Project CIRCULAR X – Experimentation with Circular Service Business Models

Featured

CIRCULAR X is a new publicly funded research project about ‘Experimentation with Circular Service Business Models’. Here more information can be found about the project.

CIRCULAR X is an ambitious research project funded by the prestigious European Research Council (ERC), which ‘supports top researchers from anywhere in the world’. The project will start on 1 April 2020 and will run for 5 years.  The project is led by Principal Investigator (PI) Nancy Bocken, based at Maastricht Sustainability Institute (MSI) at Maastricht University, Netherlands, who will research this topic for at least the next 5 years and will recruit a fulltime PhD researcher and two fulltime Postdoctoral researchers to jointly work on this research project. The project will take place in close cooperation with businesses – from small start-ups to large multinationals – who want to innovate towards the circular economy.

Summary

With increasing pressures on resources and the climate it is clear that a new way of doing business is needed. The Circular Economy is a potential key driver for sustainability and competitiveness. In contrast to the current ‘linear economy’, in a Circular Economy, materials  are kept at their highest utility at all times. Despite great policy, business and academic interest, knowledge on how to ‘implement’ the Circular Economy in business is lacking.

Project CIRCULAR X addresses a new and urgent issue in sustainability research: experimentation with circular service business models (CSBMs). Examples of such new business models include companies shifting from selling products to selling services and introducing lifelong warrantees and maintenance and repair services to extend product lifetimes. However, CSBMs are far from mainstream and experimentation focused on experimentation with new CSBMs is little understood.

Project CIRCULAR X will bridge and expand knowledge on experimentation approaches across disciplines such as sustainability, design, business and entrepreneurship research. It will develop novel concepts, tools and labs by bridging these diverse research fields.  CIRCULAR X aims to advance understandings on how CSBMs manifest themselves in business and how these can be experimented with, which will ultimately advance business activities towards a circular economy transition.

Timing and funding

CIRCULAR X is run between 2020-2025 by Maastricht University, Maastricht Sustainability Institute (MSI) and is funded by the European Union. This project has received funding from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme, grant agreement No. 850159. Principal Investigator of the CIRCULAR X is research programme is Professor Nancy Bocken, based at Maastricht University, Maastricht Sustainability Institute (MSI). For any information and potential collaboration, feel free to contact me via LinkedIn or email. A new website related to the project will follow soon, but key outputs will also be posted here.

Sustainable business modelling

This is a re-post on tools for sustainable business model innovation and features the value mapping tool and sustainable business model canvas.

What is a business model? A business model describes how a company does business and what its value proposition (benefits or offering to customer), value creation (resources, suppliers and other partners who help create value) and value capture mechanisms (cost structures and revenue streams) are.

What are sustainable business models? Sustainable business models consider a much wider group of stakeholders than just customers, and explicitly consider society and environment as stakeholders. They go beyond creating value for a customer and include concerns about the benefits and harms to society and the environment by the way business is done. This is a much more systemic view on doing business than making money by delivering benefits and value to customers.

I am interested how current business models can become more sustainable and how start-ups can develop sustainable business models from the outset.

Together with my colleagues Sam ShortPadmakshi Rana, and Steve Evans, I developed the Value Mapping Tool, to assist in ‘sustainable business modelling’ – the process of inventing new sustainable business model ideas.

Value mapping tool. Source. Bocken, Short, Rana, Evans (2013)

This tool can help users to:

  • Understand the positive and negative aspects of value in a network of stakeholders
  • Identify conflicting values (i.e. where one stakeholder benefit creates a negative for another stakeholder)
  • Identify opportunities for business model redesign – especially to improve societal and environmental impact

Here is a simplified process of using the value mapping tool to use for your business:

Each ring in the diagram represents a different brainstorm. During each of these brainstorms, all of the following “stakeholders” need to be considered:

  • Customers – perceived and actual benefits and negative impacts. You may want to break this down into different customer segments.
  • Network actors – in short, the firm and its supply chain responsible for creating value. This may be broken down into particular key suppliers or partners as can be seen above.
  • Environment – benefits (afforestation) and negative impacts (e.g. emissions to air).
  • Society – benefits (e.g. health) and negative impacts (e.g. working conditions)

Brainstorm 1: the purpose of the business is discussed. Why is the business here in the first place? What is the product or service offered by the company or business unit? What is the primary reason for the existence of the business (this should not be primarily financial)?

