A Circular Business Model: Your Next Business Model
Linear business models have proven to have limited potential. Circular business models are the future. Companies like Caterpillar, Desso, and Michelin among many others, are rethinking and redesigning their products. They employ new design, new materials and new business models. How can you change your business model into a circular business model and become part of the circular economy?
Life-cycle thinking leads to Circular Business Models
Businesses that take into account the entire life-cycle of their offering independently of the life-cycle stage that is affected by their company’s Key Activities have enjoyed long-term success. That is because lifecycle thinking have led them to rethink the operating system and design and adopt circular business models. In circular business models resources do not get lost in the making. Products are designed to come back to their makers and get disassembled so that technical materials can be reused and products can be regenerated. On the other hand linear business models use a “take, make, dispose” approach, where the maximisation of product volume is what matters. For businesses with a “reduce, reuse, recycle” culture, product quality matters more than product volume. By maximising resource productivity and resource efficiency they manage to reduce their costs.
Examples of changing organizations
Companies like Caterpillar, Desso, and Michelin are rethinking and redesigning their products. They change their design for disassemble and for remanufacturing, they include materials that can endlessly be recycled, and their resources do not get lost. Through its remanufacturing activity (Cat Reman), Caterpillar has managed to increase profit margin while producing high quality components. They replace products before they break and rebuild them by using new and used parts. Caterpillar builds products that can be remanufactured multiple times. The preservation of materials gives them a greater business advantage over their competitors, who often focus on reducing overhead costs. Desso, one of the world’s leading companies in environmentally responsible flooring products, produces carpets that reduce fine dust in the indoor atmosphere and unwanted noise, and aims at having all of their products designed according to Cradle to Cradle principles by 2020. Michelin has developed solutions such as the 4R strategy: reduce, reuse, recycle, and renew for an ecologically-viable circular economy, where less carbon, energy and natural resources are consumed.
Your Next Business Model?
Are you ready to change your business model to a circular business model just like the above mentioned companies did? When you make the switch from the “throw away and replace” business culture to life cycle thinking, you start influencing product design, strategic planning, procurement, and sales in a manner that enhances the image and value of your brand, as well as your revenue streams.
Ask yourself the questions that they did: Do your Key Activities take into account the life-cycle of your offering? Does your Value Proposition optimize the use of the product/system over its total lifespan? Do you create the highest value for the longest possible time with minimal resources (materials and energy)? Can your waste build capital rather than reduce it?
To make it through the competitive business modeling world, it’s not about one manufacturer changing one product. It’s about all the interconnected companies in the value network! Your business model has to be one that puts emphasis on various forms of collaboration and partnership. You will do it together with others and create value together.