Circular Business Models

Tell us your story about your business idea and explain how it works within the
circular business network. Prototype the architecture of your circular business and
show us the benefits of it.

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use the material commercially, get in contact with Fraunhofer IZM, Berlin ([email protected]).

Fraunhofer IZM 2018. Florian Hofmann, Tapani Jokinen. Max Marwede

Circular Business Providing the capability or services to satisfy user
needs without needing own physical products

Models Wheel
A process-oriented solution, concerned with using
residual outputs from one process as feedstock for Exploiting residual value of products – from
another process, which benefits from geographical manufacturing to consumption and then back to
proximity of businesses manufacturing – or collection of products
between distinct business entities

Exploiting the residual value of resources: collection

and sourcing of otherwise “wasted” materials or Business models focused on delivering long-product life,
resources to turn these into new forms of value supported by design for durability and repair for instance

Solutions that actively seek to reduce end-user consumption through

principles such as durability, upgradability, service, warrantees,
reparability and a non-consumerist approach to marketing and sales
Fraunhofer IZM 2018. Florian Hofmann, Tapani Jokinen. Max Marwede
 New paradigm of doing business
Hieminga (2015): Rethinking finance in a circular economy
Kooloos et al. (2016): Money makes the world go round
Hofmann (2017): Circular added value CONVENTIONAL BUSINESS MODELS CIRCULAR BUSINESS MODELS

VALUE CREATION Value circle – Customer/ user are part of the

Value chain ends at the last customer/
STRUCTURE value creation processes
user

Companies operate in a circular business

COLLABORATION Traditional buyer-supplier relationships network (actors who participate in the value
circle) that often involve a strong element of
collaboration and co-creation

OWNERSHIP Ownership is central for the Access to a service is more important than
consumption and use of products and ownership of a product that delivers the
services service

Success is measured in financial cost Success is measured in balanced

SUCCESS MEASUREMENT
benefit analyses ecological, social and financial
indicators
Fraunhofer IZM 2018. Florian Hofmann. Tapani Jokinen. Max Marwede
Types of business models
Characteristics/ Long Life Model Modularity Model Re-Value Model Access Model Service Model
Key aspects
Customer Customer Customer Company Company
Ownership of product
Sales of repaired/
Sales of initial product, Sales of initial product, refurbished products
Revenue streams (for company) Access fee Service fee
Post-purchase services Sales of spare parts /recycled materials,
Repair services
High utilization per Maximal value
Reduction in resource Reduction in resource Addition of new value to
Realization of resource efficiency/ product, pay-per-use has exploitation of resources
consumption through consumption through products/materials after
Value exploitation effect on customer’s use due to professional
longevity of product lifetime extension first life
habit planning
Encouragement of Encouragement of reuse Prolongation of EOL Prolongation of EOL
Realization of resource Encouragement of reuse
second-hand market and by facilitating repair/ through regular through regular
circularity/ Material loop by enabling second life
repair/ service market upgrade maintenance maintenance
Knowledge transfer on Return of product post- Recollection of product/
Collaboration amongst High quality demand Guarantee of compatibility
technology, use patterns, consumption, Company- materials; direct feedback
stakeholders throughout supply chain between components
failure mechanisms customer relationship from customers
Modular design/ ease of
Design for durability and Design for durability and
Design for durability and upgradability; Design for Design for easy upgrade
Product Design reliability, repair at reliability, repair at
reliability easy exchange, upgrade and repair
high service level high service level.
and repair
Emotional attachment to Adaptability and Environmental Flexible short-term Delegation of task to
Customer motivation brand value /Customer upgradeability of awareness, Economic solution, Economic professional
loyalty, Possible revenues individual needs, Environ- feasibility of upgraded/ feasibility, Convenience of
from post-use sales mental awareness repaired products product return

Source: Emmerich, Johanna (2017); “Identification of Circular business models and shortlists of applicable dematerialization options“ PolyCE, Deliverable 1.1

Fraunhofer IZM 2018. Florian Hofmann. Tapani Jokinen. Max Marwede

 Circular Business Models
Business modeling is about building logic of how the business of firm works

Drawing sheet for designing, visualizing, and developing your circular business
model

1. The questions in each field give you instructions for filling out the building
blocks
2. You can add some of your post-its from your circular system prototype to the
template
3. Visualize (words, sentences, drawings, etc.) further ideas, thoughts, impulses,
and visions on post-its to each building block
4. Circular business modelling is an iterative process of continuous learning with
no determined starting or ending point
5. Maybe you have different circular business ideas?

Fraunhofer IZM 2018. Florian Hofmann. Tapani Jokinen. Max Marwede

 What are the needs you are
aiming to meet?
Circular Business Modelling
What problems will be solved
with the services or products
you offer?

Which stakeholder groups VALUE

from the economical, political, PROPOSITION
legal, technological and Name? Which key resources are needed to
cultural spheres are crucial for create and distribute the value
the long-term success? proposition?

VALUE
STAKEHOLDER CREATION

CIRCULAR BUSINESS
MODEL CANVAS Which actors participate in the
value circle?
Which key resources and key Who are the main customers or
activities cause negative social/ users of your services or products?
environmental impacts? Which value circle actors provide
key resources and activities?
EXTERNAL What is the revenue model? CIRCULAR BUSINESS
COSTS What are the pricing tactics? NETWORK
What are the most important cost
© Florian Hofmann
positions?
Icons designed by freepik.com
Which key resources and activities
are most expensive?

FINANCIAL
ASPECTS

Fraunhofer IZM 2018. Florian Hofmann. Tapani Jokinen. Max Marwede

 Print out in DIN Services and/or products:
A3 or bigger
Circular Business Canvas

Economical, political, Key activities &

legal, technological, resources:
cultural:

VALUE
PROPOSITION
Name?

VALUE
STAKEHOLDER CREATION
Negative environmental Actors within the value
& social impacts: circle:
CIRCULAR BUSINESS
MODEL CANVAS

Cost structure & revenue

streams:

EXTERNAL CIRCULAR BUSINESS

COSTS NETWORK
© Florian Hofmann
Icons designed by freepik.com

FINANCIAL
ASPECTS

Fraunhofer IZM 2018. Florian Hofmann. Tapani Jokinen. Max Marwede

 Circular business model check list

fair, neutral, good or excellent

Implementation of circular business models
Degree of consideration

Do you provide a platform to allow collaboration among product users?

Do you sell products or deliver and provide services?
Do you retain ownership of your products during the use-phase?
Is the circular business model an ambition of individuals (you) or is it largely supported by the company?
Are your customers and suppliers aware of circular business solutions?
Do you have product-take-back programs?
Do you involve customers as well as suppliers in your value-added processes (co-creation)?
How closely do you cooperate with your customers, suppliers and the whole circular business network?
Are there any legislations or government regulations that need to be followed for implementing circular
business model (in terms of product liability, parts recycling, materials usage etc.)?

Fraunhofer IZM 2018. Florian Hofmann. Tapani Jokinen. Max Marwede

 Circular business model check list

fair, neutral, good or excellent

Implementation of circular business models
Degree of consideration

Do you consider environmental and social aspects in the cost-benefit analysis (beside financial aspects)?
Do you know the financial and accounting impact of providing services instead of selling products?

Fraunhofer IZM 2018. Florian Hofmann. Tapani Jokinen. Max Marwede