Brainstorm 2: what value is created for the different types of stakeholders? What positive value is created and what negative value do all the stakeholders mitigate?

Brainstorm 3: what is the value destroyed or missed or negative outcomes for any of the stakeholders? Consider for example, waste to landfill or loss of local employment caused by offshoring. Are there contradicting impacts at a global and local level? Is the business missing an opportunity to capture value, or squandering value in its existing operations? For example, are assets, capacity and capabilities under-utilised? Are potentially useful materials going to landfill?

Brainstorm 4: This brainstorm is intentionally put at the end and is about blue-sky thinking. The focus is on turning the negatives into positives. What new positive value might the network create for its stakeholders through introduction of activities and collaborations? What can you learn from competitors, suppliers, customers or even other industries?

To move from ideas to implementation the brainstorm may be followed up by roadmapping the activities and business model elements to be changed. A great way of doing this is using the Business Model Generation work by Osterwalder and Peigneur (see www.businessmodelgeneration.com for more details). We have adapted their “strategy canvas” here:

Overview of business model elements in ‘sustainable business model canvas’. www.businessmodelgeneration.com, adapted by Bocken, Schuit, Kraaijenhagen (2018)

For a more detailed discussion of the value mapping tool and sustainable business model canvas, the full research articles can be found here: 

Bocken, N., Short, S., Rana, S., Evans, S. (2013) A value mapping tool for sustainable business modelling”, Corporate Governance, 13(5) .482 – 497. DOI link: 10.1108/CG-06-2013-0078

Bocken, N. M., Schuit, C. S., & Kraaijenhagen, C. (2018). Experimenting with a circular business model: Lessons from eight cases. Environmental innovation and societal transitions28, 79-95. DOI link: https://doi.org/10.1016/j.eist.2018.02.001

The guide for facilitators and more info can be found here

Lean Startup and the Business Model: Experimenting for Novelty and Impact

Lean Startup has been impacting how companies – small and large – innovate their business models. However, academic understanding of Lean Startup and the related  experimentation process is only emerging. Recent academic critique on Lean Startup highlights the inadequate guidance provided for hypotheses generation; limits related to experiential learning that can be generated from customer feedback; and the potential incremental nature of experimentation outcomes.

In this article, we aim to contribute a more positive perspective on the opportunities of Lean Startup. We highlight how it can enable continuous innovation and stakeholder engagement for novelty and impact. First, we argue that Lean Startup has not been conceived for ideation, but rather for iterative experimentation to reduce uncertainty, engage stakeholders, and promote collective learning. The figure below shows our interpretation based on Ries (2011) of where and how the Lean Start-up is positioned –  after entrepreneurs have formed their vision and initial business model idea(s). Second, taking a process perspective on experimentation, we suggest that novel business models can emerge during experimentation.

 

Lean startup experimentation

 

The full open access article can be found here.

 

Sources:

Bocken, N., & Snihur, Y. (2019). Lean Startup and the Business Model: Experimenting for Novelty and Impact. Long Range Planning, 101953.

Felin, T., Gambardella, A., Stern, S., & Zenger, T. (2019). Lean startup and the business model: Experimentation revisited. Long Range Planning, 101889.

Reis, E. (2011). The lean startup. New York: Crown Business

 

Barriers and drivers to sustainable business model innovation: Organization design and dynamic capabilities

Sustainable business model innovation is increasingly seen as a key driver for competitive advantage and corporate sustainability. While it has been recognised that companies require dynamic capabilities to innovate their business model for sustainability, the role of organisation design to nurture such dynamic capabilities remains under-addressed.

