Circular Economy Business Models with a Focus on Servitization

Abstract

During the fourth industrial revolution, based on information and communication technology (ICT), service-led growth has been an increasingly important development area. This paper focuses on service-led growth as an innovative business model in the circular economy and offers the ‘product as service model’. A business model needs to be flexibly adjustable for changes in the market in response to changes in technology, the economy, and the environment. For firms facing increasing scarcity of resources, the right business model for using resources is becoming crucial for their growth. In a circular economy, a new method of business modelling is essential. This paper introduces the ‘product as a service model’ using a conceptualized and case study methodology. We illustrate this innovative circular business model through product servitization at the Hyundai Automotive Enterprise in Korea. This business model can be effective because of emerging new ‘smart connected products’ such as the ‘internet of things’ and ‘fifth generation’ network technologies. Cost, convenience, and the circular economy for firms, consumers, and the environment are critical factors in this new business model.

Electronic Markets on sustainability

“…The second perspective conceives sustainability in its environmental dimension and is rooted in the scarcity of natural resources. To reduce environmental deterioration, the ambitious concept of the circular economy is proposed, which relies on the 3R principles of reusing, reducing and recycling (Han et al 2020). Although the concept it its entirety will be difficult to achieve (Parrique et al 2019), electronic markets are important enablers in this context.…”

“…& Business models in the field of smart energy (Kranz et al 2015; Schwister and Fiedler 2015; Paukstadt and Becker 2020) where electronic markets could enable smart grids (e.g. Dedrick et al 2015), real time pricing to contain energy consumption (Han et al 2020), the validation of clean energy resources (e.g. Weking et al 2020) (Willing et al 2017) or in numerous second-hand or resale markets (e.g.…”

“…Although many authors equal technological sustainability with Green IT (e.g. Bolla et al 2017;Han et al 2020) as well as with a reliant and fault-tolerant operation of IS (e.g. Wulf and Zarnekow 2010;Weking et al 2020), another stream links the term with usability, i.e.…”

Diseño Regenerativo y Economía Circular

“…El uso de nuevos materiales, la producción aditiva, las energías renovables, la sensorización, el modelamiento del funcionamiento y efectos de los productos y servicios, gracias al big data, y aprendizaje de máquinas, se conectan con el impulso de nuevos modelos de negocios. Estos modelos de negocios, el producto como servicio, la economía compartida, la simbiosis industrial, revalorización y recuperación de remanufacturación, son ejemplos que se orientan hacia la recuperación y regeneración de los sistemas socio-ambientales a escala global (Bai, Dallasega, Orzes, & Sarkis, 2020;Han, Heshmati, & Rashidghalam, 2020;Ramakrishna, Ngowi, Jager, & Awuzie, 2020;Rossi, Bianchini, & Guarnieri, 2020;Wang, Umar, Akram, & Caglar, 2021).…”

Industry 4.0 and Smart Data as Enablers of the Circular Economy in Manufacturing: Product Re-Engineering with Circular Eco-Design

“…To implement this change in corporate culture, however, it is necessary to innovate not only technologies, but also organizational paradigms and, therefore, business models [21]. Among these, circular business models [22] involve the development of products as service models [23], for which servitization becomes the way to extend their life cycle [24]. Extending the life cycle of products means keeping their value, and the resources used to manufacture them as long as possible within the economic loop [25].…”