Your Business Model is key to your organisation. It is meant to shape the strategy of your organisation. It is the driver of competitiveness.
Developing “conscious businesses models”, that generate value for employees, organisations, customers, society and the planet as a whole, becomes increasingly important and can be seen as a major success factor for more conscious and innovative organisations.
That requires business model innovation.
Business model innovation is delineated as the successful modification of every business model element to be distinguished from competitors. Furthermore, business model innovation usually represents growth strategies. It can either mean to modify the way of value creation to satisfy the customers’ demand or to generate the ability to take over new markets, but mostly, lead to an improved state compared to the status quo.
In this regard, could business models, developed in the realm of the Circular Economy, can be seen as innovative and conscious business models?
Circular Economy aim and goals
Circular Economy, a concept aims to transform in-depth the way we use resources. Its goal is to replace existing open production systems, based on a linear consumption model, where raw materials are extracted, processed into finished products, and become waste after they have been consumed, with closed systems that reuse resources and conserve energy.
Circular Economy aims at overcoming the dominant linear take, make, disposal model, that overtook natural resources that are not so abundant, nor so accessible.
Instead of your organisation extract materials, apply energy to transform them into final products, sell them to your consumers and, finally, throw them away when they are no longer working or no longer satisfying their needs; your organisation can make more effective use of materials and create more value, both by cost savings and by developing new markets or growing existing ones.
Circular Economy is normally represented by four key principles:
- product-life extension
We can appoint that the big differences in the Circular Economy approach are:
- Customer access over ownership, pay for performance e.g. pay per lux or pay per scan;
- Business model innovations, from transactions to relationships via service and solution models;
- Reverse cycles, including partners outside current value chains e.g. upstream-downstream integration and co-creation;
- Innovations for material-, component-, and product reuse, products designed for disassembly, and serviceability.
Conscious business models based on circular economy
The Circular Economy principle of promoting customer access over ownership, for example, will enable the development of a new, collaborative, and less impactful business model, by increasing the capacity of utilisation and thus the efficiency of the deployed resources.
This, however, can only be the first step towards performance-oriented business models. These business models presume that consumers do not want access but rather want to have a certain performance, e.g. having a hole in the wall to fix their shelf, for which access to a drilling machine is only one possible solution – maybe not even the most efficient one. Finally, also these business models can only be seen as an intermediate step towards result-oriented business models, which are targeted at the desired outcome, e.g. fixing a shelf on the wall.
From a customer perspective, new business models aimed towards more efficient use of resources, and by so becoming more conscious, can thus be categorised into four main categories:
It becomes apparent that the underlying consumer business model is a catalyser for the circular economy.
When moving along from ownership towards result-based business models the incentives for a circular value chain increase manifold. When a customer buys a defined performance as opposed to a defined usage time the service provider will have a strong incentive to extend the product-life by refurbishing, repairing or by providing a longer-lasting (and thus more expensive) product in the first place.
Thus, a move from ownership-based to results-based business models will lead to a situation where long-lasting, easy to repair and easy to update products gain a strong competitive advantage over the low-cost consumer products that prevail today in most ownership models.
The described circular business models provide huge opportunities for organisations, customers, and the environment. Enabling the existence of business models that can be considered as more conscious.
The success of certain (more conscious) business models, such as bottle recycling or car sharing, gives a glimpse at the opportunities for innovative business models in different organisations.
This might only be the starting point for changing the entire economy.
An issue that requires a more conscious society, not only conscious organisations
Conscious business models based on the circular economy will only succeed if it’s value proposition could be optimised, by not only rational but also non-rational motives of consumer behaviour, which include habits and routines of individuals.
An example of this is the car-sharing business model. Giving up one’s car and make use of mobility solutions that are composed of different modes of transportation, for instance, cannot be taken for granted for a vast majority of car owners, even if it is more economical.
The big challenge of organisations and us all as a society is not only about designing an optimal system. It is about conceiving a system that fits our human nature, for the sake of not being ignored or misused.
If you are an organisation driven by the Purpose beyond the Profit, as we talk about in our article: Does your organisation puts purpose beyond profit towards becoming a conscious organisation?, you are willing to rethink your business models to become more conscious and based on Circular Economy principles.
This will require a profound understanding of the motivations of different market actors as well as an in-depth analysis of consumer acceptance or rejection reasons.
Since it is a complex and challenging issue, AMARNA Consulting is here to help your organisation towards designing a more conscious business model, regarding Circular Economy principles.
We are here to help you on your journey for you to become a more conscious organisation. Continue to follow our LinkedIn page and visit us at www.amarnavida.com.
Happy to help your organisation become more conscious.
Founder and Managing Director
Powered by AMARNA Vida’s team