To investigate this in more detail, we conducted a study with 7 multinational corporations leading in the field of sustainability. In total, we conducted 53 semi-structured, in-depth interviews with 6 top managers, 24 senior managers, and 25 mid-level managers actively engaged in Sustainable business model innovation inside their organisations.

By taking this qualitative research approach, we address how organisation design affects dynamic capabilities needed for sustainable business model innovation. We identified barriers and drivers on three levels: the institutional, the strategic, and the operational. The overview of institutional, strategic and operational barriers and drivers can be found in the figure below. It should be noted that drivers are not direct antidotes to the barriers identified; they rather co-exist as counter-forces.

 

 

Figure Barriers and DriversThis study has 3 key contributions:

  1. Understanding how organisational design affects dynamic capabilities needed for business model innovation.
  2. Presenting a multi-level framework (institutional, strategic, operational) to show how interconnected barriers and drivers obstruct or enable sustainable business model innovation
  3. Advancing theoretical perspectives on sustainable business model innovation through this comprehensive study

 

Finally, this study on sustainable business model innovation, organisation design and dynamic capabilities can help guide companies in their transitions towards achieving greater levels of sustainability. By creating greater awareness of the barriers and drivers at the institutional, strategic and operational levels, building on knowledge from mid-, senior- and top-managers in 7 multinational companies seen as sustainability leaders, it can serve as a source of inspiration to support business practice towards sustainability.

The fully open access article can be found here.

 

Sources: 

Bocken, N. M.P., & Geradts, T. H.J. (2019). Barriers and drivers to sustainable business model innovation: Organization design and dynamic capabilities. Long Range Planning, 101950.

Teece, D. J. (2018). Business models and dynamic capabilities. Long Range Planning, 51(1), 40-49.

 

Developing Circular Business Model Innovation Tools

The circular economy is now seen as potential driver for sustainable development by business, academia, and policymakers. In such a future circular economy, new business models need to be developed that slow, close and narrow resource loops to address key resource and climate challenges. However, this is not easy and new tools and methods are necessary to support the transition and development of such new business models.

In the new collaborative paper with Lars Strupeit, Katie Whalen, and Julia Nußholz, we map the field of Circular Business Model Innovation (CBMI) tools. We find that there are many generic tools and approaches that might be used, such as the lean startup approach by Eric Ries, or the business model canvas by Osterwalder & Pigneur. Also there are various sustainability focused tools such as the value mapping tool. However, few specifically focus on CBMI, and the generic tools and approaches might ‘dilute’ the circularity or sustainability message. We classify the tools according those that focus more on Ideation and Design, Implementation and Testing, and Evaluating and Improving circular business models, building on the work on business model innovation by Frankenberger and colleagues, amongst others. Finally we develop a checklist that could support future ‘tool developers’ (Figure 1, below). This checklist might also be of interest to those developing sustainability tools, by replacing the first line with ‘The tool is purpose-made for sustainable innovation’.

Future work will involve collaborative development of CBMI tools and roll-out to help make circular business models more widespread.

Checklist for tool CBMI development

Figure 1. Checklist for CBMI tool development. Source: Bocken, Strupeit, Whalen, Nußholz (2019). 

 

Source:

Bocken, N., Strupeit, L., Whalen, K., Nußholz, J. 2019. A Review and Evaluation of Circular Business Model Innovation Tools. Sustainability, 11(8), 2210.  https://doi.org/10.3390/su11082210

 

 

 

CALL FOR PAPERS FOR SPECIAL ISSUE ON “BUSINESS EXPERIMENTATION FOR SUSTAINABILITY” – DEADLINE 31 MARCH 2018

Business Experimentation for Sustainability

 

Guest Editors:

