THREE INGREDIENTS TO DESIGN SUCCESSFUL CIRCULAR BUSINESS MODELS
25 June 2021
Erwan Mouazan, a researcher on circular economy at the University of Vaasa (Finland) was a guest speaker at our 2nd Open Innovation Camp. He very kindly accepted to contribute to our newsletter, providing us with his take on creating successful circular business models.
Today, our consumption and production patterns are not sustainable. Raw materials are collected, transformed into products which are used briefly, and then thrown away. This “take, make, waste” economy creates an unprecedented pressure on our environment. In order to achieve a more sustainable future, strengthen our social foundation while staying within planetary boundaries, we need to rethink how businesses create value, for their clients and society at large. Circular business models, which adopt a set of circular principles to close the loop, offer a promising avenue. But which mindset can support the design of successful circular business models? The three ingredients below should be addressed when cooking your new circular venture.
Codesign, cocreation and coproduction with the end user
Circular value propositions are more complex than traditional value propositions. They need to consider the full life cycle of the product/service offering and provide solutions to different stakeholders at different time. Beyond its dynamic feature, circular solutions should be based on a constellation of different value dimensions aiming at engaging the end user. Focusing only on the « Circular » feature is not enough. Depending on your position in the market (b2b, b2c) your offering should combine a set of functional values (features, performance, outcomes), some cost/sacrifice values (economic savings, risk reduction), symbolic values (self-expression, personal and social meaning) and experiential value (sensory, emotional). At its core, engaging the end user through codesign, cocreation and coproduction can validate which additional value is a must-have in your final solution. A company selling refurbished phones should for instance tackle the challenge of quality loss by offering additional warranty features, while offering the same sensory experience as buying a brand new device.
Designing from a value network perspective
Circular business models are by essence networked: in-depth collaboration between key stakeholders of a circular venture is a key element for the success of a circular business model. By taking a network lens, your business model should provide adaptive and locally attuned responses aiming at dynamically built symbiotic relationships between all parts of the system. By systematically addressing where value is leaked in your current system, you can start developing a business model that meets the needs of different stakeholders, while at the same time capturing different societal and environmental benefits. A food app addressing the challenge of food waste should, for instance, offer benefits for the consumer while providing additional solutions for food retailers and member restaurants.
The necessity of experimentation
Beyond filling up the different blocks of your business model canvas, experimentation is needed to test your initial value proposition (product/service offerings) with customers or other stakeholders to validate their desirability. Tangible data is also needed to create evidence to convince stakeholders, inside and outside the business, about the viability of new propositions. Experimentation is also about understanding what is feasible under which conditions. This involves collaboration with others, whether these are business partners, (local) governments, nongovernmental organizations (NGOs), or citizens. Early prototyping, cocreation sessions with different stakeholders and conversational interviews should be used to refine and ultimately validate your successful business model.
Erwan Mouazan is researcher on circular economy at the University of Vaasa, and director of Ecovala, a Finland based consultancy focusing on circular innovation for public and private organisations