The power of circular venture building

Today, many companies struggle to stay relevant in a rapidly changing and increasingly complex world. They are searching for ways to innovate and adapt to today’s competitive landscape, shifting customer needs and behaviors, and last but (definitely) not least; the rising issue of material scarcity and environmental pollution. Because today, many of our current business models are still fueled by taking and selling the earth's limited resources.

So, therefore, a question arises that many companies share: how can we innovate towards resilient business models that create value whilst respecting the boundaries of the earth’s resources? Although there’s not a single answer to this question, at Accenture Song we are convinced that circular venture building will be a major part of the answer. This point of view shares the power of circular venture building and how you can internalize it in four ways.

Welcome to circular venture building

An innovation method that provides the possibility to thrive and stay relevant within the boundaries of the earth’s resources is circular venture building. The circular economy aims to remove waste from the product life cycle and ultimately become regenerative. It does so by shifting from a take-make-waste process towards a model where material and product value is being sustained (figure 1). This way, the life cycle of products is extended, waste is seen as valuable and a more efficient and resilient model is established. Different strategies contribute to this model, such as reducing, reusing, and recycling products & materials (figure 2). Venture Builders aims to systematically produce relevant businesses by industrializing innovation. By integrating the philosophy of a circular economy into the purpose and process of venture building, resilient ventures can be developed and thrive in the world of tomorrow.

The case for circular venture building

Accenture Song believes that venture building will serve as an enabler in the transition toward a circular economy, because of the following reasons:

1. Circular venture building is a future-proof and effective way of innovating;
2. Building ventures enables you to develop circularity strategies higher in the waste hierarchy compared to innovating existing business models.

Although we’re already noticing the effects of material scarcity, the impact will become only more prevalent in the coming decades. We consider this a major concern, which should be taken into account in the creation of business models that are future-resilient.

But at the same time, we consider it a huge opportunity. By turning waste into value with new business models, companies can boost their competitiveness by reducing dependence on scarce resources and generating new innovative services that are of societal value and economically healthy. Accenture's internal research calculated that the Circular Economy could generate $4.5 trillion of additional economic output by 2030 [1]. Launching circular ventures enables existing companies to tap into these value streams, strengthening their future positioning.

Circular venture building as an innovation methodology is a very effective one as well. The high success rate of venture-build companies is the result of multiple factors. These include the guidance of a team of seasoned professional support during the ideation & growth phase (data scientists, designers, and corporate finance people), a systemic building approach, the necessary resources, and lastly a network of potential partners. When comparing circular venture building with adopting existing business models towards a circular economy, a second advantage arises.

Within a circular economy, different strategies can be applied to maintain the value of the products; such as re-using or re-cycling (figure 2). These strategies differ in their hierarchy in the waste management ecosystem; re-using products (e.g. a user buying a second-hand bicycle) keeps the value of materials higher than recycling does (e.g. a bicycle being recycled to save (downgraded) materials). As strategies are positioned higher in the waste management ecosystem, circularity increases.

Research [3] shows that although the circular economy has started to be integrated into the corporate sustainability agenda, the focus is on end-of-life management strategies, while the adoption of business models incorporating higher levels of circularity is less prevalent.

Start-ups, however, develop circularity strategies higher in the waste hierarchy. Therefore, venture building can develop propositions that incorporate higher levels of circularity compared to the level established firms are currently doing.

Approach to circular venture building

By now the value of circular venture building for ensuring a resilient and thriving company is clear, let’s deep dive into the ‘how’. When evaluating how to go about circular venture building, consider the following:

✔   Start with an ambitious purpose;

✔   Refine towards a circular venture-building approach;

✔   Envision and engage toward a circular ecosystem;

✔    Shift from customer-centricity to life-centricity.

Circular venture building starts with an ambitious purpose

The first step in the creation of a circular venture is setting an authentic and ambitious purpose and making yourself accountable to it. This ‘reason for being’ empowers you to establish a venture as a vehicle for the transition towards a circular economy. Long and short-term this benefits environmental resilience, societal endorsement, and organizational relevance.

Companies driven by an ambitious purpose that directly resolves an environmental need can simultaneously create new markets and generate additional revenue. The Porter Novelli / Cone Purpose Premium Index found that consumers are 33% more likely to try a product or service from a purpose-led company and 50% more likely to switch brands from one they typically buy [4]. Next to that, business leaders recognize the need to act. Our recent study uncovered that 73% of business leaders identified “becoming a truly sustainable and responsible business” as a top priority for their organization [5].