Nancy Bocken a,b, Ilka Weissbrod c and Maria Antikainend

a The International Institute for Industrial Environmental Economics (IIIEE)Lund University, P O Box 196, SE-221 00 Lund, Sweden

bTU Delft Faculty of Industrial Design Engineering, Landbergstraat 15, 2628 CE Delft, Netherlands

c Centre for Sustainability Management, Leuphana University Lüneburg Universitätsallee 1, 21335 Lüneburg, Germany

d VTT Technical Research Centre of Finland Ltd Tampere, P.O. Box 1300, 33101

 

Background

 

This special issue in Journal of Cleaner Production explores ‘business experimentation for sustainability’ as an approach to accelerate sustainability transitions in business. It aims to create understanding on the concepts; methods, strategies and approaches; and ways of implementing business experimentation for sustainability.

Natural resource and climate challenges are becoming increasingly urgent and businesses need to adapt their way of generating social, environmental and economic value (Epstein, 2018). Experiments can produce learning about pressing sustainability challenges and aim to generate evidence-based actionable knowledge (Caniglia et al., 2018). The purpose of business experimentation for sustainability (BES) is to learn about aspects of novel products, services and ways of sustainable value generation with limited risks and resources (Antikainen et al., 2017; Bocken et al., 2018; Weissbrod and Bocken, 2017).

Experimentation is common in the natural sciences, where these often take place in a controlled environment. In contrast, businesses need to respond to direct financial pressures and attend to the current customer base which hinders the potential to control experiments (Weissbrod and Bocken, 2017). Challenges to control experiments in the sustainability context lead to uncertainty of outcomes (Caniglia et al., 2017). At the same time, the governance of experiments becomes more important as controllability of experiments decreases (Hildén, 2017).

A deeper understanding of ‘business experimentation for sustainability’ is needed to understand how evidence-based actionable knowledge can be created, in order to solve urgent sustainability challenges.

Research is needed to understand the ‘business experimentation for sustainability’ concept; ways in which such experiments can be implemented; and how it can help accelerate sustainability transitions in business.

The purpose of this Journal of Cleaner Production special issue on ‘Business Experimentation for Sustainability’ is to start addressing this important gap in the sustainable business research.

 

Themes of focus

 

Tools, approaches and impact assessment

  • How can BES simultaneously test business, customer and sustainability (people, profit, planet) viability?
  • How can BES lead to solutions that create ‘strong’ as opposed to weak sustainability (e.g. absolute reductions in resource use and climate emissions)?

 

Business experimentation for sustainability across organisational contexts

  • What are the links or differences between BES in large businesses and small startups?
  • How may sustainable business model experimentation take place jointly with stakeholders; with resulting value distributed across stakeholders?

 

Best practices and case studies of Business Experimentation for Sustainability 

  • How do companies approach new customer proposition testing for sustainability using experimentation?
  • What evidence exists on consumer behavior transformations resulting from conducting trials with new business models?

 

Policy implications for Business Experimentation for Sustainability 

  • What policies may encourage collaboration across different firms and industries?
  • What might be the links or connections between business climate and resource governance experiments and BES at the level of the individual business?

 

 

The full list of potential research questions and call for papers on the Journal of Cleaner Production website can be found here.

This call for papers is also posted onto the sustainable business model group blog.

 

Schedule:

 

  • Submission deadline 31 March 2019 (submissions are open from 1 October 2018). When submitting, please select the virtual special issue: “VSI: Business Experiment”
  • Peer review, paper revision and final decisions: 31 August 2019
  • Final publication: 30 September 2019

 

References

 

TOWARDS A SHARING ECONOMY – INNOVATING ECOLOGIES OF BUSINESS MODELS

There are high expectations on business models as ways to drive sustainable development.  Various ‘sharing business models’ have emerged, some with a pure business intent, but others more clearly oriented towards societal and environmental benefits. The actual impacts of new sharing business models on society, the environment and the economy are debatable, and may in some cases even be adverse. It is clear that sharing business models need to be more clearly understood.

