In the recent months there was a lot of news on plastics and microplastics. Some of it was good news (for example the efforts by Boyan Slat with The Ocean Cleanup project, or the almost globally adopted ban on plastic straws (and the different creative solutions to that)), but most of it was pretty terrible (microplastics in the arctic snow, rain water, a lot of our food …).

While there is a lot of ongoing research on the material input side in terms of bio-based, biodegradable, and even bio-compostable materials, and at the same time on the end-of-life phase (recycling) of plastics as well, a part of the equation that in our opinion is far too often overlooked are the business models supporting plastic waste, and more importantly those who help in reducing or eliminating plastic waste. The models that take a look at plastic waste as a strategic design error of the business model you use.

Earlier this year the EU launched the report A circular economy for plastics, in which several experts gave a state-of-the-art overview of plastics from different point-of-views. With switchrs we were fortunate to be able to take part in this process and share our insights on the role of business models in our transition towards a circular economy. In this blogpost we’ll dive in deeper in the report with a business model and strategic innovation focus. Make sure to check out the entire report when you’re working on plastics in the circular economy, be it from policy, research or entrepreneurship point-of-view, and let us know what you think!

Why business model innovation is vital for the circular economy

Before we get into the business models, archetypes and emerging patterns, we must first establish a clear understanding of what it is we’re talking about. Business model is an umbrella term for the whole rationale in which an organisation creates, delivers and captures value. Most of the times this value is defined as economic value (revenues and costs), but it can also be regarded as a broader range that includes social, cultural and other values as well. 

Although business models are not a new thing, it is fairly recent that they also became an integrated part of the design process. ideally, especially in strategic design, you don’t start from a given technology, material-innovation, or pre-defined product or service, but from a user or customer need. This need is first translated into a business opportunity through a business model supported by a rough idea of the kind of product or service that could support that model.

Once the context (the business model, target audience, focus etc.) is clear, we can start with really designing the product or service that emerges from that context. This logic of “context creating content” (and not the other way around) is still very new for both businesses and designers, and what it does is changing the narrative in such a way that the market need and the relevance of the product is placed at the heart of innovation, which results in the use of technology as a tool rather than a goal. With technology changing at an ever increasing pace, this changing narrative helps in building resilience, since you’re less tied to a specific product or technology, and always try to go back to the broader relevance of the business logic.

Within the circular economy, it has been clear that business model innovation, and change in user-interactions will be vital in our quest to close material loops. These interactions are far more often embedded in the business model than they are part of the product design (as far as you can still define these as two different things). When looking at the most used picture to define the circular economy, terms like maintain, reuse and repair are, even though they have a clear impact on the design of the products themselves, aimed directly at the logic in which a business generates value. For example, within the business logic of simply selling a product, it will be much harder to use the product for longevity or to add maintenance services since your revenue is defined by throughput of materials. Before redesigning your product for the circular economy, and deciding on the materials or technologies, you should always take a look at the underlying business logic in place, and see if you can first redesign that logic.

Ellen MacArthur Foundation Circular Economy

Ellen MacArthur Foundation Circular Economy

To make things even more complex, when designing for the circular economy, you should try to have a look not only at your own business model, but at the overarching logic of the value chain. Plastics are a good example here. They are touched by many different stakeholders, who each have their own logic on why they make and handle the product the way they do. The strategic design approach that is needed will therefore also have to be a systemic approach. Aligning different stakeholders, or at least creating a business model that challenges the models of the stakeholders. 

Why it’s hard to define THE business model for circular economy

Let’s get something clear: there’s no such thing as THE business model for circular economy. There’s no such thing as THE business model for anything. Business models are context dependent.

Don’t fall for the old “X archetypes you can use” sales pitch, it’s a great idea to look for emerging patterns in other cases, and to use analogy thinking to learn from them, but in the end business models should be tailor made. They should be tweaked because you understand how they work, not because the one you bought doesn’t quite fit. Archetypes are great for inspiration, but try to understand on a deeper level exactly why and how they work. Or as Picasso once allegedly said: “Good artists copy, great artists steal.

Good artists copy, great artists steal.

– Pablo Picasso 🎨

Also, if you design your own business model, redesigning or finding alternative versions to it becomes way easier (which might be a good idea if you’re working in something that is still pretty fluid like the circular economy). If you build in anything in your business model, build in the ability to quickly shift and change when needed.

