PHILIPS SMARTPATH: A Circular Economy Business Model Case

This report presents the case study of Philips’ SmartPath business model for MRI scanners. SmartPath for MRI was chosen as the focus for the case study because: MRI systems have been a key focus for the implementation of circular economy models within Philips, and are an important line of business for the company. The SmartPath portfolio of upgrades focus on keeping products at their highest value throughout their lifetime, which is a core principle relevant to the circular economy. The SmartPath portfolio contains a number of circular business model patterns – some of which have been operational for many years at Philips. Nevertheless it is a model which is improving and evolving, and thus offers insights for Philips as well as other businesses. Insights for business guidelines This case study highlights the following key insights relevant to companies in similar industries or sharing a similar context: Significant value can be created by taking a lifecycle and service-centric approach to serving customers. This requires re-balancing priorities from focusing on new product sales towards maximising the value for customers from products already installed (the installed base). With this new focus, the installed base becomes a key resource to be ‘cultivated’ over its entire lifecycle. This creates the foundation for developing solutions and services that are consistent with the principles of circular economy: o Enhancing the utility and value of products at different stages of their lifecycle o Enabling the upgrade and life-extension of products o Establishing mechanisms to incentivise the take-back of products at end-of-cycle so that their value can be re-captured – for example through refurbishment and re-sale Product development and design needs to be consistent with a lifecycle approach, for example ensuring that future solutions are backward-compatible with systems already installed, and that these are equally upgradeable when new hardware or applications become available. This requires additional investment, however creates significant benefits including: o Ensuring systems in the installed base can maintain or enhance their value over the lifecycle o Improving customer experience and satisfaction o Creating opportunities for new and recurring revenue streams Transitioning from a product focus to a service/solutions focus (a form of ‘servitisation’) is a key enabler for circular business models. Offering products as a service creates a focus on value generation and customer satisfaction based on delivering overall performance and outcomes, rather than on the specifications of a produc

CANON: A Circular Economy Business Model Case

This report presents the case study of Canon’s EMEA business for Document Solutions (DS), with a focus on the business model for remanufacturing and refurbishment. It was chosen as it provided an example of a mature remanufacturing model, as well as potential for further circularity and business benefit through expansion of refurbishment activities. Canon EMEA has also been growing services such as Managed Print Service (MPS) – a service-based model for providing printer copiers – which, while not a focus of the case study, provides opportunities for both remanufacturing and refurbishment. Canon operates in a market which is currently in decline, with vendors competing intensely for market share. This is creating a stark contrast between a business model driven by new product sales, and one that emphasises the cultivation and reutilisation of existing deployed assets. In this context, it is important to emphasise that this case study focuses on the circular business models and potential for Canon EMEA, whose business is principally a combination of sales/marketing and service delivery. This is in contrast to Canon Inc. (Japan) who manufactures and supplies equipment for Canon EMEA to sell and integrate into its service offerings. This case study explores the opportunities, as well as enablers and barriers, to Canon expanding the role of remanufacturing and refurbishment within its circular business models. We believe this will have important positive implications for Canon given the broader strategic challenges it face

BRIDGESTONE EUROPE: A Circular Business Model Innovation Journey

This report provides an overview of the circular business model innovation journey guided by the R2π project team for Bridgestone EMEA (Europe, Middle East and Africa). The team customised an innovation process to suit the specific needs of the company in order to help them explore opportunities to become more sustainable and circular. Due to confidentiality agreements, this report does not provide details of Bridgestone strategy and internal business data, rather the purpose of the report is to describe the innovation journey and tools utilised. A key challenge of the company relates to end-of-life tyres (ELT), a problem that persists in all tyre companies and in society due to the negative environmental and social impacts that this waste could result in, if not properly collected and treated. According to the European Tyre and Rubber Manufacturing Association (2018), the global tyre output is estimated at 1.5 billion units per year, which will all eventually fall into the category of end-of-life tyres.1 Over the last 18 years, recovery rates for tyres have increased in Europe, and the cost of recycling has decreased due to both efficiency in management structures and new recovery routes. This shift shows that products derived from end-of-life tyres can be legitimately recognised as a valuable secondary material. About 2.6 million tonnes of end-of-life tyres (ELT) are recovered annually in Europe and 600,000 tonnes of used tyres are either reused or sent for re-treading, so the tyre industry has promoted promising economic activities that are beneficial to the environment while also creating over 10,000 jobs2, but there is still much more to be accomplished. Therefore, Bridgestone is seeking viable business models to continue improving this situation and to continue its mission, “Serving Society with Superior Quality”3. To that end, a cross-functional team from Bridgestone and R2π was brought together in workshops to gain a deeper understanding of the current business model and context within the market as well as to innovate new business models. Based on internal and external strengths, weaknesses, opportunities and threats identified within their current business model and context, they generated and explored multiple options for future circular business models. Thereafter, they further detailed these options and mapped out bold steps required to achieve the new business models. Team members identified their most critical assumptions and planned out roadmaps to allow them to test these assumptions and move forward towards implementing a more sustainable and circular business mode