A new way of investigating the real impact of sharing business models is the ‘ecologies of business models’ approach, which analyses the symbiotic and competitive relations between new and existing business models. This approach is presented in Boons & Bocken (in press).

The ‘ecologies of business models’ is based on dynamics in nature, to advance understanding of how new business models reinforce existing ones or jeopardise these. This will help us assess the real impact of new business models by understanding the interlinkages between various new and old business models. E.g.: To what extent does a car sharing business model reduce the total number of cars on the road, or sustain car sales? To what extent do clothing sharing business models prevent new clothing sales and reduce the actual amount of clothes being produced?

An overview of the types of relationships is shown in Table 1. Knowing the relationships between different business models, e.g. whether they are in competition or symbiotic, will facilitate the understanding of whether such business models live up to expectations. For example: do car sharing business models really prevent new cars from being built, or, do they sustain our car dependencies through sustaining our car dependencies?

This research has clear implications  for understanding ‘wider systems change’, for example, the transition to a Circular Economy or understanding the interplays between stakeholders and businesses to transition to sustainable cities, which deals with issues around mobility and ‘livability’.  Further work building on this approach is in progress.

 

The full article is available here.

 

Table 1: Ecological relationships between business (Boons & Bocken, in press)

Ecological relationships between business models

Sources

Boons, F.,Bocken, N., 2018. Towards a sharing economy – innovating ecologies of business models. Technological Forecasting & Social Change (in press).  Authors own copy (accepted version not edited by the journal) available here.

 

Experimenting with a circular business model: Lessons from eight cases

From 2016 to 2017, we conducted action research with eight case studies at Delft University of Technology, in collaboration with a societal and environmental purpose-driven innovation consultancy firm, Innoboost, both based in the Netherlands. The objective of this collaborative project, ‘Kickstarting circular business experimentation’, was to help eight case companies transition to profitable circular business models through experimentation.

The case companies varied in terms of size and age and included:

  1. Fresh-r (decentralised ventilation system with heat recovery);
  2. Mud Jeans (leasing jeans);
  3. Bugaboo (strollers);
  4. Peerby (product sharing platform);
  5. Evides (drinking water & water services);
  6. Vereijken Hooijer (stables and nursing homes for pigs);
  7. Philips (electronic appliances for a healthy lifestyle); and
  8. Boska (accessories for cheese, also called cheesewares)

In the journal paper, we report on the process of experimentation as well of the role of experimentation in the sustainability transition of the companies:

Process: The case studies showed that there is a certain sequence in steps, but companies tend to go back-and-fourth between steps, for example, going back to the business purpose or redoing a value proposition experiment. Circular business experimentation tends to be an iterative process rather than a linear checklist type of approach.

Role of experimentation: The cases showed that experimentation could serve as a way to create internal and external traction for a sustainability transition. Tracking progress against sustainability goals was found to be an important part of the experimentation process in addition to the need to move from experiments to scaling up.

In the journal paper, we also develop a “Circular Business Experiment Cycle”, which shows a potential sequence of experiments, starting  with the business purpose and sustainable value proposition. In contrast to just ‘making money’, the business purpose for a sustainable business includes clear societal and environmental goals. A value proposition experiment then focuses on the customer viability of the product/service offering. Value delivery experiments focus on customer relationships, customer segments and channels. Other stakeholders, such as local community representatives (‘society’)  or environmental NGOs (‘environment’) can get involved in these experiments to test whether and how the business can create and capture wider societal and environmental value. Value creation and value capture experiments are about including stakeholders to operationalise the business model, and developing the business case for all stakeholders involved respectively. Finally, a field experiment can test all assumptions together including operational aspects.

The Circular Business Experiment Cycle includes “triple bottom line checks” (i.e., checks for sustainability performance, which can be done using something like the streamlined environmental value proposition approach)  in addition to deliberate learning after each experiment. After the field experiment, a more thorough LCA could be performed to assess the full environmental impact.

CBME cycle                                             Figure. Circular Business Experiment Cycle.                                                                      Developed in Bocken, Schuit and Kraaijenhagen (2018).

