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Circular revenue models

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Circular Revenue Models: making money as a manufacturer in the Circular Economy

Circular Revenue Models: making money as a manufacturer in the Circular Economy

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  • 1. Consultancy Program and Project Management New Business Circular Revenue Models Making money as a manufacturer in the Circular Economy
  • 2. Revenue models – circular economy © 2014 Mare2 Profile of Mare Advies Consultancy Program and Project Management New Business • Founded in 2011 by 2 experienced consultants • 300+ projects • Business model innovation and strategy execution • Multiple industry sectors www.mare-advies.nl
  • 3. Revenue models – circular economy © 2014 Mare3 Wat is er aan de hand? Strong growth of the world population …who also want to consume… …leading to shortages in abundance and depletion of the planet… …in short, a new (industrial) model is inevitable …and rising / highly volatile raw material prices…
  • 4. Revenue models – circular economy © 2014 Mare4 Cost structure of Dutch industry sectors indicates a high sensitivity to commodity prices 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Other Labor Energy Material Source: CBS, 2011
  • 5. Revenue models – circular economy © 2014 Mare5 What are the building blocks of the Circular Economy? I. Circular product design & production II. New Business Models III. Cascades & reverse cycles IV. Accelerators
  • 6. Revenue models – circular economy © 2014 Mare6 Business model and revenue model Framework Source: A. Osterwalder
  • 7. Revenue models – circular economy © 2014 Mare7 DBFMO and ESCo, ‘new’ ways of contracting D D Design B Build F Finance M Maintain O Operate Circular Business Models E Energy S Service Co Company
  • 8. Revenue models – circular economy © 2014 Mare8 Leasing of clothing Circular Business Models Source:www.dutchspirit.com
  • 9. Revenue models – circular economy © 2014 Mare9 Pay-per-Lux, a whole new way to deliver light “I told Philips, ‘Listen, I need so many hours of light in my premises every year. If you think you need a lamp, or electricity, or whatever – that’s fine. But I want nothing to do with it. I’m not interested in the product, just the performance. I want to buy light, and nothing else.” Thomas Rau Circular Business Models Source:www…..
  • 10. Revenue models – circular economy © 2014 Mare10 Green wheels, only pay for use Circular Business Models Source:www.greensheels.com
  • 11. Revenue models – circular economy © 2014 Mare11 Overall conclusion: 3 generic revenue models Ownership Price of purchase Usage Price per period of use Usage Price per result Joint interests Customer-supplier Usage optimization Pay for use Pay for results Circular Business Models II I III
  • 12. Revenue models – circular economy © 2014 Mare12 Model I: pay for ownership Cost structure Interest (over purchase) Depreciation Costs of usage Maintenance & repair Installation & de- installation Insurance UserManufacturer Revenue stream Service Financial services Installation & de- installation Consumables Sales price
  • 13. Revenue models – circular economy © 2014 Mare13 Model II: pay for use Cost structure Costs of usage Revenue Streams (- Cost streams) Payment for usage (periodically) Consumables UserManufacturer Interest (over purchase) Insurance Maintenance & repair Installation & de- installation Depreciation
  • 14. Revenue models – circular economy © 2014 Mare14 Model III: pay for results Cost structure Revenue Streams (- Cost streams) Payment for results UserManufacturer Interest (over purchase) Insurance Maintenance & repair Installation & de- installation Depreciation Costs of usage
  • 15. Revenue models – circular economy © 2014 Mare15 Both user and manufacturer profit from new business models ManufacturerUser + savings per machine: material (about 108 kg. steel & energy (2,5 ton CO2) + high-end machines are well suited for refurbishment and remanufacturing Small fact: more households own a washing machine than a car Source: Ellen MacArthur Foundation
  • 16. Revenue models – circular economy © 2014 Mare16 Project ‘Eigen Haard’: earning the usage of high- end white goods back with energy savings Circular Business Models
  • 17. Revenue models – circular economy © 2014 Mare17 Circular Economy demands more than a change of processes: a change of the system Barriers • Ownership • Legal framework • Costs of transaction Legal • (Book) value • Financial framework • Funding Financial • Second hand • TCO vs. purchase • Transparency Societal • Dependency • Shared risk model • Complexity Operational Accelerators • ‘Rules of the game’ • ‘Taxation system’ • New laws Legal • Accounting rules • Investment funds • Risk mgt., tools Financial • Awareness • Impulses • Education Societal • Cooperation • Processes & systems • Standards & norms Operational
  • 18. Revenue models – circular economy © 2014 Mare18 Source: The Lean Startup How to start as an organization? Test Ideas Adjust Knowledge Develop Concepts www.mare-advies.nl Consider new 'circular' ways and business models Detail using the business model framework (see slide 6): what are the principles? Determine how the key principles can be verified: cheap, fast & with little risks Test in the market with selected customers and collect the data. The aim is to learn, immediate success is just luck Learn of the test: identify what is working and what not. Draw conclusions Adjust the business model or, when testing successfully, roll out in the whole market start small test roll out after success