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Exploring disruptive business model innovation for the Circular Economy

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Conference presentation in KES SDM 2017 conference
Abstract. Recently the concept of the Circular Economy (CE) has attracted growing interest as a novel economic model aiming to foster sustainable eco-nomic growth, boost global competitiveness, and generate new jobs. A sys-tem-wide disruptive innovation shaping new ecosystems and changing the whole process of value creation is needed to tackle the current challenges and transformation to the CE. This paper asks how disruptive business model innovations work as a change mechanism for the CE. The paper develops a conceptual framework for shaping the industrial systems towards CE ecosys-tems and proposes how value circles and co-creation of value with a variety of partners are crucial aspects in enabling CE. The paper highlights that the concept of value circles would be beneficial in clarifying the difference to linear value chain models and the co-existence of several overlapping value circles.

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Exploring disruptive business model innovation for the Circular Economy

  1. 1. VTT TECHNICAL RESEARCH CENTRE OF FINLAND LTD Exploring disruptive business model innovation for the Circular Economy Anna Aminoff, Senior Research Scientist Katri Valkokari, Maria Antikainen, Outi Kettunen KES SDM 2017 @AminoffAnna @AarreResearch
  2. 2. 16/08/2017 2 Background Recently the Circular Economy (CE) has attracted growing interest as a novel economic model aiming to foster sustainable economic growth and boost global competitiveness, economic growth is decoupled from resource consumption as end-of-life products are seen as resources rather than waste A system-wide disruptive innovation changing the whole process of value creation is needed to tackle the current challenges and transformation to the CE. This system-level change sets big challenges for established companies, and might even disrupt the usefulness of their existing capabilities, networks, and business models. Still the academic literature has focused on a resource scarcity and environmental impact, only little attention to out the economic benefits of industrial actors The CE concept itself might create barriers for implementations, as it might be perceived as being too radical or too complex to be fully adopted. The language of the concept is rather abstract, and the definition and interpretation of the term needs to be understood
  3. 3. 316/08/2017 Objectives  The aim of this paper is to synthetize the previous literature to a conceptual framework for shaping the industrial systems towards CE ecosystems   Building blogs  Framework is based on various streams of literature  Circular economy  Value chains, interorganizational relations and business ecosystems  Innovation management/ distruptive innovation  Business models/ Business model innovation  Reserach questions:  How does a disruptive business model (co-) innovation work as a mechanism that changes industrial systems towards CE ecosystems?  How to support business model co- innovation that utilizes opportunities created by the breakthroughs of a CE?
  4. 4. 16/08/2017 4 A conceptual framework for shaping the industrial systems towards CE ecosystems  The preliminary framwork proposes a disruptive business model (co)-innovation as a mechanism that shapes industrial systems towards CE ecosystems  It takes the viewpoint of the managers of an industrial company.  To be able to lead the transformation, managers need to understand the mechanisms to shape industrial systems towards CE systems. The framework offers building blogs CE Ecosystems Current industrial systems / supply chains Distruptive business model innovation
  5. 5. 16/08/2017 5 From supply chains towards CE ecosystems  The concept of value chain is important in a CE, since CE requires the key actors involved in value flows to be defined. However, it is not enough; instead of seeing themselves as isolated entities and only taking responsibility for their part, companies need to be aware of themselves as part of a bigger network  Thus, introducing an ecosystem approach to the CE would bring novel understanding to re-conceptualize of supply/value chains and industrial systems  We define CE ecosystems as co-evolving, dynamic and potentially self- organising configurations1 in which actors integrate resources and co-create circular value flows in interaction with each other  The CE rethinks partnerships,  the shift towards value co-creation highlights interactions, joint resource bases (e.g. sharing economy), (engagement) platforms and ecosystemic approaches as new means for business 1
  6. 6. 16/08/2017 6 Value circles and CE ecosystem  From value chains  value circles  The value circle includes the full range of activities, performed by different actors, which are required to bring a product or a service to a user and back to the system. A CE ecosystem composes of various value circles 1). Modified from (Porter & Kramer 2011; Fearne et al. 2012)  The value is shared across different value circle actors through innovative governance and collaboration.  In reflecting the regenerative and restorative principles of a CE, the value is considered mutually beneficial for value circle actors, the environment and society.
  7. 7. 16/08/2017 7 Distruptive business model co-innovation Value creation innovation Clauss, T., 2016. Value proposition innovation Value Capture innovation How and by what means firms create value using the resources and capabilities New capabilities, new technology/equipment, new partnerships, new processes, A portfolio of solutions for customers, how they are offered A new offering, new customers and markets, new channels and new customer relationships. How value propositions are converted into revenues. New revenue models and value cost structures Searching for new value circle actors, composing new value circles (Lewandowski 2016; Lieder & Rashid 2016) Re-thinking partnerships within a CE ecosystem (Bocken et al. 2014; Lewandowski 2016; Lieder & Rashid 2016; Peltola et al. 2016) Mapping value to different value circle actors (Adner & Kapoor 2010; Antikainen & Valkokari 2016; Bocken et al. 2013) Creating novel flows of resources, knowledge and value (Aminoff et al. 2016) Engaging suppliers into CE principles (Boons & Lüdeke-Freund 2013) Engaging users in co-innovation (Hippel 2005) Implementing CE principles in the value proposition (sustainable value proposition) (Patala et al. 2016; Bocken et al. 2013), for example, related to PSS (Tukker & Tischner 2006; Lewandowski 2016) New channels, new markets and customers (Clauss 2016) New revenue & costs models in value circles (Antikainen & Valkokari 2016); a financial model reflecting an appropriate distribution of economic costs and benefits among value circle actors – a ´win-win-win` setting (Boons & Lüdeke-Freund 2013; Aminoff et al. 2016) New revenue models based on, for example, selling product-based services as performance-based services (Tukker 2015; Lewandowski 2016) Networked business model innovation is highlighted in the transition towards a CE. Distruptive innovation: A disruptive innovation is an innovation that creates a new market and value network and eventually disrupts an existing market and value networks (Christiansen)
  8. 8. 16/08/2017 8 Conlcusions  We synthetized previous literature to a conceptual framework, that  suggests business model innovation as a mechanism to transfer the supply chains into CE ecosystem and includes the critical elements of disruptive business model co-innovation  We defined a CE ecosystem and value circle and proposed that a CE ecosystem is composed of various overlapping value circles:  We highlight that the concept of value circles would be beneficial in clarifying the co-existence of several overlapping value circles and how they differentiate from linear value chain models  In the definition of the value circle we emphasize governance innovation, since network-level governance structures are what bring actors into a working relationship together (Governance innovation future research avenue)
  9. 9. Thank you anna.aminoff@vtt.fi
  10. 10. y x zv w 1 w 53 d 2 5 cd x
  11. 11. 16/08/2017 11 Background Recently the concept of the Circular Economy (CE) has attracted growing interest as a novel economic model aiming to foster sustainable economic growth, boost global competitiveness, and generate new jobs; economic growth is decoupled from resource consumption and pollutant emissions as end-of-life materials and products are conceived as resources rather than waste The academic literature has focused on a resource scarcity and environmental impact, only little attention to out the economic benefits of industrial actors The CE concept itself might create barriers for implementations, as it might be perceived as being too radical or too complex to be fully adopted. The language of the concept is rather abstract, and the definition and interpretation of the term needs to be understood

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