Business Models: The silent ruler of firms

Nyström, T., Williander, M.
Type of publication: 
Conference item

ID: 212
Oral, workshop, round table, panel or poster
Topics: Business strategy and LCM
Business Models: The silent ruler of firms
Mats Ingmar Williander1, Thomas Nyström2
1Viktoria Swedish ICT, Sweden; 2Chalmers University of Technology, Sweden

Product-Service Systems (PSS) and closed loop material loops (CML) are seen as two key concepts of firms’ business models in a more eco-sustainable future (Nasr & Thurston, 2006; c.f. UNEP, 1999), also referred to as a circular economy (Stahel, 2007). These concepts are claimed to be both profitable (Pearce II, 2009) and can lead to resource reductions of up to 80% or more (Nasr, 2011; Nasr & Thurston, 2006; Lovins, Lovins et al. 2007). 

Given the daily efforts in industry to reduce cost and improve competitiveness and profits, a circular business model with CML and PSS must either look impossible or imply costs. Why would otherwise profit-seeking business not rapidly introduce these profitable resource efficiency improvements?

A business model describes how the firm creates and appropriates economic value (cf. Osterwalder & Pigneur, 2009). One consequence of maximizing value in a traditional linear business model is the maximization of a product’s value at point of sale and another is to devalue the product’s customer value as fast as possible once the product is sold. This is achieved through two established and well researched principles for a firm’s design and product development logic, value engineering (Green, 1991) and planned obsolescence (Guiltinan, 2008).

We argue that from the perspective of an OEM with a traditional linear business model and its corresponding design and product development logic, PSS and CML don’t show enough business potential. However, once the OEM gets help to get into the mindset of a business model based on circular economy, the business potential gradually unfolds and the design logic changes accordingly.

Based on a case study of an SME, using an interventionist research setting (Lukka, 2006), one finding is that a change of business model of a firm affects the design logic quite effectively. However, taking the design logic as a starting point within a given linear business model easily leads to dead ends due to organizational lock-ins. It seems that the business model is conditioning the minds of an organization.Therefore, the business model can’t be ignored when addressing eco-sustainability issues in firms.

Official URL:
The Swedish Life Cycle Center (at Chalmers University of Technology) Göteborg
Published in: 
LCM 2013
Additional info: 

Submitted 2013-01-08

Awaiting review respons