.japanfs.org/en/news/archives/news_id035856.html#comment

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Selling Services, Not Products: 15 years of Efforts and Achievements by
Nihonkai Gas

Selling Services, Not Products

Efforts to shift to circular economies (regenerative economic systems)
are accelerating globally in response to resource depletion and the
increasing need to reduce waste and carbon dioxide emissions.

One of the various approaches to create a circular economy is to
introduce a business model known as "Product as a Service (PaaS),
which promotes the business concept of selling services, rather than
products.

For example, an electric drill is often found in the household toolkit
in the United States as it is a common do-it-yourself tool. One study
found that total time a typical drill was actually used for drilling
averaged around 30 minutes during its lifetime. In this case, a key
question is whether people want the drill itself, or whether they want a
hole. Unless they are drill collectors, the typical answer would
probably be that they want a hole. If so, the business model to sell not
drills but a service to drill holes would be feasible. Car-sharing, a
business that is growing in popularity globally in recent years, is a
business model of this kind. Its concept is to sell not the car itself
but the "mobility" provided by the car.

This business model was introduced by one Japanese company 16 years ago,
and since then it has been pursuing the approach of selling a service,
not a product. Here, we introduce the company, its achievements, and how
effectively the business model has worked.

New Business Model Launched in 2001: "We Don't Sell Products"

Nihonkai Gas. Co., based in Toyama City, Toyama Prefecture, is a utility
company providing natural and liquefied petroleum gas to Toyama and
Ishikawa prefectures in Japan. The company was founded in 1942 and is
capitalized at 679.5 million yen (about US$6 million). Its net sales in
2016 were 16.2 billion yen (about US$144 million), and it had 273
employees as of April 2017.

The company's main business is to produce, supply and sell liquefied
natural gas (LNG), liquefied petroleum gas (LPG), and other
high-pressure gases. Other than that, it is active in a broad range of
business areas include manufacturing, selling and renting gas
appliances; designing, constructing and managing building, public
engineering and piping projects; and also producing, selling, repairing
and renting devices for air-conditioning, cooling and heating systems,
commercial kitchens, bathtubs, toilets, and more. The company also sells
fan heaters as one of its gas appliance products.

Around the year 2000, I spoke with Mr. Hachiro Nitta, president of the
company, who I knew personally. At that time I introduced him to the
business style of Interface, Inc., a carpet company based in the U.S.,
and told him that the company had drastically transformed its business
model from only selling carpets to "offering comfort and relaxation
through the use of carpets." I mentioned that the company had launched
a new model based on leasing contracts, in which it leases carpets, then
collects and thoroughly recycles the used carpets. Through this approach,
the company has succeeded in both growing its business and reducing its
environmental impacts. After a while, Nihonkai Gas started a new service
to rent fan heaters (natural gas heaters that use a fan to blow the air
for room heating). Their message was, "What our customers want is heat,
not heaters. We will offer our customers the option of renting heaters
in the winter season so they don't have to buy them and have them be
useless during the summer season."

JFS covered the company's business approach in September 2002 as
follows:
http://www.japanfs.org/en/news/archives/news_id025088.html

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Nihonkai Gas. Co., Ltd., based in Toyama Prefecture, Japan sells gas as
well as gas appliances, including cooking ranges and fan heaters. But in
the winter of 2001 they started a service to rent fan heaters, on the
grounds that what their customers want is heat, not heaters.

The rental fee is 3,000 yen (about U.S$25 dollars) for one season. In
their first year of service, all 150 units for rental were fully booked
immediately. Due to the high demand, the company eventually rented out
more than 200 units. It is reported that more than 90 percent of these
customers placed reservations to continue the use of the service for the
next season when the company collected the fan heaters in the spring.

When the weather warms in the spring and heating is no longer needed,
the company takes back the fan heaters and stores them in its warehouse,
after technicians have completed maintenance. It is thought that this
thorough maintenance will prolong the working life of fan heaters longer
than if kept at home, making this rental business profitable even at the
seasonal fee of 3,000 yen. The company claims that their customers are
happy with this service, and that the longer life of the fan heaters can
help reduce waste and the amount of resources used. This approach could
create a win-win-win situation for everyone involved--the customers, the
company and the Earth--by focusing on function, rather than on the
product itself.

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Achievements and Value Added Through the "We Sell Services, Not
Products" Business Model

It has been nearly 16 years since the rental service started. I asked Mr.
Nitta again about the aims of the business as well as its achievements
and outcomes to date. Here is the reply.