Take for example the clothing brand Patagonia, who are known for advertisements like ‘don’t buy this jacket’. This statement is a call for attention directed at customers to reduce clothing consumption. This aligns with their ambitious purpose: ‘we’re in business to save our home planet’. By buying Patagonia products, customers feel they are contributing to the highest environmental standards. Patagonia’s purpose has been able to grow as a clothing company by promoting circular behavior to its customers.

Ask yourself

How might you refine your current purpose to make the circular economy thrive?

Refine towards a circular venture-building approach

To build a house you need people, materials, tools, and energy. An approach to circular venture building isn’t any different. Circular venture building can be seen as a systematic approach that explores and exploits exciting opportunities at a lower-risk profile.

Some prerequisites to not leave you in the dark when you want to apply this approach:

✔ Do you have a multi-disciplinary team with the right spirit and mindset?

✔ Do you evaluate your venture in a holistic way that goes beyond commercial impact and also considers environmental and societal impact at every step?

✔ When it comes to material and tools; do you look through four lenses – Desirability, Viability, Feasibility, and Impact – when reviewing your organization, product, or service?

✔ Do you evaluate how your venture fits in with the rest of the ecosystem and supply chain?

At Accenture Song, these elements are part of our default approach when engaging with clients and taking on new challenges.

Ask yourself

How might you internalize this approach for your organization and what are areas to improve this?

Envision and develop a circular ecosystem

Making the transition towards a circular economy is so complex and full of interdependencies that no single company or actor can achieve it alone. The time companies had a strong focus on simply product and competition, lies therefore in the past. By envisioning and developing a circular ecosystem, ventures can understand their role, responsibilities, and dependencies on other actors involved in the products’ / service lifetime. This requires multi-stakeholder collaboration and partnerships vertically and horizontally where possible.

One way to do so is to create a product journey in parallel to a customer journey. By mapping out the entire journey of the product/service throughout its lifetime, an overview is created of all stakeholders involved. By defining your circular responsibilities within this bigger ecosystem, you’ll be able to set goals for yourself but also inspire and collaborate with other stakeholders, working towards a common circular ambition.

Pieter Pot, a Rotterdam-based company, provides a service for plastic-free grocery shopping. Using glass pots, they deliver groceries to your door while taking back the used pots, like the milkman used to do. One of Pieter Pots' goals was to achieve system change; they wanted to have an impact on stakeholders in the ecosystem they are part of. They’ve successfully achieved this, as Kraft Heinz is now offering XXL packaged versions of their products (e.g. 1200 Heinz ketchup bottles) to companies like Pieter Pot, enabling a chain that brings the product from supplier to customer while drastically limiting packaging waste.

Ask yourself

We invite you to study the ecosystem of your envisioned proposition.

• How does your product or service fits within this broader model?
• Can you leverage value streams that are not circular yet?
• Can you inspire and team up with other stakeholders?

Shift from customer-centricity to life-centricity

Similar to the ecosystem perspective that takes a holistic view, we can broaden the perspective of our user understanding. For Accenture, this means shifting from being customer-centric to life-centricity. Because there are more elements in the user’s life than just the user’s interaction with the product or service. A deep understanding of these factors in life user behavior increases the chance to successfully launch a circular proposition. Businesses need to widen their aperture and move from focusing only on the consumption of customers to seeing their customers as they see themselves: multifaceted, complex, and doing their best to adapt to unpredictable life circumstances out of their control.

IKEA has been applying life-centricity since they introduced the ‘Bring Back Friday’ concept and the Circular Hub. Both initiatives close the product life-cycle loop and stimulate users to bring back their redundant furniture as they move through different phases in life. Moreover, both initiatives stimulate a change of behavior and make it easier for users to live sustainably.

Ask yourself

How does a life-centric understanding of your user influence your proposition?

The time is now

Circular venture building enables you to develop propositions in a future-proof and effective way. But more importantly, it serves as a vehicle for the necessary transition towards a circular economy. Through incorporating circular strategies such as reducing, re-using, and recovery in venture business models, companies can be designed and scaled that thrive on sustainable value streams. With that in mind, why wait for tomorrow?

Want to get started with circular venture building?

Get in contact with Nathan Kizilirmak, or Martijn Stolk to explore how circular venture building can work for your organization.