Extra-condensed knowledge

Manufacturing companies must avoid key missteps as they shift to more environmentally sustainable approaches.

Pursuing Value With a Circular Business Model

Making the transition from a linear to a circular business model is an ambitious undertaking that involves rethinking how the organization creates, captures, and delivers value.

Circular business models hold promise for renewing the vitality of manufacturing companies — by enabling them to work in new ways with business-ecosystem partners to minimize environmental harms while maintaining profitability.

Genioux knowledge fact condensed as an image

Condensed knowledge

CONTEXT

The Research

From 2015 through 2020, the authors studied how companies collaborated with ecosystem partners in designing, developing, and implementing circular business models.
They conducted more than 100 interviews and 12 workshops with executives, senior managers, and engineers from 15 large European manufacturing companies that sought to adopt circular business models.
The following industries were represented: mining, construction, construction equipment, medical technology, appliances, aviation, automotive, heavy trucks, pulp and paper, and forestry.
The authors examined why successes and failures occurred during each phase of the transition and identified practical lessons for other manufacturing companies seeking to adopt circular business models.

The urgency of the climate crisis is driving some of Europe’s leading manufacturers to pursue new strategic approaches intended to mitigate the environmental impacts of their products and processes.

One such innovation is to adopt a circular business model, whereby a focal company collaborates with its ecosystem partners to create, capture, and deliver sustainable value.
The goal: to improve resource efficiency — by extending the life spans of products and parts, for example — to achieve environmental benefits while still meeting profit targets.

Circular business models hold promise for renewing the vitality of manufacturing companies — by enabling them to work in new ways with business-ecosystem partners to minimize environmental harms while maintaining profitability.

In short, circular business models can allow companies to simultaneously target all pillar objectives of the so-called triple bottom line: financial, social, and environmental.
“Going circular” is a gradual process for revamping a company’s approach to achieving all three of those elements.
But a company’s leaders and managers need to remain vigilant about their biases and their resistance to cultural change as they confront the challenges of moving from a company-centric mindset to an ecosystem-centric mindset.
A broader, more long-term orientation to designing and developing products, collaborating with new and existing ecosystem partners in novel ways, and moving away from a transaction-based interaction will make manufacturers more likely to achieve long-term sustainability, both as companies and as stewards of a changing planet.

Category 2: The Big Picture of the Digital Age

[genioux fact deduced or extracted from MIT SMR]

Type of essential knowledge of this “genioux fact”: Essential Deduced and Extracted Knowledge (EDEK).

Type of validity of the "genioux fact".

Inherited from sources + Supported by the knowledge of one or more experts + Supported by research.

Authors of the genioux fact

Fernando Machuca

References

The Four Fatal Mistakes Holding Back Circular Business Models, Johan Frishammar and Vinit Parida, February 18, 2021, MIT Sloan Management Review, MIT SMR.

ABOUT THE AUTHORS

Johan Frishammar is a professor of entrepreneurship and innovation at Luleå University of Technology and a research fellow at the Stockholm School of Economics’ House of Innovation in Sweden. Vinit Parida is a professor of entrepreneurship and innovation at Luleå University of Technology and at the University of Vaasa in Finland.