(Van Engeland et al. 2018). The new type of business models is defined as ‘productas-a-service’, ‘product-service’, or product service systems (Reim et al. 2015;
Annarelli et al. 2016; Franco 2017; Geisendorf and Pietrulla 2018)
Businesses are also therefore required to balance the trade-off between extending
the life of existing assets and replacing existing assets with new more efficient
technology. A classic example of the product-as-a-service operating model is the
leasing of photocopy machines, where the leasing company is responsible for
maintenance and the continuous operation of the photocopy machines. Instead of
the customer buying a photocopy machine, they are ‘paying per use’. The business
model can be referred to as ‘use-oriented’. As with all assets, over time, it might be
more economical to replace existing machines with newer technology. The firm is
incentivized to carefully weigh up the cost and benefits of maintaining existing
assets against new investments, and in this sense, the onus of the material efficiency
of products or assets remains with the initial manufacturer. The question is how
incumbent firms ought to make this transition and where the relevant opportunities
are for the logistics sector.
Frishammar and Parida (2019) define a roadmap for firms to transform linear
business models to circular business models. The roadmap is based on empirical
observations of how eight existing firms, motivated by consumer interest in sustainable business practices on the side of firms, have made this transition. Frishammar
and Parida (2019) were able to deduce a four-phase approach to transforming from
typical linear business models to greater circularity. Phase 1 involves identifying the
potential for adopting circular business principles and creating awareness regarding
circularity amongst the existing customer base. If opportunities can be identified,
then the phase 2 can be initiated in which the existing business model is exhaustively
evaluated in terms of shortcomings, barriers, and potential circular business opportunities. This phase also involves creating awareness within the firm regarding the
potential for circularity. The shortcomings and opportunities are the starting point for
phase 3, in which the new circular business model is designed. Here, incumbent
firms can draw from examples of case studies of other firms who have already made
the transition. The firm in question needs to achieve internal alignment so that all the
necessary departments in the firm are aligned in supporting the transition. The firm
also needs to identify potential for collaboration with other firms or “ecosystem
partners” and other network actors. Finally, the phase 4 involves validating the
proposed transformation by introducing a pilot-scale prototype. The small-scale
trial allows the firm to identify room for improvement and potential pitfalls of the
circular business design before moving towards large-scale rollout.
The logistics sectors in many cases are ecosystem actors that provide the operational infrastructure for moving products between producer and customer. As firms
continue towards increased servitization, the one-time flows of products to customer
and from customers to end-of-life treatment (disposal, recycling etc.) will be
replaced with products (or assets) remaining at customers for longer and servicing
and maintenance of those assets. In other words, there will be less throughput of
product and this will be replaced by the movement of service personnel and spare
parts to and from customers. Logistics service providers have the opportunity to
10
A. Beames et al.
Annarelli et al. 2016; Franco 2017; Geisendorf and Pietrulla 2018)
Businesses are also therefore required to balance the trade-off between extending
the life of existing assets and replacing existing assets with new more efficient
technology. A classic example of the product-as-a-service operating model is the
leasing of photocopy machines, where the leasing company is responsible for
maintenance and the continuous operation of the photocopy machines. Instead of
the customer buying a photocopy machine, they are ‘paying per use’. The business
model can be referred to as ‘use-oriented’. As with all assets, over time, it might be
more economical to replace existing machines with newer technology. The firm is
incentivized to carefully weigh up the cost and benefits of maintaining existing
assets against new investments, and in this sense, the onus of the material efficiency
of products or assets remains with the initial manufacturer. The question is how
incumbent firms ought to make this transition and where the relevant opportunities
are for the logistics sector.
Frishammar and Parida (2019) define a roadmap for firms to transform linear
business models to circular business models. The roadmap is based on empirical
observations of how eight existing firms, motivated by consumer interest in sustainable business practices on the side of firms, have made this transition. Frishammar
and Parida (2019) were able to deduce a four-phase approach to transforming from
typical linear business models to greater circularity. Phase 1 involves identifying the
potential for adopting circular business principles and creating awareness regarding
circularity amongst the existing customer base. If opportunities can be identified,
then the phase 2 can be initiated in which the existing business model is exhaustively
evaluated in terms of shortcomings, barriers, and potential circular business opportunities. This phase also involves creating awareness within the firm regarding the
potential for circularity. The shortcomings and opportunities are the starting point for
phase 3, in which the new circular business model is designed. Here, incumbent
firms can draw from examples of case studies of other firms who have already made
the transition. The firm in question needs to achieve internal alignment so that all the
necessary departments in the firm are aligned in supporting the transition. The firm
also needs to identify potential for collaboration with other firms or “ecosystem
partners” and other network actors. Finally, the phase 4 involves validating the
proposed transformation by introducing a pilot-scale prototype. The small-scale
trial allows the firm to identify room for improvement and potential pitfalls of the
circular business design before moving towards large-scale rollout.
The logistics sectors in many cases are ecosystem actors that provide the operational infrastructure for moving products between producer and customer. As firms
continue towards increased servitization, the one-time flows of products to customer
and from customers to end-of-life treatment (disposal, recycling etc.) will be
replaced with products (or assets) remaining at customers for longer and servicing
and maintenance of those assets. In other words, there will be less throughput of
product and this will be replaced by the movement of service personnel and spare
parts to and from customers. Logistics service providers have the opportunity to
10
A. Beames et al.