<p>Improved value capture from old products and keeping the installed base of products alive for longer enables firms to save costs and <em>significantly</em> reduce environmental impact. However, achieving this is not trivial. The risk of cannibalising new product sales, uncertainty about willingness to pay and implications for the aftermarket business are common challenges. Solutions are often based on increased customer value.</p>
Imagine that the business makes more money with more satisfied customers the less material resources flow through the system. In circular business models the value capture and value creation logic are designed to create incentives for closed and slowed material cycles. For increased material productivity. Our expertise in circular business models create value by contributing business administrative knowledge managers can act upon. For many years, we have built expertise based on international research on the circular economy (where we are regularly cited) and our own projects with many firms that have begun their journey towards a circular economy.
What circular economy opportunities suit a specific company depends on the industry, the product design and degree of vertical integration. Different parts of RISE have expertise in different industries. All companies engaging in radical innovation, such as circular business models, will face challenges. Three common challenges are where to start looking, how a circular business model can coexist with the old business model in a transition period, and how to think about and measure the profitability of a business novel to the firm. For instance, it might look like a circular business model threatens the profit contributions from new product sales if the revenue model of the circular business model is based on charging for the end-result of using a (long-lived) product, rather than charging for continuous product sales. Sometimes that is the case, and then other circular opportunities might take precedence. But sometimes that assessment is based on underestimating the current customer acquisition cost or reliance on customers continuously underestimating the total cost of ownership of the product. In the former case, a circular business model may cut costs. In the latter case, a circular business model provides an opportunity to gain market share. We help in the process of creating and identifying such cases.
RISE runs many applied research projects with firms on the topic of circular business models. Direct consulting projects do occur, when we believe that the potential for clear and direct sustainability gains is large and imminent. In both cases, our approach is always that the specific knowledge to act upon in the individual case must be co-created with individuals in collaborating firms. So that new circular initiatives remain and grow also after the collaboration with RISE.
When collaborating with RISE on the topic of circular business models you will get access to the latest within international research combined with a pragmatic approach to solutions that can be implemented in practice.