Circular Business Model Innovation: Inherent Uncertainties

Abstract

Circular business models based on remanufacturing and reuse promise significant cost savings as well as radical reductions in environmental impact. Variants of such business models have been suggested for decades, and there are notable success stories such as the Xerox product–service offering based on photocopiers that are remanufactured. Still, we are not seeing widespread adoption in industry. This paper examines causes for reluctance. Drawing on a hypothesis‐testing framework of business model innovation, we show that circular business models imply significant challenges to proactive uncertainty reduction for the entrepreneur. Moreover, we show that many product–service system variants that facilitate return flow control in circular business models further aggravate the potential negative effects of failed uncertainty reduction because of increased capital commitments. Through a longitudinal action research study we also provide a counterexample to many of the challenges identified in previous studies, which could be overcome in the studied case. Copyright © 2015 John Wiley & Sons, Ltd and ERP Environment

Circular Business Models: Defining a Concept and Framing an Emerging Research Field

“…For example, studies that aim to conceptualise the term "circular business model" [15] or to examine companies' transition towards a circular business model [17] were considered relevant. Studies that address business models for sustainable development, product service systems (PSSs) or industrial symbiosis without an explicit reference to advancing circular economy were excluded from the analysis.…”

“…Changes in the cost structure can be realised, for example, by substituting higher-priced primary production with secondary production or avoiding costs related to end-of-life disposal [17]. In addition to direct economic gains, Schenkel et al [58] show that multiple other indirect benefits occur in closed-loop chains, including customer, informational, and environmental value that can be captured.…”

“…Revenue streams could also include profit either from selling a long-life product at a higher price, from adopting a PSS and selling access to a product [51], or from providing maintenance services [14]. Changes in the cost structure can be realised, for example, by substituting higher-priced primary production with secondary production or avoiding costs related to end-of-life disposal [17]. In addition to direct economic gains, Schenkel et al [58] show that multiple other indirect benefits occur in closed-loop chains, including customer, informational, and environmental value that can be captured.…”

“…In recent years, circular business models have received attention from practitioners [11][12][13], policy makers [1] and researchers [7,8,[14][15][16][17]. However, despite the increasing use, few scholars provide a clear definition of circular business models, and no common understanding of the concept has been established.…”

Exploring How Usage-Focused Business Models Enable Circular Economy through Digital Technologies

“…In this regard, companies should convert not only their value proposition, but also their entire BM [3,18,28,40,41], thus moving towards a servitized one, which is an excellent vehicle to enhance competitiveness and foster sustainability simultaneously [42]. However, moving from products to product service is not only related to the integration of the most advanced service offerings.…”