Stage 3 innovate
The main focus during this stage should be on designing several feasible options for your new business model and value proposition. You will need to review these against your design criteria and choose only one option that you will carry into the validation stage. Be aware that you are likely to return to these options once you cannot operationalise (fail to validate) your first business model option and thus, trying to validate your other options in turn. This is one of the reasons why you should aim to establish 4-6 different value propositions and business models – you will need to pivot between these two stages until you find a good business model fit (successful validation). There are several tools that you can use to develop and review your options.
3.1 Create New Value Propositions
The Value Proposition besides being one of the most fundamental building blocks of the Business Model Canvas is also one of the most complex ones. The overall success of your new circular business model is contingent upon the value it creates for customers. By designing a sound and relevant value proposition, you will be able to create, test and deliver precisely what your customers want. It helps you systematically understand customers and allows you to organise customers’ information and assumptions in a simple way. A direct result of the well-designed value proposition is reflected in the profitability of your business model. It is simple, the more directly and effectively you can design your value proposition around customers’ most pressing issues, wants, and desires, the more likely they are willing to pay for it.
Value Proposition Designer
When it comes time to really understand your customers, including their: jobs-to-be-done; pains and gains; as well as your offer to them – the Value Proposition Canvas, is one of the best tools available to help you in this regard.
It’s important that the canvas is completed, one section at a time, in the following order:
Persona: Who is he/she (e.g., profession, age)? Is this persona buyer, user, decision maker?
Jobs-To-Be-Done: What are the jobs your customer is trying to get done in work or life? These could be both functional and social. What basic needs do your customers have (emotional and/or personal)?
Pains: What is annoying or troubling your customer? What is preventing him or her from getting the job done? What is hindering your customer’s activities?
Gains: What would make your customer happy? What outcomes does he or she expect and what would exceed their expectations? Think of the social benefits, functional, and financial gains.
Pain Relievers: How can you help your customer relieve his pains? Be explicit about how they can help.
Gain Creators: What can you offer your customers to help them fulfill the gains? Be concrete (in quantity and quality)!
Products and Services: What are the products and services you can offer your customer(s) so they can get their job done?
Clarity of your customers’ Pains and Gains with ideas around ways you can address these. This will feed into the following exercise – the Pain Relievers, Products and Services providing direction for innovating new options.
3.2 Create New Circular Business Model Options
After you have defined your core customer segments and understood their needs (pains, gains, jobs-to-be-done), you are ready to start designing a business model through which you would be able to address these. To do this effectively, you should aim to create several (4-6) different business model options and choose the one that you will further validate.
Circular Economy Business Model (CEBM) Patterns
A ‘business model pattern’ (or archetype) describes a distinct set of business model dynamics. In order to generate circular material pathways, seven circular economy business model patterns have been identified. These are defined based on a set of distinctive business model dynamics and where they lie along a product’s lifecycle. The patterns are described in Figure 2 below. Two of these – the ‘Access’ and ‘Performance’ patterns – are not necessarily circular per se, but significantly enhance the circularity impact and value when combined with other patterns.
Each of the 7 Circular Patterns have been built out as individual canvases – ’circularising’ the Business Model Canvas framework to include relevant prompting statements in each of the 9 elements of the canvas. These act as examples of what a Business Model could look like for each of the 7 Circular Patterns.
Understanding of potential circular business models and inspiration for new value propositions and improved future state.
Considering which areas your current business model scored highly in during the CEBM assessment stage ( See 2.5.1) , and the 7 Circular Economy Business Model Patterns that have been provided as examples, it’s time to throw out some ideas about the new direction that your business model could take.
Individually brainstorm new business ideas, 1 idea per post it and stick up onto a blank wall for everyone to see.
It will eventually become apparent that some ideas are repeated often, and so can be clustered throughout. This eventually shows the most popular ideas that have come up during the rapid innovation stage.
4 – 6 new circular business model options to build out
Circular Business Model Thinking
Using the Business Model Canvas from Stage 2.1 as your template, refer to the Circular Business Model Thinking canvas to prompt consideration of CE business model elements when building out your new, chosen business model options. Each ‘option’ should be built out as an individual canvas.
Complete each block of the canvas, referring to their respective block on the Circular Business Model Thinking canvas. See Stage 2.1 for order of steps
Repeat for each new option you wish to explore
4 – 6 new circular business models to choose from moving forward
3.3 Review Potential Partnerships
Now that you have a number of new (circular) business model options to choose from, it’s important to identify relevant value exchange with your current key partners or potential new partners to approach, that can be leveraged towards circular activity.
An essential tool for designing, negotiating, and adapting partnerships. This tool works as an add-on to the business model canvas See Stage 2.1.
Desired Assets: Based on the definition of this purpose, you will be able to describe the missing element from your own business model, for which you are seeking a partner. You can use the definition of this element to screen candidate partners on a (set of) asset(s) that you desire.
Value Offer: If you have identified what value you desire in a partner, then you need to develop a matching offer that connects with that value. A value offer is required, which is based on one or more elements from your own business model. An effective offer either complements or enhances the value you would desire from a partner. Only if this connection is made, do you have a basis for creating a relationship.
Transfer Activity: Through what collaboration activities or through what form will these values be connected? It is essential that both parties find a way to integrate the value that they are putting to the table. This transfer activity building block is the exchange by which synergy between the partnering business models is created.
Creating Value: What we’ve defined so far is a basis for connecting values. The ultimate question is whether this value engine enables you to create a new form of value that you can utilise to innovate in one of the building blocks of your business model. This question on created value makes up the fourth building block of the partnership.
The partnership canvas creates empathy between two prospective partners on the strategic importance of the partnership to each. It can be used as a stand-alone tool to quickly identify a partnering opportunity. But for full strategizing value, it’s better to use it in conjunction with the business model canvas See Stage 2.1
3.4 Review Against Design Criteria
You have set out your design criteria in the previous stage, so your task now is to review your new circular business model options against them to ensure they fit what you are trying to achieve. Based on these criteria you will choose one business model option that you will carry into the validation stage. There will be several business model options that will meet your design criteria, and that is fine. At this stage, you only need to choose one and keep the others as your go-to options should your chosen one, fail the validation stage (i.e., the most significant assumption cannot be validated, and no iteration in the business model is possible).
Design Criteria (See stage 2.4)
Here come the description of the tool
Review your new Circular Business Model against your established:
- ‘Must’s’ – how does it score? If it doesn’t encapsulate the criteria that you decided must be at its’ core, then you’re missing the most fundamental aspect of the overall model.
- If this is the case, please re-review your multiple business model options developed during Stage 3.2 .
‘Should’s’ how does it score? If it’s lacking, you may want to take into consideration, whether or not these ‘shoulds’ are crucial to the success of the business model.
If this is the case, please consider this when re-reviewing your business model options from Stage 3.2 If the model can be successful based on the Must’s alone, and they are covered, you may be okay to continue.
Could’s – how does it score? This section is quite flexible. If some of these are featured on your business model, it’s a bonus. If none of them are featured, your business model will survive without them, but keep them in the back-burner for development, if needed.
Won’t’s how does it score? If you find that anything you established would not be a part of your business model, features in your chosen option, you need to re-review your multiple business model options developed during Stage 3.2 .
Confirmation that your chosen business model option fits the criteria you set out as optimal guidelines for the success of your circular vision.