Despite the promises of the circular economy to become an attractive source of innovation, many firms have so far hesitated to pursue circular innovations. Incumbents are facing a dilemma: While circular innovations may be potentially disruptive to the current profitable linear business, standing still may be dangerous, as traditional businesses may be rendered obsolete in the current changing environment.Yet, the literature has so far provided only a few insights into how firms can approach circular innovations strategically. By using the lens of disruptive innovation, we offer a strategic analysis of circular innovation challenges and potential ways to overcome them. Based on two in-depth cases, we show how a separate organizational structure can help to implement potentially disruptive circular innovation, but some caveats exist. In addition, this structural separation should be linked with a clear innovation strategy, and the partnerships, organizational culture, and competencies needed for implementation should also be considered.
The transition toward the circular economy requires stakeholders to collaborate along value chains. Yet, such collaborations are considerably challenging. Given the paradigmatic change, stakeholders face high levels of uncertainty and also need to align on a common way forward. We extend research on interorganizational sensemaking and the circular economy by exploring the process of interorganizational alignment in a European consortium of over 150 companies representing the value chain for flexible packaging with the objective to transform the value chain from linear to circular. We find that the interorganizational sensemaking process unfolds across three levels—organization, value chain, and ecosystem—which provide different reference frames for the process. We provide insights into how these frames, power dynamics, and identity considerations influence this process. Our findings highlight the importance of considering interdependencies between stakeholders and a collective reconceptualization of the established value chain to successfully transition toward a circular one.
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