ROLLS-ROYCE: A Circular Economy Business Model Case

This report presents the case study of Rolls-Royce’s ‘TotalCare’ business model for widebody aircraft aero engines. It was chosen due to the commercially successful development of a whole lifecycle, servitised value proposition and associated business model. Insights for business guidelines This case study highlights the following key insights relevant to companies in similar industries or sharing a similar context: Revenue mechanisms that align interests between a company and its customers can create powerful circular business models. Although Rolls-Royce engines are sold to the aircraft owner, the TotalCare service package means Rolls-Royce retains responsibility for ensuring the product performs to customer requirements. The power-by-the-hour charging mechanism (revenues generated per engine flight hour) keeps incentives aligned by rewarding Rolls-Royce when the product is working as needed, and penalising it when it is not. This mechanism and alignment between the OEM and its customers encourages continuous improvement and collaboration. This also drives the extension of asset lifetime while optimising/reducing repair and maintenance costs. This results in reduced waste, increased resource efficiency, and enhances the asset’s value over its lifetime. Service-focused offerings that enable manufacturers to gain insight and intelligence on the use and performance of their products can lead to better customer service, improved product/service design, and resource efficiency. TotalCare provides opportunities for constant insight and learning around customer requirements. This insight is enabled by the collection of engine usage and performance data, as well as through deep customer relationships. This produces ongoing improvements and evolution of the value proposition itself as well as expansion of value added services. This means that the customer is no longer buying ‘just’ a product, but gaining expanded value addressing a suite of needs and requirements. This provides greater flexibility for manufacturers to manage the underlying asset within a service contract, focusing on outcomes for the customer. Servitised performance-based models can be important enablers for ‘Resource Recovery’ as well as ‘Re-condition’ / ‘Re-make’ circular business model patterns. In the example of TotalCare, Rolls-Royce’s service contract includes the provision of maintenance services which it has the responsibility and flexibility to deliver in an optimal way. This ensures that the ‘life’ and utility of the engine product is kept at the right level over its lifetime. Furthermore, the service contract gives the manufacturer visibility of the product throughout its lifecycle. This is especially relevant at the end-of-cycle where it creates an opportunity for product take-back and recovery of high value materials through close-loop recycling. When transitioning from a product-focused to a service-focused business model, the installed base becomes a key asset and driver of revenue and profitability. In product-focused business models, revenue is driven by the product sales price, and potentially some recurring revenue from maintenance services and sale of consumables and add-ons. In a service-focused business model, the installed base of products in use can become the drive

VAN DER VALK HOTEL: A Circular Business Model Innovation Journey

This report provides an overview of the circular business model innovation journey guided by the R2π project team for Van der Valk Hotel Venlo (The Netherlands). The team customised an innovation process to suit the specific needs of the company in order to help them explore opportunities to become more sustainable and circular. Due to confidentiality agreements, this report does not provide details of Van der Valk’s strategy and internal business data, rather the purpose of the report is to describe the innovation journey and tools utilised. A key challenge of the company relates to the daily business of running the hotel, a problem that persists in all hotel companies and can have an important role in eliminating negative environmental and social impacts. For over 10 years, there has been a strong sustainability ambition in the region of Venlo. From the moment the city of Venlo embraced the Cradle to CradleR principles, its motto has been ‘Realizing economic growth by boosting innovation that goes beyond conventional sustainability’. The cradle to cradleR inspired city hall of Venlo inspired the Van der Valk Hotel in Venlo. The circular principles will be embedded in rebuilding the hotel, both in the construction as well as in the interior concepts. However, the management also seeks ways how these principles can be implemented in the daily business and operation of the hotel. Therefore, Van der Valk Hotel Venlo is seeking viable business models to continue improving this situation and to create a process to continuously contribute to a circular transition. To that end, a cross-functional team from Van der Valk and R2π was brought together in workshop to gain a deeper understanding of the current business model and context within the market as well as to innovate new business models. Based on internal and external strengths, weaknesses, opportunities and threats identified within their current business model and context, they generated and explored multiple options for future circular business models. Thereafter, they further detailed these options and mapped out bold steps required to achieve the new business models. Team members identified their most critical assumptions and planned out roadmaps to allow them to test these assumptions and move forward towards implementing a more sustainable and circular business model. During this innovation process, facilitated design thinking methods and tools were used to identify opportunities on how Van der Val Hotel can innovate circular business models that increase business value while simultaneously reducing – or completely eliminate - negative impacts on the environment. Throughout the innovation journey, business opportunities were identified and explored, seeking to develop action plans that can take these ideas into practical activities and products for the company to become more circula

Preface: research at Liang Bua, Flores, Indonesia

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