Expert tips to increase momentum in circular business model innovation

On the face of it, circularity is both necessary and unavoidable. Within the next 30 years, the circular economy will become the new normal, and the transition will have been powered by business model innovation.

> RELATED VIDEO:  Circularity is possible: Unlock the next frontier with business model innovation

The case for circularity

• Humanity currently uses 1.7 more resources per year than our planet’s ecosystems can regenerate.  Global Footprint Network
• By applying circular economy principles to the way we produce and manage food resources we could cut greenhouse emissions by 49% by 2050.   Ellen MacArthur Foundation
• 50% of executives foresee circularity as the ‘new normal’ for all companies in the next decade, while a third expect their industry to be disrupted by insurgent circularity start-ups.  Circularity Survey by Bain & Company
• The circular economy could create more than seven million jobs and unlock up to $4.5 trillion in economic growth by 2030. UN Trade and Development Report ‘Entrepreneurs Riding the Wave on Circularity'

“The secret of getting ahead is getting started.  The secret of getting started is breaking your complex, overwhelming tasks into small manageable tasks, and starting on the first one."  | American author - Mark Twain

It’s just as applicable for businesses today – and especially those weighing up the circular economy. 

Recognising the uncomfortable truth about circular innovation

Circularity will be the next big turn of the industry wheel.  Forward-thinking businesses will rise to the mighty challenge, compelled to reset the unsustainable consumption of the planet’s resources and motivated by the commercial enticement laid down by consumers.  They will be the ones that go beyond recycling and reuse of materials to develop new business propositions and new ways of working. Those that can’t or won’t adapt will likely cease to exist in 2050, if not sooner. 

But if only circularity were a straightforward choice. The problem for traditional linear companies today is that there is no switch to flick marked CIRCULARITY. For many CEOs, circular innovation presents short-term risks that seem to outweigh the long-term gains, in terms of profitability and resilience. 

The encouraging news for business leaders is that linear companies are already making waves in circularity. It’s not just a start-up game. 

Cognosis has compiled a repository for circular business model innovations, which details where and how new ideas and partnerships are taking shape. We have also spoken to industry experts who are leading the way with circular business model innovation. 

Here are their 3 top tips for setting out or accelerating your journey into the circular economy:

Will, Patricia, and Tahir were panel speakers at Cognosis’ recent event on circular innovation.

1. You don’t have to go at it alone

Innovating in tandem with like-minded partners and suppliers will help share the burden of risk. Partners may be better placed to provide insight and data on fresh opportunities. It could be that acquiring a start-up is a smarter move than trying to develop new propositions internally. 

Assembling the right team is incredibly important too. When you're trying to do something really ambitious and lead your industry in a new direction, then ‘good enough’ is not enough. You need people that can drive capability, credibility, excitement and positivity in the business.

Today, the concept of circular economy is well understood, so now’s the time to move from ambition to action. By working in partnership and sharing the right tools and techniques, fellow organisations – and even competitors – can advance together into the practicalities of project implementation.

“First, know your data, as that enables better decisions. Second, collaborate. Talk to your supply chain and even your competitors. Lastly, be bold. Do something rather than nothing. Consumers are ready to make the right choices, and they just need that nudge.” | Will Ghali, CEO of Ecosurety, a packaging compliance scheme that aims to accelerate change towards an environmentally and socially sustainable world.

2. Stay close to the money

Any new circular ideas will need to quell anxiety around the commercial viability of circular innovation. Executive patience could quickly run thin. As with all proposition development, there is a risk of failure. Be open about your chances of success and make a clear business case. Try to avoid the usual suspects of innovation malfunction, such as lack of internal alignment, poor customer empathy, bad commercial assumptions and optimism bias. 

Where possible, involve all elements of the business. It also pays to gain sponsorship from an ally within the leadership team who is comfortable with hockey stick growth over instant returns. Go step by step, improving incrementally to discover and demonstrate how your new circular business model is progressing – and make decisions whether to proceed or kill based on cold commercials. 

“Make sure circular innovation is core to your strategy, because if it is not, then it will be just a pilot and it might fizzle out. It can’t be something your sustainability team is doing on the side. It needs to be a systems change. You have to involve your whole value chain.”  | Tahir Naqui, Strategic Partnerships Manager at the Ellen MacArthur Foundation, a pioneering voice on circularity.

3. Start with consumer behaviours, not product development

What if customers could choose a new circular service model over a different version of an existing product? That was the observation of the electronics leader Philips, which is offering products-as-a-service to extend the lifetime and recyclability of goods through subscriptions – rather than outright ownership. 

This shift from ownership to access is a model that will be required in a lot of industries. The first step is to focus on the customer, not the products, to know what kind of service you need to provide.

Expecting consumers to bend to your will – just because you have a new circular business model – can lead to disappointment. The standard rules apply. A product or service still has to be no less convenient (and ideally more convenient) because consumers are busy. Secondly, they won’t pay a premium to do the right thing. So you need to make it a cost neutral decision.

Cost and convenience are the watchwords of circularity. In an ideal world, the consumer will not have any bad choices to make. And if you do get those consumers and customers onside, then try get them to deliver the message on why it works. Their words will resonate louder at a senior level. 

 “There are a lot of innovations that rely on consumer behaviour change. At DS Smith, we are piloting trials that don’t force people to completely adapt their behaviour in order to do the right thing with their packaging.  For example, there's already a lot of people who order three sizes of clothes and then send two back. That’s an existing behaviour that you capitalise on by offering reusable packaging, as customers are going to be using it anyway. It's incredibly hard to create momentum out of nothing, so you’re better to push on something that already has some.” | Patricia Wyst, Head of Partnerships at the leading packaging firm DS Smith.

Doing nothing is not an option

“Never put off till tomorrow what you can do the day after tomorrow.” 

The truth is that not every company can transform into a circular business overnight. This is not the moment to panic. There will be inflection points, regulations, new technologies and shifting cultural influences in the years ahead. But now is absolutely the right time to start the journey. Besides, it’s always wise to develop a strong view on where your industry is heading in the future, and to monitor new innovations and consumer trends. 

For businesses that are struggling to address the challenge of circularity, as many are, our report ‘Circularity is possible - Unlock the next frontier with business model transformation’ provides some simple steps to get the foundations in place and begin the conversation about circular business model innovation.