 

More information about this work can be found here.

 

Sources:

 

 

Assessing the environmental value proposition of your business

The Circular Economy is now regarded as a key driver for sustainability by business, policy makers, and academia.

Recently a special issue was dedicated to the phenomenon in Journal of Industrial Ecology , presenting tools, methods, opportunities and challenges associated with the Circular Economy as a driver for sustainability.

We investigated how companies pursuing circular economy as part of their business can quickly assess their environmental value propositions and verify impact. This would lead to the identification of improvement proposals to help refine the value proposition for sustainability.  The environmental value proposition framework can be found in Figure 1 below.

 

Environmental value proposition evaluation framework

Figure 1. Environmental Value Proposition Evaluation framework. Source: Manninen et al. 2018.  Note. BOL, MOL and EOL refer to Beginning, Middle and End of Product Life, referring to different stages in the product life cycle from material sourcing and extraction up until consumer use and reuse (and recycle etc). 

 

Start-up HOMIE, focused on driving sustainable consumption and pursuing circularity (e.g. long-lasting products, reuse, reparability and recycling) through a pay per use business model, starting with washing machines, is one of the case studies who applied the framework.

All cases as well as the framework and an environmental value proposition table (EVPT) created by the authors can be found here (free to download using this link the upcoming 50 days).

Sources:

Bocken, N.M., Olivetti, E.A., Cullen, J.M., Potting, J. and Lifset, R., 2017. Taking the Circularity to the Next Level: A Special Issue on the Circular Economy. Journal of Industrial Ecology.

HOMIE Pay per use website

Manninen, K., Koskela, S., Antikainen, R., Bocken, N., Dahlbo, H. and Aminoff, A., 2018. Do circular economy business models capture intended environmental value propositions?. Journal of Cleaner Production.

Sustainable business model adoption among S&P 500 firms

Sustainable business model innovation is a hot topic, which has received increasing interest from businesses, academia, NGOs and policy makers as a promising way to create ‘systems-level change’ for sustainability. This work was intended to do a ‘reality check’ of the adoption of sustainable business models by the largest global corporations — those listed in the S&P 500 index — over the period 2005–2014. We examined press release communications during this period, which represent public data about business-relevant events. We used academic and practitioner expert panels to build a set of keywords across nine sustainable business model archetypes (Figure 1) and utilised automated content analysis to examine companies’ sustainable business activities and practices.

Nine SBM archetypes

Figure 1. Nine sustainable business model archetypes (Ritala et al., 2018 based on Bocken et al., 2014, 2016 and Lüdeke-Freund et al., 2016).

 

One of the findings was that large capitalized firms have mostly adopted the environmentally-oriented archetypes, and to much lesser extent the societal and organizational ones. Difficult topics such as sufficiency and scaling up of sustainable business model innovation initiatives remain challenging in large business. Further detail about the analyses on types of business models pursued and trends can be found in our paper. Good food for thought for future work!

Sources:

Bocken, N., Short, S., Rana, P., Evans, S. 2014. A literature and practice review to develop Sustainable Business Model Archetypes. Journal of Cleaner Production, 65, 42–56

Bocken, N.M.P., Weissbrod, I., Tennant, M., 2016. Business model experimentation for sustainability. Sustainable Design & Manufacturing Conference, Crete, Greece, 4-6 April 2016.

Lüdeke-Freund, F., Massa, L., Bocken, N., Brent, A., & Musango, J. 2016. Business Models for Shared Value: How Sustainability-Oriented Business Models Contribute to Business Success and Societal Progress. Cape Town: Network for Business Sustainability South Africa.

Ritala, P., Huotari, P., Bocken, N., Albareda, L., Puumalainen, K. 2018. Sustainable business model adoption among S&P 500 firms: A longitudinal content analysis study. Journal of Cleaner Production, 170, 216-226. https://doi.org/10.1016/j.jclepro.2017.09.159