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Circular Business Model

A circular business model articulates the logic of how an organization creates, offers, and delivers value to its broader range of stakeholders while minimizing ecological and social costs.

Circular businesses no longer focus mainly on profit maximization or pursue cost-cutting through greater efficiency in supply chains, factories, and operations as the primary corporate objective. Rather, they concentrate on redesigning and restructuring Product-Service-Systems from the bottom up to ensure the future viability of business activities and market competitiveness.

Circular businesses are deeply involved in the product usage phase; they generate revenues through provisioning services instead of selling physical products; they rethink the conventional producer-consumer relationships, value creation activities and the structure of value chains; ecological and social factors complement the overall business culture and philosophy.

The move to a circular business model is an example of a fundamental change, which requires a new way of thinking and doing business. The following identified circular business model typology provides opportunities for implementing the idea of circularity at a practical level. It should be noted that the briefly described types do not necessarily present full business model innovations, but rather, key elements of strategies that contribute to a circular business. They have their own distinct characteristics but precisely boundaries between them do not exist. They can be used singly or in combination to support companies achieve massive natural resource productivity.

Circular supplies | It is based on supplying fully renewable, recyclable, or biodegradable resource inputs that sustain circular production and consumption systems. The value proposition focuses on the substitution of fossil, critical, and scars materials.

Access and performance | It is concerned with providing the capability or services to satisfy users’ needs without owning physical products. The value proposition includes the offering of Product-Service-Systems, a combination of products and services that seek to provide functionality for customers.

Extending product value | It focuses on exploiting the residual value of products and delivering high-quality, long-lasting products supported by design for durability, reparability, upgradability, and modularity. Values that would otherwise be lost through wasted materials are instead maintained or even improved by repairing, upgrading, refurbishing, remanufacturing, or remarketing products.

Bridging | It promotes platforms for collaboration among producers and consumers, either individuals or organizations. The value proposition concentrates on enabling interaction between different but interdependent actors and bring together supply and demand.

Business model strategies to slow and close resource loops

Provide and Perform
Providing the capability or services to satisfy user needs without needing to own physical products.

Extend product value
Exploiting the residual value of products – from manufacture to consumers, and then back to manufacturing – or collection of products between distinct business entities.

Long-life
Business models focused on delivering long-product life, supported by design for durability and repair for instance.

Encourage sufficiency
Solutions that actively seek to reduce end-user consumption through principles such as durability, upgradability, service, warranties, reparability, and a non-consumerist approach to marketing and sales.

Extend resource value
Exploiting the residual value of resources: collection and sourcing of otherwise “wasted” materials or resources to turn these into new forms of value.

Industrial Symbiosis
A process-oriented solution, concerned with using residual outputs from one process as feedstock for another process, which benefits from the geographical proximity of businesses.

Imagine New Partnerships

Imagine new or unexpected partnerships that strengthen your value chain, increase system effectiveness or make a more robust business case. This will also help to achieve alignment and clarity on how to move forward together.

Following initial prototyping, new opportunities may appear to broaden your sphere of influence within the wider system in which you’re operating. This may uncover a need to partner with new or unexpected organizations.

STEPS

  • You may have already identified potential partners during the Business Model Canvas, but given what you’ve learned during user research and prototyping, what type of new organizations could help inspire your product or service? 
  • Ask – what new emerging opportunities have come up while you’ve been developing your concept? Who would you need to talk to understand how these might be incorporated?
  • Use the brainstorming method to help you think of more unexpected partnerships that could make your value chain more effective/efficient.

Once you have identified partners, here is some preparation for the conversation with a potential new partner.

  • Develop a narrative or a point of view that will help the new partner understand the value to them and the system.

During the conversation.

  • What commitments would be needed from either side to make things a reality (minimum viable release) and to mitigate risk?
  • Develop some ‘ground rules’ on prototyping the new partnership together – e.g. who will gain from new business opportunities it may create?
  • Set parameters for making collaboration a success – what will you measure to know whether the partnership is worth pursuing?

Actors map

The Actors map represents the relationship between stakeholders. It’s a view of the service/ system and its context.

TASKS

1. Arrange a room where you can focus and work for a couple of hours.
2. List down the core stakeholders on a big sheet of paper.
3. List down the subgroups of stakeholders.
4. Connect the stakeholders to each other and describe how they relate to each other.
5. Write down the specifics of the relationships between the stakeholders, how, where, and why do they communicate?
6. Document the end result.

User-Centred Research

Understand the needs of everyone involved in the use cycle of your circular proposition(s) – the end-users or beneficiaries, but also suppliers, manufacturers, retailers, and others who may reuse your materials.

User-centered research helps you gain empathy for the people you are designing for. In the circular economy, you are not only designing for a customer or user, but also for a range of people who may sit within your extended value chain. It will help you gain a better understanding of what’s important to people each step of the way for the product or service you are creating.

STEPS

  1. Start by defining all of the individuals who sit within your value chain. This should include your potential users. Who are the people you envision benefitting the most from this product or service?
  2. Next, create a set of questions based on what you’d like to learn. Most importantly, see if you can come up with questions that look to understand user needs. What do they experience? What could make their lives easier? etc.
  3. Set up a time to speak with these individuals. It’s best if you can meet them in their environment to gain a better understanding of their world. (If you are meeting a user, can you meet them in their home or workspace? If you are talking with a manufacturer, can you meet at the factory? Or if you are meeting with someone who might reuse your material, can you meet them in their workspace or a recycler in their plant?)
  4. When you speak with these individuals, capture what they say as a stimulus for discussion with your team. If possible, take photos of things you find interesting or inspiring.
  5. Once you’ve completed all of your interviews, spend some time with your team capturing your learnings and insights. Take turns telling the stories of what you’ve heard. (Ask yourselves – what surprised you? How might what you learned to affect what you design? What ideas might these learnings inspire?) 
  6. Finally, now you have your main user needs, think about what circularity could offer around this product or service, and pair them to user needs before heading into brainstorming.

Find Circular Opportunities

Identify small, measurable opportunities to design for circularity. This will help you scaffold your approach to the project you’re about to take on.

Making your product, service, or organization more circular can begin with small changes. Consider what you have direct influence over and start there. Keep an eye on the big picture, and as you build small successes, scale your solution over time.

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