Circular business experiments on a systems level
Today, most of us live in a linear economy: we take resources, make products, use them, and then throw them away.
This has a big downside: we need a continuous inflow of new resources to create value for people. At the same time, since around the 1950s, we as a species have accelerated our activities; and are rapidly approaching the planetary boundaries that define a safe space for us humans to live in (read more here). Nobody knows what these trends imply for long-term prosperity.
See below this ‘great acceleration’ in domains like population, water use, paper use, domesticated land and emission levels. The dotted line marks the year 1950 (read more here).
Important sectors for sustainable innovation include mobility (especially airplanes and cars), food (mainly dairy and meat), energy (mainly energy-using household goods) and housing (construction and demolition). Together, they cause around 70–80 % of total global life-cycle environmental impacts (read more here).
These sectors are thus full of opportunity for meaningful, sustainable innovation.
The circular economy provides a useful story for this type of innovation. It suggests that we find ways of 1) maximising the use value of products, components and material, and 2) minimising a system‘s resource inputs, as well as its waste and emission outputs. This can be done by narrowing (use less), slowing (use longer) and closing (use again) loops (read more here).
It is a systems concept, and can therefore only be realised if multiple organisations work together across sectors and in new ways. Being creative and successful in this context is not so much about individual products or business models anymore (even though this is still important). Rather, it is about how well organisations manage to contribute their skills in collective projects that aim at addressing systemic challenges.
Such projects happen in situations of high uncertainty. They should therefore be seen as experiments that require the formulating, prioritising and testing of one’s assumptions about the desirability, feasibility and viability of proposed project ideas.
Let us use an example of an innovation project on a systems level: Adaptive City mobility, an innovation project supported by the German Government to make inner-city mobility more sustainable and efficient. It consists of ten technology organisations that have jointly developed a zero-emissions e-mobility system for cities.
The system consists of three main parts: a battery management and exchange system, a light-weight vehicle (450kg), and connectivity of all assets through software. The idea is to use locally generated and renewable electricity to charge vehicle batteries. The batteries (12kg) can be manually exchanged, which makes the system less dependent on existing charging infrastructure. The vehicles are designed to carry both people and goods: the two back seats can be switched for a Euro-pallet. Software enables mode switching between the different kinds of jobs (e.g. grandma during the day, deliveries during the night). It does by collecting and using data on the location, condition and usage of the system’s components and the ambition to optimise usage and minimise excess capacity. In addition, the vehicles contain several ink-based, highly energy-efficient displays for location-specific content (e.g. offerings from local service providers). The intended revenue model is mobility-as-a-service, with use-based fees for the suit of the system’s services. Its competitive edge comes from its ‘lightness’, i.e. reduced total cost of ownership through minimised vehicle weights (less electricity needs), maximised use of assets (less vehicles needed to do different jobs), and lowered dependence on charging infrastructure. This is meant to reduce the system’s overall operating expenditures.
The intended circular properties of the system are: minimised resource inputs through inter-operable and multi-mode assets, around 50% less material needs for the light-weight vehicles, and a reduced need for additional charging infrastructure (narrow loops, use less), servitised business models and extended component life cycles through, for example, second lives of batteries in households (slow loops, use longer), as well as minimised waste, emission and energy leakages due to local, renewable electricity generation to power the vehicles.
The project is a good example of how organisations across sectors can jointly experiment with circular and sustainable solutions on a systems level. After numerous iterations and lots of social and technical challenges, the pilot system will be tested in the city of Munich as of August 2018. At that point in time, it will have taken five years for a full prototype to test critical assumptions about the desirability, feasibility and viability of the proposed system. From a lean startup perspective, this is a long experiment cycle. Of course, the project is a complex undertaking. Still, going forward, it will be interesting to see how experiment cycles can be shortened in similar projects that tackle sustainability on a systems level. In any case, projects like this one are great, as they can help us understand how business experiments, systems thinking and the circular economy can be combined to speed up the transition towards cleaner and more resilient futures.
I am grateful to have studied this project since I made first contact with Paul Leibold, the project initiator, in June 2017. Meanwhile, I have spoken with people from eight involved organisations to address two questions: how have people and organisations in this case experimented with sustainable and circular business models on a systems level? What barriers have they encountered along the way? Me and my supervisors look forward to the opportunity to discuss the preliminary findings from this case study at the 25th innovation and product development management conference this June (2018) in Porto, Portugal.
This work is made possible by the Marie-Sklodowska-Curie Innovative Training Network “Circ€uit” — Circular European Economy Innovative Training Network, within the Horizon 2020 Programme of the European Commission. I gratefully acknowledge the support of the European Commission and the contributions of partners in this project.
Jan Konietzko, PhD Candidate — Circular Business Model Design, Departments of Design Engineering and Product Innovation Management, Faculty of Industrial Design Engineering, Delft University of Technology