Because the circular economy is very much a networked economy, it’s a good idea to try to abstract the different stakeholders and see how they interact with each other, who creates value (and how and where), how materials flow, and where cash gets generated. With switchrs we’ve designed the Circular Design Map to easily map out a simplified version of material flows, so you can easily find emerging patterns on a cross-sectoral level.

Lastly, when looking at business models, try looking beyond the product or the sector in which they are used. Sometimes a bike-manufacturer can learn more from a producer of carpet tiles then of another bike-manufacturer. Look beyond the product and the materials used. Look at the value chain and see which ones are controlled directly, and what parts are outsourced. Look at the clients and what they were searching for or bought into. 

In the case of a plastics economy (which this report is all about), you can look into sharing business models, which are often cited in circular economy, but keep in mind that the things we share are usually both underused (eg. a drill or lawnmower is not doing anything most of the time) and pretty expensive (especially to be underused). Unfortunately, plastics are still pretty cheap, and break rather easily when used intensively. Just looking at the product, and placing it in these new models won’t do the trick most of the times.

A good example of how a new business model impacts the product and vice versa is what the UK-based company Splosh did. Instead of completely rethinking their packaging (plastic bottles), they started by looking at what their consumers needed (to be able to clean), and what was needed to do that (some sort of detergent). In that business model it still makes sense to bring that detergent to your customer’s houses. Only, most soaps are only a small part of detergent, and mostly water. Splosh rethought the business model, made their packaging reusable, and offers a refill service for concentrated detergent you can water down yourself. With doing this, they sharply reduced transport costs and environmental impact. To further unburden their clients, they now offer a subscription model, making sure you never run out of soap.

Splosh

Splosh

So within this report you’ll find different archetypes and patterns that are emerging at this moment, but always take the time to reflect on what exactly happened. Look at the previous model and why this new one is either radically different, or maybe pretty much the same but from a different angle. Some models require you to completely redesign everything, and as long as there are big opportunities in that new logic, you should always explore those, but sometimes all it takes are some minor tweaks to get going with what you already have. 

New business models through strategic innovation

It makes a lot of sense that when we’re talking about plastics, and plastic waste more specifically, you’ll want to look at the products and packaging that are becoming that waste. This is what in design thinking is defined as single-loop learning. A specific user interaction with a design results in a negative outcome (plastic waste in this case), so we take a look at the products and update them to reduce or ideally eliminate that outcome.

Single loop learning

Single loop learning

In strategic design however, we don’t just look at the products or services that generated this specific outcome, but we take a look at the underlying assumptions and, in the case of strategic business design, the logic in which the value was created.

Double loop learning

Double loop learning

Within that broader scope it’s clear that business model development is part of that bigger strategic process. Whereas we’re often innovating with technology as a driver, ideally it’s the other way around. Technologic innovation holds in itself some huge opportunity leverages, but the moment your product, or your business becomes dependent on the technology it uses, it can only work as long as the technology is relevant.

Always keep in mind that technology never evolved as fast as it is doing today, and it will never again move as slow as it is today. The right market fit and good questions tend to age better than this fast moving technology. Successful innovation management within the circular economy implies a firm understanding of technology, and implementing it without the fear of being wrong, while at the same time understanding that technology is a means and not the goal. People often talk about balancing these two, but balance implies some sort of perfect equilibrium. In reality it’s more like a flow. More like surfing. To move forward, at some point you’ll have to catch a wave, otherwise it’s just peddling, and you’ll end up tired and still at the same place. But the moment you try to catch each and every wave, you’ll be knocked off your board the moment the right one hits, just because you grew too tired.

Now what?

Hooray, another report!

The chance that you are all shouting this are probably rather small. With this report being written mostly for governments and policy, it’s important to see what you can take from it, and leave the rest for what it is. While it’s important to keep capturing lessons learned and expanding the knowledge on circular economy, it is equally important to do something with that knowledge.

With switchrs we’re focussing on exactly that. Making circular economy and social impact tangible. Translating it into new business opportunities, designing start-ups, creating the conditions for social and circular innovation to thrive. Doing things and reflecting on those actions to do even better next time.

We’re really interested in learning how you’re working with these new ideas, and looking forward to further explore that process with you. Don’t hesitate to reach out (hi@switchrs.com), comment on this blogpost, and share with your network!