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We launched the gas fan heater rental service in September 2001. The
major purpose of the service was to meet diversifying customer needs.
The business is based on three objectives.

First, we wanted to shift from the concept of "selling products" to
"selling services." Customers who live in apartment buildings usually
have a problem with limited storage space for seasonal-use items. We
provide the storage space for these customers. People who relocate often
for work also want to avoid having too many possessions, so through our
rental service they can enjoy having a good heater without increasing
the number of things they own.

Also, many users, especially the elderly, do not want to be bothered by
having to maintain their heaters. Without proper care, gas equipment is
likely to have shorter life, which is unfavorable environmentally. With
the rental business, maintenance of the equipment can be handled by our
company. This leads to more satisfied users and more efficient use of
resources.

Our second objective is to build our customer base of gas users. If
renting is an option, users can easily try the equipment before the
purchase. For those who want to use gas fan heaters but are worried
about the cost of gas, we can offer a trial use and let them experience
the performance and the cost in their daily life.

Third, we want to promote gas heating. Excluding areas where city gas is
available, kerosene is widely used in Toyama Prefecture, accounting for
70 percent of hot-water supply and 90 percent of room heating, and in
fact, both kerosene and equipment for it are cheap. We focus on this
rental service as a first step for users to experience natural gas
instead of kerosene heaters, which emit more carbon dioxide.

The rental period of our heaters is when heating is needed, from October
to the end of April the following year. We start taking orders in
September and delivering heaters to users from the beginning of October,
and then take them back in May. We rent the heaters at a fixed rate,
then collect, clean and store them when the season is over.

The rental service cost is very reasonable and charged per season at
3,000 yen (about US$27, tax included) for a heater used in a room of
about 14-18 square meters, and 4,500 yen (about US$40, tax included) for
a room of about 18-22 square meters.

Customer feedback has been positive:
"No need for storage space." "No initial cost." "Fuss-free because
this service covers the whole process of delivery, installation and take
back." "This is convenient as the service replaces any faulty heaters
for free." and "I always feel safe about using the heater thanks to
the maintenance service by the gas company."

The main types of users are workers living alone away from home, families
that have been relocated for work, residents of housing complexes or
housing for government workers, seniors, and so on. We have been
providing this service for 15 years and have a high ratio of repeat customers,
as they are attracted to the services of delivery and collection, cleaning
and maintenance.

As shown in the following graph, the number of fan heaters rented has
grown steadily and is now about ten times the level in 2001, the launch
year of the service.

Trend in number of delivered rental fan heaters
http://japanfs.org/en/files/nl_170715_en.jpg
Source: Nihonkai Gas Co.

Besides the expected benefits of the rental service, other benefits have
also been revealed in these 15 years of efforts.

First, our service has generated employment for senior workers in the
maintenance of the heaters when they come back to us after rental.

Second, we make customer visits upon request when installing and taking
back the heaters. Visiting our customers gives us a chance to
communicate with them, which often leads to further revenues such as new
orders for home renovations (kitchen, bathroom, etc.).

Third, as we handle a growing number of heaters with this rental service,
all of our staff are involved in some way in installment and take back,
so staff not working in the sales department will also have good
opportunities to hear directly from our customers.

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Closing

The Nihonkai Gas heater rental program results in a longer product
lifecycle for gas fan heaters thanks to having the maintenance work done
by trained personnel, and this helps reduce the resources and energy
consumed in manufacturing. At the same time, the company responds to the
needs of customers who want warmth during the wintertime, while
providing additional benefits for customers such as the elimination of
initial purchase cost, the need for them to do maintenance, and the need
for storage space for the units in summer. This is a good example of how
a new business model can open up business opportunities and have
positive impacts for the company both internally and externally.

There are many other initiatives in Japan that are connected with the
circular economy. JFS will keep you updated on this topic, so stay tuned
for more in the future!

Written by Junko Edahiro

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[JFS Web Site Additions of the Month]

- This month's cartoon:
"If only I could get free of these biggest burdens..."
(2017/06/09)
http://www.japanfs.org/en/manga/manga_id035847.html

- JFS Newsletter No.177 (May 2017)

Fewer People Think Continued GDP Growth Necessary or Possible
-- Survey Results Released(2017/06/15)
http://www.japanfs.org/en/news/archives/news_id035841.html
The Zero-to-One Village Revitalization Movement
in Chizu Town, Tottori Prefecture(2017/05/31)
http://www.japanfs.org/en/news/archives/news_id035837.html

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