Digital technologies catalyzing business model innovation for circular economy - Multiple case study
Digital technologies have been identified as important enablers of circular economy. Existing research has however been mainly conceptual and literature review based, and thus understanding about how digital technologies enable circular economy business in real-life settings is lacking. The goal of this research was to increase understanding about the ability of digital technologies to catalyze business model innovation for circular economy. The research was conducted as a multiple case study, using interviews and document-based data from four forerunner firms with digitally enabled circular economy business models.
The research identified mechanisms through which the implementation of digital technologies enables innovating business models towards improved circularity and economic value creation. The role of knowledge creation was especially highlighted as a source of business model innovation. For example, digital technologies improve firms’ knowledge on the usage, wear, and location of products, enabling improved reuse and maintenance. Furthermore, digital technologies can improve firms’ knowledge about the use preferences and habits of their customers, enabling improved design and customization of products and services more effectively.
The ability of different types of digital technologies to catalyze the innovation of circular economy business models was also analyzed in the research. Data collection technologies, for example use of sensors in products, enabled only incremental business model innovations from both the circular economy and economic value creation perspectives, primarily through efficiency improvements to existing operations. Data integration technologies, such as ERP-systems, enabled radical innovations from the economic value creation perspective, by for example enabling the firm to move from selling products towards service-based business models. Data analysis technologies were able to deliver radical business model innovations from both circular economy and economic value creation perspectives, enabling use of newly created knowledge in design and use phases of products, thus lengthening product lifecycles, improving component reuse, and the material and energy efficiency of products.
The research identified the ability of different types of digital technologies to catalyze circular economy business model innovation, and mechanisms through which such innovation is enabled. The digital technology types form a hierarchy, where the implementation of data collection technologies is a necessity before value can be gained from data integration technologies, while both are required before data analysis technologies become valuable. To achieve radical business model innovation through digital technologies, each of the technology types needs to be leveraged. The mere implementation of technologies is however not enough, but firms need to further identify and follow the realization of the mechanisms identified in the study, and develop their business accordingly to capture the emerging benefits.
Authors: Valtteri Ranta, Tampere University, Center for Innovation and Technology Research (CITER); Leena Aarikka-Stenroos, Tampere University, Center for Innovation and Technology Research (CITER); Juha-Matti Väisänen, BearingPoint
Published: Resources, Conservation and Recycling