Six ways to build circular business models

Nancy Bocken, Paavo Ritala

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Purpose
Circular business models can improve resource use in a financially and environmentally feasible way. However, companies struggle to choose among the vast variety of ways to achieve circularity within a business model. The purpose of this paper is to offer a pragmatic guide for making strategic decisions on circular business models.

Design/methodology/approach
This paper develops a conceptual model of six different strategic approaches to circular business models and provides examples to business cases and practice to illustrate these.

Findings
This study identifies two critical strategy choices companies should make. First, an innovation strategy addresses the extent to which circularity is achieved with internal or external stakeholders. Second, a resource strategy addresses how companies achieve circularity by narrowing, slowing or closing resource loops. Using examples from business practice, this study illustrates how the combinations of these two strategies can be used to design competitive circular business models. Key managerial questions are also identified to help decide upon a feasible strategy for circular business model innovation.

Originality/value
While different types of circular business models have been described, it is less clear what the strategic choices are that companies need to make to find feasible business cases for circularity in terms of value proposition, value creation and delivery and value capture. This study outlines these through a “circular business model strategy framework”.
Original languageEnglish
JournalJournal of Business Strategy
DOIs
Publication statusE-pub ahead of print - 2021

Keywords

  • collaboration
  • strategy
  • open innovation
  • business model innovation
  • business model
  • closed innovation
  • circular economy

Cite this