Sustainable and Circular Business Model Innovation: Tools, Techniques and Strategies for Firms

Abstract

Firms are increasingly aware of the need to transition to more sustainable and circular ways of doing business. This can arguably be best achieved through innovation not at the level of technology, product, or service, but rather at the level of an organization’s business model(s). Sustainable business model innovation (SBMI) aims to create positive and/or reduce negative environmental and social impacts through changes to a firm’s value creation, capture, and delivery mechanisms, while circular business model innovation seeks to create, capture, and deliver value by replacing linear resource use with the narrowing, slowing, closing, and regenerating of resource loops. Despite their awareness of the potential gains in revenue, resilience, and competitiveness afforded by these kinds of business models, the vast majority of large organizations and multinational corporations still struggle to successfully design and implement new, sustainable and circular business models in practice. This ‘design-implementation gap’ stands in the way of the transition to more sustainable forms of production and consumption.

This dissertation aims to bridge this gap through the development of practical tools and insights for practitioners, while also making a theoretical contribution to the literature in this area. Grounded in a pragmatist epistemology, the research conducted here first synthesizes responsible innovation and effectuation in developing the concept of a Responsible Innovation Lab as well as two accompanying tools, the Responsible Innovation Tool and Responsible Impact Tool. The dissertation further leverages a design science research approach in developing and testing two tools for managers, the Circular Experimentation Workbench and Sustainable By Design. The latter tool brings together three important concepts — organizational design, dynamic capabilities, and SBMI — in helping practitioners overcome the design-implementation gap. The connections between these concepts are further investigated as part of a case study with elements of action research, resulting in actionable insights for managers while advancing theory around how these concepts relate.

The tools developed here are themselves ‘key findings’ and results of the research. Other key findings include the value of collaboration, experimentation, and embracing effectuation in overcoming the design-implementation gap. Research findings underscore the importance of organizational culture in determining a firm’s ability to develop the dynamic capabilities needed for SBMI, and the inherent challenges firms will face in attempting cultural transformation for sustainability. More broadly, the research finds that firms must address key organizational design issues — including barriers and drivers at the level of culture, strategy, and operations — in order to overcome the design-implementation gap.

These challenges can be addressed in part by leveraging the tools developed here. Future research may further bridge the design-implementation gap by continuing to explore the connections between responsible innovation and effectuation in the form of a Responsible Innovation Lab; investigating the outcomes of circular business model experimentation, in particular through the use of tools like the Circular Experimentation Workbench; applying a tool like Sustainable By Design to study long-term firm outcomes in addressing cultural, strategic, and operational barriers and drivers to SBMI; and further studying the connections between organizational design, dynamic capabilities, and SBMI in other industry and case contexts.